The Backlash Against Soft Money
Earlier this year, Republican fund-raisers asked a big Wall Street investment house for a donation to the Committee to Preserve the Eisenhower Center, the Republican Party's Washington headquarters. It was a routine request for the kind of "soft money" donation that has come to dominate U.S. campaign funding. The Eisenhower Center fund, in fact, easily pulled in $1.4 million during the last election. But when the call came this time, the CEO had had enough. "I'm not writing any more checks to that damn building," he fumed to his Washington lobbyist.
BOTTOM-LINE REASONS. The Wall Street CEO isn't alone. With the Donorgate scandal shining a harsh light on campaign finance--and Corporate America's role in funding the money machine--executives are weighing in on how to fix the system. No, they're not talking about forgoing political contributions--or the access to policymakers that they ensure.
For the most part, executives are joining the chorus calling for curbs on soft money because they're tired of endless appeals for funds that may not serve their interests. The unrestricted millions supposedly support party-building activities, but in practice are often funneled to candidates throughout the country. With soft money, donors still buy clout. But they don't get the direct access that comes from making contributions to politicians. "You don't know if the money's being spent on cocktail parties and limo rides or on ads that benefit statehouse candidates in Minnesota," gripes a lobbyist for a New Jersey company.
What changes does business want to see? In a BUSINESS WEEK\Harris Poll conducted in mid-March, two thirds of the 400 top executives who responded called for an end to soft-money donations. But most of the executives--some 61%--would like greater freedom to make direct contributions to campaigns in order to gain access to politicians and influence business issues. And 74% said that the $5,000 cap on corporate political action committee donations is fine as is.
In this case, a little bit of self-interest may be just the thing to prod Washington. If business leaders, for their own reasons, throw their weight behind efforts to clean up the campaign-finance mess, they could roll over congressional resistance to sweeping revisions of election-finance laws. "We desperately need grass-roots accountability to force some of our colleagues to realize this is a cutting-edge issue," says Senator John F. Kerry (D-Mass.), a reform advocate.
It isn't hard to find corporate executives who are sick of soft-money shakedowns. "Soft money is a travesty," gripes Robert Stuart, the former chairman of Quaker Oats Co. Says Mitchell Kertzman, CEO of Sybase Inc., a California software maker: "I feel tapped out." He gave the Democratic National Committee more than $100,000 last year, but he intends to give less in the future. "The whole process is out of control."
CRUSADERS. Other top execs say they'll give less next time, too. It's easy to see why. For the '96 election, soft-money donations shot through the roof. The political parties raked in $262 million in soft money, triple their take for '92. According to Common Cause, a nonprofit group that tracks donations of $10,000 or more, corporations and executives generated 93% of the GOP's $138 million backdoor-cash hoard and 74% of the Dems' $128 million soft-money cache.
Business donors are also wary of the spotlight the Donorgate scandals are throwing on them. Their worst fear: being dragged into messy congressional inquiries. Ohio Senator John Glenn, the ranking Democrat on the Senate Governmental Affairs Committee, plans to grill tax-exempt nonprofit groups with close ties to the Republican Party. But he doesn't rule out serving subpoenas on fat-cat donors: "We will consider bringing CEOs before the panel," he says.
A few prominent businesspeople are joining the wider crusade for comprehensive campaign-finance reform. A foundation controlled by financier George Soros has pledged $3 million to Public Campaign, a nonprofit group trying to build support for public financing of state and federal elections. Soros is also aiding a handful of other campaign-reform groups.
New York investment banker Jerome Kohlberg Jr. plans to spend $1 million a year on efforts to educate voters and lobby Congress on the need to revamp the system. Kohlberg, a co-founder of leveraged buyout pioneer Kohlberg Kravis Roberts Co., backs a bill sponsored by Senators John McCain (R-Ariz.) and Russ Feingold (D-Wis.) that would ban soft money. "It's demeaning and insidious, and it's undermining the whole political system," says Kohlberg.
Some leaders are focusing on public funding for TV advertising. "The fundamental problem is that politicians have to raise all this money to buy TV commercials," says Newton N. Minow, former chairman of the Federal Communications Commission. Barry Diller, chairman of the Home Shopping Network, has come out in support of a proposal to give broadcasters no-cost licenses for new airwave spectrum in return for free air time for candidates. That would cut campaign costs and encourage more substantive debate, says Paul Taylor of the Free TV for Straight Talk Coalition.
Democrats have good reason to clamor for reform. Traditionally, they've been at a disadvantage with the GOP in the money-raising sweeepstakes. Worse, the current flap about fund-raising abuses is having a chilling effect on their donors. "Major contributors will be in a holding pattern until this issue is resolved," says Nathan Landow, a Bethesda (Md.) real estate developer and veteran Democratic fund-raiser.
KEEPING UP. But as soft-money kingpins, Republicans will fight an outright ban on these donations. "That would amount to unilateral disarmament for the GOP because unions would still be free to get out the vote for the Democrats," says Steven Stockmeyer of the National Association of Business PACs. Indeed, many business donors say they'll keep giving as long as their rivals do. "Given the degree to which Federal Express is regulated, it's absolutely necessary for us to participate in the process," says a spokesman for FedEx, which gave $959,000 in soft money to the two parties for '96. Adds Daniel Rappaport, chairman of the New York Mercantile Exchange: "If everyone else is giving and we don't, our voice won't be heard."
But with more executives emboldened to just say no, Congress may have a tough time resisting new fund-raising curbs. The pols' success in putting the arm on business could well turn out to have been too much of a good thing.