bgs module-4 ps

Module-4

Public Policies

Module overview

• The role of public policies in governing business• Government and public policy• Classification, areas of public policy• Need for public policy in business• levels, elements of public policy• Corporation and public policy, framing PP• Business and politics involvement• Business, govt, society and media relationship• Govt regulations in business• Justification of regulation, types and problems of

regulation

The role of public policies in governing business

– Public policy is a definite course of action selected among alternatives of given conditions to guide and determine present and future decisions of govt and public authorities.

– “Public policy is what govt chooses to do or not to do”

– Public policy differs from nation to nation

The role of public policies in governing business

• Public policies may be regulative, distributive, organizational and govt engaged all these to achieve objectives.

• Public policies deal with areas as defense, education, public health, taxation, welfare, housing, employment, relief for calamities such as floods, earthquakes, tsunami, equitable distribution of income and wealth, labor laws, rural development, inflation and recession.

Government and public policy

• There is a close relationship between public policy and govt.

• Govt gives public policy 3 distinctive characteristics:– It lends legitimacy to policies. Govt policies are

generally regarded as legal obligations which are easily observed by citizens.

– Govt policies involve universality

– Govt alone can exercise coercion in society-only govt can legitimately imprison violators of it policies.

Classification of public policy

• Public policy can be organized along the foll five lines.– Regulatory ( criminal law statues)

– Distributive (goods and services such as welfare and health)

– Redistributive (rearranging one or more basic schedules of social and economic reward like tax policy)

– Capitalization• Cash payments to farmers to improve agriculture

• Tax subsidies to encourage exploration and production in selected industries and audit subsidies

– Ethical ( death sentences, cloning of humans, euthanasia-killing hopelessly sick persons)

Areas of Public policy

• Economic management

• Labour management relations

• The welfare state

• Shaping of public policies affecting corporate sector

Need for public policy in business

• Public policies that affect corporations are shaped by

– Social forces

– Economic forces

– Political forces

– Technological forces

Social forces•Demographic changes•Social values•Lifestyles and patterns of living

Economic forces•Unemployment•Interest rates, tax rates•Imports and exports•Income distribution•Market structure

Political forces•Political relationships•Political processes•Political stability•Efficacy of rule of law

Technological forces•New products and process•Innovation•Scientific discovery•Investments in R&D•Flow of technology

Corporation

Shaping of Public policies

Need for public policy

• To create a competitive environment

• To have control on foreign investment

– To protect local industries

– To regulate demand and supply, where resources are scare

– To regulate prices in unhealthy competitive environment

– To protect environment

Different levels of public policy• Levels depend on the intended geographic reach and

the degree of sovereignty the authority concerned enjoys– National level: applicable across country

• Industrial development and regulation Act (IDRA)• Monopolies and restrictive trade practices (MTRP)

– State level: applicable only to particular state– Regional level: applicable to certain regions

• Common agricultural policy (CAP)• Sharing river water

– International level: adopted by international org• Intellectual property rights• Trade related investment measures (TRIMS)

Elements of public policy

• Agenda building

• Policy formulation

• Policy decision

• Policy implementation

• Policy evaluation

Elements of public policy

INPUTSWhat factors to

consider?

RESULTSWhat happens?

GOALSWhat to do?

MECHANISMSHow to do it?

Agenda building

Policy formulation

Policy decision

Policyimplementation

Policy evaluation

Key element of the public policy process

Elements of public policy

• Inputs ( what factors to consider?)

– Economic or foreign policy

– Domestic political pressure from constituents and interest groups

– Technical information

– Consensus emerged in national politics

– Tax imperatives

– Reaction of natural or national calamities

Elements of public policy

• Goals (what to do?)– It can be ideal oriented or narrow and self serving

– Ideal orientation• Values such as freedom, democracy, equitable

distribution of income and wealth to share in economic prosperity have led to the adoption of civil rights laws and assistance programmes for the weaker sections of society

– Narrow, self serving• Tax legistalation will allocate burden of taxes among

various interest and income groups

Elements of public policy

• Mechanisms ( how to do it?)

• It uses a mechanism of incentives and disincentives to prompt citizens, business to achieve policy goals.– Alternative ways to raise revenue,

– Graduating tax rates for individuals and businesses,

– reduced deductions

– Excise duties

– Sales tax on selected items ( automobiles, cosmetics, cigarettes, petrol, alcohol)

Elements of public policy

• Results ( what happens?)

• Some are intended and some unintended– Effect million people

– Some will be pleased and displease others.

– Regulations may cause business to improve

– E.g. pre natal leave and post natal leave with full salary for pregnant women

– Unintended effect ( discrimination against women that will conflict goal of equal employment)

– Intended effect (protecting emp)

The corporation and public policy

• Limits the power of democratic govt: power restricted under– Constitutional law

– Common law

• Limits to powers of non-democratic monarchy, dictatorship, religious rulers, socialist state.– When govt exceed public tolerance, result in

violent actions to change the govt as it happened in France and Russia

Framing of policy

• Powers of government– Constitutional governments

• In a constitutionally elected system of governance, the will of the people and their desires get reflected in public policies.

– Non-democratic governments• In non-democratic governments special interest

lobbying of the leadership elite complete with illegal bribes and payments international pressure for change, public demonstration and civil disobedience play decisive role in shaping public policies

Involvement of business in public policy decision making

• There are 2 different schools of thought about business participating in public policy decision making

– Business should be involved

– Business should not be involved

Business should be involved in public policy decision making

– Business is an important constituent, should not be left out

– Economic stakes are high for firms and industries and public policy decisions might promote or mar their interests

– Business counterbalances other social interests since it has an overriding influence and impact on society through production and distribution of goods and services, income generation and employment

– Business is a vital stakeholder of govt, being a provider of revenues and the conduit for executing govt policies

Business should not be involved in public policy decision making

• Executives are not fit to engage in political debates

• Politicians can outsmart them both by rhetoric and tall promises which businessmen trust implicitly, and later burn their fingers

• Business is too big and powerful, and politics is fragmented by its nature and makes gain by divide and rule policy

• Business risks its credibility by engaging in politics, losing their wealth

Business and politics-level of involvement

• There are 3 levels of business involvement in political activities and distribution of goods and services, income generation and employment.

– Financial involvement

– Organizational involvement

– Strategic public policy involvement

Business and politics-level of involvement

• Financial involvement

– Formation of political action committee

• In democratic countries direct contribution by corporations to political candidates to fun their offices are forbidden by law

• In US companies are permitted to spend company fund to organize and administer PAC

– Trade association support

• Business participate in other interest groups

– Federation of Indian Chambers of Commerce and Industry (FICCI)

– Chartered insurance institute (CII)

Business and politics-level of involvement

• Organizational involvement

– Lobbying

• Direct contact with govt official to influence thinking or actions of that person on an issue or public policy.

– Employee grass root involvement

• Grass root programmes are organized efforts to get constituents to influence govt officials to vote or act in a favorable way.

Business and politics-level of involvement

• Strategic public policy involvement

– Executive participation where representatives participate in decision making by acting as the part of the executive.

– Involvement with industry working groups and task forces, policy position development are the other kinds

Business-govt-society-media relationship

Government

Business Media Society

Control, influence and intrusion go both ways

Govt represents the political voice of society. Civil society and public interest groups influence govt, which in turn attempts to influence and use societal and public interest group to influence business

Media raises issues as a player, in keeping/placing issues in the agenda and in contributing to their resolution

Govt regulations in business

• What is govt regulation?

– Govt regulation of business is a mechanism for implementing social choices and helps in creating the basic conditions that lead to economic prosperity

Justification of govt regulation

• Market failure– Using regulation to add the social costs of a product

that are not otherwise demanded in the market

• Ethical failure– Regulation ensures fairness and justice, and adds this

cost to the product

• Stakeholder demands– Special interest groups lobby for more govt

intervention in environmental conservation, consumer protection

Justification of govt regulation

• Public reaction

– Communication of national events has made most “accidents” more visible and less acceptable

• Political advocacy

– Org representing minorities and women call for govt being proactive in these areas

Types of govt regulation

• Industry specific

– Prevention of abuse to buyers in markets where market forces are distorted, usually by monopoly or other market power by suppliers

– transportation, communications, energy, banking

• Industry wide

– Primary social issues that affect all business

– Environment, safety, pensions, healthcare, employment

Types of govt regulation

• Functional– Specific to certain business operations

– Stock trading, anti-trust, labour, energy

• Media attention– Media connect globally

– Events are chronicled as they occur, the public and govt officials see social needs that should be highlighted

– Oil spillovers in ocean when ships break mid-seas, causing irreparable harm to fish, penguins

Problems of govt regulation

• Cost/benefit– All regulations add cost to products.

– When govt mandates operations that would not otherwise occur, or interfere with the operations of markets, costs or premiums are added to products, raising the price to the consumer

– The trend in govt is increasing cost and new rules

• Effectiveness– Is the intended purpose achieved and what are

the unintended consequences and costs?

Problems of govt regulation

• Deregulation

– Stakeholders resist deregulation, even when cost/benefit and effectiveness clearly favor deregulation

• Policy confusion

– TV and cable systems of delivery has caused confusion

THANK YOU

End of Module-4