John Chambers, Cisco Systems' president and chief executive officer, took Silicon Valley executives to task Monday night. He accused them of undermining the value of developing companies by giving themselves and their employees vested stock options that let them cash out after only three years of investment.
Chambers could have listed his own stock situation as an example of the value of waiting for investments to fully mature. Earlier this month, he registered to sell 1.15 million shares of Cisco stock, worth about US$151.5 million, a Cisco spokeswoman confirmed.
Nonetheless, Silicon Valley's reputation as the country's leader in high-technology product development is endangered by the new era of dot-com entrepreneurs and employees poised to cash out of their startups as soon as they can, he said.
Speaking to more than 500 entrepreneurs and high-tech executives at the Churchill Club in Palo Alto, Chambers said both US government regulators and the general public have historically admired the Silicon Valley culture that repeatedly leads to technology breakthroughs.
But that high regard is under threat, he said. "We are in danger of losing it," Chambers said. "I'd like you to think about the image you leave with the outside world."
Increasingly, startups and other high-tech firms are giving stock options to their executives that can be cashed in after only three years, leading to short-term loyalty to companies, Chambers said.
"Are we hired guns?" Chambers asked his audience. "Each of us has the capacity to change that perception."
Cisco isn't following the three-year trend, Chambers said. "We moved our (stock) options (vesting period) to five years," he said. "We did it with the perception that it is going to build value to last."
Chambers also said the valley should be a leader in pushing for education reform that will allow the young to bridge the "digital divide" which separates those with access to technology from those without such access. To that end, he encouraged support for Proposition 26, that would reduce the two-thirds requirement for passage of local school bonds -- which raise money for school projects -- to a simple majority. The measure will appear on the March 7, 2000, California ballot.
"Do we want a digital divide or an Internet gateway?" he asked. "We have a once-in-a-lifetime opportunity to make education the gateway (to the fast-changing digital world)," he said.
Chambers has worked at Cisco for nine years, the last five as CEO as he shepherded the networking company to its current status as one of America's leading IT corporations.
His notice of intent to sell his stocks, which he filed with the US Security and Exchange Commission (SEC) is "pretty standard stuff," according to Blair Christie, a Cisco investor relations manager.