1. Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Chapter 8 Business-Government Relations

2. 8-2 Ch. 8 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

3. 8-3 How Business and Government Interact  Government cooperates with business for mutually beneficial goals  Influenced by nation’s values and customs, therefore differs by county  Government’s goals and business’s objectives are in conflict  Companies operating globally may find governments whose legitimacy or right to be in power is questioned  May 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 place

4. 8-4 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

5. 8-5 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

6. 8-6 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

7. 8-7 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

8. 8-8 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 externalalities  Natural monopolies  Ethical arguments

9. 8-9 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

10. 8-10 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

11. 8-11 Types of Regulation and Regulatory Agencies Figure 8.1

12. 8-12 Spending on U.S. Regulatory Activities Figure 8.2

13. 8-13 Staffing of U.S. Regulatory Activities Figure 8.3

14. 8-14 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

15. 8-15 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