1. Business, Government, and Regulation
Chapter 11
Business, Government, and Regulation
Business, Government, and Regulation
Chapter 11
Prepared by Deborah Baker Texas Christian University
Business and Society: Ethics and Stakeholder Management, 7e • Carroll & Buchholtz Copyright ©2009 by South-Western, a division of Cengage Learning.  All rights reserved

2. Chapter 11 Learning Outcomes
Business, Government, and Regulation
Chapter 11 Learning Outcomes
Articulate a brief history of government’s role in its relationship with business.
Appreciate the complex interactions among business, government, and the public.
Identify and describe government’s nonregulatory influences.
Explain government regulation and identify the major reasons for regulation, the types of regulation, and issues arising out of it.
Provide a perspective on privatization versus federalization, along with accompanying trends. 2

3. Chapter 11 Outline A Brief History of Government’s Role
Business, Government, and Regulation
Chapter 11 Outline
A Brief History of Government’s Role
The Roles of Government and Business
Interaction of Business, Government, and the Public
Government’s Nonregulatory Influence on Business
Government’s Regulatory Influences on Business
Deregulation
Summary
Key Terms
Discussion Questions
A Brief History of Government’s Role
The Roles of Government and Business
A Clash of Ethical Belief Systems
Social, Technological, and Value Changes
Interaction of Business, Government, and the Public
Government/Business Relationship
Public/Government Relationship
Business/Public Relationship
Government’s Nonregulatory Influence on Business
Industrial Policy
Privatization
Other Nonregulatory Governmental Influences on Business
Government’s Regulatory Influences on Business
Regulation: What Does It Mean?
Reasons for Regulation
Types of Regulation
Issues Related to Regulation
Deregulation
Purpose of Deregulation
Trend Toward Deregulation
Dilemma with Deregulation
Deregulatory Reform
Approaches to Regulatory Reform
Regulatory Trends: A Decade of Experience
Summary

4. Introduction to Chapter 11
Business, Government, and Regulation
Introduction to Chapter 11
The chapter examines the relationship between business and government, and in particular, the government’s role in influencing business.

5. Government’s Role in Influencing Business
Chapter 11
Business, Government, and Regulation
Government’s Role in Influencing Business
Prescribes the rules of the game for business.
Purchases business’ products and services.
Uses its contracting power to get business to do things it wants.
Is a major promoter and subsidizer of business.
Is the owner of vast quantities of productive equipment and wealth. 
Is an architect of economic growth.
Is a financier.
Is the protector of various interests in society against business exploitation.
Directly manages large areas of private business.
Is the repository of the social conscience and redistributes resources to meet social objectives.

6. Roles of Government and Business
Chapter 11
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?

7. Clash of Ethical Systems
Chapter 11
Business, Government, and Regulation
Clash of Ethical Systems
Business Beliefs
Government Beliefs
Collectivistic ethic
Subordinates individual goals and self-interest to group goals and group interests
Maximizes obligations assumed by the individual and discouraging self-interest
Emphasizes equality of individuals
Individualistic ethic
Maximizes concession to self-interest
Minimizes the load of obligations society imposes on the individual (personal freedom)
Emphasizes inequalities of individuals
Figure 11-1

8. Social, Technological, and Value Changes
Chapter 11
Business, Government, and Regulation
Social, Technological, and Value Changes
Major Changes
National society
Communal society
Entitlements
Quality of life
Societal Value Changes
Youth movement
Consumer protection movement
Ecology movement
Civil rights movement
Women’s movement
Egalitarian movement

9. Interaction Among Business, Government, and the Public
Chapter 11
Business, Government, and Regulation
Interaction Among Business, Government, and the Public
Lobbying
Regulations and Other Forms of Persuasion
Advertising
Public Relations
Political Process
Voting
Interest Groups
Contributions
Public
Business
Government
Interest groups
Not buying products
Protests
Politicking
Political influence
Figure 11-2

10. Interaction Among Business, Government, and the Public
Chapter 11
Business, Government, and Regulation
Interaction Among Business, Government, and the Public
Government / Business Relationship
Lobbying
Public / Government Relationship
Voting
Electing officials
Business / Public Relationship
Advertising
Public Relations
Other forms of communication

11. Government’s Nonregulatory Influence on Business
Chapter 11
Business, Government, and Regulation
Government’s Nonregulatory Influence on Business
Two Major Nonregulatory Issues
Industrial Policy
Privatization @

12. Industrial Policy Industrial Policy
Chapter 11
Business, Government, and Regulation
Industrial Policy
Industrial Policy
Any selective government measure that prevents or promotes changes in the structure of an economy.

13. Industrial Policy Schools of Thought Accelerationists Adjusters
Chapter 11
Business, Government, and Regulation
Industrial Policy
Adjusters
Targeters
Central planners
Accelerationists
Bankers
Schools of Thought

14. Industrial Policy Arguments For Arguments Against
Chapter 11
Business, Government, and Regulation
Industrial Policy
Arguments For
Arguments Against
Decline of U.S. competitiveness
Use by other world governments
Ad hoc industrial policy
Reduces market efficiency
Promotes political decisions
Foreign success variable
Various interventions create an industrial policy by default

15. Privatization @ Privatization
Chapter 11
Business, Government, and Regulation
Privatization
Privatization
The process of “turning over to” the private sector some function that was previously handled by government. @

16. Other Nonregulatory Government Influences
Chapter 11
Business, Government, and Regulation
Other Nonregulatory Government Influences
Major employer
Standard setter
Largest purchaser
Use of Subsidies
Transfer payments
Major competitor
Loans and loan guarantees
Taxation
Monetary policy
Moral suasion

17. Government’s Regulatory Influence on Business
Chapter 11
Business, Government, and Regulation
Government’s Regulatory Influence on Business
Factors to Consider Regarding Government Regulation
Fair treatment
Protection
Scope
Cost
Burden

18. A Federal Regulatory Agency…
Chapter 11
Business, Government, and Regulation
A Federal Regulatory Agency…
Has decision-making authority
Establishes standards or guidelines conferring benefits and imposing restrictions on business conduct
Operates principally in the sphere of domestic business activity
Has its head and / or members appointed by the president (generally subject to Senate confirmation)
Has its legal procedures generally governed by the Administrative Procedures Act

19. Reasons for Regulation
Chapter 11
Business, Government, and Regulation
Reasons for Regulation
Controls negative externalities
Achieves social goals
Controls excess profits
Controls natural monopolies
Controls excessive competition

20. Types of Regulation Economic Regulation
Chapter 11
Business, Government, and Regulation
Types of Regulation
Civil Aeronautics Board
Federal Communications Commission
Interstate Commerce Commission
Economic Regulation
Major costs of economic regulation are for:
Finance and banking
Industry-specific regulation
General business

21. Types of Regulation Social Regulation Environmental Protection Agency
Chapter 11
Business, Government, and Regulation
Types of Regulation
Occupational Safety and Health Administration
Equal Employment Opportunity Commission
Environmental Protection Agency
Social Regulation

22. Comparison of Economic and Social Regulation
Chapter 11
Business, Government, and Regulation
Comparison of Economic and Social Regulation
Economic Regulations
Social Regulations
Focus
Market conditions;
economic variables
People in roles as employees, consumers and citizens
Affected Industries
Selected (railroads, aeronautics, communications)
Virtually all industries
Examples
CAB FCC
EEOC, OSHA, CPSC, EPA
Current Trend
From regulation to deregulation
Stable
Figure 11-3

23. Benefits of Regulation
Chapter 11
Business, Government, and Regulation
Benefits of Regulation
Fair treatment of employees
Safer working conditions
Safer products
Cleaner air and water

24. Costs of Regulation Direct costs Indirect costs Induced costs Effects
Chapter 11
Business, Government, and Regulation
Costs of Regulation
Direct costs
Indirect costs
Induced costs
Effects
Innovation may be affected.
New investments in plant and equipment may be affected.
Small business may be adversely affected.

25. Regulatory Spending in the U.S.
Chapter 11
Business, Government, and Regulation
Regulatory Spending in the U.S.
Figure 11-5

26. Deregulation Purpose Dilemma
Chapter 11
Business, Government, and Regulation
Deregulation
Purpose
Intended to increase competition with the expected benefits of greater efficiency, lower prices, and enhanced innovation.
Dilemma
Many competitors are unable to compete with the dominant firms.
Must enhance competition without sacrificing applicable social regulations (e.g., health and safety requirements).

27. Industries Affected by Deregulation
Chapter 11
Business, Government, and Regulation
Industries Affected by Deregulation
Trucking
Telecommunications
Financial Services
Electric Utilities

28. Key Terms Regulation Individualistic ethic of business Market failure
Chapter 11
Business, Government, and Regulation
Key Terms
Regulation
Market failure
Natural monopoly
Negative externalities
Social costs
Social goals
Excess profits
Excessive competition
Economic regulation
Social regulation
Direct costs
Indirect costs
Induced costs
Deregulation
Individualistic ethic of business
Collectivistic ethic of government
Industrial policy
Accelerationists
Adjusters
Targeters
Central planners
Bankers
Privatization
Federalization