AWACS; American Jewish Congress takes on corporate America
Why would a bus company, a ketchup maker, and a breakfast cereal firm lobby for sophisticated radar planes - AWACS - for Saudi Arabia? That's what the American Jewish Congress (AJC) would like to know.
Almost a year and a half after the controversial vote in Congress to sell five Airborne Warning and Control System (AWACS) planes to Saudi Arabia, the dust hasn't settled.
Some AWACS opponents are still steaming about what they call corporate strong-arm tactics and presidential arm-twisting that they feel helped align a majority of the United States Senate behind the $8.5 billion sale. The emotional debate pitted the Reagan administration and some business leaders against a number of Jewish groups and other supporters of Israel in a struggle for the hearts and minds - and votes - of a few pivotal senators. The vote was 52 to 48.
To some it was a question of helping Saudi Arabia protect its oil fields from possible attack from Iran. To others, AWACS in Saudi hands meant a threat to the security of Israel.
''It was a very bitter fight,'' says Will Maslow, general counsel of the AJC.
His organization - a New York-based, tax-exempt group with 50,000 members nationwide - has undertaken a campaign to force disclosure of pro-AWACS lobbying by corporations. It is doing this through the use of shareholder proxy resolutions, through which stock owners sympathetic to the AJC goals can bring the lobbying issue to a vote at corporate annual meetings.
Among the questions the AJC is raising:
* Were companies acting in their own and their shareholders' best interests in lobbying for AWACS?
* Should shareholders be notified of what the company is lobbying for?
Among the questions AJC critics are asking:
* Do corporations have a right to lobby for policies they perceive as being in the best interest of their companies, the nation, and the Middle East?
* Is the AJC striving to silence what it sees as potential adversaries (in corporate America) on future Middle East issues?
In a complaint filed with the Securities and Exchange Commission, one representative of a targeted company charged that the AJC shareholders' campaign was designed ''to harass (the corporation) so as to create a chilling effect deterring them from taking positions opposed to those taken by the American Jewish Congress.''
According to a recent report by the Investor Responsibility Research Center in Washington, ''The evidence that the US corporate community played an important role and lobbied extensively for approval of the AWACS is very strong.'' But the report adds that ''the importance of the corporate effort is open to debate.''
This month that debate is under way in board rooms across the country as a result of the AJC shareholder campaign to force disclosure of how much was spent by corporations to influence the AWACS vote.
According to Mr. Maslow, the AJC and others are particularly concerned that a similar corporate lobbying effort might be used successfully to push through the sale of advanced arms to Jordan or to reduce US aid to Israel.
''The AWACS issue may be old, but the Jordanian arms issue is just coming up, '' Maslow says. ''About half the companies we've talked to said they will not be involved in a Jordanian arms deal.'' He adds, ''As far as we are concerned this was a success.''
The AJC effort comes at a time when the historic ''special relationship'' between the US and Israel has increasingly eroded into one of confrontation. In the aftermath of the Israeli invasion of Lebanon and the unwillingness of the Begin government to halt Jewish settlements on the West Bank, the Reagan administration has been working to entice King Hussein of Jordan to join negotiations with Israel over a future Palestinian entity on the West Bank.
Some observers say they believe the administration, eager for preelection breakthrough in the Middle East, may offer the King a sizable arms package as an incentive to come to the negotiating table. Already, 52 senators have signed a resolution against any proposed arms sale to Jordan.
A similar resolution, supported by 54 senators opposed to the AWACS sale, had circulated prior to the Reagan administration's official proposal to sell the AWACS to the Saudis.
As a part of its strategy, the AJC targeted 23 corporations it says were the ''most active in the AWACS deal.'' The list is primarily comprised of members of the airline and oil industries and includes many firms that do business in Saudi Arabia.
Among those on the list: Greyhound Corporation (which has a subsidiary in Saudi Arabia and says its lobbying amounted to sending four letters to two senators); H.J. Heinz Company (which has no subsidiaries in Saudi Arabia and has not yet decided if it will disclose its AWACS efforts); and Kellogg Company (which also has no subsidiaries in Saudi Arabia and which denies any company involvement in AWACS lobbying. The Kellogg chairman had signed a telex to senators with other executives urging approval on the morning of the AWACS vote, but a company spokeswoman says he signed the telex as an individual rather than as a company official).
Last October the AJC asked sympathetic stockholders in each of the corporations to introduce identical shareholder resolutions calling for disclosure of how much was spent lobbying for AWACS. The resolutions also asked corporations to detail their future plans for lobbying on Middle East issues.
The corporations were given a choice: Either put the resolutions up for a vote at this year's annual meetings or make full disclosures in quarterly reports to shareholders. Those who did neither would be sued.
Of the 23 targeted companies, 11 decided to include the resolution for a vote on their yearly proxy statements, 10 will make disclosures, and two have not yet made decisions.
To some the AJC campaign smacks of sour grapes from losing the AWACS battle. Some see it as an attempt to prevent corporate managers from exercising their right of free speech in making their views known to government leaders.
The AJC's Maslow says he sees it as a means of protecting the public from the potential excesses of a ''chummy club'' of corporate executives who might use their multinational resources and power to influence votes on controversial issues. He says that in many cases corporate managers have lobbied on issues in which they have no direct business interest. He adds most act without receiving authorization from or even notifying shareholders.
''Anybody can lobby if he wants to,'' says Maslow, ''but here is management lobbying with other people's money. It is a question of who is speaking for whom and is management authorized to do so.''
The AJC resolution says in part: ''There is no greater threat to the integrity of our political institutions than the ability of executives of our giant corporations to influence public opinion by the expenditure of millions of corporate dollars.''
Many in corporate America disagree.
''When we think that something is in the best interest of the country or the company and the shareholders, we think we have an obligation to speak out, and that's what we did,'' says Edward R. Luter, senior vice-president at Dresser Industries, an oil and gas drilling equipment firm. He said the firm's pro-AWACS effort consisted of ''a few phone calls.''
Some say management's job is to run the corporation. If shareholders were consulted on all potentially controversial items, they argue, there would be no time left to manage, let alone be competitive in today's markets.
The old ''Wall Street rule'' is that if shareholders are unhappy with positions taken by management, they are free to sell their stock. Most corporations, however, are willing to discuss resolutions with their shareholders and, where possible, satisfy requests. This is done to avoid controversies and avoid, as one corporate official put it, ''cluttering up the proxy statement.'' (A proxy statement is a stockholder's ballot for voting on corporate matters at a firm's annual meeting. Most are completed by mail.)
The use of stockholder proxy resolutions by special interest groups is not new. It has been done by church, environmental, political, and other groups for years in an effort to make corporations more responsive on issues ranging from doing business in South Africa to banning smoking in airplanes.
According to Diana Wienckoski of the American Society of Corporate Secretaries (the company officials who prepare proxy statements), the number of resolutions proposed to US corporations each year has increased from 500 in 1977 to more than 1,000 last year. She says that 20 to 30 percent of all US corporations receive shareholder proposals, and that the largest and most visible corporations tend to receive the most resolutions.
Despite the proliferation of so-called shareholder activists, the success rate of proxy proposals remains extremely low. ''If a shareholder proposal receives 5 percent of the vote that's considered good. If it gets 10 percent that is extraordinary. There are very few that are passed,'' Ms. Wienckoski says.
Why then initiate a proxy resolution?
''It is a method of projecting an issue to the public,'' says Maslow. ''The leverage is not the votes, but the public attention that it generates.''
He says, ''Let them (the corporations) face the consequences of [their] indiscriminate lobbying.''
We don't question the legal right of corporations to lobby in their own interest. But we do question the propriety of companies that spend stockholders' money for lobbying when there is no direct benefit to the company or its shareholders.''
Despite this statement, the AJC list includes: Boeing Company (builder of the basic AWACS plane); United Technologies (whose Pratt & Whitney subsidiary builds AWACS engines); and Westinghouse (builder of the AWACS radar).
Others on the list, many of whom have business interests in Saudi Arabia, include: Aluminum Company of America; Ford Motor Company; Deere & Co.; Eastern Air Lines; NL Industries; SmithKline-Beckman Corporation; Kellogg Company; Republic Steel Corporation; American Airlines; Blount; Greyhound Corporation; H.J. Heinz Company; Dravo Corporation; Dresser Industries; Fluor Corporation; FMC Corporation; General Telephone & Electronics Corporation; Halliburton Company; Mobil Corporation; and Northrop Corporation.