Backlash in Silicon Valley: The Future of Business Is Business as Usual

In recent months, a backlash against Bay Area technology firms has picked up considerable steam. Critics have accused the Googles and Google-wannabes of Silicon Valley—and the legions of thick-walleted tech workers they employ—of rapidly making San Francisco unaffordable for the merely comfortable (to say nothing of the working poor). Other Silicon Valley quirks—like a disproportionately young and male workforce, and the fleets of employee-only buses that frequent public bus stops—are doing little to counteract the notion that tech firms are changing their neighborhoods, and not for the better.

Tech Comes of Age
Silicon Valley, says Klaus Weber, an associate professor of management and organizations at the Kellogg School of Management, is truly coming of age. According to Weber, all of the negative attention is healthy in a way: there’s no reason why Facebook or Apple ought to be exempt from the level of scrutiny that other large firms routinely receive. “If you live in New York, or [other] financial centers like London, UK, the high salaries of the bankers ruin the housing market for everyone else, and companies are criticized for that,” he points out. Why should tech get a free pass?

Still, the fall from grace has been a long one. “The amazing thing about Silicon Valley, and the biotech industry there too, is that for a long time they were almost immune to [criticism],” says Weber. “They’ve been kind of the golden child, the epitome of the American dream, the pride of the country.”

In part (and somewhat ironically), the glowing reputation stemmed from how well the tech firms treat their employees: the high salaries, the pleasant work environments, and the benefits—like those much-despised private buses. “Few companies offer those kinds of perks these days,” Weber points out. Of course, the reality is that Google, Apple, and the rest don’t pamper their employees to be nice. They do it to attract high-demand workers who can afford to be choosy. Still, the tactic (in addition to the companies’ “cutting edge and cool” factor) earned them a great deal of goodwill—and kept them out of activists’ line of fire.

Beyond Growing Pains
But even favorite children grow up. And when they “become institutions like other companies,” as Weber puts it, “people are sort of disappointed in that. You wanted to think of them as different.” This sense of betrayal—that a company with a motto as refreshing as “Don’t be evil” can at times be a pretty bad neighbor—could help explain the extent of the backlash.

Yet—why all the negative attention now? Weber pinpoints some national trends at play:

• The Occupy movement, which has brought economic inequality to the forefront of policy discussions in America.
• Recent bad publicity about the low effective tax rates paid by many tech companies. This seems to particularly rankle people because, although all companies engage in a certain amount of tax shenanigans—like setting up offshore subsidiaries in nations with no corporate income tax—tech companies are better at tax shenanigans. That’s because (and this is another sore subject) they don’t actually employ that many Americans, or make that many products in the US. “Those are American companies. We’re so proud of them, and they make us wealthy, and their products are everywhere,” says Weber. “But hey! They [are] produced in China, and the profits go to some offshore country, and they don’t pay taxes. And by the way, they only employ a few thousand people in the US. So they look great and important, but for jobs and tax revenues, they maybe don’t do as much.”
• Cyclical changes in how the public perceives a company’s obligations to its community. At the heart of the matter, says Weber, is the question of how much we can really expect from companies. Data suggests that demand for corporate social responsibility tends to peak every 20 or 25 years. Today the public expects levels of social responsibility that haven’t been seen since the prerecession 70s. “We’ve caught it sort of on an upswing,” says Weber, “and the question is how long its going to last. I’m pretty sure it’s going to go down again.”

Best Feet Forward
Silicon Valley has much to lose from the backlash: its reputation, its ability to attract the best and brightest, and even its likelihood of staying under regulators’ radars. “If you’re not in good standing or come under scrutiny, it can make doing business much harder in a very broad sense,” explains Weber.

So what’s to be done? Tech companies would be smart to expand their (historically anemic) public relations departments and start thinking about their corporate images the way everyone else does: strategically. “And with that I mean not just window dressing!” says Weber. Sure, a company may encourage volunteer work or even initiate programs where its employees teach IT in local high schools. A program like that can be great, says Weber, and draw on a company’s skills. But it can also come across as self-serving. More importantly, “it doesn’t really address the issue of inequalities, gentrification, and those kind of things.”

Photo credit: Håkan Dahlström.