Managerial Ethics And Social Responsibility-4

Chapter7-BusinessGovernmentRelations.pptx

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Chapter 7

Business-Government Relations

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Ch. 7: Key Learning Objectives

7-1 Understanding why sometimes governments and business collaborate and other times work in opposition to each other.

7-2 Defining public policy and the elements of the public policy process.

7-3 Explaining the reasons for regulation.

7-4 Knowing the major types of government regulation of business.

7-5 Identifying the purpose of antitrust laws and the remedies that may be imposed.

7-6 Comparing the costs and benefits of regulation for business and society.

7-7 Examining the conditions that affect the regulation of business in a global context.

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How Business and Government Relate

Seeking a collaborative partnership

Government cooperates with business for mutually beneficial goals.

Influenced by nation’s values and customs.

Working in opposition to government

Government’s goals and business’s objectives are in conflict and results in an adversarial relationship.

Legitimacy issues

Companies operating globally may find governments whose legitimacy or right to be in power is questioned.

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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 sets the goals, plans, and actions that each national government follows in achieving its purposes.

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Elements of Public Policy

Public policy inputs: external pressures that 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.

Public policy tools: incentives and penalties that government uses to achieve policy goals.

Public policy effects: the outcomes arising from government regulation.

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Types of Public Policy: Economic1

Economic policies

Fiscal policy: patterns of government collecting and spending funds to stimulate or support the economy.

Monetary policy: policies that affect the supply, demand, and value of a nation’s currency.

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Types of Public Policy: Economic2

Other types of economic 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.

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Types of Public Policy: Social

Social assistance policies

Policies that concern social services for citizens.

 Example: health care and education.

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Government Regulation of Business1

Regulation

The action of government to establish rules of conduct for citizens and organizations.

It is a primary way of accomplishing public policy.

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Government Regulation of Business2

Reasons for regulation

Market failure: marketplace fails to adjust prices for the true costs of a firm’s behavior.

 Example: EU standards for food contamination.

Negative externalities: the manufacture or distribution of a product gives rise to unplanned or unintended costs (spillover effects).

Natural monopolies: without competition, firms could raise prices as much as they want.

 Example: electric utility services.

Ethical arguments: consequences, fairness issues.

 Example: the recent UK Modern Slavery Act.

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Types of Regulation: Economic

Economic regulations

Aim to modify the normal operation of the free market and the forces of supply and demand; the oldest form of regulation.

Includes regulations that

Control prices or wages.

Allocate public resources.

Establish service territories.

Set the number of participants.

Ration resources.

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Antitrust: A Special Kind of Economic Regulation

Antitrust laws prohibit unfair, anticompetitive practices by business.

 Example: The AT&T – Time Warner Merger of 2018.

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 Trade Commission.

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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:

Equal employment opportunity.

Protection of pension benefits.

Health care for all citizens.

Pollution control.

Safety and health concerns.

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Types of Regulation & Regulatory Agencies

Figure 7.1

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The Effects of Regulation1

Government hopes that the benefits arising from regulation outweigh the

costs.

The Costs and Benefits of Regulation

Cost-benefit analysis helps the public understand what is at stake when new regulation is sought.

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Spending on U.S. Regulatory Activities

Figure 7.2

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The Effects of Regulation2

Continuous Regulatory Reform

Deregulation: the removal or scaling down regulatory activities of government.

Example: Deregulation in the United States, starting in 2017.

Reregulation: the expansion of government regulation.

Example: Reregulation of the securities and financial services industries in the 2000s.

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Regulation in a Global Context

Government established rules to protect the interests of the their citizens.

International regulatory agreements and cooperation.

Sometimes, nations negotiate agreements directly with one another.

Sometimes, they do so under the auspices of the United Nations or regional alliances.

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Accessibility Content: Text Alternatives for Images

Types of Regulation & Regulatory Agencies Text Alternative

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The illustration contains two concentric circles that are divided into fifteen segments. The inner circle contains categories of business, and the outer circle depicts the corresponding regulatory agency. Segments 1 to 7, 13, 14, and 15 fall under the economic regulation category. Segments 8, 9, 10, 11, and 12 fall under the social regulation category. In a clockwise manner of appearance, the content in the segments of the inner circle and their corresponding agencies in the outer circle read as follows: Segment 1 – Energy under the FERC and the DOE. Segment 2 – Banks under the FRB, Treasury department, FDIC, and FREDDIE MAC. Segment 3 – Agribusiness under the USDA. Segment 4 - Antitrust under the FTC and the DOJ. Segment 5 - Securities and investment under the SEC and the CFTC. Segment 6 - Labor practices under the NLRB, DOL, and the FLRA. Segment 7 - Taxation under the IRS and the BATF. Segment 8 - Vehicle safety and economy under NHTSA. Segment 9 - Environmental protection under the EPA. Segment 10 - Consumer protection under the FTC, CPSC, FDA, and CFPB. Segment 11 - Safety and health under OSHA, MSHA, and HHS. Segment 12 - Discrimination under EEOC and the DOL. Segment 13 - Nuclear industry under the NRC. Segment 14 - Transportation under the FAA, DOT, and NTSB. Segment 15 - Radio, TV, phones, cable under the FCC.

Below this illustration, the acronym and its full name is listed for each economic and social regulatory agency. Under the heading economic regulatory agencies, the following agencies are identified: NRC - Nuclear Regulatory Commission. FAA - Federal Aviation Administration. FCC - Federal Communications Commission. FERC - Federal Energy Regulatory Commission. FRB - Federal Reserve Board. CFTC - Commodity Futures Trading Commission. Freddie MAC - Federal Home Loan Mortgage Corporation. DOT - Department of Transportation. USDA – Department of Agriculture. DOJ – Department of Justice. FLRA – Federal Labor Relations Board. FTC - Federal Trade Commission. SEC - Securities and Exchange Commission. NLRB - National Labor Relations Board. IRS - Internal Revenue Service. BATF - Bureau of Alcohol, Tobacco, Firearms, and Explosives. FDIC - Federal Deposit Insurance Corporation. DOE - Department of Energy. NTSB - National Transportation Safety Board. Under the heading social regulatory agencies, the following agencies are listed: EEOC - Equal Employment Opportunity Commission. OSHA - Occupational Safety and Health Administration. MSHA - Mine Safety and Health Administration. FTC - Federal Trade Commission. HHS - Department of Health and Human Services. CPSC - Consumer Product Safety Commission. FDA - Food and Drug Administration. EPA - Environmental Protection Agency. NHTSA - National Highway Traffic Safety Administration. CFPB - Consumer Financial Protection Bureau.

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Spending on U.S. Regulatory Activities Text Alternative

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The x-axis is labeled years, and it contains eight markings. From the left to the right, these markings read 1960, 1970, 1980, 1990, 2000, 2010, 2015, and 2018.

The y-axis is labeled constant (real) 2009 dollars, and it contains seven markings. From the bottom to the top, these markings read 0; 10,000; 20,000; 30,000; 40,000; 50,000; and 60,000.

A key in the top left corner of the illustration indicates that social spending is represented as a dark blue and economic spending as a light blue.

The data reveals that spending on U.S. economic regulatory activities has gradually increased since the ‘60s and then flattening out after 2005.

In 1960, economic spending was approximately 1,000 dollars. In 1970, it was about 2,000 dollars.

In 1980, it was about 2,800 dollars.

In 1990, it rose to around 3,800 dollars.

In 2000, it jumped to over 5,400 dollars.

In 2010, spending rose to over 8,000 dollars.

In 2015, it skyrocketed to nearly 11,000 dollars.

In 2018, a slight decline dropped the spending to just over 10,800 dollars.

Spending on U.S. social regulatory activities has also increased since the ‘60s.

In 1960, social spending was just over 2,000 dollars. In 1970, it jumped to almost 5,000 dollars.

In 1980, it rose dramatically to just under 14,000 dollars.

In 1990, it was just under 17,000 dollars.

In 2000, it jumped to nearly 26,000 dollars.

In 2010, it rose significantly to over 45,000 dollars. In 2015, it increased to over 46,000 dollars.

And in 2018, social spending reached an all-time high of over 53,000 dollars.

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