The timing of my lunch yesterday with SAIC founder J. Robert Beyster was pretty close to impeccable, since it came just four days after the defense contractor formally announced the relocation of its corporate headquarters from San Diego to McLean, VA.

The departure of a Fortune 500 headquarters with a 40-year history in one city used to be the stuff of wounded civic pride—and great newspaper copy. I expected to hear at least some wailing and gnashing of teeth among San Diego’s economic development leaders, municipal elders, and other community kingpins. Big companies with established roots are often a crucial source of corporate philanthropy and financial support for symphonies, museums, and other cultural centers—so the loss of a Fortune 500 company headquarters is not just about bragging rights, either.

Yet San Diego heard barely a discouraging word about the announcement last week, while the governor of Virginia was crowing about SAIC’s arrival as the state’s fourth-largest company. So I was curious to hear what Beyster had to say.

“I felt it was inevitable that the move would occur because so much business is done in Washington,” Beyster tells me. He adds, “I’m not sure I would have done it if I was in charge,” and says the reason SAIC kept its headquarters in San Diego is because this is where he and his wife wanted to live. But he also notes matter-of-factly that he no longer has much say in the matter. “The important thing is that something stupid isn’t being done,” Beyster says. “It’s not at all a bad thing.”

Beyster, who is now 85, retired five years ago from the company also known as Science Applications International Corp. He was working as a nuclear physicist at San Diego’s General Atomics when he founded his own company in 1969 to provide government agencies with highly specialized services—such as calculating the yields of nuclear weapons. He’s told me previously the business was so specialized at first that he expected it to remain small. But he expanded SAIC by recruiting other prominent scientists, enticing them with offers of stock and leadership roles in an employee-owned company. Beyster went to extraordinary lengths to maintain SAIC’s culture of employee-ownership and entrepreneurship, creating a federation of high-tech business units that nuclear scientist Harold Agnew once described as “a farmer’s market with central heating.”

In many cases, the scientists Beyster recruited came with the government-funded projects they were already working on. So the company, which generated $250,000 in sales in its first year, has expanded over the past 40 years into a $10 billion-a-year juggernaut of government contracts.

Most of that business is conducted with government agencies in and around Washington, D.C., where SAIC now has … Next Page »

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As the unemployment rate climbed to 11.5 percent statewide in California, and 9.4 percent in San Diego County, two local industry groups announced major initiatives to encourage and support innovation in the region. Read up on that and the rest of San Diego’s business and technology news:

—San Diego’s software industry, which already hosts a cluster of developers that specialize in predictive analytics, is organizing a business networking group for geographic information systems, or GIS. Organizer Yash Talreja says a combination of mapping, GPS, and Internet technologies are making GIS a hot sector. Next month, some 14,000 people are expected to attend the conference held each year in San Diego by Redlands, CA-based ESRI, a leader in GIS mapping and modeling technology.

—With the recession opening a void in local startup activity, San Diego’s wireless industry is creating a non-profit incubator to provide free office space and business support for up to two years to communications-based startups. Rory Moore, who heads the industry group CommNexus, says the new EvoNexus incubator is intended to help a new generation of companies get started.

—San Diego DivX (NASDAQ: DIVX) CEO Kevin Hell says managing the video codec developer depends on anticipating the next step in the evolution of consumer media. That means enabling any online content to play on any device, according to the DivX boss. He views “video freedom” as being able to seamlessly move a video among a computer, TV, and wireless mobile device.

—The former chairman and CEO of San Diego Gas & Electric gave an endorsement of sorts to EcoDog, a Vista, CA-based startup, by allowing the company to announce that he is the first angel investor in an early stage round that aims to raise $5.6 million. EcoDog founder Ron Pitt told me he has developed a device that encourages conservation by helping homeowners monitor their electricity.

—San Diego’s Accelrys (NASDAQ: ACCL), which specializes in scientific software used in computation, simulation, and the management and mining of scientific data, named former Interwoven president Scipio “Max” Carnecchia as CEO. The company later said Carnecchia will be entitled to purchase up to 800,000 shares of the Accelrys common stock at an exercise price per share equal to $5.38. Carnecchia, also is joining the board.

—The era of employee ownership came to an end Friday at San Diego defense contractor SAIC, according to the San Diego Union-Tribune. When nuclear physicist (and San Diego Xconomist) J. Robert Beyster founded SAIC 40 years ago to provide high-technology research and engineering services, he viewed employee ownership as crucial to the startup’s entrepreneurial culture. The defense conglomerate has become a more conventional public company since Beyster left the company in 2004. He wrote in his blog that the battle to preserve employee control at SAIC was lost years ago.

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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.

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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.

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