James Harding?s view from the valley (16 July)

Details of CEOs salaries for last year show that 771 top executives received more than $1 billion

If you are moaning about things at work, spare a thought for those who are being sacked or made redundant. A recent report in Silicon Valley has examined methods of getting rid of staff and how to do it as humanely as possible, with the minimum disruption. Apparently, Hewlett Packard HQ in Palo Alto is careful to avoid disruption ? not only does it instantly escort fired staff out of the building, it packs up their belongings and a big delivery man drops them off at the former employee?s house. Ouch.

Even the Americans agree that the amount of legal action over here is ridiculous but thankfully a recent ruling may change that. IT is a young, turbulent industry and the value of an IT company is tied into intellectual property which can be made obsolete overnight, so stock prices are particularly vulnerable to class-action lawsuits.

These come about if the company is not doing as well as it says it is. When a company turns in disappointing results, shareholders can sue it because the value of their investments has fallen. The suits are so common that they don?t make the headlines of the local papers in Silicon Valley any more. It?s crazy.

If it were illegal in the UK for marketing staff to make positive statements about companies when they are not doing very well, then a few high-profile staff would be in court. Apple?s marketing staff would have very little work left to do, for a start.

But a case of this nature against Silicon Graphics ended in defeat for the plaintiffs because the judge said they had not proven the case adequately, referring to a new US act intended to cut down on ?meritless? legal action of this type.

The only certain winner in all this ? the shareholders? lawyer ? said he will appeal, but I hope the decision is upheld. Investors have made a small fortune from IT stock in recent decades, but they do not give the IT industry any credit for that. Returns are not guaranteed, they knew the risks, and if the $100,000 investment made five years ago is only worth $200,000 now and not $500,000, they can lump it.

As I am on the subject of lumps, I want to tell you about the earnings of the top executives in Silly-con Valley, which were revealed in the local paper recently. Including bonuses, stock options and other expenses, Lawrence Hambly, VP of Sun Microsystems, made a whopping $2.4 million. And he only runs a division of the company.

Of the more familiar names, Adobe CEO John Warnock banked $2.7 million in 1996 and he was a lowly 85th on the list of top earners. Former Apple CEO Michael Spindler made $4.7 million, Sun CEO Scott McNealy took home $7.2 million, Seagate CEO Al Shugart reaped $16.4 million and Oracle president Ray Lane pocketed a cool $19.9 million.

For a year?s work, these figures seem excessive to me and it makes you wonder if anyone is worth that much. Yes, they have more responsibility, but do they work 100,000 times harder than most computer company staff? When you think that Oracle CEO Larry Ellison took $19 million to spend on planes and toys in 1996, it gets worrying. It is worrying that a guy like McAfee CEO Bill Larson could earn $23 million.

But even he wasn?t top of the list. Cisco CEO John Chambers took away $33.2 million ? the sum he could expect if he were the sole winner of a National Lottery jackpot that had rolled over three times ? and Intel CEO Andy Grove made an amazing $97.9 million in 1996. Yes, $97.9 million. That?s more than many countries? gross domestic product.

More than $94 million of that figure was made in stock options and the pay of the top 771 executives in Silicon Valley was over $1 billion, double the 1994 figure. Although the industry leaders? salaries rose by an average of just three per cent ? the same as the average in the industry ? the stock options boosted their income to unprecedented levels.

It is fairer that these executives rely more on stock, and therefore the performance of their companies, for their income. But the levels of compensation for these men is surely driven by Mammon and the boom in IT company share prices. The only justification most companies offer is that top executives need vast pay packets to stop them moving on.

That is a weak argument and it cannot cover up the fact that IT leaders? pay smacks of greed. The only part of this that makes me smile is the fact that Grove could have made an extra $33 million if he had held on to his Intel stock for a few more months. Still, you don?t worry about a few extra bucks when you are on $97.9 million, do you?

Since I moved to Silly-con Valley, I have heard some of the ?cool lingo? that upwardly mobile people in IT use, but I am fighting hard not to repeat any of it myself.

Let me give you an example. ?Prairie dogging? is the term to describe the activity at companies with cubicle-style offices when something happens and everyone pops their head up to see. To see the effect, try going into 3Com, for example, and shouting: ?Wow! Look at that!?

So that?s prairie dogging. Another local phrase next week, I?m afraid.