Can CEOs Save the Economy?

Last week, Berkshire Hathaway’s (NYSE: BRK-A  ) (NYSE: BRK-B  ) Warren Buffett brought up the idea that U.S. tax policy “coddles” the wealthy. Starbucks’ (Nasdaq: SBUX  ) Howard Schultz chimed in on the political debate with another attention-grabbing idea: Corporate America should cut off political donations until Washington gets its act together.

Standard & Poor’s recent U.S. downgrade underlined our country’s alarming levels of indebtedness. As much as the debate about the debt ceiling captured Americans’ attention (and brought us very close to default), the political class hasn’t given much indication that any real fixes to the government’s fiscal situation are coming anytime soon.

The CEO suggestion box
Howard Schultz’s suggestion was certainly interesting. If CEOs and businesses cut off their financial support to politicians, maybe politicians would have a little more incentive to get things done.

However, early indications showed few CEOs were willing to publicly rally behind Schultz’s fighting words (money does talk, after all). But Cypress Semiconductor’s (Nasdaq: CY  ) founder and CEO T.J. Rodgers indicated that he’s already "on the Schultz plan” because he doesn’t give to political candidates in the first place.

Corporate campaigns
CEOs are clearly an influential bunch. Even though these individuals rake in the big bucks, they can donate to whatever political candidates they wish, just like the rest of us.

However, Schultz’s call to arms reminds us of another factor that’s important to shareholders, which is corporate political spending.

Shareholder advocates have been increasingly pushing for transparency in corporate campaign donations. Take a look at some corporations that fielded shareholder proposals regarding political spending reports in 2011 as tracked by Proxy Monitor’s database (and votes in favor):

  • Sprint Nextel (NYSE: S  ) : 40.97%
  • Northrop Grumman (NYSE: NOC  ) : 38.07%
  • JPMorgan Chase (NYSE: JPM  ) : 30.29%
  • AT&T (NYSE: T  ) : 30.98%

Last October, the Center for Responsive Politics compiled a list of the top 10 corporate campaign contributors between 1989 and 2010. AT&T came in at No. 1, having contributed a whopping $45.6 million to both Republican and Democratic candidates. AT&T also shelled out $25 million in 2006 in lobbying expenses alone.

However, let’s not forget that while business is a major source of campaign contributions, it’s not the only one. When the Center for Responsive Politics expanded the scope of its search and looked at the highest contributors for the 1989 to 2010 timeframe, AT&T was the only corporation to make the top 10; the rest of the list is comprised of unions and special-interest groups. Howard Schultz might need to get a few more folks on board with his plan to cut off the funds.

The buck stops here
Howard Schultz has said he’s been “stunned” by the response to his plan, particularly the responses he’s received from regular working Americans supporting his idea of a bipartisan boycott of campaign funds donations.

Personally, I’d like to see less shareholder money directed to political campaigns; trying to sway the marketplace through political influence is no competitive advantage and defies free-market principles.

Clearly, though, many “corporate persons” indulge in this behavior anyway. At the very least, I’m glad shareholder advocates are fighting for campaign financing transparency.

One thing’s for sure, though: Howard Schultz’s move has made news headlines and a distinct impression. Hopefully constituents great and small can remind politicians that instead of acting like toddlers in a partisan sandbox, they must do the right thing in taking responsible measures to get the U.S. economy on more secure footing.

Schultz is saying the buck should stop here. Will others -- particularly politicians -- listen?

Check Fool.com every Wednesday and Friday for Alyce Lomax's columns on environmental, social, and governance issues.

Alyce Lomax owns shares of Starbucks. The Motley Fool owns shares of JPMorgan Chase, Berkshire Hathaway, and Northrop Grumman. Motley Fool newsletter services have recommended buying shares of Berkshire Hathaway, AT&T, and Cypress Semiconductor. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (10) | Recommend This Article (11)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 24, 2011, at 3:45 PM, TMFBane wrote:

    Great article, Alyce! I also like the second pledge of his plan where he says that companies should take the initiative to create jobs. He writes, "Our companies are going to hire. We are going to accelerate growth, employment, and investment in jobs."

  • Report this Comment On August 24, 2011, at 3:49 PM, TMFLomax wrote:

    TMFBane, I agree! I'd say creating jobs, expanding business (in turn expanding the economy) is a far better use of shareholder money than campaign donations anyway.

    Here's an update to this topic I just ran across, 100 CEOs sign on to Schultz's pledge to halt donations:

    http://www.bloomberg.com/news/2011-08-24/starbucks-schultz-s...

  • Report this Comment On August 24, 2011, at 3:58 PM, TMFBane wrote:

    Thanks for the link! Here's another one to his Upward Spiral Facebook page, which will support this effort:

    http://www.facebook.com/UpwardSpiral2011?sk=app_125233847572...

  • Report this Comment On August 24, 2011, at 4:35 PM, TMFLomax wrote:

    Thanks for that link, too! How cool!

  • Report this Comment On August 25, 2011, at 11:42 AM, wolfman225 wrote:

    Was this article written by two separate people?

    I enjoy reading your articles, Alyce. Exposure to alternative points of view are necessary to balance perspective, but this makes little sense.

    You admit that for the period 1989 thru 2010 AT&T was the ONLY corporation in the list of top ten biggest political contributors, with the balance of the list being UNIONS AND SPECIAL INTEREST GROUPS who remain suspiciously unnamed, with no mention of how much they contribute (and to whom).

    You make an effort to point out that AT&T was the largest corporate contributor during that time period. Where did they stand on the list as compared to the unions and special interest groups? Did you simply point out their position in the hierarchy of corporate donors to create the impression that AT&T was the largest political donor, period?

    You then attempt to reduce the importance of the fact that 9/10 of the largest donors weren't corporations by asserting that "...many 'corporate persons' indulge in this behavior....".

    Perhaps you could research and do a follow-up article concerning the influence of unions' and special interests' contributions to politics and issue a call for them to cease their attempt to influence politics/politicians? It seems to me that their influence is at least as large as that of business.

  • Report this Comment On August 25, 2011, at 2:37 PM, DJDynamicNC wrote:

    You can review the list of the top ten donors on political websites and via the Sunlight foundation; if I recall correctly, the rest of the list was rounded out by lobbying groups and PACs representing a variety of industries and unions (in other words, businesses and workers, or in other-other words, just about everybody).

    The issue now is that corporations can directly donate to political campaigns - and they have been, in incredibly large quantities. I'll be interested to see the list for the coming elections.

    I can get behind any plan that calls on corporate leaders to stop spending money on buying influence.

  • Report this Comment On August 25, 2011, at 2:56 PM, TMFLomax wrote:

    Hi wolfman225,

    I provided a link to the overall list of heavy hitters, but you're right, I failed to specifically note that AT&T came in at #3 on that list. I made an effort to point out that unions and special interests should also be included in the list of folks who need to be acknowledged for making a boat load of political donations though.

    I wasn't attempting to reduce the importance of those other organizations' political contributions, it's just that I do feel strongly that corporations should be transparent about their political spending for shareholders (since that impacts how shareholder money is directed) and that was the original topic of the article. Sorry if the article wasn't clear in any way though or seemed intentionally reducing other elements here. That was not my intent.

    You're also right that this could be a good follow-up, because yes, those other entities are also highly involved in campaign donations, and it's another side of the story in the whole issue (and does tend to get ignored by the media, I think).

    Thanks for the comment and the opportunity to clarify some things that weren't included in the piece.

    Best,

    Alyce

  • Report this Comment On August 25, 2011, at 5:28 PM, wolfman225 wrote:

    ^Hi back, Alyce. Thanks for the reply. I didn't mean to cast accusations. I just think that you could just as easily trade the words " CEOs, corporations, businesses" for "unions and special interests/PACs" with just a few tweaks. For example:

    "Howard Schultz’s suggestion was certainly interesting. If CEOs and businesses cut off their financial support to politicians, maybe politicians would have a little more incentive to get things done.

    However, early indications showed few CEOs were willing to publicly rally behind Schultz’s fighting words (money does talk, after all)."

    becomes,

    Howard Schultz’s suggestion was certainly interesting. If unions and special interests/PACs cut off their financial support to politicians, maybe politicians would have a little more incentive to get things done.

    However, early indications showed few unions or special interest groups/PACs were willing to publicly rally behind Schultz’s fighting words (money does talk, after all).

    Also,

    "However, Schultz’s call to arms reminds us of another factor that’s important to shareholders, which is corporate political spending."

    similarly becomes,

    However, Schultz’s call to arms reminds us of another factor that’s important to taxpayers, which is union and special interest/PAC political spending.

    I have several friends who are/were members of unions. Many of them often expressed opposition privately concerning the political activities of their leadership (they expressed such feelings privately due to the certainty of reprisal) funded, at least in part, with their dues.

    Lest it seem that I am against political contributions and/or participation by either corps or unions/PACs, I want to say that I am not opposed to political activity and donations from any source. We are all, either individually or in groups, possessed of a Constitutional right to petition government. I would simply like to have full disclosure of who gives to whom and when. I believe we are capable of making educated choices in our elected officials, if given all the information.

  • Report this Comment On August 25, 2011, at 5:36 PM, wolfman225 wrote:

    @DJ--

    "The issue now is that corporations can directly donate to political campaigns - and they have been, in incredibly large quantities. I'll be interested to see the list for the coming elections.

    I can get behind any plan that calls on corporate leaders to stop spending money on buying influence."

    If you are willing to do a similar word-swap, I'm right with you. Otherwise, it needs to remain an open field.

    Being overly influenced by either side would be equally defiant of free market principles.

  • Report this Comment On August 25, 2011, at 7:39 PM, wolfman225 wrote:

    Correction: I am not opposed to political contributions from any source EXCEPT foreign nationals/government agents. This also goes for local and state elections. If you aren't a resident, or if you don't have a local business outlet, you should stay out of another state's business.

    <sigh> I can't believe I didn't make that clear in my post. Must be getting old. :(

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