Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. 1-1 BA Business Environment Chapter 10 Business, Government, and Regulation BA Business Environment Week 5 ~ Part 1

Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. 1-2 BA Business Environment Chapter 10 Business, Government, and Regulation Agenda Chapter 10 intro Current Event Presentations

Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. 1-3 BA Business Environment Chapter 10 Business, Government, and Regulation Business & Government The relationship between business and government and the government’s role in influencing business decision making. Search the Web To keep abreast of changes in industrial policy in the U.S., go to

Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. 1-4 BA Business Environment Chapter 10 Business, Government, and Regulation Roles of Government and Business What should be the respective roles of business and government in our socioeconomic system? Given all of the tasks that must be accomplished to make our society work, which of these tasks should be handled by the government and which should be handled by business? How much autonomy are we willing to allow business?

Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. 1-5 BA Business Environment Chapter 10 Business, Government, and Regulation Government Roles in Business 1.Rulemaker. 2.Customer. 3.Influencer. 4.Major promoter and subsidizer. 5.Owner of vast quantities of productive equipment and wealth. 6.Architect of economic growth. 7.Financier. 8.Protector of society against exploitation. 9.Direct manager. 10.Repository of the social conscience and redistributes resources toward social objectives.

Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. 1-6 BA Business Environment Chapter 10 Business, Government, and Regulation Clash of Ethical Systems Business Beliefs Maximizes concession to self-interest Minimizes the load of obligations society imposes on the individual (personal freedom) Emphasizes inequalities of individuals Government Beliefs Subordinated individual goals to group goals and interests Maximize obligations assumed by the individual Emphasized equality of individuals

Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. 1-7 BA Business Environment Chapter 10 Business, Government, and Regulation Social, Technological, and Value Change National society Communal society Entitlements Quality of life

Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. 1-8 BA Business Environment Chapter 10 Business, Government, and Regulation Interaction Chart Business Public Government Lobbying Regulations and Other Forms of Persuasion Advertising Public Relations Political Process Voting Interest Groups Contributions

Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. 1-9 BA Business Environment Chapter 10 Business, Government, and Regulation Interaction of Business, Government, and the Public Government/business relationship Public/government relationship Business/public relationship

Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved BA Business Environment Chapter 10 Business, Government, and Regulation Government’s Nonregulatory Influence on Business 1.Industrial policy 2.Privatization

Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved BA Business Environment Chapter 10 Business, Government, and Regulation Industrial Policy: Schools of Thought Accelerationists Adjusters Targeters Central planners Bankers

Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved BA Business Environment Chapter 10 Business, Government, and Regulation Industrial Policy: Pros & Cons Pros Decline of U.S. competitiveness Use by other nations Ad hoc system Cons Reduces market efficiency Promotes political decisions Foreign success variable National attempts uncoordinated and irrational

Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved BA Business Environment Chapter 10 Business, Government, and Regulation Privatization Producing versus providing a service Privatization debate –i.e., Federalization of Airport security

Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved BA Business Environment Chapter 10 Business, Government, and Regulation Other Nonregulatory Influences Major employer Large purchaser Major influence –Subsidies –Transfer payments Major competitor Major lender Taxation Monetary policy Moral suasion

Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved BA Business Environment Chapter 10 Business, Government, and Regulation Regulatory Factors to Consider Protection Scope Cost

Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved BA Business Environment Chapter 10 Business, Government, and Regulation Federal Regulatory Agency 1.Has decision-making authority 2.Establishes standards or guidelines conferring benefits and imposing restrictions on business conduct 3.Operates principally in the sphere of domestic business activity 4.Has its head and/or members appointed by the president (generally subject to Senate confirmation) 5.Has its legal procedures generally governed by the Administrative Procedures Act

Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved BA Business Environment Chapter 10 Business, Government, and Regulation Reasons for Regulation Controls natural monopolies Controls negative externalities Achieves social goals Other reasons –Controls excess profits –Controls excessive competition

Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved BA Business Environment Chapter 10 Business, Government, and Regulation Economic regulation –Interstate Commerce Commission (ICC) –Civil Aeronautics Board (CAB) –Federal Communications Commission (FCC) Social regulation –Environmental Protection Agency (EPA) –Occupational Safety and Health Administration (OSHA) –Equal Employment Opportunity Commission (EEOC) Types of Regulation

Comparison of Economic and Social Regulation Economic RegulationsSocial Regulations FocusMarket conditions; economic variables People in roles as employees, consumers and citizens Affected Industries Selected (railroads, aeronautics, communications) Virtually all industries ExamplesCAB; FCCEEOC, OSHA, CPSC, EPA Current Trend From regulation to deregulation Stable 10-21

Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved BA Business Environment Chapter 10 Business, Government, and Regulation Benefits of Regulation Fair treatment of employees Safer working conditions Safer products Cleaner air and water

Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved BA Business Environment Chapter 10 Business, Government, and Regulation Costs of Regulation Direct costs Indirect costs Induced costs –Effects Reduced innovation Reduced investment in plant and equipment Increased pressure on small business

Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved BA Business Environment Chapter 10 Business, Government, and Regulation Deregulation: Purpose & Dilemma Purpose –Intended to increase competition towards greater efficiency, lower prices, and enhanced innovation. Dilemma –Must enhance competition without sacrificing applicable social regulations (e.g., health and safety requirements).