Influencing the Political Environment

Chapter 9 Influencing the Political Environment Participants in the Political Environment Influencing the Business-Government Relationship Political Action Tactics Levels of Political Involvement

Introduction • One of the actors to shape public policies and government regulations is businesses. • The emergence of public issues often encourages companies to monitor public concerns, respond to government proposals and participate in the political process. • By developing strategies for working effectively with government, businesses has the responsibility of obeying the laws of the land and of being ethical in its responses to government expectations and mandates. • As the regulatory environment becomes more intense, businesses have little choice but to become more politically active.

Why Business Should Be Involved A pluralistic system invites many participants. Economic stakes are high for firms. Business counterbalances other social interests. Business is a vital stakeholder of government. Why Business Should Not Be Involved Managers are not qualified to engage in political debate. Business is too big, too powerful. Business is too selfish to care about the common good. Business risks its credibility by engaging in partisan politics. Figure 9.1 The arguments for and against political involvement by business

Corporate political strategy • Because governments implement regulations that affect the basic operations of business, businesses must develop a corporate political strategy. • Corporate political strategy Refer to the activities taken by organizations to acquire, develop, and use power to obtain an advantage. • Three strategic types • Information strategy: where businesses seek to provide government policymakers with information to influence their actions. • Financial-incentives strategy: where businesses provide incentives to influence government policymakers to act in a certain way. • Constituency-building strategy: where businesses seek to gain support from other affected organizations to better influence government policymakers to act in a way that helps them.

Figure 9.2a Political strategies, tactics, and characteristics: Information strategy Tactics • Lobbying • Direct communication • Expert witness testimony Characteristics • Targets government policymakers by providing information. Source: Adapted from Amy J. Hillman and Michael A. Hitt, “Corporate Political Strategy Formulation: A Model Approach, Participation, and Strategy Decisions,” Academy of Management Review, 24 (1999), Table 1, p. 835.

Figure 9.2b Political strategies, tactics, and characteristics: Financial-incentive strategy Tactics • Political contributions • Economic leverage • Political consulting aid • Office personnel Characteristics • Targets government policymakers by providing financial incentives. Source: Adapted from Amy J. Hillman and Michael A. Hitt, “Corporate Political Strategy Formulation: A Model Approach, Participation, and Strategy Decisions,” Academy of Management Review, 24 (1999), Table 1, p. 835.

Figure 9.2c Political strategies, tactics, and characteristics: Constituency-building strategy Tactics • Stakeholder coalitions • Advocacy advertising • Public relations • Legal challenges Characteristics • Targets government policymakers by providing information Source: Adapted from Amy J. Hillman and Michael A. Hitt, “Corporate Political Strategy Formulation: A Model Approach, Participation, and Strategy Decisions,”Academy of Management Review, 24 (1999), Table 1, p. 835.

Political action tactics Lobbying • Lobbying is the process of influencing government officials to promote or defeat a legislation. • A lobbyist represents the business before the people and agencies involved in determining legislative and regulatory outcomes. • Lobbying involves direct contact with a government official to influence the thinking and action of the government official on a public policy or issue. • 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. • The goals of a lobbyist are to promote legislations that is in their organization’s interests and to defeat legislations that runs counter to their organization’s interests.

Political action tactics Direct communications with policymakers • Businesses often participate in activities that will improve government officials’ understanding of management and employee concerns. • These activities include inviting government officials to visit local plant facilities, give speeches to employees, attend award ceremonies and participate in activities that will improve the government official’s understanding of management and employee concerns. • These activities are aimed to foster a closer relationship between government officials and the public.

Political action tactics Expert witness testimony • Businesses may want to provide facts, anecdotes, or data to educate or influence government leaders through public congressional hearings. • CEOs and other company executives may be invited to give testimony in various public forums.

Promoting a financial-incentive strategy • Businesses may also try to influence government policy makers by providing financial incentives to legislators so that they will be persuaded to act in ways that will be favourable to the business’s interests. • 2 most common financial-incentive strategy tools are: • Political Action Committees (PACs) • Economic leverage

Promoting a financial-incentive strategy Political action committees (PACs) Independently incorporated organizations that can solicit contributions and then channel those funds to candidates seeking political office. • PACs are the principal instruments through which business uses financial resources to influence government. • PACs are also one of the most common action tools used by businesses. • PACs are formed for the purpose of raising funds to support the election of legislators.

Promoting a financial-incentive strategy • Economic Leverage Occurs when businesses use its economic power to threaten to leave a city, state or country unless a desired political action is taken. - Economic leverage can also be used to persuade a government body to act in a certain way that would favour the business.

Promoting a constituency-building strategy • Refers to activities that seek support from organizations or people who are also affected by the public policy. • This strategy is also known as a grassroots strategy because its objective is to shape policy by using the public to support a business’s position. • Grassroots – individual citizens who might be most directly affected by legislative activity. • Constituency-building strategies include: • Advocacy advertising • Public relations • Building stakeholder coalitions

Promoting a constituency-building strategy Stakeholder coalitions • Businesses try to influence politics by mobilizing various organizational stakeholders (such as employees, stockholders, customers and the local community) to support its political agenda. • If a political issue can negatively affect a business, it is likely that it will also negatively affect the business’s stakeholders. • A coalition is formed when distinct groups/parties realise they have something in common that might be to their advantage to join forces. • Often businesses organize programs to get organizational stakeholders to act as lobbyists to influence government officials to vote or act in a way favorable to the business.

Promoting a constituency-building strategy Advocacy advertising • Advertisements that focus on a company’s views on controversial issues relating to the social, political or economic environment. • These advertisements do not focus on the company’s products. • The main objective of advocacy advertising is to influence people so that they will believe in something or behave in a certain way toward a particular issue. • E.g: • A company may use an advocacy advertising to discourage young people from using drugs. • Advocacy advertisements may be used to encourage people to adapt to a safer, healthier lifestyle.

Promoting a constituency-building strategy Public relations and trade associations • Businesses also make effective use of their public relations and public affairs staffs to communicate with the public about political issues. • Businesses may include a politically charged comment in a speech given by a senior company executive or even run a well-funded, long-running public relations campaign targeting a proposed legislation or regulation. • Sometimes businesses can also work through trade associations to coordinate their grassroots mobilization campaigns.

Promoting a constituency-building strategy Legal challenges • Businesses seek to overturn a law after it has been passed or threatens to challenge the legal legitimacy of the new regulation

Figure 9.5 Levels of business political involvement Level 3: Aggressive Organizational Involvement • Executive participation • Involvement with industry working groups and task forces • Public policy development Level 2: Moderate Organizational Involvement • Organizational lobbyist • Employee grassroots involvement • Stockholders and customers encouraged to become involved Level 1: Limited Organizational Involvement • Contribution to political action committee • Support of a trade association or industry activities

Figure 9.5 Levels of business political involvement Level 1: Limited Organizational Involvement • Managers of the organization are not ready or willing to become politically involved by giving their own time or getting their stakeholders involved. • But they still want to do something to influence their political environment. • Organizations are this level may show their political support by writing out a cheque to a trade organization to support their political cause.

Figure 9.5 Levels of business political involvement Level 2: Moderate Organizational Involvement • A more active form of political involvement by an organization. • Managers at such organization might: • directly use a lobbyist to represent the company’s political strategy; • Get the organization’s stakeholders politically involved (Employees might be asked to write a petition to a government official.) • The company’s senior executives might communicate with stockholders or customers regarding a particular issue and encourage them to write letters to voice their concerns. • Bundling

Figure 9.5 Levels of business political involvement Level 3: Aggressive Organizational Involvement • The most direct and personal involvement in the political environment by the organization. • Managers become personally involved in developing a public policy. • Some of the company executives might be asked to sit on important task forces charged with writing legislations that will affect the firm or the firm’s industry.

Influencing the Political Environment