The Lucrative Road From Congress to Corporate Boards

By Jeff GreenJeff Green, Brandon Kochkodin and Blacki MigliozziBlacki Migliozzi
October 18, 2016

In an election year dominated by populist outsiders, politicians are learning that cozy relationships with corporate America can be a liability.

Take former U.S. Senator Evan Bayh, a Democrat from Indiana, whose campaign to regain his old seat has been impeded by the $3.8 million he made serving on four corporate boards after he left the Senate. Bayh’s early lead in the race has evaporated as well-funded conservative groups have spent millions in ads attacking him as a creature of Washington beholden to special interests. His role as a director of one of the banks that got taxpayer money during the 2008 financial crisis has drawn criticism because he voted in favor of the federal aid.

And yet “director” is a popular and lucrative job title for many former members of Congress. Last year, the 64 one-time lawmakers who sat on boards pulled down an average $357,182, twice what they earned when taxpayers paid their salaries, according to data compiled by Bloomberg of former members of Congress who served on Russell 3000 company boards in 2015.

Corporate board compensation of former legislators

2015 Pay
Total Pay
Figures compiled from proxy filings. May include partial-year data.
Cumulative pay for directors serving on boards as of 2015. Calculations begin in 2005, when public disclosure of such compensation started.
See Expanded List

Washington is famous for its revolving door, with erstwhile lawmakers regularly joining lobbying firms or starting their own. Under federal ethics reforms adopted over the past three decades, there’s been a required cooling-off period — one year for representatives, two for senators — before they’re allowed to start officially politicking on behalf of corporate America. But nothing bars them from becoming directors right away. And since 1992, 44 percent of senators and 11 percent of representatives who’ve departed Capitol Hill have ended up in boardrooms, according to research from Harvard University and Boston University.

Where’s the harm in that? Robert Weissman, president of the government-watchdog group Public Citizen, said one concern is that a lawmaker might hold his or her fire on an issue to increase the odds of getting a director job.

“Someone who is on one of the health committees, and railing about drug pricing and trying to do something about it, they’re not going to get an offer to serve on the board of Pfizer,” Weissman said.

The current class of directors who were once in Congress is pretty evenly split, with 31 Democrats and 33 Republicans, according to the data. The Republicans last year averaged $382,535 in compensation, and the Democrats $330,194. The yearly pay for senators and representatives is $174,000. Those in leadership positions make more.

You can’t outlaw people from working. We’re always going to be in this imperfect world...

— Alec Levenson of USC’s Marshall School of Business

Former House Majority Leader Eric Cantor of Virginia, a Republican, was the highest board-member earner in 2015 among former senators or representatives, pulling down $2 million. Cantor declined to comment.

Former Democratic House Majority Leader Richard Gephardt tops the overall earnings chart, with $10.8 million in director compensation since retiring in 2005 after 14 terms representing Missouri, according to the data.

“I’ve learned a lot from this board experience,” Gephardt said. “In fact, I would wish that any member could have board experience and labor experience” before taking office.

There’s also a benefit to companies that need expertise to help understand government, labor and “human nature,” he said. “When you’re in politics, you’re in the people business.”

Boards should have members with a mix of skills and backgrounds, said Alec Levenson, a senior research scientist at the Center for Effective Organizations in the Marshall School of Business at the University of Southern California. And he said it isn’t realistic to expect members of Congress to never pursue another livelihood.

“You can’t outlaw people from working,” he said. “We’re always going to be in this imperfect world where the people who have the money and the power, they are going to have a better advantage than the ones who don’t.”

Bayh’s the rare example of a politician trying to return to office after profitable directorship posts. This may have been a particularly difficult year to try it, with voter frustration over the Washington-insider status quo at a high, stoked by Donald Trump’s populist candidacy.

Opponents of Bayh have accused him of cashing in on his public service, voting while in the Senate for the Troubled Asset Relief Program that bailed out banks during the financial crisis and then joining the board of Fifth Third Bancorp in Cincinnati, which received $3.4 billion in TARP money. His other board service has also drawn attention in the race against Republican Todd Young, who has represented Indiana in the U.S. House since 2011.

Ben Ray, spokesman for Bayh’s campaign, said the earnings reflect Bayh’s success in the private sector.

“He was great on growing Indiana’s economy as governor, was very strong as senator and now has private sector experience,” Ray said. “We think he’s got the total package.”

Ray pointed to Bayh’s service on the board of Berry Plastics Group Inc., an employer headquartered in Evansville, Indiana.

“We don’t think there’s anything bad about that,” he said. “He’s watching out for Indiana.”

As for Gephardt, the top earner, he was paid about $1 million last year for service on boards such as health care provider Centene Corp. in his home state of Missouri and Spirit AeroSystems Holdings Inc. He was also previously on the boards of United States Steel Corp., Boeing Co. and Ford Motor Co. Many of his board seats were facilitated by his expertise with labor unions, he said.

Come January, more than 50 former legislators may be looking for work, because they’ll have retired or been voted out. Nels Olson, co-lead of Korn/Ferry International’s director and chief executive officer search business in Washington, said he’s talked with many of them about their next move, “and sitting on a board is always top of their list.”