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The Politics of Business

Shareholders vote on corporate campaign contributions in the US

Campaign finance goes to a vote in the US this week - not on Capitol Hill but in the business community.

Shareholders of at least seven major American corporations have the opportunity to sound off on money their companies gave politicians and political causes in 1996 elections.

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The first vote comes at the annual shareholders' meeting of Torchmark, an insurance giant based in Birmingham, Ala.

Similar votes follow, through May, for DuPont, Exxon, Federated Department Stores, AT&T, US Airways, and Viacom.

Hundreds of thousands of corporate dollars poured into Democratic and Republican campaign coffers last year.

But until now, few had asked shareholders - who own the contributing companies - about those contributions.

Experts in shareholder activism, however, say campaign finance sits low on the agenda for most investors.

"The majority of shareholders care more about corporate performance [earnings, profits, dividends], than who they are contributing to," says Louis Thompson, president of the National Investor Relations Institute in Vienna, Va.

"Shareholders understand ... legitimate business expenses like lobbying, and they are willing to defer to management," adds Nell Minow, co-author of three books on shareholder activism.

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"Shareholders are such a widely diverse group," she adds, "that it would be difficult to ... send a unified message."

For more than 90 years it has been illegal in the US for corporations to contribute directly to candidates for federal office.

Over the years, corporations found legal loopholes to funnel their money to candidates.

No US corporations have been charged with wrongdoing during 1996, but contributions reached new levels as businesses used political action committees and soft dollar contributions to support candidates, parties, and causes.

Many corporations view political support and lobbying as a cost of doing business, a kind of political insurance in advance of difficult regulatory or tax issues. The money can help executives get a foot in the door at a crucial time.

"From an investor's standpoint, this is good business practice," says Michael Useem, a professor of management at the University of Pennsylvania's Wharton business school.

Businesses want "access to talk with Congress people and senators personally, and a PAC [political action committee] contribution does that," he says. They are not buying votes, but ensuring their views have a hearing.

Executives at Torchmark felt strongly enough about the issue that they decided to ask shareholders for a reserve fund for political contributions - .05 percent of pre-tax earnings, about $247,000 a year.

The proxy questions at the other six corporations were initiated by well-known corporate gadfly Evelyn Y. Davis. She is asking shareholders to require disclosure of how much goes for lobbying and political contributions and for which causes.

"I'm not saying they shouldn't make contributions, but I'd like to know how the money is spent," Ms. Davis says.

Executives at each of the corporations urge shareholders to reject the measures. They say contributions are already disclosed to the Federal Election Commission, and further disclosure would waste company resources.

Public documents show this spending:

* Torchmark - $564,250 in PAC and soft money contributions in the last election; $280,000 for lobbying last year.

* AT&T - $2.21 million in PAC and soft money contributions; $8.36 million for lobbying.

* Viacom - $500,857 in PAC and soft money; $195,000 for lobbying.

* US Airways - $75,100 in PAC and soft money: $640,000 for lobbying.

* DuPont - $130,700 on PACs; $735,000 for lobbying.

* Exxon - $556,790 on PACs; $5 million for lobbying.

* Federated - $17,000 on PACs.

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