New Economy Backers Lust for That Old-Fashioned Clout

Monday, October 9, 2000
by Marc J. Lane

Reprint permission from the October 9, 2000 issue of Crain's Chicago Business.

It's election time, and anything can happen. But this go-around, some unexpected forces are at work.

Six people recently offered to sell their votes for president on the Internet, fetching $10,000 bids each before the online auctioneer concluded the bidding. Federal and state laws prohibit vote selling, and the auction site is cooperating with investigators from the U.S. Department of Justice.

Another site is soliciting undecided voters to offer as a bloc. The site's purpose is to deliver absentee ballots to the highest bidder. When the New York City Board of Elections brought pressure to bear, the New York-based owner of the site sold it to an Austrian marketing company.

Astonishingly, the company's management believes a worldwide market exists for the buying and selling of votes, even though the practice is illegal everywhere, and predicts the eventual legalization of vote-peddling.

All the while, Big Business is doing business as usual. Seeking to protect and promote their special interests, Wall Street's richest companies are hedging their bets by giving tens of millions of dollars, in almost equal shares, to Republican and Democratic candidates. More pragmatic than ideological, the most powerful companies in the nation spread their money around.

But leave it to the entrepreneurs to innovate.

The efforts of a new political action committee (PAC) raise unprecedented and disturbing questions. A group of young Silicon Valley execs is launching the PAC to dole out stock options as campaign contributions.

The committee's members plan to build a war chest of equity securities in their pre-IPO or newly public companies and share their entrepreneurial prospects with sympathetic candidates, particularly those in the hardest-fought campaigns.

It is good to see the new economy's leaders actively engaged in the political process. They have every right to promote their interests on issues from Internet taxation to cyber-terrorism. And it is only good business for them to cozy up to the politicians who might take their side.

Nothing in the law seems to preclude campaign contributions of stock and stock options. In fact, the Federal Election Commission, the less-than-vigilant agency that oversees federal campaigns, has green-lighted the practice.

But the whole idea of rewarding candidates for high office with hot stock has a smoke-filled back-room stench to it.

For years, partisans have bundled small cash donations and delivered them to the campaigns they support. Their game has been to finesse legal fund-raising limits while buying the influence that big money exerts.

Campaign finance reformers are on the right side of the argument when they challenge the strategy, and here, its application is more dangerous than most.

The law limiting political contributions was designed to level the playing field so that the most affluent Americans could gain no more influence over their elected officials than less wealthy, but equally concerned, voters.

Stock options can leverage huge wealth, and pooling and contributing them through PACs subverts the law's intent. Worse still, the candidates themselves become commodities, the opportune targets of investors and speculators.

Republican vice-presidential candidate Dick Cheney waffled about how he would handle the stock options he took with him when he retired as chairman of Halliburton Co., the oil services giant. He deserved the heat he felt. So will the public servants who become business partners of the entrepreneurs whose support they invite.

Marc J. Lane is a Chicago lawyer and financial planner and an adjunct professor of law at Northwestern University.


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Copyright © 2000 by Crain Communications Inc.

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