Chapter 8

Influencing the Political

Environment

Copyright 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.

Ch. 8: Key Learning Objectives

Understanding the arguments for and against business
participation in the political process.
Knowing the types of corporate political strategies and
the influences on an organizations development of a
particular strategy.
Assessing the tactics businesses can use to be involved
in the political process.
Examining the role of the public affairs department and
its staff.
Recognizing the challenges business faces in managing
businessgovernment relations in different countries.

Copyright 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of 8-2
McGraw-Hill Education.

Business as a Political Participant

This debate involves the question of whether,
and to what extent, business should legitimately
participate in the political process.
This justice and fairness argument becomes
even stronger when one considers the significant
financial consequences that government actions
may have on business.
Businesses see themselves as countervailing
forces in the political arena.
One significant opposition to businesses in the
political arena comes from labor unions.

Copyright 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of 8-3
McGraw-Hill Education.

Business as a Political Participant

Recent annual Harris polls
showed concern about business
influence among Americans:
88% felt business had too much

political power
87% felt political action committees (a
favorite business political tactic) were
too powerful
At the same time only 5% of
respondents felt small business had too
much power in the political
environment

Copyright 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of 8-4
McGraw-Hill Education.

Business as a Political Participant

Top labor union PAC
donors:
Engineers Political Education

Committee
AFL-CIOs Committee on
Political Education
International Brotherhood of
Electrical Workers PAC
Carpenters Legislative
Improvement Committee
American Federation of State
County & Municipal Employees

Copyright 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of 8-5
McGraw-Hill Education.

The Arguments for and

Against Political Involvement by Business
Figure 8.1

Copyright 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of 8-6
McGraw-Hill Education.

Types of Corporate Political Strategy

Three strategic types:
Information strategy
Businesses seek to provide government

policymakers with information to influence

their actions.

Financial-incentives strategy
Businesses provide incentives to influence

government policymakers to act in a certain

way.

Constituency-building strategy
Businesses seek to gain from other affected

organizations to better influence

government policymakers to act in a way
that helps them.

Copyright 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of 8-7
McGraw-Hill Education.

Corporate Political Strategy

Involves the activities taken by organizations to
acquire, develop, and use power to obtain an
advantage
To further a firms economic survival or growth.

Target limiting a competitors progress or ability

to compete.
Strategies: exercise the businesss right to a
voice in government affairs
Such as some companies protest against the Arkansas

religious freedom bill.

Companies develop an ongoing political strategy.
Example: firms in the chemical industry

Copyright 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of 8-8
McGraw-Hill Education.

Business Strategies for Influencing

Government
Figure 8.2

Copyright 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of 8-9
McGraw-Hill Education.

Promoting an Information Strategy:

Lobbying
Lobbying: direct contact with a
government official to influence the
thinking/actions of that person on an
issue or public policy.
Lobbyists role:
Communicate with and try to persuade others
to support an organizations interest.

Revolving door: when businesses hire

former government officials as lobbyists
and political advisors.

Copyright 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of8-10
McGraw-Hill Education.

Promoting an Information Strategy:

Lobbying
Under U.S. law and EU directive, lobbying
activities are severely limited and disclosed
publicly.
Lobbying firms and organizations employing
in-house lobbyists must:
Register with the government
Must file regular reports on their earnings or expenses
Indicate the issues and legislation that were the focus
of their efforts

These rules are to guarantee that politicians

are free from undue influence and represent
the public interest.

Copyright 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of8-11
McGraw-Hill Education.

Total Federal Lobbying Spending and

Number of Lobbyists, 1998 to 2014
Figure 8.3

Copyright 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of8-12
McGraw-Hill Education.

Promoting an Information Strategy:

Direct Communications

Businesses invite
officials to participate
in activities that will
improve government
officials
understanding of
management and
employee concerns.

Copyright 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of8-13
McGraw-Hill Education.

The Business Roundtable

Organization of CEOs of leading
corporations (founded in 1972).
Promote direct communication
between business and
policymakers.
Studies various public policy
issues.
Advocates for laws it believes
foster vigorous economic
growth and a dynamic global
economy.

Copyright 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of8-14
McGraw-Hill Education.

Promoting an Information Strategy:

Expert Witness Testimony

Businesses provide
facts, anecdotes, or
data
to educate or influence

government leaders at
public forums like
congressional hearings.

Copyright 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of8-15
McGraw-Hill Education.

Promoting a Financial Incentive Strategy:

Political Action Committees

Independently incorporated

organizations.
Solicit contributions and channel
those funds to candidates seeking
political office.
Active in industries that are highly
regulated.
Example: financial services and health care

industries

Disadvantage:
Contributions are capped at fairly low levels
Companies cannot give money directly to their
affiliated PACs

Copyright 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of8-16
McGraw-Hill Education.

Political Action Committee Activity

Figure 8.4

Copyright 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of8-17
McGraw-Hill Education.

Promoting a Financial Incentive Strategy:

Super-PACs

As long as PACs did not

contribute directly to
other bodies, they could
accept unlimited
contributions from
individuals/ unions/
corporations.

To support particular

candidates or parties.
Example: the Senate Majority
PAC and the House Majority
PAC

Copyright 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of8-18
McGraw-Hill Education.

Promoting a Financial Incentive Strategy:

Tax-exempt Organizations
Tax-exempt Organizations: a
third mechanism businesses can
use to direct money to election
campaigns.
Dark money: contributions made to the

organizations since the donors names

and amount of their contributions were
not reported to the Federal Election
Commission.
Have no contribution of spending limits.
Intended to promote social welfare but
now used to support politicians running
for office.

Copyright 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of8-19
McGraw-Hill Education.

Promoting a Financial Incentive Strategy:

Direct Contribution by Corporations

Citizens United v. the Federal

Election Commission

Decision allowed companies for the

first time to contribute directly to
political campaigns.
Critics said it would corrupt
democracy.

McCutcheon v. Federal

Election Commission

Abolished all limits on election

spending by corporations as well as
unions.

Copyright 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of8-20
McGraw-Hill Education.

Promoting a Financial Incentive Strategy:

Executive and Employee Personal Contributions

Encourage their executives/

employees to make personal

contributions to the campaigns
of candidates whom they are
interested in.

Individuals are able to

significantly influence the

political process if they have
money.
Example: Charles G. and David H.
Koch

Copyright 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of8-21
McGraw-Hill Education.

Promoting a Financial Incentive Strategy:

Economic leverage
When a business uses its

economic power to
threaten to leave a city,
state, or country unless a
desired political action is
taken.
To persuade a government
body to act in a certain
way that would favor the
business.

Copyright 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of8-22
McGraw-Hill Education.

Promoting a Constituency Building

Strategy
Often called a
Grassroots
Strategy

Objective is to shape

policy by mobilizing
the broad public in
support of a business
organizations
position.

Copyright 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of8-23
McGraw-Hill Education.

Promoting a Constituency Building

Strategy
Type of strategies:
Stakeholder coalitions
Influence politics by

mobilizing various
organizational stakeholders
to support its political
agenda.

Advocacy advertising
and public relations

Advertisements that focus

on a companys views on
controversial political issues.

Copyright 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of8-24
McGraw-Hill Education.

Promoting a Constituency Building

Strategy
Type of strategies:
Trade associations

Coalitions of companies in
the same or related
industries used to
coordinate businesses
grassroots mobilization
campaigns.

Legal challenges

Business seeks to overturn

a law after it has been
passed to challenge the
legal legitimacy of the new
regulation.

Copyright 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of8-25
McGraw-Hill Education.

Levels of Business Political Involvement

Figure 8.5

Copyright 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of8-26
McGraw-Hill Education.

Levels of Business Political Involvement

Bundling: the
company takes all of
the contributions to
the candidates,
clearly indicating that
the contributions are
from the firms
stockholders.

Copyright 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of8-27
McGraw-Hill Education.

Managing the Political Environment

The role of the public affairs
department:
To manage the firms interactions with

governments at all levels

To promote the firms interests in the political
process

Typical public affairs executive

usually:
Direct lobbying with federal or state

politicians
Host visits by politicians to the companys
locations
Attend funding raising activities
Participate in coalition building

Copyright 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of8-28
McGraw-Hill Education.

Business Political Action Abroad

Managers must be aware of the
opportunities for and
restrictions on business
involvement in the political
processes in other countries.
Issues:
participation in the political

environment
campaign financing
fair ethical climate throughout the
public policy process
Example: EU antitrust case and the
Right To Be Forgotten controversy at
Google

Copyright 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of8-29
McGraw-Hill Education.