1. Chapter 8 Business-Government Relations Copyright © 2008 The McGraw-Hill Companies, All Rights Reserved. McGraw-Hill/Irwin

2. Ch. 8 Key Learning Objectives  Understanding why governments sometimes seek to cooperate with business and other times work against business  Defining public policy and the elements of the public policy process  Knowing the major types of government regulation of business  Explaining the reasons for regulation  Comparing the costs and benefits of regulation for business and society  Examining how regulation affects business in a global context 8 - 2

3. 8 - 3 Ways Government and Business 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  Government may need to act in adversarial role to remedy negative externalities or spill-over effects of the business borne by other stakeholders

4. 8 - 4 Ways Government and Business Interact  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

5. 8 - 5 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

6. 8 - 6 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

7. 8 - 7 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

8. 8 - 8 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

9. 8 - 9 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  Ethical rationale

10. 8 - 10 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

11. 8 - 11 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

12. 8 - 12 Types of Regulation and Regulatory Agencies Figure 8.1

13. 8 - 13 Spending on U.S. Regulatory Activities Figure 8.2

14. 8 - 14 Staffing of U.S. Regulatory Activities Figure 8.3

15. 8 - 15 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  Financial institutions

16. 8 - 16 Forms of International Regulation Figure 8.4