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ELECTION '96 | NEWS ANALYSIS

Companies Cheer State Voters' New Attitude

Initiatives: 211's defeat shows that a once-scornful electorate has become more supportive of business' concerns.

November 07, 1996|JULIE PITTA and JAMES FLANIGAN | TIMES STAFF WRITERS

In choosing among the state ballot initiatives, California voters on Tuesday displayed a generally favorable stance toward business and a healthy level of sophistication about the possible effects of the sometimes-complicated proposals.

Business people throughout the state hailed the overwhelming defeat of Proposition 211, the lawyer-sponsored initiative that would have made it easier to sue public companies in California courts when their stocks tumble.

Especially in Silicon Valley, the rejection of 211 was seen as vital in preserving a receptive climate for entrepreneurial companies and advanced technology.

"That proposition was a great threat to business in this state. Its resounding defeat is a green light," said William Hauck, president of the California BusinessRoundtable, a Sacramento-based public policy forum whose 72 members are chief executives of large companies.

The election confirmed a turnaround from the early 1990s' perception that California was an anti-business enclave plagued by workers' compensation fraud and regulators who regarded business people as potential criminals.

Now, state government and the electorate are seen as understanding of the job-creating value of entrepreneurial companies and supportive of them most of the time.

But not all of Tuesday's election results were welcomed by business. The passage of Proposition 218, which requires local governments to put any tax or fee increase to a direct popular vote, was seen as a hindrance to infrastructure development and an invitation to abuse.

"We have not lost our appetite for public services, but our willingness to pay for them is questionable. If local government has to raise money, it may resort to other, counter-productive means such as special charges on new companies," said economist Stephen Levy of the Center for the Study of the California Economy.

On the whole, voters demonstrated a sophisticated understanding of economic realities. In Los Angeles, they gave the Department of Water and Power the go-ahead to sell electricity to customers outside the city, recognizing that the DWP must find ways to cope with electricity deregulation.

Voters rejected propositions 214 and 216, the HMO-regulation initiatives, because they didn't think the initiatives would improve medical care or bring down costs.

But voters approved a rise in California's minimum wage that will boost state levels higher than federal minimum wages by 1998, despite warnings by small-company owners that doing so would kill job opportunities.

California's turn to a pro-business climate didn't occur by accident. Business groups have been acting ever more vigorously to protect their interests, as was seen most prominently in the computer industry executives who ferociously fought Proposition 211 and its principal backer, San Diego trial lawyer William Lerach, who has reaped millions suing high-technology companies.

At a celebration party in Silicon Valley on Tuesday night, the executives appeared surprised by their margin of victory but also cognizant that this was not their last political fight.

"We have to stay organized," said Thomas Proulx, the 34-year-old co-founder of the finance software maker Intuit Inc. and a leader of the "No on 211" forces. "Lerach is planning Round 2. He's looking at this only as a lost battle. The war is not over."

Proposition 211's defeat represents Silicon Valley's second triumph in this arena; computer industry executives lobbied heavily for federal securities litigation reform last year, despite the vehement opposition of Lerach and President Clinton's veto of the legislation.

The computer industry, traditionally retiring on political matters, demonstrated newfound energy and commitment in the "No on 211" campaign. The effort was well financed, with $25 million in contributions from Silicon Valley executives. And it was sophisticated, making heavy use of slick television advertisements.

Leading industry figures, led by John Doerr, a partner in the venture capital firm Kleiner Perkins Caufield & Byers, volunteered free time to mobilize other technology executives and their employees. They used their technical expertise to spread their message via the Internet.

"The defeat of 211 clearly shows the resolve of high-tech companies to protect themselves by entering the political arena," said Dudley Buffa, president of the nonpartisan Institute for a New California.

Efforts are already underway to build on the anti-211 campaign. The California Technology Alliance, a political action committee formed in August, hopes to raise between $1 million and $2 million per election cycle. It will focus on state issues, especially any legislative efforts on securities litigation reform.

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