BUSINESSWEEK ONLINE : MARCH 6, 2000 ISSUE
NEWS: ANALYSIS & COMMENTARY

More Corporate Chiefs Are Hedging Their Election Bets
Multiple gifts increase as Bradley falters, McCain surges

Who is really the insider and who is the outsider in the race for the Republican Presidential nomination? If America's chief executives are any guide, the emphatic choice of the Establishment is Texas Governor George W. Bush. However, according to a BUSINESS WEEK analysis of fourth-quarter campaign-disclosure statements filed with the Federal Election Commission, an increasing number of CEOs are mailing checks to the insurgent campaign of Arizona Senator John McCain--just in case.

While the election remains more than eight months off, the battle for ''early money'' is long over. Now, the whistle is blowing for ''late-train'' cash. That's when CEOs who have already donated to one candidate ante up for others.

''PANIC.'' Why try to climb on the late train? Some execs genuinely admire multiple candidates and are willing to shower several of them with $1,000 contributions. Others want candidates to prove that they are viable before they invest their disposable income on them. And many pragmatic CEOs want an open door at the White House whichever candidate emerges victorious. ''It's panic at the prospect of not being on the winner's donor list. They're covering bases and hedging against all eventualities,'' says Rice University political scientist Earl Black. Adds one Republican CEO who has raised money in the 2000 Presidential race: ''If you're an access player, you have to be there.''

In examining the donation patterns of the chief executives of America's 1,000 largest corporations, BUSINESS WEEK--with the assistance of the Campaign for America, a nonpartisan watchdog group--found that Bush has the financial backing of 301 out of 417 CEOs who have made contributions to White House hopefuls. Trailing far behind are Democratic contender Bill Bradley with 101, Vice-President Al Gore with 59, and McCain with 39. Bush also commands the greatest loyalty from his CEO allies: 76% of the front-runner's backers give only to him, compared with 51% for Gore, 48% for Bradley, and just 39% for McCain.

Still, the number of CEOs who are hedging their bets has shot up in recent months as McCain has emerged from the pack as Bush's strongest challenger and Bradley, an early favorite of the boardroom set, has struggled to topple Gore. In the last quarter of 1999, the majority of CEO donors had previously sent checks to another White House hopeful. That's a huge shift from the third quarter, when only 28% of CEO contributors were donating to multiple candidates. ''We've seen a lot of cross-candidate and cross-party donations,'' says Larry Makinson, executive director of the Center for Responsive Politics, which tracks campaign cash.

Amerada Hess CEO John B. Hess already had donated to Bush, Bradley, and Gore. But with McCain surging in New Hampshire polls, Hess sent him a check for $1,000 on Dec. 29. Ditto for Dana G. Mead of Tenneco Automotive Inc., who matched an earlier $1,000 gift to Bush with one to McCain on Nov. 30 (Mead was CEO when he made the donations; he is now chairman). And U.S. Cellular CEO H. Donald Nelson, an early financial backer of Vice-President Gore, sent checks to Senate Commerce Committee Chairman McCain in October and December. In the fourth quarter, McCain won the first-time financial backing of 13 CEOs, compared with 16 for Bush.

The recent McCain windfall has become an issue in the primaries, with Bush blasting his rival for taking money from the business interests he denounces as part of the ''iron triangle'' of corporate money, high-priced lobbying, and legislation. ''He's been ringing that iron triangle like a dinner bell,'' Bush charged on Feb. 21 in Michigan.

Many of McCain's CEO supporters are like Morton H. Fleischer of Franchise Finance Corp. in Scottsdale, Ariz., which provides financing for chain restaurants. Fleischer, who has donated to both Bush and McCain, calls McCain ''a hero'' and attributes his fund-raising boomlet in corporate suites to the notion that ''the world loves a winner.'' Still, Fleischer remains a big fan of Bush, with whom he served on the board of Touchstone Pictures. ''He's an extremely capable and thoughtful man,'' Fleischer says of Bush. ''If I had to pick between the two of them, I'd choose George Bush.''

TOP COMBO. In fact, both Bush and McCain are the beneficiaries of late-train multiple-giving. Bush has picked up backing from CEOs who earlier donated to Bradley or failed GOP candidate Elizabeth Dole. The favorite CEO donation combination this campaign season is Bush and Bradley, with 26 of the 417 execs giving across party lines. Of the chief executives who have divided their money between Bush and his rivals, two-thirds first backed another candidate, then later mailed a check to Bush. Last June, RPM Inc. CEO Thomas C. Sullivan sent a $1,000 donation to Bradley. But by late December, with Dollar Bill sinking in the polls, Sullivan sent another check--this time to Bush.

Still, there's some evidence that Bush's efforts to woo the corner-office set may be close to topping out. While Bush raised $165,333 from top CEOs in the second quarter of 1999, his return fell to $93,700 in the third quarter and $20,500 in the fourth. Bush finance director Don Evans attributes the falloff to a conscious campaign strategy. ''You raise money early and then you spend it relatively late,'' the Midland (Tex.) oilman says. Evans says that Bush's fund-raisers will actively solicit top execs again in the spring for the general election effort. The goal: ''Single-digit millions.'' Boasts Evans: ''When you've got this kind of leadership, it's easy.''

Despite the recent fund-raising lull, Bush remains dominant in virtually all economic sectors. Bush has the backing of every single top energy-company CEO who has written a check in Campaign 2000, along with 84% of utilities chief executives, 76% of food, beverage, and consumer-product corporation execs, 74% of technology CEOs, 73% of industrial corporation bosses, 71% of pharmaceutical CEOs, and 67% of both service-industries and transportation-company chiefs. In entertainment, Bradley holds a narrow lead, and the telecommunications industry remains up for grabs, with Bush facing stiff competition from both McCain and Gore.

The Veep is hoping to win the financial backing of a few more late-train CEOs. And even if Corporate America is unwilling to embrace Gore, ''we want them to not be out there aggressively trying to defeat us,'' says Gore campaign director Tony Coelho. At least a few CEOs are likely to open their wallets to him as political insurance. Says Bush backer Jim Karman, vice-chair of RPM in Medina, Ohio, a paintmaker with 70 plants around the world: ''Some may give to Gore for business reasons, but it doesn't mean anything.''

What does mean something is Bush's huge financial edge, fueled in part by his corporate following. Despite spending over $50 million to date, Bush still has $20 million--more than double the amount in McCain's coffers. That cash could prove crucial in the megaprimaries between Mar. 7 and 14, when 20 states select GOP delegates. But with McCain's wins in Arizona and Michigan, more late-train CEOs must be wondering whether it's time to send him a check, too.

By Richard S. Dunham and Susan Straight in Washington, with Lorraine Woellert in Detroit and Fred Jespersen in New York

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