Reclaim Democracy!

Court Declares Corporations Are People, Some Human Beings Are Not

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By Jeffrey Kaplan
Published February 8, 2008

In evaluating allegations that U.S. military forces deprived four British men of human rights during two years they were held captive in Guantanamo Bay prison, a U.S. appeals court found an innovative way to let the Bush administration off the hook. Two of three judges ruled the men — because they are not U.S. citizens and, technically, were not imprisoned in the U.S. — were not legally “persons” and, therefore, had no rights to violate.

While those judges were defying common sense and decency by denying legal personhood to living human beings, an appeals court in Boston has been reviewing an April 2007 decision by Federal Judge Paul Barbadoro that engaged in a different form of judicial activism — granting human rights to corporations.

Barbadoro struck down a New Hampshire law that prevented pharmaceutical corporations from learning exactly what drugs doctors prescribe and how much they prescribe. The law aims to protect doctors and, indirectly, their patients, from drug companies pressuring doctors to choose their products.

The judge’s grounds? He claims corporations, as legal persons, have “free speech rights” that would be infringed by such a measure.

The real issue in these cases (Maine recently passed a similar law) isn’t free speech at all; it’s manipulation and control. The drug salespeople only will decide what to say after poking into the doctors’ prescription records. Under the guise of protecting speech, Judge Barbadoro denied both legitimate privacy rights of doctors and key protections to ensure patients are prescribed drugs based on their medical situation, not pressure applied to their physician.

Taken together, these two rulings are a perplexing and dangerous development. The founding principle of our country is right in the Declaration of Independence: all people are “endowed by their Creator with certain unalienable Rights.” It is not for judges to decide who is and who is not a human being.

Nor should the courts play Creator by endowing legal constructs like corporations with human rights. Our constitutional rights exist to prevent large, powerful institutions — whether governments, corporations, or other entities — from oppressing us humans.

For too long a strange dichotomy has persisted between many principled people on the political left and right wings. The left wing often warns against the growing power of business corporations. The right wing complains the left ignores the overweening power of the government and is “anti-business.”

Both sides have been seeing only part of the same elephant. What’s happening is a merger of corporations and state.

Already there are corporate “black holes” for human rights that rival government affronts like Guantanamo. Under the Bush administration’s legal framework for Iraq during its occupation, the Iraqi government wields no authority over Blackwater corporation’s security guards.

And it’s not clear the U.S. government does either. As a result, we may never see anyone punished for Blackwater’s wanton killing of Iraqi civilians in Baghdad last September.

Then there’s the case of Jamie Leigh Jones, an American employee of Halliburton/KBR in Iraq who claimed she was gang raped by co-workers in 2005. U.S. officials reportedly handed the evidence to KBR, whereupon the evidence apparently disappeared. Nobody in Congress, Democrat or Republican, has been able to persuade the Bush administration to reveal what it has done about the case since then.

Halliburton/KBR, like Blackwater, apparently enjoys the rights of a person, but not the responsibilities.

Editor’s note: shortly after completing this article, we learned of this shocking story: Judge Denies Allows Halliburton to Force Sexual Assault Case Out of Court

The danger of “corporate personhood” is a bit like global warming; people have warned us of the threat for decades only to go unheeded because the dire consequences seemed far-fetched.

But look at what’s happened to the First Amendment. Corporations use it to strike down laws clearly designed to protect citizens, even while courts deny prisoners the right to know what evidence the government is using against them. It’s time for alarm.

We should take offense whenever we hear the dangerous notion of “corporate citizenship” promoted. Soon, the only citizens with real power in the United States may be the corporate kind.

Jeffrey Kaplan is a researcher with ReclaimDemocracy.org, a non-profit organization working to restore citizen authority over corporations.

© 2008 ReclaimDemocracy.org

Take Action: Protect Your Right to Know the Source of Your Food

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To protect sales of synthetic hormones, Monsanto tries censorship

Published December 19, 2007
Updated January 17, 2008

Millions of Americans now seek out dairy products coming from farms that do not inject their cows with synthetic growth hormones. Some people want to ensure they are not contributing to demonstrably higher rates of sickness among animals injected with the hormones, often referred to as rBGH or rBST. Others simply want to support more natural forms of agriculture or believe there may be health risks from ingesting rBGH-derived products.

In most places, we have the freedom to choose because many companies recognize the demand for such products and increasingly are providing customers what they want. Consumers also can easily discern those products because most companies use labels to identify products from farms that do not use these artificial hormones.

All this is unobjectionable to anyone who believes in a market-based economy.

The corporation that enjoys an absolute monopoly on the product in question, however, isn’t keen on consumers making informed decisions.

The Monsanto Corporation manufactures Posilac, the only bovine growth hormone approved for sale in the U.S. Monsanto claims the increased milk yield that results from Posilac outweighs the products expense and the cost of increased rates of illness among cows that results from its use.

Faced with a growing resistance to Posilac, Monsanto is waging war on informed decision-making, lobbying state officials to ban dairies from placing factual information about rBGH on their label. Its lobbyists argue that consumers are making poorly-informed choices based on fear-mongering, necessitating government intervention to save us from being misled by alarmists.

For more than a decade, Monsanto has attempted and (mostly) failed to censor such information through lawsuits and federal lobbying efforts. Incredibly, four states — Indiana, Washington, Missouri, and Ohio — have legislative or executive efforts pending that would ban dairies from using product labels that assert they purchase only from dairies not using Posilac.

Pennsylvania actually had a ban slated to take effect on February 1, 2008, but citizen outcry led PA Governor Edward Rendell to scrap the plan just two weeks prior. A similar plan in NewJersey was abandoned in the face of strong public opposition on Jan. 4, 2008.

Regardless of anyone’s views on the utility of rBGH, citizens should be outraged at state governments censoring information that many citizens need to make decisions consistent with their values. We hope you’ll use the information below to speak out.

Take Action!

  • Ohio residents
  • Indiana residents. On January 15, 2008, Bill 1300 was introduced into the Indiana Assembly. Tell your elected officials your thoughts on censoring product information.
  • Nationwide: If you live elsewhere in the U.S., don’t wait to be put on the defensive — start educating people about potential assaults on their rights, why so many people seek out Posilac-free products (see resources linked below), and consider proactive measures like:
  • propose banning Posilac-derived products from being sold in your community or state
  • propose mandatory labeling of products that do come from synthetic hormones.

Such actions will be challenged in court and the former measure likely would be struck down in the short term. Though a federal court struck down vermont’s mandatory rBGH labeling law in 1996 in International Dairy v. Amnestoy, such a law should withstand any legal challenge if written with that goal in mind. Please contact our office for direct assistance if you consider these actions.

Information sources on Monsanto and Posilac

The Organic Consumers Association and Food and Water Watch provide a wide array of anti-rBGH information. The Environmental research Foundation hosts many articles opposing rBGH itself and indexes opposition groups and their material.

Monsanto’s press release announcing its FTC complaint is posted here (pdf). Unfortunately, the company removed its complaint letters to the FDA, the FTC and accompanying exhibits from its website sometime during Dec, 2007.

ReclaimDemocracy.org article addressing Monsanto and corporate/ government suppression of consumer information: When Silence is Not Golden: Negative Free Speech and Human Rights for Corporations by Dean Ritz

© 2007 ReclaimDemocracy.org

Uncivil Liberties

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ACLU ‘s argument that “money = speech” undermines democracy

By Jeffrey Kaplan 
Published March 29, 2006

Editor’s note: We were surprised to get some replies to this article accusing us of being anti-ACLU. To the contrary, we value the overwhelming majority of the group’s work and our advocacy work in defending civil rights overlaps regularly. Indeed, we have collaborated with various ACLU state chapters and regularly find ourselves working as allies far more often than as opponents at the national level to the Senate Judiciary Committee.

We simply think the national directors are badly misguided in arguing that corporations and wealthy individuals have a constitutional right to use their money to wield power over others. The matter is central to our mission of revoking corporate control of our country and the ACLU’s active opposition to that work is a significant barrier. We aim to provoke an open and constructive debate.

The American Civil Liberties Union seems to believe that not only does money talk, it has a First Amendment right to do so. In keeping with that highly dubious notion, the ACLU is attacking a Vermont law that limits contributions to political candidates and candidate spending in state elections. In a case now being considered by the U.S. Supreme Court, (Randall v. Sorrell) the ACLU argued the law conflicts with the infamous “money equals speech” doctrine first promulgated by the Court in its 1975Buckley v. Valeo ruling.

Editor’s note: The Court struck down Vermont’s expenditure limit and ruled $200-$400 limits on the amount that one person can donate to any individual candidate per election to be unconstitutionally low.

Although Buckley did allow restrictions on individual contributions, the Court struck down a law limiting the funds a candidate could spend on a national political campaign. Many critics think this decision has hamstrung serious attempts to keep wealth from being a dominant factor in elections.

In its amicus curiae (friend of the court) brief in Randall, the ACLU, like the justices inBuckley, offers up a legal argument that uses “speak” and “money” as if the words were interchangeable: “Above all else,” the ACLU brief (pdf) states, “the Court concluded inBuckley that ‘the First Amendment simply cannot tolerate [the] restriction upon the freedom of a candidate to speak without legislative limit on behalf of his own candidacy’ whether the source of his money is personal wealth or funds raised from legal contributions.”

The ACLU seems oblivious to the fact that there’s a profound difference between who we are (human beings with an inalienable right to self-expression) and what we may possess (money or other forms of property). Democracy is simply not sustainable in any society that confuses the second with the first.

The argument of the Buckley Court was more appropriate to plutocrats who believe they are what they own than to the ACLU, which declares on its website, “If the rights of society’s most vulnerable members are denied, everybody’s rights are imperiled.” The Court reasoned that limiting individual contributions was OK to prevent potential corrupting influence on a candidate, but declared limits on expenditures violated the First Amendment because it created an unjustifiable “restriction on the quantity of political expression.” The Court majority claimed to believe that a candidate’s war chest would be commensurate “with the size and intensity of the candidate’s support.”

Even 30 years ago, that was a dangerously narrow view, especially in light of the Court’s warning in the same decision against “naively” underestimating “the ingenuity and resourcefulness of persons and groups desiring to buy influence.”

Resourceful they have been. Jack Abramoff, now under indictment in the most extensive political corruption scandal in a generation, was a “Pioneer” for President Bush’s re-election campaign in 2004, channeling over $100,000 in individual donations from wealthy donors (those who funneled $200,000 or more were dubbed “Rangers”). The list of the other 548 people who raised $100,000 or more reads like a roll call for Corporate America. Of course, John Kerry’s campaign also relied heavily on such elites.

“Naïve” is too weak a word to describe the ACLU’s attempt to ignore the likelihood such donations had much more to do with business than expressing one’s beliefs. We should beware that criminal acts by the likes of Abramoff and Tom DeLay don’t distract us from the more subtle and completely legal corruption that keeps our representatives from actually representing most citizens.

The Buckley Court ‘s rationale for banning limits on spending by independent organizations that support a candidate was equally suspect. The Court claimed, “The concept that government may restrict the speech of some elements of our society in order to enhance the relative voice of others is wholly foreign to the First Amendment.” So would the Court would consider an ordinance prohibiting the use of bullhorns at town meetings an unconstitutional attempt to “enhance the relative voice” of those without them?

Unfortunately the people with bullhorns are gaining ever-more control. According to a recent Congressional Budget Office report, as of 2003 the top one percent of households in the United States owned 57.5 percent of corporate wealth — a staggering 50-percent increase from 38.7 percent just 12 years earlier. During the same time, the wealthy and their allies in Congress repeatedly cut taxes for themselves, while mostbudget cuts targeted the poor .

Though corporations have been banned from contributing directly to candidates for a century, we’re still dealing largely with corporate money here. The Bush campaign gave code numbers to their elite fundraisers, allowing corporate executives to ensure their company was duly credited for donations they solicited. That credit later can be redeemed for access to the administration, if not overt favors.

It is state-granted privileges that allow corporations to amass great power. Governments grant privileges benefiting investors, such as like limited liability and perpetual existence, based on the notion that society as a whole will benefit indirectly.

Democracy is at risk when we permit vast amounts of money accumulated through these privileges to buy power over the political process itself. Even a majority of Supreme Court justices recognized this problem in 1990 when they noted, “the corrosive and distorting effects of immense aggregations of [corporate] wealth … have little or no correlation to the public’s support for the corporation’s political ideas.”

Those corrosive effects run far deeper than any corruption scandal. According to testimony at state court hearings leading up to Randall v. Sorrell, “party and party leaders urged legislators not to oppose pharmaceutical interests for fear of being ‘shut off in the next election cycle from any contributions.’”

In other words, the money big donors withhold, not just money they give, helps keep legislators in line. The result is a “chilling effect” — a term the ACLU often employs — whereby certain policies are not even discussed for fear of alienating wealthy donors.

As one witness at a Vermont legislative hearing commented, “there’s an agenda out there that is pretty much set by folks that are not elected.”

The result is a well-founded sense of political disenfranchisement on the part of Vermont (and U.S.) voters. As one former legislator put it, many citizens don’t vote because “They think it’s all wrapped up and that the special interests control it and, quite frankly, they aren’t that wrong.”

It’s not the few overtly corrupt politicians that leave citizen feeling powerless, but the legal and unspoken bias of politicians toward large donors. As a Supreme Court amicus brief  by ReclaimDemocracy.org in Randall v. Sorrell states, “Decent people, after all, typically return courtesies with courtesies and favors with favors without keeping exact track or using quid pro quo calculations.”

In view of its ongoing denial of political reality, the ACLU’s position that the “power, even of a democratic majority, must be limited to ensure individual rights” is replete with irony. In this instance, what the ACLU is ensuring is the “right” of the moneyed minority to exercise political power commensurate with its wealth.

Nor is Randall an anomaly. The ACLU has a track record of helping wealth subvert democracy. In Nike v. Kasky, the ACLU supported Nike Corporation’s claim that its alleged lies about the abuse of Asian factory workers was constitutionally-protected “political speech.”

It’s not clear the ACLU’s advocacy for “corporate free speech” and against limiting the power of money in elections reflects members’ views or merely those of executive staff. Gregory Wonderwheel, a board member of the ACLU’s Sonoma County (CA) chapter has tried to provoke debate within the organization on these positions, but has found staff unresponsive. “The organizational leaders have their own opinions and don’t seem particularly interested in finding out how the grassroots members feel about this question,” said Wonderwheel.

The ACLU has been at the forefront of the legal struggle against the Bush Administration’s assaults on our civil rights and those efforts should be applauded. But given the increasing boldness of those attacks, it’s appalling the organization is diverting members’ donations to fight Vermonters’ right to govern themselves instead of focusing all available energy on those real threats to freedom.

It’s time ACLU members call on the leadership to stop undermining citizens’ right to self-governance and recognize the rights of human beings must take precedent over the power of property.

Jeffrey Kaplan writes for the San Francisco Bay Area chapter of ReclaimDemocracy.org.

Additional Resources

  • Find and contact your state ACLU chapter here to find out if they have a position on the issue and share your concerns.
  • An e-mail form to the ACLU national office is here.
  • To read the ACLU’s explanation on the closely related subject for why it argues for “corporate speech” to be protected by the First Amendment, and responses from ReclaimDemocracy.org, click here.
  • ReclaimDemocracy.org’s amicus brief in Randall v. Sorrell.

© 2006 ReclaimDemocracy.org

The Question Nobody’s Asking Bush’s Nominees

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By Ted Nace 
Published October 6, 2005

Supper smells great, the kids are finally sitting down — at last, a brief respite in a hectic day. Then the phone rings. There’s a telemarketer on the line intruding on your hard-won moment of tranquility.

Thankfully, that scenario occurs less often today since Congress created the Do-Not-Call Registry in 2003 — a system allowing Americans to block most unwanted telemarketing calls. Wildly popular among both Democrats and Republicans, the measure passed the Senate 95-0 and the House 412-8. Within months 50 million people had signed up for “don’t bug me” status.

But the telemarketers still held a trump card. Their attorneys sought relief in federal court in Denver, and a sympathetic judge, Edward Nottingham, blocked the Registry on the grounds that it might harm the First Amendment rights of telemarketing corporations.

Ultimately, Nottingham’s slap-down itself was quashed by a higher court, but it did raise a central question: do corporations deserve First Amendment protection?

Besides telemarketing calls, courts also have applied such protection to such “speech” as corporate political spending and advertising. But are these kinds of “speech” by business entities really equivalent to the speech of human beings?

Considering the central role of corporations in American society, this seems a critical topic for Senators to ask a Supreme Court nominee. Yet in the confirmation hearings for Justice Roberts, no such questions were raised by either Republicans or Democrats. Nor does it appear likely that anyone will query Harriet Miers, herself a former corporate attorney, on the issue. That’s unfortunate, because the Constitutional soil underlying the notion of corporate rights is actually quite thin. Nowhere does the Constitution even mention corporations, much less justify blocking democratically-enacted regulation on their behalf. Construction of corporate rights always has depended on logical leaps — judicial activism at its most ambitious.

When the Constitutional Convention convened in 1787, delegates hotly debated the role of corporations in American society. A majority had been instructed by their home states to oppose giving power to corporations. The prevailing fear was that large corporations might come to overwhelm American politics in the way that the East India Company had dominated Parliament or what Thomas Jefferson later termed “the aristocracy of our monied corporations.”

Failing to win explicit protections in the Constitution itself, corporate interests sought sympathetic court interpretation of vague provisions like “due process.” By the 1880s, the Supreme Court was packed with former railroad attorneys who scored their first big success in the1886 Santa Clara County v. Southern Pacific Railroad ruling that institutionalized corporate “personhood” for purposes of applying protections of the Fourteenth Amendment. Since then, at least ten additional Supreme Court decisions have expanded corporate rights.

The first Supreme Court decision extending First Amendment protection to corporations arrived in 1978, when the Court overturned a Massachusetts law barring corporate spending on certain ballot questions. Surprisingly, the late Justice Rehnquist, generally one of the most conservative Justices, dissented strongly. “Extension of the individual’s freedom of conscience decisions to business corporations strains the rationale of those cases beyond the breaking point.” wrote Rehnquist. “To ascribe to such artificial entities an ‘intellect’ or ‘mind’ for freedom of conscience purposes is to confuse metaphor with reality.”

Do Bush’s appointees to the Supreme Court share the same skepticism about corporate rights as Rehnquist, his former mentor? It would be nice to find out.

With the Supreme Court acquiescing to corporate interests and Senators unwilling to ask tough questions, it falls to citizens to to break the silence about corporate legal privilege and power Whether the topic is energy policy, campaign finance reform, health care, the Iraq War, or simply the ability of a family to have a quiet meal at home, that power plays an overwhelming role in shaping American life.

Ted Nace is the author of Gangs of America: The Rise of Corporate Power and the Disabling of Democracy (Berrett-Koehler, 2003, 2005). He is active with ReclaimDemocracy.org, a non-profit organization working to restore citizen authority over corporations.

© 2005 Ted Nace

Read the NY Times’ review of Gangs of America

Overview of Do-Not-Call Registry Litigation

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by ReclaimDemocracy.org Staff & Volunteers
Last updated October 4, 2004

Editors’ Note: If you seek detailed legal analysis of the DNCR case, see: Mainstream Marketing Services, et al. v. Federal Trade Commission: Resources and Legal Analysis

Introduction

Beneath the surface of the Do-Not-Call list dispute lie critical constitutional and democratic questions, such as: should corporations have free speech rights? Should courts consider economic impacts in evaluating whether a law is constitutional?

ReclaimDemocracy.org has compiled resources presenting all sides of this dispute and the larger issues of “commercial speech” and corporate claims to the protections of the U.S. Constitution. We do so because we believe it presents a key opportunity to re-examine the judicial creation of constitutional rights for corporations (corporate personhood) and explore how corporations use ill-gotten power to trump bona fide rights of citizens.

Background of the Do-Not-Call Registry (DNCR)

U.S. residents have tried to avoid unwanted phone solicitations with unlisted numbers, caller ID, voice mail, and other devices. Until recently, the burden rested on individuals to stop unwanted solicitations by spending time and money on these technologies and by requesting that they be added to company-specific”do not call” lists (a request telemarketers legally are obliged to honor). Despite these significant expenditures of time and money, many citizens complain they are losing control and are unable to defend their personal space.

In response, the Federal Trade Commission (FTC) created the national Do-Not-Call registry in 2003. The DNCR allows citizens to place their phone numbers on a national list controlled by the federal government. Under the law, it is illegal for commercial telemarketers to call people on the registry (however businesses may solicit recent customers who are on the list).

Citizens may register online at www.donotcall.gov or by phone. Three months after registration, commercial telemarketers are forbidden from calling you. Telemarketing companies are required to cover the costs of the program by purchasing the do-not-call lists from the government at a cost of $25 per area code and a $7,375 maximum annual charge. If a telemarketer makes an unauthorized call, the recipient can file a complaint, which the FTC will compile and use to fine or prosecute repeat offenders.

Telemarketing Corporations Sue to Block the Program

Telemarketing corporations filed two lawsuits attempting to stop implementation of the program. In the first, five telemarketing firms jointly argued that the Federal Trade Commission did not possess the legal authority to create and enforce the registry. On September 24, 2003, U.S. District Judge Lee R. West ruled for the telemarketers and prohibited the FTC from implementing the list and its associated restrictions. In response, the next day Congress approved legislation ratifying the authority of the FTC to enforce the no-call list, which George W. Bush promptly signed into law.

This Congressional save did not last long, however. Another group of telemarketing corporations (Mainstream Media Services, TMG Marketing, and American Teleservices Association) had filed a second lawsuit. On September 25 Denver-based U.S. District Court Judge Edward Nottingham decided that the registry unconstitutionally violates the telemarketing corporations’ “free speech rights.” Nottingham reasoned that no legal basis existed for the FTC to allow citizens to screen for-profit solicitors while not also offering citizens an opportunity to block calls from non-profit groups. So Nottingham prohibited the FTC from implementing the registry on October 1, 2003, the date it was supposed to take effect.

The FTC appealed the decision to the Tenth Circuit Court of Appeals. On October 7, a three-judge panel gave the FTC permission to enforce the registry while it decides whether to uphold or strike down Judge Nottingham’s decision. In doing so, the Tenth Circuit found that the FTC had a substantial chance of success on the merits of its appeal regarding the constitutionality of the DNCR.

The FTC reopened access to the registry on October 10, and it went into full effect on October 17. In addition, the Federal Communications Commission (FCC), which has overlapping jurisdiction with the FTC to protect citizens from telemarketing abuses, passed regulations under which it, too, can enforce the DNCR. The two agencies will coordinate enforcement. While the ultimate constitutionality of the registry hangs in the balance, the FTC already has issued civil fines to enforce the registry (see this pdf file for details).

Getting at the Core Issues

The DNCR dispute provides provocation to examine some extreme arguments made by the telemarketing industry:

1. Corporations enjoy commercial speech rights that are on par with, and may even take precedence over, the rights of people to enjoy peace and privacy in their homes.

2. The government must weigh the financial impacts of speech regulation on an industry as part of evaluating a law’s constitutionality. This is particularly disturbing given that telemarketing corporations voluntarily chose to create an industry based on breaching citizens’ privacy.

The inherent conflict between court-created “corporate rights” and the rights of human beings is growing. Consider this dualism: Corporations have obtained “intellectual property rights” to profit exclusively (with government enforcing their private monopoly) from the creations of employees–even for decades after an employees death. Access to, and use of, this information by others is limited because the government forcibly protects this lucrative proprietary information. Conversely, you have almost no power to protect your own personal information, such as your telephone number, e-mail addresses, home address, and personal financial information; and what little power you possess (excepting the DNCR) has required substantial time and effort to exercise. Courts have created corporate property rights allowing businesses to buy and sell this information without your consent.

The question for citizens is whether to accept corporate usurpation of human rights or to help revoke illegitimately-granted corporate privileges.

Updates: On October 4, 2004, without comment, the U.S. Supreme Court rejected an appeal by commercial telemarketers, which upheld the no-call list as constitutional.

Additional Resources

See our legal analysis of the Do-Not-Call Registry cases, with links to major briefs, court decisions and news coverage.

Learn more about Corporate Personhood

Voting With Your Dollars?

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Wal-Mart executives raise big money for Bush while Costco execs favor Democrats

By Michael Forsythe and Rachel Katz
First published by Bloomberg News July 25, 2004

WASHINGTON — Executives at Wal-Mart Stores Inc. and Costco Wholesale Corp., competitors in the $76 billion US warehouse-club market, have taken their rivalry to a new level: national politics.

Wal-Mart, the world’s largest retailer and owner of Sam’s Club warehouse stores, gives more money to Republican candidates than any other company. Its top three managers, including chief executive H. Lee Scott, donated the individual maximum $2,000 to President George W. Bush, and Jay Allen, vice president for corporate affairs, raised at least $100,000 to reelect the president, earning him the Bush campaign’s designation of ”Pioneer.”

Wal-Mart — two-thirds of whose 3,580 stores are in the ”red states” that voted for Bush in 2000 — is backing White House policies on everything from trade to limiting overtime pay.

Costco chief executive Jim Sinegal, 68, is a Democrat who says Bush’s $1.7 trillion in tax cuts unfairly benefit the wealthy. He opposed the Iraq war and supports Democratic Senator John Kerry of Massachusetts for president. And he’s the only chief executive of a company in the Standard & Poor’s 500 index to donate money to independent political groups formed to oust Bush, Internal Revenue Service records show.

”Wal-Mart is extremely strong in Republican strongholds; they are a red-state retailer,” said Amy Bonkoski, an investment adviser at Cleveland-based National City Corp.’s private-client group, which manages about $26 billion, including Wal-Mart and Costco shares. ”Costco is stronger in Democratic states. Costco is a friend to labor. Unions hate Wal-Mart.”

The differences are based on more than ideology: Each retailer has a stake in the election’s outcome in areas from healthcare to the minimum wage to the way unions can organize workforces.

Kerry, 60, a four-term senator, pledges to induce more employers to insure workers with a $257 billion proposal calling for the government to pay most so-called catastrophic healthcare costs — only for companies that provide comprehensive coverage. He’d raise the minimum wage and make it easier for workers to join unions.

Those policies may benefit Costco and hurt Wal-Mart.

Issaquah, Wash.-based Costco offers comprehensive health insurance to most of its 78,000 US employees, making it eligible for Kerry’s plan, said Kerry’s top domestic policy adviser, Sarah Bianchi, 31. That may cut 10 percent, or $35 million, off its annual healthcare premiums.

Wal-Mart’s health plan for its 1.3 million US workers is probably not broad enough to qualify for the savings that Kerry’s proposal would bring, since it doesn’t cover enough workers, said Jason Furman, 33, the Democrat’s chief economic policy adviser. Fewer than half of Wal-Mart’s employees are enrolled in the company health plan, according to figures supplied by the retailer.

Costco wouldn’t have to raise salaries with Kerry’s proposal to increase the minimum wage to $7 an hour, from $5.15 now. It already pays hot-dog vendors as much as $16 an hour, and the lowest wage it pays is $10 an hour. That’s higher than the $9.96 average wage paid at discount stores bearing the Wal-Mart name.

Bentonville, Ark.-based Wal-Mart supports the Bush administration’s expansion of free-trade agreements and its bid to curtail the number of workers eligible for overtime pay, according to its lobby disclosure reports.

Wal-Mart has benefited from the president’s opposition to raising the minimum wage, since some employees make less than $7 an hour, and from the Republican-controlled Congress’s reluctance to make it easier for workers to unionize. Wal-Mart has no unions; about one-sixth of Costco’s workers are represented by labor groups.

Wal-Mart and Costco aren’t the only companies in the same industry whose executives are on opposing sides in the election. Google Inc. chief executive Eric Schmidt is backing Kerry, while Internet rival Yahoo Inc. chief executive Terry Semel endorsed Bush.

What makes the Wal-Mart and Costco rivalry stand out is that their political donations are so partisan and both companies are likely to gain if their party wins in November.

IRS disclosure records show that Sinegal and Costco chairman Jeffrey Brotman each gave $95,000 last December to the fund-raising arm of America Coming Together, a group organizing voters against Bush, and the Media Fund, which is running anti-Bush advertisements.

Wal-Mart’s political action committee, the biggest company PAC, gave Republicans 81 percent of its $1.3 million in donations in the past two years, a higher proportion than any of the top 25 corporate PACs, according to PoliticalMoneyLine, a nonpartisan Washington-based group.

Sixty-seven percent of Wal-Mart’s stores are in the 30 states that voted for Bush and Cheney in 2000, according to a comparison of store-location figures in the Wal-Mart 2003 annual report and election results. Costco’s stores are mostly located on either coast, with 208 of its 321 stores in the higher-wage, more union-friendly 20 states that voted for Democrat Al Gore in 2000.

Sinegal makes no apologies for Costco’s policies, saying higher wages reduce employee turnover, which lowers training costs. ”I’m not a social engineer,” he said in an interview. ”Paying good wages is simply good business.”

© 2004 Bloomberg News

Related features:

The Costco Dilemna: Is Treating Employees Well Unacceptable for Publicly Traded Corporations? (Wall St. Journal)

Wal-Mart Becomes Largest Corporate Political Investor

The better alternative: support your local, independent businesses