An Overview of Government-business Relations in the Global Business Ecosystem

For most businesses, some combination of the interactive and proactive approaches with government and other interest groups is most often the best approach

Vertical: General News

FREMONT, CA: Since public policies have a significant impact on businesses, it is in their best interests to stay informed about public policies and to try to influence governmental decision-making and public policy. Companies view and act on their relationship with the government in a variety of ways. Businesses may view business and government as being on two sides and at odds with one another. In the years following the Great Recession at the end of the first decade of the twenty-first century, some have suggested that this was the overwhelming mainstream business position.

It has been referred to as the antiregulatory or limited government perspective and is linked with people who think free markets and a small amount of government intervention are ideal for the functioning of the economy. This viewpoint frequently emphasises relations between businesses and the government in attempts to minimise government and lessen the costs and responsibilities associated with taxes, regulations, and policies on private enterprise and the overall economy.

Another business viewpoint on government is that the government should favour and incentivise business performance and investment because businesses are the primary source of jobs, innovation, and societal and economic well-being, and thus the government should support businesses with grants, tax credits, and subsidies. A third general view of business and government relations is that business works with the government to address societal matters. In contrast, the government acts as a regulator to ensure that businesses are socially responsible.

Once a company understands how the government affects its operations and profitability, it can formulate strategies for interacting with the government. There are three types of business responses to public policy: reactive, interactive, and proactive.

Reactive actions include responding to the governmental policy after it has already occurred. An interactive response entails interacting with government actors and politicians (including the media) in an effort to influence public policy in the company's favour. A proactive response strategy comprises influencing public policy, foreseeing policy changes, and attempting to improve competitive standing through accurate policy prediction. A combination of interactive and proactive approaches is the best approach for most businesses.

Businesses may respond in a variety of ways to meet challenges from nongovernmental organisations (NGOs) and the media, including:

Confrontation

Both the message and the messenger may be vigorously attacked, and in extreme circumstances, the business has felt justified in suing its critics for libel.

Participation

Businesses may form alliances or coalitions with NGOs, as was the case with McDonald's and the Environmental Defense Fund or Home Depot and the Rainforest Alliance.

Anticipation

In order to anticipate emergent difficulties and modify or change business processes before strict laws or regulations are passed, businesses may employ issues management programs.

When a company operates in a reactive reaction mode, it confronts its rivals most frequently. When it switches to an interactive response mode, it engages in discussions with NGOs and the media and forms alliances or partnerships to advocate new policies and programs. When a company acts proactively, it foresees pressures and changes in policy and modifies its own internal corporate policies and practices before it is forced to. A reactive approach may occasionally be practical, but it frequently merely serves to put off the need for more interactive or proactive engagement. In most cases, an interactive or proactive approach works better to address societal and political concerns while preserving the firm's reputation.