Hillary Clinton, corporate executive

Recently I suggested that John Edwards ought to be held to SOX 404-type standards with respect to a company from which he received significant financial support. Now it seems similar questions may arise for Hillary Clinton. Today's Wall Street Journal notes:

Six members of the Paw family, each listing the house at 41 Shelbourne Ave. as their residence, have donated a combined $45,000 to the Democratic senator from New York since 2005, for her presidential campaign, her Senate re-election last year and her political action committee. In all, the six Paws have donated a total of $200,000 to Democratic candidates since 2005, election records show. That total ranks the house with residences in Greenwich, Conn., and Manhattan's Upper East Side among the top addresses to donate to the Democratic presidential front-runner over the past two years, according to an analysis by The Wall Street Journal of donations listed with the Federal Election Commission.

It isn't obvious how the Paw family is able to afford such political largess. Records show they own a gift shop and live in a 1,280-square-foot house that they recently refinanced for $270,000. William Paw, the 64-year-old head of the household, is a mail carrier with the U.S. Postal Service who earns about $49,000 a year, according to a union representative. Alice Paw, also 64, is a homemaker. The couple's grown children have jobs ranging from account manager at a software company to "attendance liaison" at a local public high school. One is listed on campaign records as an executive at a mutual fund.

The Paws' political donations closely track donations made by Norman Hsu, a wealthy New York businessman in the apparel industry who once listed the Paw home as his address, according to public records. Mr. Hsu is one of the top fund-raisers for Mrs. Clinton's presidential campaign. He has hosted or co-hosted some of her most prominent money-raising events. * * *

Kent Cooper, a former disclosure official with the Federal Election Commission, said the two-year pattern of donations justifies a probe of possible violations of campaign-finance law, which forbid one person from reimbursing another to make contributions. "There are red lights all over this one," Mr. Cooper said.

If it turns out there have been campaign law violations (there's no direct evidence of this yet) shouldn't Clinton take the heat for her campaign's ignoring the "red lights"? Shouldn't candidates have internal controls in place to catch problems like these? After all, the candidate is the CEO of her campaign. I'm no great friend of federal election laws, but since we do have these laws, shouldn't the candidates be held responsible for compliance?

In general, I suspect that if similar standards applied to politicians as apply to corporate executives business regulation might make a lot more sense than it does now.

Comments

[M.D. Fatwa]

Do you believe that candidates hold a fiduciary (or similar) duty to the electorate in the same manner that CEO's owe a duty to shareholders as overseers of their investment monies? That, after all, justifies the 404 requirements for CEOs--not necessarily some strange sense of vindictiveness, or other desire to micromanage corporate executives. I imagine you could argue that candidates do owe such a duty to campaign donors to see that their donations are used to useful effect and not squandered on Caribbean summer homes and the like. But if that were the case, the 404-like duty would run to the Paws and Hsus, wouldn't it? (Unlike shareholders, I doubt they would object to lax oversight...)

[Larry E. Ribstein]

The campaign owes a duty under the campaign laws, just as corporations owe duty under many regulations, including the securities laws. Under SOX, corporate officers have a duty to make sure that the corporation complies with this obligation, enforced not only by shareholder suits, but also by the SEC and prosecutors. Moreover, the shareholders have no power to opt out of this duty. So the duty seems to run to the public (supposedly to protect the markets) and not just the shareholders. Why not the same under the campaign laws?