Influencing the Political Environment

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

3. 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.

4. 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

5. Corporate political strategy • Because governments implement regulations that affect the basic operations of business, businesses must develop a corporate political strategy. • Corporate political strategy Involves 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 from other affected organizations to better influence government policymakers to act in a way that helps them.

6. 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.

7. 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.

8. 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.

9. Political action tactics Lobbying • Lobbying is the process of influencing government officials to promote or defeat a legislation. • 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.

10. Political action tactics Direct communications with policymakers • Businesses often participate in activities that will improve government officials’ understanding of management and employee concerns. Expert witness testimony • Businesses may want to provide facts, anecdotes, or data to educate or influence government leaders through public congressional hearings.

11. 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 formed for the purpose of raising funds to support the election of legislators. 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.

12. 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 and trade associations • 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. Legal challenges • Business seeks to overturn a law after it has been passed.

13. 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