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Business Influence onGovernment and Public Policy

Presented BySuja K. Ravindran

1st Semester MBA (Evening)

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Introduction

Today, because of the multiple roles it plays in influencing business activity, governmentposes significant challenges for business owners and managers. Attempts by business to influence government are a major and accepted part of thepublic policy process in the United States. The U.S. political system is driven by the activeparticipation of interest groups striving to achieve their own objectives. The business sectoris, therefore, behaving in a normal and expected fashion when it assumes an advocacyrole for its interests.

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Corporate Political Participation

PoliticalInvolvement

Participation in the formulation and execution of public policy at various levels of government

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Political involvement is broadly defined as participation in the formulation and execution of public policy at various levels of government. As decisions about the current and future shape of society and the role of the private sector shift from the marketplace to the political arena, corporations, like all interest groups, find it imperative to increase their political involvement and activity. To appreciate more fully the participation of business in the process of public policy formation in the United States, it is necessary to understand the approaches that business uses to influence the government stakeholder.

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The various approaches are: Lobbying Political Action Committees Coalition Building Political Strategy

Corporate Political Participation

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Lobbying

PACs

CoalitionBuilding

PoliticalStrategy

The process of influencing public officials to promote or secure passage or defeat of legislation

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

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Business Lobbying

Lobbying is the process of influencing public officials to promote or secure the passage or defeat of legislation. Lobbying is also used to promote the election or defeat of candidates for public office. Their goals are to promote legislation that is in their organizations’ interests and to defeat legislation that runs counter to their organizations’ interests. Business interests, labor interests, ethnic and racial groups, professional organizations, and those simply pursuing ideological goals they believe to be in the public interest are lobbying at the federal, state, and local levels.

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The Purposes of Lobbying

Gain legislative support or institutional approval for some objective

Obtain reinforcement of established policy or the defeat of proposed policy shifts

Targets the election or defeat of national, state, and local legislators

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Organizational Levels of Lobbying

Umbrella Organizations

TradeAssociations

Company-LevelLobbying

Broad

Midrange

Narrow/Specific

Representation

•Chamber of Commerce of the US•National Association of

Manufacturers

•National Automobile Dealers Assn•National Association of Realtors

•Washington and State Capital Offices•Law firms•Public affairs specialists•PACs•Grassroots lobbying

Examples

Figure 12-1

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What Business Lobbyists Do for Clients

Get 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

Figure 12-3

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Grassroots Lobbying

Grassroots Lobbying

Mobilizing the “grassroots”—individual citizens who might be most directly affected by legislative activity—to political action

CyberadvocacyUsing the Internet to amass grassroots support, and enable grassroots supporters to contact their legislators

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Coalition Building

A coalition is formed when distinct groups or parties realize they have something incommon that might warrant their joining forces, at least temporarily, for joint action. Coalition formation has become a standard practice for firms interested in accomplishing political goals or influencing public policy. If a company or an association wants to pass or defeat particular legislation, it needs to seek the support of any individual or organization that has a similar position on the issue. Coalitions enable members to share their resources and pool their energies when they confront difficult issues.

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To do this, the following steps are recommended:

Manage the sequence in which issues are addressed

Increase the visibility of certain issues Unbundle issues into smaller subissues

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Golden Rule of Politics: “He who has the gold, rules.”

Political Action Committees (PACs) are groups of like-minded businesses using financial resources to influence government.

Political Action Committees

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National Association of RealtorsNational Beer Wholesalers AssociationNational Association of Home BuildersNational Automobile Dealers AssociationInternational Brotherhood of Electrical WorkersOperating Engineers UnionAmerican Bankers AssociationLaborers UnionAmerican Association for JusticeCredit Union National Association

Top 10 PAC Contributors to Federal Candidates (2005-2006)

Figure 12-4

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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.

Arguments For PACs Arguments Against PACs

Political Action Committees

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Political Action Committees

Conditions Needed for Effective PAC Contributions

1. When the issue is less visible2. During the early stages of the legislative process3. When the issue is narrow, specialized, or unopposed4. When PAC’s are allied5. When PAC’s adapt lobbying techniques to their

contribution strategies

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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

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Political Action Committees

Strategies for Political Activism

Containment Strategy• Keeps an issue off the public agenda and

out of the limelight• Helps to define an issue

Regulatory Life Cycle Approach• Formation, formulation, implementation,

administration and modification of a firm’s political strategy

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Contingency Approach

Contingency approach considers variables of:1. The number of salient issues in a legislative

district2. The amount of information a legislator

possesses concerning voter preferences

After considering the above, then determine:3. The salience of the issue to the legislator’s

constituency 4. The identification of the expected position of

voters on the issue

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Strategies for Political Activism

The political activities are contingent on:

1. Modes of corporate responses• Defensive• Accommodative• Positive activism

2. Internal corporate conditions

3. Anticipated political risks

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