Corporate power grabs on the California ballot: What do we learn?


We may finally have discovered a remedy for corporate executives with more greed than brains: Let them invest corporate funds by the millions in California ballot initiatives, then vote the things down.

Isn’t that the lesson of Tuesday’s balloting on Propositions 16 and 17, those majestically cynical initiatives sponsored by Pacific Gas & Electric Co. and Mercury Insurance Group?

To recap for the 82% of eligible voters statewide who didn’t bother to vote last week, Proposition 16 was an initiative concocted by PG&E, the state’s biggest private utility, to hamstring the public power agencies that are its chief competitors — pretty much its only competitors. Of the $46 million in cash contributions raised to pass the initiative, $46 million, or 100%, came from PG&E.

Proposition 17 was an initiative concocted by Mercury to undermine the insurance consumer protection system put into place by Proposition 103 of 1988. Of the $13.56 million in cash raised to promote Prop. 17, $13.5 million came from Mercury, whose founder and chairman, George Joseph, has turned the punching of holes in Prop. 103 into a personal obsession. That spending may make Mercury a cheapskate by PG&E standards, but by any rational standard of democratic process, the scale of it was obscene.

Yet these initiatives went down in defeat by almost identical margins, losing about 52%-48%.

That doesn’t speak well of the management prowess of the executives in charge. PG&E Chairman Peter Darbee walked his company down a $46-million plank to secure it nothing but a permanent place in the corporate citizenship hall of shame. He collected $10.6 million in compensation last year.

Do the PG&E directors really believe that the outcome of Tuesday’s vote is the sort of performance they’ve so lavishly paid Darbee to achieve? If they do, I have a follow-up question: What makes them qualified to serve on a corporate board?

Considering that the U.S. Supreme Court has given the green light to almost limitless political spending by corporate interests, it’s worth pondering how the initiatives lost, the better to deal with the oil slick of electoral cash sure to be heading our way on the next tide.

The most striking statistic that emerges from Tuesday’s results, as my colleagues Marc Lifsher and Dianne Klein have observed, is the margin by which Proposition 16 got beaten within PG&E’s service area in Northern and Central California — a “no” vote of more than 60% in much of the region.

The measure lost by narrower margins in many Southern California counties, where there wasn’t enough familiarity with PG&E to breed that much contempt.

The “no” vote on Mercury’s Proposition 17 followed a similar pattern, which suggests that the proximity on the ballot of the two corporate power grabs made anti-PG&E sentiment infectious.

That indicates that the antidote to unrestrained corporate political spending is to make sure that voters know that a corporate interest is behind an ad, an issue campaign or a candidate.

As it happens, that’s the approach chosen by Sen. Chuck Schumer (D-N.Y.) and Rep. Chris Van Hollen (D-Md.) in their Disclose Act, which would require CEOs to appear on camera to endorse any ad or commercial their companies fund, as candidates do. (The act has recently run into opposition from the National Rifle Assn. and the AFL-CIO, which don’t care to be held to the same rules.)

That the proposed disclosure rules would likely have a disinfecting influence follows from a very interesting pattern discernable in the corporate initiative campaigns in this state — along with Props. 16 and 17, let’s throw in the attempt by the oil company Venoco to cripple the municipal planning process in the city of Carpinteria (slaughtered Tuesday 70%-30%), and the oil industry’s developing campaign to suspend the state’s emissions limits (due for a vote in November).

The pattern is that the companies and industries most willing to subvert democracy by turbo-funding deceitful initiative campaigns are those with already dodgy records of corporate citizenship.

PG&E’s reputation for customer service and its compliance record on regulatory directives are unremittingly foul — so much so that the Public Utilities Commission had to issue a four-page letter last month explaining to the company, in terms even a 4-year-old could understand, how its machinations against Marin County’s renewable energy initiative violated the law.

Mercury has been repeatedly accused by regulators of dealing with the state’s rules on insurance underwriting by simply ignoring them. Occasionally the company has agreed to rectify illicit practices, according to a complaint filed in April by the Department of Insurance, and then failed to do so.

“Ultimately, Mercury does not believe that we have the authority to require them to change ... their business practices,” observed a 2004 agency memo, which is as concise a description of this company’s attitude as you could wish.

As for the oil industry, the evidence of its concern for the public interest has been washing up on the beaches of the Gulf of Mexico every day for a month and a half.

One lesson of the Proposition 16 and 17 campaigns may be that PG&E and Mercury, as regulated companies, have been treated far too indulgently by government overseers. The regulators plainly have allowed both companies to overcharge their customers so much that the excess cash has been burning a hole in their pockets.

Take PG&E, which currently has an application before the PUC for a multibillion-dollar rate hike. The utility maintains that the $46 million it spent on Proposition 16 belongs to its shareholders, not ratepayers, but that’s a typically neat piece of deception. The truth is that every penny PG&E has comes from its customers’ pockets; it’s possible that eventually the firm will have to cut shareholder returns to cover the Prop. 16 campaign, but it won’t have to document for the PUC how it accounted for those expenditures until years have passed. In the meantime, it was able to use the customers’ money, essentially for free, against those customers’ interests.

As for Mercury, it reported that it spent well below 70% of its collected premiums on claims last year. Even health insurers typically pay out more than that.

Both firms have proved that they can’t be trusted to use their spare cash for their shareholders’ good, much less the public interest. The PUC and Insurance Department should take the evidence to heart: Give companies like this too big an allowance, and they’ll only use the money to cause trouble.

Michael Hiltzik’s column appears Sundays and Wednesdays. Reach him at, read past columns at, check out, and follow @latimeshiltzik on Twitter.