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Chapter 12
Business
Influence on
Government
and Public
Policy

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 Learning Outcomes
1. Describe the evolution of corporate political participation,
including the different levels at which business lobbying occurs.
2. Discuss corporate political spending, and the arguments for and
against it.
3. Describe the different types of political action committees
(PACs), in terms of their historical growth, and the magnitude of
their activity.
4. Describe the agency issues involved with corporate political
spending and some of the contexts where these might arise.
5. Discuss the issues of corporate political accountability and
disclosure.
6. Outline the types of strategies for corporate political activity.
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 Chapter Outline
• Corporate Political Participation
• Business Lobbying
• Corporate Political Spending
• Political Action Committees
• Political Accountability and Transparency
• Strategies for Corporate Political Activity
• Summary
• Key Terms
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 Business Influence on
Government and Public Policy
• Government is a central stakeholder of
business, and its interest is broad and
multifaceted.
• Government’s power is derived from its legal
and moral right to represent the public in its
dealings with business.
• Society would be best served if the system
maintained a balance of power, but a
controversial U.S. Supreme Court ruling
(Citizens United v. Federal Election Commission)
has left business with the power to drive the
political agenda unchecked.
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 Corporate Political Participation

Political Involvement -
• Participation in the formulation and
execution of public policy at various levels of
government.
• Two major approaches to corporate political
activity:
• Lobbying
• Political spending

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 Business Lobbying
Lobbying -
• The process of influencing public officials to promote
or secure passage or defeat of legislation.
• Lobbyists are intensely self-interested.
• Their goals are to promote legislation that is in the
interest of their organization, and to defeat
legislation that runs counter to that goal.
• Because of the large amounts of money involved,
people will cross the legal and ethical line.
• Lawrence Lessig: “There’s all the difference in the
world between a lawyer making an argument to
the jury, and a lawyer handing out $100 bills to
the jurors.”
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8 © 2018 Cengage
• Washington and State Capital Offices
• Law firms
• Narrow/ Company
Public affairs specialists
• Specific Lobbying
PACs
• Grassroots lobbying
• National Automobile Dealers Assn.
• National Association of Home Builders Sector Trade
Midrange
• National Association of Realtors Associations
• American Bankers Association
• Chamber of Commerce of the US
• National Association of Broad Umbrella Trade
Manufacturers Organizations
Examples Representation
Organizational Levels of Lobbying
 Professional Lobbying:
What do Business Lobbyists Do?

• Get access to key legislators

• Monitor legislation
• Establish communication channels with regulatory bodies
• Protect firms against surprise legislation
• Draft legislation, slick ad campaigns, direct-mail campaigns
• Provide issue papers on anticipated effects of legislative
activity
• Communicate sentiments of association or company on
key issues
• Influence outcome of legislation
• Assist companies in coalition building around issues
• Help members of Congress get reelected
• Organize grassroots efforts

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 Grassroots Lobbying
Grassroots Lobbying
• Mobilizing the “grassroots,” which are
individual citizens who might be most
directly affected by legislative activity, to
political action.
Cyberadvocacy
• Using the Internet to amass grassroots
support and enable grassroots supporters
to contact their legislators.

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 Grassroots Lobbying (continued)
Astroturf Lobbying/Grasstops Lobbying
• Fake groups that appear to be genuinely
grassroots but are largely created and
funded by a professional organization or
trade association.

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 Trade Associations
• Established by individual industries to help
businesses in the same industry to interact
with each other and benefit from those
interactions.

• Association-level lobbying is common.

• Sometimes find themselves battling each

other in attempts to lobby Congress.

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 Umbrella Organizations
Two major U.S. umbrella organizations
• Chamber of Commerce of the United
States
• National Association of Manufacturers
(NAM)
Other umbrella organizations
• Business Roundtable
• National Federation of Independent
Businesses (NFIB)
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 Coalitions
• Form when distinct groups or parties
realize they have something in common
that might warrant their joining forces for
joint action.
• Standard practice for firms interested in
accomplishing political goals or influence
public policy.
• Can provide cover for a company wanting
to push their own agenda without its
name attached.

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 Corporate Political Spending
• Corporations must vet requests for political
contributions to avoid “dangerous terrain.”
Arguments for Political Spending -
• The Supreme Court decision in Citizens United ruled
that government may not restrict corporate political
spending, equating such spending with free speech.
Unlimited spending creates an imbalance of power.
Arguments against Political Spending -
• Business is not likely to focus on the common good.
• The Golden Rule of Politics – He who has the gold,
rules.
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 Political Action Committees
• Political Action Committees (PACs) - are
committees organized to raise and spend
money for political candidates, ballot
initiatives, and proposed legislation.
• Connected PAC – is associated with a
specific group or organization, and can only
raise money from that group.
• Nonconnected PAC – can accept funds from
any individual or organization, including a
connected PAC, as long as those
contributions are legal.
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 Top 10 PAC Contributors
to Federal Candidates
• Honeywell International
• AT&T, Inc.
• Lockheed Martin
• National Beer Wholesalers
• National Association of Realtors
• Northrup Grumman
• Credit Union Nation Association
• Blue Cross/Blue Shield
• International Brotherhood of Electrical Workers
• American Bankers Association
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 The Impact of Super PACS
• Super PACS have facilitated outside spending
in politics, and the effect has been huge.

• By the end of January 2015, the top three

presidential candidates had raised over $388
million, their Super PACs had raised over
$100 million.

• Super PACs are still new so their full effect is

not yet known, but sums of money that large
will certainly have a profound impact.

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 Agency Issues
• Agency issues arise when actions of managers
are not in the shareholders’ best interests.
• Corporate political spending, like all corporate
spending, should have the best interests of
the firm, its shareholders and its
stakeholders in mind.
• Political spending should not provide an
opportunity for managers to pursue their own
agendas, or for trade associations to pursue
theirs.

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 Political Accountability
and Transparency (1 of 2)
• Political accountability – an assumption of
responsibility for political actions, and a
willingness to answer for them.
• Today, corporations have unprecedented freedom
to pursue their political agendas; restrictions on
the money they can spend are gone.
• Multiple opportunities exist to hide the nature of
their activities from public view.
• This freedom brings a duty for corporations to be
responsible; a movement to promote corporate
political accountability has formed.
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 Political Accountability
and Transparency (2 of 2)
• Transparency– has become a major issue because much
of today’s corporate political activity is outside public
view.
• Dark Money is the term which refers to the political
contributions from undisclosed donors - more than
$300 million in the 2012 presidential election.
• In 2016, $4.88 million in dark money expenditures had
been made in the year before the election.
• Advocacy is best understood when one knows the
motives of the person making the arguments.
• Voters have a right to know who is making the
arguments.
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 Strategies for
Corporate Political Activity
• The purpose of political strategy is “to secure a
position of advantage regarding a given
regulation or piece of legislation, to gain control
of an idea or a movement and deflect it from
the firm, or to deal with a local community
group on an issue of importance.”
• Three types of strategies that companies use to
interact in the political arena –
• Information Strategy (provide information)
• Financial Incentives Strategy (make contributions)
• Constituency Building Strategy (mobilizing others to
work together)
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 Financial Performance Outcomes

• Studies to determine whether corporate political

spending influences political decisions have mixed
results.
• A meta-analysis found that corporate political
activity had a consistent positive relationship with a
firm’s financial performance, but generic results are
of limited value because the outcomes occur in a
variety of contexts.
• Context matters, and strategies that work in one
situation will not necessarily work in another.
• A 2013 study found a negative association between
political investments and market performance.
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 Key Terms (1 of 2)

• 501(c)(4)s • Golden Rule of Politics

• 527 groups • grassroots lobbying
• Ad hoc coalitions • Independent
• Astroturf lobbying expenditure-only
• Carey committees committee
• Citizens United v. • Leadership PAC
Federal Election • lobbying
Commission • Nonconnected PAC
• Coalitions • Political accountability
• Company lobbying • Political action
• Connected PAC committees (PACs)
• Cyberadvocacy • Political corporate social
• Dark money responsibility (PCSR)
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 Key Terms (2 of 2)
• Political involvement
• Revolving door lobbyists
• Sectoral trade associations
• Shadow lobbying
• Stealth lobbying
• Speechnow v. Federal
Election Commission
• Super PACs
• Trade associations
• Transparency
• Umbrella trade associations

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