Rigging the game: CPA as an illegitimate strategic business action
In the following paper the central theme will be corporate political activity. Corporate political activity (CPA) is defined as corporate attempts to shape government policy in ways favourable to the firm (Baysinger, 1984). Hillman (2004) notes how firms engage in political participation all over the world: in the US and the European Union (Coen, 1997), Japan (Angel, 2000; Broadbent, 2000), South Korea (Kang, 2002) and Russia (Kubicek, 1996).
Hillman (2004) identifies two types of CPA: proactive and reactive. Proactive CPA includes informing the decision makers about the impact of a policy, trying to reduce government regulation of the firm, making campaign contributions and lobbying (influencing legislative/regulatory process). Reactive CPA is mainly concerned with the tracking of the development of legislation/regulation to be in compliance on time. Since I don’t see any harm in just being informed and observing the law, this paper will discuss the legitimacy of proactive CPA as a strategic action i.e. designed to achieve a long-term or overall aim of the enterprise (Chandler, 1962).
First, this paper will explain how non-market CSR (integrating social and environmental concerns in the business operations and interactions with their stakeholder, UNIDO definition) and CPA differ, and how the latter makes use of the former to advance goals of self-interest. After, the grounds of a legitimate action are identified it will be demonstrated that CPA does not satisfy these requirements. Lastly it will be argued that besides CPA being an illegitimate activity, empirical research has also found that CPA does not improve company’s bottom line either, therefore questioning why firms should pursue such strategies at all.
The debate on the legitimacy of CPA is relevant as the hard division between national governments and (multinational) corporations is becoming less clear. Globalization has led to a complex web of multiple stakeholders with a mutual economic interest (Jackson, 2016). As such the idea of political realists on international relations that used to see the nation-state as the sole
actor in the world arena is increasingly contested. Rather, Sherer (2011) argues that companies have a new political role that goes beyond mere compliance with national legal standards and have the duty to address complex political issues to socially beneficial goals. But are companies really entitled to do so? Clearly, on constitutional grounds they have no legal right, but besides that: are they virtuous enough to act morally just? The news is full of ethical scandals in which companies have pursued self-interests over the one of the general public (e.g. the emission scandal of Volkswagen or the hacking of cell phones by News Corp just to name a few).
Given all these arguments I prefer policies to be developed independently by the government for the interest of society as a whole...