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November 1, 2011

Metals Industry Lukewarm to Howard Schultz’s Brew

“THE PROBLEM[S] WE HAVE in America today—unemployment, the fracturing of consumer confidence, the lack of lending—all of these things are tied, unfortunately, to the dysfunctionality and the ideology of separate agendas in Washington,” Starbucks CEO Howard Schultz told CBS News in September.

His solution: Schultz wants business leaders across the country to boycott political contributions until Washington deals more effectively with the economy and overcomes what he calls a “crisis of leadership.” His proposed two-prong pledge also includes a promise from businesses to do everything they can to accelerate job creation by the end of 2011. Schultz argues that the business community cannot wait for Washington's help in creating jobs and opportunities for America to get back on its feet.

HEEDING THE CALL

And some of Schultz's peers in corporate America are heeding his call by swearing off political contributions altogether until the gridlock on Capitol Hill ends. CEOs from companies such as AOL, J. Crew, Zipcar, NASDAQ, PepsiCo, Hasbro, NYSE and Whole Foods have all signed on to his campaign, dubbed Upward Spiral.

It has been reported that Nucor Corporation CEO Dan DiMicco also joined the effort; a spokesman said that while Nucor has not officially signed on, it likes some aspects of what Upward Spiral is doing and is evaluating how it can support the campaign. But DiMicco may be an island in the metals business, an outlier among numerous industry executives who told Forward that they have no plans to put their checkbooks away for the 2012 election season.

Metals industry executives agreed that campaign contributions remain the mother's milk of American politics; failing to recognize that means silencing your—and your company's—voice in Washington. Deciding to turn off the cash spigot can be especially perilous for any industry that at times has to turn to its political friends for help on legislative or regulatory issues.

Plus, while some executives and other individuals may choose to hold their fire, labor leaders, workers—and rivals—may not necessarily follow suit.

“If you take that approach, what's your competitor doing?” says Nancy Gravatt, vice president of communications for the American Iron and Steel Institute (AISI), whose political action committee, SteelPAC, helps elect candidates to Congress who support AISI's legislative goals of promoting steel use and boosting the competitiveness of the North American steel industry.

WHERE THE MONEY COMES FROM

Individual campaign contributions are just one slice of a multi-billion dollar pie that finances our nation's federal elections. Operated by companies, labor unions and trade associations, political action committees (PACs) such as those operated by Gravatt's organization also spend mightily in House and Senate contests to advance their policy agendas. Overall this election season, PACs had doled out $87 million in campaign contributions, according to a press-time tally by the Center for Responsive Politics.

Some industry observers say sitting on the political sidelines can be particularly dangerous for trade groups, whose primary role is to participate in the political process.

“Not giving keeps you out of the game,” explains Tom Danjczek, president of the Steel Manufacturers Association.

Danjczek also recommends supporting local politicians and lawmakers who support domestic manufacturing, such as Reps. Tim Murphy (R-Pennsylvania) and Peter Visclosky (D-Indiana), vice-chairman of the Congressional Steel Caucus. On Sept. 15, the caucus sent a letter to Defense Secretary Leon Panetta urging the agency to only use domestic armor steel plates.

Other firms and associations are working with Congress to keep America competitive in a global marketplace.

AISI, for example, has been making more noise to get the transportation bill passed “over a multi-year period with the significant levels of funding that would really create jobs but also would address major challenges to our country's competitiveness,” Gravatt says.

The deterioration of infrastructure, she adds, is a “barrier of our efficiency and our businesses.”

Metals companies are also using their collective coalition power to urge the creation of more opportunities in their sector.

For example, The American Steel Coalition, which supported former President George W. Bush's 2002 steel tariff remedy and his program to rejuvenate and protect the industry and those small and medium-sized businesses that depend on it, was re-activated in early September 2011 to serve as “a strong voice in advocating for policies that strengthen the global competitiveness of the American steel industry and the overall U.S. manufacturing sector.”

ANOTHER SOLUTION: CREATING JOBS

Despite the economy, some companies are forging ahead and hiring anyway—something Schultz is also encouraging business to do.

ThyssenKrupp Steel USA, LLC, for example, is a relatively new startup currently ramping up operations in Alabama.

“Over the past four years, we have certainly done our part by employing tens of thousands during the construction phase of our nearly $5 billion project and employing over 2,000 people in full-time, competitive jobs with our operations in Alabama,” says a company spokesman.

In the end, the metals industry's reluctance to join the Schultz parade seems firmly rooted in a political reality that even sympathetic advocates acknowledge.

“On the one hand, the pledge is a symbolic act, designed to get attention. On the other hand, if you withhold enough money, that can be an incentive to change behaviors,” says Michael Beckel, a spokesman for the Center for Responsive Politics/OpenSecrets.org. “Very few industries want to unilaterally disarm in the influence game. If you don't have access and your competitors do, what does that get you? Campaign contributions are a way for companies to build relationships and make sure their voice is part of the conversation.”

PACs from the steel industry, for example, donated $863,756 total to federal candidates in 2010. That's not much compared to the top donor PACs for that election cycle, which gave anywhere from $2 million to $3.8 million each. And of those steel PACs, nearly all of them gave to both Republicans and Democrats, according to OpenSecrets.org.

“You would be shocked by how many people give to both sides to cover their bets. And you wonder why we're screwed up,” Danjczek says.