News Analysis: Political funding says that?s the way to do IT

Concerns about IT-related legislation are fuelling an increase in contributions to political parties

The decision of high street giant Dixons Stores Group to pull back from donating chunks of money to the Conservative Party has highlighted the growing influence that computer companies hold with political organisations.

This phenomenon has been particularly felt in the US, where the amount of money paid by companies in Silicon Valley to campaign contributions in Washington to sway decision-makers has grown dramatically. According to an independent survey, the IT industry paid out $7.3 million in campaign contributions in 1996, a figure that looks set to grow even higher this year.

The current session of congress is due to consider 13 pieces of proposed legislation that would have a direct impact on the IT industry. These range from the Tax Free Internet Act 1997, which prohibits the taxation of the internet or other online services and is likely to be approved, to the Encrypted Communications Privacy Act, which is held up at a judiciary committee hearing stage.

In the light of all this IT-related legislation, Silicon Valley companies are becoming more politically active. As well as paying out to support campaigns and politicians, they are spending more on professional lobbying firms to act on their behalf.

The survey, from the Centre for Responsive Politics, divides spending into soft money or individual contributions, and funds channelled through self-styled political action committees (PACs), which a growing number of firms see as a more up-front, legitimate way of making contributions. The centre cited Oracle as an example of a company that set up its own PAC last year and so far this year has donated more money via that than it did in the whole of 1996.

The most significant PAC funder was services giant EDS, which specialises in central government services contracts on both sides of the Atlantic. EDS spent $237,749 in 1996 through its PAC, $127,850 of which went to the Republicans and $109,899 to the Democrats. It was followed in terms of largest donations by Texas Instruments with $100,500 and Computer Sciences with $71,100.

But PAC funding remains a small component of overall political contributions, which have increased by 52 per cent since 1992. Many firms are making individual contributions to fund specific individuals or causes ? for example, 14 Microsoft employees gave $7,600 to a Republican representative in 1995 at a crucial point in the progress of a Securities Litigation Reform Bill.

Microsoft employees were the third most politically generous, donating $114,089, while Sterling Software staff were second on $128,067. But EMC was well ahead of the pack with $206,709, $204,259 of which went to Republicans and a mere $1,450 to the Democrats.

Among the US political figures to benefit were Republicans Tom Campbell, Thomas Davis and Rick White, as well as household names such as Ted Kennedy, Joe Kennedy and Newt Gingrich, the disgraced speaker of the house.

IBM is strikingly absent from the list of contributors, preferring to make its presence felt through political lobbying firms. In 1996, it spent $4.9 million on lobbying through Podesta Associates. It was followed by Texas Instruments on $3.6 million, EDS on $1.8 million and Microsoft on $1.1 million.

The success of all this spending is a moot point, but the industry can point to some notable victories. For example, Silicon Valley firms united last year to defeat Proposition 211, which would have made it easier for investors to bring lawsuits against IT firms that failed to perform financially exactly as they predicted.

Silicon Graphics? Cray Research arm pulled off a coup last week when it persuaded the US Commerce Department to penalise Japanese supercomputer firms by imposing crippling duties on their products when exported to the US market. The company spent $300,000 on lobbying in Washington last year; keeping Japanese rivals out of its domestic market will make that outgoing very worthwhile.