When I was young and growing up in the Detroit area, the city was a hotbed of innovation and industry like nowhere else in the United States. The automobile industry was in full swing, and for decades it was the engine of growth for our nation. Although the city—and the companies that helped make it great—have stumbled in recent years, I believe that Detroit can make a comeback. As the city’s motto declares: Speramus meliora; resurget cineribus—that is, “We hope for better things; it shall rise from the ashes.” I too hope for better things for Detroit, and I strongly believe the city and Detroit area can and will rise from the ashes.

Detroit is still the center of the American auto industry. We must keep this industry in Detroit, and the industry itself must focus on driving world-leading technology and innovation. We can out-innovate the Japanese, German, and other international automobile manufacturers if we put our minds and our capital investments behind the industry. Many U.S. companies that develop advanced technologies have proven this time and time again. The auto industry needs to step up to the challenge.

GM and Chrysler need to take a close look at Ford’s successful model and adopt many of the company’s practices. Ford continues to out-innovate the competition, and it has done so without taking government financial handouts. There are lessons to be learned here.

Detroit can’t make a comeback all by itself—it needs and will continue to need the help of the federal government for some time to come. President Barack Obama’s automotive task force was a step in the right direction, but more can be done.

The federal government needs to step in with far greater resources—both financial and human—to help the city get back on its feet. A combination of direct financial investments and tax credits could make the city an attractive place for technology companies to establish their headquarters.

The Michigan Film Office is finding success in promoting Detroit and the rest of the state as a new hotbed of filmmaking, sweetening the pot with a 40 percent refundable tax credit (and an extra 2 percent in Detroit and 134 other core communities) for filmmakers and generous production and location assistance. This initiative seems to be gaining traction. Why not provide high-tech companies with a similar incentive for locating in downtown Detroit?

Comments (1) | Reprints | Share:          

When I founded Science Applications International Corporation (SAIC) in 1969, I owned 100 percent of the company’s stock. However, I soon realized that to attract talented employees—and keep them—I would need to offer them real ownership in the business by allocating some of the stock I held. So, within a year after I founded the company, I had reduced my ownership stake to roughly 10 percent. The company continued to issue new stock every year (as well as recycling stock repurchased from departing employees) and by the time I retired in 2004, I owned less than 2 percent of SAIC’s stock.

There is no doubt that this approach to structuring SAIC’s ownership was an unqualified success. The prospect of owning and running a piece of the business attracted many extremely talented men and women to the company, and we were able to grow SAIC from nothing in 1969 to about $6 billion of annual revenues by 2004. Today SAIC’s annual revenues top $8.9 billion a year.

But for entrepreneurs and company owners, there is another question that I am sometimes asked: How much stock does the founder need to maintain control of the company?

I can only answer this question using my own example, as each situation is unique.

By 1970, as I mentioned above, my ownership stake of SAIC was diluted to 10 percent of the company’s stock—so trying to maintain majority ownership and control of the voting stock became a moot issue for me. Even so, the benefits of our employee ownership were tremendous, and nobody really questioned who was in charge.

Company management issued stock to employees who brought new business into the company, and to attract highly talented new employees while rewarding high-performing current employees. By 1990, I owned approximately 2 percent of SAIC’s total shares outstanding and that continued until I retired as chairman in 2004.

Lacking majority voting control, I was fully accountable to the SAIC employee-shareholders during the entire time I served as CEO. That fact, coupled with our broad-based employee ownership structure meant that in many respects SAIC operated as a publicly traded company (including registering our shares with the SEC). But that didn’t inhibit my ability to control the company from the perspective of setting the strategic direction and overseeing key decisions typically handled by any CEO. If you know anything about SAIC’s history, you are probably aware that the pressure to take the company public grew considerably in the several years immediately preceding my retirement. Unfortunately, as my own ownership stake declined below 2 percent, so too did my ability to control efforts—both inside and outside the company—to pursue an IPO and change our unique approach to employee ownership.

I personally believe my position within the organization would have been strengthened if I had held onto 8 percent or so of the company stock to the end. This would have helped to keep those pressing for the IPO at bay—at least until I retired.

So my advice to founders is to hold on to 8 to 10 percent of their company’s stock for as long as they possibly can. This will allow them to use a large portion of the remaining stock to incentivize their employees while at the same time retaining a sufficient balance for themselves to maintain firm control over the company’s direction. This will also make their negotiating position at retirement stronger than what I personally experienced.

Comments (16) | Reprints | Share:          

Well, we have seen something that I thought I would never see in my lifetime—the elevation of an African-American man to the highest elected office in our land: President of the United States. While we all bask in the afterglow of this momentous occasion, we are in the middle of our most serious recession in decades. There is no time for the usual 100-day honeymoon-the serious work of getting this country back on an even financial keel must now begin in earnest.

Unfortunately, Obama now has many Washington interests vying for his attention—each with a compelling case as to why they should be favored with the nation’s time, attention…and money. My advice to our new President is this simple list of his top-three priorities during his first year in office: (1) the economy, (2) the economy, and (3) the economy.

Of course, there are many other things that also require his attention, like wrapping up our successful incursion in Iraq, and putting a newly energized focus on the work yet to be done in Afghanistan. However, until the economy is fixed, these important efforts and others will suffer. As will the hope of the American People.

I’ve been around for more than 80 years now, and I’ve been through just about every possible economic situation—both good and bad—that this nation has ever experienced. I was a child during the Great Depression. I saw banks and companies going bankrupt all over my hometown of Detroit, and I saw home after home boarded up as their owners went bankrupt. My own father’s business suffered greatly during this time.

I have also lived through the great post-war prosperity of the ‘50s, when our nation’s economy grew in leaps and bounds and it seemed there would be no end to the things we could do as a nation.

Of course, the economy as we know has good times and bad times, and the dark is always followed by the dawn. Here is my recommendation for getting out of our current economic mess and returning to prosperity: create a culture of growth based on employee ownership. Now more than ever we need to make employees true partners in our businesses. Study after study shows that employee-owned companies perform better than companies that are not. Widespread employee ownership will have a huge, positive impact on our economy.

Creating a culture of growth requires leaders to remove the organizational obstacles that get in the way of moving quickly to take advantage of changes in the marketplace. In some cases, these may be procedures and practices that have served the company well in good times, but that threaten to bog the company down in bad times. Hire smart people and then put your trust in them. Give them a stake in the business that they contribute to, and unlock their energy and ideas. Create an entrepreneurial culture, where employees have wide-ranging autonomy and authority, and are rewarded for finding and capitalizing on new opportunities for growth. And don’t be afraid to experiment, and try new combinations of people and organizational structures.

Comments (8) | Reprints | Share: