Corporate Traffic Heavy on U.S. Political Money Trail

You won’t find America’s most competitive and best-managed corporations anywhere near the top of this chart.

Blue-chip firms such as Intel, Merck, Caterpillar, Procter & Gamble and General Electric rank far down among corporate contributors to candidates for federal office.

Instead, according to a Times analysis of political giving by every major corporation in America, the big players include a number of firms that have become the focus of federal investigations, or whose reputations have declined within their industries. The big givers are highly regulated by the government or highly dependent on it for subsidies--typically in the financial, defense, tobacco, oil and telecommunications sectors.

If money buys access to Washington’s power brokers--and this is what the corporate contributors say they are seeking--then, for the most part, the government is not focused on the ideas of the nation’s fastest-growing and most forward-looking companies.

As controversy swirls around the billions of dollars lubricating the federal election machinery, The Times examined the political contributions of every major corporation in the nation, the 544 biggest public and private companies.

The Times survey shows that contributions by the 544 companies jumped 75% to $102.4 million over the last four years. Company executives and other employees kicked in an additional $26.9 million, a 41% increase.

More companies are getting into the political-giving derby, the survey shows. Among the biggest 544 companies, the number making federal political contributions rose from 366 in 1992 to 403 in 1996.

Under federal election laws, businesses may give to individual candidates only through political action committees that raise funds from voluntary employee contributions.

However, corporate donations given directly to political party organizations--so-called soft money--are the one form of corporate largess not limited by federal law. Soft money is the fastest-growing component of corporate political giving, having more than tripled to $50.8 million between the presidential elections in 1992 and 1996.

The Times study also found sharp imbalances in the geographic distribution of corporate contributions. California provides just 9% of the money, even though it has 12% of the seats in the House of Representatives. But the corridor of big business in New Jersey, New York and Connecticut is a titanic force, providing one-third of the combined corporate and employee contributions in the last two-year election cycle. The financial-services sector in the Northeast, which accounts for much of the region’s giving, exercises plenty of clout in Washington.

‘Special Interests Play a Huge Role’

The big corporate contributors say their intent is not to exercise improper influence but to elect politicians who support policies good for their companies and the nation as a whole. They believe that corporate money plays a necessary and responsible role in a democracy.

Critics say the intent of the corporate contributors is far from benign.

“Special interests play a huge role in legislation; otherwise these appropriations bills would not be larded with pork, and tax-code bills would not be loaded with loopholes,” complained Sen. John McCain (R-Ariz.), who is pressing for tight campaign-finance limits. “And who ends up making up the difference if the money is spent in a wasteful and inefficient fashion? The average American, who doesn’t have the influence or the access in Washington.”

The Times examined the role of business in financing federal elections at a time when unprecedented scrutiny is being focused on unorthodox and potentially illegal fund-raising efforts by politicians for their 1996 campaigns.

The analysis shows that companies most frequently cited as the best-managed major corporations in America are all below-average contributors. While pharmaceutical maker Merck & Co. is the 50th-largest corporation on The Times’ list of 544 firms, for example, it ranks as the 129th-largest contributor. Intel Corp., the computer chip giant, is the 45th-largest firm but the 307th-largest political player.

Meanwhile, Philip Morris Cos., the nation’s biggest corporate political contributor in 1995-96 at $3.9 million, is under political and legal attack for its cigarette marketing and manufacturing practices. While the company is regarded as well-run and highly profitable, it has also eliminated 12,000 jobs during the last five years.

AT&T; Corp., the third-largest contributor, pumped $2.2 million into federal election campaigns in 1995-96. In a survey this year by Fortune magazine, AT&T; dropped more sharply than any other corporation in America in its reputation among its peers for good management.

Lockheed Martin Corp., the nation’s seventh-largest political contributor, has taken a beating for years on issues ranging from its arms exports to the price of its toilet seats. The defense contractor has eliminated more than 12,000 jobs since 1995, mostly the result of the collapse of the defense industry. But as it was injecting $1.3 million into federal elections, it argued successfully for a multimillion-dollar government program to underwrite the closure of surplus defense plants.

Similarly, Arco, the Los Angeles-based oil company, cut more than 5,000 jobs in the past five years while giving more than $1.2 million to political candidates and parties, making it the eighth-largest contributor. The company is seeking federal approval to explore for oil on 4.6 million acres of Alaska’s National Petroleum Reserve.

Archer-Daniels-Midland Co., whose management is judged by its peers in the Fortune survey to be at the bottom of the agribusiness industry, has become something of a symbol of big corporate giving. ADM and its executives gave $964,000 in 1995-96. The company, the largest recipient of federal tax credits for ethanol production, pleaded guilty to antitrust charges last year and paid a $100-million criminal fine.

The Times also looked at corporate contributions as a percentage of sales, as a way to measure which companies are stretching the hardest to play politics. By this measure, the paramount corporate giver in the past two years was Beneficial Finance, a lending firm that is fighting to protect its turf as Washington debates whether to reform federal banking laws and regulations.

The firm’s $740,000 in contributions equate to $266.90 for every million dollars of sales, by far the highest.

Veteran Politicians Joining the Outcry

The Times’ study, conducted over the past three months, was assisted by Dwight Morris and Murielle Gamache of the Campaign Study Group in Springfield, Va. The study used information from the Federal Election Commission, but the federal reports were compiled into a separate database by Morris.

Critics have long expressed deep misgivings about the big money influencing federal elections, and now many veteran politicians are joining the chorus.

Steve Grossman, national chairman of the Democratic Party, called the acceleration in political spending analogous to the nuclear arms race of the 1960s, when the United States and the Soviet Union sought meaningless superiority in missiles.

“There is too much money in the system,” Grossman said.

Democrats such as Grossman are particularly anxious about corporate giving.

While corporations have historically tilted toward Republicans, the disparity grew wider after Democrats lost control of Congress in 1994. In the two-year period before the 1996 elections, the 544 corporations showered $87 million on Republicans and gave just $40 million to Democrats.

The top five contributors to Democratic candidates were AT&T; Corp., Ernst & Young, Federal Express Corp., Phillip Morris and MCI Communications Corp., which gave $4.3 million to Democrats for the 1996 elections. By contrast, Republican candidates received $8.8 million from the top five GOP givers--Phillip Morris, RJR Nabisco Inc., AT&T;, United Parcel Service and Union Pacific Corp.

Despite the big increases in contributions, corporations do not dominate political giving, The Times’ study shows. The $102.4 million given by the firms and the $26.9 million given by their employees represent just 6% of the $2 billion in total federal campaign spending in the last election cycle, while the corporations are responsible for an estimated 21% of U.S. gross domestic product, according to an analysis of their employment and sales. Indeed, the $102.4 million in corporate contributions is equal to what was earned in a single year by America’s highest-paid executive, Lawrence Coss, chief of Green Tree Financial.

Nonetheless, certain companies and certain industries work the campaign-contribution gambit extra hard. And many of the top contributors have waged serious battles with the government over the past two decades in the oil, defense, banking, tobacco and telecommunications sectors.

“They are heavily regulated by the federal government, or their profits can be dramatically altered by government policy,” said Kent Cooper, executive director of the Center for Responsive Politics, a nonpartisan group that tracks contributions. “They are the ones that need to deal with government.”

Aerospace titan Lockheed Martin has been a political juggernaut in Washington ever since the government bailed Lockheed out of near bankruptcy in the 1970s. Steve Chaudet, Lockheed Martin’s PAC director, said the firm’s money generally chases after political viewpoints that it supports. But it also opens doors in Washington’s corridors of power.

“It allows you to tell your story, to get an appointment,” Chaudet said. “You might be able to see a member [of Congress] for 10 minutes.”

Critics such as Bill Hartung of the World Policy Institute say defense industry contributions also substantially distort U.S. arms policies. Last year, for example, the Senate killed the so-called Code of Conduct, which would have blocked arms sales to dictators and human rights abusers.

Hartung found that senators voting against the bill received $18,928 each from arms exporters, five times as much as those voting for the ban. The contributions “made the job of proponents substantially more difficult,” he said in an interview. Defense firms in The Times’ survey contributed $7.5 million in the 1996 elections, nearly double what they put into the 1992 elections.

A Lockheed Martin spokesman dismissed the whole subject, arguing that the Code of Conduct was so badly flawed that the United States itself would not qualify for U.S. weapons because its use of capital punishment is regarded by some groups as a human rights abuse.

Can political involvement also be a sign that a company needs government favors as a substitute for success in the marketplace? Critics point to AT&T; as a company that fits this description.

Although AT&T; was a technological powerhouse in the 1960s, its critics contend that it began spending too much time defending its monopolies instead of positioning itself for the coming high-technology boom.

Jerry Lowerie, AT&T;’s chief lobbyist as senior vice president for government affairs, responded that he “can’t fathom” such criticism.

“What if we didn’t [contribute] and trusted our fate to others?” he asked. “We would have ended up a nonexistent company.”

If AT&T; had not protected its franchise when Congress approved the 1996 Telecommunications Reform Act, he explained, its very survival would have been threatened by local and regional phone companies that were seeking access to AT&T;’s long-distance markets while agreeing to concede only a little of their own protected turf to AT&T.;

McCain has a different slant on the effectiveness of contributions by AT&T; and other telecommunications companies.

The promise that the legislation would prompt lower prices, more choice in the marketplace and faster technological innovation was broken, McCain said, as Congress sought to satisfy the conflicting agendas of big political contributors.

“I was there,” McCain said. “I saw the consumers sold out.”

Financial Industry Full of Heavy Hitters

The financial-services industry, headquartered in the New York metropolitan area, is one in which just about all the major players are also heavy hitters in the political-giving game.

For more than a century, East Coast bankers and financiers have been regarded as the back-room bosses of the nation’s political system, and their political contributions in 1995-96 did nothing to dispel that image.

Banks and other financial-services firms contributed $28.7 million during the 1995-96 period, more than one-quarter of everything the biggest firms gave. During the same period, accounting firms nearly tripled their 1991-92 contributions.

“This town is awash in financial-service lobbyists,” said Steven Stockmeyer, senior legislative consultant to the National Assn. of Business Political Action Committees. “They have had a tradition of political involvement that transcends other interest groups. They are bundlers of money.”

The industry has recently confronted a series of crucial legislative and regulatory issues, including proposed reforms affecting securities litigation, investment advisors and mutual funds. A big battle is looming over changes to the Glass-Steagall Act, which has kept ownership of banks isolated from other sectors of industry.

“They want weaker securities laws, less law enforcement and less private litigation against them,” said consumer advocate Ralph Nader. “The function of money in politics is to nullify votes. It is basically to give enough support to an incumbent to ignore the public interest and support the special interest.”

In the political-contribution derby, Wall Street executives are in a class by themselves. When corporations are ranked by their employees’ contributions, eight of the 10 largest political givers are financial services firms. The leader, by a huge margin, is the investment banking firm Goldman, Sachs & Co., whose employees gave $1.5 million: $662,000 to Democrats and $484,093 to Republicans. An additional $360,000 went to nonaffiliated groups, including industry political action committees.

A spokesman for Goldman, Sachs, where Treasury Secretary Robert E. Rubin was once a senior executive, said the privately held partnership would not discuss its practices.

The financial industry also rises to the top of the heap when companies are ranked by political contributions relative to their size.

Beneficial Corp., the Delaware-based operation that specializes in high-interest loans to lower-income borrowers, outdistances the field by a wide margin. If all Fortune 500 companies gave at the same rate as Beneficial, corporate America would have pumped $2.7 billion into the last election cycle--more than actual spending from all sources.

Beneficial, the ultimate practitioner of supporting only incumbents, gave nothing to challengers in House races before the 1996 elections. The company showed little ideological consistency, contributing to both conservative Republicans and liberal Democrats.

Altogether, the firm gave $245,000 to House Republican candidates and $86,000 to Democratic candidates. It targeted money where it could be most effective: to seven of the nine House Banking and Financial Services Committee members, for example.

Why does it contribute so much? Gary Perkinson, Beneficial vice president for government relations, said the company wanted to protect its turf in the banking reform battle.

“Banks and consumer finance companies aren’t generally liked anyway,” Perkinson said. “Who likes a bank? You go down the pole and you get to consumer finance companies. You imagine what could happen to us if we weren’t in Congress and various state legislatures, making our case.”

Perkinson added that the company made “no apologies whatsoever,” because everybody did the same thing. “We do it out front, and we do it heavily,” he said.

And in a commentary on Congress, Perkinson observed: “Can you imagine the members of Congress trying to figure out what’s going on out there? Who is going to tell them? Lobbyists who are often behind the contributions are delivering a real message to government: ‘Here’s how it works, guys.’ ”

East Coast corporations are particularly generous with politicians, The Times’ data show. Corporations headquartered in New York alone accounted for 26% of all political contributions.

When donations are measured as a percentage of sales, firms on the East Coast and in the South contributed disproportionately to the most recent election campaigns.

Southerners, said Karen Bauer, a Washington consultant who specializes in helping corporations set up PACs, give out of patriotism. “In the North,” she said, “people hold their nose while they contribute.”

As a whole, California firms gave at about the national average. Most of the lowest rates were recorded in the industrial Midwest; relative to their size, Wisconsin-based companies contributed about $1 for every $5 from California.

UPS Managers Gave Heavily

Like so much in the murky world of politics, some firms are big players for obscure reasons. United Parcel Service was the nation’s fourth-largest corporate contributor and operated the largest corporate PAC in the 1996 elections, with $2 million in total contributions.

Of course, the company competes with the U.S. Postal Service, and it faces heavy federal regulation on its air-, ground- and rail-transport system. In addition, its employees are members of the heavily political Teamsters union.

But the motivation of UPS managers is one big reason for the company’s high rate of contributions. Under federal law, participation in corporate PACs is voluntary and individuals may contribute no more than $5,000 per year. So a successful PAC must have broad support among middle management.

The average corporate manager’s contribution to a PAC is about $10 per month, said Bauer, the PAC expert, and the less successful PACs have participation rates among managers as low as 5% or 10%.

UPS, the largest employee-owned company in the nation, has a highly motivated core of managers who open up their wallets, said UPS spokeswoman Gina Ellrich. But she refused to disclose UPS participation rates.

Rival Federal Express, a publicly traded company, also made massive contributions of $1.9 million and ranked as the nation’s fifth-largest corporate contributor.

Federal Express Chairman Frederick W. Smith obtained a highly unusual 45-minute meeting with President Clinton on Aug. 23, 1996, to lobby for administration action on Japan’s refusal to allow the company to move cargo from Japan to other Asian nations. The dispute is costing Federal Express $100 million in lost business. In the meeting, Clinton declined to offer immediate help to Smith but promised to work with him after the 1996 elections. A senior White House official said Federal Express’ large contributions played no role in any decisions involving the firm.

2 Agribusinesses Use Different Approaches

No company is more often linked with political contributions than ADM, the big agribusiness firm that gets more than one-third of all the highly controversial federal tax credits for ethanol production. Is ADM, whose political strategy is masterminded by its controversial chief executive, Dwayne O. Andreas, a winner because of its $964,000 in contributions?

Not in the view of Senate Agriculture Committee Chairman Richard G. Lugar (R-Ind.). ADM’s political contributions have so muddied the ethanol issue, Lugar said, that supporters such as himself have difficulty defending the tax subsidy.

“That’s a part of the problem--it surrounds ADM, Dwayne Andreas’ political contributions--[suggesting] that it must be a terrible policy because these people have been involved in all the political money,” Lugar said. “So, I wish somehow we could just clean the slate and get them out of it and get somebody else to produce it.’

Cargill Corp., the world’s largest privately held corporation and the world’s dominant agribusiness firm, has another way of doing business. With $56 billion in revenues, Cargill is four times larger than ADM, but its contributions are five times smaller.

Unlike ADM, Cargill contributes no soft money and runs its PAC through an independent steering committee elected by PAC members and outside the control of senior executives.

The company defies almost every convention in contributions: It strongly supports challengers. It avoids presidential races. It seeks to deregulate agriculture markets and eliminate subsidies, including the ones on which ADM thrives.

Cargill’s focus on growth markets has appeared to pay off handsomely over the years. “Our goal is to double our business every five to seven years, and over time we have met that goal,” said Cargill Vice President Rob Johnson.

ADM is also growing, albeit somewhat slower than Cargill. ADM officials declined a request for interviews.

Wolfgang Demisch, a securities analyst at BT Securities, said the strongest American corporations ask the government not to provide them with favored treatment but only to refrain from favoring their competitors.

“Successful companies need a level playing field,” Demisch said. “They don’t need everything slanted their way.”

Monday: Why some companies don’t make political donations.

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The Corporate Role

Contributions to federal election campaigns, in millions of dollars. Soft money is given in unlimited amounts by corporations to political party organizations. Corporate political action committees give directly to candidates. Most corporate employee contributions are direct to candidates.

Corporate giving (in millions)

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1991-1992 1995-1996 Soft money $16 $51 PAC contributions $43 $52 Executive and other $19 $27 employee contributions Total $78 $130

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