Companies Brake Political Gravy Train

As Senate probes campaign donations, firms begin to cut back on 'soft money' giving.

Corporate America, the money tree for the nation's two major parties, is rethinking its place in American politics.

The last election saw an unprecedented - and some say unseemly - feeding frenzy for political dollars. In response, some companies, including General Motors, Monsanto, Ameritech, and AlliedSignal, have either suspended or ended donations of company money to the Republican and Democratic Party organizations. Others are considering such a move.

Their charge: a lack of accountability over what happens to money once they hand it over, and a lack of public appreciation for their support.

Senate hearings into campaign finance, which are beginning, will focus mainly on the foreign donations made to the Democrats for last fall's elections. But the whole system is under fire, in particular the largely unregulated donations of "soft money" that companies and individuals make to the party committees that support general party activities but not individual candidates.

In the past two years, the parties raised $263 million in soft money, triple the amount raised during the previous presidential campaign. Ninety percent of the GOP's $141 million in soft money came from corporations, as did 70 percent of the Democrats' $122 million soft dollars.

"There's a lot of soul-searching going on," says Bernadette Budde, a political analyst for BIPAC, the business and industry political action committee. "It's not so much that [corporations] feel there's anything wrong with soft money. But they realize there are so many other things they can do with their political money now."

Some companies are looking at funding more "issue advocacy," advertising that directly targets voters and members of Congress on issues corporations care about most, such as taxes and trade. Business sees the labor movement continuing to spend big money on its own issue advocacy - most recently, ads opposing the Republican tax-cut plan - and feels compelled to respond blow for blow.

It's too soon to say if the corporate backlash against soft money will seriously hurt the parties' already-shaky finances. But political leaders are alarmed about the possibility. The Democratic Party's debt has skyrocketed, from $6.2 million at the end of last year to $14 million, as bills come due from the last election and legal fees pour in over the fund-raising scandal.

The Republican Party has cut its debt to $4.5 million since the election. But the party's general chairman doesn't want to see the GOP lose its edge in an area of fund-raising where it beats the Democrats.

"It concerns me, because there's a process going on that will examine what happened in the last election and then we'll see what changes ought to be crafted," says GOP chairman Jim Nicholson, who is setting up accountability committees with members of the business community to oversee how soft money is used.

Some business leaders warn a cutback in corporate soft-money donations would amount to "unilateral disarmament" against the Democrats, and that therefore, companies won't stop giving to the GOP.

But for now, corporations are taking a hard look at how they spend political money, and whether it's worth it. Washington-based corporate representatives have been meeting to discuss their criteria for giving and how to make the political process serve their goals most effectively.

Elsewhere, business executives in a two-year-old group called the Campaign Reform Project - founded by Wall Street takeover guru Jerome Kohlberg - are contacting other top executives and urging them to halt corporate soft-money donations.

Many companies that have stopped soft-money donations say they felt they were throwing money into a black hole.

"It's difficult to track where all the soft money is actually used," says Pat Morrissey, a spokesman for General Motors, which gave about $300,000 in soft money in the last election. "We felt we were better off sticking with our PAC," he adds, referring to the company's political action committee, a more regulated vehicle for making political donations.

St. Louis-based Monsanto, which gave about $90,000 to the two parties in the last election, made a quiet decision a few months ago to drop soft money. "There just wasn't much bang for the buck," says company spokeswoman Scarlet Foster.

Other corporate representatives, speaking on background, complained about comments last fall by then-GOP chairman Haley Barbour, who exhorted companies to keep donating and to "clear out" Democrats who are running some corporations' Washington offices. But some reps hope that the political off-season has brought an opportunity for more sober reflection and possible change.

One whose company has suspended soft-money donations says he has three goals for campaign-finance reform: that it lead to more participation in the political process through individual donations; that there be full disclosure of where donations come from; and that there be greater incentives for people at the state and district level to get involved in supporting candidates.

"Soft money is worth the investment," he says. "The parties play a role that advocacy groups cannot - the selection [of candidates], the recruiting, and the organizing are all party functions. And it is in business's interests to have a strong two-party system."

But, he adds, "when the parties' work consists of fund-raising and money to consultants for advertising ... that's when you scratch your head and wonder why you're doing it in the first place."

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