Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

chapter 9

Influencing the PoliticalEnvironment

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Ch. 9: Key Learning Objectives Understanding the arguments for and against business

participation in the political process Knowing the types of corporate political strategies and the

influences on an organization’s development of a particular strategy

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

Examining the role of the public affairs department and its staff

Analyzing how the problem of money and campaign financing in the American political system affects business

Recognizing the challenges business faces in managing business–government relations in different countries

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The Arguments for and against Political Involvement by Business

Figure 9.1

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Business as a Political Participant Many business executives and managers see their role

in the political process as vital to the progress (and possibly survival) of their company

2009 Harris poll showed concern about business influence: 85% of public polled felt business had too much political power 85% felt political action committees (a favorite business

political tactic) were too powerful At the same time only 5% of respondents felt small business

had too power in the political environment

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Role of Interest Groups and Coalitions

Interest groups, representing varying concerns and populations, have a voice in the political process

Labor unions have a longstanding role in U.S. politics AFL-CIO launched a heavily funded attack on 2008 Republican

Presidential candidate John McCain’s economic platform, called “McCain Revealed”

Ad hoc coalitions Diverse business organizations and interest groups band together

in support or opposition to a specific legislative or regulatory initiative

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Influencing the Business-Government Relationship

Business leaders and scholars agree that firms must participate in the political process Stakes are too high for business not to be involved Government acts on issues that affect basic operations of

companies

Companies therefore must formulate a Corporate Political Strategy Involves the activities taken by organizations to acquire, develop,

and use power to obtain an advantage

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Types of Corporate Political Strategy Three strategic types

Information strategy• Businesses seek to provide government policymakers with

information to influence their actions

Financial-incentives strategy• Businesses provide incentives to influence government

policymakers to act in a certain way

Constituency-building strategy• Businesses seek to gain from other affected organizations

to better influence government policymakers to act in a way that helps them

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Business Strategies for Influencing Government

Figure 9.2

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Promoting an Information Strategy Lobbying

Lobbyists communicate with and try to persuade others to support an organization’s interest or stake as they consider a particular law, policy, or regulation

Direct communications Businesses invite officials to participate in activities that will

improve government officials’ understanding of management and employee concerns

Expert witness testimony Businesses provide facts, anecdotes, or data to educate or

influence government leaders at public forums like congressional hearings

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Total Federal Lobbying Spending and Number of Lobbyists (1998 – 2008)

Figure 9.3

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The Business Roundtable One of the most effective organizations for promoting

direct communication between business and policymakers

Organization of CEOs of leading corporations

Studies various public policy issues and advocates for laws it believes foster vigorous economic growth and a dynamic global economy

Considers issues like corporate governance, education, health care, and civil justice reform

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Promoting a Financial Incentive Strategy Political action committees

Independently incorporated organizations that can solicit contributions and then channel those funds to candidates seeking political office

Economic leverageOccurs when a business uses its economic power to threaten to leave a city, state, or country unless a desired political action is taken

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Political Action Committee ActivityFigure 9.4

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Promoting a Constituency Building Strategy Stakeholder coalitions

Businesses try to influence politics by mobilizing various organizational stakeholders to support its political agenda

Advocacy advertising Advertisements that focus on a company’s views on

controversial political issues

Trade associations Coalitions of companies in the same or related industries used

to coordinate businesses’ grassroots mobilization campaigns

Legal challenges Business seeks to overturn a law after it has been passed

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Levels of Business Political InvolvementFigure 9.5

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Managing the Political Environment The role of the public affairs department is to manage

the firm’s interactions with governments at all levels and to promote the firm’s interests in the political process

Eight of the 10 most frequently performed activities by public affairs officers and departments involve a political action tactic and attention has increased for most of these political activities during the past few years.

More than half of the senior public affairs executives, 55 percent, sit on the corporation’s strategic planning committee

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Campaign Finance Reform: A Special Issue During the 1990s critics feared the growing amount of

money pouring into elections would become a corrupting influence

Public outcry resulted in calls for campaign finance reform legislation (Bipartisan Campaign Reform Act of 2002)

Largest provision was ban on soft money Unlimited contributions to the national political parties by

individuals or organizations for party-building activities $470 million in 2001-2002 election

The immediate reactions to the new campaign reforms were mixed

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Business Political Action: A Global Challenge Critical that managers be aware of the opportunities for

and restrictions on business involvement in the political processes in other countries

Other governments struggle with same issues as U.S. - participation in the political environment, campaign financing, and maintaining a fair ethical climate throughout the public policy process

Has resulted in campaign finance reform in many other countries

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Campaign Financing Reform Abroad Limits on expenditures

Contribution limits

Disclosure regulations

Bans against certain types of contribution

Bans against certain types of expenditures

Measures designed to encourage donations

Subsidies in kind

Public subsidies