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STRATEGY

Playing Politics

It can be very tempting to try to grease the political wheels. But are campaign donations a sound investment?
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Like most americans, Gail Kennard knows that politics can get dirty. But as president of the Kennard Design Group, a Los Angeles architectural and planning firm largely dependent on government contracts, Kennard has a window into exactly how the game is played.

Last year, for example, her firm received a contract to design a municipal building in a nearby suburban city. Within six months, the reelection campaigns of two of the city's five council members and one challenger came calling, asking for donations. The politicos were savvy enough not to promise anything specific in return, but Kennard knew she had to give the matter serious consideration. After all, she would need the council's approval for any changes to her designs, as well as for future payments. The council could easily slow the project by postponing a decision, or even consideration, about some aspect of the $800,000 project to a later meeting. And then there was the question of future contracts. Clearly, Kennard needed friends on the council. "It's definitely easier if politicians know you than if they don't," she says. "A contribution is one way of getting to know them."

Corporate America, of course, has known this for years, purchasing access to all levels of government officials, regardless of political party, with strategically placed donations and elaborate lobbying campaigns. Entrepreneurs, by contrast, have been less savvy -- or, if you will, less cynical. When they do give, it often has less to do with accomplishing a particular business goal than with supporting a cause or candidate for personal reasons, says David Magleby, a professor of political science at Brigham Young University and an expert in campaign finance. In other words, they participate in the political process less as tough-minded CEOs than as the citizen next door.

But it's getting harder for business owners to sit it out. For one thing, small companies are being targeted more than ever. Blame it on the campaign-finance reform laws passed in 2002, which capped donations in federal campaigns at $2,000 and outlawed soft-money contributions. The idea was to reduce the influence of big-money corporate political action committees and high-net-worth donors. But the result has been that political campaigns, whether on the national, state, or local level, are on the lookout for new and smaller contributors.

That makes this a good time for entrepreneurs to rethink the way they approach politics and political giving. Very often, entrepreneurs don't even consider such matters -- until it's too late, says Morris Reid, a former aide to Secretary of Commerce Ron Brown who now runs Westin Rinehart, a public affairs and lobbying firm in Washington that specializes in working with private companies. "You should begin thinking about the public sector and what it can offer from the beginning, when you write your business plan," Reid advises. "It's tough when you haven't budgeted and then have to scrimp pennies to get out of a crisis."

"If you and I both call the mayor, and I'm a giver and you're not, whose call does he return?"

Jack Collins, a Philadelphia campaign consultant who has worked with both Democrats and Republicans, says small-business owners need to think as strategically as their peers in corporate America. For many companies, that means targeting local races, where smaller donors can have bigger impact. "If you and I both call the mayor, and I'm a giver and you're not, whose call does he return first?" Collins asks. It's a rhetorical question, of course. "Now, he might not necessarily give me what I want, but he will certainly give me access. If both of us want the same thing, I'm the one that's going to get it done."

Some entrepreneurs try to increase their political access through a less direct practice known as "bundling." With individual donations capped, bundlers commit to raise money from as many individuals as possible. The campaigns then keep track of who raises, or bundles, the donations. Ronn Torossian, owner of 5W Public Relations in New York City, became a so-called Maverick bundler for President Bush's reelection campaign last year, committing to raise $50,000. Torossian isn't looking for help with government contracts. For him, politics is all about networking. At a cocktail party with other Bush supporters last December, for example, Torossian had a five-minute conversation with the owner of a real estate company in nearby Westchester County. The two men exchanged cards and had lunch a few days later. After that, the man became a client. Torossian is a strong supporter of the President's reelection campaign, but he concedes that "through politics, you can meet a lot of people that you can't in everyday life. Giving a few thousand dollars and getting access to some of New York's movers and shakers is worth the investment."

Before making any donation, be sure to study federal, state, and local laws, which are more complicated than ever. On the federal level, many new restrictions are not widely known. Employers, for example, are not allowed to reimburse employees for donations, nor can they require employees to contribute to a campaign. You can, however, send a note to employees endorsing a candidate and explaining why that candidate is good for your business. It becomes an issue if you ask employees for receipts from the donation or try to verify that they contributed. What's more, your own political efforts cannot be coordinated by an official campaign. "Let's say you decide to run an ad in Iowa for Bush or Kerry," says Aron Pilhofer, a campaign-finance expert at the Center for Public Integrity in Washington. "That is fine until they come to you and say, 'Why don't you do Texas instead?' At that point, it becomes coordination and the spending must be reported as a donation. You'll run into trouble if you have given the max." State and local campaign-finance laws vary, though many have similar restrictions on the books.

Even when you know the law inside out, playing politics takes a stronger stomach than many entrepreneurs might possess. Kennard, for example, eventually opted not to donate to the council members. Any contributions would have been perfectly legal, but Kennard figured the risk, however remote, of seeing her company's name connected to an influence-peddling or corruption scandal was not worth the access her money would buy. Such an attitude is easy to understand in Los Angeles, where a pay-to-play contracting scandal led to the resignation of the chairman of the city's airport commission in April and continues to dog the reelection campaign of Mayor James K. Hahn. Indeed, Kennard decided she was so turned off by campaign solicitors that she's considering drafting a formal company policy forbidding her 10 employees from donating to candidates or causes related in any way to company contracts. Such a policy could mean less access to decision makers, she admits. But at least it will keep the company clean.

Last updated: Sep 1, 2004




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