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November 13, 2000
Microsoft Resolution Spotlights Shareholder Concern Over Soft Money
    by Mark Thomsen

A resolution calling for Microsoft to report its political contributions highlights increasing shareholder attention to the corporate influence of elected officials.

The 2000 election has seen unprecedented sums of money donated by corporations. According to a recent Common Cause report, Microsoft's soft money contributions went from $77,000 in the 1996-1997 election year cycle to approximately $1.8 million in the first eighteen months of the 1999-2000 election year cycle. This apparent interest in influencing Washington coincides with the Department of Justice's first suit against Microsoft alleging anti-competitive practices, which was filed in 1997.

The Microsoft resolution was filed by Trillium Asset Management Corporation and three members of Responsible Wealth. Responsible Wealth is a network of investors and affluent Americans working to promote more widely shared prosperity. Using a SEC-approved formula, Responsible Wealth reported the resolution received a 7.6% yes vote. It has not been decided yet whether a resolution will be filed for the 2001 meeting.

The amount of money Microsoft is spending for political influence is small change for a company of its size. Yet the possible return is too huge to value: preventing breakup of the company.

"Is our company succeeding solely on the basis of its ability to innovate and to serve customers better or because of its access to political leaders that can provide a host of tax breaks, subsidies, and regulations that treat our company advantageously?" asked Lois Canright, Microsoft shareholder and Responsible Wealth member who presented the resolution at the company's November 9th annual meeting.

Federal rules govern the amount of money individuals can donate to candidates and political parties. Up to $1000 can be contributed to a single candidate per election, and up to $20,000 per year to a political party. Corporations and labor unions are prohibited from making expenditures or contributions to influence federal elections.

Yet labor unions and corporations collectively are making hundreds of millions of dollars in political contributions in the 1999-2000 election year cycle. How? One method is through a loophole by which donations are ostensibly used for "party building," not influencing a federal election. The commonly used term for this is "soft money." The Federal Election Commission, not Congress, created this loophole in an obscure administrative ruling in 1978.

Political Action Committees, or PACs, provide another means for making contributions. Corporations and labor unions are allowed to use their own funds to establish and administer PACs in order to make contributions and expenditures. PACs may give $5,000 to a candidate per election and $15,000 to a national party committee per calendar year.

There are numerous other cases where the return on political contributions is easier to quantify. Often called "corporate welfare," returns can be astronomical.

One example is the Federal Communications Commission (FCC) issuing of new licenses to broadcasters in 1997, giving them use of an additional portion of the public airwaves for what is known as "digital broadcasting." The market value of this spectrum was estimated to be around $70 billion dollars. The National Association of Broadcasters and the top 10 broadcast interests gave $9.5 million in political contributions between 1987 and 1997.

Some corporations, such as Monsanto, General Motors and Honeywell, have responded to public clamor by changing their policies regarding soft money contributions. Shareholder resolutions such as the one presented to Microsoft will add pressure for curbing corporate political donations. But with the returns being so high, many corporations will find it too difficult to resist continuing their attempts to influence Washington.


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