Controlling Interdependence: The Organization as a Political Actor

Implicit in the observation that organizations attempt to obtain advantages from government regulators is the notion that formal organizations-have interests and make demands on government just as individual citizens do. There is little doubt that organizations have been heavily involved in American government and American politics for a long time and will continue to be involved. The importance and pervasiveness of corporate political involvement has generated very little systematic empirical research on the causes or consequences of such involvement. Most of the material published has been case studies, and most of these have dealt with corporate involvement in electoral politics. However, it is likely that organizational attempts to affect the decisions made by government bureaucracies are equally important to, if not more so than, direct interventions in elections.

The fact that political activities of organizations are not considered in textbooks on management and organizational behavior tells us something about the beliefs of writers of these books. Apparently, political activity of organizations is not considered because it is not taken to be a normal and legitimate administrative function. Of course, the institutional function of management generally has been neglected in texts which have typically focused on problems of supervising and motivating workers. And, it is certainly not in the interests of organizations to call these omissions to anyone’s attention. Given current attitudes and values, corporate attempts to manage their environments are, from their point of view, better left unexplored. Yet, it is undoubtedly true that organizations are involved in political activity, with different degrees of effectiveness.

Some organizations may have a large staff in Washington to gather information on governmental activity and lobby the administrative and legislative branches. Other organizations may have only a dim awareness of what actions are being taken and may limit their efforts to influence governmental policies. At times, one can document how private economic interests are reflected in governmental activity, such as Stigler’s (1971) analysis of truck weight limits to prevent competition with railroads. Other times, corporate involvement in the political process has virtually no discernible impact. Thus, the issues of why organizations are involved in political activity and what consequences such involvement has for governmental decisions are important problems posed when the focus is on organizations as political actors.

Why do some organizations attend to the political environment and others do not? The answer is probably that the political environment is a greater source of interdependence for some organizations. Some may depend on the government for sales or for market protection. The political system becomes relevant for the – organization when the system begins to affect organizational outcomes. There are two types of effects of government actions on organizations. One is direct action supplying money to the organizations, either through the purchase of goods and services, as from defense contractors, or through the provision of various cash subsidies. The second effect is action that protects markets from foreign or domestic competition or from competition from complementary or substitute goods and services, such as the building of roads for truckers or the use of tariffs to restrict imports in various industries.

One might predict that political involvement would be directly related to the extent that these two forms of governmental action are important for the successful operation of the organization. Measuring the effects of governmental action on industry, or individual firm, results is likely to be difficult, but consideration of the major contributors to political campaigns provides at least some support for this position; Because of the campaign finance reform law of 1971 and the Watergate scandals from the Nixon White House in 1972, more information about corporate activity in the 1972 campaign was developed than ever before. Epstein (1976) reviewed the status of the campaign reform laws, and provided information about political contributions. An examination of these patterns of contribution provide some interesting insights.

Secret contributions to the Nixon campaign of over $2 million were recorded by President Nixons personal secretary Rose Mary Woods. Of the 28 companies on this list, 6 were defense contractors, and these 6 accounted for 23.4 percent of the total money contributed by all the firms listed. Two other firms were in electronics, two were in the oil industry, two were in the automobile industry, and two were in the chemical industry. All 28 firms faced significant interdependence with the government. The electronics and chemical firms may also have been major suppliers of the defense department, while oil was facing price regulation and environmental constraints, and the automobile industry was contending with safety and pollution regulations as well as with competition from abroad.

The Senate Watergate Committee’s hearings and related investigations revealed that industry-wide solicitations by Herbert Kalmbach and others working for the Committee to Reelect the President produced more than $5 million just from the top nine industries. These industries and their amount of contributions were (Epstein, 1976:68);

Each of these industries receives some form of benefit from the government. Trucking, of course, is regulated by the ICC. Home builders and the carpet industry both rely on home construction, which in turn is affected by government policies including various programs to directly stimulate construction, urban renewal projects, and programs that affect the availability of mortgage money and its cost. Textile firms and automobile manufacturers face severe foreign competition; the latter also face various pollution control and safety regulations that affect sales and profit margins. Petroleum companies operate overseas, requiring governmental protection, and faced at the time of their con- tributions domestic price regulations, as well as concern over the depletion allowance and the regulation of natural gas, which is largely produced by the major oil Companies. With the government getting into medical insurance, the pharmaceutical business was profoundly affected by governmental activity, including FDA licensing, payment provisions in various social insurance programs, and protection provided by the patent and licensing laws ( see Hirsch, 1975 ). Investment banking is partly regulated and, moreover, handles major government agency financings, while insurance was seeking to remain unregulated by the federal government, so it could deal with the more easily negotiated state regulatory bodies. Furthermore, as Epstein ( 1976:19) pointed out, this list did not include contributions of over $5 million from oil company executives, contributions of over $2.5 million from officers and directors of the largest 25 defense contractors, or the contributions made by milk producers.

As government impact on industry has become more pervasive, so have the political activities of firms and industries.

One might suspect that organizational involvement in political activities is not a preferred mechanism for dealing with the environment because it has several disadvantages. First, political activity is relatively visible, due to stringent campaign finance laws. Visibility both increases the probability of influence attempts being directed at the organization and also facilitates influencing the organization since actions that are public are more easily constrained. Another major disadvantage of political action is that solutions to problems found in this arena may take longer and are not subject to the organization’s demands for scheduling. Court cases wind their way through the system slowly, and regulatory actions take time and move at their own pace. Getting special legislation through committees and Congress is time consuming and a process that may be interrupted by other pressing events, vacations, or elections, which frequently require that the process begin anew.

Perhaps the most significant disadvantage of political intervention is that the system invites opposition from groups or organizations who themselves have interests affected by the government. Thus, when an organization requests some special action, for example, to protect it from foreign competition, this action becomes public, and opposition can be mustered. The public forum of political debate makes opposition more likely, and the shifting positions of political figures, interested primarily in reelection, makes obtaining favorable political outcomes uncertain.

Epstein (1969) has noted that involvement by business corporations in American political activity has come about partially as an unintended consequence of the increasingly pervasive government intervention in economic affairs. Large government virtually assures large intervention on the part of organizations in political activity. The two are inevitably related. Such corporate or organizational involvement in political activity, moreover, is not frivolous use of organizational slack, like plush carpets or executive limosines. For many industries, governmental actions so profoundly affect their economic environment that these policies may make the difference between profit or loss or between survival and disappearance.

Prior to the action taken by OPEC to raise oil prices, Senator Kennedy, among others, maintained that the oil import quotas ex-eluding inexpensive foreign oil added $5 billion a year to the cost of fuel for consumers. Import quotas on textile products, particularly from the Far East, enhances the profitability of domestic textile producers and also assures the jobs of their employees. Import quotas on! steel, meat (until July 1972), sugar (until June 1974), and manufactured items as well as other raw material play an important part in the maintenance of domestic corporation profits. The use of quotas, rather than tariffs, does not even have the redeeming virtue of producing any revenue for the treasury.

Import quotas can be so important to an industry that it is not reluctant to spend some money to keep the political system informed about the need for the protection. Martin Lobel, a former energy office aide, told of a meeting he once had with oil industry representatives. When Lobel first started working for Senator Proxmire he had some questions about the oil import quota system and called up an Exxon lobbyist. The lobbyist called headquarters and flew five experts to Washington to brief Lobel. They met at a very plush club and presented an elaborate slide show, as well as liquor and good food (Gruenstein and West, 1975).

Protection from foreign competition is only one area of organizational political activity. Another is taxation. Organizations and products are frequently subjected to differential rates of taxation. It is in the interests of organizations to press for some benefits. Liquor, gasoline, and cigarettes are all taxed heavily, and therefore, assuming negatively sloped demand curves, sales of these products are reduced. There are a variety of depletion allowances for virtually all mineral products which serve to reduce the taxes paid by corporations. Within the various states, there may be differing rates of taxation on incomes, sales, or products, and again corporations may find it desirable to work to shift the burden elsewhere.

Business corporations are not the only organizations to engage in political activity. Cities and states continually lobby the federal government for funds. Agencies of the executive branch itself lobby in Congress and conduct massive public relations campaigns to let their constituency know how well they are being served and to create more demand for their services. Public relations is not only the province of the Pentagon—public service”advertisements (promotions) are run by Social Security, Housing and Urban Development, and the Equal Employment Opportunity Commission, among others. Universities and school systems are major sources of influence concerning bills affecting the funding of education, while hospitals have developed, through their associations, mechanisms for exerting influence on legislation affecting funding for health care.

Political intervention has typically been classified into two categories: (1) election activity, or (2) governmental activity.

Governmental activities . . . include both political involvement intended to influence the formulation and execution of policy by governmental decision makers and efforts designed to create a public opinion favorable to the corporation’s political goals. Electoral activities center around the selection and support of candidates or of issues that come before the public (Epstein, 1969:67).

Most investigations have concluded that organizational attempts to influence policy do not arise principally through participation in election activities. While much public concern has been voiced about corporate and union contributions to political campaigns, such activity may have relatively unimportant effects on political decisions.

With respect to what Epstein called governmental activities, there are again two categories. Organizations may lobby or petition the legislators, or organizations may lobby or petition the various administrative or executive agencies of the government. Again, it is not clear that the area which has received the most attention—lobbying of legislators —is really the most important. As Bauer et al. (1963:267) have eomr mented, “business bureaucrats would rather deal with government bureaucrats, without being bothered by the temperamentally differing politician as an intermediary.”

The models of organizational interest groups influencing the government are many and varied. There is, however, little theory or empirical research to aid in the understanding of when one might be used rather than another. Along one dimension, organizations may engage in their political activities alone through their own resources or collectively pooling their resources with other organizations which have similar interests. As with any collective effort, the danger exists that the interorganizational organization may not represent the interests of all the members, and for those coordinating mechanisms that develop formal staffs and structures, control of the lobbying organization itself becomes, at times, an organizational objective. We suspect that collective organizations are used when the individual organizations represented are small, for there are undoubtedly economies of scale in lobbying which would make collective efforts more efficient for all. Furthermore, collective efforts are more likely when firms in the industry are relatively homogeneous, so that the interests of all are likely to coincide. Group representation is also more feasible when, group members share common interests. A third variable might be the extent of governmental importance to the firm and the industry. Here; we might expect a curvilinear relationship. If the organization were,; highly dependent on governmental actions, then it might find it worthwhile to conduct its own political activities. When the organization is affected but not quite as much, it may find it desirable to share its efforts with others. And, when the organization is not affected at all, it would not support efforts to represent its interests. Thus, the importance of group representation of corporate interests is more likely, other things being equal, when corporations are moderately affected by governmental activities.

The National Association of Manufacturers (NAM) and the,: United States Chamber of Commerce are two well-known, broadly based business associations that work to influence the economic en.-, vironment through political action. Many trade associations also lobby and conduct public relations campaigns to build a favorable climate for the particular industry. Gable (1953) attempted to analyze the influence of NAM in passage of the Taft-Hartley Act, a bill long favored by manufacturers. Gable stated that “a political interest group tends to exercise a guiding influence in the determination of public policy when it succeeds in identifying its conception of the needs of the moment with the prevailing attitudes of the public, and has access to the major centers of policy decision so that its proposals can reach government … a political interest group may either manipulate public opinions so that they approximate group opinions or else adjust group opinions to conform to public opinions or both” (1953:255). Gable viewed political influence as a process of legitimation, one of establishing a congruence between the interests of the organizations and the interests of the general public. Gable also defined some variables that may affect how much influence on policy an organized group can have: “The effectiveness of these efforts is related to such internal factors as: the size of the group; the alliances it can make with other groups; its structure, organization, and policy-making proce-dures; the quality of its leadership; its financing, and its cohesion” (1953:256).

The strength of associations like NAM may diminish both with their success and with their perceived inability to meet external ; threats. If the organization cannot deal effectively with the environment, then the members are likely to withdraw support. On the other hand, when, or if, the organization removes a major environmental difficulty for the member organizations, they may no longer see any reason for participating and may withdraw. With respect to NAM, an organization which has been particularly active in opposing the extension of labor union power, Gable found that membership fluctuations have coincided rather remarkably with fluctuations in the membership of labor unions. Each new threat from labor has induced NAM to expand. When the union growth diminished, membership in NAM fell. For instance, after the passage of the Taft-Hartley Act, NAM membership declined by a thousand firms from 1947 to 1949 (Gable, 1953:260).

Gable’s treatment of the Taft-Hartley issues illustrates how difficult it is to assess the influence of any one set of interests on legislative outcomes. The final bill looked remarkably like several legislative proposals which NAM actively supported. Not all NAM-favored pro-visions, however, remained in the final version. The difficulty of inferring organizational power from legislative similarity is: If the arga-nization tends to support bills that are consistently passed, it may be because the organization really has the power to influence legislation, or it may be simply that the organization is able to identify prevailing opinion and line up behind it.

NAM represents one model of influence, an association of organi- zations directly representing their interests through lobbying and public relations. Another way in which such industry associations may operate is by directly negotiating with the various other interested parties outside the legislative process and then jointly presenting a compromise agreement to the legislature for its formal ratification into law. Since legislation typically does require compromise, it may be fruitful for the interested parties to deal with each other directly, rather than working through the legislator-intermediaries. An example of such interaction is provided in the study of the Associated Industries of Vermont (AIV) (Garceau and Silverman, 1954). This organization represented about 450 concerns in 1951, about half the total payroll of the state of Vermont. Vermont’s legislative apportionment left the legislature dominated by the Farm Bureau, representing; agricultural interests. Labor had almost no voice in the legislature; and only a few representatives were friendly to their interests. AFVs princir pal concern in 1951 was a bill proposed by labor to include certain occupational diseases under the Workman’s Compensation Act. When the session opened, AIV had planned to introduce three bills aimed at tightening the qualifications for workers claiming benefits under the Unemployment Compensation Law. Labor, on the other hand, hoped for an increase in both the duration and the amount of unemployment benefits (1954:677-678). The leader of AIV negotiated directly with the CIO representative, and an agreement was reached under which. AIV would get the occupational disease bill it wanted and it would drop the bills tightening up requirements for benefits under Work- man’s Compensation. In turn, labor agreed to drop its quest for higher unemployment benefits. “These negotiations were carried on completely outside the legislative hall with only two legislative participants.” (1954:678). Since each group was interdependent with the, other, with labor’s access to the legislature almost entirely through AIV, they reconciled their differences outside of the legislative process.

While these studies focused on the use of organizations that represent the interests of others, Epstein (1969) noted that organizations frequently engage in direct political activities. This direct activity is, in part, a consequence of the increasing size of major organizations, which makes self-representation economically and politically feasible, It is also partially the consequence of the growing political sophistication on the part of organizational managers and of the fact that when organizations join together in some intermediary organization, none of their interests are perfectly served. Stigler (1971), for instance, has shown that many political benefits tend to be distributed more equally among the organizations on the principle of one organization, one share, rather than on the basis of relative size.

Another form of organizational influence in the political process is the hiring of former government officials by industry or the government’s hiring of former industry officials. Cross movements between government and other organizations help build some common understanding. The actual cross movement of personnel, however, may be more of consequence than a cause of a mutual pattern of interaction and understanding that has developed. When personnel from two organizations are constandy in contact because of the interdependence between the organizations, it is likely that they and their organizations will develop stable structures of interaction and behavior to manage the interdependence and reduce uncertainty. These stable patterns of expectation, interaction, and structure of behavior facilitate movement between the organizations. And while such interorganizational flows of personnel may, in turn, further ratify the existing interorganizational relationships, the fact that such interchanges may be an effect, as well as a cause, of interorganizational collaboration should not be overlooked.

Two other points need to be made about the organization as a political actor. The first is that organizations, especially large, diversified organizations, seldom have a unified structure of interests. One division of an organization may favor one side of an issue and another division may favor the other side. Trade legislation is one setting where such controversies within the organization may occur. One division may be a major exporter, dependent upon reciprocal trade agreements for entry into foreign markets. Another division may be selling primarily domestically and would like to exclude the threat of competition from foreign manufacturers. Organizations are, after all, coalitions of various interests, and to the extent these interests exert different pressures for the organization, the organization itself may avoid a unified, determined position on any issue.

The second point is that organizations are limited in their exercise of political influence, often because they appear to be so powerful. Dexter (1960) has noted this about DuPont’s political activities in Delaware (see Bauer, Pool, and Dexter, 1963). When an organization is quite large relative to its environment and possesses conspicuous economic or social power, the very fact of that power constrains its behavior. General Motors is constrained in its competitive behavior because of its near monopoly of the automobile industry. And DuPont is constrained in its attempts at influence because of its unique position in Delaware. Even though, for example, DuPont owns the Wilmington papers through a holding company, the editors took a stand on the foreign trade issue opposite to that of DuPont. DuPont is quite circumspect and proper in its attempts to communicate its positions to Delaware senators and representatives. This is not to say that DuPont exerts no influence on political activities, but merely that because of the visibility of the organization and its power, such influence is likely to be constrained by the attention it generates.

Source: Pfeffer Jeffrey, Salancik Gerald (2003), The External Control of Organizations: A Resource Dependence Perspective, Stanford Business Books; 1st edition

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