Unions, Facing Initiative to Curb Clout, Fire Back

With a November ballot measure threatening to diminish labor’s political clout in California, unions are striking back with a proposed initiative to bar corporations from spending on election campaigns without shareholder approval.

The move to curb corporate influence in Sacramento is part of a clash between labor and business that has intensified this year as Gov. Arnold Schwarzenegger has pushed an agenda fiercely opposed by unions.

Organized labor is still in the early stages of qualifying the measure for the June 2006 ballot, so its fate is highly uncertain. But the decision by union leaders to take direct aim at corporate campaign money is a notable turn in their struggle with business for political dominance in the state.

For years, unions have threatened to lobby for shareholder-consent measures across the country. But campaign finance experts said the California proposal was a rare attempt to put one into law.

Business leaders said the proposal seemed riddled with constitutional violations and probably would face a court challenge. Allan Zaremberg, president and chief executive of the California Chamber of Commerce, said it would stifle corporations trying to fight ballot measures that could “put them out of business.”

“It would be inappropriate to deny them the ability to participate in the political process,” he said.

The initiative sponsor, Alliance for a Better California, has spent millions of dollars this year on television ads attacking Schwarzenegger. Its members include the California Teachers Assn., Service Employees International Union, California Correctional Peace Officers Assn., California Professional Firefighters and several other unions for government employees.

Gale Kaufman, a political strategist for the alliance, said the proposal was a response to the November ballot measure that would require public-employee unions to get members’ written consent to spend dues on political donations.

“The alliance feels very strongly that fair is fair,” she said.

In June 1998, labor defeated a similar proposal, Proposition 226, which would have applied to all California unions, not just those representing public employees.

Conservative groups pushed that measure to stymie the influence of labor, the chief benefactor of Democrats who control the Legislature. But labor’s campaign against Proposition 226 galvanized union voters and fueled the victory of Gray Davis, the union favorite in the Democratic primary for governor.

The new version of the measure, Proposition 75 on the November ballot, has alarmed labor leaders, who have vowed to spend millions of dollars to defeat it.

“It’s a very, very big deal, because it really is an ultraconservative attempt to silence the voice of working people,” said Art Pulaski, leader of the California Labor Federation.

The measure’s chief proponent is Lewis K. Uhler, founder of the National Tax Limitation Committee in Sacramento.

Labor faces a tough fight against the measure, which supporters call “paycheck protection.” A Field Poll survey last month found 57% of registered voters inclined to vote yes on the measure. In 1998, early polls found voters strongly favored Proposition 226 too, but support eroded as unions stepped up their campaign against it.

This time, an important unknown is whether Schwarzenegger will take a stand on Proposition 75. So far, he has not. The state’s top business groups, the Chamber of Commerce and the California Business Roundtable, have also declined to take a position. The unions’ countermeasure, which they call the “corporate political accountability act,” covers ballot measure advocacy and donations to parties and candidates for public office. It would apply to any publicly traded or privately held corporation that seeks to donate or spend money on campaign activity in California.

The corporation would have to produce annual reports for shareholders listing all political donations and spending from the previous year. Its political budget for the following year would require majority shareholder approval.

The budget, however, would be cut to reflect the percentage of the vote. A $1-million political budget, for example, would be sliced to $600,000 if holders of 60% of the shares voted to approve it.

Larry Noble, executive director of the Center for Responsive Politics, a nonpartisan group that monitors campaign spending, said the shareholder-consent measure would force corporations “to be much more upfront” about political spending.

“The question is how many shareholders are aware of, or agree with, corporate political activities,” he said.

Some investors, he said, might resist corporate political spending to influence worker safety or environmental policy. Pension funds largely controlled by labor unions are among America’s biggest corporate shareholders.

The proposed initiative, under review at the state attorney general’s office, remains a long way from qualifying for the statewide ballot. The unions plan to start collecting signatures next month on petitions to put it to a vote in June 2006.

The campaign would require a huge financial commitment from labor, coming on the heels of its battle to fend off the union dues measure in November. Labor officials are coy at this point about whether the initiative would be dropped if they were to defeat Proposition 75.

“We’d have to assess at that point what our priorities would be,” said Pulaski, the labor federation leader.

The national implications of a measure to constrain corporate political money are likewise difficult to figure.

The federal government and roughly half the states -- though not California -- already ban corporate campaign donations, said Robert A. Stern, president of the nonpartisan Center for Governmental Studies in Los Angeles. Those bans have led corporations to find other ways to exert political influence, and the shareholder-consent measure could do the same, he said. Corporate managers, for instance, might donate personal money to political action committees that look out for a company’s interests.

John Matsusaka, president of the Initiative and Referendum Institute at USC, said it would also come as no surprise if unions figured out a way to minimize trouble from Proposition 75.

“If it passes,” he said, “I’m sure the unions will be clever in looking for some loophole to try to get around it.”