[Solution] The Government and Social Responsibility
Created at:
Author: Sarah Bennett
How socially responsible companies are and what form that social responsibility takes is influenced by the relationship between business and government.
The Relationship Between Business and Government
In almost all countries, government takes an active role in making sure businesses adhere to certain standards of social responsibility. At the same time, businesses influence governments in an effort to forestall or modify government restrictions on business activities.
How Business and the Government Influence Each Other
Government → Business
- Direct regulation
- Indirect regulation
- Antitrust enforcement
Business → Government
- Personal contacts
- Lobbying
- Political action committees
- Favors
How Government Influences Business
Governments influence business behavior through various regulatory mechanisms, both direct (laws and regulations) and indirect (incentives and tax policies).
How Business Influences Government
Businesses use several strategies to influence government policy and regulation, including personal relationships, lobbying, campaign contributions, and other methods.
Select the correct response(s) to the following question.
Which of the following are examples of indirect government regulation of business? Check all that apply.
- A government agency issues regulations restricting the activities of business.
- A city gives people low-interest loans if they open businesses in a certain neighborhood.
- Lawmakers pass a law giving tax breaks to certain companies.
- A legislature passes a law requiring businesses to perform certain actions.
View Explanation
Indirect regulation rewards certain behavior but does not require it. Indirect regulation includes tax codes that encourage companies to be socially responsible, or monetary incentives to do things that promote the general social welfare.
Match each way in which business influences government with the corresponding example.
Several arts organizations establish a group to raise funds to elect politicians who support government funding of the arts.
An executive gives the head of a government agency small gifts.
An executive calls her member of Congress to ask him to vote against a certain bill.
A company hires a spokesperson to testify before Congress in opposition to a bill that would disadvantage the company.
View Explanation
Personal contacts: Managers cultivate relationships with politicians and heads of government agencies, and vice versa, to have influence with them through direct personal contact. Calling a legislator is an example of such direct personal contact.
Lobbying: For-profit and nonprofit companies often hire professional lobbyists, whose job is to represent their employer's interests to legislators and to influence votes on legislation. Hiring someone to testify before Congress is an example of lobbying.
Political action committees (PACs): PACs are fundraising groups that organizations create so they can legally donate money to politicians' election campaigns. Business PACs influence government by funding the campaigns of politicians whose policies are favorable to business interests. The arts organizations in this example are forming a PAC.
Favors: Businesses do personal favors for politicians, like taking them out to dinner or covering some of their expenses. There are legal limits on the cost of such favors. Such favors earn businesses considerable goodwill. Giving gifts to agency heads is one way of trying to win favor with influential people in government.
