Donorgate And Corporate America

Is the price for becoming a lead underwriter of political campaigns in America getting too steep for the business community? Does Corporate America really want to finance an increasingly corrupt political process held in growing contempt by the public? These are questions entrepreneurs and CEOs of public corporations should be asking themselves as the campaign fund-raising scandal burns through Washington.

Start with the money. Driven by an ever-growing hunger for campaign dollars for TV, politicians who were once grateful for corporate cash are now demanding, even threatening. It's more like a shakedown than a request. Vice-President Al Gore cold-calls prospective donors from the White House in a no-nonsense request for funds. Who dares say no? GOP party leaders lambaste business political action committees for giving too much to Democrats, even though two-thirds of 1996 PAC contributions went to Republican candidates. Give us 100%, they demand. Or else?

The sums are staggering. Contributions just to Republican party committees, including national as well as those overseeing House and Senate races, came to $548.7 million last year. Democratic party committees raised $332.3 million. The entire cost for electing a President, a Vice-President, and 476 members of the Senate and House came to $2.1 billion. This is a gargantuan amount of money--and business was asked to foot much of the bill. The business community contributed 92% of the $264 million raised by the Republican and Democratic national committees, according to the Center For Responsive Politics. By some estimates, business PACs, individual corporations, and businesspeople may well have contributed more than $1 billion in this one campaign season.

Some in Corporate America argue that this is money well spent. There are now two political parties in control in Washington, and business must spend defensively to protect itself against legislation and regulations that could harm it. It is entirely proper for the business community to engage in the political process. But can publicly traded corporations possibly justify such huge campaign contributions? Are they really buying access or just being played for chumps by politicians promising what they cannot deliver?

It may only be a matter of time before the public begins to tar businesspeople who finance campaigns with the same brush it now reserves for politicians. Contempt for political leaders has never been greater. To date, only Asian companies and execs have drawn public opprobrium for what appear to be illegal Presidential campaign contributions. But the unseemly nature of many legal contributions, including those to House and Senate races, will draw attacks as well once they are made known. At that point any number of companies may draw criticism.

The greater danger is that in financing a corrupt political system, CEOs and politicians could begin to corrupt the economy as well. Contracts, not contacts, still define the way most business is done in America, but that could change. Too much business in big cities used to revolve around political ties, not the best price or product. This kind of corruption could happen again at the national level where, say, a company's competitive advantage could be lost by a simple change in regs in favor of a rival that makes a large campaign donation to the right pol. Or a politician, unhappy with one company's contributions, could mete out punishment by changing tax and regulatory policies. What, after all, constitutes "corporate welfare"? These threats are already being made sotto voce. High-tech research, Export-Import Bank loans, and other "subsidies" for companies not willing to pay to play are on the short list of items to be cut in the near future.

A transparent, rule-governed, competitive economy plays to the strengths of American culture. Replacing it with guanxi capitalism or Tammany Hall-style politics would undermine America's competitive edge and damage growth. This is no way to run a nation, much less lead the world, and the American public knows it. Chief executives and entrepreneurs should get behind campaign-finance reform before it taints them as much as the politicians they are underwriting.