Why CEOs Should Care about Being Policy and Political Actors

Screenshot 2018-01-03 at 15.25.31By Mark Smith and Chris Micheli

For the past 7 years, Mark Smith has taught a class at the UC Davis Graduate School of Management, which is called “The Business of Politics”. As a guest speaker, Chris Micheli has presented a lecture for several years on lobbying at the State Capitol. The premise of the course is straightforward: businesses are affected by government at the local, state, and federal levels and, as a business leader, it would be in your best interest to clearly understand that relationship. This may seem fundamental, but the surprising fact is that this topic is not one of the core fundamentals discussed in any business management curriculum.

Open any page of the Wall Street Journal, or click on the CNN website, and any day of the week you can find numerous examples of companies being affected by government regulation, a former CEO being selected for an executive branch appointment, or a current executive being hauled in front of Congress to explain corporate action (or inaction), tech startups creating business in and navigating a gray space where public policy has not been fully developed (such as autonomous vehicles or the use of drones), or cities competing for business growth or relocation with lucrative tax packages. The list is almost endless.

From greenhouse gas reduction regulations to legislative mandates on paid sick leave or minimum wage, policy and politics represent a minefield that requires careful navigation for optimal outcomes for your business. Therefore, it is surprising that more business schools do not cover these fundamentals in detail.

Stepping back, let us start with the basics. What is government relations? One short answer is that government relations is essentially ensuring a relationship with the government entities that regulate you. It is valuable for this relationship to be a two-way street. While it is important for business professionals to be aware of how government impacts their business, it is equally valuable for government decision-makers (both elected officials and appointed regulators) to understand your business, including its purpose, how it operates, and how it can be most successful.

When was the last time you heard an elected official complain that we have too many jobs and need fewer of them? Whether they are local, state or federal elected or appointed officials, they should care about how your company provides jobs, is a valuable partner in the community, and what they can do to support your business and its employees. But you must get in there and make your voice heard because others are not doing it on your behalf. That is where government relations and lobbying come into play.

In fact, business leaders might want to check if their competitors are engaged in the policy process to their own benefit, as well as to your detriment. Have you ever heard of a startup company called Uber? Do you wonder where the taxi cab companies and independent operators were when Uber started gaining steam? Do you ever read how the California Environmental

Quality Act (CEQA) is used by one business or a labor union to prevent competition by restricting growth and investment of competitors?

You might ask, so what if I want to engage? How do I do that? What leverage does my business have in the policy and political arenas? Do I have to personally do this? The answers might surprise you, and it is probably easier than you thought.

First, your company, wherever it does business, employs constituents of a specific legislator or generates revenue in a specific legislator’s district. This means that your legislator should want to be aware of who you are and what you do, and most importantly, support you and your business. But you need to educate them.

Second, remember that the value of business collectively is that private enterprise is the major revenue source for government by employing people (who pay income tax), conducting business (and paying corporate tax), and selling products (resulting in sales taxes). Without private industry, the government revenue model collapses upon itself. They need you.

Third, if your company is not large enough to have dedicated staff to represent you in the political space, then you should join a politically engaged trade association or hire a contract lobbyist. A successful lobbyist is knowledgeable regarding the subject matter of your business. He or she has working relationships with key legislators and policy staff, as well as executive branch appointees (i.e., your regulators). He or she understands the politics and policy regarding the subject matter, can move legislation through the process, and can guide you through the regulatory regime in this state.

Business school and management courses are not designed to make aspiring business leaders experts in every subject area. Instead, they teach enough to develop awareness and educate students on the right resources and the right questions to ask. If your business school curriculum is not teaching aspiring business leaders about the interaction of business, policy, and politics, they might be leaving out some critical information for your future success.

Mark Smith is a Senior Policy Associate with Environmental & Energy Consulting. Chris Micheli is a Principal with Aprea & Micheli, Inc.

 

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