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Following the Money

By Scott Proudfoot, Principal 
August 2002

Canada vs. US political fundraising. Do our politicians need more or less money? Helpful tips for those who do want to give. 

"Politics has become so expensive that it takes a lot of money even to be defeated." --Will Rogers

Every few years, campaign finance issues jump back into the spotlight. The Enron debacle in the US precipitated the current round of scrutiny. The company was exceedingly generous to the Bush gubernatorial and presidential campaigns and most Texas legislators who could draw a breath (or cast a vote). Enron’s largesse gained little when required the most but the public furor did pressure the US Senate to pass a major campaign finance reform bill.

The escalating cost of political contests has been fueling public concern in the US. Senate elections cost a minimum $20 million and some as high as nine figures. Incumbents’ ability to raise more fund than all but the wealthiest challengers ensures Congressional and Senate seats rarely change hands. There is also the pervasive impact of unregulated ‘soft money’.  In the 1994 election cycle, Republicans and Democrats raised $87 million dollars in soft money. By the 2000 contest, it was $449 million.

Canadian politics is nothing if not derivative. After the Enron issue broke, the campaign reform issue quickly crossed the border. Questions were raised in the House; editorials written and pundits advised us to follow the money trail. Big donations by advertising firms were noted. The fund raising activities for undeclared leadership campaigns were scrutinized (the Canadian soft money equivalent).

Now under some pressure, the Chrétien Government will bring greater transparency to the process. Leadership candidates will have to be more forthright about who is financing their campaigns. New Ethics rules will be promulgated.

A recent poll by the Liberal’s own pollster suggested 45% of the public thought them “corrupt” and the party’s support has dropped. Greater transparency won’t eliminate all public mistrust but it is the logical starting point. But before the Canadian public is ready to condemn their politicians holus bolus, they should recognize the real and important differences in how parties raise funds in Canada.

Most candidates running for federal parliament spend in the $40,000- $60,000 dollar range to get elected.  That is pocket change in the US. During the last federal election, Prime Minister Chrétien spent $60,591 in his own riding, Finance Minister Paul Martin $51,161. Even the maligned Alfonso Gagliano only needed $57,440. Most constituency organizations are able to raise these amounts over a period of four years and hardly need to be beholden to special interests.

In the 2000 federal election, all the Canadian political parties combined (mainstream and fringe) spent approximately $35 million on their electoral efforts. On May 13 of this year, President George Bush raised $33 million at just one fund-raiser. Money fuels the US system far more than ours.

Some Canadian political parties’ problem is not that they raise too much money but too little! In the 2000 election, the Liberals were the only party to spend close to their allowable limit of $12,710,000. The Canadian Alliance spent $3 million less than it could have, the New Democrats $6 million less, the Progressive Conservatives over $8 million less.  Canadian federal elections are less competitive because our highly fragmented opposition parties have trouble raising sufficient funds to stage strong national campaigns.

Meanwhile, the major sea change in campaign reform may come from corporations themselves. Maligned and under scrutiny for their political contributions, many corporations have simply decided it is not worth the bother. Recently British Petroleum announced it would not make political donations anywhere in the world citing “intensive scrutiny” from anti-globalization activists and a plethora of interest groups. In fact, many large corporations don’t make political donations and more would like a good excuse to stop entirely.

A large discrepancy exists between the benefits the public perceives corporations obtain from political contributions and the benefits the corporations perceive themselves. A recent Compass poll of Canadian CEOs revealed half gave donations or worked for companies that did. The primary reason for giving was ideological rather than expectations of gain. Most said donations were motivated by the desire to support competent politicians, back the party process, support ethical politicians or support free enterprise. Using donations to support the corporations’ business affairs or networking objectives was a less important benefit. Most CEO respondents did not perceive much corporate benefit from providing political donations. In fact, more were likely to see it as a greater risk due to public or media backlash against unfair or improper influence.

And What of the Importance of Associations to Political Fundraising?

Associations are both more and less important to political parties. During the 2000 election year, the Federal Liberals collected over $20 million in contributions. Businesses provided 59% of that total, individual donors another 34%, and associations only 5.6% or about $1.1 million. However, 81% of those Association donations actually came from related provincial and constituency Liberal associations.

In Canada, the national party organizations are partially subsidized by provincial or constituency associations who raise funds locally and then transfer monies to the national organization. This pattern holds across all the major parties. For example, in 2000, the Bloc Quebecois raised  $195,000 from Associations but $166,000 of that came in a single donation from the Parti Quebecois.  Party associations routinely dominate the list of top 100 donors to any the major parties whether the Liberal, Alliance, Bloc or Conservatives. The exception is the NDP which relies more heavily on Unions.

This is a long way of saying that independent Associations are not of great financial importance to the main political parties in Canada. They fill some extra chairs at events.

Should Corporations and Associations Be More Active Donors?

I regularly pay for and attend political events and occasionally raise money for political parties. I have always encouraged my clients (corporate and associations) to consider some level of political contributions. I provide two main reasons:

Enlightened Self Interest
- Politics costs money.  In our society, someone has to underwrite the party process. Any society that does not want its politicians to be bought and sold should make it easy for them to raise money without having to offer favors or make specific concessions.

The willingness of companies, individuals and associations to support political parties in, at least, a partially disinterested fashion is one of the best protections against widespread political corruption. Political corruption is bad for business.  It misdirects resources, distorts entrepreneurship, dissipates productivity and impoverishes society.

-If used properly, political contributions create  a little visibility in the government marketplace and provide a vehicle for some useful networking. The value of this is modest and should not be exaggerated but if an organization meets regularly with politicians and routinely appears before legislative committees, it can be seen as an awareness and brand building exercise.

Politics, by its very nature, concerns the interplay of altruism and self-interest so it is perfectly acceptable to combine the two in your organization’s contribution policy.

Here are a few suggestions for any organizations political contribution program:

  • Establish a modest annual budget. For a small organization, a few thousand dollars should be enough. Only the largest organizations need to spend more than $10,000.
  • Be totally event-driven.   Some groups make a single large donation to the national political parties.  Beyond the fund-raiser, few people in the party know of the contribution.  If you want people to know your organization, go to the events and introduce yourself.
  • You cannot attend everyone’s events so make choices about who is important to your organization - then attend their events of a regular basis. These are usually the Cabinet Ministers, Parliamentary Secretaries, Commons Committee chairs, and Opposition Critics most involved with your issues.
  • Don’t be afraid to say no! Some Party events are expensive cattle calls with a cast of thousands. Buying a table at these is prohibitively expensive. If you are an association with a wide membership, organize a table but have members take turns buying and filling the chairs on a rotational basis. Otherwise, opt for smaller events.
  • Most Political Parties offer special donor program, usually at a $1,000 annual fee. It gets you invited to some smaller cocktail parties. These are good options for the organization CEO.
  • Don’t ignore the opposition. In government, everyone wants to be your friend but politicians tend to remember those who were there when both the halls and crowds were smaller

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