When Jack Valenti was at the helm of the Motion Picture Association of America, his $1.5m annual salary easily topped that of Microsoft chief executive Steve Ballmer.
Ed Black, the president of the Computer and Communications Industry Association, boasted a $980,000 salary in 2004. That's more than Cisco's chief executive John Chambers or Dell chief executive Kevin Rollins made last year, if bonuses aren't counted.
As technology companies and their political rivals vie for more influence in Washington, non-profit groups and trade associations are benefiting handsomely from the expanding war chests. A ZDNet UK sister site CNET News.com analysis of 47 organisations active in technology policy and legislation shows that, in total, they have assets of about $1.1bn, annual revenue of $573m and an average executive director salary of $332,665.
At the high end, Cary Sherman, president of the Recording Industry Association of America, took home a pay cheque of $1m in 2003. Douglas Lowenstein, head of the Entertainment Software Association, claimed $620,250, and Robert Holleyman, president of the Business Software Alliance, received $452,670.
"They try to get a seat at a lot of tables to have a dialogue, and they do spend money," Jerry Berman, president of the Centre for Democracy and Technology, said about tech company spending.
It's well-known that after landmark events like the Microsoft antitrust trial — and, to a lesser extent, the Communications Decency Act, Y2K liability caps and encryption export limits — technology companies sought to change their relationship with Washington agencies and bureaucrats. (Another analysis published on Monday shows that spending on lobbyists by large tech firms has more than doubled between 1998 and 2004.) But what's harder to track is the increase in money that flows to trade associations and non-profit organisations.
Under US federal law, non-profit groups that receive corporate contributions are not legally required to disclose the identities of those funding them. Not only do the corporations receive tax breaks for these donations, but the recipients also routinely use the money to pay lawyers to testify before Congress, draft legislation and meet privately with government officials — activities that might be viewed as lobbying if done directly by a company.
A non-profit group "should have policies not to take money from corporate interests that could overly serve to influence their stance on the issues," said Daniel Borochoff, president of the American Institute of Philanthropy, a charity watchdog organisation. "Just as health groups tend to not want to take money from the cigarette companies — though of course some do."
Nobody expects trade associations organised under section 501c6 of the tax code to do anything other than represent the interests of their member companies. But 501c3 groups are supposed to represent the public interest, and donations to them are completely tax-deductible for that reason. (Trade association dues are tax-deductible if not used for lobbying.)
"Can they try to buy you?"
The complex nature of non-profit groups is illustrated by the work of the Centre for Democracy and Technology, which describes itself a non-profit organisation that "works to promote democratic values" such as privacy online.
A review of the Washington group's finances shows that it is bankrolled by tech companies, many of which have faced legal action over their own privacy practices. Corporations such as Microsoft, DoubleClick, Acxiom and LexisNexis accounted for...
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...53 percent of the CDT's income in 2004, discounting a one-time reimbursement for legal fees. Charitable foundations make up the rest of its $3m annual budget.
The centre adopts positions that tend to benefit those who fund it. It sued Utah and Pennsylvania to overturn pornography laws opposed by the most of the Internet industry. The group has also backed concepts like P3P, a self-regulatory approach that the Internet industry used to avoid new privacy laws but was opposed by non-profit privacy organisations that do not rely on corporate funding.
The Justice Department once argued in court documents that technology corporations "funnelled money through" CDT to fund litigation. In another sign of close ties with the industry, Alan Davidson, the centre's former associate director, was hired by Google last year as a staff lobbyist.
Berman, CDT's president, with a 2004 salary of $223,111, acknowledges that his group's positions benefit those who fund him but says his organisation does not modify its positions after receiving a check. "Can they try to buy you?" Berman asked. "Maybe they'd love to. But we try to resist that, in terms of a diversity of funding, and we make it quite clear."
Microsoft initially opposed some forms of Internet privacy legislation that the centre did support, he says. "Now they're in favour of privacy legislation — who influenced whom?"
Berman previously was the policy director for the non-profit Electronic Frontier Foundation when it moved from its original home of Cambridge, Massachusetts, to a Washington office in the downtown corridor known for its preponderance of corporate lobbyists. His work there illustrated the importance of non-profit groups in influencing policy decisions.
When the FBI was pressing for the Communications Assistance for Law Enforcement Act (CALEA) in 1994, most privacy groups, such as the American Civil Liberties Union and the Electronic Privacy Information Centre, remained steadfastly opposed to the measure. CALEA requires telecommunications companies to design their networks to be explicitly wiretap-friendly.
Berman, a long-time Washington hand, eventually let EFF endorse what he described as a compromise proposal that was more privacy-sensitive. A number of procedural safeguards were added that seek to minimise the threats to privacy, security and innovation, Berman told a House panel in September 1994.
EFF's position--which supported reimbursing companies for wiretapping compliance--also happened to coincide with the interests of some of the telecommunications giants that provided it with cash. AT&T, Bell Atlantic, Apple Computer and Microsoft gave EFF a combined $235,000 in 1993, according to CyberWire Dispatch.
With EFF's cautious endorsement, CALEA easily cleared both houses of Congress, and President Clinton signed it in October 2004. After a worried EFF board ousted Berman soon afterwards, he created what became CDT and brought with him money from Nynex and a penchant for compromise and deal making. Today, CALEA is being applied to voice over Internet Protocol (VoIP) and broadband connections, and it has become the subject of a federal lawsuit.
Newt Gingrich's favorite think tank
Despite their influence, non-profit groups can easily fall victim to the vagaries of Washington politics — a precarious position underscored by the fate of the Progress & Freedom Foundation, one of Washington's most influential think tanks in the vanguard of the Republican revolution in the mid-1990s. Mostly conservative, and in some ways libertarian, the...
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...foundation was the ideological favourite of then-House speaker Newt Gingrich, and it wielded unusual clout as a result.
"Of all the think tanks, that's one whose reports are not just going to sit on the shelf," lobbyist Jim Tozzi, whose firm has helped tobacco and chemical companies fight government regulations, told Time magazine in 1995. "If I give somebody money, I want to make sure the report will be read. If I give to that group, I know it will be."
Then Gingrich ran into ethics charges, a leadership challenge and allegations of an improper $4.5m book deal. Because PFF funded Gingrich's college course, called "Renewing American Civilisation", it was drawn into the investigation.
The foundation suffered that blow around the same time the Clinton administration began pursuing Microsoft through the court system on antitrust charges.
Major conservative, free-market and libertarian groups sided with Microsoft — this was, after all, a Democratic administration assailing a high-tech company that, until 1997, had been practically unfettered by government regulation. The lone exception was PFF, which had been taking money from Microsoft rivals Sun and Oracle. PFF called for a complete break-up of the software company.
An essay published in 2000 by the free-market Cato Institute, which did oppose the antitrust case and lost support from Sun as a result, accused PFF of "making the case for Microsoft's archrivals, like IBM, Oracle and Sun". Cato receives about 85 percent of its funding from individuals instead of corporations, so it's not terribly vulnerable to pressure from contributors, said David Boaz, a vice-president at Cato.
"Corporations support organisations because they think they'll get something out of it," he said. "One of the great virtues of not getting much corporate money is that you don't hear [demands] very often."
Since the Microsoft trial, PFF's staff has gone through a near-complete turnover. It's hired former analysts from Cato, Citizens for a Sound Economy (now FreedomWorks) and the Competitive Enterprise Institute, which opposed the antitrust suit. PFF has become primarily active on digital copyright and broadband topics, and it no longer talks about antitrust. Microsoft has even become a sponsor.
In a recent interview, foundation spokesman Patrick Ross said his group's public stance was not for sale. "That's a pretty scurrilous charge," Ross said.
Today PFF lists as supporters a wealth of companies, including AT&T, BellSouth, Disney, eBay, Intel, Sprint Nextel, Qwest Communications International and Time Warner. The non-profit group does not disclose specific dollar figures or breakdowns, but it says it has a minimum of $25,000 for corporate contributions. Individual contributions appear to be minimal.
Ross says PFF does not disclose its donations as a "courtesy to these people funding us. I don't think it's appropriate for us to put that amount out there. If they want to disclose it, it's certainly their prerogative."
PFF, which had a 2004 budget of $3.1m, paid its president $235,000 that year. Unlike CDT, the foundation does not disclose rough percentages that could indicate how much cash came from a certain corporation.
"The percentages are only important insofar as you accept an assumption that they somehow influence the work that is done here," Ross said. "I would argue vehemently against that."
CNET News.com's Anne Broache contributed to this report.
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