What Role Does Business Play in Politics - Essay Example

Introduction From the past few decades, business firms have started to engage in activities that have since long been regarded as responsibilities of the government bodies. The business firms, especially the multinational businesses have started adopting a new role as political actors along with their role of active economic actors. In the light of globalization, global governance has emerged as a multilateral and poly centric process to define and implement global rules. In global governance, the corporate play active roles to address social and environmental issues and other concerns that are experienced all across the globe. Discussion Are firm’s economic or political actors? Whether firms are economic or political actors has become a debatable topic with the advent of globalization. The argument on the relationship between business and politics is based on the assumption of a regulatory environment, where in the public concern issues are addressed by the nation state level institutions. The nation state institutions also regulate the business behaviour in the country. The state institutions are therefore, the only political institutions that work for ensuring the well-being of the society. In contrast, business firms are generally considered as economic actors. Business firms use their political and lobbying strategies to influence the political system. Also, they take up corporate philanthropy as a part of their strategies. But these activities do not establish them as political actors that operate with the aim of addressing public concerns. Instead these activities of the business firm in the political sphere are more aimed at boosting their economic ends. However, over the last decade, the separations between the economic and political spheres have become blurred. With the advent of globalization, the national context of governance started losing its foothold. It was observed in many cases that the state system did not succeed in dealing with the transnational social and environmental issues, administering the rights of citizenship, regulating the economy, serving the interest of the public and in providing necessary public goods. These incidents of failure were seen many times worldwide due to the lack of proper enforcement mechanisms and the lack of essential resources. In these situations, often the private business firms intervened and filled in the void through their voluntary activities. In the current scenario, a number of multinational businesses have implemented voluntary regulation of activities and production of public goods. The companies have taken up responsibilities that were once into the foray of the government bodies only. The firms have started contribution to public education, health, protection of human rights, social security with the objective of filling up the gaps in the legal regulation processes and promoting stability and peace in the societies. Thus, now the businesses are operating as social entrepreneurs who serve public interest with the use of the resources in the business thus creating a distinct change in the political ideology throughout the world. Is the pursuit of corporate non-market/political strategy unethical? Although, the concept of a business firm occasionally taking up political activities is accepted with a broad consensus, yet a business actually being a strong political actor itself other than the governments still draws very less appreciation. The changing image of the firms from economic to political actors in global political scenario is highly contested. This is because this change challenges the existing theory of the role of business firms as economic actors in the society (Yves 351). Also, another reason is that this has caused the rise of substantial concerns about the impact of this change on democracy and public response all over the world. Internationally, only the states are known to have voting rights but international organizations often invite business firms to give their inputs in the rule making processes to access the expertise in these businesses and improve legitimacy. The pursuit of corporate political strategies cannot be tagged as unethical as the companies have access to major resources and financial strength that has a profound impact on the society. But if the political activities of the business firms are directed to influence the stakeholders and reshape the regulatory environment in which the business operates, this may result in unfair impact on the public policies. The legitimacy of zealous lobbying strategies is a debatable topic in current world politics scenario. The consistent lobbying strategies used by the business firms against regulations designed to correct market failures are considered as a troubling feature of the businesses acting as political actors. Most business strategies in the political sphere are conceived as self-interested attempts to extend the power of the business to influence the government regulations in different levels. The strongly financed business lobbying is known to dominate the political processes and cover up other legitimate voices. The political and public interest groups tend to criticize the impacts of lobbying strategies. But it is expected that setting up ethical standards for the lobbying processes would be beneficial for both the public and commercial interests. What explains different forms of corporate political engagement cross countries? The corporate firms take up different social activities which are aimed at addressing the transnational issues and threats. The corporate engage their resources and expertise in improving social security, health and literacy levels, nutrition problems, and protection of human rights which are often not addressed effectively by the state authorities due to the lack of resources and funding. The business firms take up these activities as a part of their corporate social responsibilities (Solomon 34). These activities fill up the void that is created when the government bodies are unable to solve these problems by working as a single authority. Many companies work on the global level to sufficiently regulate the economy and provide sufficient public goods thus making effective use of the transnational interdependence among economic and social actors. What role(s) does business play in politics, and what challenges and opportunities does this raise for effective and democratic governance? In this era of an emerging social transformation, business firms have started playing an important role in the political sphere. Many of the responsibilities of the government bodies are taken up by the private firms as a part of their corporate strategies. The changing economy of poverty, social and environmental issues has led to the emergence of political corporate social responsibility activities done by both big and small business firms. Global corporate power is majorly used in the different political arenas such as dealing with poverty issues, environmental threats, and protection of human rights, education and other activities to benefit the society. The gaps which are left by the state bodies while looking for legal regulation are often filled up by the business firms through the effective use of their financial and operational resources. A business firm in today’s global market does not act as a mere part of the state regulatory system, but is often an intrinsic player who makes and enforces rules in the governance. Lobbyism and power practice is considered the old viewpoint in which the political strategies were used by the companies to reshape the government policies in favour of the business (Weber 326). It was conceived that the business chose to participate in political activities to add to the value of the business. But in today’s concept, business firms engage in political activities to share the social responsibilities collaboratively and benefit the society in different ways. The democratic government faces challenges due to the firms acting as political actors but is also benefited by the huge resources of the businesses which is often lacking in government bodies. The activities of the firm demonstrate an increasing involvement of the businesses in global business regulations and the production of public goods. The firms have filled in the vacuum that has been created in the process of globalization which could not be covered by the state bodies. The businesses have started gaining importance as political actors as they fulfil the need that’s the nation states and international institutions have not succeeded in fulfilling. Post globalization, the nation state started losing its power because of the many social and economic activities beyond the territorial enforcement and jurisdiction. The businesses are gaining a position to escape the local rules and play one system against another. In this situation, the governments have to lure the businesses by offering infrastructural investment, regulation cut backs, tax benefits and subsidies. This may result in causing a downward spiral in the social and political conditions of the global governance. Does economic globalization lead to the convergence of corporate political engagement across the globe? Before globalization started, order was mainly based on the capacity of the state bodies that had monopolistic power on their territory. The social roles and expectations within the communities were more or less stabilized (Stone 177). But after the advent of globalization, the post-national constellation theory started working, in which both of these criteria changed. In many areas, the state agencies were unable to provide public goods or to solve the different externality problems which had transnational causes and impacts. The homogeneity of national political culture is now replaced by the new rising heterogeneous multi-cultural communities. The corporate have started to contribute their resources and expertise to fill the gaps in the global regulations and to address the issues regarding the supply of public goods. Certain issues that were handled by the nations state authorities slowly moved to the discretion and responsibilities of the business firms. The power is de-centred from the authority and an emergence of the political authority of the international organizations and transnational businesses is noticed. The imperfections at the state level and the complexity of the modern society hint that the state authorities cannot take the burden of all the present issues alone (Shaffer 376). Thus an integration of the business and society is done to solve the issues and conflicts within the society. The governments in various nations throughout the world are facing challenges which have transnational causes and impacts and cannot be solved unilaterally. These issues are posing as threats to the global economy and environment and are issues like global warming, epidemic diseases, deforestation and regulation of capital markets. How does the relationship between business and government change when companies go global and what are the implications? In response to the globalization phenomenon, business firms are gaining new role as political actors that goes beyond mere adherence and conformity to the legal standards and rules. The government and the business firms establish a symbiotic relationship through these activities in the political dimension (Palazzo 90). The business firms have started operating with a politically heightened concept of responsibility by formulating their strategies to deal with the social issues and concerns that were previously considered to be under the discretion of the state authorities only. The government benefits from the expertise present in the business as well, as from the abundant resources in the businesses all across the globe. The companies benefit by being able to apply some power over reshaping the regulations in the territory so as to benefit their operations. But the increasing activities of the businesses in the political domain results in power shifts and new risks. Consequently, the government has to develop new forms of global governance to effectively deal with these risks. The capacity of the state authorities to regulate the market conditions is declining (Werhane 43). In this situation, the private firms often start playing a regulatory role without having a democratic mandate granting them legitimacy and are often met with heterogeneous social demands. Initiatives are taken by both public and private business to compensate the decline of the government power. Thus, a new form of transnational regulation has emerged in which there exists extensive global governance involving the government as well as private and public businesses. Why do companies engage in politics, and what shapes their choice of strategy? Generally, economists view the political activities of the corporate businesses as ways to benefit the business and modify the regulations for the benefits of the business. But companies have different objectives of entering into the political sphere. The first reason why corporate firms generally enter into the political field is to focus on the impact of the business on the society as a whole. When the businesses enter politics, they often end up controlling vast organizational, human and financial resources and the transnational borders. The companies get the power to shape the flows of capital and labour and achieve a broader and more dominating role in the society and the regulatory system (Scherer 413). The corporate strategies of the businesses are impacted by the company’s market and non-market environment. The business firms decide to play the political role based on the following factors: the direction in which the business is trying to move, the markets of the business, the resources available in the business, the advantages from these activities, the expectations of the stakeholders and the environment factors that affect the business. Companies develop their non-market strategies using the 4Is analysis i.e. issues, institutions, interests and information (Wood 54). The business firms enter into a political role after making a careful analysis of the market impacts and the non-market reactions. The choice of entering into the political sphere is also highly dominated by the availability of resources like contacts, money, expertise, social status, authority and collective action. Has globalization made politics more or less important for business, and has it made business more or less important in politics? The phenomenon of globalization has made business more important in politics as businesses are becoming more influential in modifying the market regulations and are emerging as competent authorities to fulfil the needs of the society. In a global perspective, the nation states or the international institutions alone are not succeeding in sufficiently regulating the global economy and provide enough public goods globally. The decline in the governance power of the nation states is compensated by the emergence of a new form of global governance in which the corporate are key players in the governance scenario. The post national constellation has led to new challenges for the business operating environment and thus the business firms are actively taking up the role of political actors to be able to influence the regulatory systems. In the era of globalization, the ability of the state bodies to regulate the business environment and face externalities is decreasing. Whereas operating in a global field, the businesses can access numerous options for making their business decisions regarding the locations. The firms can apply various economy criteria to find the optimal choice of labour and social and environmental regulations. The advent of economic globalization has opened up new challenges for political direction which exceeds the capability of a nation working alone. Thus, the post national constellation has shown a decrease in the regulatory impact of national government and has resulted in a power shift and development of new form of global governance in which the corporate have vital roles to play. Do politics matter more for business in emerging markets than for business in high-income countries? In case of the emerging markets the per capita income of the countries is quite low. Most of these countries struggle to achieve the desired level of growth. However in such developing economies there are several other economic problems which need to be addressed at the same time. These issues include the problems of inflation and unemployment which hit every individual dwelling in that country (Culpepper 16). In the economies like China, India and South Korea which generally either have a mixed economy framework or the socialist economy framework, the government intervention in the processes of business would be an important aspect of all the businesses operating in those countries (Hale 32). Thus for the countries which are on the negative side of the development process politics would play a major role in determining how businesses would be run. For example in case of the economies of Brazil or Mexico the party that would be on the power would have an essential role in determining the relationships with the developed countries like the United States. The foreign policies that the parties would make would determine the future of the enterprises that existent in these emerging markets (Morgan 12). This would be more applicable for those industries which are dependent on the exports to the foreign countries like the US, Canada and the other European nations. Along with these there might also be regulatory controls which may restrict the flexibility of operation of the businesses. Most of the high income countries are based on the capitalist market structure which allows the businesses to operate in any market. In case there is too much influence or political pressures the companies have the option to move over seas and set up their businesses elsewhere. Where does the responsibility of the firm end and that of the state begin? There is a huge responsibility on part of the business as well as the government in the contribution of the growth of a country. While the firms need to aim at increasing the profitability in the most ethical manner possible it is the duty of the government to provide the right framework under which the firms would operate. Alongside the government should also ensure that it has provided ample opportunity to the various businesses in the economy to be successful with efficient infrastructure (Kellerman 165). The government’s role in not only restricted to providing permissions for the businesses, but also providing protection to the various stakeholder of a particular business. For example the unions of the various companies may have political representatives who would look after the benefit of the employees. In case of organizations which do not have any form of union for them also the government provides protection in forms of non discrimination practices or the standardization of the work hours per day. The collection of the corporate taxes and ensuring environmental sustainability also come under the responsibilities of the government (Dales 57). Finally the consumers who are the most important stakeholders are protected by the laws and bi-laws formulated by the government. Conclusion The political role taken up by the corporate does not necessarily weaken the role of the corporate as economic actors. Instead, due to the existence of deficient institutional rules, the corporate can take up the role of political actors in the society if they want to boost their role as economic actors and create value for their businesses. In this era of global governance, businesses have a critical role to play in the global political and economic environment. Works cited Culpepper, Pepper D. Quiet Politics and Business Power: Corporate Control in Europe and Japan. New York: Cambridge University Press. 2011. Print. Dales, John Harkness. 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