Lerbinger O. Corporate Public Affairs. Interacting with Interest Groups, Media, and Government

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Box 9.1 Microsoft’s Entry Into the Beltway

Microsoft’s belated presence in Washington, DC, illustrates the mo

tives that prompt lobbying activities. Before opening an in-house lob

bying office in 1995, the company shunned politics and barely

acknowledged Washington existed. In low-key fashion, it relied on the

DC law offices of Preston, Gates, Ellis & Rouvelas Meeds (Gates is the

father of Bill Gates). By the second half of 1997, however, Microsoft

extended its activities; it spent $1.2 million on lobbying, nearly double

the $660,000 spent during the first 6 months.

Even before its antitrust troubles started with the Justice Depart

ment, Microsoft hired Grover Norquist, the head of Americans for Tax

Reform and one of the best connected conservatives in Washington.

He was able to help Microsoft in two ways. One was to fight changes

in proposed immigration legislation in 1996 that would have jeopar-

dized the status of numerous legal immigrants that Microsoft employs.

Another way was to help secure passage of the Software Export Equity

Act in 1997, which rewarded software exporters with a tax break worth

an estimated $1.7 billion over the next 10 years. Although the law

benefits almost 100 companies, Microsoft is the biggest beneficiary.

Microsoft was further spurred into action by an October 20, 1997,

Justice Department suit seeking a $1 million-a-day fine from Microsoft

for allegedly violating a 1995 antitrust consent decree. In question was

Microsoft’s requirement that PC makers who want to use its Windows

operating system must load Microsoft’s Internet Explorer Web browser

on their machines. A week before November 4, 1997, when a Senate

Judiciary Committee hearing was scheduled to discuss the matter,

lobbyists implored members to tread softly on their client, and

Microsoft’s home state senators blitzed the members with “Dear Col-

league” letters asking for fairness in questioning Bill Gates about his

business practices.

Microsoft also countered Ralph Nader, who convened a conference

on the software business in November 1997. Microsoft and Charles

Kelly, president of the Worldwide Association of NT Users Groups,

which represents 180,000 programmers, staged a counterconference

that called for the government not to interfere in Microsoft’s affairs.

On November 25, Microsoft also released findings of a survey com

missioned by it from political pollsters Peter D. Hart and Robert M.

Teeter. By a margin of more than four to one, the survey supported

Microsoft’s contention that the market, not the government, should

determine the contents of software products.

Among other actions, Gates invited Patrick J. Leahy of Vermont,

the senior Democrat on the Senate Judiciary Committee, to corporate

headquarters and his luxurious home. Another action was to appear

on ABC’s Nightline to argue his case.

firms offer a full range of services—“everything from public relations,

traditional lobbying, research, polling, and direct-mail canvassing to

specialists who deal in drumming up ‘grass roots’ support for issues.”

According to a Roll Call review of lobbying reports for 2002, the reve-

nues of the top 25 lobbying firms were $304.3 million—and the total

lobbying fees for all firms from January 1 to June 20, 2002 exceeded

$859.5 million.

(See Box 9.2 for list of Washington’s top lobbying

firms in 2001.)

Corporate DC Offices. Corporate offices are primarily maintained

by large corporations; smaller companies tend to rely entirely on their

trade associations. Besides engaging in lobbying, these Washington of-

fices perform the following functions:

1. Supply information to the home office by acting as a listening post

and “early warning system” on current government policies and

future plans and actions that might affect company operations.

DIRECT LOBBYING I 233

Outside lobbying firms, mostly law firms, are the beneficiaries of

lobbying expenditures. Microsoft hired a bipartisan group of promi

nent lobbyists, which included four former members of Congress and

32 former congressional staffers and government officials. Microsoft

currently has 10 outside lobbying firms on retainer. Only one,

Edelman PR Worldwide, is a public relations firm. Its assignment, ac

cording to a memo made public by the Los Angeles Times, was to

place op-eds and letters to the editor in newspapers in states where

Microsoft is under antitrust investigation.

Box 9.2 Washington’s Top Lobbying Firms in 2001

Firm Fees (in Millions)

Cassidy & Associates $33.0

Patton, Boggs 23.5

Akin, Gump, Strauss, Hauer & Feld 19.2

Verner, Liipfert, Bernhard, McPherson & Hand 18.5

Greenberg Traurig 16.4

Van Scoyoc Associates 13.4

Barbour Griffith & Rogers 12.3

Washington Council Ernst & Young 12.0

Williams & Jensen 10.9

PricewaterhouseCoopers 10.8

2. Render service to visiting home office personnel.

3. Provide marketing assistance.

4. Provide legislative representation.

5. Supply analyses of government programs and policies.

Trade Associations. Well-heeled trade associations “are taking on a

growing role … as intermediaries between their industries and an in

creasing army of federal regulations.”

The American Society of Associ

ation Executives reports 25,000 members for 2003, 30% of which are

Washington-based trade associations.

At the end of the 1980s, the

number was only about 3,000.

Many joined the migration to the capi

tal during the 1960s and 1970s when federal regulation of business be

came rampant. This reaction suggests lobbying is a particularly strategic

function. Other functions are marketing, education, employer–employee

relations, research, standardization and simplification, and statistics.

National Business Groups. Corporate political activity often cen-

ters around supra-organizations that represent broad segments of busi-

ness. Most important among these are the Business Roundtable (see Box

9.3), U.S. Chamber of Commerce, the National Association of Manufac-

turers, the American Business Conference, and the National Federation

of Independent Business.

One feature that has accounted for the Business Roundtable’s notable

success is CEOs’ engagement in direct lobbying with leaders of Congress,

the executive branch, and high levels of the civil service. Previously, few

CEOs had lobbied government officials, as the incident in Box 9.4 dem-

onstrates. Another factor that has accounted for the Roundtable’s effec-

tiveness is the use of a pragmatic rather than an ideological approach:

“Its basic rationale for survival is solid and still stands: economic

strength in America’s capitalist society cannot exist without the cooper

ation of the managers of the nation’s largest corporations.”

However, the tide may have turned against the Business Round

table’s effectiveness. In recent years it has lost much of its influence be

cause CEOs can no longer walk into a few key offices at the White

House and Capitol and fix problems. With the demise of the old senior

ity system, each member of Congress now acts like an independent

contractor. CEO members of the Business Roundtable simply cannot

deliver the huge numbers of votes required to pass or defeat legislation.

Furthermore, membership is so diverse that the group has difficulty

arriving at a consensus.

Another type of national business group has been spawned by the

new high-tech industry and reflects its ever-shifting concerns. Called

adhocracy, these are temporary virtual associations that reflect the in

dustry’s policy interests. Similar to coalitions, they serve as temporary

umbrella groups to advocate interests ranging from privacy to taxa

tion. One of them, Americans for Computer Privacy, was instrumental

234 I CHAPTER 9

235

Box 9.3 The Business Roundtable

The giant among the national business groups is the Business

Roundtable, which consists of about 200 CEOs of big business in the

industrial, financial, and services industries. The combined gross reve

nues of its members are equal to about half of the gross domestic

product of the entire nation. The group was formed in 1972 after the

Nixon administration began its unprecedented peacetime program of

wage and price controls to combat high inflation, unemployment, and

international exchange problems. As stated by Kim McQuaid, “Execu

tives became increasingly aware that they needed stronger and better

negotiating techniques at the federal level; the situation demanded

up-to-date political acumen.” Executives also recognized that new reg

ulations, such as those of the EPA or Occupational Safety and Health

Administration, cut across industry lines—unlike old-style regulations

that pertained to particular industries.

The Roundtable employs modern managerial techniques to cope

with the fragmented power structure of Congress. It is organized into

issue-oriented task forces, it assigns responsibilities on the basis of ex-

pertise, researches legislative proposals, makes recommendations on

bills, drafts its own proposals, and supports or opposes legislative pro-

posals. The Roundtable has in recent decades spearheaded the politi-

cal mobilization of business. It often forges alliances with other

business lobbies, including organizations like the United States Cham-

ber of Commerce, the National Association of Manufacturers, and the

National Federation of Independent Businesses.

Box 9.4 Historic Meeting: DuPont’s CEO Meets With the House

Speaker

In 1961 Crawford H. Greenewalt, then president of DuPont, arranged

a 1-hour meeting with House Speaker John W. McCormack of Massa

chusetts to talk about the divestiture of General Motors stock. Sur

prised, McCormack told a friend,

“You know, Clarence, I’ve just had a most refreshing experience with

a businessman. He was the president of the DuPont Company,

Crawford H. Greenewalt, and it was the first time in the 30-odd years

that I’ve been a member of Congress that the head of one of the six or

eight largest corporations in the United States came to my office to talk

directly with me on a problem that gave him concern. It was about the

recent decision of the Supreme Court in the General Motors case.

“He came straight to the point without beating around the bush,

without talking about his maiden aunt who had gone to the same

school with my mother, or anything of that sort. He was forthright, he

knew the facts, and he explained them clearly.”

in persuading the Clinton administration to reverse its long-standing

policy on the export of encryption technology. Another, the Internet Tax

Fairness Coalition, supports a simplified uniform sales tax for Internet

commerce.

Other Lobbying Groups: Law, Public Relations, and Accounting

Firms. Washington, DC abounds with law firms, some of which are

branches of the country’s leading law firms. Of the nation’s top 50

firms in 1981, 47 had offices there compared with 33 offices in 1978.

Most attorneys in these offices are specialists in such governmental ar

eas as regulatory and international law.

There is no ballpark estimate of how many people work in public re

lations in Washington, according to Kilian and Sawislak, who say that

these professionals do the job of keeping their clients informed about

regulatory activities, “write speeches and testimony for congressional

hearings and agency appearances, plan and run seminars and conven

tions, set up press conferences, lay on cocktail parties, and take clients

and contacts to lunch and dinner.”

Mainly, however, public relations

firms enable corporations and interest groups to coordinate lobbying

and public relations campaigns. On the basis of 1998 revenues, the top

public relations firms in the Washington area are the following:

• Burson-Marsteller, $32.9 million.

• Hill & Knowlton, $27.0 million.

• Fleishman-Hilliard, $19.6 million.

• Ketchum, $18.9 million.

• Porter Novelli, $17.5 million.

• Ogilvy PR Worldwide, $16.2 million.

• Powell Tate, $15.7 million.

• GCI/APCO, $14.3 million.

• Shandwick Public Affairs, $13.0 million.

• Edelman PR Worldwide, $12.3 million.

Public relations firms have been active in acquiring lobbying firms. In

November 1999, Shandwick USA acquired the well-known Cassidy

Companies; a decade ago, Hill & Knowlton acquired the lobbying firm of

Gray & Company. Both public relations firms, in turn, are owned by

larger advertising firms. Shandwick USA belongs to the Interpublic

Group, and Hill & Knowlton belongs to the WPP Group, which also owns

the advertising giants Oglivy & Mather and J. Walter Thompson.

Further consolidation has occurred. By early 2004, three publicly

traded advertising and public relations companies—WPP Group PL,

Omnicom Group, Inc., and Interpublic Group of Companies, Inc.—

owned most of the influence industry’s best known names. They con

trol firms founded by former president Bill Clinton’s pollster, former

president Jimmy Carter’s spokesman, and the current chairman and

immediate past chairman of the Republican party. One impetus behind

236 I CHAPTER 9

this consolidation is that these public affairs firms are more profitable

than public relations.

Corporations also hire accounting firm lobbyists, largely because tax

laws are becoming increasingly complex. As stated by Jeffrey H.

Birnbaum: “the hottest tactic in lobbying these days pits corporate tech

nicians-for-hire, like those at Price Waterhouse, against the govern

ment’s own technicians. And increasingly, the government is simply

outmatched.”

When top government tax staffers decide to leave gov

ernment, they often turn to Price Waterhouse. Two former staff direc

tors of the Joint Tax Committee, Congress’s repository of tax

information and analysis, started the trend when they joined the ac

counting firms, which by 1990 employed 123 professionals, compared

with 45 at the Joint Tax Committee.

DIRECT LOBBYING RESOURCES AND SKILLS

Direct lobbying requires three resources: access, information, and a mu-

tually beneficial relationship. A lobbyist must also possess the persua-

sive skills of being an excellent listener, communicator, and negotiator.

Access

Personal access to legislative and regulatory decision makers is a prereq-

uisite for lobbying. As stated by Edwin Epstein, “the chance to get a

hearing and the opportunity to make one’s case at crucial times and

places” is a key political resource.

For this reason, former senators,

representatives, legislative aides, White House cabinet members, press

secretaries, and anyone else in a high position who has contacts are

eagerly sought out as lobbyists. Being a member of a politician’s family

presumably enhances access. Linda Daschle, a powerful lobbyist for

American Airlines, is the wife of Tom Daschle. According to Arianna

Huffington, author of Pigs at the Trough, she was instrumental in the

passage of the $15 billion bailout of the airline industry after 9/11. Chet

Lott, Trent Lott’s son, went from running a pizza joint to being a power

ful Washington lobbyist. Huffington asks, “How can these things be

legal? Why should they be allowed to be lobbyists and members of the

families of politicians who make these key decisions?”

Staff Directories. Several available directories enable individuals

and groups without preexisting personal contacts to least easily identify

members of the legislative and executive branches of government.

• Congressional Staff Directory lists members of the Senate and

House, as well as officers and staffs and their legislative specialties.

Every member page contains addresses, telephone and fax numbers,

e-mail and web addresses; expanded member biographies, photo

DIRECT LOBBYING I 237

graphs; a state map with district highlighted; staff members with ti

tles and legislative responsibilities; all district offices with address,

phone fax, staff; and leadership positions, committees, subcommit

tees and caucuses.

• Federal Staff Directory lists 44,000 decision makers in the execu

tive branch of the federal government and contains more than 2,600

biographies.

The directory provides information on the Executive

Office of the President—which pinpoints senior officials and top aides

working directly with the President and Vice President—cabinet de

partments, and independent and quasi-official agencies.

• Leadership Directories comprise 14 yellow books. Those most

useful for lobbying purposes include the Congressional Yellow Book

(members of Congress, including committees and key staff), the Fed

eral Yellow Book (key personnel in federal departments and agencies),

the State Yellow Book (elected and appointed officials in the executive

branch, as well as state legislators and their committees), the Judicial

Yellow Book (covers federal and higher state courts), the Municipal Yel-

low Book (leading city and county governments and local authorities,

and Foreign Representatives in the U.S. (information on thousands of

business and government decision makers in the United States). The

Internet provides daily changes in the Leadership Library.

Michael K. Deaver, a lobbyist with a long history of lobbying in the

nation’s capital, shows how he exploited his former employment in the

White House by obtaining access to it for personal gain (see Box 9.5).

Former Senator Bob Packwood (R-Oreg.) is another public official who

used the “revolving door” to become a lobbyist. In November 1996, he

filed papers to incorporate his new lobbying firm, just 11 days after the

legal 1-year moratorium on lobbying expired. He will benefit from the

knowledge acquired in government services because he will be lobbying

for a business coalition on estate tax issues, a subject he oversaw as

chairman of the Senate Finance Committee.

When their terms were up

in January 2005, well-connected Senators John Breaux and Don

Nickles planned to join the private sector as lobbyists. According to Pol

itical-MoneyLine.com, 272 former members of Congress have regis

tered to lobby since 1995, a trend abhored by critics. “Many lawmakers

stay in office only until they can cash in on their positions,” says Larry

Noble, executive director of the Center for Responsive Politics. “Then

they use their special contacts on the Hill to benefit paying clients.”

The revolving door also applies to some civilian administrators. The

case of the Air Force’s Darleen Druyun, who for three decades had nego

tiated billion-dollar weapons contracts, received national notoriety

when in January 2003 she accepted a job with Boeing. For about a year

it was known that she was talking about job opportunities with three of

the nation’s largest defense contractors: Boeing, Lockheed Martin, and

Raytheon. Both Michael Sears, Boeing’s chief financial officer, and

Druyun were fired a year later for “unethical conduct.” Pentagon inves

238 I CHAPTER 9

tigators and the Justice Department were probing into whether she

shared a rival company’s information with Boeing and pushed a con-

troversial $21-billion plan to have the government lease and later buy

100 Boeing-made airplanes while she worked as a government acquisi-

tion officer.

Officers of major corporations have easy access to government deci-

sion makers because they and their companies possess the following po-

litical resources:

• Corporate managers have continual contact with government of

ficials in their performance of important public functions.

• Businesses make political contributions, and public officials wish

not to offend them. They at least give them an audience.

• Government agencies are sometimes required by law to consult

groups affected by their regulations.

• Dinners between business leaders and top officials in the federal

government are sometimes arranged for purposes of dialogue.

• As industrial statesmen and “leaders of industry,” CEOs of the

largest corporations are accorded the status of semiofficial spokes

persons for the business community. This is one of the strengths of

the Business Roundtable, mentioned earlier.

• As managers of the most important economic enterprises in the

country, whose cooperation and assistance are critical to the na

DIRECT LOBBYING I 239

Box 9.5 Michael K. Deaver: The White House Insider

Michael K. Deaver is a prime illustration of the value of personal ac

cess. In May 1985, 2 weeks after he left the White House, where he

was deputy chief of staff and an intimate of President and Mrs. Rea

gan, he and Canadian officials held formal discussions that led to a

$105,000 lobbying contract. Among the clients he represented were

Rockwell International (in its attempt to persuade the administration to

build more B-1 bombers), a group of Caribbean nations (interested in

the administration’s initiative to help Caribbean Basin countries), and

a South Korean manufacturer, Daewoo (accused of violating U.S. im

port restrictions).

Deaver was severely criticized because he was seen as blatantly tak

ing advantage of his special access to the White House. As reported

by Newsweek, Deaver, the “ultimate lobbyist,” was allowed to keep his

pass to the White House and access to its tennis court after resigning

from his position. Also, on instructions from Nancy Reagan, he still re-

ceived the president’s detailed daily schedule. His purchase of a mo-

bile-phone-equipped Jaguar XJ6 also received considerable publicity

and added to the perception he was flaunting his position as an influ-

ence peddler.

tional interest, business leaders have served in official capacities,

for example, on top-level presidential public-service commissions

and as consultants.

• On an informal basis, top executives rank high in social status. As

social elites, they are thrown into contact with other notables, in

cluding leaders in politics and government.

• Also informally, the similarity of their socioeconomic back

ground to that of a significant number of independently wealthy

senators facilitates contact between them and contributes to un

derstanding.

Access Through Travel Gifts. Industry leaders and their profes

sional and trade associations pay for the travel of regulators to conven

tions and conferences where they not only speak on panels but have a

chance for cocktail conversations about policy matters. Cable compa

nies, radio and television broadcasters, high-tech businesses, and the

telephone industry, for example, have paid for scores of trips by FCC

members and staff. Over the past 3 years, FCC members accepted more

than $725,000 worth of airfare, hotel rooms, meals, and expenses from

the industries they regulate, with smaller amounts provided by interna-

tional agencies and few public groups and universities.

The National Association of Broadcasters, the largest trade group for

the radio and TV broadcasters, spent more than $75,000 flying commis-

sioners and more than a dozen staff members to its yearly convention in

Las Vegas. Another group, the National Cable & Telecommunications As-

sociation, which represents about 200 member companies, also invites

FCC members to its annual convention, attended by about 90,000 people.

“That’s probably the best opportunity to help people, both the FCC and

staff, really understand how our business works,” said Rob Stoddard,

spokesman for the association. Individual companies, such as Viacom,

owner of CBS, Infinity Broadcasting, Paramount Pictures, and Showtime,

have also funded trips.

Coincidence of Personal and Legislative Interests. The need for

access to a member of Congress is diminished when a legislator’s per

sonal interests coincide with a corporation’s because of stock ownership

(see Box 9.6). There is no law or congressional rule that requires mem

bers of Congress to excuse themselves from legislation or subcommit

tees that could directly affect their major stock holdings.

Information and Knowledge

Although “nailing the right Congressman and influencing the right

vote” is the essence of lobbying, such contact must be backed up with

“superior information—at the right time,” says Philip Lesly, a veteran

public relations consultant.

Access alone, therefore, is insufficient for

political influence; a lobbyist must be credible and knowledgeable. He or

240 I CHAPTER 9

she must be able to assemble expert information and present a credible

analysis of the pros and cons of specific issues.

Providing the best researched and best developed factual report on a

legislative subject is an important and neglected means of assuring fa

vorable legislation and regulation, says Lesly. Such information must be

unimpeachably objective. It must also enter the pipeline of consider

ation at the right time; namely, when bills are still in the formative stage

and officials are looking into the subject. Often the best studies made by

business, think tanks, and other groups arrive after the sifting process

has gone too far to undo many hours of work by many people.

When Michael Deaver was accused of flaunting his access to the

White House for his client, the Canadian government, he defended him

DIRECT LOBBYING I 241

Box 9.6 Two Cases of Overlapping Interests

Bristol-Myers Squibb Bristol-Myers Squibb had an automatic ally in

Congress through Senator Judd Gregg (R-N.H.), who owned between

$100,000 and $250,000 of stock in the company, according to his

1995 financial disclosure statement. Accordingly, legislation that ben

efitted the company also benefitted Gregg. House consideration of the

FDA Export Reform and Enhancement Act of 1995 was a case in

point. It would enable pharmaceutical firms, such as Bristol-Myers, to

sell non-FDA-approved drugs in other countries. Gregg was an out

spoken advocate for the pharmaceutical industry in the 104th Con

gress. On one occasion, as the Senate’s chief deputy whip, he tried to

bring the measure to the Senate floor for a vote. Having failed in that

endeavor, he used his seat on an appropriations subcommittee to at

tach an amendment onto an appropriations bill. When that amend

ment carried without debate and became law in April 1996, Bristol-

Myers stock rose 65%, from $82 a share to $136 a share over the next

10 months. Gregg was enriched as the value of his stock holdings in

Bristol-Myers Squibb increased by between $60,000 and $150,000.

Columbia/HCA Another example of automatic access to Congress

is Senator Bill Frist (R-Tenn.), whose father, Dr. Thomas Frist, Sr., was

a founder of Columbia/HCA, the country’s biggest chain of for-profit

hospitals. Senator Frist’s personal investment in the company was $13

million, representing 65% of his personal fortune of $20 million, ac-

cording to his 1994 financial disclosure. Not surprisingly, Frist was an

outspoken advocate to give Medicare recipients more “options” and to

allow hospitals and doctors to join together as private entities that

could contract with Medicare. Both measures would help Columbia/

HCA. Defending his stand, Frist said, “Everybody knows my back

ground, where I come from and the hats that I wear.… There is a

stone wall that comes between any money that I get or interests that I

have, and what I do here.”