I think you will find the attached article of interest. As
most of you are aware Thomas
Donahue is a member of the Qwest Board of Directors and is an employee of
> Attached is a copy of the Donohue report. I am also pasting below a
> New York Times story that references it.
> February 20, 2005
> Taking Care of Business, His Way
> By GRETCHEN MORGENSON and GLEN JUSTICE
> WHEN President Bush signed the Class Action Fairness Act into law last
> Friday at a White House ceremony, Thomas J. Donohue, the president and
> chief executive of the United States Chamber of Commerce, had a
> front-row seat. Though Mr. Donohue did not take a bow, he could have.
> After all, he and his troops had been fighting for years for such a
> change. The new legislation will push class-action cases out of state
> courts, which are often more accommodating to such lawsuits, and into
> federal courts.
> "We worked it from one end of this country to the other - morning,
> noon and night - in every way we could think of," Mr. Donohue said in
> an interview a few days before the ceremony. "That's our strength. We
> have an ability over longer periods of time to create perceptions, to
> educate people, persuade them and get stuff done."
> That Mr. Donohue and the chamber have been getting stuff done is
> beyond dispute. Besides helping to effect change in the legal system,
> the chamber has also succeeded in stalling a proposal by the
> Securities and Exchange Commission that would have allowed
> shareholders more say in how their directors are selected. And the
> chamber has begun to challenge provisions in the Sarbanes-Oxley law,
> the corporate reform legislation that followed the collapses of Enron and WorldCom.
> But now some people in Washington are beginning to wonder if the
> Chamber of Commerce is overreaching. Late last year, the
> organization's legal arm sued the S.E.C. over a rule requiring a
> majority of a mutual fund company's directors, as well as its chairman, to be independent.
> And last month the chamber filed a brief in support of Siebel Systems,
> a software company that has been twice sued by the S.E.C., accused of
> running afoul of the rule that requires companies to disclose material
> information to all investors at the same time.
> Critics, meanwhile, are raising questions about Mr. Donohue's work as
> a director at several companies. He serves on the boards of Qwest
> Communications, the telecommunications concern, as well as Sunrise
> Senior Living, Union Pacific and XM Satellite Radio Holdings.
> Like any other director, Mr. Donohue has a fiduciary duty to represent
> shareholders. But one independent investment advisory firm has raised
> concerns about whether he has fullfilled that duty at two companies.
> And some institutional shareholders and a government watchdog group
> have questioned decisions he has made as a member of these boards.
> "I think the chamber has shown contempt for shareholders, and I
> attribute that to Donohue personally," said Nell Minow, editor at the
> Corporate Library, an independent research firm specializing in
> corporate governance. "I would not be surprised to see him targeted
> this year by shareholders as the director they love to hate."
> AS the man who brought the United States Chamber of Commerce back from
> the dead, Mr. Donohue and the organization are now practically
> synonymous. The typical trade group represents a single industry or a
> narrow band of the business world; the chamber, however, is the
> nation's largest federation of companies and associations. It has more
> than three million members, from businesses of every size, sector and
> region; its 2,800 affiliated state and local chambers give it a
> presence in nearly every state and Congressional district.
> Through Mr. Donohue's efforts, the chamber has become the most visible
> and effective business lobby in the country. If money is a measure of
> muscle, the chamber is Herculean. It spent more than $53 million on
> lobbying in 2004, more than any organization has ever spent in a year,
> according to PoliticalMoneyLine, which tracks federal lobbying.
> The chamber also wades deeply into politics. By its own count, during
> the most recent election, it deployed 215 people in 31 states, sent
> 3.7 million pieces of mail, made 5.6 million phone calls and sent more
> than 30 million e-mail messages on behalf of its candidates. Although
> it is difficult to attribute the outcome of any election to any one
> group, more than 90 percent of the Congressional candidates endorsed
> by the chamber won.
> The chamber has several affiliates that push its issues. For example,
> the Institute for Legal Reform presses for business-friendly changes
> to the civil justice system, from the legislation governing
> class-action litigation that passed last week to bills dealing with
> medical malpractice suits.
> One of the chamber's most powerful weapons is its legal unit, the
> National Chamber Litigation Center. Known internally as "the law firm,"
> the center works through the courts to challenge government
> regulations and help companies win cases. It was active in 79 cases
> last year; one was the suit against the S.E.C.
> Presiding over this powerhouse is Mr. Donohue, 66, whose capacity for
> blunt talk is as striking as his white hair and blue eyes. "My job
> here is to lead the place, to set the tone, to set the character of
> the institution, to be out publicly on issues of high significance to
> the business community," he said.
> Whether flying in a private plane to talk with chief executives and
> raise money - he had more than 200 C.E.O. meetings last year - or
> traveling to Capitol Hill in a chauffeured car to confer with
> Congressional leaders, he has left his mark on the organization since
> he took its helm on Labor Day in 1997.
> One measure of his efforts at the chamber is its bankroll. During his
> tenure, revenue has almost tripled, reaching $135 million last year.
> Scores of companies donate six- and seven-figure amounts to the
> chamber, secure in the knowledge that the chamber does not have to
> disclose its donors or how much they give. As the chamber's chief executive, Mr.
> Donohue makes $1.65 million in annual salary.
> Sitting in his large, wood-paneled office with a view of the White
> House across the street, he mimed an accordion player, spreading his
> arms broadly, as he explained the chamber's interest in a host of
> issues. To varying degrees, the group is pushing for changes to laws
> and regulations that govern bankruptcy, taxation, trade, immigration
> and just about any other matter that affects United States companies.
> He brings his hands together to show how the chamber narrowly focuses
> people and money on priorities. "We have to always remember our
> accordion," he said. "We have to reach wide to understand and to serve
> our members and to help them, and we have to squeeze narrow to get
> ultimate focus and pressure."
> For a man who fights battles for the business world, Mr. Donohue has
> had scant experience actually working in it. He graduated from Adelphi
> University on Long Island with a master's degree in business
> administration and later became a vice president at Fairfield
> University in Connecticut. He went on to become regional assistant
> postmaster general in San Francisco and in New York City, before
> eventually being named deputy assistant postmaster general in Washington.
> In 1984, he joined the American Trucking Association, a lobbying
> organization in Washington, as president and chief executive. Thirteen
> years later, he joined the Chamber of Commerce, then moribund.
> "What we basically were faced with was an extraordinary brand name
> that had fallen into some disrepair," he said. "That disrepair was on
> the financial side, where the revenues had dried up." He also said
> that membership needed to increase and that the chamber's focus needed
> to be sharper.
> He defends all of the chamber's actions in the public policy arena,
> saying the organization operates "with high integrity" and "good
> "There's no question that when you get as big as we are and spend as
> much money as we do, there are going to be some people, probably
> rightly so in some instances, that are going to be critical of what we
> do or of the individuals that do it," he said.
> When it comes to regulations dealing with corporate governance or
> accounting, Mr. Donohue has called for moderation. In that spirit, he
> has repeatedly criticized Eliot Spitzer, the New York attorney
> general, who has brought prosecutions against brokerage firms,
> insurance companies and mutual funds.
> Last week, Mr. Spitzer returned fire: "Tom Donohue has never once
> found a crime that he couldn't justify, as long as it was committed by
> one of his dues-paying members," he said in an interview with Fox News.
> A large part of the chamber's job appears to be taking unpopular
> stances that its members, by themselves, are unwilling or unable to
> pursue. "If individual companies went out and sued the S.E.C. or said
> some of the things that I have said about the need to come back to
> some balance in corporate governance and accounting, they would open
> themselves up to extraordinary risk and criticism," he said.
> "We are an advocacy organization," he added. "I believe that advocates
> should be enthusiastic and should be energetic, and I do believe they
> should be aggressive."
> Perhaps the best example of the chamber's influence is its
> long-running campaign to pass pro-business changes to the legal
> system, an issue known in Washington shorthand as "tort reform." To
> that end, the chamber has led a highly effective charge against a
> major Washington lobby willing to spend heavily opposing the efforts:
> the trial lawyers. Over the years, much of the work was done by the
> Institute for Legal Reform, which Mr. Donohue created in 1999 to
> gather money and resources to focus on the fight.
> Since then, the institute has spent more than $72 million on
> lobbyists, research, advertising and other weapons to revamp the legal
> system around the country. The institute "was designed to be the
> pointy end of the stick," said Stanton D. Anderson, the chamber's
> executive vice president and chief legal officer. "It was designed to
> rattle around in the trial lawyers' faces and get a reaction."
> THE institute's tactics have been anything but typical. It has helped
> push legislation in individual states, gaining victories in Texas and
> Mississippi. It also sought to protect these changes by supporting
> state candidates for attorney general and the Supreme Court. It was
> involved in 16 state races in the 2004 elections, Mr. Anderson said.
> In the national election last year, the chamber gave $3 million to
> seed the November Fund, a group that criticized Senator John Edwards,
> the Democratic vice presidential candidate, who was a trial lawyer
> before he was elected to the Senate.
> The institute even helped to start a newspaper, The Record, in Madison
> County, Ill., a place that attracts droves of class-action lawsuits
> because the courts there are considered favorable. The chamber
> provided start-up financing for the paper, which is charged with
> reporting and publicizing the action in the county's courtrooms.
> "Are they anti-trial lawyer? You bet," Mr. Anderson said. "That's
> their focus, but their principal focus is to cover what's happening."
> Alongside the institute is the National Chamber Litigation Center,
> which says it works to shape public policy on important legal
> questions of national concern to American business. But the
> organization has also filed briefs on behalf of companies, including some on whose boards Mr.
> Donohue serves or whose executives are on the chamber's board.
> Last September, it filed a brief in support of Union Pacific, urging
> the United States Supreme Court to review a 1998 Arkansas Supreme
> Court decision that upheld a $25 million punitive damage award against
> the railroad related to a fatal accident. The request is pending.
> In 2003, the litigation center urged the United States Supreme Court
> to review an Illinois Court of Appeals decision dismissing the claims
> of the Overnite Corporation - the trucking unit of Union Pacific that
> was spun off that year - to recover money for damage caused by the
> Teamsters during violent picketing. The Supreme Court declined to hear the case.
> Also in 2003, the chamber urged the Supreme Court to review a Montana
> Supreme Court decision requiring a broker "to explain the consequences"
> of an arbitration clause before it was enforced. Such clauses require
> brokerage firm customers to bring any suits they may have against the
> firm in arbitration rather than in the courts.
> The brief was filed on behalf of Edward D. Jones & Company, a firm run
> by John W. Bachmann, the chairman of the chamber's board. In it, the
> chamber argued that the Montana court's decision imposed a needlessly
> stringent requirement. The Supreme Court declined to hear the case.
> But it is Mr. Donohue's activity as a director at four public
> companies that is beginning to attract the spotlight. Last year, Glass
> Lewis & Company, an institutional advisory firm in San Francisco,
> recommended that shareholders at Qwest and Union Pacific withhold
> their votes for Mr. Donohue. The firm said that he was a member of the
> compensation committees at both companies that had doled out excessive executive pay.
> And at Qwest, Glass Lewis's analysts said, he could not be considered
> independent from management, since the company made a $100,000
> donation to the chamber in 2003.
> Mr. Donohue is quick to defend his service on corporate boards,
> offering both broad explanations and detailed rebuttals to his critics.
> "I have nothing in that category of my life that I'm not very pleased
> about," he said. "I'm not unhappy about the board service. I believe
> it has served me and the chamber very well."
> The $106,000 in cash retainers and the thousands of stock options he
> received for his director work for 2003 are not a motivation, he said.
> With few exceptions, he said, he does not take his payments in cash.
> "I won't touch any of that money until the whole deal is over," he said.
> "By the way, in Qwest, depending how it all comes out, there may not
> be anything there after all that time and energy." Qwest is the
> weakest of the big telecommunications companies, and is seeking a
> partner that could make it a more formidable competitor.
> Mr. Donohue says the board positions offer him firsthand insight into
> how corporations operate and the challenges they face. "It's like
> getting a Ph.D. in dealing with the government of the United States,
> with the markets, with international finance, with the press, with the
> regulators and with the unbelievable changes going on in the business
> community," he said.
> The insight helps him run the chamber, he said, adding that his board
> work also "allows me a series of relationships and contacts that I
> otherwise might not have."
> BUT who benefits from these contacts? And is Mr. Donohue looking out
> for the shareholders in his role as corporate director? Some of the
> relationships seem to have benefited him and his family personally.
> In November 2003, his son, Thomas J. Donohue Jr., an investment banker
> at Adelphi L.L.C. in Washington, was named to the board of the
> Overnite Corporation, the company spun off by Union Pacific. He serves
> on the board's compensation committee and its nominating and corporate
> governance committee; he received a $45,000 retainer last year, half
> in cash and half in stock, as well as 2,000 options.
> Mr. Donohue said, "I had zero to do with getting him on that board."
> The younger Mr. Donohue, 40, did not return phone calls seeking comment.
> Before Sunrise Senior Living went public and the senior Mr. Donohue
> became a director, he struck a private deal with the company that
> turned out to be quite lucrative for him.
> Back in 1993, Mr. Donohue and his wife, Elizabeth, invested $500,000
> in a property it partly owned.
> He joined the Sunrise board in 1995. During the next year, just before
> it offered shares to the public for the first time, Sunrise bought the
> ownership stake back from Mr. and Mrs. Donohue for stock worth
> $1,050,000 at that time. Add the $95,000 that the investment generated
> in income during the three years he owned it, and Mr. Donohue more
> than doubled his money on the deal. At the time of the I.P.O., he also
> received options then worth $200,000.
> He said that the deal was years ago and that it took place before the
> company went public. "I was an absolute independent director because I
> sold that property at the time the company went public," he said. "It
> doesn't compromise my views at all."
> MR. DONOHUE'S work as chairman of the compensation committee at Union
> Pacific has also raised questions among critics. As is often the case
> at public companies, executive pay is linked to its performance. How
> that performance is measured can mean the difference between moderate
> and more munificent pay.
> In 2001, Union Pacific's board approved an incentive pay program that
> would grant cash and stock at the end of a three-year period. The
> awards would be granted, the program stated, if the company's stock
> traded above $70 for 20 days in a row or if company earnings for the
> period totaled at least $13.50 a share.
> In late 2003, it became clear that the company might miss both targets.
> The compensation committee chose to include the proceeds from the
> Overnite sale in the earnings computation. That put the executives
> over the top for the cash and stock awards, even though proceeds from
> a sale are not typically included in earnings.
> For 2003, Richard K. Davidson, Union Pacific's chief executive,
> received $9.5 million in salary, long-term incentive pay and other
> compensation as well as $4.5 million in restricted stock and 325,000
> At the time of the deal, the company maintained that adding the
> proceeds to earnings was appropriate. But investors frowned on the deal.
> Glass Lewis said the members of the compensation committee had failed
> in their duty to Union Pacific stockholders as a result of the
> questionable earnings computation. Mr. Donohue declined to comment.
> His involvement with Qwest and Union Pacific has also caught the eye
> of Public Citizen's Congress Watch, a watchdog group that opposed the
> class-action bill and wrote a report focusing on Mr. Donohue, to be
> released tomorrow.
> Citing Qwest's long list of run-ins with telecom and securities
> regulators and Union Pacific's troubling safety record, which includes
> a high rate of train accidents, the report is severely critical of Mr.
> Donohue and the chamber's efforts on tort reform. "Donohue is a
> steward of two companies that serve as vivid examples for why we need
> a strong civil justice system and vigorous regulatory oversight,"
> according to a draft of the report.
> Of course, individual board members cannot be held solely responsible
> for all the actions of the multibillion-dollar businesses they help
> guide. And little is known about the positions, arguments and
> recommendations that Mr. Donohue tendered as a director at either
> company, because public companies rarely disclose directors'
> And, to some degree, Mr. Donohue's tendency to grant high executive
> pay that is not justified by the company's stock performance may be a
> throwback to the pre-Enron days when boardrooms were collegial places
> and directors were handpicked by the chief executive more for their
> loyalty than their toughness.
> But as investor scrutiny of directors continues to rise, Mr. Donohue
> seems certain to remain in a harsh spotlight.
> "Unlike his predecessors at the chamber, he has not run a business and
> his actions at the chamber seem aimed at diluting the power of
> shareholders," said Greg Taxin, chief executive of Glass Lewis. "In
> the eyes of many of our clients, Donohue is an odd choice for a director."
> Taylor Lincoln
> Senior Researcher
> Public Citizen's Congress Watch