Despite its bad press, the paid pursuit of influencing policy can offer real societal value.
By Dr. Stephanos Anastasiadis and Dr. Sigrun M. Wagner
Lobbyists paying elected representatives to place questions in the U.K. parliament. Arms manufacturers giving South African officials BMWs in exchange for army contracts. Smoke-filled rooms featuring stuffed brown envelopes. No wonder lobbying has a bad name. But these are not images of lobbying: They depict corruption, albeit in a policymaking setting. These actions are morally suspect and usually illegal. They also contravene the UN Global Compact: Principle 10 requires the combating of corruption. In fact, lobbying is far more often about committee meetings, reports, and other unspectacular activities. Lobbying can be understood as the focused provision of relevant information, with the intention of influencing public policy or process. Corporate lobbying is not just important for companies; it helps create better public policies, and can therefore have real societal value, despite its bad press.
Even so, there is much scope for criticizing corporate lobbying. In our research, we have found that the lobbied (usually civil servants and elected representatives) often perceive companies as exaggerating, bullying, and even lying outright. In their 2005 report, Towards Responsible Lobbying, the UNGC and AccountAbility argue that lobbying needs to be reformed, and set out proposals for responsible lobbying practices. Simon Zadek, then AccountAbility CEO, rightly said: “Lobbying [was] one of the few business practices to have escaped close scrutiny in recent years.” David Vogel later wrote about responsible (in the HBR Lit in 2008), arguing that companies should lobby for more sustainable policies. The 2005 report acknowledged that demands for complete transparency are both unrealistic and may in fact be counterproductive. It acknowledged that more rules—such as compulsory registration—do not prevent unethical lobbying. And it also called for UNGC participants—more than 2,200 companies and NGOs at the time—to bring lobbying practices in line with the Ten Principles of the UNGC.
Nearly a decade later, not much has changed. The world has moved on in other ways, though. Recent scandals and crises have shone a light on corporate actions. At the time of writing, the horsemeat scandal in Europe and a factory collapse in Bangladesh were leading to a greater focus on supply chains. Corporate tax has become a hot topic. We have heard repeated calls for government intervention. Before the crisis, governments had been in retreat. As Colin Crouch argued in 2011, this is a long-term trend. In the short-term, though, the significance of governmental policies and regulations has become clearer. This has thrown lobbying into sharper relief: Societal skepticism of lobbying has become more pronounced, as “dodgy” lobbying practices are seldom out of the news. At least one socially responsible investment label has recently started taking lobbying into account in their company ratings.
Interestingly, the UNGC implicitly promotes responsible lobbying. Principle 6, for example, is about promoting elimination of workplace discrimination. A company that takes its UNGC commitment seriously arguably has an obligation to promote public policies to this effect, particularly where it is present in or entering a country with weak institutions and rule of law. It is also in companies’ interests to do so. Consider the following caricature, based on Principle 4 (eliminating all forms of forced and compulsory labor): If you are going beyond local regulations and paying your own staff decently, but your competitor is using slave labor, then you are at a disadvantage, mutatis mutandis.
If you accept the “fallacy of restricted alternatives” and race for the well-publicized bottom by employing your own slave labor, then your company will suffer reputational damage when (not if) your behavior is reported in your home market. Instead, you can promote stricter standards and monitoring—policies that create a level playing field at an acceptable level. If raising your rivals’ costs gives you a competitive advantage in the process, so much the better.
If it is this simple, then why does it not happen all the time? Indeed, why does lobbying have such a bad reputation at all? And why are we not seeing improvements over time, in line with corporate responsibility developments in other areas?
There is emerging evidence that the problem is at least partly one of perception. In her recent study of corporate environmental lobbying in Europe, Sigrun Wagner found that while companies see environmental protection as important, specific regulations present costs and/or opportunities: The emphasis has been on regulations’ cost-effectiveness. Where companies see environmental regulations only in terms of costs (which is often), they tend to lobby defensively, that is to block policy proposals. In a similar study, Stephanos Anastasiadis found that the way companies understand the nature of the political process—and their role within it—is critical for the nature of their engagement. Most companies took an instrumental approach to lobbying—analogous to seeing policies only in cost terms. A minority took a cooperative approach. These are very different perspectives. For example, companies taking an instrumental approach tend to understand their own engagement in terms of acting to prevent government interference, which they see as unnecessary and intrusive. The more cooperative companies, by contrast, tend to value the legislative process as generating freedom to innovate within limits that apply to all. Both studies point to a sense that the “simple facts” are less important for responsible lobbying than the manner in which companies make sense of what is going on.
This suggests that problems in lobbying will continue until companies address the underlying phenomenon. This really matters, because in a world of social media, ubiquitous internet access, and whistle blowers, companies have more to lose than ever. In 2005, the UNGC noted a significant gap between “everyday” CR policies and activities, on the one hand, and lobbying practices on the other. The only thing that seems to have changed in this respect is that the lobbying of individual companies is now more visible. The flow of media reports on lobbying suggests that many companies have not internalized the danger.
In a seminal paper, Mark Suchman wrote about gaining, maintaining, and repairing legitimacy. There are three kinds, he argued. Pragmatic legitimacy is based on the audience’s (stakeholder’s) self-interest. Cognitive legitimacy rests on comprehensibility and taken-for grantedness. Finally, moral legitimacy is based on normative approval. All legitimacy management depends heavily on communication between the organization and its stakeholders. In essence, then, if a business wants to be sustainable, in the narrow sense of continuing to survive, then it needs to remain legitimate, thus maintaining its social license to operate. This is at the heart of stakeholder management. More recently, Guido Palazzo and Andreas Scherer have argued that moral legitimacy is increasingly important as other bases for legitimacy decline. Their argument explains the ever greater societal and media pressure on companies to act responsibly. Indeed, the suc- cess of the Global Compact itself is hard to explain without a rise in the significance of moral legitimacy. It is therefore remarkable that corporate lobbying seldom appears to enjoy normative approval.
David Vogel wrote: “Lobbying needs to become a critical component of a CSR strategy. It is not enough for companies to engage in sophisticated private initiatives, however strategic. They must also be willing to support public policies that make it easier for them and other firms to do the right thing.” John Elkington has recently made a very similar argument. We agree that this is needed. But it will not be enough for companies to simply decide to change. Mistrust of politics and politicians is deeply rooted in the culture of many companies. The practices resulting from that mistrust mean that policymakers have come to expect companies to lobby unethically, adjusting their expectations of their policymaking partners. If the root of the problem is cultural, then the treatment must also be cultural.
This is not an engineering problem, and it cannot be solved simply by introducing codes of conduct or implementing greater transparency. The stories we tell ourselves to make sense of our environment have real-world consequences: They directly affect not only what we see and feel, but also how we act. In short, if we want to have responsible lobbying, then we need to change the story. Engaging with stakeholders and sharing good-practice examples is a positive way to start, as is ensuring that company lobbyists are fully integrated into the rest of the company. Real change will take time and require intensive engagement. This is hard, but the rewards for both business and society could be substantial.