Fringes vs. Basics in Silicon Valley

Electronic Arts, responding to this financial shift and to its labor critics, plans to announce this week that it will depart from tradition by beginning to pay overtime to some workers. Those workers would no longer be eligible for options or bonuses...

"This tears at the employment model that Silicon Valley was built on," said Rusty Rueff, the director of human resources for Electronic Arts, which has 5,800 workers. Overtime pay will move game developers "out of a culture that emphasizes entrepreneurialism and ownership and into a clock-watching mentality," he said...

[EA] said it was reviewing its total compensation structure, including who receives stock options, and that it would begin paying overtime to some workers in lieu of bonuses or stock options.

Company executives pointed to amenities, including the gym, nutrition-conscious cafeterias, and flexible work structures that let employees take breaks to use the on-campus pool tables, video game machines, basketball courts and masseuse and acupuncturist. They also said employees were compensated not just with salary, but with a bonus that can be 5 to 30 percent of salary.

Mr. Rueff, the human resources executive, conceded that the bonuses and stock options in some cases would be less than an employee would receive if paid in overtime. But he said options and bonuses continued to enable employees to be part of the entrepreneurial foundation of Silicon Valley. He said the company was now reassessing its entire compensation structure, including who gets stock options.

At the same time, Electronic Arts said that if workers began demanding too much, the company would be forced to find new sources of labor, possibly outside California or even across the nation's borders, where labor costs are lower. Already, more than half of Electronic Arts' 5,800 employees are outside the United States, including 1,700 in Vancouver, British Columbia.

"We can do this in Vancouver, Montreal, or Orlando," said Jeff Brown, vice president for Electronic Arts. "We're not even talking yet about China."

nytimes article or continue reading for the full transcript:

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SAN FRANCISCO, March 8 - It was a lunch-hour scene not uncommon on Silicon Valley corporate campuses. A video game programmer curled a dumbbell and checked out his biceps in the mirror. Nearby, two colleagues walked on treadmills, chatting, while another young man leveled karate kicks at a boxing bag.

Those employees of Electronic Arts, the world's largest independent video game maker, were spending their break one day last week in a big, modern company gymnasium that would put many private health clubs to shame. But lately critics at the company, and at other employers in the Valley, say such perks put a cozy face on what amounts to a white-collar sweatshop.

Electronic Arts, based in Redwood City, Calif., has become the focal point of a debate over whether technology companies are exploiting workers by demanding long hours and using on-campus fringe benefits while skimping on tangible benefits like overtime pay, and rewarding worker loyalty by sending jobs to cheaper labor overseas.

The debate has called into question the longstanding Silicon Valley compensation formula in which long hours were soothed with stock options and bonuses. But with no technology boom to fuel stock prices, and new accounting rules making options much more expensive to grant, stock options are no longer the currency that has fueled the traditional Silicon Valley work ethic.

Electronic Arts, responding to this financial shift and to its labor critics, plans to announce this week that it will depart from tradition by beginning to pay overtime to some workers. Those workers would no longer be eligible for options or bonuses.

The move, while not unprecedented in the Valley's recent lean years, is certain to be watched closely by executives at other technology companies.

Electronic Arts concedes that the move breaks with tradition. But it says it is acting more in response to employee pressure than because the company considers it the best way to handle labor relations.

"This tears at the employment model that Silicon Valley was built on," said Rusty Rueff, the director of human resources for Electronic Arts, which has 5,800 workers. Overtime pay will move game developers "out of a culture that emphasizes entrepreneurialism and ownership and into a clock-watching mentality," he said.

Electronic Arts, like other Silicon Valley companies, uses revenue per employee as one measure of efficiency. The company said it had $1 million in sales for each of the 3,500 development studio employees last year.

The clash between Electronic Arts and its employees was prompted by an online essay late last year by the wife of a game programmer. She accused the company of driving its workers to the point of collapse. The lament, widely circulated and discussed, has ignited an industry debate over whether there is a need to rethink the rights of high-technology labor.

In the past, unions have gotten little, if any, traction trying to organize at technology companies. And few experts see much chance even now of old-style trade unions catching on in the new economy. But there is little question that a new labor base has been galvanized by critics who say that as Silicon Valley has come to be dominated by big public companies that respond mainly to Wall Street's quarterly scoreboard, the corporate gyms and other campus perks may be relics of a partnership with workers that no longer exists.

Several hundred workers and managers from the video game industry met at an all-day seminar in San Francisco on Tuesday to discuss quality-of-life issues. The gathering, a rare public acknowledgment of the depth of the worker unrest, was part of an industry conference this week for game developers.

The tone was far from rabble-rousing. The focal point was crunching - referring not to gym exercises, but to the intense period, usually lasting months, just before the release of a new game. During that time, the animators, artists, designers, engineers, and all the others involved in producing a video game are rushing to meet the unforgiving deadline for getting the product to market on the schedule promised to distributors, retailers and shareholders.

With few exceptions, industry executives and employees agree, crunching is part of a video game's life cycle - often a very painful part. Workers say they put in 60, 70, even 80 hours a week, with no days off, throwing themselves body and mind into the long march and in many cases fueled by caffeine or even stronger stimulants.

"It's soul crushing," said a senior executive at a small public video game company who has spent 10 years in the business. Speaking on condition of anonymity, he said he had watched developers become increasingly disillusioned. "This is much more of a mass-market industry."

Such toil is not unique to the video game industry. Lawyers crunch on the eve of a trial, as do investment bankers in the midst of a deal. But lawyers and bankers tend to be better compensated for their efforts than $70,000-a-year game programmers.

Game developers, though, once worked in relatively small companies and took enormous pride in the products they created. Now, amid a consolidation that has put the video game business in the hands of a few big public companies like Electronic Arts and Activision, and in which best-selling titles can cost $10 million to $20 million to create, many developers say they feel like cogs in someone else's machine.

Last July, a group of employees filed a lawsuit against Electronic Arts, asserting it is required under California law to pay overtime for hours worked during crunches. The suit is pending in state court.

But it was the online essay, published anonymously by the employee's spouse, that provoked widespread debate about working conditions at the company.

In an interview, granted on the condition that she or her husband not be identified, she said that her husband is an engineer who makes $50,000 to $70,000 a year. She calculates that if he were paid overtime, he would have received an additional $15,000 to $20,000 in overtime for working six, sometimes seven, days a week over a period of several months.

Her essay on the Internet received some 4,000 responses and comments. Many supported her position ("White-collar slavery is alive and well in the games industry") but many others took exception ("If you don't like a job, quit").Subsequently, at least two other employee lawsuits have been filed in the video game industry, including a second one against Electronic Arts and one against Sony Computer Entertainment of America, which is based in Foster City, Calif., and employs about 1,400. Sony declined to comment.

Electronic Arts also declined to comment on the suits. But the company said it was taking the crunch-time concerns seriously. It said it was reviewing its total compensation structure, including who receives stock options, and that it would begin paying overtime to some workers in lieu of bonuses or stock options.

Mr. Rueff, the human resources executive, said the company had changed its approach to project management to make sure deadlines were met earlier in the product cycle of a video game, to reduce the crunch-time pressure.

Electronic Arts, for example, is currently developing a game based on the "Godfather" movies and has added 7 new project managers to the staff of 130 assigned to the project. But even while addressing workplace issues, the company disputed the notion that it is running a sweatshop.

Company executives pointed to amenities, including the gym, nutrition-conscious cafeterias, and flexible work structures that let employees take breaks to use the on-campus pool tables, video game machines, basketball courts and masseuse and acupuncturist. They also said employees were compensated not just with salary, but with a bonus that can be 5 to 30 percent of salary.

Mr. Rueff, the human resources executive, conceded that the bonuses and stock options in some cases would be less than an employee would receive if paid in overtime. But he said options and bonuses continued to enable employees to be part of the entrepreneurial foundation of Silicon Valley. He said the company was now reassessing its entire compensation structure, including who gets stock options.

At the same time, Electronic Arts said that if workers began demanding too much, the company would be forced to find new sources of labor, possibly outside California or even across the nation's borders, where labor costs are lower. Already, more than half of Electronic Arts' 5,800 employees are outside the United States, including 1,700 in Vancouver, British Columbia.

"We can do this in Vancouver, Montreal, or Orlando," said Jeff Brown, vice president for Electronic Arts. "We're not even talking yet about China."

The threat of sending jobs overseas is one reason that workers need to start thinking about organizing into unions, said Marcus Courtney, the founder of WashTech, a Washington State-based union that is trying to organize technology workers. Since 1998, the union has attracted only 450 members around the country, who pay monthly dues of $11.

The idea of organizing labor in the technology sector is an uphill fight, said Gina Neff, an assistant professor at the University of California at San Diego, who studies labor issues in the new economy.

Ms. Neff said technology workers themselves had typically been reluctant to organize because they believed they were decently compensated, they liked the industry's dynamism and they felt that as educated people they had individual bargaining power. But those dynamics might be changing as the technology industry matures.

Video game workers "have some of the best jobs the American workplace has to offer," Ms. Neff said, "and still their individual power is not enough to guarantee good workplaces."