Executive strategy: On business and democracy

It’s a bit absurd to describe business and government as separate societal sectors these days. Individual businesses and trade associations have greatly influenced national and state elections, laws and regulations. The U.S. Chamber of Commerce spent more than $200 million lobbying in 2006, and Altria Group (NYSE: MO) and General Electric (NYSE: GE) both spent close to $100 million. It’s safe to say that all of America’s largest companies engage with governments on a regular basis.

The same cannot be said about many of the small and mid-sized companies trying to offer more sustainable products and services, a fact that begs a few questions. Can these kinds of companies engage with governments? Should they attempt to do so? One can easily make a case that these are precisely the companies that should be talking to government officials, directly and often.

Companies trying to forge a sustainable path face all kinds of government roadblocks, most of which don’t look like roadblocks to those enforcing them. When this is the case, company leaders should speak up. They can ask to meet with legislators or regulators to explain their unique challenges and suggest alternative regulatory approaches.

Apparel manufacturers have been frustrated by regulatory guidelines for care labels, which push companies to tell consumers to wash garments in warm or hot water, even though cold water would do just fine. Those rules only began to change when innovative apparel industry leaders made calls and sent notes.

This is a useful example because it shows there are other motives for engaging with government beyond the assumed primary motivation of greed. It proves such engagements can be simple and direct. A phone call and a suggestion can lead to a meeting. A meeting sometimes leads to change. It’s worth the time and effort.

Companies can try to sell their products and services to government agencies, competing directly with all other sellers of the same products and services. Or they can push for regulatory changes to require government agencies to buy more sustainable products, a move that would clearly give their company an advantage over traditional manufacturers. Solar panel manufacturers are doing this in many states and at the federal level. If a company sets a higher environmental standard with its own manufacturing, it can push to make this the new regulatory standard. The change would benefit society and also give the company a competitive advantage. That’s a reasonable two-for.

If a company chooses to engage with governments, there are of course risks. The primary one is a brand issue, as the company may risk negative public exposure. There is a chance the company may, in the familiar press conference parlance, give “the appearance of impropriety.” To protect against such a misunderstanding, I’ll offer a simple set of guidelines for engagement.

No secrets. This is the obvious rule one hears when working in national politics: If what you’re thinking of doing would embarrass you if it was written about on the front page of the Washington Post, then don’t do it. The same rule applies in business: You should avoid any political activities you might feel a need to keep secret. If you don’t want to read about it somewhere or hear it discussed on the radio, then don’t do it.

Focus on frameworks. In principle, I believe government should set borders on corporate activity. A descending cap on carbon dioxide emissions is a good example; it doesn’t tell business how to accomplish these reductions, but says the reductions are required. I think companies cover their risks by focusing on broadly applicable changes and guidelines. Even those who might disagree with this approach on a philosophical level might still acknowledge its practical value. If a company focuses on a big picture framework — with rule changes that can benefit society and offer the kind of stable regulatory environment that can foster innovation — it is less likely to be accused of feathering its own nest. If you know of a regulatory change that could help society and your business, ask yourself whether the idea can be expanded to increase its societal benefits and help more companies.

Don’t go it alone. Rather than approach elected officials or regulators on your own, find a suitable partner who can raise the issue with you. If you want better market access for products with recycled content, for example, find an environmental group that might share your views, start conversing with them and see whether they will help you in your meetings with government officials. The group likely will push to make sure the advantage doesn’t just help one company, but many. It can also add important credibility and cover; the group’s presence shows the request is not about a company, but an issue.

It’s a short list because, like good regulations, it shouldn’t be overly complicated.

There is another side to all of this, and it’s why I wrote at the outset that one could make a strong case for engaging with governments. I did not give an unqualified “yes” to the questions posed because I have some strong philosophical reservations. A board member of a company I was advising once asked me to identify the most progressive step her company could take. She wanted me to stretch a bit and really challenge the company to take some bold steps. She assumed the answer would be from the environmental arena, the primary topic of interest to her company. My response surprised her.

I told her that the most progressive step her company could take would be to give up its right to engage in politics and government at any level. It would require rewriting the corporate charter to prohibit any engagements that were attempts to shape elections, laws or regulations. She was shocked to hear a progressive company should give up its right to wage a political fight with the Exxons of the world. My point was that Exxon (NYSE: XOM) would nearly always win its political battles with small- and mid-sized companies such as hers, so the best bet was not to compete but to change the rules. By rewriting its charter, the company would remind the media and the public that corporations are not citizens, and that politics and government should be controlled by citizen voters, not wealthy shareholders.

I had a brand argument for her as well. Taking such a step would generate significant visibility and could make hers one of the more interesting companies anywhere. It could strengthen the brand, while also highlighting the aggressive lobbying practices of the energy and auto companies. That would be a nice two-for.