Business and Society Chapter Notes

Chapter 12

Business Influence on Government and Public Policy

LEARNING OUTCOMES

After studying this chapter, you should be able to:

  1. Describe the evolution of corporate political participation.
  2. Differentiate among the different levels at which business lobbying occurs.
  3. Explain the phenomenon of political action committees (PACs) in terms of their historical growth, the magnitude of their activity, and the arguments for and against them.
  4. Define coalitions and describe the critical role they now assume in corporate political involvement.
  5. Discuss the Bipartisan Campaign Reform Act and other issues surrounding campaign financing.
  6. Outline the principal strategic approaches to political activism that firms are employing.

TEACHING SUGGESTIONS

INTRODUCTION – In this chapter the authors focus on business’s attempts to influence government. They take a descriptive approach to the topic, seeking primarily to understand the various approaches business uses, and to evaluate strengths and weaknesses, successes and failures. However, as the students read the chapter, they will undoubtedly be impressed with the tremendous power that business wields in the political realm, primarily through its application of money to the process. The question is whether they will be pleased with the situation or scared for our republic. As discussed in the previous chapter, government also influences business, and students should be reminded of this fact.

KEY TALKING POINTS – The authors did not go into depth about the process by which corporations gained political power in the United States, but the subject is worth exploring with students. From the relatively low status corporations held in the early years of the United States, they have risen to be the most powerful social institution we have. The books mentioned in Chapter 11 of the Instructor’s Manual (and repeated below) do an excellent job of tracing their trajectory, especially Gangs of America. Contributing factors include the separation of management and ownership, the rise of a consumer culture, receding religious influence, business’s concerted efforts to gain power, and legal decisions that granted certain rights to corporations that they had not previously held. Ted Nace, in Gangs of America, argues that corporations now have more rights than do individual humans. One of the most important rights won was the right to be conceived of as a “person,” and therefore protected by the Fourteenth Amendment to the Constitution (Santa Clara County v. Southern Pacific Railroad, 1886). This amendment was originally passed to protect freed slaves, but has been used much more often for the benefit of corporations. One of the interesting questions for students to explore is if corporations have garnered too much power in our society.

Several recent books have delved into this subject in some depth. The instructor may want to incorporate some of their content into the classroom discussion or assign students to read sections of different books. One of the earlier writings was Taking Care of Business, a 32-page pamphlet written by Richard Grossman and Frank Adams. This item is currently available through the Program on Corporations, Law & Democracy (POCLAD) at Other relevant books include:

Bakan, J. 2004. The Corporation. New York: Free Press. (A movie of the same name has been produced and is currently available on DVD.)

Kelly, M. 2003. The Divine Right of Capital. San Francisco: Berrett-Koehler Publishers, Inc.

Nace, T. 2003. Gangs of America. San Francisco: Berrett-Koehler Publishers, Inc.

While many students are familiar with the concept of lobbying, few understand how the process actually works and the different levels at which lobbying occurs. A review of the lobbying process should prove beneficial. Furthermore, few students will know how PACs work and how businesses use PACs in the political process. Instructors may want to explore how PACs truly function in our society. Finally, the instructors should lead students into a discussion on the impact of the Bipartisan Campaign Reform Act on the use of hard and soft money and the dollar limits regulated by the Federal Election Commission.

PEDAGOGICAL DEVICES – In this chapter, instructors may utilize a combination of:

Cases:

Should Business Hire Illegal Aliens?

Sweetener Gets Bitter Reaction

Astroturf Lobbying

The Ethics of Earmarks

The Hudson River Cleanup and GE

Ethics in Practice Cases:

Influencing Local Government

Patriotism vs. Profits: What Should a Firm Do?

Search the Web:

The Center for Responsive Politics –

Video clip:

Anita Roddick and The Body Shop

Power Point slides:

Visit for slides related to this and other chapters.

LECTURE OUTLINE

  1. CORPORATE POLITICAL PARTICIPATION
  2. A Lesson Learned
  3. Business Lobbying
  4. Organizational Levels of Lobbying
  5. Professional Lobbyists
  6. Grassroots Lobbying
  7. Trade Association Lobbying
  8. Umbrella Organizations
  9. Chamber of Commerce of the United States
  10. National Association of Manufacturers (NAM)
  11. Business Roundtable
  12. National Federation of Independent Businesses (NFIB)
  1. COALITIONBUILDING
  1. POLITICAL ACTION COMMITTEES
  2. Evolution of PACs
  3. Arguments for PACs
  4. Arguments Against PACs
  5. PACs and the Vote-Buying Controversy
  6. Center for Public Integrity Study
  7. PACs and Campaign Financing
  8. The Hard Facts About Soft Money
  9. Strategies for Political Activism
  10. Regulatory Life Cycle Approach
  11. Contingency Approaches
  1. SUMMARY

SUGGESTED ANSWERS TO DISCUSSION QUESTIONS

Students should recognize that their answers to these discussion questions should be well reasoned and supported with evidence. Although some answers will be more correct than others, students should be aware that simplistic answers to complex questions, problems, or issues such as these will never be “good” answers.

  1. Lobbying is the organized effort to influence government officials (elected and appointed) to pass or interpret laws and regulations that are beneficial to your organization. Lobbying can take place at the company level (addressing issues specific to a single company), at the grassroots level (mobilizing individual citizens affected by legislation), through trade associations (groups of companies in a single industry or line of business), and through umbrella organizations (representing the “business interests” of the country). Umbrella organizations are subject to division because they represent such a broad range of firms and interests. Just as we saw in Chapter 11 that the broad “public interest” makes finding consensus difficult, so it is with umbrella organizations. A gun manufacturer and a bank might both belong to the Chamber of Commerce, but have very different political agendas.
  1. Political Action Committees (PACs) are organizations of like-minded individuals who raise money and donate it to political candidates. PACs are an effective way of raising money and supporting the organization’s special interests. Because democracy can be viewed as a “competition” among special interests, PACs are vehicles through which that competition can be strengthened. The business community and many members of Congress view PACs as a viable way in which not only business, but other special interest groups such as labor, education, etc., can organize their contribution efforts and participate in the political process. The major drawback to PACs is their reliance on one form of power, money, to dominate other forms of persuasion, such as religious beliefs or simply numbers of voters. Many feel that there is an implication that the money provided by PACs is used to buy votes; whether or not this is accurate, the implication itself is enough to cause concern over the process. While there are issues with PACs, they are one workable way in which business can participate in the political process. Many note that money pollutes the political process, and since business is the institution with the most money, business dominates politics as well. However, since PAC contributions are regulated by the Federal Election Commission, voters have public access to information regarding PAC contributions to candidates and can make informed decisions regarding how such donations may or may not impact a candidate’s voting record. Arguably, this process enables business to participate in the political process, which is their right as a legal “person” under the law, but creates checks by which the voter can determine the legitimacy of this process.
  1. The regulatory life cycle approach to political activism views regulation as a dynamic process with differing influences and opportunities at each stage. An activist who subscribes to this approach would seek to use different strategies and address different constituencies, depending on the stage of the process. Contingency approaches, on the other hand, view political strategy in a more static light. Depending on the situation at the current moment, those using the contingency approach adjust their strategy to fit that condition. However, they do not view the political arena as a process that has logical and well-understood steps.
  1. While the Bipartisan Campaign Reform Act was designed to limit the influence of soft money and the use of “issue ads” in political campaigns, recent decisions by the Supreme Court have determined that these provisions are unconstitutional. Consequently, the impact of the Act on future elections is questionable. Furthermore, even after the Act was initially adopted, its impact was severely limited by the use of 527s. Having the benefit of writing this after the 2004 Presidential election, it is clear that the attempts to limit the influence of money on the election process failed. More money was raised and spent in this campaign than ever before, by a wide margin. While many believe that the success of the Bipartisan Campaign Reform Act has been limited, it is important for legislators to continue to examine potential ways to regulate the influence of money on the political process. The key to success in campaign financing is to balance an individual’s free speech rights with the concern that financial contributions can determine the outcome of an election. The fact remains that it has become more and more expensive to run a successful election campaign. To be competitive, candidates must have access to significant funds, especially now that most of our elections are determined in the media. Consequently, funds must be expended on the political process; however, our society needs to continue to examine the processby which such funding occurs and the laws related to this process to ensure that we do not effectively create a system where the candidate with the most money wins.
  1. Circumvention of government regulations is suspect at best, and most of the time highly unethical. Rules, laws, and regulations cannot anticipate all possible actions, so there will always be loopholes to exploit. Companies have the advantage of having a set of rules laid out, which then allows the firms to figure out ways to get around them. Lawmakers, on the other hand, must look to past activities and try to conceptualize future possibilities when they craft the rules. Because of this relationship, individuals and corporations will always be able to figure out ways to get around laws and through loopholes if they want to. The only way to prevent circumvention is for the actors to police themselves and follow the spirit of the law, regardless of the opportunities to exploit loopholes.

GROUP PROJECT

Divide students into groups of four to five students. Assign each group a federal candidate for president or for congressional office. Students should track the political contributions to their assigned federal candidate. Specifically, students should track individual contributions (and their affiliations) as well as PAC donations to determine the various groups that may eventually have political pull with certain candidates. Students may begin their search at but instructors should encourage the students to use other resources to research their assigned candidate. Each group should prepare a brochure for the rest of the class detailing the following information regarding their respective candidate (1) funds raised to date, (2) the source(s) of various political contributions, (3) the impact of the political contributions on the contender’s candidacy, (4) the candidate’s use of the funds to date, and (5) a comparison of the candidate’s financial resources with his or her closest competitors’ financial resources. Instructors may vary this project by having students complete the same assignment for state candidates.