Is big business going blue? Not IBM blue, but politically blue, as Barack Obama takes up residence in the White House and Democrats solidify their hold on Congress.
Absolutely not, says Tony Coelho, the former Democratic congressman from California and House majority whip, who has sat on several corporate boards including Tele-Communications Inc. before it was acquired by AT&T. Business will adjust and cooperate with President-elect Obama just as it did with President Clinton, but "business supports Republicans," Coelho says.
A survey of 751 CEOs in September by Chief Executive magazine seems to support Coelho's assessment. Two months before the election, John McCain had a 4-to-1 margin among them, and 74% said they feared the consequences of an Obama presidency. Howard Putnam, former CEO of Southwest Airlines and Braniff International Airways, met with a number of Fortune 500 executives in Los Angeles in early November just after the election. "I found no evidence that business is turning blue," he says.
But September and November seem a lifetime ago, and it's hard to ignore the Who's Who of business leaders who have rallied around the 44th president, starting with Warren Buffett and Obama's transition economic advisory board that includes Xerox CEO Anne Mulcahy, former Time Warner chairman Richard Parsons and Google CEO Eric Schmidt. General Electric put out press releases this month saying it "applauds the president-elect's bold vision."
If business is nothing else, it is pragmatic, and evidence of it can be found in the October/November issue of the Academy of Management Journal. The study says that when a party gains control of the House, Senate and presidency — something that happened after the victories of Clinton in 1992, George W. Bush in 2000 and now Obama in 2008 — former congressmen and Cabinet members of the party in power stand a better chance of landing a corporate board seat than members of the party out of power. Study co-author and Texas A&M management professor Richard Lester says the chances of a former Republican congressman or Cabinet member gaining a seat on the board of a large corporation went down 29% with Obama's victory.
Such a shift in the politics of board members is becoming increasingly meaningful. In 1973, 14% of large corporate boards included a former Cabinet officer or member of Congress. By 2007, that had risen to 52%, according to executive search firm Korn/Ferry International. The reason is influence, Lester says.
Government is a large customer. Government can influence trade, taxes and standards on everything from safety to the environment. Massive stimulus spending and legislation as sweeping as energy policy and health care reform will swing billions of dollars in revenue and stock market value to some companies and not others, creating corporate winners and losers.
"Businesses are becoming more blue at the management level, if only to receive their fair share of green," says Steve Hafner, CEO of travel search site Kayak.
Oilman T. Boone Pickens, who contributed to the defeat of John Kerry four years ago, now says Obama and the Democratic Congress can move the USA toward energy independence. Labor unions were strongly behind Obama, and now auto executives have teamed with them to get a $17 billion federal rescue. Next on the agenda may be a quiet labor/corporate push toward government-paid health care to get the expense off their books, not exactly something true capitalists would lobby for, says Steve Forbes, who ran for president in the 1996 and 2000 Republican primaries and appeared in November for the first time on the cover of Forbes magazine with his story, "How Capitalism Will Save Us."
Obama is not tipping his hand, which allows conservatives and liberals alike to project what they choose, Forbes says. "You have Silicon Valley and other entrepreneurs supporting him. He's young, he's cool, he's smart," and, therefore, they believe that "he'll fix it."
Nasdaq CEO Robert Greifeld spoke in Washington, D.C., this month and several times expressed conservative views such as the importance of letting "the cold hand of capitalism" weed out the weakest of the auto companies. But he also said the stimulus package must be big and comprehensive, and when asked if another $1 trillion of debt caused him concern, he said no.
Connie Mack, a former Republican senator from Florida who sits on the boards of four public companies — including Genzyme and Darden Restaurants, which operates Red Lobster and Olive Garden — says it makes sense that corporate boards would add directors from the party in power to gain influence. Still, he recalls only one instance in seven years when he was asked to place a phone call to Washington on behalf of a company. More often, he says, companies tap his expertise to explain how the world of Washington works.
Business leaders "haven't a clue" about Washington, Mack says. But he says many are frustrated by the lack of fiscal discipline and mounting deficits under Republicans.
"The largest debt known to mankind has happened under their watch," says Tony Cataldo, CEO of telecommunications company VoIP Inc. in Altamonte Springs, Fla., who changed allegiances and voted for Obama.
Companies may start out with favorites, but they back winners. Many, including Donald Trump and Darden Restaurants CEO Clarence Otis, contributed to candidates on both sides. Most executives don't take a public position before elections so as not to offend a large chunk of customers, employees or investors. "But once the votes are in, they go with the flow and support the administration in power either directly, or through lobbyists and industry organizations," says former airline executive Putnam.
While attacks on business most often come from the left, the assumption that top executives are lock-step Republican has long been an overgeneralization. President Clinton, for example, won the support of former Apple CEO John Sculley. An unscientific survey of 154 CEOs a year ago by USA TODAY during the presidential primary season found two in five supported Obama, Hillary Clinton or another Democrat.
"I'm a big fan of Obama's," Trump says. "He's done an amazing job. Big business leans toward Republicans, but it does better under Democrats."
Realignment could be temporary if Republicans regain the high ground as the pro-business party of fiscal restraint and, of course, if Republicans regain power. But decades before Obama's victory there were fundamental changes at play that have gradually made business more accepting of Democrats.
For 20 years there has been a move toward racial and gender diversity at the upper levels of corporate management, and on boards. Seventy-eight percent of the largest 200 companies now have at least one director who is African American, according to executive search firm Spencer Stuart. Eighty-seven percent of Fortune 500 companies have at least one woman on the board, and 41% have three or more female corporate officers, according to Catalyst.
Diversity has meant political diversity, and in September USA TODAY identified 99 African-American corporate directors who contributed to at least one presidential candidate during this election cycle. Ninety-five percent contributed to Obama or Clinton, or both. Even Halliburton, where Vice President Cheney was chairman before becoming Bush's running mate, has two Obama contributors on its board. Over time, more liberal directors could influence major strategy decisions. They ultimately vote on the hirings and firings of CEOs.
Real estate developer Don Peebles, an African American who raised more than $300,000 for Obama at a single event in Miami Beach, says Obama's election will expedite the rise of more qualified minorities to the highest levels of business, furthering the shift to blue.
Merits vs. ideology
But any political shift is out of pragmatism, says CEO Harold Korell, whose natural gas exploration company, Southwestern Energy, has had the best-performing stock during the eight years of the Bush administration, according to Capital IQ. Korell says his Houston-based company has no political insiders on the board, and its success had nothing to do with the party that controls Washington. Still, Korell says, he visits Washington twice a year to make the company's case with members of Congress. Upon reflection, he says that the presence of President Bush and his potential veto may have prevented Congress from passing taxes that might have penalized investment in exploration.
Korell says he is cautiously optimistic about Obama's presidency. "When candidates run for president, they say things. I trust he will make decisions on merits and not ideology."
Raul Fernandez, CEO of ObjectVideo and co-owner of the NHL's Washington Capitals, said a year ago he was supporting McCain. After the October market meltdown, he contributed $4,600 to, and voted for, Obama.
Fernandez says he has no doubt that business is trending blue. And, it's not just to get on the side of the party in power, Fernandez says, but because Republicans "lost their grip on the foundation elements of Lincoln's party: small government, individual empowerment and welcoming immigrants as the growth engine of our nation."
Jack Kemp, Bob Dole's running mate in 1996, is on the boards of Oracle, Hawk and Six Flags. The directors on those boards are almost evenly split politically, Kemp says, and he believes more women and people of color should be added for diversity and to bring a range of expertise to help companies compete in a global economy.
"Business is not red," Kemp says, although he doesn't think it will get to the point where companies will have to actively recruit Republicans to balance out political diversity on their boards.
Kemp pauses when asked if the business trend toward blue is for real. Then he jokes, "I can't say. I've only been a Democrat for 15 minutes."