Power Politics In Silicon Valley?

High tech gears up to fight off the tort lawyers

It's barely sunrise on Aug. 9, and the titans of technology are filing into a meeting in the heart of Silicon Valley. On 24 hours' notice, Hewlett-Packard CEO Lewis Platt, Intel Chairman Gordon Moore, and Apple CEO Gilbert Amelio join 45 other leaders from companies representing more than $370 billion in market value to tackle what they say is a life-threatening issue. What has roused them from bed so early? A ballot initiative that, if passed this fall, would make it easier for investors to sue companies whose stock price drops sharply. And directors and officers could not be indemnified if they are found to have contributed to the wrongdoing. "It's like a neutron bomb going off in the boardroom," says Steven P. Jobs, CEO of Pixar Inc. "There will be no one left in the chairs."

CIRCLED WAGONS. Such emotion from Jobs and others isn't surprising. The volatile technology sector is especially vulnerable to claims of stock fraud. What is new is the sleek lobbying machine emerging in an industry that had previously been politically inept. For the first time, the high-tech community is rallying its considerable resources to form an organized-- and professional--coalition. The momentum is driving Silicon Valley to establish a permanent bipartisan outfit, called the California Technology Alliance, to address concerns ranging from trade issues to capital-gains taxes. "Until now, high-tech, high-growth companies haven't been involved in government," says venture capitalist L. John Doerr, host of the dawn powwow. "That has changed forever."

What's rousing the insular community is the realization that Silicon Valley's political muscle isn't nearly as impressive as its economic might. Now technology companies are being drawn together by a common threat: a ballot proposal known as Proposition 211 that would turn California into a haven for securities suits. A handful of small companies, such as San Jose chipmaker Monolithic System Technology Inc., has even vowed to abandon the state if the measure passes. Many directors of public companies are threatening to resign.

Proponents of Prop. 211, who include a nationwide coalition of plaintiffs' lawyers and consumer groups, argue that federal law reform passed last year makes it too hard for ripped-off shareholders to recover their money. By making it easier for investors to sue companies that exaggerate their prospects, the state initiative, they contend, will protect small investors and ensure healthier markets. "Corporate America knows that if it beats us, then it is home free to do anything it wants," says plaintiffs' attorney Melvyn I. Weiss.

The last time Silicon Valley and trial lawyers squared off was in March, when the industry launched three initiatives aimed at curbing litigation. But it raised money too late to bring its message to the voters, and the measures failed. Not this time. By June, nearly $7 million had been collected. Even non-California companies such as Compaq Computer Corp., feeling threatened by 211's possible effects on their directors and bottom line, are chipping in. "Having learned the hard way, we've gotten people on fire about this," says Intuit Inc. co-founder Tom Proulx, who ran the March campaign.

Apart from better fund-raising, this campaign is better managed. Ads began running three days before the proposition was even assigned a number. When it got the 211 label, the campaign was ready to go, since it had already shot five separate TV spots using five different numbers. In July, organizers recruited John A. Young, former CEO of Hewlett-Packard Co., to carry technology's message coast to coast. Playing to its strengths, Silicon Valley is also launching a sophisticated cybercampaign, linking its campaign Web site to internal networks of many companies.

A big payoff came on Aug. 7, when Clinton shocked his handlers--and trial lawyers--by opposing Prop. 211. Silicon Valley hopes it's just the beginning. "We will emerge from this campaign as an industry with a lot of political presence," says Proulx. Ironically, it plans to do that by mirroring its archrivals: the tort lawyers.