Chapter 7- Business and

Public Policy
BUSINESS-GOVERNMENT RELATIONS
INFLUENCING THE POLITICAL ENVIRONMENT
BY: NACELIA HULL
INTERNATIONAL COLLEGE OF THE CAYMAN ISLANDS (BE.SO-425)
 Business-Government Relations
How Business and Government Relate
The relationship between businesses and government is dynamic and complex, but they work together
to seek a collaborative partnership, to work at arms length and legitimacy issues (Lawrence & Weber,
2014).
1. Seeking Collaborative Partnership- The government may work with businesses to get mutual benefits,
so they see each other as key partners and work openly to achieve a common objective. A crisis may
bring them together as well.
2. Arms Length- Government and businesses goals my differ so they are at odds which cause them to
work at arms length from each other or small businesses may not like government regulations.
3. Legitimacy Issues- Business may refuse to work with the government because their authority, their right
to be in power is questioned or they may illegally assume law making or legislative power. So, businesses
may not want to run their company under a government that supports illegitimate power.
 Governments Public Policy Role

The government plays an essential role in the modern society whether it is their safety or protection which
is provided by the police force and the fire department. These are all provided by the government to
protect their citizens. The government aim is to sets goals, plans and actions that will allow them to
achieve their purpose which is to serve the public (Lawrence & Weber, 2014).
There are four elements of public policy- inputs, goals, tools, and effects. Public policy inputs are external
pressures that shape a governments policy decisions and strategies to address problems. Goals can be
broad and high-minded or narrow and self-serving. The government use different tools to achieve their
goals. Lastly, effects are the outcomes caused by government regulations; some may be intended or
unintended (Lawrence & Weber, 2014).
Also there are two types of public policy- economic policies and social assistance policies, these may be
distinct or intertwined(Lawrence & Weber, 2014). Economic Policy directly concerns the economy so this
how the government collects and spend funds that are used to stimulate or support the economy. For
example, they provide bailouts.
The social assistance policy covers the wellbeing of citizens, and they have improved key areas such as
healthcare and education; they have also developed systems for social services.
 Government Regulation of Business

Societies rely on the government to establish rules of conduct for citizens and organizations called
regulations. Many companies often have lawyers, public affairs specialist and expert to monitor and
manage their interaction with the government because of their many levels of complex webs of
regulation.
Some of the many reasons whys government implement rules is to prevent 1. market failure- occurs when
the marketplace fails to adjust prices for the true costs of a firm behaviour. For example, Fosters do not
spend on equipment to reduce population so the government can implement rules to enforce such
activities.
2. Negative Externalities- takes place when manufactures or distribution of a product give rise to
unplanned cost caused by customers, competitors, communities and other business. So, to control this
the is where the government steps in.
3. Natural Monopolies- CUC is an example of a natural monopiles so they might raise their prices as much
as they wish because there is no competition so the government has intervene.
4. Ethical Arguments- employers usually set rules for the employees so they may argue that they want to
be self-regulated so that they can cut out the government costly regulations (Lawrence & Weber, 2014).
 Government Regulation of Business

There are two types of regulation: economic regulation and social regulation (Lawrence & Weber, 2014). 1.
Economic regulation-the aim is to modify the normal operations of the free market and the forces of supply
and demand. Also, they control prices or wages, allocate public resources, establish service territories, set the
numbers of participants, and ration resources.
2. Social Regulation- is to protect consumers, the environment and providing workers with safe and healthy
working conditions. There are many other important areas such as equal employment opportunity, protection
of pension benefits, and healthcare.
The Effects of Regulation: is the cost and effectiveness of regulation as some unintended consequences that
cannot be looked over but they hope the benefits outweigh the cost.
The Costs and Benefits of Regulation- there are no free benefits, so someone has to pay for them but some
benefits are worth the cost while some exceed the benefits. But the test of cost-benefit analysis helps the
public to understand what is at stake when new regulation is sought.
Continuous Regulation Reform- regulations may lessen (deregulation) or become greater (reregulation).
Deregulation- is the removal or scaling down of regulatory authority and regulatory activity of government.
Reregulation- is the increase or expansion of government regulation, especially in areas that were previously
reduced (Lawrence & Weber, 2014).
 Regulation in a Global Context

As we know consumer of particular country buy food, automobiles, and clothing from companies that
are located all over the world- Africa, Asia, Australia, Canada, Europe, and Latin America, this is called
international commerce. Hence, the government has to regulate rules to protect their citizens because
no nation would want their citizen to consume dangerous products (Lawrence & Weber, 2014).
Example- Most of the clothing stores and grocery store in the Cayman Islands purchase their items from
foreign countries, so the government make sure that they are inspected when passing through customs.
Also, business should take into consideration the different challenges that can occur when doing
business with other countries. Challenges such as international company structure, foreign laws and
regulations, international accounting, cost calculation and global pricing strategy, universal payment
methods, currency rates, political risk and so no (Hult News, 2017).
 Chapter 8- Influencing the Political Environment:
Participants in the Political Environment
There are many participants that are featured in a countrys political environment. These participants
have different goals and objectives, varying access to political tools, and disparate levels of power or
influence. Businesses, stakeholders and coalitions participate in political process and claims of legitimacy
(Lawrence & Weber, 2014).
Business as a Political Participant- there are many debates on whether businesses should take part in
government affairs. Some say since groups such as special interest groups are permitted to be involved in
the political process it is only fair for businesses to be involved as well.
Stakeholder Groups on Politics- many stakeholder groups has a voice in politics and public policy process
and they use the same tactics that businesses use to influence government officials, elections and
regulations.
Coalition Political Activity- businesses and stakeholder groups do not act alone in political process; two or
more participants may join together. Ad hoc coalitions bring diverse groups together to go against or for
legislation or regulation but this can create alliances and curious conflicts.
 Influencing the Business-Government
Relationship

Most people think the stakes are too high for businesses not to take part in politic so the government must
act on many issues; these issues may affect the operations of businesses and pursuit of economic stability
and growth. Hence, businesses develop a corporate political strategy (Lawrence & Weber, 2014).
Corporate Political Strategy- is the activities that organizations take in to acquire, develop, and use
power to obtain an advantage.
An example of an advantage is changing or not changing a particular allocation of resources, such as
government support for a project supported by a business or an industry.
Companies may put political strategies in place so that are ready when a public issue arise, if they think
they are a risk of harm from unexpected issues, or when they are a frequent target of the public
attention.
 Political Action Tactics

Tactics or tools that businesses use to influence the public policy process are often similar to those
available to other political participants. Though some businesses will have more financial resource than
others but it is not the amount of money spent but the tactics will determine their effectiveness. Tactics
that business use in broken down into three strategic areas of information, financial incentives, and
constituency building (Lawrence & Weber, 2014).
1. Promoting an Information Strategy- is where businesses seek to provide government policymakers with
information to influence their action, such as lobbying or direct communication.
Lobbying is an important tool used by businesses involvement in politics. Most companies have lobbyist-
keep the company abreast of developments that may affect them or to communicate with government
officials.
Direct communications is another information strategy that is used to communicate with policymakers.
Business can communicate directly with officials by inviting them to their local pant facilities, attend
award ceremonies, give speeches to employees, and participate in activities that will improve the
officials understanding of management and employees.
 Political Action Tactics

2. Promoting a Financial-Incentive Strategy- in attempt to persuade policymakers to act in a certain way

or cast a vote favourable to the businesss interest by providing financial incentives. The two most
common tools used when carrying out this strategy are Political action committees and economic
leverage (Lawrence & Weber, 2014).
Political Action Committees- business use this strategy to form and contribute to a political action
committee. Political action committee (PAC) are independently incorporated organization that can
solicit contributions and then channel those funds to candidates seeking political office or to be elected.
Economic leverage- this is used by businesses when pursuing a financial incentive strategy to used their
economic leverage to influence public policymakers. This happens when a business uses its economic
power to threaten to leave country unless a desired political action is taken or to persuade a
government body to act in favour of the business.
3. Promoting a Constituency-Building Strategy- is used to seek support from organization, people who are
also affected by the public policy and who are sympathetic to businesss political position. And this is
sometimes called the grassroot strategy or grass tops strategy, because its objective is to influence local
leaders opinion. Advocacy advertising, public relations, and building coalitions with other affected
stakeholders is used as a method to build support among constituents.
 Political Action Tactics

Stakeholders coalitions- business often try to influence politics by mobilizing various organizational
stakeholders to support their political agenda. Reason being if a political issue can negatively affect a
business it will affect stakeholders as well.
Advocacy advertising- this focuses on an organizations or companys view on controversial political
issues. Advocacy advertisement is also called issue advertisement and can appear in the newspaper, on
the television, or in the media outlets.
Trade Association- business work through trade associations to coordinate their grassroots mobilization
campaigns, such as the Legislative Exchange Council. Letters, telephone calls, tweets, blogs, emails, and
other Internet communications to register approval or disapproval of government officials position on an
important issue are the activities of a trade association.
Legal Challenges- is used by businesses as a political tactic, this enables them to seek to overturn a law
after it has been passed or threatens to challenge the legal legitimacy of the new regulation in the
courts.
 Levels of Political Involvement
Business can choose how involved they want their company to be in politics. There are three different
levels of involvement (Lawrence & Weber, 2014 ):
Level 1. Limited Organizational Involvement (indirect and impersonal)- is to contribute to political action
committee and support a trade association or industry.
Level 2. Moderate Organization Involvement (indirect yet personal)- when there is an organizational
lobbyist, employee grassroot involvement, stakeholders and customers encouraged to become
involved.
Level 3. Aggressive Organizational Involvement (direct and personal)- when there is executive
participation, involvement with industry working groups and task force and public policy development.
Example- there is a program called leadership that shapes the leaders of tomorrow, it is a six-month
programme. It allows participants to acquire an in-depth view of social, economic, business, and political
issues; to get involved in the community projects and develop the necessary skills to assume leadership
roles and (Chamber Position, n.d.).
 Managing the Political Environment

Most businesses use the public affairs department to manage political activities. Public affairs department
manages the companys interactions with government at all levels and promotes the firms interests in
the political process. The head of most public affairs department are senior vice presidents or vice
president position; some report directly to the CEO, while others are one level (Lawrence & Weber, 2014).
 Business Political Action: A Global
Challenge
Firms conduct business with companies abroad, so managers have to be aware of the opportunities and
restrictions on business involvement in the political processes. Also, it is important that ethical morals and
standards guide managers as they deal with political issues with different communities and countries
(Lawrence & Weber, 2014).
 References

Chamber Positions. (n.d.). Retrieved November 10, 2017, from

http://www.caymanchamber.ky/chamberpositions.html

Hult News. (2017, September 28). 11 Biggest Challenges of International Business in 2017. Retrieved from
http://www.hult.edu/news/international-business-challenges/

Lawrence, A. T., & Weber, J. (2014). Business and society: stakeholder, ethics, public policy (14th edition).