November 5, 2002 2:04 PM PST
Tech money fueling campaigns
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The tech industry and its employees had contributed $18.2 million to federal campaigns as of September, according to the Center for Responsive Politics, which tracks donations. That's down from $40.8 million during the entire 2000 race, a figure that includes contributions through December of that year. Although contributions tend to ramp up in the weeks before the election, it's unlikely the tech industry will meet its 2000 season figures based on its current rate.
Campaign-finance experts attribute this year's drop in donations to the beleaguered economy and to a historically lower interest in midterm elections compared with presidential races.
Nevertheless, the tech industry appears to be maintaining its growing influence on the world of politics. Tech is still holding its own against other sectors, ranking eighth overall among contributors, up from 36th a decade ago, when the industry donated only $5.1 million.
The tech sector "is now a fixture among contributors from U.S. industries," said Steven Weiss, a spokesman for the Center for Responsive Politics.
Contributors in the top 10 include Microsoft, Gateway, Oracle and Cisco Systems, which overall sent about two-thirds of their contributions to Republicans. Propel, which makes technology to speed up Internet connections, topped the list. Propel CEO Steve Kirsch, a Silicon Valley executive who founded InfoSeek, gave Democrats $3.3 million.
For years, tech companies ignored the political scene, hoping they could develop and sell their products without interference from lawmakers.
But the sector got a wake-up call in 1996, when an initiative was placed on the California state ballot that would have made it easier for shareholders to sue a company. Fearing an onslaught of lawsuits, the tech industry jolted into action, working to successfully defeat the measure. The effort also spawned the formation of TechNet, a Silicon Valley-based political lobbying group. Efforts to tax the Internet, restrict encryption exports, and clamp down on H1-B visas further inspired techies to focus some attention on Washington.
"There's been a continued maturing of the industry and a realization that you still have to be part of the political process," said Rick White, chief executive of TechNet and a former congressman. "Some companies have been through the political ringer a few times and have come out on the wrong end. So tech companies and their shareholders recognize it's important to have their story told to government."
Ironically, a company's revenue and earnings performance do not always correlate with the level of its campaign contributions. For example, despite the telecommunications industry taking a large hit and a number of companies filing for bankruptcy, the industry this year has continued to pump millions of dollars into campaign contributions.
"The telecom industry has always been highly regulated and has spent a ton of money on local (contributions), like AT&T, Sprint, et cetera," White said. "Whether a company is making money or not, they need to make campaign contributions because their industry is heavily regulated."
The communications and electronics industry, which is tracked separately from the computers and Internet sector, has contributed $77.2 million in the 21 months ending in September, according to the Center for Responsive Politics. And although the level of contributions has dropped by about 43 percent compared with the 2000 campaign season--which coincided with the height of the tech industry's go-go days--the level of contributions is up by a similar degree when compared to the preboom days of 1998.
Some of the top 20 contributors in the sector include WorldCom and Global Crossing, both of which filed for bankruptcy this year. WorldCom, along with its company executives and employees, donated $1 million in contributions for the 21-month period ending in September. And Global Crossing, along with its executives and employees, coughed up $1.2 million in the period. Both companies collapsed under revelations of financial improprieties.
Companies in industries that face little regulation might also turn to campaign contributions, TechNet's White said, in part to bring more government contracts their way as revenues from private companies dry up.
Those who are giving money this time around may also be hoping to get a slice of the homeland-security pie. A new Homeland Security Department promises to be a cash cow for the tech sector as it purchases computer equipment for internal use and promotes new technology to help the U.S. fight terrorism.
"Some companies realize they are better off selling to the government, since they're the only ones around with money," White said. "And some do it to help the industry resolve an issue or flourish. When you have an economic downturn, you have to do both. You need to develop a relationship with the politicians who care about your issues and show you can be seen as someone who wants to help the economy as a whole."
Several other factors may be influencing donations this time around. Campaign finance reforms going into effect after Election Day make this the last time companies can make certain types of major contributions known as soft money. Soft money donations have gone largely unregulated and therefore have had no cap. Congress is also expected to consider changes to accounting practices involving stock options. Forcing companies to expense options, as some lawmakers have proposed, could result in lower earnings reports.
And finally, the tech industry is working to counteract Hollywood's efforts to push bills that could dictate tech product development in the name of fighting unauthorized distribution of copyrighted material. However, unlike the movie and music industry, which so far is sending 77 percent of its contributions to Democrats, the tech sector as a whole is hedging its bets, giving to 49 percent to Democrats and 50 percent to Republicans.