Clinton and his cronies aren't kidding. They're dead serious about technology--and nowhere was this more apparent than at the 1993 Technology Summit hosted by the University of California's Berkeley Roundtable on the International Economy (BRIE) and the U.S. Department of Commerce.
The unprecedented two-day symposium brought together industry, research, and government leaders to begin defining the nation's technological future in an effort to ensure U.S. worldwide technological superiority as we move into a technology-based global economy. On the chance that things would get dull, Commerce Secretary Ron Brown used the occasion (and the National Institute of Standards and Technology's Advanced Technology Program) to dole out more than $60 million in grants to high-tech companies. Brown could have saved his breath and some of our money. At this conference, words really did speak louder than spare change. Government leaders were there to listen, and they got an earful.
Unlike previous administrations, this government sees technology as more than just big toys for big boys. From clean cars to the information highway, high technology is the keystone of Clinton's economic policy--it's the engine of economic growth for creating new jobs, building new industries, and improving our standard of living. BRIE codirector Michael Borrus echoed this in his opening words, "there is no long-term low-tech prosperity for the American economy."
Although there weren't enough soapboxes to go around, the consensus was that continued technological leadership hinges on the U.S.'s commitment to improve education, further research, strengthen intellectual property rights, provide ready access to international trade, and foster a climate favorable to entrepreneurship.
If any of these topics is uniquely American, it's entrepreneurship. Virtually every technologically advanced country in the world supports education, intellectual property rights, and access to trade. But unlike the U.S., other countries haven't fostered a fierce spirit of entrepreneurship. That's how Bill Gates was able to build Microsoft, how the two Steves created Apple, and how Michael Dell was able to launch Dell Computer (or whatever it's called this week) from his college dorm room. More telling, it's also why people bitten by the entrepreneurial bug--Borland's Philippe Kahn and Logitech's Pierluigi Zappacosta spring to mind--came to the U.S. to make their fortune.
As numerous attendees at the Technology Summit vigorously pointed out, however, this entrepreneurial spirit is threatened by a bill currently before Congress.
Particularly in the computer industry, stock options have been the tool that's enabled start-up companies with limited resources to attract top-flight talent. The promise of riches down the road and the chance to exercise creativity has proven to be an irresistible magnet for those frustrated by the stifling stability of large corporations. Granting stock options is one of the few effective ways we've discovered of starting up a company while empowering and involving employees. Thanks to stock options, every employee at Adobe has an equity position, and one out of every twenty Microsoft employees is a millionaire.
Ironically, changes to how accountants and revenuers treat stock options are at the heart of the challenge to entrepreneurship. In a proposal by the independent Financial Accounting Standards Board (FASB)--and championed in Congress by Senator Carl Levin (D-Mich.)--stock options would be considered compensation instead of incentive. Thus stock options, which give you the right to buy shares at a specified price, would be charged against a company's earnings when they're granted, not when they're exercised. If set into law, the rule would likely eliminate or limit the granting of stock options for employees at smaller companies. In one report, 90 percent of several hundred start-up firms surveyed said that deducting the value of stock options from profits would either cause them to eliminate options altogether or grant them to only selected executives.
Standing up for start-ups are Senators Joseph Lieberman (D-Conn.), Dianne Feinstein and Barbara Boxer (D-Calif.), and Connie Mack (R-Fla.), who've introduced bill S.1175 to block the FASB's proposal and Levin's legislation. The Lieberman bill, also known as the 1993 Equity Expansion Act, is still in committee, but expected to come to a vote this session. S.1175 would create a new employee stock option allowing tax-free exercise of options, cut in half the capital-gains tax on sale of the stock held for two years or more, and allow companies offering options to forgo their own options-related tax deductions, enabling them to continue offering deductible stock options.
Entrepreneurship as expressed in law and spirit is one edge the U.S. enjoys over its increasingly competitive international trading partners. If Clinton and Gore are indeed serious about the U.S. maintaining technological superiority, denouncing the FASB/Levin proposal and backing S.1175 are opportunities to put words into action.
Jonathan Erickson
editor-in-chief
Copyright © 1994, Dr. Dobb's Journal