Overview: ?In this assignment, you will be asked to use your critical thinking skills to assess the different perspectives a
Overview: In this assignment, you will be asked to use your critical thinking skills to assess the different perspectives about business-government-civil society interactions after reviewing the material for the assignment. Approximate length 1-2 pages (250-500 words). Make sure to answer all the questions listed in Steps 2 and 3 below.
Instruction:
Step 1. Read, view, and listen to the assigned materials (Business, government, and civil society)
https://smallbusiness.chron.com/role-government-business-803.html
https://www.investopedia.com/articles/investing/043015/why-lobbying-legal-and-important-us.asp
Step 2. Reflect on what you conclude from these sources about the interaction between business and government.
Describe the different perspectives or strategies business has about interacting with government at any level (Federal, State, and Local).
Describe and cite an example of the advantages for business in having a good working relationship with the government.
Describe and give an example of the downside risks business has in working with government.
What do you think is the best strategy for business in interacting with legislative or executive branches of government? Describe what is important about lobbying by business.
Step 3. Identify an example of a business approach that has been successful to the company in partnering with government.
A variety of government actions in addition to laws and regulations powerfully affect companies’
finances, executives say. But executives also indicate that companies’ processes to manage
their relationships with government are generally less robust than are the ones used to manage
relationships with other stakeholders.
Government is likelier to affect companies’ economic value than any other group of stakeholders
except customers, say executives in response to a new McKinsey survey.1 The results also indicate
that most executives expect government involvement in their industries—which in most cases
has skyrocketed since the global economic crisis began—to continue increasing. The survey asked
executives about their companies’ relationships with the government of the country or region
that is their primary market: how government affects their companies’ economic value, how their
companies interact with the government, how effective those activities are, and who spearheads the
companies’ relationships with the government.
The results show that government actions have a significant effect on companies’ economic value:
34 percent of respondents say 10 percent or more of their operating income is at stake. Some
government actions, such as providing infrastructure and access to capital, are likelier to have a
positive than a negative effect on company finances. However, passing laws and setting policies—the
actions executives say most often affect their companies’ economic value—have an overall negative
effect. Respondents whose primary markets are in developing economies are more positive than
others, however, about the effect of government actions, such as the passage of laws and enforcement
of rules.
1 The online survey was in the field
from November 17, 2009, to
November 30, 2009, and received
responses from 1,167 executives
representing the full range of
industries, regions, and
functional specialties.
Je an
-F ran
ço is M
artin
How business interacts with government McKinsey Global Survey results:
2 How business interacts with governmentMcKinsey Global Survey results
A strong majority of executives say business must proactively and regularly engage with government,
even though many find that dealing with government is often frustrating and consider government
officials to be uninformed about the economics of their industries. Yet companies aren’t doing as
much to counter those problems as they could; for example, only a third say their companies are
“extremely” or “very effective” at building strong relationships with key government stakeholders. In
fact, despite the variety of practices that can help a company successfully manage its relationship
with government, a majority of companies aren’t effective at even one of them.
Government’s growing role
Government has a crucial and expanding effect on companies’ industries and economic value,
respondents say (Exhibit 1).
A variety of government actions affect companies’ economic value; not surprising, respondents
in every country select passing laws and enforcing regulations far more often than other actions as
Exhibit 1
Role of government
% of respondents, n = 1,167
Decrease somewhat or substantially
Increase somewhat or substantially
Stay the same
1 = Don’t know
How do you expect the government’s involvement in your industry to change in the next 3–5 years? 1
Which stakeholders do you expect will have the greatest effect on your company’s economic value in the next 3–5 years? 2
Survey 2009 GTG Exhibit 1 of 6 Glance: Exhibit title: Role of government
1Figures do not sum to 100%, because of rounding. 2Respondents who answered “other” or “don’t know” are not shown. 3Nongovernmental organizations.
Customers 74
Government 52
Employees 50
Investors 28
Suppliers 15
Media 8
NGOs3 5
63
23
12
3 How business interacts with governmentMcKinsey Global Survey results
having an effect (Exhibit 2). Although most government actions are less likely to have an effect than
those two, others are seen as likelier to have a positive than a negative effect on companies’ finances.
There are notable regional differences in the government actions executives say are likeliest to
have a positive effect—mostly related, it appears, to a greater need for infrastructure and capital in
developing economies (Exhibit 3).
Exhibit 2
Economic impact of government activities
% of respondents, n = 1,167 Which activities that government might engage in will have the greatest effect on your company’s economic value in the next 3–5 years, and how will they affect the economic value? 1
Survey 2009 GTG Exhibit 2 of 6 Glance: Exhibit title: Economic impact of government activities
Passing laws, setting policies67
Enforcing rules, regulation59
Purchasing our products/services25
Competing with our products/services
Providing infrastructure, services, other public goods23
Providing capital16
Advocating for the interests of our company/industry13
12
9
Reducing cost of capital by offering loans or loan guarantees
38 9 47 6
41 11 44 4
58 32 7 3
60 29 6 5
49 34 10 6
46 34 14 6
50 33 11 6
7 47 41 5
Always positive or more positive than negative effect
No effect Other or don’t know
Always negative or more negative than positive effect
% ranking given activity as among top 3
1Figures may not sum to 100%, because of rounding.
4 How business interacts with governmentMcKinsey Global Survey results
At companies that try to quantify the potential impact of government actions on their companies’
economic value, majorities assess a mix of potential risks and opportunities, with 71 percent
assessing the impact of regulations on costs, 70 percent the cost of complying with regulations, and
69 percent the opportunities created by regulations.
Exhibit 3
Where government matters most
% of respondents,1
By primary market
China, n = 82 India, n = 77European Union, n = 302
United States, n = 398
Other Asia- Pacific,2 n = 114
Middle East/ Africa, n = 57
Which of the following activities that government might engage in will have the greatest effect on your company’s economic value in the next 3–5 years, and how will they affect the economic value?
Survey 2009 GTG Exhibit 3 of 6 Glance: Exhibit title: Where government matters most
Always positive or more positive than negative effect
Action most likely to have a positive effect in given market
1 Respondents who answered “other” or “don’t know” are not shown; respondents could choose more than one answer. 2Excludes China and India.
Passing laws, setting policies 52 40 57 65 28 35
Enforcing rules, regulation 48 44 56 54 36 30
Purchasing our products/services
61 55 74 70 55 71
Providing infrastructure, services, other public goods
75 62 76 83 51 63
Providing capital 66 46 68 61 45 66
Advocating for the interests of our company/industry
67 40 75 62 38 67
Reducing cost of capital by offering loans or loan guarantees
49 52 67 59 46 44
Competing with our products/services
17 6 11 2 5 19
5 How business interacts with governmentMcKinsey Global Survey results
Respondents are nearly evenly divided on whether government actions will increase or decrease the
operating incomes of their companies over the next three to five years (Exhibit 4). Yet 34 percent of
respondents say the effect, whether positive or negative, will be 10 percent or higher; thus, significant
value is at stake for many companies.
What executives think of government
Given this value at risk, it’s heartening that 71 percent of respondents say companies should
proactively and regularly engage with government. But it’s less encouraging that only 43 percent say
their companies actually do so.
Exhibit 4
Government-driven value at stake
% of respondents,1 n = 1,029
No effect
Decrease Increase
Don’t know
Executives’ estimate of effect government activity will have on their companies’ operating income in the next 3–5 years
Survey 2009 GTG Exhibit 4 of 6 Glance: Exhibit title: Government-driven value at stake
1 Figures do not sum to 100%, because of rounding.
By up to 9% 18
By 10–24% 12
By 25–49% 3
By 50% or more 1
21
11
3
4
3834
15 12
6 How business interacts with governmentMcKinsey Global Survey results
Some of the reasons for the relative lack of engagement may be executives’ own views of government.
More than three-quarters agree that business must be actively involved in shaping government policy
to succeed and that it’s beneficial for companies to be as transparent as possible with government,
but large shares also express frustration with government along various dimensions (Exhibit 5).
Ineffective engagement
When companies do engage with government, executives indicate they’re not particularly good at it.
Engaging with the governments of their companies’ primary-market countries is a top-three priority
for only a third of CEOs—although the figure rises to nearly 60 percent in China. More are involved
in overseeing their companies’ efforts to engage: almost two-thirds of respondents say their CEOs
either sponsor those efforts personally or oversee the group that does so.
Exhibit 5
Businesses’ frustration with government
% of respondents who strongly agree/agree with given statement, n = 1,167
Survey 2009 GTG Exhibit 5 of 6 Glance: Exhibit title: Businesses’ frustration with government
Greater government involvement is bad for business
The regulators and policy makers who have influence over our industry don’t understand the economics of our industry
Government often uses unfair rhetoric when talking about our industry
It is difficult to accomplish anything when working with government
Government often blames business for societal problems
44
It is difficult to determine the best way to engage productively with government
44
43
41
40
28
However, executives don’t rate their companies all that highly on practices that, our experience
shows, are important for successful engagement with government (Exhibit 6). Fewer than half
say their companies are good at ensuring that government-related issues are on the agenda of the
senior-management team, and effectiveness declines from there. There are some notable regional
differences, with companies active in the European Union and the United States often lagging those
that are active elsewhere.
7 How business interacts with governmentMcKinsey Global Survey results
Exhibit 6
How companies engage with government
% of respondents who say their company is “extremely” or “very effective” in given activity,1 n = 1,167
By primary market
China, n = 82
India, n = 77
European Union, n = 302
United States, n = 398
Total Other Asia-Pacific,2 n = 114
Middle East/Africa, n = 57
Survey 2009 GTG Exhibit 6 of 6 Glance: Exhibit title: How companies engage with government
30% or less of respondents say their companies are effective in given activity
1 Respondents who answered “don’t know” are not shown. 2Excludes China and India.
Ensuring government-related issues are on agenda of senior-management team
44 43 41 42 53 49 40
Gathering intelligence about government actions that could affect company
36 37 34 33 38 34 49
Understanding social, political, economic objectives of government actions
36 35 33 39 42 44 41
Systematically sharing information about government actions among business units and functions
34 32 32 38 34 40 62
Using CEO as company spokesperson on government issues critical to strategic agenda
33 26 36 41 44 38 47
Working to build strong, trust-based relationships with key government stakeholders
32 27 29 34 46 41 53
Quantifying potential effect of government’s actions on economic value
29 30 23 32 31 31 35
Coordinating government-facing activities across business units and functions
28 24 30 27 37 35 27
Developing and executing a strategy for engaging with all relevant government stakeholders
27 22 23 34 41 36 43
Providing key government stake- holders with facts and analyses on how government actions affect company or industry
27 23 27 28 35 32 33
Among companies whose primary market is in the European Union or the
United States, less than a quarter of respondents say their companies are
effective at developing and executing strategies for engaging with all relevant
government stakeholders.
8 How business interacts with governmentMcKinsey Global Survey results
Further, in a majority of companies, key functions and businesses are not involved in supporting
government relationships. For example, only 26 percent of respondents say business units are
consistently involved in planning or executing their companies’ government-facing activities—even
though our experience shows that the government issues companies face are often driven by
individual businesses.
Looking ahead
• More executives say government will affect their companies’ economic value than say the
same of employees, investors, or suppliers. Yet companies’ processes to manage their
relationships with government, this survey shows, are generally less robust than the processes
they use to manage relationships with other stakeholders. Most companies would benefit
from making government more of a priority by building integrated capabilities to manage their
government relationships.
• Only a third of CEOs consider engaging with the government to be a top-three priority; our
experience indicates that companies will benefit when management of government relationships
is integrated into the top leadership’s mandate to ensure CEO sponsorship of, and involvement in,
executing the company’s government agenda.
• Just over a quarter of executives say their companies are “extremely” or “very effective” at
coordinating their government-facing activities across business units and functions. A better or
separate government affairs function is insufficient to manage government relationships effectively,
given that government actions can affect so many different business units and functions. A better
approach is for all business units and functions to play a role in managing a company’s relationship
with government.
• Respondents say they are less effective at engaging with government in their secondary markets
than they are in their primary ones. As multinational companies expand their operations to
developing markets in which they are unlikely to have experience engaging with government, they
will need to build this capability in their most important secondary markets (often China or India).
Contributors to the development and analysis of this survey include Andre Dua, a principal
in McKinsey’s New York office, and Kerrin Heil and Jon Wilkins, a consultant and principal,
respectively, in the Washington, DC, office. Copyright © 2010 McKinsey & Company.
All rights reserved.
,
Business and Government Relations: How Do Government and Business Interact?
The Sustainable Business Casebook, v.1
By: Ross Gittell, Matt Magnusson and Michael Merenda
2012
Since businesses are strongly affected by public policies, it is in their best interest to stay informed about public policies and to try to influence governmental decision making and public policy. There are different general ways that businesses view and act on their relationship with government. One perspective is for businesses to consider business and government on “two sides” and in opposition to each other. Some have argued that this was the prevailing dominant mainstream business view in the aftermath of the Great Recession at the end of the first decade of the twenty-first century. It has been characterized as the “antiregulatory” or “limited government” view, and it has been associated with those who believe that free markets with a minimal government role is best for the workings of the economy. This perspective most often focuses businesses’ interactions with government on efforts to minimize government and reduce the costs and burdens on private business and the general economy associated with government taxes, regulations, and policies.
Another business perspective on government is that government should favor businesses and incentivize business performance and investment because businesses are the main source of jobs, innovation, and societal economic well-being, and therefore government should support businesses with grants, tax credits, and subsidies.
A third general view of businesses and government relations is with business in partnership with government in addressing societal matters. This is in contrast to government being the regulator to ensure businesses act in a socially responsible manner.
These views are not mutually exclusive. For example, the same solar business can use some of its interaction with government to try to maximize the benefits, such as favorable tax credits, it receives from government and at the same time work in partnership with government to achieve a social purpose, such as reducing carbon emissions, and then try to minimize its tax obligations. It is also important, as described by Pacific Gas and Electric (PG&E) CEO Peter Darbee, that the focus of business and government relationships should be on the type of policies required in response to societal challenges rather than an ideological response about the proper role of government in a free market economy.
Sustainable businesses tend to focus on their responsibility to the environment and societal impact and also tend to recognize that government policies and programs are often necessary to help them achieve their objectives and therefore are inclined to try to work with and even partner with government to achieve desired ends. It is always important for sustainable businesses to understand how their efforts to achieve profits and to serve a social purpose are both strongly influenced by government policies, and it is always important for sustainable businesses to manage their relationships with government (local, state, national, and international) effectively.
Types of Business Responses
Once a business has an understanding of how government affects their operations and profitability, it can formulate strategies for how best to interact with government. There are three general types of business responses to the public policy environment—reactive, interactive, and proactive.
Reactive responses involve responding to government policy after it happens. An interactive response involves engaging with government policymakers and actors (including the media) to try to influence public policy to serve the interests of the business. A proactive response approach entails acting to influence policies, anticipating changes in public policy, and trying to enhance competitive positioning by correctly anticipating changes in policy. For most businesses, a combination of the interactive and proactive approaches is the best approach.
In meeting challenges from nongovernmental organizations (NGOs) and the media, businesses may respond in a variety of ways, including the following:
· Confrontation. It may aggressively attack either the message or the messenger, and in extreme cases, business has felt justified to sue its critics for libel.
· Participation. Business may develop coalitions or partnerships with NGOs, as McDonald’s did with the Environmental Defense Fund (EDF; see the following discussion) or as Home Depot did with the Rainforest Alliance (see the following sidebar).
· Anticipation. Business may adopt issues management programs to forecast emerging issues and to adjust or change business practices in advance of the passage of stringent laws or regulations.
When business is in a reactive response mode, it most often engages in confrontation of its adversaries. When it assumes an interactive response mode, it participates in dialogues with NGOs and the media and develops partnerships or coalitions to advance new policies and programs. When business behaves in a proactive manner, it anticipates future pressures and policy changes and adjusts its own internal corporate policies and practices before it is forced to do so. While a reactive stance may sometimes work, it often only delays needing to engage in a more interactive or proactive way. An interactive or proactive approach is usually a better way to meet political and societal challenges while also protecting the reputation of the firm.
Tactics That Businesses Use to Influence Government
Businesses often engage in a variety of tactics to influence government policy. This includes lobbying, political contributions, and interest group politics.
Business Lobbying
Businesses lobby in different ways. This can include lobbying of Congress and state legislatures and executive branch agencies directly through its own government relations specialists, through an industry trade association, through consultants, or through a combination of all those avenues. Businesses may also engage in indirect or grassroots lobbying by appealing to its own employees, stakeholders, or the general public to make their views known to policymakers. In order to build a broad grassroots constituency, business may manage “issue advertising” campaigns on top-priority issues, or purchase issue ads in media outlets that target public policymakers or Washington insiders.
Business lobbying has a strong influence on public policies. There are more than 1,500 private companies in the United States with public affairs offices in Washington, DC, and more than 75 percent of large firms employ private lobbyists to make their case for policies that can benefit them. This includes more than 42,000 registered lobbyists in state capitals across the nation.
Business may engage in reactive defensive lobbying (defending its own freedom from government regulation) or interactive lobbying (partnering with interest groups on policies that the firm can benefit from). Businesses can also choose to engage in social lobbying, examples of which include chemical companies with the best environmental track record joining environmental NGOs in lobbying for an increased budget for the Environmental Protection Agency (EPA) and retailers wanting to address consumer concerns joining interest groups in pressuring the Consumer Product Safety Commission to adopt more stringent product safety standards. Corporations showing a willingness to join such public interest coalitions can gain reputational rewards from NGOs, the media, and public policymakers.
Political Contributions
Businesses also use campaign contributions to support their position and to try to influence public policies that can help them increase profits. Seven of the ten largest corporations in the world are oil companies, based on revenues. Their access to funds for lobbying and campaign contributions gives them a significant voice in the political system and on policies that can impact sustainable businesses.
There are a range of avenues a company might use in making political contributions. The most transparent and legitimate is that of forming a political action committee (PAC) to which voluntary contributions of employees are amassed and then given in legally limited amounts to selected candidates. Not surprisingly, larger firms in regulated industries, or in industries exposed to greater risk from changing public policies, such as oil companies in 2010 during and after the British Petroleum (BP) Gulf of Mexico oil crisis, use PACs more often than other firms. Beyond contributing directly to political candidates, firms can also advertise on ballot measure campaigns, and those contributions can come from corporate assets and are subject to no legal limitations.
A 2010 US Supreme Court decision, Citizens United v. Federal Election Commission ruled that the government could not ban independent political spending by corporations, as well as labor unions and other organizations, in candidate elections. This has led to rise of what have become known as “super PACS.” In the 2012 Republican presidential primary, about two dozen individuals, couples, or corporations gave $1 million or more to Republican super PACs to try to influence the primary election.
Interest Group Participation
Business response can include participation in interest group politics. Interest groups play a key role in all democratic systems of government. However, as an interest group is a group of individuals organized to seek public policy influence, there is tremendous diversity within interest groups. Business is just one of many interest group sectors trying to influence public policy (see the discussion previously mentioned). Businesses will encounter interest groups that may support or conflict with their position on an issue.
Other Business Interactions in the Public Arena
Businesses face a complex array of formal and informal public policy actors beyond (just) government. Business practices can be strongly influenced by citizen actions that bypass the formal institutions of government. Though they lack the economic clout and resources of industry as tools of influence, citizen groups do possess other tools. They can lobby and litigate, and they can get out large groups to demonstrate in public events and use exposure in the news media as a vehicle for getting their perspective heard.
Businesses are influenced by direct citizen activism and protest. Organized interests and nongovernmental organizations (NGOs) have been the source of influence. After their experiences in affecting public policy in the 1960s and 1970s, many citizen activists grew skeptical of the government’s ability to respond rapidly and effectively and discovered they could often accomplish their objectives more directly and quickly. Citizen groups have both confronted and collaborated with corporations in order to foster change.
Finding that confrontation is often counterproductive and that government lobbying is protracted and ineffective, NGOs often turn to collaboration with business to resolve issues. Indeed, as both sides have matured and grown less combative, business and NGOs have learned to work together to resolve problems. There are many examples of such productive collaboration, the most prominent of which have emerged on the environmental front. For example, the Rainforest Action Network (RAN) has worked with Home Depot, Lowe’s, and several timber companies in an initiative to protect old-growth forest. RAN combines elements of activism and even militant protest along with peaceful collaboration.
The Environmental Defense Fund (EDF) is an example of an NGO working cooperatively, in contrast to a confrontational approach, with corporations. The EDF was an early actor in this way. In November 1990, the EDF began to work with McDonald’s to help the company phase out its polystyrene clamshell food containers. It was a collaborative effort to significantly reduce McDonald’s negative environmental impact by cutting its solid waste. It was the first major partnership between an environmental group and a Fortune 500 company in an era when environmental and business interests were often at odds. EDF and McDonald’s worked together to develop a new solid waste reduction plan. The initiative eliminated more than 300 million pounds of packaging, recycled 1 million tons of corrugated boxes, and reduced waste by 30 percent in the decade following the initial partnership, and this was all achieved at no additional cost to the company.
Beyond the traditional political tactics, NGOs also have developed new tactics to pressure business. Ralph Nader pioneered the use of the shareholder resolution to protest such corporate actions as discriminatory hiring, investment in South Africa, nuclear power, environmental impacts, and corporate campaign donations. Since the 1970s, religious organizations, most prominently the Interfaith Center on Corporate Responsibility, have been the chief sponsors of such resolutions. More recently, they have been joined by mainstream shareholder groups, such as large institutional investors and pension funds, in calling for major changes in corporate governance and more recently for more attention to businesses’ environmental footprint and contribution to greenhouse gas emissions and global warming.
Businesses have to also understand the importance of another actor in the business and public policy sphere—the news media. The media provides important functions for both society and business. For example, it influences the public policy agenda by filtering the various events and interest-group areas of attention and it can serve as a sort of “watchdog” over both business and government exposing any unethical practices. Business must constantly monitor the media and be ready to respond. In particular, since the media are usually a pivotal actor in any corporate crisis, company “crisis management” plans must include steps for dealing appropriately with the media and other critics.
· There are three general categories of business responses to the public policy environment—reactive, interactive, and proactive.
· Business efforts to influence public policy and government include not only individual
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