Chapter 8: Business-Government Relations

Chapter 8 Business-Government RelationsCopyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/IrwinCh. 8 Key Learning ObjectivesUnderstanding why sometimes governments and business collaborate and other times work at arm’s length from each otherDefining public policy and the elements of the public policy processExplaining the reasons for regulationKnowing the major types of government regulation of businessIdentifying the purpose of antitrust laws and the remedies that may be imposedComparing the costs and benefits of regulation for business and societyExamining the conditions that affect business in a global context8-*How Business and Government RelateGovernment cooperates with business for mutually beneficial goals through collaborative partnershipsInfluenced by nation’s values and customs, therefore differs by countyGovernment’s goals and business’s objectives are in conflictAdversarial relationship where business and government works at arm’s lengthCompanies operating globally may find governments whose legitimacy or right to be in power is questionedMay be faced with dilemma of continuing to do business when could be supporting the illegitimate power May choose to become politically active or refuse to conduct business until legitimate government is in place8-*Government’s Public Policy RolePublic policy – A plan of action undertaken by government officials to achieve some broad purpose affecting a substantial segment of a nation’s citizensPublic policy inputs shape a government’s policy decisions and strategies to address problemsPublic 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 goalsPublic policy effects are the outcomes arising from government regulation8-*Types of Public Policies Economic policiesPolicies that concern the economy such as fiscal and monetary policySocial assistance policiesPolicies that concern social services for citizens such as health care and education8-*Types of Economic Public Policies Fiscal policyRefers to patterns of government taxing and spending that are intended to stimulate or support the economyMonetary policyRefers to policies that affect the supply, demand, and value of a nation’s currency8-*Types of Economic Public PoliciesTaxation policy Raising or lowering taxes on business or individualsIndustrial policy Directing economic resources toward the development of specific industriesTrade policy Encouraging or discouraging trade with other countries8-*Types of Social Public PoliciesAdvanced industrial nations have developed elaborate systems of social services for their citizensDeveloping economies have improved key areas of social assistance (health care, education)Social assistance policies that effect specific stakeholder groups are discussed in subsequent chapters8-*Government Regulation of BusinessRegulationThe action of government to establish rules of conduct for citizens and organizations It is a primary way of accomplishing public policyReasons for regulationMarket failureNegative externalitiesNatural monopoliesEthical arguments8-*Types of Regulation: EconomicEconomic regulationsAim to modify the normal operation of the free market and the forces of supply and demand Includes regulations thatControl prices or wagesAllocate public resourcesEstablish service territoriesSet the number of participantsRation resources8-*Antitrust: A Special Kind of Economic Regulation Antitrust laws prohibit unfair, anticompetitive practices by businessIf a group of companies agreed among themselves to set prices at a particular level, this would generally be an antitrust violation. Predatory pricingThe practice of selling below cost to drive rivals out of business Two main antitrust enforcement agenciesAntitrust Division of the U.S. Department of JusticeFederal 8-*Types of Regulation: SocialSocial regulationsAimed at such important social goals as protecting consumers and the environment and providing workers with safe and healthy working conditionsIncludes regulations which apply to all businessesPollution lawsSafety and health lawsJob discrimination lawsAnd others that only apply to certain businessesConsumer protection laws for businesses producing and selling consumer goods8-*Types of Regulation & Regulatory AgenciesFigure 8.1 8-*Spending on U.S. Regulatory ActivitiesFigure 8.2 8-*Staffing of U.S. Regulatory ActivitiesFigure 8.3 8-*Continuous Regulatory ReformLevels of regulatory activity tend to be cyclical and dependent on politicsDeregulation refers to the scaling down of regulatory authorityReregulation is the return to increased regulatory activityAreas where deregulation has occurred in recent yearsCommercial airlinesInterstate trucking companiesRailroadsFinancial institutions8-*Regulation in a Global ContextAs patterns of international commerce grow more complicated, governments recognize the need to establish rules that protect the interests of their own citizensInternational 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 controlSometimes national leaders resist the notion of international regulation; yet at other times, international regulation is welcomed or at least accepted as necessary8-*