Business, Government and Society MidTerm

Corporate Political Strategy BUS 166, Week 8 Matthew Maguire [email protected] San José State University

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1. Should businesses participate in politics?

2. Information strategies

3. Financial-incentives strategies

4. Constituency-building strategies

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Should businesses participate in politics?

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Tech companies spending more on lobbying Reuters, “Google, Facebook spend big on U.S. lobbying amid policy battles” https://www.reuters.com/article/ us-tech-lobbying/google-facebook-spend-big-on-u-s-l obbying-amid-policy-battles-idUSKCN1PG2TD

• Google spent a company-record $21.2 million on lobbying the U.S. government in 2018.

• Facebook spent $12.62 million; Amazon spent $14.19 million—both company records.

• Microso t spent $9.52 million on lobbying in 2018, up from $8.5 million in 2017 but below its $10.5 million tab in 2013.

• Apple spent $6.62 million in 2018, compared to its record of $7.15 million in 2017.

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Business as a political participant

Question: Is it wrong for companies to spend so much money in order to influence public policy?

• What gives them the right to do so?

• What can they gain?

• What risks are involved?

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Business as a political participant

Our pluralist society depends upon free expression and free association to produce a diverse marketplace of ideas.

But, as the political scientist E.E. Schattschneider observed, “the flaw in the pluralist heaven is that the heavenly chorus sings with an upper-class accent.”

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Business as a political participant

Center for Responsive Politics — a nonpartisan, independent and nonprofit research group tracking money in U.S. politics http://www.opensecrets.org

Federal Election Commission (FEC) — an independent regulatory agency of the U.S. federal government that enforces campaign finance law https://www.fec.gov

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Business as a political participant

Candidate Trump in 2016: “It is time to drain the swamp in Washington, DC” https://www.youtube.com/watch?v=vd3fnEAUuio

• Is Washington broken?

• He has discussed a variety of ethics reforms, including a five-year ban on elected officials lobbying the government a ter they leave government service and an expanded definition of “lobbyist.”

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Arguments for and against political involvement by business

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Business as a political participant

The stakes are too high for business not to be involved in politics.

Corporate political strategy = “activities taken by organizations to acquire, develop, and use power to obtain an advantage” (p. 150)

Like stakeholder engagement, corporate political strategy is o ten an ongoing process.

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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.

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Information strategies

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Information strategy: Lobbying

Lobbying = direct contact with a government official to influence the thinking/actions of that person on an issue or public policy

• The role of the lobbyist is to communicate with and try to persuade others to support an organization’s interest.

Revolving door = when businesses hire former government officials as lobbyists and political advisors

Discussion question: How might policymakers benefit from lobbying?

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Information strategy: Lobbying

Find more information on the revolving door here: https: //www.opensecrets.org/revolving/index.php

• Former members of the 115th Congress

• Current Congressional staffers – Reverse revolvers of the 112th Congress

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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 • 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.

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Information strategy: Lobbying

“K Street” – Many of the top lobbying firms are located within a short distance of the White House or Capitol Building in Washington, DC.

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Information strategy: Lobbying

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Information strategy: Lobbying

More recent data on lobbying can be found here: https://www.opensecrets.org/federal-lobbyin g/summary?inflate=N

• Top spenders

• Top lobbying firms

• Ranked sectors

• Issues

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Information strategy: Direct communications

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

Example: The Business Roundtable https://www.businessroundtable.org

• Organization of CEOs of leading corporations (founded in 1972).

• Advocates for laws it believes “foster vigorous economic growth and a dynamic global economy.”

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Information strategy: Expert witness testimony

Businesses provide facts, anecdotes, or data to educate or influence government leaders at public forums like congressional hearings.

Example: Facebook’s CEO Mark Zuckerberg • Testifies before a joint hearing in Congress following the Cambridge Analytica scandal

• https: //www.youtube.com/watch?v=EgI_KAkSyCw

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Financial-incentives strategies

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Financial incentive strategy: Political Action Committees

Political action committees (PACs) = “independently incorporated organizations that can solicit contributions and then channel those funds to candidates seeking public office” (p. 170)

• Active in industries that are highly regulated, like financial services and health care.

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

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Financial incentive strategy: Political Action Committees

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Financial incentive strategy: Political Action Committees

More recent data on PACs can be found here: https://www.opensecrets.org/pacs/

• What is a PAC?

• Top PACs

• Top recipients of PAC money

• Industry breakdown

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Financial incentive strategy: Super-PACs

As long as PACs do not contribute directly to other bodies (i.e., candidate campaigns or parties), they can accept unlimited contributions from individuals, unions, and corporations.

Allowed following the U.S. Supreme Court rulings in Citizens United v. Federal Election Commission and Speechnow.org v. Federal Election Commission in 2010.

• Also enabled companies to make direct contributions to political campaigns.

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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 tax-exempt organizations; donors’ names and amount of their contributions are not reported to the Federal Election Commission

• No contribution or spending limits • Issue advertising (o ten targeted to help specific candidates)

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Financial incentive strategy: Tax-exempt organizations

Find more information on dark money here: https://www.opensecrets.org/dark-money

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Financial incentive strategy: Personal contributions

Businesses encourage their executives and employees to make personal contributions to the campaigns of candidates whom they are interested in.

• Discussion question: Is it wrong for employers to encourage their employees to vote a certain way or give money to a particular candidate or organization?

Individuals are able to significantly influence the political process if they have money (e.g., Koch brothers).

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Financial incentive strategy: Personal contributions

Find more information on California’s politicians and their donors here: https://www.opensecrets.org/ states/summary.php?state=CA

• SJSU is located within California’s 19th Congressional District, represented in the House of Representatives by Zoe Lofgren

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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.

“The Market As Prison” – policymakers are severely constrained by the economic power of business.

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Constituency-building strategies

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Constituency-building strategy

Businesses use several methods to build support for a particular public policy among constituents.

• Stakeholder coalitions • Influence politics by mobilizing various organizational stakeholders to support its political agenda.

• Advocacy advertising and public relations • Advertisements that focus on a company’s views on controversial political issues.

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Constituency-building strategy

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

• Example: Silicon Valley Organization (SVO), formerly the San Jose Chamber of Commerce https://www.thesvo.com

• Legal challenges • Business seeks to overturn a law a ter it has been passed to challenge the legal legitimacy of the new regulation.

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Managing the political environment

The role of the public affairs department (also called government affairs, government relations — see p. 18):

• To manage the firm’s interactions with governments at all levels

• To promote the firm’s interests in the political process

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Managing the political environment

Typical public affairs executives usually:

• Directly lobby federal or state politicians

• Host visits by politicians to the company’s locations

• Attend funding raising activities

• Participate in coalition building

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Business political action abroad

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

For example, managers must know how the rules governing campaign finance or government lobbying differ from one country to another.

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