Chapter 09 - Influencing the Political Environment

CHAPTER 9

INFLUENCING THE POLITICAL ENVIRONMENT

INTRODUCTION

Businesses face complicated issues in managing their relationships with politicians and government regulators. Managers must understand the political environment and be active and effective participants in the public policy process. They need to ensure that their company is seen as a relevant stakeholder when government officials make public policy decisions and must be familiar with the many ways that business can influence these decisions. The opportunities afforded businesses to participate in the public policy process differ from nation to nation. Sound business strategies depend on an understanding of these differences, enabling businesses to manage worldwide business–government relations effectively.

PREVIEW CASE

Dean Kamen and the Segway

What strategies should businesspeople like Kamen use to influence state and local government officials to change laws enabling new innovations to be sold? Should governments rigorously protect citizens, or should the marketplace decide what products or services should be sold? Would Kamen have been more successful if he developed “friendships” with key politicians or legislators, providing them with various gifts? Would these actions be ethical?

Kamen, desperate to gain governmental approval to market his latest invention, the Segway transporter, developed a multi-faceted political strategy. First, he received approval from the Consumer Product Safety Commission. Unfortunately, he still was faced with thousands of municipal ordinances, thus was forced to shift his attention from a federal focus to a local one. Second, Kaman developed an information political strategy seeking to educate local officials that the Segway transporter was safe and could be operated on the sidewalks without injury to the rider or pedestrians. Lobbying seemed to be most successful information strategy employed by Kamen.

While Kamen would undoubtedly agree that governments should protect its citizens, he needed to convince local officials that the Segway transporter posed no threat to the public. Having the police and other law enforcement officials use the vehicle was an effort to show that the product was safe, leaving it up to the marketplace to decide if it should be widely used by the public.

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Chapter 09 - Influencing the Political Environment

Kamen might have been more successful lavishing government officials with gifts, although in many cases it would be illegal to do so. Governments have established strict anti-gift-giving policies, seeking to eliminate decision-making by public officials based on friendships or other perks.

Teaching Tip: Preview Case

This case emphasizes the political challenges facing an entrepreneur. The development of various strategies was necessary for Dean Kamen to market his invention, the Segway. Students may want to explore the various challenges they would face if starting their own business or attempting to market a new invention. What local or state obstacles would they encounter and how would they best address these obstacles?

CHAPTER OUTLINE

I. PARTICIPANTS IN THE POLITICAL ENVIRONMENT

A. Business as a Political Participant

Teaching Tip: Arguments For and

Against Business in Politics

The question of whether businesses should be allowed to be involved in the political environment is an excellent question for an in-class debate. Students may want to focus on the ethical aspects of the question: businesses have the right to be involved versus it is unfair for businesses to be involved given their potential economic power which create imbalances in the process. Or, students may want to pose an “outcome-based” argument, citing examples where business’s involvement has benefited others or has harmed others.

B. Interest Groups in Politics

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C. Coalition Political Activity

Teaching Tip: Coalitions – Case Study

It may be helpful for students to identify a current (possibly local) political issue involving business and explore the presence of political collations – as discussed in the chapter for the move toward longer daylight savings time. Which coalitions favor or work against business? How were these coalitions formed?

II. INFLUENCING THE BUSINESS-GOVERNMENT RELATIONSHIP

A. Corporate Political Strategy

Teaching Tip: Corporate Political Strategies

Students could scan business newspapers or the Internet to identify examples of corporate political strategies fitting each of the three types discussed in this chapter.Students might be particular aware of how industry groups, in addition to individual businesses, are involved in developing a political strategy.

*Information Strategy

*Financial-incentive Strategy*Constituency-building Strategy

III. POLITICAL ACTION TACTICS

Teaching Tip: Lobbying Political Strategies

Kwame Holman reports on the Congressional debate over how much lobbyists and politicians should disclose about their activities and whether they should be limited, in the wake of the scandal involving lobbyist Jack Abramoff. The segment touches on the K Street Project, an effort by Republicans to encourage the hiring of former congressional colleagues by lobbying firms, the use of “earmarks” (special interest items inserted into legislative bills), and the relationship between lobbyists and PACs. It

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may be used with the discussion of techniques of political influence by business.* The video segment is from the Public Broadcasting Services’s “News Hour with Jim Lehrer” and is available on the Instructor’s Resource Manual DVD that accompanies the textbook, available upon request from the publisher.

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Chapter 09 - Influencing the Political Environment

A. Promoting an Information Strategy

*Lobbying

Teaching Tip: Revolving Door

Is it ethical for a former regulator or legislator to accept a job that requires her or him to lobby or influence those colleagues still on the regulatory board or in Congress? Should a former regulator or politician be free to take any job she or he wants, or should there be greater controls on the revolving door practice?

*Direct Communications

*Expert Witness Testimony

Teaching Tip: Internet Politics

A lively discussion might ensue focusing on the question of how politics would change due to the influence of the Internet. Students might develop a strategy on how they would influence a local, upcoming election by using the Internet. What are the benefits and costs of such a change in how political campaigns are run?

B. Promoting a Financial-incentive Strategy

*Political Action Committees

*Economic Leverage

C. Promoting a Constituency-building Strategy

*Stakeholder Coalitions

*Advocacy Advertising

*Public Relations and Trade Associations

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*Legal Challenges

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Chapter 09 - Influencing the Political Environment

Teaching Tip: Political Tactics

Various realistic or hypothetical examples of political elections, regulatory reforms, or other political issues could be presented to student groups asking them to develop effective strategies emphasizing specific political tools. Then students in the other groups could comment on and critique how effective the other group’s strategies may be.Inviting a local politician to class might be another way to assess the effectiveness of the group’s strategies and use of political tools.

IV. LEVELS OF POLITICAL INVOLVEMENT

Teaching Tip: Levels of Political Involvement

The investigation of a corporation’s political action history could support or challenge the developmental levels of political involvement model presented in this chapter. Or, inviting a senior executive to class to speak on the firm’s political action history could allow the students to seen the level of political involvement in practice or question the model.

V. CAMPAIGN FINANCE REFORM: A SPECIAL ISSUE

Teaching Tip: Campaign Finance Reform

“Has campaign financing truly been reformed by recent legislation?” may be a good question for student debate using evidence from real campaigns conducted after the reform legislation was passed. Are candidates, businesses and other political involved organizations simply circumventing the reforms or are they working?

VI. BUSINESS POLITICAL ACTION – A GLOBAL CHALLENGE

Teaching Tip: Campaign Finance Reform

Since many of the examples of campaign finance reform from around the world presented in this chapter are ongoing, students could use the Internet or other information sources to explore the successes or failures of these efforts toward reform.

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A. Controlling Corruption in Politics

B. Campaign Finance Reform AbroadGETTING STARTED

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Chapter 09 - Influencing the Political Environment

KEY LEARNING OBJECTIVES

1. Understanding the arguments for and against business participation in the political process.

Some believe that businesses should be involved in politics, because their economic stake in government decisions is great, and they have a right to participate, just as do others in a pluralistic political system. But others believe that businesses are too big, powerful, and selfish, and that they wield too much influence in the political arena.

2. Knowing the types of corporate political strategies, and the influences on an organization’s development of a particular strategy.

There are three political strategies: information, financial-incentives, and constituency-building. Some firms implement strategies as needed, on an issue-by-issue basis, while other firms have a long-term, ongoing political strategy approach.

3. Assessing the tactics businesses can use to be involved in the political process.

Some of the political action tactics available for business include lobbying, direct communications, expert witness testimony, political action committee contributions, economic leverage, advocacy advertising, public relations and trade association involvement, legal challenges and encouraging involvement other stakeholders.

4. Analyzing how the problem of money and campaign financing in the American political system affect business.

Businesses are a major contributor of soft money, something that the U.S. government and other countries are trying to ban. If successful, businesses may be more limited in how they can influence elections and politicians.

5. Recognizing the challenges face business in managing business-government relations in different countries.

The differing national rules and practices governing political activity make business’s political involvement complex in the global environment. Many governments, like the United States, are trying to restrict political contributions or make campaign financing more transparent.

KEY TERMS AND CONCEPTS USED IN THE CHAPTER

ad hoc coalitions, 187

advocacy advertising, 196

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Chapter 09 - Influencing the Political Environment

bundling, 199

The Business Roundtable, 192

campaign finance reform, 199

corporate political strategy, 188

economic leverage, 195

527 organizations, 200

lobbying, 190

political action committees (PACs), 194

revolving door, 190

soft money, 199

trade associations, 197

INTERNET RESOURCES

www.commoncause.org Common Causewww.ncpa.org National Center for Policy Analysiswww.nfib.com/page/home National Federation of Independent

Businesseswww.opensecrets.org Opensecrets.orgwww.pdc.wa.gov Public Disclosure Commissionwww.fec.gov U.S. Federal Election CommissionDISCUSSION CASE

THE NEW BUSINESS POLITICAL ACTIVIST: BEHIND THE SCENES, LESS VISIBLE

Discussion Questions

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Chapter 09 - Influencing the Political Environment

1. Is Schultz’s desire to keep Starbucks out of the U.S. political arena a realistic goal in today’s business-government environment?

One might argue that businesses must be involved in the government-business relationship and develop a business political strategy since politics affects all businesses. To be uninvolved could mean being at a disadvantage in a competitive marketplace. However, how a business is involved may be debatable. The low-key approach advocated by Starbucks may be closely aligned with the firm’s culture and the values of its founder. To do otherwise might negatively affect the strong culture that Schultz has carefully established throughout his company.

2. What political strategies would you recommend that Engskov pursue to enhance Starbucks’ likelihood of success in politics? In your answer, please refer to Figure 9.2.

While Schultz seems quite hesitant about becoming involved in a financial-incentive political strategy (e.g., PAC contributions), Engskov could propose a strong information and constituency-building political strategy.

Starbucks already has realized that occasionally it may need to provide lobbying efforts to ensure that legislative action is favorable to their economic strategy. Hiring a lobbyist, or working with its competitors to hire an industry lobbyist, may be a good strategy and consistent with the Starbucks’ overall culture.

Starbucks has a tradition of working closely with its stakeholders – employees, suppliers, customers – thus it might develop a political aspect to these stakeholder relationships. Starbucks employees might be interested in becoming involved in some political issue that could affect their jobs, or Starbucks customers could become educated on political issues when purchasing a Starbucks’ product or visiting a Starbucks’ location.

3. What level of involvement should Engskov recommend for Starbucks as it becomes more involved in the political arena? In your answer, please refer to Figure 9.5.

Although the model indicates that most firms begin at level 1 – Limited Organizational Involvement: indirect and impersonal – the Starbucks’ culture seems to point to a more personal level of political involvement. The lobbyist, grassroots involvement, and engaging stakeholders, as discussed above in question #2, may be more aligned with Starbucks’ culture and Schultz’s values. It is possible that the new corporate culture, as seen at Starbucks and other new businesses, may approach political involvement in a way that is different that what is shown in Figure 9.5, which is based on traditional business political action.

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Chapter 09 - Influencing the Political Environment

4. Should Engskov avoid or delay developing certain strategies, given Schultz’s reluctance to involve Starbucks in political action? What would be the costs and benefits of doing so?

Avoiding the opportunity of becoming a participant in the political environment or delaying Starbucks’ political involvement may be quite costly to the firm and its pursuit of numerous economic, growth objectives. Rather than avoidance or delay, Engskov may crafted a political strategy that is both effective in protecting or furthering Starbucks’ political interests and aligned with Schultz’s values and comfort level with political involvement. Starbucks may realize similar benefits from becoming a strong political participant as its competitors and other businesses have found.

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