Silicon Valley Sours on Clinton
President Clinton's veto of the securities litigation reform undermines his political support among Silicon Valley's high-tech companies
P> President Bill Clinton's veto of the securities reform law appears to have hurt his political support among infotech executives. And that could undermine his campaign to win California in the 1996 election, said industry officials and political analysts.
"It will take time for that wound to heal.... It has been very tough," said David Barram, a former executive at Apple Computer Inc., Cupertino, Calif., and now a deputy secretary at the Department of Commerce. In September 1992, Barram helped organize a news conference where 30 infotech executives from California's Silicon Valley rallied behind then-candidate Clinton.
The leader of that rally was Ed McCracken, CEO of Silicon Graphics Inc., Mountain View., Calif., who also vigorously opposed Clinton's veto of the securities reform measure. "We told [President Clinton] that it was a defining issue, and it was," McCracken said last month, adding that he is a Republican.
Like many other infotech executives, McCracken wanted Clinton to approve the securities litigation reform bill, which was designed to curb so-called frivolous lawsuits filed when a company's stock price falls unexpectedly. Company officials said the lawsuits cost billions of dollars, without significantly aiding stockholders.
Congress passed the reform in December, but Clinton vetoed it after much discussion with advisors and lobbying by the legal industry. Congress then overrode Clinton's veto and passed the reform into law, delighting many industry executives.
The infotech industry's political clout is significant, mostly because Clinton can't win re-election without winning California, said Stephen Hess, a senior fellow at the Brookings Institution in Washington.
"He does need the vote of Silicon Valley in the long term, because [California] is by far the most important state," holding roughly 20 percent of the Electoral College votes needed to win the presidency, he said.
But for now, the infotech industry "is ticked off for lots of other reasons [than just the securities veto, so] it will take a series of things to get the industry supportive of the administration," said Tony Coelho, chief of the House Democrats' fund-raising efforts in the early 1980s, and now president of the investment banking firm, Coelho Associates LLC, New York. For example, the administration could help change the capital gains tax code or relax rules governing the export of data-scrambling software, he said.
The administration is already helping the industry in many ways, said Barram. It is promoting the widespread use of information technology in education, and is trying to resolve the controversy over encryption export controls, which the FBI and the Pentagon want but industry rejects, said Barram. The industry has also gained from the administration's decisions to promote free trade, relax export controls on computers, and champion the development of the National Information Infrastructure," he said.
The high-tech industry's home in California may be its most important leverage, partly because it does not try to exert its influence through campaign donations. Instead, it capitalizes on its influential role in the state's economy as a major employer and taxpayer. Besides, there are plenty of other industries -- including the legal industry -- willing to fork over millions of dollars in campaign funds. "Politicians and presidents don't want to lose anyone's support, [but Clinton] does not need [the industry's] money the way he did in 1992," said Hess.
Clinton collected at least $726,046 in political contributions from the media and electronics industry by Sept. 30, 1995. But this represented only a small portion of his $20 million campaign chest, which included donations of at least $2.6 million from lawyers and lobbyists, according to an analysis prepared by the Washington-based Center for Responsive Politics.
Clinton's main presidential rival, Republican Senate leader Bob Dole, gathered $19.8 million by Sept. 30, including at least $412,891 from the media and electronics industries, and at least $978,164 from lawyers and lobbyists, according to the analysis.
Both the Democratic and Republican candidates also stand to gain millions of dollars in donations during 1996, much of which will be donated to the Democratic and Republican parties.
Ann Lewis, the spokeswoman for Clinton's re-election campaign, declined to comment on the infotech industry's support for Clinton. However, she said the campaign has collected nearly all of the $29 million campaign chest that it had sought.
There's plenty of time for the Clinton administration to regain support from the infotech industry, especially if the Republican candidate is Patrick Buchanan, who opposes free trade policies that benefit the infotech industry, said David Mahaffey, an associate with the Washington-based firm of Gibson, Dunn & Crutcher. And if Clinton looks likely to beat his Republican opponent, the infotech industry will line up behind him anyway, he said. "It is always better to be on the winning side," he said.