Chapter 9
Influencing the Political Environment
McGraw-Hill/Irwin Copyright © 2008 The McGraw-Hill Companies, All Rights Reserved.
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 use
Analyzing how the problem of money and campaign financing in the American political system affect business
Recognizing the challenges facing business 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 Countervailing Force in Politics?
Many business executives and managers see their role in the political process as vital to the progress (and possibly survival) of their company
2005 Harris poll showed concern about business influence: 90% 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 16% of respondents felt public opinion
had much 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 Recent increase in AFL-CIO dues of 4cents/month to support
political activity raised $7million Unions are not unified in their support for a particular party
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 their 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 with policymakers 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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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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Top 10 Industry Group Lobbyist Expenditures 2005-2006 Elections
Figure 9.3
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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 leverage
Occurs 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 Public relations
Could be politically charged comment in a speech by senior executive or a public relations campaign
Trade associations Coalitions of companies in the same or related industries—to
coordinate their 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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Campaign Finance Reform In 1990’s 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 passed in 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
Have been series of legal challenges to 2002 reforms
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Top Soft Money Contributors to both Political Parties, 2001-2002
Figure 9.6
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Global Challenges to Business Political Action
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, as shown on next slide
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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
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Campaign Finance Reform or Just Politics As Usual in Canada?
In 2003 the Liberal Party in Canada introduced a sweeping political campaign finance reform bill, C-24, aimed at “making the electoral system more transparent and fair by reforming significantly the rules on financing of political participants.” It included a controversial proposal to ban corporate and trade union donations to political parties or leadership contests.
C-24 supporters argued the old law, the1974 Election Expenses Act, had failed in its goals. In 2001, 95 of the top 100 donors to the Liberal Party were businesses. Bombardier, a Canadian firm, donated more than $140,000 to the Liberal Party and received more than $100 million in government contracts. People were increasingly concerned that business and other powerful groups simply had too much influence in politics.
Exhibit 9.C
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Campaign Finance Reform or Just Politics As Usual in Canada?
The new law effectively banned political donations from corporations and unions, and limited contributions by individuals. To compensate for the loss, C-24 increased the amount of public financing available to political parties. At the time, individuals were eligible for a 75% tax credit for donations up to $200. The new law doubled this to $400.
The proposal met with strong skepticism and concerns. Democracy Watch, an independent, nonprofit advocate for democratic reforms, believed that the new bill made a good start, however, it argued that the bill did not go far enough and contained too many loopholes to be truly effective. Canadian Alliance leader Stephen Harper commented, “The central idea proposed is that we replace corporate and union contributions …with forced funding from taxpayers…this solution is worse than the problem.”
Despite the opposition, C-24 was passed and “came into force” on January 1, 2004.
Exhibit 9.C(cont.)
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