Global Policy Forum

But Company is Better than Some in Larry Land

By Mark Simon

It may be a measure of how shallow life is in Silicon Valley, but Cisco Systems has a reputation as one of the better high-tech companies when it comes to employee relations, charitable donations and civic activism. That means it's either alarming or revealing, depending on the depth of your cynicism, to read yesterday's disclosure by The Chronicle's Kathleen Pender that Cisco paid no federal income taxes last year.

None. Zip. Zero.

It appears that Microsoft did the same thing, as Pender noted, but our expectations for Microsoft are so low that it's hard to be surprised by what it does. Both Microsoft and Cisco took advantage of a special tax loophole that allows the companies to write off the value of stock options exercised by employees. In fiscal year 2000, enough options were exercised at Cisco to wipe out $1.8 billion in federal tax liability. Actually, Cisco employees exercised enough stock options that they could have wiped out tax liability of $2.5 billion. What do you want to bet that Cisco accountants at this very moment are trying to figure out how they can carry over the $700 million in write-offs they didn't need this year?

The easy response, which Cisco officials showed the good sense not to use in Pender's story, is that the employees still paid income taxes on the stock options, so the federal government still got its money. That would be fine if the corporation existed in a vacuum. But, you know, somebody built the freeway. Clearly, individuals pay income taxes because they exist in a society in which we depend on one another, sometimes for services unfelt and unseen, but provided to others for the greater good.

It's not socialism to insist that capitalists recognize that they are lucky to be here and able to make gobs of money. It's a privilege, not an entitlement, as a hard-line conservative might say about regular, run-of-the-mill welfare. That corporate welfare is an entitlement is the kind of thinking you learn to expect in Larry Land, where, as it has been noted, the corporation's problems are everyone's problems, but the corporation's profits are its own.

In Larry Land, named for Oracle CEO Larry Ellison, who has raised selfishness and corporate unconsciousness to a transcendental level, the only service the corporation provides to the community is to be the corporation. The community is here to serve the corporation. But as I noted at the outset, Cisco had a reputation for having zoned itself out of Larry Land. And Cisco CEO John Chambers is no Larry Ellison. Chambers is one of the most politically active high-tech executives -- a major donor to the Republican Party. He is widely thought to be the most likely candidate for high-profile political office from Silicon Valley since high tech became High Tech.

And the stock options at Cisco exist in the larger framework of a company widely respected for an environment in which employees are urged to think of themselves as developing lifelong careers with the company. Chambers is supposed to have called together all the millionaires at Cisco -- something like 9 percent of the employees -- the other day and urged them to start thinking about how they were going to return to the community the wealth they managed to derive from it.

So, to steal a line from Mark Harris' "Bang the Drum Slowly," Cisco is better than some and no worse than most. Still, it appears it is as susceptible as anyone else to the notion that what's good for Silicon Valley is good for the U.S.A., and, dammit, the country ought to start acting that way. Cisco is embroiled in a sticky controversy over its plans to build a $1.3 billion corporate campus on 688 acres of open space in San Jose's Coyote Valley. The company's 19,800 employees all will be headquartered at the site, the last remaining large chunk of undeveloped land in the city.

Under the best of circumstances, Cisco will have to rely on the community at large to help with some of the basic and obvious problems that will arise because of the Coyote Valley development -- not the least of which will be how to get all the people there from somewhere else. If the eventual need is for the expansion of the area's freeways, well, it will take federal money to do that. The thinking in Larry Land, however, is that only Cisco's employees should help pay for new highways with their income taxes, even though it's easy to see that the corporation itself would benefit.

It's fine, even admirable, to develop among employees a sense of long-term loyalty that includes a positive association not just with the company but with the community. But it is galling to see, over and over again, the failure of these companies to grasp that they are our institutions, that they are corporate citizens, and that citizens pay their taxes.

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