Government’s Roles in Influencing Business

1. Government’s Roles in Influencing Business • Dominates the “macro” environment. • Prescribes the rules of the game for business. • Purchases business’ products and services. • Uses it contracting/regulatory powers to get business to do things it wants. • Is a major promoter and subsidizer of business. • Is the owner of vast quantities of productive equipment and wealth. 

2. Government’s Role in Influencing Business (continued) • Is an architect of economic growth. • Is a financier. • Is the protector of various interests in society against business exploitation. • Directly manages large areas of private business. • Is the repository of the social conscience and redistributes resources to meet social objectives.

3. Questions about the Respective Roles of Government and Business • What should be the respective roles of business and government in our socioeconomic system? • Given all of the tasks that must be accomplished to make our society work, which of these tasks should be handled by the government and which should be handled by business? • How much autonomy are we willing to allow business?

4. Individualistic ethic Maximizes concession to self-interest Minimizes the load of obligations society imposes on the individual (personal freedom) Emphasizes inequalities of individuals Collectivistic ethic Subordinates individual goals and self-interest to group goals and group interests Maximizes obligations assumed by the individual and discouraging self-interest Emphasizes equality of individuals Clash of Ethical Belief Systems Contemporary Business Beliefs Common Beliefs About Government

5. Lobbying Regulations and Other Forms of Persuasion Business Government • Political Process • Voting • Interest Groups • Contributions • Advertising • Public Relations • Interest group • actions • Boycotts • Protests • Writing • Campaigns • Politicking • Politicalinfluence Public Interaction of Business, Government, and the Public

6. Government’s Nonregulatory Influence on Business Two Major, Nonregulatory Areas of Concern Industrial Policy Privatization

7. Accelerationists Schools ofThought Adjusters Targeters Central planners Bankers Industrial Policy

8. Decline of U.S. competitiveness Use by other nations Ad hoc system Reduces market efficiency Promotes political decisions Foreign success variable National attempts uncoordinated and irrational Industrial Policy Arguments For Arguments Against

9. The process of “turning over to” the private sector some function that was previously handled by government. Privatization Privatization

10. Description of a Federal Regulatory Agency • Has decision-making authority • Establishes standards or guidelines conferring benefits and imposing restrictions on business conduct • Operates principally in the sphere of domestic business activity • Has its head and/or members appointed by the president (generally subject to Senate confirmation) • Has its legal procedures generally governed by the Administrative Procedures Act

11. Controls natural monopolies Controls negative externalities Achieves social goals Controls excess profits Controls excessive competition Reasons for Regulation

12. Interstate Commerce Commission Environmental Protection Agency EconomicRegulation SocialRegulation Civil Aeronautics Board Occupational Safety and Health Administration Federal Communications Commission Equal EmploymentOpportunity Commission Types of Regulation

13. Comparison of Economic and Social Regulation

14. Benefits of Regulation • Fair treatment of employees • Safer working conditions • Safer products • Cleaner air and water

15. Costs of Regulation • Direct costs • Indirect costs • Unfunded mandates • Induced costs • Argued Effects • Reduced innovation • Reduced investment in plant and equipment • Increased pressure on small business

16. Deregulation Purpose Intended to increase competition with the expected benefits of greater efficiency, lower prices, and enhanced innovation. Dilemma Must enhance competition without sacrificing applicable social regulations (e.g., health and safety requirements).

17. Participation in the formulation and execution of public policy at various levels of government Strategic Use of Public Policy Corporate Political Participation

18. The process of influencing public officials Lobbying PACs CoalitionBuilding Internal PoliticalStrategy Instruments through which business uses financial resources to influence government Business and other groups joining forces to achieve common goals To secure position of advantage regarding a given regulation or piece of legislation Strategic Public Policy Actions

19. Chamber of Commerce of the US • National Association of Manufacturers Umbrella Organizations Representation Examples • National Automobile Dealers Assn • National Association of Realtors Broad TradeAssociations • Washington and State Capital Offices • Law firms • Public affairs specialists • PACs • Grassroots lobbying Midrange Company-LevelLobbying Narrow/ Specific Organizational Levels of Lobbying

20. What Business Lobbyists Do for Clients • Gain access to key legislators • Monitor legislation • Establish communication channels with regulatory bodies • Protect firms against surprise legislation • Draft legislation, slick ad campaigns, direct-mail campaigns • Provide issue papers on anticipated effects of legislative activity • Communicate sentiments of client on key issues • Influence outcome of legislation • Assist companies in coalition building around issues • Help members of Congress get reelected • Organize grassroots efforts

21. Political Action Committees Political Action Committees (PACs) are groups of like-minded businesses using financial resources to influence government. • Golden Rule of Politics: • “He who has the gold, makes • the rules.”

22. Political Action Committees Arguments For PACs Arguments Against PACs PACs expect something in return other than good government and this can lead to differing treatment for those who give and those who cannot, such as the poor. PACs are a reasonable means that business may use to organize their contributions to candidates for office.

23. Political Action Committees Issues Concerning PAC’s • Magnitude of activity • Vote buying • Campaign financing • Soft money

24. Political Action Committees Conditions Needed for Effective PAC Contributions • When the issue is less visible • During the early stages of the legislative process • When the issue is narrow, specialized, or unopposed • When PAC’s are allied • When PAC’s adapt lobbying techniques to their contribution strategies

25. Soft Money The Hard Facts About Soft Money • A contribution made to political parties instead of political candidates • The Bipartisan Campaign Reform Act of 2002 was a sweeping change of U.S. campaign finance • The BCRA removed the influence of soft money on candidates running for national office

26. Coalition Building The creation of an alliance for specific public- policy related activities. Often done among PACs, or with NGOs and PACs. • Helps manage the sequence in which issues are addressed • Increases the visibility of certain issues • Unbundles issues into smaller subissues

27. Developing Political Strategies Prakesh Sethi’s Model • Modes of corporate responses • Defensive/resistive • Accommodative • Positive activism • Internal corporate conditions • Anticipated political risks