By Richard S. Dunham The sun was shining on the sea,
Shining with all his might:
He did the very best to make
The billows smooth and bright --
And this was odd, because it was
The middle of the night.
-- Lewis Carroll, Through the Looking Glass & What Alice Found There
Alice is not the only person to feel like she's in Wonderland these days. Business lobbyists are watching in disbelief as their normal means of persuasion -- charm, intimidation, campaign cash, and friends in very high places -- seem incapable of slowing down the corporate-reform bandwagon on Capitol Hill. And President Bush is clearly struggling to contain the political fallout -- for the first time in his 18-month-old Presidency. "There are certain events that are beyond your control," one Bush assistant sighed. "When that happens, you do the best with the hand you've been dealt."
How surreal are things in Washington for the usually confident corporate lobbyists? When Coca-Cola CEO Douglas Daft announced on July 14 that his company would count stock options as an expense, one disbelieving business lobbyist privately told BusinessWeek that this was a "freewheeling" CEO and that Daft was, well, certainly "not well briefed."
FAILED SABOTAGE. When business lobbyists start arguing that CEOs are talking out of school, we are in a Lewis Carroll world. But it's a difficult time to be part of the K Street crowd. After the Senate passed a strict new accounting-reform bill on July 15, the corporate lobbying industry and other normally influential forces went to work trying to sabotage the legislative package put together by Senate Banking Committee Chairman Paul Sarbanes (D-Md.). What happened? For a day, the House Republican leadership played along with business, using procedural games to temporarily block the Sarbanes measure.
Then a funny thing happened at the Mad Hatter's tea party. The Republican rank and file -- the Tweedledees and Tweedledums of the House -- told the White King where to go. "It's time we stop playing politics and start working together toward a common goal," said one maverick conservative, Representative Mark Foley (R-Fla.). "In the interests of our economy and the workers of America, we need to move forward before we recess [for summer vacation] in August." Faced with a palace revolt, the House royalty backed down and said it would seek a speedy resolution of the matter.
Two weeks ago, Representative Richard H. Baker (R-La.) told BusinessWeek's Lorraine Woellert: "I don't think we're under pressure to toughen our position." But political reality has shifted under the reluctant Republicans' feet, with some 77% of Americans now saying corporate scandals are either a crisis or a serious problem for the American economy. Now pay attention to what was said by House Financial Services Committee Chairman Michael Oxley (R-Ohio), who spoke last week with Woellert: "Unless you pass a law, nobody [in the electorate] pays any attention," Oxley lamented. "That's too bad."
FLYING PIGS. Please read that quote again. The idea that lawmakers gain attention by legislating is "too bad"? Welcome to Washington in Wonderland.
"The time has come," the Pollster said,
"To talk of many things:
Of stocks that dip -- and thieving hacks --
Of greedy corporate kings --
And why the laws, they must be changed --
And whether pigs have wings."
-- Apologies to Lewis Carroll>
Yes, dear Alice, those pink creatures you see above Capitol Hill are flying pigs. It looks like Wall Street corporations are going to see the most stringent regulatory measures adopted in a crisis atmosphere since...well, since the immediate aftermath of September 11. Back then, it was only basic civil liberties under assault. This time, it's the right to make an honest (sometimes) buck. "We're in a feeding frenzy now, and the pendulum is shifting way, way over," Glaxo SmithKline President Robert Ingram told the National Press Club on July 18.
The White House feels Ingram's pain. For the first time in his Presidency, Bush has failed to control the spin on a major story. Reporters continue to write about the President's and Vice-President's private-sector accounting practices and business dealings, despite White House pronouncements that these are "nonstories."
ABOUT-FACE. The flummoxed Administration has been inconsistent in its response to the Sarbanes legislation. On June 21, Nick Calio, Bush's chief legislative lobbyist, blasted the bill. "We've laid out principles and a 10-point plan" for corporate accountability, he told reporters. "We don't think the Sarbanes bill is the answer."
After the WorldCom scandal broke five days later, though, the Bush team changed its tune. Presidential spokesman Ari Fleischer said the Sarbanes plan was "a good start." Eventually, with the pressure building, one Administration official said the President could accept 90% of the proposal. The bill is even tougher now, but it seems reasonable to believe Bush will sign it.
Where will this tea party end? Much depends on whether Democrats succeed in making corporate responsibility a key campaign issue in 2002. If they do, nothing will be sacred, including the stock options that the U.S. Chamber of Commerce and Silicon Valley desperately want to keep from being listed as up-front business expenses. If the Dems fail to mobilize a popular rebellion, however, the corporate barons may wake up in the fall to discover the Wonderland World they dreamed of in summer was all just that -- a bad dream. Dunham is a White House correspondent for BusinessWeek's Washington bureau. Follow his views every Monday in Washington Watch, only on BusinessWeek Online