Probe Amplifies Conflict-of-Interest Questions for Chamber of Commerce Chief

Thomas J. Donohue, president of the U.S. Chamber of Commerce, also serves on three corporate boards.
Thomas J. Donohue, president of the U.S. Chamber of Commerce, also serves on three corporate boards. (By Chris Kleponis -- Bloomberg News)

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By Jeffrey H. Birnbaum
Tuesday, February 6, 2007

As president of the U.S. Chamber of Commerce, Thomas J. Donohue has long been obliged to talk tough against federal regulation, especially by the Securities and Exchange Commission. But now, it's personal.

For 12 years, Donohue has been a board member (including serving on the audit committee) of Sunrise Senior Living, a publicly traded company being probed by the SEC.

Sunrise co-founder Paul Klaassen started as Donohue's driver while still in college and later was a Chamber speechwriter. Donohue, 68, believed in Klaassen so strongly that he allowed Klaassen and his wife to live in his house while they started Sunrise more than two decades ago. He then helped finance the firm's prototype facility by taking out a second mortgage and becoming one of the company's first big investors.

Recently, the SEC opened an inquiry into allegations that the Klaassens and other insiders, including Donohue, may have improperly cashed $32 million in stock options before Sunrise in May announced an accounting problem that caused its stock to drop. Donohue calls the allegations meritless and says they were drummed up by labor unions that want to organize the company. He said that he has not been contacted by the SEC and that its inquiry will amount to nothing.

Nonetheless, the controversy adds fuel to complaints that investor activists have leveled at Donohue ever since he took over and revived the Chamber, the nation's largest business lobby, in 1997.

They have questioned how Donohue could serve on boards at all. After all, they point out, an independent director is supposed to represent stockholders, not management, which is Donohue's constituency. They have also worried that Donohue might tilt the Chamber's potent lobbying to favor the companies he serves. Donohue is a director of Union Pacific, the country's biggest railroad, and XM Satellite Radio as well as Sunrise.

And now that Sunrise is being scrutinized by the SEC, critics are adding a new complaint. They say Donohue has diminished the value of his own arguments against certain regulations because he has a personal stake in curtailing them.

"It undercuts his credibility as a critic of SEC enforcement and regulation," said Barbara Roper, director of investor protection for the Consumer Federation of America. "He undermines any claim he might have to objectivity."

Donohue disagrees. He said the Chamber's board encourages him to serve as a director because it allows him to see firsthand the harm that overregulation causes.

"That I serve on corporate boards gives me a better understanding of what goes on in a boardroom," he said. "The better you understand something, the better you can figure out how to deal with it."

The Chamber Fights Back

The Chamber faces a far more hostile Congress with Democrats in charge. But it is not retreating.

"We refuse to wring our hands and say, 'Oh, we have new chairmen, we have a president who's not as strong as we'd like. Oh, woe is me, what are we going to do?' " Donohue said. "We're going to saddle up the horse and get going."

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© 2007 The Washington Post Company

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