ceosurvey_2010 by BayAreaNewsGroup

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									Silicon Valley Leadership Group
224 Airport Parkway, Suite 620
San Jose, California 95110
408.501.7864
svlg.net
Message from the Silicon Valley
Leadership Group
Everyone has heard the reports from both
outside and within our region that Silicon
Valley is on the ropes.


We disagree.
                                              Wilcox          Guardino
Executives at established companies
and start ups alike are optimistic about 2010 business and job
growth. That is the overwhelming conclusion of the 7th Annual “CEO
Business Climate Survey,” and partner Silicon Valley Bank’s “Emerging
Technology Executive Survey” (a separate report), that are being
released publicly today.


This outlook is deeply shared and very encouraging for the innovation
economy. A record setting 153 executives, representing $1.7 trillion
in annual global revenue, responded to the CEO Survey. And 304
executives from U.S.-based emerging and early-stage technology
and life science companies, with annual revenues less than $5 million,
participated in SVB’s survey.


Executives – and employees – still have plenty to be concerned
about, including a major new issue this year. For the first time,
state government dysfunction is a top business challenge in Silicon
Valley. Specifically, the No. 4 concern is the state budget, with more
traditional problems like housing costs, employee recruitment costs,
transportation and health care costs rounding out the top five.


Executives also focus on Silicon Valley’s tremendous strengths (venture
capital investment, a world-class workforce, excellent universities, a
                                                                              The 2010 CEO Business Climate Survey is produced by the Silicon
spirit of innovation and a beautiful physical environment) as unique
                                                                              Valley Leadership Group, and is made possible by the contributions of
attributes that enhance our success.
                                                                              SVB Financial Group, McAfee, Synopsys and Kaiser Permanente.

While there still are many challenges to face – including the lingering
impacts of the recession – it is becoming clear based on these surveys
that Silicon Valley’s best days are not behind us; they are in front of us.


It is the mission of the Silicon Valley Leadership Group’s 300 Member
Company CEOs to celebrate our strengths and tackle our challenges.
Please, join us.


Sincerely,




 Ken Wilcox                           Carl Guardino
 CEO                                  President & CEO
 SVB Financial Group                  Silicon Valley Leadership Group




                                                                                                                        2010 CEO Business Climate Survey 1
Key Findings                                                           Actions the local government should take
                                                                        1. Improve K-12 public education

Job Growth                                                              2. Approve more affordable home developments

  » By more than 3:1, Silicon Valley CEOs see job growth in 2010 in     3. Ease local street and road congestion
    their business cluster

  » By more than 8:1, Silicon Valley CEOs see job growth in 2010 for
                                                                       Actions the state government should take
    their company                                                       1. Improve K-12 education

                                                                        2. Continue research and development tax credit
Strengths of Silicon Valley
                                                                        3. Invest in traffic relief/traffic transportation improvements
  1. Access to skilled labor
                                                                        4. Help create more affordable housing
  2. Entrepreneurial mindset
                                                                        5. Improve higher education
  3. Proximity to customers and competitors

  4. World class universities                                          Actions the federal government should take
  5. Access to venture capital & Climate/weather (tie)                  1. Comprehensive health care reform

                                                                        2. The federal deficit
Business challenges
                                                                        3. Climate change legislation to reduce greenhouse gases
  1. High housing costs for employees
                                                                        4. Deferral/repatriation of foreign earnings
  2. Employee recruitment/retention costs
                                                                        5. H1B visa/green card reform
  3. Business taxes

  4. State budget structure                                            Other
  5. Health care costs                                                  » Local executives continue to see housing costs as the number one
                                                                          problem for their employees.
Cost of living challenges for workers
                                                                        » Strong support exists for increasing motor vehicle fees and
  1. Housing costs                                                        gasoline taxes; strong support also exists for reducing corporate
                                                                          and personal income taxes to help balance the state budget.
  2. High taxes
                                                                        » By fairly one-sided margins Valley executives want to see more
  3. Traffic congestion
                                                                          resources dedicated to K-12 public education, higher education
  4. Health care                                                          and transportation; local executives want to see fewer state dollars
                                                                          dedicated to prisons, and state employee labor costs.
  5. K-12 education
                                                                        » Of the various state public policy makers, only Governor Arnold
                                                                          Schwarzenegger receives support from local executives.

                                                                        » Valley executives see the benefits of climate change legislation and
                                                                          are putting their companies at the forefront of change.




2 Silicon Valley Leadership Group
CEO Business Climate Survey 2010                                              The 2010 CEO Business Climate Survey reports on the vital issues
                                                                              of concern to the Silicon Valley Leadership Group’s 300 member
                                                                              companies, their 250,000 employees and their families. It contains
After more than a year of suffering from the punishing recession –
                                                                              pragmatic statements about Silicon Valley Leadership Group efforts
with Silicon Valley’s unemployment rate hovering near 12 percent
                                                                              to meet important goals such as greenhouse gas reduction, address
and quarterly revenue reports filled with depressing news – there is
                                                                              taxation issues, and develop public policy approaches to complex
now optimism among many of the region’s leading companies. The
                                                                              issues in areas like education, transportation, housing and health.
Silicon Valley Leadership Group’s 2010 CEO Business Climate Survey,
                                                                              But more than a compilation of data, the report’s results also convey
completed by a record 153 executives, shows that nearly 60 percent
                                                                              specific recommendations to elected leaders from Santa Clara County
expect to hire more employees in 2010, compared to 17 percent in
                                                                              to Sacramento and Washington, D.C. For these reasons, the report is
2009. And most expect hiring in their business sector to improve in
                                                                              a roadmap to improving the wellbeing of the Valley, state and nation.
2010.

                                                                              If the past is any guide, policy makers should note that the statements
Over the last seven years that this survey has been conducted,
                                                                              contained in the surveys have often predicted economic course
the business and cost of living challenges, as well as the issues
                                                                              changes.
government needs to work on to improve the business climate, have
varied little. However, the percent of respondents that believe the
legislature is on the wrong track has risen precipitously from 31 percent
in 2007 to 78 percent in 2010 (see chart below). This is also reflected
                                                                                                                          Analysis by:
                                                                                                                          Larry N. Gerston, Ph.D.
in the percent of respondents that believe legislation is on the wrong
                                                                                                                          Professor, Political Science
track, also rising precipitously from 26 percent in 2007 to 73 percent in
                                                                                                                          San Jose State University
2010.


This survey is more than another compilation of data and forecasts
produced for policy makers. It is a window into the collective condition
of businesses that provide one-fourth of the Valley’s non-public
workforce, and by extension, the rest of the community. It is also an
indicator on how current policies may affect the future of the region,
state and nation. By asking penetrating questions to the top Silicon
Valley executives, the survey is the region’s innovation economy
barometer.




                                        Direction of State Legislature
                                         100%




                                          50%
                                                     2007




                                                                     2008




                                                                                      2009




                                                                                                      2010




                                                            Right   Good    Neutral    Poor   Wrong




                                                                                                                         2010 CEO Business Climate Survey 3
                                                          Companies Adding or Subtracting Jobs
                                                          100%




                                                           50%
The Economy




                                                                  2006




                                                                            2007




                                                                                          2008




                                                                                                       2009




                                                                                                                   2010
                                                                             Adding   Neutral     Subtracting




              Jobs Outlook
              This year’s findings reflect modestly higher numbers of companies                  Unlike the CEO Survey findings of one year ago, Silicon Valley
              that added jobs last year (in 2009) at 39%. This is an improvement                 companies in 2010 once again appear on the path to growth.
              over 2008, which had our lowest percentages of companies adding                    The trend is not across the board, nor is it firmly established.1
              jobs at 32% and our highest percentage of companies subtracting                    Nevertheless, the economic arrows point in a more positive direction
              jobs at 42%. While the trend is optimistic, it is still important to note          than we have seen in recent years. To summarize the mood, Valley
              that almost one third of companies laid workers off in 2009, and 39%               business executives are cautiously optimistic.
              adding jobs in 2009 is still quite lower than our peak of 85% reported
              for 2007 (see chart above).                                                        Economic growth can be measured in many ways, but the number of
                                                                                                 employees in a company is certainly a significant part of the mix. In
                                                                                                 the 2010 survey, more companies are positioned to add employees
              Job Growth Details                                                                 during the coming year than not. Whereas 58 percent see job growth
              Jobs Added                 % Answers
                                                                                                 in the coming year, only 7 percent anticipate declines. Overall, the
                                                                                                 jobless rate in the Valley soared during 2009 from 8 percent to 11.8
              < 20                           58%                                                 percent. That local companies expect job growth in 2010 bodes well
              21-100                         30%
                                                                                                 for their bottom lines and the region’s economic vitality, including future
                                                                                                 sales tax revenues (see chart on right).
              > 100                          11%

                                                                                                 Still, we must remember that growth does not occur in a vacuum;
                                                                                                 rather it takes place in a larger economic environment. For these
              Job Loss Details                                                                   reasons, it is important to consider how Valley companies view the
              Jobs Subtracted                 % Answers                                          various governments that impact them and their employees.

              < 20                                37%

              21-100                              41%

              > 100                               20%




              4 Silicon Valley Leadership Group
                                              Projected Job Growth by Company
                                                 100%




                                                 50%




                                                                                                                                                                 The Economy
                                                        2006




                                                               2007




                                                                             2008




                                                                                              2009




                                                                                                          2010
                                                                Adding     Neutral      Subtracting




Business Conditions
Silicon Valley executives appreciate the value of operating in Silicon          As in the past, the 2010 survey asked Valley executives to identify the
Valley. When asked about the top three benefits of doing business               leading challenges for companies doing business in the region. Nearly
here, more than seven out of ten respondents (71 percent) cited access          three fourths (73 percent) of the respondents cited housing costs—by
to skilled labor. The concern for a capable workforce helps to account          far the most pressing concern in percentages that paralleled the 2009
for the strong support expressed for public education funding. Simply           results. More than half (56 percent) focused on employee recruitment
put, without an educated population a skilled workforce is difficult to         and retention costs, also approximating the second place choice in
find. With fewer skilled immigrants available to make up the slack,             2009. Nearly half of the survey participants (48 percent) mentioned
the availability of locally trained talent is more important than ever.2        business taxes and the state budget structure. Combined, these
Almost as many survey respondents (66 percent) cite the region’s                concerns reflect the difficulties of conducting business in an economy
entrepreneurial mindset as a major asset for operating in the Valley. A         that competes nationally and globally.
third factor, proximity to customers and competitors, was mentioned
by almost half (46 percent) of the respondents as a key element for
success. None of the eight remaining categories came close to                   Business Challenges in Silicon Valley
receiving similar support.                                                      Category                         2008       2009                 2010


                                                                                Housing                          87%        75%                  73%

Benefits of Doing Business in Silicon Valley                                    Recruitment \ Retention          57%        53%                  56%
Category                                 Named by
                                                                                Taxes                            37%        37%                  48%

Access to skilled labor                    71%
                                                                                State Budget Structure           10%        34%                  48%

Entrepreneurial mindset                    66%
                                                                                Health Care                      43%        37%                  48%

Proximity to customers and competitors     46%

World class universities                   27%

                                                                                Still, survey respondents believe that local governments can help
Access to venture capital                  20%
                                                                                improve the overall climate for businesses and their employees. When
Climate/weather                            20%                                  asked to identify the most desirable changes, 64 percent mentioned
                                                                                K-12 public education—a recurrent response to many questions
                                                                                focusing on quality of life here. Also receiving attention were more
                                                                                affordable home developments (49 percent) and eased local street
                                                                                and road congestion (45 percent). Clearly, the condition of the Valley’s
                                                                                infrastructure is connected with business success in the minds of
                                                                                survey respondents.




                                                                                                                            2010 CEO Business Climate Survey 5
                  Quality of Life                                                              Response to Global Warming
                  No company operates in a vacuum. Rather it coexists in a multifaceted        With the passage of AB 32, the California Global Warming Solutions
                  environment that includes its workforce, transportation grid, housing,       Act of 2006, the state was the first in the nation to undertake a
                  balanced taxation, and general physical setting — in sum, the                comprehensive effort at greenhouse gas reduction. Accordingly, the
Quality Of Life




                  infrastructure. With these elements in place, companies and their            Silicon Valley Leadership Group has been an active partner in this
                  workforce have the opportunity to thrive. Without these elements,            effort. When asked about the activities undertaken to help implement
                  companies have difficulty attracting and keeping the best employees.         AB 32, members showed vigorous activity. More than two-thirds (68
                                                                                               percent) have installed more efficient lighting systems, 51 percent have
                                                                                               put more efficient data centers in place, and nearly half (47 percent)
                  Cost of Living Challenges for Workers                                        have committed to green building processes for both retrofits and
                  Category                    Named by
                                                                                               new construction. In addition, member companies have committed in
                                                                                               varying percentages to nearly a dozen other action steps designed to
                  Housing Costs                  86%                                           reduce greenhouse gas pollution.

                  Taxes                          63%
                                                                                               There is another side to this stewardship. The number of green jobs in
                  Traffic Congestion             36%                                           the Valley and state has surged in recent years. Thus, at the same time
                  Health Care                    35%
                                                                                               local companies are working to improve the environment, many are
                                                                                               reinventing themselves as providers of new green technology products
                  K-12 Education                 28%                                           and services.3
                  Child Care                     20%

                  Energy Costs                   12%                                           Company Conservation Efforts
                  Higher Education               11%                                           Category                                 % Favoring


                                                                                               Efficient Lighting Systems                  68%

                                                                                               Efficient Data Centers                      51%
                  In the 2010 CEO Business Survey, Valley executives were asked to
                  identify the three most pressing cost-of-living challenges for workers       Efficient Heating/cooling Systems           47%
                  and their families. Eighty-six percent cited housing costs — a
                                                                                               Water Conservation                          46%
                  staggering figure, yet down somewhat from the 96 percent in 2009.
                  No doubt, the general decline of housing prices in the area made             Green Building                              45%

                  housing more affordable for those in the workforce. Still, more than
                                                                                               Bike & Shuttle Programs                     39%
                  four out of five executives see housing as a problematic barrier for their
                  employees. High taxes were cited by 63 percent of the respondents,           PG&E Energy Efficiency Rebate Programs      32%

                  followed by traffic congestion (36 percent) and health care (35 percent).
                  Tax concerns spiked appreciably over the previous year, while traffic
                  congestion and health care concerns hovered near 2009 levels.




                  6 Silicon Valley Leadership Group
State Government                                                             require policies and reasonable regulations that allow them to compete
                                                                             with other regions on a level playing field. Clearly, there are limits on
                                                                             taxing and spending. With this in mind, the 2010 Business Climate
All levels of government impact the business conditions of Silicon
                                                                             survey delved into these controversial issues.
Valley, but the state level is particularly important to the well-being of
local businesses. Tax legislation, working conditions, education policy
                                                                             Noting that the state once again faces a sizable revenue shortfall, the




                                                                                                                                                                        Government
and environmental regulations are largely crafted by state elected and
                                                                             survey asked members whether the state should increase or decrease
appointed officials. For this reason, the CEO Business Climate Survey
                                                                             various revenue sources. With respect to corporate taxes, respondents
zeroed in on the efforts of state leaders to deal with pressing issues of
                                                                             favored decreases by a ratio of more than five-to-one (47 percent want
the day.
                                                                             decreased corporate taxes, compared with nine percent who want
                                                                             increased corporate taxes). Similar percentages favor reductions in the
                                                                             personal income tax by a margin of 44 percent to 10 percent. A small
Recommended State Government Action
                                                                             plurality favored reducing property taxes over increasing property taxes
Category                                      % Favoring
                                                                             (27 percent versus 19 percent), with more than half contending the
Improve K-12 Education                           60%                         property taxes should remain at present levels. Survey respondents
                                                                             are almost evenly split on the direction of sales taxes; whereas 29
Continue R&D Tax Credit                          53%
                                                                             percent argued for higher sales taxes, 28 percent called for lower sales
Traffic Relief Investment                        49%                         taxes. In two areas, survey participants are rather one-sided about
                                                                             raising fees and taxes: motor vehicle licenses and gasoline taxes. By
Create Affordable Housing                        43%
                                                                             a margin of more than four-to-one, respondents favored raising the
Improve Higher Education                         35%                         Vehicle License Fee (60 percent to 13 percent). And by an even wider
                                                                             margin, more than six-to-one, respondents called for increases in the
Streamline Regulatory Process                    35%
                                                                             state gasoline tax (70 percent to 11 percent).
Limit Frivolous Lawsuits                         32%

Decrease Energy Costs                            22%
                                                                             Recommended Areas to Increase Revenue
Sales Tax Exemption for Manufacturing Equip      22%                         Category                                 % Favoring


                                                                             Gas Tax                                     70%

                                                                             Vehicle License Fee or car related tax      60%
When asked about the top five actions that state leaders should take
to improve the business climate, respondents were fairly clear about         Personal Income Tax                         29%
their most important concerns. Topping the list was K-12 public
                                                                             Sales Tax                                   29%
education, which attracted the attention of 60 percent of the survey
participants. Continuation of the research and development tax credit        Property Tax                                19%
drew support from 53 percent of the executives as a key incentive for
                                                                             Corporate Tax                               9%
business success. In third place was investment in traffic relief and
transportation improvements, which garnered support from 49 percent
of the participants. More than four out of ten respondents (43 percent)
called for the state to provide help for more affordable housing. Tied       What about state spending? Valley executives are fairly like-minded
for fifth place on the list of recommended state government action           in six critical issue areas. On the plus side, overwhelming support
steps were improvements in higher education and streamlined                  exists for increasing expenditures for public education, particularly
regulatory permit processes, each at 35 percent.                             at the K-12 level, with 67 percent calling for increased expenditures
                                                                             and only four percent proposing reductions. University expenditures
Clouding the question of the state’s ability to address these issues         also receive favorable support by a margin of 48 percent (increased
is its annual budget, which the legislature had to reduce by an              expenditures) to nine percent (reduced expenditures). Transportation
unprecedented $64 billion during the 2009-2010 fiscal year. The cuts         is another winner, by a margin of more than five to one (53 percent
were made in response to the general perception that the voters would        for more expenditures and only 9 percent calling for decreased
rather see fewer services than more taxes. The results have decimated        expenditures). Three areas receive rather sharp disapproval with
the state’s infrastructure in areas vital to Silicon Valley Leadership       respect to current spending patterns: prisons, welfare and health care.
Group members and their employees. Companies need educated                   The state prison issue is virtually unanimous, with 86 percent favoring
workers who have homes near their work, travel to their jobs on reliable     reduced expenditures and only one person calling for more. Welfare
transportation systems, and are taxed within reason. Companies also          spending also draws concerns; whereas 7 percent want more money




                                                                                                                                   2010 CEO Business Climate Survey 7
             spent, 45 percent call for less. Health care is more closely divided,         workforce and the region. To that end, the survey participants were
             although respondents still call for less spending over more spending by       asked to identify three issues that deserve attention from federal
             a margin of two-to-one (17 percent believe there should be increased          policy makers. Nearly half (47 percent) of the participants called
             spending, compared with 36 who call for decreased spending).                  for comprehensive health care reform, followed by 45 percent who
                                                                                           focused on reducing the federal deficit. (The survey was completed
                                                                                           before the health care reform bill passed in March 2010.) No doubt,
Government




             Recommended Areas to Reduce Expenses                                          some of the frustration stems from the fact that about one-fourth of the
             Category                            % Favoring
                                                                                           companies assign at least 10 percent of their business costs to health
                                                                                           care. About one-third (34 percent) expressed concern for legislation to
             Prisons                                86%                                    reduce greenhouse gases, although, as noted below, most companies
                                                                                           are already taking positive steps without waiting for federal action. In
             State Employee Labor Costs             59%
                                                                                           addition, numerous open-ended comments expressed frustration with
             Welfare & Human Services               45%                                    excessive regulation.
             Health Care                            36%

             Higher Education                       9%                                     Recommended Federal Government Action
             Transportation & Infrastructure        9%                                     Category                                    % Favoring

             K-12 Education                         4%                                     Health Care Reform                             47%

                                                                                           Federal Deficit                                45%

                                                                                           Climate Change Legislation                     34%

             State Leadership                                                              Deferral/Repatriation of Foreign Earnings      28%

                                                                                           H1B Visa/Green Card Reform                     27%
             As with previous survey results, Silicon Valley Leadership Group
             executives do not see much help from state leaders other than                 Sarbanes-Oxley Reform                          18%
             Governor Schwarzenegger. In fact, member evaluations of most state
                                                                                           Intellectual Property Protection               16%
             officials and their policies are rather negative. The harshest criticism is
             directed toward statewide legislation and statewide regulation. On a
             1-to-5 scale, with 1 being the “right direction” and 5 being the “wrong
             direction,” state legislation receives a 4 or 5 from 74 percent of the
             respondents. Statewide regulations don’t fare much better—nearly              Conclusion
             two-thirds (64 percent) of the survey participants reply with unfavorable
             4 or 5 scores. These data continue a trend that has existed over the          While Silicon Valley executives are hopeful for a rebound in 2010,
             past few CEO Business Climate surveys. For CEO Business Climate               they will need a strong, capable workforce to continue innovating and
             Survey respondents, the state legislature and bureaucracy still haven’t       developing products for their customers, both in the United States and
             received the message.                                                         abroad. In return, local companies will help the economic recovery by
                                                                                           paying more taxes, as demonstrated during the first couple of months
             For several years, survey participants have viewed the governor               of 2010.
             more favorably than other state leaders. This trend has continued
             with the 2010 survey, where support for the governor is somewhat              But as is the case with any partnership, Valley companies will be
             to the positive side. Thirty-nine percent of the respondents award            most helpful to the economy if governments play constructive roles in
             the governor a 1 or 2, whereas 23 percent hand out 4 or 5 scores; 38          enhancing companies’ capabilities rather than inhibiting them. Local
             percent are neutral.                                                          improvements in roads, public education and other elements of the
                                                                                           infrastructure; state commitments to reasonable regulation and fair tax
                                                                                           systems; and federal management of the fiscal deficit, tax policies and
             Federal Government                                                            health care represent excellent public policy areas for companies to
                                                                                           renew the vibrant partnership with governments. If both sides carry out
             In recent years, the Silicon Valley Leadership Group has attempted            their responsibilities, then Silicon Valley will maintain and strengthen its
             to work closely with national leaders, especially California’s two            leadership role in the national and global economies.
             U.S. Senators and local members of the House of Representatives.
             Whether in small workshops or organized trips to Washington, D.C.,
             members have vocalized their concerns for their companies, their



             8 Silicon Valley Leadership Group
About the Survey                                                            Views From the Valley
                                                                          Views From the Valley
The Silicon Valley Leadership Group CEO Business Climate Survey                  “Silicon Valley remains the world’s leader in
                                                                             “We are slowly but surely destroying one of America’s
is distributed annually to the organization’s 300 members, whose                 advancing technology innovation, and our Silicon
                                                                             and California’s greatest assets, the whole capital
companies collectively employ more than one-fourth of the Valley’s               Valley businesses will be the underpinning of the
                                                                             markets ecosystem with regulation, tax, and other
private sector workforce. The 2010 survey instrument received                    country’s leadership in Companies are looking
                                                                             burdens on companies…. clean technology.”
responses from 153 executives, a participation rate of 50.5 percent.         to other markets and sending their business overseas
The exceedingly high response rate – up slightly from past survey                “We are slowly but surely destroying one of
                                                                             permanently as a result.”
returns – underscores the importance of the survey to its members                America’s and California’s greatest assets, the
both as a barometer of member sentiment and a call for action to                 whole capital markets ecosystem with in
                                                                             “Silicon Valley remains the world’s leader regulation,
public policy leaders.                                                           tax, and other burdens on companies….
                                                                             advancing technology innovation, and our Silicon
                                                                                 Companies are looking to other markets and
                                                                             Valley businesses will be the underpinning of the
Member companies were organized into nine sectors to gather                      sending their business overseas permanently as a
                                                                             country’s leadership in clean technology.”
responses on issues germane to Silicon Valley, the state and the                 result.”
nation. The sectors also reveal which areas of the Valley are growing        “H1B and green card issues – do not loose brain
and which are not. Table 1 reveals the sector-by-sector breakdown.               “H1B and green card issues
                                                                             power to Asian and Europe.” – do not lose brain
High-tech manufacturing and financial/professional/venture capital               power to Asia and Europe.”
lead the way with 19 percent and 18 percent of the respondents               “R & D tax credits must be made permanent.”“San
respectively. Just three years ago, high-tech manufacturing also led,            “R the prime example of ‘Open for Biz.’ The
                                                                             Jose is & D tax credits must be made permanent.”
but with 29 percent of the respondents. The loss of these participants       Mayor’s tone from the top is: make it easy to get a
is consistent with data reported elsewhere.4 Clearly, Silicon Valley is          “San Jose is the prime do whatever is possible to
                                                                             license and approvals, andexample of ‘Open for Biz.’
going through change in terms of its major employment sectors.                   The Mayor’s tone from the
                                                                             attract business to move in.” top is: make it easy
                                                                                 to get a license and approvals, and do whatever is
                                                                                 possible to attract business to move in.”
                                                                             “Regulation, litigation, and cost of doing business
Notes                                                                        continue to stifle growth in the Valley.”
                                                                                 “Regulation, litigation, and cost of doing business
 1 “Valley recovery faces big roadblocks, reports say,” San Jose                 continue to stifle growth in the Valley.”
                                                                             “I was offered four opportunities to move to the Bay
 Mercury News, February 11, 2010.                                            Area over the preceding 18 years. Although I was
                                                                                 “I was I turned down the offers to to the the
                                                                             interested,offered four opportunities duemove tocost
 2 “Silicon Valley Could Lose Its Edge, a Report Warns, The New York             Bay Area over the preceding 18 years. Although
                                                                             of home ownership. And now seeing the mess in the
 Times, February 11, 2010.                                                       I was interested, I turned down higher education)
                                                                             educational system (both K-12 andthe offers due to
                                                                                  very glad home stayed in And now seeing
                                                                             I’mthe cost of to haveownership.New England to the
 3 “’Green Economy’ Growing in state despite recession,” San Jose                mess in kids.”
                                                                             educate ourthe educational system (both K-12 and
 Mercury News, December 9, 2009.                                                 higher education) I’m very glad to have stayed in
                                                                                 New England to educate to kids.”
                                                                             “Allow repatriation of profitsour be reinvested in
 4 See “Tech feels job-loss pinch,” San Jose Mercury News,                   California Business expansion.”
 December 19, 2009.                                                              “Allow repatriation of profits to be reinvested in
                                                                                 California Business expansion.”




                                                                                                               2010 CEO Business Climate Survey 9
          Survey Results                                          5. If Subtracted, How Many?
                                                                  < 20                                          37%

                                                                  21-100                                        41%
          1. Which Of The Following Most Closely Describes Your
          Industry Sector?                                        101-250                                       10%

          Education                                       7%      251-500                                       10%

          Financial/Professional/Venture Captial          18%     501-1,000                                      0%

          Gen. Manufacturing/Aerospace/Defense            5%      More Than 1,000                                0%

          Health Care/Bio-Tech                            6%      Added Or Stayed The Same                       0%
Results




          High-Tech Manufacturing                         19%     Don’t Know/No Answer                           2%

          Internet/Communications                         10%

          Utilities/Energy                                7%
                                                                  6. If Subtracted, Were Most Of The Jobs:
          Transportation                                  1%      Permanently Eliminated                        57%


          Software                                        6%      Temporarily Eliminated                        35%


          Don’t Know/No Answer                            0%      Added Or Stayed The Same                       0%


          Other                                           22%     Don’t Know/No Answer                           8%




          2. Number Of Employees In Silicon Valley
                                                                  7. If Your Company Moved Jobs Out Of State, What Was
          < 20                                            15%
                                                                  The Most Important Reason?
          21-100                                          21%
                                                                  Lower Land/Lower Infrastructure Costs          5%
          101-500                                         31%
                                                                  Reduced Labor Costs                            7%
          501-1,000                                       11%
                                                                  More Available Workforce                       5%
          1,001-5,000                                     19%
                                                                  Less Regulation                                0%
          5,001-10,000                                    2%
                                                                  Proximity To Customers                         2%
          10,001 Or Higher                                1%
                                                                  Government Incentives In New Location          2%
          Don’t Know/No Answer                            0%
                                                                  Lack Of Tax Policy Incentives                  0%

                                                                  Corporate Taxes Too High                       0%
          3. Since January 1, 2009, Have You Added, Stayed The
                                                                  More Convenient Supply Chain                   0%
          Same, Or Subtracted Jobs In Silicon Valley?
                                                                  Jobs Were Not Moved Out Of State              59%
          Added Jobs                                      39%
                                                                  Don’t Know/No Answer                          10%
          Stayed The Same                                 29%
                                                                  Other                                         10%
          Subtracted Jobs                                 32%

          Don’t Know/No Answer                            0%
                                                                  8. If Your Company Moved Jobs Out Of The U.S., What
                                                                  Was The Most Important Reason?
                                                                  Lower Land/Lower Infrastructure Costs          0%
          4. If Added, How Many?
                                                                  Reduced Labor Costs                           19%
          < 20                                            58%
                                                                  More Available Workforce                       0%
          21-100                                          30%
                                                                  Less Regulation                                0%
          101-250                                         7%
                                                                  Proximity To Customers                        10%
          251-500                                         2%
                                                                  Government Incentives In New Location          5%
          501-1,000                                       0%
                                                                  More Convenient Supply Chain                   0%
          More Than 1,000                                 2%
                                                                  Jobs Were Not Moved Out Of The Country        48%
          Subtracted Or Stayed The Same                   0%
                                                                  Don’T Know/No Answer                          14%
          Don’t Know/No Answer                            2%
                                                                  Other                                          5%




          10 Silicon Valley Leadership Group
9. How Do You See Job Growth In Silicon Valley In Your     12. What Are The Top Business Challenges In Silicon
Industry Sector In 2010?                                   Valley?
Better                                             51%     Business Regulations                                           39%

Worse                                              16%     Business Taxes                                                 48%

No Change                                          27%     Employee Recruitment/Retention Costs                           56%

Don’t Know/No Answer                               6%      Energy Costs                                                   12%

                                                           Frivolous Lawsuits                                             22%

                                                           Health Care Costs                                              43%
10. How Do You See Job Growth In Silicon Valley For Your
                                                           High Housing Costs For Employees                               73%
Company In 2010?




                                                                                                                                          Results
                                                           Immigration: H1-B And/Or Green Cards                           24%
Better                                             58%
                                                           Intellectual Property Protection Costs                          9%
Worse                                              7%
                                                           Overtime/8-Hour Work Day Requirement                            7%
No Change                                          33%
                                                           Paid Family Leave                                               0%
Don’t Know/No Answer                               3%
                                                           State Budget Structure                                         48%


11. What Are The Top Benefits/Strengths Of Doing           Traffic Congestion                                             35%

Business In the Silicon Valley?                            Unemployment Insurance Costs                                    3%

Access To Airports/Seaports                        7%      Water                                                           4%

Access To Skilled Labor                            71%     Workers’ Compensation Costs                                     8%

Access To Venture Capital                          20%     Don’t Know/No Answer                                            1%

Arts And Culture                                   3%      Other                                                           5%

Climate/Weather                                    20%

Entrepreneurial Mindset                            66%     13. If You Answered “B” (Business Regulations), Which Of
                                                           The Following Challenges Applied:
Ethnic Diversity                                   14%
                                                           Ab 32 Requirements                                             12%
Merit-Based Work Environment                       12%
                                                           Green Chemistry Regulations                                    22%
Pacific Rim Locations                              8%
                                                           Import-Export Controls                                         13%
Proximity To Customers And Competitors             46%
                                                           Sarbanes-Oxley                                                 42%
World Class Universities                           27%
                                                           Wage And Hour Issues                                           40%
Don’t Know/No Answer                               0%
                                                           Don’t Know/No Answer                                           22%
Other                                              3%
                                                           Other                                                          18%




                                                           14. What Are The Top Cost Of Living Challenges In Silicon
                                                           Valley For Workers And Their Families?
                                                           Child Care                                                     20%

                                                           Energy Costs                                                   12%

                                                           Health Care                                                    35%

                                                           High Taxes                                                     63%

                                                           Higher Education                                               11%

                                                           Housing Costs                                                  86%

                                                           K-12 Education                                                 28%

                                                           Traffic Congestion                                             36%

                                                           Don’t Know/No Answer                                            0%

                                                           Other                                                           1%




                                                                                                    2010 CEO Business Climate Survey 11
          15. What Top 5 Actions Could The State Government Take                     17. What Has Happened To Your Workers’ Compensation
          To Improve The Business Climate For Your Company?                          Since The State Overhauled The Program In 2004?
          Avoid Split Roll Tax                                                 14%   Stayed The Same                                                       7%

          Continue Research And Development Tax Credit                         53%   Increased Between 0-10%                                               13%

          Help Create More Affordable Housing                                  43%   Increased By 11-25%                                                   11%

          Improve Higher Education                                             35%   Increased More Than 25%                                               1%

          Improve K-12 Education                                               60%   Decreased Between 0-10%                                               11%

          Invest In Broadband Deployment                                       13%   Decreased By 11-25%                                                   3%

          Invest In Traffic Relief/Traffic Transportation Improvements         49%   Decreased More Than 25%                                               3%
Results




          Limit Frivolous Lawsuits                                             32%   Don’t Know/No Answer                                                  50%

          Lower California’S Minimum Wage To The National Minimum Wage         5%

          Lower Energy Costs                                                   22%   18. What Percent Of Your Total Business Costs Are
                                                                                     Attributable To Healthcare?
          Offer Full Sales Tax Exemption For Purchases Of Manufacturing
                                                                               22%
          Equipment                                                                  1-5%                                                                  25%


          Reduce Unemployment Insurance Cost Increase                          12%   6-10%                                                                 23%


          Reduce Workers Compensation Rates                                    18%   11-15%                                                                14%


          Reinstate Overtime After A 40-Hour Work-Week Rather Than An 8-Hour         16-20%                                                                7%
                                                                               20%
          Work Day                                                                   Over 20%                                                              2%

          Repeal Paid Family Leave Benefits                                    3%    Don’t Know/No Answer                                                  29%

          Streamline Regulatory And Permit Approvals                           35%

          Don’t Know/No Answer                                                 1%

          Other                                                                10%
                                                                                     19. What Top Actions Could Federal, State And/Or Local
                                                                                     Governments Take In The Health Care Arena?
                                                                                     Enable Pooled Health Insurance Purchasing By Companies                42%


          16. What Top Changes Could Local Government                                Enact A “Shared Responsibility” Program That Requires Contributions
                                                                                                                                                           26%
          Undertake To Improve The Business Climate For Your                         From Individuals, Employers, And The State

          Company?                                                                   Invest In Health It And Infrastructure                                38%

          Approve More Affordable Home Developments                            49%   Mandate Health Insurance Coverage For Individuals                     17%

          Ease Local Street And Road Congestion                                45%   Offer Low-Cost Health Insurance For All Children                      13%

          Enhance Arts And Culture                                             3%    Offer Low-Cost Health Insurance Purchasing By Companies               17%

          Expand Convention Center Space                                       5%    Provide Tax Incentives For Employee-Paid Benefits                     36%

          Fund More Street Maintenance/Pothole Repairs                         11%   Recognize Employer Wellness Programs With Insurance Rate
                                                                                                                                                           37%
          Improve K-12 Public Education                                        64%   Reductions


          Improve Public Safety                                                15%   Reduce And Streamline Operating Regulations For Providers And
                                                                                                                                                           20%
                                                                                     Insurers
          Provide More Parks And Open Space                                    7%
                                                                                     Don’t Know/No Answer                                                  7%
          Reduce Public Pension Costs                                          30%
                                                                                     Other                                                                 11%
          Streamline Permit Approval Process                                   38%

          Support Development Of Professional Sports Facilities                7%

          Other                                                                5%




          12 Silicon Valley Leadership Group
20. In 2006, California Enacted Ab 32, The Global Warming                                   23. In Which Of The Following Areas Would You Support
Solutions Act, To Roll Back Greenhouse Gas Emissions                                        Changes In State Expenditures
Below 1990 Levels By 2020. In Which Of The Following                                                                               Increase         Decrease      Stay the same
Areas Is Your Company Working To Meet Our State’s
Greenhouse Gas Reduction Targets?                                                           K-12 education                          67%                4%             28%

                                                                                            Higher education                        48%                9%             43%
Alternate Commute Programs For Employees For Networked Work
                                                                              31%
Facilities                                                                                  Welfare and human services               7%               45%             49%

Fleet Conversion To Hybrid And/Or Electric Vehicles                           17%           Health care                             17%               36%             47%

Green Building For Both Retrofits And New Construction                        45%           Prison expenditures                      1%               86%             14%

Incentive Programs For Employees Such As Installing Solar Or                                Transportation and infrastructure       53%                9%             38%




                                                                                                                                                                                    Results
                                                                              12%
Purchasing Hybrids
                                                                                            State government employees              19%               59%             22%
More Efficient Data Centers                                                   51%

More Efficient Heating/Cooling Systems                                        47%           24. Are There Other Areas That You Recommend Cuts In
More Efficient Lighting Systems                                               68%           To Help Balance The State Budget?
Participation In Bike-To-Work Programs, Shuttles Or Other                                   Top Responses                                                      # Respondents
                                                                              39%
Transportation Alternatives                                                                 Reduce Size of Government                                                 4

Participation In PG&E Energy Efficiency Rebate Programs                       32%           Eliminate duplicitous State agencies                                      3

Partnering In Sustainable Silicon Valley                                      14%           Reduce public employee pensions                                           3

Solar Energy Investment In Your Buildings                                     23%

Water Conservation                                                            46%

Other                                                                          9%




21. What State Revenue Changes Would You Support?
                                             Increase          Decrease     Stay the same

Corporate Tax                                  9%                47%            44%

Sales Tax                                      29%               28%            44%

Personal Income Tax                            29%               28%            44%

Property Tax                                   19%               27%            54%

Vehicle License Fee or Car Related Tax         60%               13%            27%

Gas Tax                                        70%               11%            19%




22. Are There Other Sources Of Revenue That You
Recommend To Help Balance The State Budget?
Top Responses                                                             # Respondents

Repeal Proposition 13                                                          5

Legalize Marijuana                                                             4

Tax Oil                                                                        3

Alcohol and Cigarette Tax                                                      3

VAT                                                                            2




                                                                                                                                              2010 CEO Business Climate Survey 13
          25. Generally Speaking, Would You Say That                                                          27. Which 3 Of The Following Issue Areas Deserve The
          Statewide legislation is on the right track (1) or the wrong track (5) in creating a healthy
                                                                                                              Most Attention From The Federal Government For Silicon
          business climate?
                                                                                                              Valley?
                                                                                                              Broad band deployment                           11%
          1 Right                                                                             1%

                                                                                                              Legislation to reduce greenhouse gases          34%
Results




          2                                                                                   6%

                                                                                                              Comprehensive health care reform                47%
          3                                                                                   21%

                                                                                                              Corporate governance                            11%
          4                                                                                   36%

                                                                                                              Cybersecurity                                   10%
          5 Wrong                                                                             36%

                                                                                                              Deferral/repatriation of foreign earnings       28%
          Statewide regulations are on the right track (1) or wrong track (5) in creating a healthy

          business climate?                                                                                   The federal deficit                             45%

          1 Right                                                                             2%              H1B visa/green card reform                      27%

          2                                                                                   6%              Intellectual property protection                16%

          3                                                                                   27%             More free trade                                 14%

          4                                                                                   35%             Patent reform                                   9%

          5 Wrong                                                                             29%             Rejection of the “Employee Free Choice” Act     12%

          The governor is on the right track (1) or wrong track (5) in creating a healthy business            Sarbanes-Oxley reform                           18%
          climate?
                                                                                                              Other                                           9%
          1 Right                                                                             14%

          2                                                                                   25%

          3                                                                                   38%

          4                                                                                   14%

          5 Wrong                                                                             9%

          The state legislature is on the right track (1) or wrong track (5) in creating a healthy business

          climate?

          1 Right                                                                             1%

          2                                                                                   5%

          3                                                                                   16%

          4                                                                                   31%

          5 Wrong                                                                             47%




          26. What Should Be The Top Priorities For The Silicon
          Valley Leadership Group That Would Be Worth Your
          Personal Involvement?
          Top Responses                                                                 # Respondents

          Education                                                                           35%

          Taxes                                                                               26%

          Climate Change / Energy / Environment                                               22%

          Transportation                                                                      12%

          Health Care                                                                         12%




          14 Silicon Valley Leadership Group
Respondents*
Accenture                               DeVry University                        McAfee                                    Silicon Valley/San Jose Business Journal

Adura Technologies, Inc.                DeVry University-Bay Area               Mckinsey                                  SiTime Inc.




                                                                                                                                                                            Results
Affymetrix inc.                         EFI                                     MetricStream                              Sling Media, Inc.

Agilent Technologies                    Egon Zehnder International              MIPS Technologies                         Solar Junction

Akeena Solar                            El Camino Hospital                      MoSys, Inc.                               Solaria

AKRAYA, Inc,                            eLynx                                   MSquared                                  SolFocus, Inc.

ALOM                                    Empire Broadcasting Corp.               NASA                                      SpikeSource, Inc.

ALZETA Corporation                      Exponent                                National Hispanic University              Splice Communications

American Airlines                       Extron                                  NBC Bay Area                              SunPower

Aon Risk Services                       Fairchild                               NCPB Inc/KQED-KTEH                        Symmetricom

Applied Materials                       Finelite, Inc.                          NetApp                                    Synaptics

Athletics Investment Group              Golden Gate University                  Netgear                                   Synopsys, Inc.

BAE Systems Santa Clara                 Goodwill Industries of Silicon Valley   NetLogic Microsystems                     Tagent

Bank of America                         Gordon Biersch Brewing Company          Novellus Systems San Jose                 Targus Human Capital Partners

Bell Microproducts                      Greenlight Organic                      NXP Semiconductors USA                    Tessera, Inc.

Bentek                                  Harris Stratex Networks                 oDesk                                     The Health Trust

Better Place North America              Heritage Bank of Commerce               Ooma Inc.                                 The NASDAQ OMX Group

Bloom Energy                            Hitachi GST                             Palm, Inc.                                Trimble

Borel Private Bank & Trust Co.          HP                                      Palmer College of Chiropractic            Turner

Brocade                                 IBM Corporation                         Palo Alto Medical Foundation              UC Santa Cruz

CA, Inc.                                iControl Incorporated                   Patelco Credit Union                      Union Bank

Cadence Design Systems                  Innovalight                             PBS Group, LLC                            United American Bank Shahrzad Pantera

California State University, East Bay   Integrated Science Solutions, Inc.      PG&E                                      Varian Medical Systems

California Strategies                   Intel                                   Plantronics                               Venrock

California Water Service Company        Intevac Inc                             PMC                                       Virage Logic Corporation

CARGILL                                 JDSU                                    Presencia, LLC                            Virgin America

CEO ETM-Electromatic Inc.               Johnson & Johnson                       PricewaterhouseCoopers                    VirtualLogix

Citibank, N.A.                          KICU TV 36                              Renesas Technology America, Inc.          Webcor Builders

City National Bank                      KLA-Tencor                              San Jose Giants                           Wells Fargo Bank

ClearEdge Power                         LBNL                                    San Jose Mercury News                     Wyse

CMEA Capital                            Lehigh                                  San Jose State University                 XenoPort, Inc.

Cobalt Technologies                     LibraryWorld, Inc.                      San Jose Water Company                    Xyratex International

Coulomb Technologies                    LifeScan, Inc.                          SanDisk

Cowen & Company                         Lincoln Law School of San Jose          Santa Clara University

Crescendo Ventures                      Linden Research                         SAP Labs

CSC                                     Lockheed Martin Space Systems Company   Silicon Valley Bank

Dell, Inc.                              Lucile Packard Children's Hospital      Silicon Valley Leadership Group

Deloitte                                Mattson Technology Inc                  Silicon Valley Sports and Entertainment   *Some respondents are anonymous.




                                                                                                                                      2010 CEO Business Climate Survey 15
About the Leadership Group

Since 1978
Silicon Valley remains the innovation capital of the world, and the
mission of the Silicon Valley Leadership Group is to tackle those
issues that will help Silicon Valley remain the international capital of
innovation, with a healthy business climate and a great quality of life for
our workers.


Board of Directors                                                            Staff
Tom Werner, Chair, SunPower                                                   Carl Guardino, President & CEO
Mike Klayko, Vice Chair, Brocade                                              Dennis Cima, Senior Vice President, Public Policy
Robert Shoffner, Secretary/Treasurer, Citibank                                Shiloh Ballard, Vice President, Housing and Community Development
Aart de Geus, Past Chair, Synopsys                                            Phyllis Claassen, Vice President, Administration
Michael Splinter, Past Chair, Applied Materials                               Bob Hines, Vice President & General Counsel
John Adams, Wells Fargo Bank                                                  Steve Wright, Vice President, Strategic Communications
Shellye Archambeau, MetricStream, Inc.                                        Kirk Everett, Vice President, Government Relations and Tax Policy
Richard Baird, IBM Corporation                                                Brian Brennan, Senior Director, Member Services
Ned Barnholt, KLA-Tencor                                                      Emily Lam, Senior Director, Health Care & Federal Issues
Don Bell, Bell Micro                                                          Mike Mielke, Senior Director, Environmental Programs & Policy
George Blumenthal, University of California, Santa Cruz                       Bena Chang, Senior Associate, Housing & Transportation
Tom Bottorff, Pacific Gas & Electric                                          Gavin Douglas, Associate, Online Programs
Rami Branitzky, SAP Labs North America                                        Anne Smart, Associate, Energy & Enviornment
Tory Bruno, Lockheed Martin Space Systems Company                             Nick Rajkovich, Associate, Housing & Community Development
David Cush, Virgin America                                                    Ashley Smith, Office Manager
David Dewalt, McAfee, Inc.                                                    Justin Marlaire, Executive Assistant
Raquel Gonzalez, Bank of America
Tim Guertin, Varian Medical Systems
Jon Hoak, Hewlett-Packard Company
Kevin King, Affymetrix
Paul Locatelli, S.J., Santa Clara University
Tarkan Maner, Wyse Technology
Ken McNeely, AT&T California
Len Perham, Monolithic Systems
Kim Polese, SpikeSource, Inc.
William E. Rhodes III, BD Biosciences
Alan Salzman, VantagePoint Venture Partners
Mac Tully, San Jose Mercury News
Dan Warmenhoven, NetApp, Inc.
Bill Watkins, Bridgelux
Kenneth Wilcox, SVB Financial Group




16 Silicon Valley Leadership Group
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All rights reserved
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Silicon Valley Leadership Group
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