Dueling protections: Will ‘paycheck’ beget ‘shareholder?’

Could Proposition 75 end up placing shackles on corporations?

The “paycheck protection” initiative is widely backed in the business
community and is leading in the polls. It would place restrictions on the
ability of unions to use member dues for political purposes without members’
permission.

However, if Prop. 75 passes, it could place new pressures on voters to
approve a “shareholder protection” initiative that is likely to appear on
next year’s ballot. Supporters are already gathering signatures for the
initiative, and some say that appeals to equality could make shareholder
protection much harder for corporations to oppose. If union members have the
right to push back against the political decisions made by union bosses, the
argument goes, shouldn’t company stockholders have the same right?

Such pronouncements could be dismissed as liberal rhetoric–if it weren’t for
the fact that Gov. Arnold Schwarzenegger has publicly endorsed the idea.

“If there’s an initiative on the ballot next year, I will support that,” he
said at a town hall meeting Monday. “Because no one — if it’s a corporation,
or stockholder or union member — no one should have money taken out of their
paycheck without permission and have it used for political campaigns. So
it’s unfair.”

Numerous people contacted by Capitol Weekly declined to discuss the issue.
But the handful who did speak were passionate.

“The message is, ‘it’s only fair,'” said Irwin Nowick, a Democratic
consultant for Senate Pro Tempore Don Perata, and also a major shareholder
in several corporations. “Right now, I don’t have that right with Cisco.”
However, business groups aren’t buying the connection.

“They are two completely different and separate issues,” said Sarah Lee,
spokeswoman for the California Chamber of Commerce. “Proposition 75 is about
giving employees the ability to control their own paychecks. Shareholders
already have that ability. If they disagree with the moves a company makes,
they can sell their stock.”

Lee added that her group and others are already planning the campaign
against the so-called shareholder protection initiative. Such a campaign
would likely focus on the differences between shareholder and paycheck
protection, Lee said, emphasizing the point that in many fields, employees
can’t opt out of the union.

But Bob Stern of the watchdog group the Center for Government Affairs said
Prop. 75 could set off a political domino effect that could include not only
shareholder protection, but a push for outright bans on political
contributions by both unions and corporations. Many other states have and
the federal government have either severe restrictions or bans, he said.

While these don’t end up pushing either corporations or unions out of
politics altogether, these rules increase the amount of “soft money” given
to parties, PACs and issue groups.

There’s one thing Lee, Nowick and Stern all agree on–that Prop. 75 may not
have a huge effect on the political power of unions. Unions might not have
as much money to spend on ads, the argument goes, but Prop. 75 would force
them to be more politically attuned to their members.

This, in turn, might lead to a huge turnout for shareholder
protection–especially if Schwarzenegger maintains his support.
“We’re in for a whole series of ballot measures if this [Prop. 75] passes,”
Stern said. “That would begin an interesting dynamic, Arnold campaigning
with the unions against corporations.”

Sarah Leonard, a spokeswoman for the No of 75 campaign, said that
Schwarzenegger’s comments on shareholder protection in 2005 won’t
necessarily turn into action in 2006. After all, she said, Prop. 75 came
from Schwarzenegger’s political allies, including sponsor Lewis Uhler, as
well as Citizens to Save California, which gathered the signatures. If he
really supported shareholder protection, she said, he could have gotten it
onto the ballot at the same time as paycheck protection.

“His support for the Shareholder Act is grossly politically expedient at
this point,” Leonard said. “It comes at a time when it is easy for him to
make these claims.”

Prop. 75 was up 49 percent to 43 percent among likely voters, according to a
poll released Oct. 13 by the Pacific Research Institute. But if it does
pass?

The result would be more power for large private stockholders, Nowick said,
who have already been gaining more influence in the wake of the dividend tax
changes, as well as recent financial scandals and the new Sarbanes-Oxley
rules.