Is the Chamber of Commerce Its Own Worst Enemy?

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(L. to R.): Hoang Dinh Nam / AP; Youtube

As he announced the launch of a $100 million advocacy campaign to promote and defend "the free enterprise system" two weeks ago, Chamber of Commerce CEO Thomas Donohue, 72, maintained that his new initiative was not "a campaign against anyone" or "about any piece of legislation." At the same time, he cited "plans afoot to weigh down America's once vibrant capital markets with excessive regulations, and to raise taxes on our most productive citizens" and also raised the specter of socialism, which he said was making worrying inroads, especially among youth.

But if Donohue, a silver-haired former trucking lobbyist, was hoping not to send mixed signals, he failed; in the partisan pressure cooker of the nation's capital, where the chamber is more than ever a lightning rod for the role of business in politics, his critics saw the organization's campaign as simply part of its effort to block the Democrats' agenda on everything from health-care reform and climate change to financial regulation.

The Chamber is undoubtedly the most effective business organization in the country, but lately it has found itself stumbling. President Obama has slammed it for "completely false" ads against his proposed Consumer Financial Protection Agency, and the White House has increased its efforts to seek out CEOs directly and marginalize the Chamber. Major Fortune 500 players Nike, Apple, Exelon and PG & E, recently quit the organization (or its board) because of its "extreme rhetoric and obstructionist tactics" on global warming, as Nike put it in a letter. The Chamber has spent $17 million on the health-care debate, more than any other organization, but may end up losing its fight to keep any form of public option from ending up in the final legislation. And last week, the Chamber was the victim of an elaborate media hoax, when activists put out a fake press release and held a phony news conference announcing the Chamber's supposed shift in its controversial climate change stance.

"Their aggressive ways are out of step with a new generation of business leadership who are looking for more cooperative relationship with Washington, trying to be problem solvers instead of nay-saying, being a brick wall to government action," argues Hilary Rosen, a partner at the Brunswick Group, a communications firm, who served as Chairman and CEO of the trade organization the Recording Industry Association of America from 1998-2003. "In leadership positions, you see a wave and you want to get on board to help shape it and instead I think he is looking at a wave and is trying to stop it."

While defending the organization against a recent series of high profile defections over its climate change policies, Chamber officials insist they are just faithfully representing their membership's views. The problem with that is the lowest common denominator dynamic in trade associations, in which common policy is set by those with the most at stake. In a petition challenging the Environmental Protection Agency's authority to regulate greenhouse gases — authorized under a Supreme Court decision — the Chamber maintained there are likely to be some positive aspects to climate change. The resulting skepticism among environmental groups turned to outrage in early October , when a senior official of the U.S. Chamber of Commerce said that climate science should be put "on trial" like in the famous 1925 Scopes Monkey case, in which a Tennessee teacher was prosecuted for teaching evolution rather than creationism. The statement, by William Kovacs, the Chamber's vice president for policy, was later disowned by the Chamber, but the damage was already done.

"We are not crazy or outside the mainstream," says David Chavern, the Chamber's COO. "We've been around for almost 100 years because we've done pretty good at figuring out what's needed for the business community to be successful and we are going to be around for another 100 years."

Many observers think the Chamber, in so zealously opposing so much of the Democrats' agenda, may be its own worst enemy. Peter Darbee, PG&E's CEO, applauds Donohue's effort to rehabilitate the American public's faith in free enterprise in the wake of the past year's troubles." But he added, "I'm struck by the irony that, as we try to restore public trust in business on the one hand, on the other the Chamber's behavior on the climate issue only reinforces stereotypes that erode that very same confidence."

The same might be said of its stance toward corporate transparency. The Chamber successfully sued the Securities and Exchange Commission five years ago to block a requirement that 75% of mutual funds' boards be independent. And another legal battle seems likely to be brewing over the new SEC Commissioner's interest in pushing to allow shareholders to nominate independent members to corporate boards. "They will accept all kinds of stimulus funds and bailouts but God forbid we should ask for any kind of accountability in return," says Nell Minow, co-founder of Corporate Library, a corporate governance research firm.

But that position, critics say, is par for the course for Donohue, who has shown relatively little interest in expanding corporate transparency. One of his chief innovations has been a stealth corporate advocacy program, which encourages firms to funnel funds into special chamber accounts to pay for advocacy campaigns run under the chamber's banner, without mention of the company paying for the ad or their stake in the fight.