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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, euthanasiakilling 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

Shaping of Public policies

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

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

Key element of the public policy process
Agenda building Policy evaluation RESULTS What happens? Policy implementation GOALS What to do? Policy formulation MECHANISMS How to do it?

INPUTS What factors to consider?

Policy decision

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
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

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

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

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

Is the intended purpose achieved and what are the unintended consequences and costs?

Problems of govt regulation

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

Policy confusion
TV and cable systems of delivery has caused confusion

End of Module-4