The Intimidation Game

by Kimberley Strassel

Danhof these days is trying to beat the left at its own game, by proactively filing his own proxy resolutions, which are designed to refocus corporate minds on the free-market bigger picture.

  He’s filed resolutions with Google and Apple asking them to be “transparent” with investors about the high costs of their alternative energy and climate investments, and about the risks if Washington pulls the plug on subsidies. He’s filed resolutions with McDonald’s and Coca-Cola demanding that they better educate their consumers about the safety and benefits of using genetically modified food. He’s questioned insurers to explain their continued support of a failing Obamacare regime. He’s filed resolutions pushing dozens of companies to adopt policies to protect employees from workplace discrimination over their political actions and beliefs.

  Those last resolutions followed the hounding out of Mozilla CEO Brendan Eich, for the supposed crime of donating to a campaign in support of traditional marriage. Companies like Visa moved quickly to take such a positive action. Companies like Costco, which may top the list of liberal corporate sellouts, went so far as to ask the SEC to disqualify Danhof’s proposal.

  This is one of Danhof’s big frustrations—that the SEC often turns down his proxy resolutions. The SEC usually allows anything that is considered a “significant policy issue” to go through. The problem, says Danhof, is that “significant policy issues in the eyes of the SEC is anything the left creates. Just tick them off: political lobbying, disclosure, diversity in the workforce, gay rights, fracking reports, renewable energy, global warming, net neutrality, childhood obesity. But when I come along with a proposal related to political speech and the First Amendment, well, that’s apparently not a significant policy issue.”

  He’s also been shot down on his attempts to ape the left’s proposal arguments. “I once filed nearly a dozen resolutions with health care companies. I made the exact same argument they had. The liberal proposals asked corporations to support a socialist health care platform. I said, ‘You say you support free markets. But you also belong to an organization that lobbied for Obamacare. You can’t both support the free market and support Obamacare. You are misaligned.’” The SEC wouldn’t allow it.

  Danhof remains convinced, however, that this business pressure is the key to creating more “backbone” and free-market policies. “What the left has understood forever is that big business and big government go hand in hand. They use the growth of big business to expand the growth of big government, and vice versa. What they also understand is that business is far more susceptible to pressure than government. So they devote a lot of time to pressuring business. We on the right, we ignore that. We sit here and we throw little pebbles at big government and get all frustrated when things don’t change overnight. What we need to be doing is using the model the left created, and attacking this symbiotic relationship from the business side.”

  * * *

  The DiNapoli tactics and continued pressure also provoked a trio of the nation’s top business leaders to act. In April 2013, Chamber of Commerce president and CEO Tom Donohue, Business Roundtable president John Engler, and National Association of Manufacturers president and CEO Jay Timmons coauthored a letter to business leaders nationally. It was intended as a full-scale exposé of the left’s intimidation operation, highlighted by three of the most influential business leaders in the country. They explained that this proxy season, CEOs would be getting letters from “groups claiming to represent your investors.” They were in fact “activists,” whose “goal is to limit or remove altogether the business voice from the political and policymaking processes.” They laid bare the “multi-faceted strategy” on the left—proxies; the campaign to get the SEC to impose disclosure; the books-and-records litigation.

  They also laid out the four “key myths” of this movement: “1) disclosure of corporate political activity has broad support among investors; 2) a lack of disclosure regarding government relations activities (as the activists define it) is risky for investors; 3) most companies are satisfying activists’ demands for disclosure; and 4) disclosure is the activists’ only goal.” They then demolished each myth.

  The three largest mutual fund companies in the country, they pointed out, had never supported a disclosure proxy. The authors referenced comprehensive 2012 research by former Clinton official and Harvard PhD Robert Shapiro, who found “no credible evidence” that political activity harms shareholder value. They ran through Freed’s Zicklin Index ruse. They quoted from the Media Matters memo about the left’s real goals, and included a revealing statement from New York’s Bill de Blasio: “We will use every tool, whether it is actions among consumers up to boycotts, whether it’s shareholder actions, whether it’s work from pension funds—to use the pension funds to direct Corporate America to change its ways—legal action, you name it, it’s on the table.”

  The three business leaders concluded, “These groups will not stop until business’ ability to engage in political and policy advocacy is eliminated altogether. The good news is that the old saying is true: Knowledge is power. We believe that your company can benefit by knowing the facts.”

  Republican politicians are also speaking to the issue more, even within the 2016 presidential campaign. In October 2014, as she was preparing for her own bid, Carly Fiorina, the former head of Hewlett-Packard, penned a piece in the Washington Post calling on businesses to grow a pair. Corporations, she said, need to “understand the source and purpose of activist pressure. Caving on an issue only invites more attacks. If a company is a good steward of customer and shareholder interests, pursues appropriate policy and delivers on its brand promise, there is nothing to fear. We need more business leaders who are willing to stand up and contribute to our public discourse.”

  The Chamber of Commerce’s Bruce Josten is hopeful, too. Somewhat. Only a few days before I interviewed the business chieftain for this project, in the early fall of 2015, the chamber received a letter. That letter also went to the CEOs of all 108 member companies of the chamber’s board of directors. Its authors were twelve Democratic senators. It demanded information about the chamber’s “denial efforts.” The senators had heard that the chamber and companies were mobilizing to oppose President Obama’s (extralegal) climate regulations. It slammed the chamber as a “partisan enforcer for industries whose activities threaten public health and undermine the public well being.”

  The left-wing Senate caucus demanded that every company submit responses (within three weeks) that clarified their position on the chamber’s legal efforts to oppose the Obama regulations; whether they’d been informed by the chamber of this effort; whether they’d been given an opportunity to express a view; and whether they’d told their own board of directors and stockholders of the chamber’s efforts against “climate action.”

  Donohue immediately sent out a letter to the same CEOs clarifying all the misrepresentations of the senators and offering a pep talk about “standing up to pressure.” But Josten remains unsure where this will go.

  After all, he’s seen it before. This was a repeat of the left’s intimidation tactics against an influential conservative group called the American Legislative Exchange Council. It had nearly destroyed ALEC.

  Chapter 16

  Corporate Blackmail

  To this day, Lisa Nelson refers to it as the “corporate blackmail” letter. It arrived in the early spring of 2012 at her Visa office in D.C. Nelson at the time was in the government relations department for the credit card company and had seen her share of bare-knuckle political activism. But this letter was bigger, meaner, scarier.

  The letter was officially addressed to Visa CEO Joseph Saunders and every single member of Visa’s board; Nelson had been cc’ed. It came from a black advocacy group known as Color of Change, cofounded by liberal activist Rashad Robinson and by onetime Obama adviser Van Jones. The letter was very clear about what it wanted Visa to do. And it was very clear about what would happen if Visa didn’t do it.

  The prior month, a se
venteen-year-old African American in Sanford, Florida, Trayvon Martin, had been fatally shot by a neighborhood-watch volunteer named George Zimmerman. The circumstances of the altercation proved confusing, but the black community instantly became angry over the police’s decision not to arrest Zimmerman. Florida has a “stand your ground” law, which authorizes a person to protect against a perceived threat. Within a few weeks, Color of Change was blaming this law on a center-right organization known as the American Legislative Exchange Council.

  Visa was among a number of corporations that gave money to ALEC, in support of its efforts to foster a pro-business environment at the state legislature level. Color of Change’s letter was as direct as could be. Visa’s board must immediately pull all money from ALEC. If it did not, the advocacy group would commence airing radio ads in the hometowns of every single Visa board member, holding each of them personally accountable for the death of a young black man. Color of Change helpfully included the menacing script of the ad that would rain down on their communities if they didn’t comply, and quick.

  “So imagine this,” says Nelson, a spunky fifty-four-year-old dirty blonde. “Here you are, a former CEO of a company. You now sit on the board of Visa. You are semiretired. You are trying to enjoy the rest of your life, while still doing some good, giving back, corporate governance. And you get a letter being told that you are about to be held responsible—among your friends and neighbors—for Trayvon Martin being shot. The calls, as you might imagine, started raining down on the CEO.”

  The Visa board members weren’t alone. More than a few Fortune 500 companies had made the mistake of revealing, at an event here or there, that they gave money to ALEC’s work. The threat letters flew out to board members at McDonald’s, John Deere, Coca-Cola, Pepsi, Amazon, Wendy’s, Procter & Gamble. They all contained the same message: Keep donating to that free-market group, and you will experience character assassinations, consumer boycotts, and a political migraine that no prescription medicine will fix.

  Nelson, both at Visa and at her former job at AOL Time Warner, had witnessed the rise of the proxy disclosure-and-pressure movement—the boycotts, the campaigns against companies, the attempts to hound them out of free speech. But she’d never seen anything as aggressive as this. She also knew well of ALEC’s important work. She immediately arranged a conference call with her CEO where she conferred this message: “You need to understand that this is corporate blackmail. And if we give in to it, they’ll just want more and more and more.”

  Nelson felt from the start that “I needed to keep making the case that, as a company, we could not be put in a position where we could be told who we could work with.” Her CEO agreed. She was successful, and Visa kept on with its ALEC donations.

  At least for a time.

  * * *

  It was just a little meeting in Chicago, in September 1973. Among those around the table were Illinois state representative Henry Hyde (who’d go on to become a prominent member of the House), Paul Weyrich (who’d go on to cofound the Heritage Foundation and Moral Majority), and Lou Barnett (who’d go on to run Reagan’s political action committee). The three were all active conservatives, united for free markets and limited government, but they also held the belief that the best government is local. They felt that state lawmakers needed a forum where they could exchange ideas, build on best practices, and coordinate efforts.

  And so ALEC was born. Membership was voluntary, and state legislators from both parties paid a small annual fee to belong. The group held regular meetings, and by the 1980s had created more than a dozen task forces: on civil justice reform, health care reform, telecommunications reform, and more. Legislators join task forces of choice, and help create “model policy” that other members take back to introduce in their own state chambers. ALEC’s model policies are always free-market, always aimed at a better business climate, often revolutionary. ALEC helps create the ideas and spread the gospel from state to state.

  It quickly proved a vibrant alternative to the official National Conference of State Legislatures, which is taxpayer-funded and includes every state legislator by definition—which means it is often captive to liberal, blue-state interests. ALEC subsists on member dues and contributions from foundations, companies, and nonprofits. The 1994 conservative wave fueled membership, and by 1995 ALEC boasted three thousand out of the country’s seventy-five hundred state legislators. Its membership included thirty-two state legislative speakers and thirty-four majority leaders. In that year, at least twelve governors were ALEC alumni.

  It was also bipartisan. ALEC was a way for pro-business Democrats, especially those from the South and the West, to talk with like-minded Republicans and hash out smart policy and workable compromises at the state level. The 1994 election left a lot of closely divided statehouses, and ALEC proved the glue in many of the bipartisan state reform successes that followed. Democrats also felt a real stake in the organization, which has a practice of rotating its chairmanship each year between Republicans and Democrats.

  ALEC is also effective. In any given year, an average of a thousand bills based on ALEC model policy are introduced in state legislatures. In any given year, an impressive average of 20 percent of those become law. ALEC is a reason states have cut taxes on income and on corporations; reduced unemployment insurance; shored up private property rights; instituted medical savings accounts; reformed public pension plans; cracked down on trial lawyers; and enacted sunshine laws. Few Americans have heard of ALEC. But there’s a case to be made that no one policy organization has touched the daily lives of more Americans.

  ALEC’s success quickly earned it the ire of the left. Public-sector unions dislike ALEC’s success at government pension reform. Spend-happy Democrats dislike ALEC’s success at tax and budget cuts. Environmentalists dislike ALEC for its opposition to green mandates and subsidies. Naderites dislike ALEC for its policies that give individuals, rather than government, more choice over their health care or appliance buying. Teachers’ unions dislike ALEC for its support of vouchers and charters and school choice. Liberal governors and legislators dislike ALEC for its annual state rankings, which often show that their fiefdoms have miserable business climates. Trial lawyers dislike ALEC for its triumphs in asbestos reforms, medical malpractice reforms, and punitive damages reforms.

  They dislike that it is bipartisan, because that helps ALEC’s model bills to pass in state legislatures and emerge with more credibility. They dislike ALEC’s whole philosophy of state power. Democrats like things centralized. It’s easy to lobby and influence one bill in the nation’s capital. It’s hard to put out fires in fifty states. It’s harder still to stop those fires from spreading. ALEC proves Supreme Court justice Louis D. Brandeis’s famous 1932 idea that states are “laboratories of democracy.” ALEC need only get a successful model reform passed in one state before ten more are competing to do the same. National politicians see those reforms work and start advocating them at the federal level.

  And they dislike that so much of ALEC’s work exposes their own ties to special interest groups, and their feeding at the public trough. Eliot Spitzer, the onetime New York attorney general, pioneered the tactic of attacking businesses for headlines and state (settlement) profits. His fellow Democratic attorneys general across the country adopted those tactics and refined them. They’d also file questionable suits against business, earning headlines and profits. But many added the twist of handing the state’s legal work to their friends in the trial bar, who would in turn donate some of these taxpayer payments back to the AG’s reelection. ALEC helped expose this scam, and more than a decade ago started pushing a model Private Attorney Retention Sunshine Act, which mandates public disclosure of the contracts between a state and the trial bar. At least twenty states have already adopted that law, making it much harder for AGs to blatantly pay off their plaintiffs’ attorney campaign donors. The left dislikes that.

  So most of ALEC’s forty-year existence has been dogged by liberal abuse and
attack. For the most part, though, it was the usual political cut and thrust. Left-wing groups issued press releases condemning ALEC model legislation. They ran lobbying campaigns against ALEC-inspired bills in statehouses.

  A favorite tactic was to impose anti-ALEC litmus tests on Democratic politicians. In 2003, the liberal People for the American Way sent a warning letter to Anthony Williams, then the Democratic mayor of Washington, D.C. PFAW president Ralph Neas bemoaned that Williams had recently embraced school vouchers, and told him he’d better not go through with a planned appearance at an ALEC workshop devoted to school choice. Williams’s presence, complained Neas (who also, of course, released the letter to the press), would provide a “veneer of bipartisan respectability to a group whose goals are destructive to the public interest and the people you serve.” The sight of a disconnected, liberal Hollywood club lecturing a black mayor on the needs of his constituency was something to see, and Williams clearly thought so too. He attended the ALEC event.

  The attacks were endless, but also expected and manageable. They required an ALEC statement here, some pushback there. Few intruded on ALEC’s growth or success. And as the organization expanded, it began to develop an interest in areas outside of its traditional focus. In the mid-2000s it created a new organization that came to be known as the Public Safety and Elections Task Force, and that dealt with noneconomic issues. In retrospect, it was a mistake.

  * * *

  In the spring of 2005, Florida state senator Durell Peaden and state representative Dennis Baxley worked through their state legislature what they called “stand your ground” legislation. The law protects a citizen’s right to defend their life against real or perceived threat. The bill was a policy and political winner, popular among state residents—in part on liberty grounds, in part on the belief that it would reduce crime. Former Florida governor Jeb Bush signed the bill into law in 2005.