Government as a stakeholder Defining government laws and

Government as a stakeholder

Defining government, laws, and regulations • Government – variety of institutions and actors at different levels that share a common power to issue laws • Laws – serve as a codification into explicit rules of the social consensus about what a society regards as right and wrong • Regulation – rules that are issued by governmental actors and other delegated authorities to constrain, enable, or encourage particular business behaviours. Regulation includes rule definitions, laws, mechanisms, processes, sanctions, and incentives 2

Government as a stakeholder of business Government as the elected representative of citizen’s interests Restricting business Enabling business Government as an actor (or group of actors) with interests of its own Dependent on business Competing with business 3

Government as a representative of citizens’ interests • Unlike many other stakeholders, government in principle represents an entire community since it is elected by the citizens of a certain town, region, country or even continent • In this role as the elected representative of citizens’ interests – Defines the conditions for the licence to operate of business • Restricting business • Enabling business • Debate about the degree of governmental responsibility for a functioning economy – Laissez-faire vs. forceful role in industrial policy 4

Government as an actor (or group of actors) with interests of its own • Governments have a self-interest to be reelected • Governments very dependent on business • Governments also compete with business 5

Ethical issues in the relation between business and government

Identifying the basic problems and issues: legitimacy, accountability and modes of influence • Main source of ethical problems stems from fiduciary relation to society in general • Government therefore in bipolar situation Regulation that protects their interests Taxes, jobs, investment, etc. Business Government Profitable and stable economic framework Society Consent 7

Legitimacy of business influence • Business can have a significant influence on the implementation and direction of governmental policies. It is therefore to no surprise that the issue of ‘public sector ethics’ has gained enormous momentum (Dobel 2007). The main ethical consideration arising from this situation is twofold – legitimacy of business influence; – accountability. • Is power and political influence of business leaders a threat to democracy? • To what degree is it legitimate for business to have an influence in politics? 8

Accountability to the public • One may contend that since the government acts as a representative of society’s interests, the public has a right to be informed about governmental decisions with other constituencies (such as business), and be able to determine whether it is acting in its interests or not • Although both parties are able to influence each other, the main concerns for business ethics are where business has influence on government 9

Modes of business influence on government • Numerous ways that business can influence government • Oberman (cited in Getz 1997: 59) distinguishes among different ways, using following criteria: – Avenue of approach to decision-maker • Direct • indirect – Breadth of transmission • Public • private – Content of communication • Information orientated • Pressure orientated 10

Business influence on government 11

Lobbying • Lobbying represents a direct, usually private attempt by business actors to influence governmental decision-making through information provision and persuasion. – It is considered a weak form of influence (Mc. Grath 2005) • Different types of lobbying: – – – Atmosphere setting Monitoring Provision of information to policy-makers Advocacy and influencing Application of pressure 12

Party financing and individual conflicts of interest • Donations to parties by business can raise conflict of interest problems • Prospect of preferential treatment • The situation is a dilemma: having good relations with political parties seems necessary, but party financing has dangers – It gains influence – but it could severely harm the company’s image and perhaps encourage questionable behaviour on the part of employees • Overlap of posts between business and government – ‘Revolving doors’ common globally (e. g. , US, Europe, Japan) – This raises substantial conflicts of interest 13

Corruption of governmental actors by business • Corruption is the abuse of entrusted power for private gain (Transparency International) – Main issue of government corruption in relation to business is activities where private firms shape the formulation, implementation, or enforcement of public policies or rules by payments to public officials and politicians • State capture is a situation where private firms shape the formulation of regulation by payments to public officials and politicians – Where state capture becomes a ‘universal law’ (Kant), a normally functioning economy becomes nearly impossible 14

2008 Corruption Perception Index for selected countries Note: Score relates to perceptions of the degree of corruption among government officials as seen by business people and risk analysts, and ranges between 10 (highly clean) and 0 (highly corrupt) Source: Taken from Transparency International Corruption Perception Index, 2004 (www. transparency. org) 15

2008 Corruption Perception Index for selected countries Country rank Country CPI score 1 Denmark 9. 3 1 New Zealand 9. 3 1 Sweden 9. 3 4 Singapore 9. 2 5 Finland 9. 0 5 Switzerland 9. 0 7 Iceland 8. 9 7 Netherlands 8. 9 9 Australia 8. 7 18 Japan 9 Canada 8. 7 18 11 Luxembourg 8. 3 12 Austria Country rank Country CPI score 40 South Korea 5. 6 45 Czech Republic 5. 2 54 South Africa 4. 9 55 Italy 4. 8 57 Greece 4. 7 58 Lithuania 4. 6 58 Poland 4. 6 58 Turkey 4. 6 147 Russia 2. 1 7. 3 166 Zimbabwe 1. 8 USA 7. 3 171 Congo, Democratic Republic 1. 7 23 France 6. 9 171 Equatorial Guinea 1. 7 8. 1 23 Uruguay 6. 9 173 Chad 1. 6 Slovenia 6. 7 173 Guinea 1. 6 Score relates to perceptions of the degree of corruption among public officials and politicians as seen by business people, country experts, and risk analysts, and ranges between 10 (highly clean) and 0 (highly corrupt). 12 Hong Kong 8. 1 26 14 Germany 7. 9 27 Estonia 6. 6 173 Sudan 1. 6 14 Norway 7. 9 28 Spain 6. 5 176 Afghanistan 1. 5 16 Ireland 7. 7 32 Portugal 6. 1 177 Haiti 1. 4 16 United Kingdom 7. 7 33 Israel 6. 0 178 Iraq 1. 3 35 United Arab Emirates 5. 9 178 Myanmar 1. 3 Belgium 7. 3 39 Taiwan 5. 7 180 Somalia 1. 0 18 Source: adapted from Transparency International’s 2008 Corruption Perception Index 16

Ethical issues in the context of privatization and deregulation • Privatization profits – Key issue is a fair price • Citizens turned consumers – Economic basis for decisions, rather than political • Natural monopolies – Can lead to over-charging or delivering poor quality • PPPs, Public-private-partnerships – Private sector profit-maximization tends to dominate at the expense of quality and effectiveness for citizens 17

Globalization and businessgovernment relations

Globalization and businessgovernment relations • Globalization defined as “the progressive eroding of the relevance of territorial bases for social, economic, and political activities, processes, and relations” • British political scientist Anthony Mc. Grew has described this in terms of a transition from a traditional to a global context, which he calls ‘the post -Westphalian’ setting (Held and Mc. Grew 2000) 19

From the national to the global context • When globalisation deterritorializes social, economic and political action, the significance of these nation states is weakened. • This transition is summarized as: – – – Society Holder of political power Manifestation of political activity Addressee of regulation Intensity of regulation Democratic control of political power 20

Globalization, government, and business: changing context National context (Westphalian setting) Globalized context (Post-Westphalian setting) Society Nation World Society Holder of political power Monopoly by national governments Multitude of governmental, civil society, and private actors Manifestation of political activity National regulation (laws) Systems of transnational negotiations (e. g. EU directives, codes of conduct) Addressee of regulation Social actors (e. g. domestic companies, citizens) Nation states (e. g. EU member states) Private transnational actors (e. g. MNCs) Intensity of regulation Decreasing (e. g. deregulation, privatisation) Increasing Democratic control of political power Higher Lower 21

Globalization, government, and business: changing roles National context (Westphalian setting) Global context (Post. Westphalian setting) Role of the state Dominant (as Regulator) Dependent (as addressee of regulation) Role of the company Dependent (as addressee of regulation) Dominant (e. g. corporate power of withdrawal) Types of regulation Imperative regulation Nation states: imperative regulation Private transnational actors: private, self-controlled regulation 22

Business as an actor within the national context (Westphalian setting) • Businesses are still located within nation states and they are therefore still subject to national law, which we have called imperative regulation • Problematic: Situations where business becomes an actor in authoritarian and oppressive regimes 23

Business as an actor in the global context (post-Westphalian setting) • On a global level, corporation assume a more dominant role while governments – bound by their confinement to territorial boundaries – have only limited influence beyond national boundaries • Result is so-called ‘race to the bottom’ 24

Business-government relations in international trade regimes • Several transnational government institutions have significant impact on business – Regional bodies: EU, NAFTA, ASEAN • EU is particularly significant, due to its strong legislative powers – Global players: WTO or World Bank • Role of these bodies is to enable trade and exchange of goods and services • Double-edged sword: – They can enable access to cheap labour and larger markets – But the same institutions increase competition and in some ways limit business 25

Corporate citizenship and regulation Business as key player in the regulatory game

Corporate citizenship and regulation: business as key player in the regulatory game • Debate over how to improve rulemaking • Business involvement through self-regulation or ‘reflexive regulation’ and corporatism • Reasons for new forms of regulation: – Encouragement of a proactive approach from industry – And the hope/assumption of • Cost-effectiveness • Faster achievement of objectives 27

Players in the regulatory game and selected examples of private regulatory efforts Business Government 1 1 2 3 2 5 4 3 4 6 Civil regulation, made by: • NGOs (environment, social, human rights, etc • Local community orgs • Trade unions 6 CSOs 5 Regulation made by: • National governments • European Union • United Nations • International governmental organizations (WTO, IMF, World Bank, OECD, etc) • International treaties (NAFTA, Mercosur, etc. ) Regulation made by: • Business associations, • Chambers of commerce • Industry associations • Individual corporations • Supply chain members • Specific initiatives and programmes • EMAS • Self-commitments by industry • Marine Stewardship Council • Ethical Trading Initiative • See Figure 10. 6 Multipartite agreements: • UN Global Compact, • European Alliance for CSR • OECD guidelines for MNCs • Dutch covenant approach • Voluntary Principles, Security & Human Rights 28

Examples of regulatory outcomes on different levels in a multi-actor setting 29

Governments, business and sustainability

Global climate change legislation and business responses: Support vs. obstruction • The debate on climate change regulation has been a key political arena of sustainability • CO 2 reductions represent a big threat for some industries – Result: Global Climate Coalition, to lobby against regulation – Variable success (and the coalition has been disbanded) – In Europe, public appetite for action, so firms lobbied to shape the regulation that emerged. ETS introduced in 2005 • Strictest approach, but uses market mechanisms, flexibly – In Australia, Canada, USA, lobbying was against action • Global supply of food and water is another key issue – Bolivian example of ethical issues in water privatization – Volatility of global markets for wheat and rice, exacerbated by rise of biofuels 31