Proxy Battle

Hewlett-Packard's corporate campaign makes politics look cheap.

I'm not referring to this week's election in California, which saw upstart Bill Simon wipe out former Los Angeles Mayor Richard Riordan in the Republican gubernatorial primary while Dennis Cardoza sent Gary Condit packing in the congressional contest. I'm referring to Hewlett-Packard's March 19 proxy election, when its 900,000 shareholders will decide whether to approve the firm's $24 billion merger with Compaq Computer Corp. Hewlett-Packard's CEO, Carleton S. Fiorina, is stumping hard for a thumbs up, and her job is most likely on the line if she doesn't get it. She's opposed by Walter B. Hewlett, the co-founder's son and a board member, who's rallied the family interests to his side.

The corporate campaigners have learned a lot from politics. They're buying full-page ads in major newspapers, sending out direct mail, and soliciting endorsements from trusted outside groups. They've personalized the campaign, focused on tangential issues, and gone negative with charges of lies and misrepresentations. Fiorina's camp has appropriated the image and words of co-founder Dave Packard to push its cause. Packard's son, who like Hewlett opposes the deal, reached into his pocket for $150,000 to buy an ad to set the record straight. In a mailing to investors, the company tried to undermine Hewlett's business credibility, labeling him an "musician and an academic." Meanwhile, Hewlett says Fiorina fibbed, and therefore violated SEC rules, when she told investors in February that she had enough votes to prevail. Both sides are traipsing across the country making personal appeals to investors.

There's something people who fret about our corrupt political process can learn from this entertaining spectacle. Communication, the basis of an effective campaign, is expensive.

Mr. Hewlett expects to spend $32 million making his point. He claims the company will spend at least $100 million to convince shareholders he's wrong. (The company tells The New York Times it will spend less, but it won't say how much.)

Although the current campaign finance bill is more likely to redistribute rather than reduce the total amount of money spent on political activities, the effort to further regulate political spending is driven by a belief that there's just too much money slushing around the political system. So how does the corporate campaign compare to political campaigns? It makes them look like a bargain.

Political spending appears excessive when reported in aggregate numbers, with totals in the millions. But when put in the context of the purpose it actually serves—communicating with voters—it doesn't appear so menacing. The Hewlett-Packard election, based on the company's numbers, will cost $147 per voter. Compare that to the most expensive 2000 Senate races. Hillary Rodham Clinton's New York contest cost $11 per registered voter and Jon Corzine's New Jersey Senate race cost $20 per registered voter. All the presidential candidates combined spent a mere $2.75 per registered voter, less than a super-sized quarter pounder meal at McDonald's or a single issue of Newsweek.

In the last election cycle, the Bureau of National Affairs estimates that all players—candidates, political parties, labor unions, corporations, and interest groups—shelled out a combined $4 billion. It sounds outrageous, until one puts it in perspective. It's $31 per registered voter. Meanwhile, the same year, GM spent $2.6 billion to advertise its cars.

It's hard to see how political spending is excessive, considering that the people it serves to put in power control $1 out of every $5 Americans earn—or $31,000 per registered voter over the next election cycle. That's at least as important as pitching cars, or deciding whether two computer companies are going to make a marriage, even if it's not always as entertaining.