We the Corporations Read online

  Prompted by Pulitzer’s exposés, the New York legislature recruited Hughes to investigate the management practices at Equitable and the other major life insurance companies, including Perkins’s New York Life. Over the first few weeks of the investigative hearings, according to one report, there were “a few minor sensations but nothing very shocking had been brought to light.” Then Perkins took the stand.5

  Full of energy, Perkins literally stood—refusing to sit in the witness box and remaining on his feet for the better part of four days of testimony. He was eager to talk not just about company finances; he wanted to defend his honor. Pulitzer’s stories on Hyde and Equitable had sullied the image of everyone in the insurance business, and Perkins wanted the world to know he was no flamboyant, self-dealing playboy like Hyde. He offered lengthy answers to Hughes’s questions, filled with excessive detail about his upright character, outstanding job performance, and pure motives. Everything he had done was for the benefit of New York Life Insurance and its policyholders, he insisted, and the company had consistently profited from his decisions.6

  Presenting himself as a man with nothing to hide, Perkins answered all of Hughes’s questions without hesitation. There was, however, one thing about which Perkins thought Hughes ought not inquire. On the first day of his appearance, Perkins requested a private audience with Hughes at the luncheon break. Once they were behind closed doors, Perkins advised Hughes not to dig any deeper into that ambiguous $48,000 entry in the New York Life’s books. “You’re handling dynamite,” Perkins warned.7

  * * *

  OFTEN REPRODUCED IN TEXTBOOKS, Joseph Keppler’s “The Bosses of the Senate” is a famous political cartoon that captured the way many Americans in the late nineteenth century understood how corporations corrupted democracy. First published in Puck magazine in 1889, it shows twelve colossal businessmen, clad in the signature top hat, ruffled collar, and tails of the Gilded Age, filing into the United States Senate through a doorway marked “Entrance for Monopolists.” More than ten times the size of the Lilliputian senators, the titans of industry, each with a dollar sign and a label scrawled across his corpulent belly—“Standard Oil Trust,” “Copper Trust,” “Sugar Trust”—dominate the chamber. In the age of the trusts, political corruption came from huge corporations that were stronger and more powerful than any government. Those businesses used their amassed wealth to overwhelm and control legislators, securing laws to bloat corporate profits.8

  JOSEPH KEPPLER’S 1889 CARTOON “THE BOSSES OF THE SENATE” REFLECTED THE PUBLIC’S FEAR ABOUT THE POWER OF THE TRUSTS.

  This vision of corporate corruption was a product of the burgeoning industrial revolution, which swept the American economy in the decades after the Civil War. To win favorable legislation in this changing environment, corporations turned to lobbying, special favors, and, when that failed, flat out bribery. That was the approach taken by the B&O Railroad back in Roger Taney’s day and by the Central Pacific around the time of the Civil War. With money and stock certificates to dish out, large corporations like the railroads became politically influential, sometimes immensely so. Yet one area of politics that corporations had not previously been involved with was financing election campaigns. Up until the 1890s, candidates drew their funds from family wealth, local machines, or patronage, but not from corporations.

  The end of the nineteenth century, however, saw “politics’ own industrial revolution,” as the American electoral process went through a radical transformation similar to what was happening in the American economy more generally. The unprecedented corruption of the Grant administrations of the 1870s, along with growing frustration with machine politics, helped spur a series of reforms to clean up elections and government bureaucracy. In 1883, Congress passed the landmark Pendleton Act, which curtailed patronage and reduced partisan appointments to federal office. Civil service reform at the federal level was coupled with ballot reform in the states. In the past, voters had brought to the polls their own ballots, often in bright colors so that partisan poll watchers could be sure they were voting correctly. In the 1880s, however, laws requiring an official, government-printed ballot that could be cast in secret, behind the curtains of the polling place, swept the nation. The result of these and other election reforms reduced the ability of political machines to control who won on Election Day. Increasingly, candidates needed to earn their support in the marketplace of public opinion, much like a business selling a product.9

  No one understood the implications of this transformation better than Marcus Alonzo Hanna. The Karl Rove of his day, Hanna, with a round face, loose jowls, and sloping, shiny forehead, resembled more than a bit the man who would shepherd George W. Bush’s two successful presidential campaigns. Hanna was also the political mastermind behind a twice-successful Republican presidential candidate, William McKinley, who took the White House in 1896 and was reelected in 1900. Hanna was raised in Cleveland, where he was a high school classmate of John D. Rockefeller, and enjoyed a successful career in the coal and steel industries. His true passion, however, was politics. In 1895, he handed off his company to his brother and turned his full attention to electing McKinley, a fellow Ohioan. He used his businessman’s instinct for innovation and marketing to revolutionize how election campaigns raised and spent money—and, for the first time, brought significant amounts of corporate cash into the electoral process.10

  As chairman of the Republican National Committee in 1896, Hanna felt a pressing need to raise more money than any previous presidential campaign. The Democrats had nominated the fiery William Jennings Bryan, a Jeffersonian populist opponent of corporate power who drew broad support from farmers and the working class. These were the people hardest hit by the financial panic of 1893, the worst economic depression in US history to date. As with the historic Crash of 1929, blame was placed squarely on the bankers and moneymen of Wall Street. In his celebrated speech at the 1896 Democratic convention, Bryan accused the leaders of corporate America of trying to “crucify mankind upon a cross of gold.”11

  Early in the campaign, one of the most significant in presidential history, Bryan had all the momentum. Bryan’s broad appeal meant that even traditionally safe Republican strongholds were in play. To counter Bryan, Hanna decided to undertake an exhaustive and systematic publicity campaign to educate voters. The effort would be expensive, but it would require more than just money. It would require overhauling how presidential campaigns were run. Hanna sought to conform the national committee’s methods to the standards of corporate America—and, in the process, created the first modern political campaign.

  MARCUS ALONZO HANNA REVOLUTIONIZED THE FINANCING OF ELECTION CAMPAIGNS AND SOLICITED MONEY FROM CORPORATIONS.

  Although state committees had traditionally managed the local campaigns, even for presidential candidates, Hanna centralized them all under his authority in order to be “the general staff of the whole army.” He reorganized the RNC’s executive offices and introduced an improved system of bookkeeping. He opened a branch headquarters in Chicago, closer to the midwestern voters whose support McKinley would need. He created the first nationwide advertising campaign to market a presidential candidate and produced over 100 million pieces of campaign literature printed in German, Spanish, French, Italian, Danish, Swedish, Norwegian, and Hebrew to appeal to immigrants. Buttons, cartoons, placards, posters, billboards, and leaflets were manufactured “by the carload.” The RNC hired 1,400 people to go out and promote McKinley in every competitive district. When a canvass in Iowa revealed a probable majority for Bryan, Hanna sent speakers and distributed campaign material “into every town and village” until public opinion turned. Theodore Roosevelt, the vice-presidential candidate on the McKinley ticket, remarked that Hanna “advertised McKinley as though he were a patent medicine.”12

  Hanna’s new methods of electioneering required far more money than campaigns of old—and corporations would be willing to supply it. More than most, Hanna recognized the value of money in electoral p
olitics. Even before he became the Republican Party’s chief fund-raiser, he had been a generous contributor. One morning back in 1887, he had happened upon a meeting of glum campaign operatives from Cuyahoga County. “It looks pretty blue here,” said Hanna. “What’s the matter?” After they complained about their campaign being more than a thousand dollars in debt, Hanna sat down and wrote out a check for the entire amount. “There,” he said. “Pay your debts and look cheerful.” Hanna, whose own giving made him credible with donors, once famously (and perhaps apocryphally) quipped, “There are two things that are important in politics. The first is money, and I can’t remember what the second one is.”13

  More than a century before Citizens United opened the floodgates to corporate money in elections, Hanna sought to make corporations both a model for organizing modern political campaigns and also a source of financing for them. The amassed capital of the late-nineteenth-century corporate giants meant they had the wealth to spend on electoral politics—just as they had the means to afford the best lawyers to pursue corporate rights.

  Business leaders were fearful of the economic consequences of a Bryan presidency, but at first Hanna had few connections to eastern money or Wall Street. His early efforts in 1896 to raise funds from big business had been a failure, so much so that Hanna contemplated quitting the campaign, as he explained to James J. Hill, an old friend he bumped into one day on the street. Hill, a railroad magnate, offered to introduce Hanna to the right people. The two men went on a five-day tour of New York firms, and soon Wall Street money was flowing generously into McKinley’s coffers.14

  Once his campaign fund-raising was under way, Hanna approached it like a businessman, not a beggar. He told the leaders of America’s biggest corporations that McKinley was good for their bottom lines, and they should contribute according to their ability and their stake in American prosperity. Banks should give one-quarter of one percent of their capital; large industrial corporations were recommended to give five- and six-figure amounts. Standard Oil, the economic giant run by Hanna’s schoolmate, was asked to donate $250,000. Hanna “systematized fundraising as no political operative had done before.” At the same time, he made clear he was not selling favors. When one Wall Street firm sent in $10,000 along with a suggestion of some service in return, Hanna promptly returned the check. He had a different and seemingly more benign vision: if businesses placed their money in McKinley’s campaign, they would profit from his wise economic polices.15

  Hanna’s fund-raising efforts generated $7 million for McKinley, more than ten times the amount spent by Bryan and the most ever at the time for a presidential candidate. While election campaign costs tend to increase steadily every cycle, Hanna’s haul in 1896 was so huge that no presidential campaign would equal it for nearly half a century. “Dollar Mark,” as he came to be known, revolutionized political campaigns by adopting the methods of business and by relying for the first time on significant amounts of corporate money. When McKinley took the oath of office, the leaders of America’s richest corporations knew they had made his victory possible.16

  Most other Americans, however, did not know it. While many people today worry that gaps in campaign disclosure laws permit too much “dark money,” or funds from unidentified donors, the 1896 election took place with no disclosure laws whatsoever. The first federal law requiring any campaigns to disclose their funders was not enacted until 1910—in part a reaction to Dollar Mark’s voracious fund-raising. Before then, candidates raised and spent their money in secret. Hanna, of course, chose not to advertise his methods for fear of fueling Bryan’s claims about big corporations dominating politics. Nonetheless, in December of 1896, after stories began to circulate of corporate donations to McKinley, Texas governor Charles A. Culberson asked New York Life Insurance, George Perkins’s company, to submit a sworn affidavit specifying “the amount, if any, paid by or on behalf of the company for political purposes” during the presidential campaign. The company’s treasurer complied, insisting that New York Life had made no contributions, either “directly or indirectly.”17

  Rumors of corporate money flowing into the Republican presidential campaigns continued to swirl around the 1900 and 1904 elections. During the 1904 campaign, Democratic presidential nominee Alton Parker charged Roosevelt, the incumbent president after McKinley’s assassination in 1901, with taking contributions from big business in exchange for promises of political favoritism. “Political contributions by corporations and trusts mean corruption,” Parker said. “A corporation will subscribe to a political party only because the corporation expects that party . . . to do something for the benefit of the corporation or to refrain from doing something to its injury. No other motive can be imagined.”18

  Roosevelt bristled at the charges. Parker had impugned his integrity by suggesting he could be bought, and also threatened to undermine Roosevelt’s carefully constructed public image as a trustbuster. Although the McKinley administration was strongly pro-business, Roosevelt cast himself as a populist once he assumed the White House. From his first State of the Union address, in which he promised to break up the large corporations that were crushing competition, to his unprecedented prosecutions of trusts like Standard Oil and American Tobacco under the Sherman Act, Roosevelt sought to harness the growing public sentiment for reform. Roosevelt’s transformation prompted steel magnate Henry C. Frick to complain, “We bought the son of a bitch and he didn’t stay bought.”19

  Roosevelt, however, cared more about what the public thought of him. More than any previous president, Roosevelt purposefully managed his public image. Back when he was governor of New York, he had learned that meeting with reporters regularly helped to promote his agenda. As president, Roosevelt brought his press secretary into his cabinet and created the White House press corps, establishing the first formal press room in the West Wing and issuing credentials to reporters. Seeking to stem the public relations damage from Parker’s accusations, Roosevelt issued what the New York Times called a “direct and fierce” denial.20

  * * *

  “YOU’RE HANDLING DYNAMITE,” George Perkins warned Charles Evans Hughes when the two men met privately during the lunch break of the insurance hearings. Hughes, Perkins advised, should not ask for an explanation of the ambiguous entry in the New York Life’s books. “That $48,000 was a contribution to President Roosevelt’s campaign fund.”

  Hughes was surely taken aback. New York Life officials had previously sworn under penalty of perjury that the company had made no political contributions, and Roosevelt had publicly denied receiving any inappropriate corporate gifts. Yet here was Perkins, an associate of the president, admitting that his company had made contributions to Roosevelt’s campaign. The situation was fraught for Hughes, himself a Republican. Hughes had been active in party politics at least since 1887—when he campaigned for a reform-minded candidate for district attorney, DeLancey Nicoll—and had inchoate political ambitions of his own. If he let Perkins’s secret out, Hughes might be blacklisted from the party, and any dreams of elected office might be dashed. “You want to think very carefully before you put that into the evidence,” Perkins advised Hughes. “You can’t tell what may come of it.”21

  Hughes, who prized his integrity more than anything, did not have to think about it for long. “After lunch, I’m going to ask you what was done with that $48,000,” Hughes told Perkins. “And I expect a candid answer.”

  When the hearing resumed, Hughes asked Perkins about the money. Perkins admitted the expenditure had been made to J. P. Morgan & Company to reimburse Perkins for making a contribution of the same amount to Roosevelt’s campaign. The Aldermanic Chamber erupted. Hughes recalled that reporters jumped out of their seats and “ran to the nearest telephones”—taking advantage of the novel communication device appearing more and more in America’s cities. Spurred by Perkins’s admission, Hughes burrowed deeper into the account books of the life insurance companies to find additional political contributions. The investigation even
tually revealed that New York Life had contributed substantial sums to the Republican National Committee in each of the previous three presidential elections. Like many corporations who fell in line with Mark Hanna’s practices, New York Life had become an active player in financing Republican presidential campaigns, including in 1896, when officials had issued a sworn denial.22

  New York Life’s contributions were just the initial strike of what was called the “gushing oil well of insurance sensations tapped by the Investigating Committee’s drill.” Each of the other major insurance companies had also secretly contributed to political campaigns, mostly to Republicans. Equitable Life had given even more than Perkins’s company to Roosevelt’s 1904 reelection fund, alongside large annual payments to Senator Chauncey Depew (R-NY). Mutual Life Insurance had also contributed to Roosevelt. All told, insurance companies had contributed nearly $5 million (in 2017 dollars) to recent campaigns.Despite the president’s denials, his 1904 campaign had raised more than 70 percent of its financing from corporations.23

  THE ARMSTRONG COMMITTEE OF THE NEW YORK STATE LEGISLATURE AND ITS LEAD INVESTIGATOR, CHARLES EVANS HUGHES.

  Relative to the total assets of the wealthy insurance companies, the amounts contributed to Roosevelt and other politicians were small. Yet the public outcry they provoked in this era of muckraking journalism was enormous. The Great Wall Street Scandal would prompt 115 front-page stories in the New York Times; between August 1905 and January 1906, the influential weekly Collier’s published an article on the scandal in every issue, save for the special Christmas edition. The uproar was not simply over how politics had been corrupted. As the investigation continued, it would become increasingly clear that the modern corporation had been corrupted too.