Chapter 8 Managing Business Government Relations 8-1 Business and Society POST, LAWRENCE, WEBER McGraw-Hill/ Irwin © The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. Figure 8-1 The case for and against political involvement by business 8-2 Reasons business should be involved Reasons business should not be involved A pluralistic system invites many participants Economic stakes are high for firms and industries Business counterbalances other social interests Business is a vital stakeholder of government McGraw-Hill/ Irwin Executives are not qualified to engage in political debates Business is naïve about politics Business is too big and too powerful - It is the “500 pound gorilla” Business risks its credibility by engaging in partisan politics © The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. Figure 8-2 Levels of business political involvement Level 1: Financial involvement • Formation of political action committee (PAC) • Trade association support 8-3 Level 2: Organizational involvement • Lobbying • Employee grassroots involvement • Shareholder and customer communications Level 3: Strategic public policy involvement • Executive participation • Involvement with industry working groups and task forces • Policy position development McGraw-Hill/ Irwin © The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. Figure 8-3 The triangle of business government society relationships 8-4 Government Media as a wildcard Role of media in raising issues as a player, in keeping/placing issues in the agenda, and in contributing to their resolution has increased dramatically. Government represents society but is not the sole voice in terms of representation. Societal and public interest groups influence Control as previously, government, and government in turn but influence and intrusion attempts to influence and use societal and now go both ways. public interest groups to influence business. Business McGraw-Hill/ Irwin Society © The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. Figure 8-4 Motorola’s public policy agenda Product level (Motorola business unit only) Example Standards for cell phones 8-5 Business unit level (Motorola corporate level) Foreign competitors’ dumping practices Industry level (Motorola and competitors) Encryption standards/regulation Multi-industry level (Motorola and non-competitors) * specific proposals * general proposals McGraw-Hill/ Irwin U.S. policy on trade sanctions WTO membership for China National macroeconomic policies Linking human rights to trade policy © The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. Figure 8-5 Profile of political action committees 8-6 McGraw-Hill/ Irwin © The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. Figure 8-6a Financial activity of political action committees (PACs) 8-7 No. of PACs Contributions from reporting some PACs 1/1/99 to activities (1999-2000) 6/30/00 (millions) Money spent on U.S. Senate Races All PACs 4,393 $430.6 $41.6 Corporate PACs Labor PACs 1,703 119.3 18.2 348 95.7 5.4 888 102.9 10.4 1,293 99.7 6.1 161 2.8 1.3 Trade membership/ health org. PACs Nonconnected PACs Other McGraw-Hill/ Irwin © The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. Figure 8-6b Financial activity of political action committees (PACs) 8-8 Money spent on U.S. House of Rep. Races (millions) All PACs Corporate PACs Labor PACs Trade membership/ health org. PACs Nonconnected PACs Other McGraw-Hill/ Irwin PACs donations to Democratic Senate and House candidates (millions) PAC donations to Republican Senate and House candidates (millions) $122.9 $80.2 $86.3 41.0 20.5 40.2 28.7 40.2 2.8 34.7 17.8 27.5 14.8 8.4 12.8 3.6 2.2 2.8 © The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. Figure 8-7 What other countries do to control money in politics Limits on Public financing fund raising or spending U.K. No Yes France Reimburse candidates based on votes received Yes Japan No Yes Reimbursement to Germany parties according to votes received McGraw-Hill/ Irwin No 8-9 Television Free time based on party's strength in previous election Free and equal time to candidates Candidates given some free time for speeches; no negative advertising Free time to candidates on public stations © The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. Exhibit 8-A Politics and money in election 2000 8-10 • Republican and Democratic parties raised a total of $1.2 billion in “hard” and “soft” dollars for the 1999-2000 election cycle. • Republicans raised $447.4 million of federal, or “hard, money.” • Democrats raised $269.9 million of “hard money.” • Largest percentage increases for both parties occurred in nonfederal, or “soft money.” • Republicans raised $244.4 million, an increase of 73% over the same period in 1995-1996. McGraw-Hill/ Irwin © The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. Exhibit 8-A(continued) Politics and money in election 2000 • Democrats raised $243 million, a 99% increase. 8-11 • Congressional campaign spending for the 1999-2000 election cycle grew to more than $858 million, an increase of $240 million, or 39%, from 1997-1998 levels. • More than $9 million was spent by candidates in special elections and more than $109 million by candidates who lost in primary elections. • Political action committees supported by business, labor, and other special interests accounted for a substantial portion of this fundraising. McGraw-Hill/ Irwin © The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. Exhibit 8-B International Business Government Relations 8-12 Colonial Mutual Group • Geographically diversified company capitalizes on market niches of businesses in which it operates and diversifies their business accordingly. • Business strategy and the public affairs strategy must be adapted to market conditions. • Colonial's top management defined its geographic markets as falling into three groups in the late 1990s: - Mature markets - Australia, UK, and New Zealand - Existing Asian markets - Hong Kong, Indonesia, Malaysia, Philippines - Potential and new markets - China, Vietnam, India. McGraw-Hill/ Irwin © The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. Exhibit 8-B(continued) International business government relations Mature markets: • consumerism, the media, and government relations create conditions that require major public affairs resources • focus on media, government rulemaking, product branding, and communications 8-13 Asian markets: • a less aggressive media, non-English speaking staff, government bureaucracy, and cultural diversity • relationships managed by local managers of each country • top management has little involvement in public affairs China, Vietnam, and India: • negotiate government permission to operate in these places • decentralize most government and media relations to local managers McGraw-Hill/ Irwin © The McGraw-Hill Companies, Inc., 2002 All Rights Reserved.