Lecture Business and society: Stakeholders, ethics, public policy (14/e): Chapter 8 - Anne Lawrence, James Weber

Chapter 8 - Business-government relations. After studying this chapter you will be able to: Understanding why sometimes governments and business collaborate and other times work at arm’s length from each other, defining public policy and the elements of the public policy process, explaining the reasons for regulation, knowing the major types of government regulation of business,...

Chapter 8 Business-Government Relations McGraw­Hill/Irwin Copyright © 2014 by The McGraw­Hill Companies, Inc. All rights reserved Ch Key Learning Objectives  Understanding why sometimes governments and business collaborate and other times work at arm’s length from each other  Defining public policy and the elements of the public policy process  Explaining the reasons for regulation  Knowing the major types of government regulation of business  Identifying the purpose of antitrust laws and the remedies that may be imposed  Comparing the costs and benefits of regulation for business and society  Examining the conditions that affect business in a global context 8­2 How Business and Government Relate  Government cooperates with business for mutually beneficial goals through collaborative partnerships  Influenced by nation’s values and customs, therefore differs by county  Government’s goals and business’s objectives are in conflict  Adversarial relationship where business and government works at arm’s length  Companies operating globally may find governments whose legitimacy or right to be in power is questioned  May be faced with dilemma of continuing to business when could be supporting the illegitimate power  May choose to become politically active or refuse to conduct business until legitimate government is in place 8­3 Government’s Public Policy Role  Public policy – A plan of action undertaken by government officials to achieve some broad purpose affecting a substantial segment of a nation’s citizens  Public policy inputs shape a government’s policy decisions and strategies to address problems  Public policy goals can be broad and high-minded or narrow and self-serving  Governments use public policy tools involving combinations of incentives and penalties to prompt citizens to act in ways that achieve policy goals  Public policy effects are the outcomes arising from government regulation 8­4 Types of Public Policies Economic policies   Policies that concern the economy such as fiscal and monetary policy Social assistance policies   Policies that concern social services for citizens such as health care and education 8­5 Types of Economic Public Policies Fiscal policy   Refers to patterns of government taxing and spending that are intended to stimulate or support the economy Monetary policy   Refers to policies that affect the supply, demand, and value of a nation’s currency 8­6 Types of Economic Public Policies  Taxation policy  Raising or lowering taxes on business or individuals  Industrial policy  Directing economic resources toward the development of specific industries  Trade policy  Encouraging or discouraging trade with other countries 8­7 Types of Social Public Policies  Advanced industrial nations have developed elaborate systems of social services for their citizens  Developing economies have improved key areas of social assistance (health care, education)  Social assistance policies that effect specific stakeholder groups are discussed in subsequent chapters 8­8 Government Regulation of Business  Regulation  The action of government to establish rules of conduct for citizens and organizations  It is a primary way of accomplishing public policy  Reasons for regulation     Market failure Negative externalities Natural monopolies Ethical arguments 8­9 Types of Regulation: Economic  Economic regulations  Aim to modify the normal operation of the free market and the forces of supply and demand  Includes regulations that      Control prices or wages Allocate public resources Establish service territories Set the number of participants Ration resources 8­10 Antitrust: A Special Kind of Economic Regulation  Antitrust laws prohibit unfair, anticompetitive practices by business  If a group of companies agreed among themselves to set prices at a particular level, this would generally be an antitrust violation  Predatory pricing  The practice of selling below cost to drive rivals out of business  Two main antitrust enforcement agencies  Antitrust Division of the U.S Department of Justice  Federal 8­11 Types of Regulation: Social  Social regulations  Aimed at such important social goals as protecting consumers and the environment and providing workers with safe and healthy working conditions  Includes regulations which apply to all businesses  Pollution laws  Safety and health laws  Job discrimination laws  And others that only apply to certain businesses  Consumer protection laws for businesses producing and selling consumer goods 8­12 Figure 8.1 Types of Regulation & Regulatory Agencies   8­13 Figure 8.2 Spending on U.S Regulatory Activities   8­14 Figure 8.3 Staffing of U.S Regulatory Activities   8­15 Continuous Regulatory Reform  Levels of regulatory activity tend to be cyclical and dependent on politics  Deregulation refers to the scaling down of regulatory authority  Reregulation is the return to increased regulatory activity  Areas where deregulation has occurred in recent years     Commercial airlines Interstate trucking companies Railroads Financial institutions 8­16 Regulation in a Global Context  As patterns of international commerce grow more complicated, governments recognize the need to establish rules that protect the interests of their own citizens  International regulation in general occurs when there is a growth of exiting, yet often conflicting, national regulations of a product, or the product itself is global in nature, thus requiring international oversight and control  Sometimes national leaders resist the notion of international regulation; yet at other times, international regulation is welcomed or at least accepted as necessary 8­17 ... shape a government’s policy decisions and strategies to address problems  Public policy goals can be broad and high-minded or narrow and self-serving  Governments use public policy tools involving... Objectives  Understanding why sometimes governments and business collaborate and other times work at arm’s length from each other  Defining public policy and the elements of the public policy process...  And others that only apply to certain businesses  Consumer protection laws for businesses producing and selling consumer goods 8 12 Figure 8. 1 Types of Regulation & Regulatory Agencies   8 13