© 2005 by Nelson, a division of Thomson Canada Limited. 1 Business, Government, and Regulations + Canadian Business Ideologies

© 2005 by Nelson, a division of Thomson Canada Limited. 2 Government’s Role in Influencing Business 1.Prescribes the rules for business 2.Purchases business’ products and services 3.Contracts power to get business to do things it wants 4.Is a major promoter and subsidizer of business 5.Is the owner of vast quantities of productive equipment and wealth

© 2005 by Nelson, a division of Thomson Canada Limited. 3 Government’s Role in Influencing Business 6.Is an architect of economic growth 7.Is a financier 8.Protects society against business exploitation 9.Directly manages large areas of private business 10.Acts as a social conscious and redistributes resources to meet social objectives

© 2005 by Nelson, a division of Thomson Canada Limited. Chapter 10 Business Involvement in Politics: Examples 1.Financing of political parties 2.Publicly expressed support for a candidate or party 3.Publicly expressed views on political issues 4.Executives running for public office 5.Management’s position on employee participation

© 2005 by Nelson, a division of Thomson Canada Limited. 5 Roles of Government and Business What should be the respective roles of business and government in our socioeconomic system? Which tasks should be handled by government and which by business? How much autonomy are we willing to allow business?

© 2005 by Nelson, a division of Thomson Canada Limited. 6 Canadian Business Ideologies Government Business LiberalsConservativesNDP Collectivism/Monopoly Mentality/Mixed Economy/Corporatism/Managerialism/Neo-conservatism LeftRight Relative Involvement of Govt in Business

© 2005 by Nelson, a division of Thomson Canada Limited. 7 Roles of Government and Business Business Beliefs Maximizes concession to self-interest Minimizes obligations society imposes on the individual (personal freedom) Emphasizes inequalities of individuals Government Beliefs Subordinate individual goals and self-interest to group goals and group interests Maximized obligations assumed by the individual and discouraging self-interest Emphasize equality of individuals Clash of Beliefs

© 2005 by Nelson, a division of Thomson Canada Limited. 8 Influence of Government on Business Nonregulatory Issues Industrial policy Privatization Regulatory Issues Economic Regulation Social Regulation

© 2005 by Nelson, a division of Thomson Canada Limited. 9 Government’s Nonregulatory Influence on Business Pros Decline of national competitiveness Use by other nations Ad hoc system Cons Reduces market efficiency Promotes political decisions Foreign success variable National attempts uncoordinated and irrational Industrial Policy

© 2005 by Nelson, a division of Thomson Canada Limited. 10 Government’s Nonregulatory Influence on Business Privatization Producing versus providing a service Privatization debate – Use markets to discipline delivery of goods and services –Federalization of certain functions Airport security

© 2005 by Nelson, a division of Thomson Canada Limited. 11 Government’s Regulatory Influence on Business Controls natural monopolies Controls negative externalities Achieves social goals Other reasons –Controls excess profits –Controls excessive competition Reasons for Regulation

© 2005 by Nelson, a division of Thomson Canada Limited. Chapter 10 Spectrum of Regulation Laissez-faire regulation Corporate self-discipline Industry self-regulation Self-regulation involving stakeholders Negotiated self-regulation Mandated self-regulation Quasi-government regulation Government regulation

© 2005 by Nelson, a division of Thomson Canada Limited. Chapter 10 Market Regulation No need for government-imposed laws or regulations Corporation influenced by market forces Laissez-faire approach Government does not interfere with business Consumers can force companies to behave in particular ways by refusing to purchase goods or services or through boycotts

© 2005 by Nelson, a division of Thomson Canada Limited. Chapter 10 Self-Regulation Corporate self-discipline regulation –mission, values statement, codes of conduct or ethics Industry self-regulation –voluntary codes Self-regulation involving stakeholders Negotiated self-regulation Mandatory self-regulation

© 2005 by Nelson, a division of Thomson Canada Limited. 15 Government’s Regulatory Influence on Business Economic regulation –Transport Canada –CRTC Social regulation –Employment Equity –Occupational Safety and Health –Human Rights Commission Types of Regulation

© 2005 by Nelson, a division of Thomson Canada Limited. 16 Government’s Regulatory Influence on Business Fair treatment of employees Safer working conditions Safer products Cleaner air and water Benefits of Regulation

© 2005 by Nelson, a division of Thomson Canada Limited. 17 Government’s Regulatory Influence on Business Costs of Regulation Direct costs Indirect costs Induced costs –Effects Reduced innovation Reduced investment in plant and equipment Increased pressure on small business

© 2005 by Nelson, a division of Thomson Canada Limited. 18 Deregulation Purpose –Intended to increase competition with expected increased efficiency, lower prices, and innovation Dilemma –Must enhance competition without sacrificing applicable social regulations (e.g., health and safety requirements). Purpose & Dilemma

© 2005 by Nelson, a division of Thomson Canada Limited. 19 Canadian Business Ideologies Government Business LiberalsConservativesNDP Collectivism/Monopoly Mentality/Mixed Economy/Corporatism/Managerialism/Neo-conservatism LeftRight Relative Involvement of Govt in Business

© 2005 by Nelson, a division of Thomson Canada Limited. 20 Collectivism Control of economic activity by the state Socialist ideals Govt needed to correct defects of market Health care, CPP, NEP, subsidies ‘New Left’

© 2005 by Nelson, a division of Thomson Canada Limited. 21 Monopoly Mentality Allowable domination of sector by public or private ownership Canada’s markets are too small & spread out for US competitive ideal to work well Hudson’s Bay Co. Canadian Wheat Board

© 2005 by Nelson, a division of Thomson Canada Limited. 22 Mixed Economy Compromise of collectivism and conservatism Business and government cooperate informally Best description of how things actually work

© 2005 by Nelson, a division of Thomson Canada Limited. 23 Corporatism Formalized cooperation among business, govt and labour = Tripartitism Sweden, Japan, France ‘Quebec Inc.’ Can lead to emergence of sector elites who decide what is ‘best’

© 2005 by Nelson, a division of Thomson Canada Limited. 24 Managerialism Competitive Enterprise System The Chamber of Commerce view Assume corporations operate in the best interests of society Trust it

© 2005 by Nelson, a division of Thomson Canada Limited. 25 Neoconservatism Get government out of business (and people’s lives in general) Privatize and let the market discipline Voucher systems Social policy is against subsidies, welfare, transfer payments

© 2005 by Nelson, a division of Thomson Canada Limited. Chapter 10 Business Lobbying Business lobbying attempts to influence: –Making or amending of legislation and regulations –Making or changing of government policies or programs –Government decisions in the awarding of grants, contracts, contributions, or any similar benefits –Government appointments to boards, commissions, and any other public office Source: Carson, 1998

© 2005 by Nelson, a division of Thomson Canada Limited. Chapter 10 Business Lobbying: Criticisms Practices unethical (e.g., bribes, gifts, improper political contributions, blackmail) Business lobby too powerful Business has unequal access to government Cost of business lobbying passed on to consumers

© 2005 by Nelson, a division of Thomson Canada Limited. Chapter 10 Ethical Implications in Business–Government Relationship Appropriateness of government involvement and interference in business operations Matter of accessibility to government Favouritism to some corporations regarding loans, grants, or protection Endorsement of political candidates or parties can be perceived as expecting favours in future Lack of transparency in relationship between government and business