THE COALESCENCE BETWEEN CORPORATE LOBBYING AND CSR by-Sakshi Shankar
Transnational Corporations are generally known for their extensive policies on the corporate social responsibilities. However, the policies on CSR over the past decade of such companies does not explicitly include the ethical repercussions and outcomes of corporate lobbying that has been pertinent outside the business conducting principles of the corporation. It is generally construed that influence on politics and policies by the means of donations as pointed out by OECD falls under CSR criterion, but lacks with respect to the relationship between CSR and corporate lobbying. Global Reporting Initiative provides a systematic outline of strategies and activities of lobbying but it is observed that TNCs do not sustain such information to the stakeholders which can further be considered as perturbing in developing countries. Although lobbying is not defined specifically or generally that is accepted amongst most, the widely considered definition of lobbying is “all activities carried out with the objective of influencing the policy formulation and decision-making process” as stated by the Commission of the European Communities, 2006. This activity is also referred to as corporate political lobbying and explains the same as activities with political and civil professionals that use these means to influence policies.Empirical studies of interest group influence, on the other hand, are relatively arduous due to the complications of operationalizing the idea, acquiring data on corporate activities, and quantifying effective influence.As a result, corporations engage in lobbying to protect themselves from harmful regulations and to gain a competitive edge by securing favourable policy changes. From employing ex-government officials by business giants to injecting enormous sums of money into political party fundraising during election campaigns, it can take on a variety of nefarious shapes. Examples of such outcomes are discussed in the following paper. In addition to analysing the implications of the aforementioned, an economic instrument of Public Choice Theory is also discussed apropos these concepts. However, as pointed out by Daniel Farber and Philip Frickey, “Transparency and regulation in these processes amount to the creation of barriers that allow society as a whole to create a demand for socially pragmatic policies, as opposed to financially biased regulations.”2 Such a framework for the regulation of lobbying is offered by the theory, but regulates a policy that fulfils the stakeholder’s demands and serves their own interests.
Conclusively, by comparing high-income countries and developing countries along with various case studies, the paper essentially deliberates and examines the practical implications of the stipulations and practical paradigms pertaining to the influence and relationship between corporate lobbying and Corporate Social Responsibility.
Keywords: Corporate lobbying, Corporate Social Responsibility (CSR), Public Choice Theory (PCT), Regulations, Transnational Corporations, Economics and Company Law
“Lobbying is a complex phenomenon, generally used to refer to the activities related to influencing policy-making, particularly to influence a legislator’s vote to meet personal interests.”3 Each State has observed various approaches towards lobbying in order to understand and implement the same through distinct modes. However, it is generally construed as an intricate means to identify the lobbyists’ interfaces with the legislators with respect to the phenomenon and can also be perplexed with basic advocacy. Theoretically, lobbying could be understood as an influencing of political and corporate agendas, however “a large part of the debate stems from the negative perception of lobbying which arises primarily due to the lack of clarity in the type of policy that is derived from such activities.”4 Lobbying can also be practiced in democratic States in the forms of non-governmental establishments or think tanks observing policy advocacy etc. that could play an important part in the communication and representation of the citizens of the State in the presence of regulators and legislators.
Lobbying exists in two major forms around the globe, which are:
1) Political Lobbying
Political lobbying, also known as grassroots lobbying is practiced widely practiced in India and other democratic States which helps pertain the general understanding law and the regulations passed but the legislature and their effects on the day-to-day lives. It is generally practiced by the mobilization of masses with respect to the aforementioned legislative actions. “Grassroots lobbyists influence and ask the general public to contact their legislators and the other officials regarding such issues.”5 The difference between political and corporate lobbying lies between the interaction of the general citizens and government officials along with parliamentarians and bureaucrats.
2) Corporate Lobbying
Also known as direct lobbying, corporate lobbying is the more common form of influential prospect wherein the lobbyist is directly involved and is an active participant in the legislative procedures or governance and is generally aware of the required and relevant information with respect to the pertinent policy. The crux of direct lobbying lies within the ability of equip information from the governmental officials, bureaucrats, parliamentarians etc.
It should be noted that “while earlier, corporate entities believed in maintaining a safe distance from the government, of late, they are plunging into this arena.”6 Legally and informally, corporate lobbying generally is practiced by the means of interactions and exchanges with a bureaucrat, legislator or policy making authorities with the general intent of influencing the said policies in favor of their represented parties. The motive behind such influences and networks is to restructure the governmental policies according to the requirements of the companies and the regulations surrounding the particular industry. Some of such industrial networks would include CII (Confederation of Indian Industry), FICCI (Federation of Indian Chambers of Commerce and Industry) etc.
Practically, the corporate sector inclines towards the protections of personal and colloquial interests, essentially resorting to the influence the respected authorities for propitious policy changes. “It thus takes nefarious forms – from hiring of ex governmental officials by corporate giants and infesting of on-going governmental discussions on policy issues to pumping of huge pay-outs into political party funding during election campaigns.”7 Additionally, the “phenomenon is not just limited to the influence sought to be exerted by corporates on laws but also includes maneuvering to influence governmental and ministerial positions to secure for themselves perpetual support from the incumbent governments.”8 Due to the aforementioned understanding and practice of lobbying, distorting the lines between theory and practice, corporate lobbying has also been synonymous with bribery. Countries with regulations of lobbying are critiqued as ‘legalized bribery’ as well. However, the difference between lobbying and bribery can be examined by various means, some of which are:
- The intention of bribery stems from the evasion of the policy present whereas the intent of lobbying is to influence the existing law modification to be presented in the
- The contention that laws impact the citizens of the State and its relationships with other States, legitimizes lobbying and not bribery as bribery intends to exchange and barter
- Lobbyists possess the power that lacks in the hands of a briber with respect to legitimization and
- It can also be observed that in developed or high-income countries, lobbying prevails over bribery but the developing countries tend to observe more of bribery, leading into the wider aspect of corruption and economic disparities.
The possibility of negative implications of lobbying with respect to the economy and polity remains within the scope legality of the State as provided. This can be further observed by the exemplar of USA wherein the “forms leveraged lobbying to prevent regulators from enacting laws which could have controlled mortgage lending by financial institutions, thereby suggesting a link between lobbying and the consequent financial crisis.”9 “Lobbying exists in some form or another in most countries, however, despite the ramifications it can have on the judiciousness of law making, it is an unregulated activity in most jurisdictions.”10 Approximately, one-third of the OCED countries observe lobbying regulations and countries such as Australia, Canada, Germany, Taiwan, Lithuania etc. consider lobbying as a legal aspect and regulate the same through the legislation. However, in India, the examination of corporate lobbying has not been discussed widely. “As India develops as an economy, there is a likelihood for increased pressures faced from corporate entities to influence policy in the interest of profitability.”11 Therefore, by the means of both domestic and international bodies, it is required to consider the pedantic aspect of addressing the stakeholders as well as the citizens of the States with respect to the effects of lobbying.
The prospect of the research paper would be to further analyze the aspects of corporate lobbying pivots on the alternatives adopted by the corporations about lobbying strategies along with CSR and also includes the analysis of lobbying in various high-income and developing countries. Furthermore, a comparative analysis of India with other high-income and developing countries would lead to the scrutiny of the required and current framework of lobbying in India and contrast its locus of the regulations surrounding the same. Additionally, considering the Public Choice theory and delving into the economical understanding of policy making and the engagement of the public to generate supply and demand of the said policies.
PUBLIC CHOICE THEORY
Dennis Mueller elucidates that the Public choice theory can be defined as the “economic study of non-market decision-making, or simply the application of economics to political science. The subject matter of public choice is the same as that of political science: the theory of the state, voting rules, voter behaviour, party politics, the bureaucracy and so on. The methodology of public choice is that of economics, however. The basic behavioural postulates of public choice, as for economics, is that man is an egoistic, rational, utility, maximiser.”12 By this definition, it can be interpreted that “Lobbying is deeply intertwined with the affecting of policy by corporations to bring about reforms that would be financially beneficial to them.”13
“The inter-relationship between profiteering and policy-making has led to some scholars taking an economic approach towards lobbying.”14 By the means of such approaches, the financial benefits that are appropriated by the Transnational companies are collected due the changes in policies while simultaneously considering the repercussions on the general public. “One of the methods used to understand the impact of lobbying on politics is the public choice theory, which applies economic tools to political science and policy decision-making.”15
“The public choice theory views the process of legislative functioning as essentially negative, where the legislature works towards the creation of laws that address matters that meet their private interests as opposed to public interests.”16 The general premise that the legislative members and decision-makers is to avoid personal conflict with respect to public at large, focus groups, including all corporations. “As a result, political decision-making must involve a third player, namely citizens, to represent their interests and thereby create a ‘demand’ for policy that is created in their favour.”17
“A presumption made when applying this theory is that politicians work to maximise voter appeasement so as to maximise their position in power.”18 Conversely, the Public Choice Theory is based on the economical perspective of the State, rather than the political. “This is because it propounds that funding economic growth directly creates tangible results that are perceived by the voters, with additional variable factors such as political rhetoric and climate.”19 Due to this, the groups of corporate lobbying have the opportunity to present their proposals and agendas as well as the public agendas, even in the cases of the interests of corporations and public interests not affiliated with one another.
“The scholars of this theory argue that it applies only in cases where there is a two-party system– this becomes problematic as most countries follow a multi-party system, where it is rare to find a single party gaining absolute or true majority.”20 Hence, the parties in a multi-party system, due to this, acts as a delegatory prospect of the people thereby, making decision-making bodies function on their behalf. Furthermore, if it is demanded by the constituencies that a certain regulation needs to be administered and implemented, policymakers and legislators will have to work towards the same and consider the public choices over the accessions of corporations. “However, this does not mean that regulations would only be necessary intwo body systems, as in multi-party systems, the status quo may be skewed in favour of certain groups that often control the economic and social factors in the society.”21 Thus, scholars of this theory believe that lobbying is a legitimate form of stakeholder representation and is governed by simple rules of demand and supply, as policymakers are influenced to take decisions in the interest of lobbyists if it offers them political advantage.”22It is only plausible by the means of rules and regulations is to ensure a formal construct of lobbying and policy-making.
The policymakers do not obstruct the general applications of rules and the procedure of making the said policies in order to manage and sanction in the process. “This is because where parties have a significant majority, they continue to remain in power for longer periods and as a result, they determine the rules that would govern lobbying.”23 However, the application of the aforementioned regulations is intricate. The guidelines frequently address the disclosure of information, as well as the certification of bodies that undertake lobbying on behalf of organisations. Throughout most cases, the judicial bodies are recognised as the major entity responsible for concerns connected to lobbying, the required regulations, and governance. By explicitly outlining the norms and isolating the regulatory authorities from politicians, it would effectively pose challenges towards meeting the needs and interests of constituents by transferring the onus of duty for lobbying regulation from legislators to a mandated regime.
Additionally, it can be constituted that “regulations of lobbying are necessitated as a result of the public’s choice.”24 “Transparency and regulation in these processes amount to the creation of barriers that allow society as a whole to create a demand for socially pragmatic policies, as opposed to financially biased regulations.”25 Despite its shortcomings, this theory offers a framework for how a regulatory system for lobbying should be structured and why policymakers would deliberately attempt to develop such a framework in order to serve their own interests by addressing the needs of larger constituencies.
Public Choice theory can help us understand how government laws are based by the means of applying the economic theory to it’s process, identifying difficulties such as self-interested groups and possible exploitation of compelled minorities, and proposing strategies to mitigate these flaws. “In recognition of this important role, the American economist James M. Buchanan received the 1986 Nobel Prize in Economic Sciences for his work in explaining the nature of exploitation in electoral systems, the self-interest of politicians and bureaucrats, the power of interest groups, and the potential role that constitutional restraints could have in limiting their malign effect on public decision-making.”26
The concept of theoretical and practical lobbying pertains in some form in most countries around the globe but has been observed to be unfettered by the means of a regulatory body or a legal structure irrespective of its effect on the legislative aspect of the country and its residents. Countries such as United States of America, Australia, Canada, Taiwan, the United Kingdom, Germany, Israel, Poland, Hungary, Slovenia and Lithuania are a part of the Organisation of Economic Cooperation and Development (OECD) have specific laws regarding lobbying and sustain a regulatory body to govern the process lawfully. The legal understanding and application of Lobbying with such procedures in place are generally observed in High-income States whereas the lack thereof, in Low-income States. The following is a comparative analysis of examples of a few of the States in order to determine the regimes of lobbying in various States.
LOBBYING IN HIGH-INCOME COUNTRIES
High-income Countries such as The United States of America and The United Kingdom fall under OECD and have a legalized mechanism for lobbying as mentioned above. The attributes of the same in the respective countries are as follows:
1) The United States of America
The United States of America entails an entirely separate industry that primarily deals with the influencing of policies and advocating for various issues and sustains one of the most prevalent forms of lobbying and is growing on a rapid rate across the spectrum. Corporate lobbying has a significant legal framework in the United States, as evidenced by the landmark case of Citizens United v. Federal Election Commission27, wherein the Supreme Court of the United States ruled that a law prohibiting or restricting super Political Action Committees (PACs) from investing in or influencing elections would be in violation of the First Amendment of the Constitution of the State. Lobbying is also lawful and practiced in the United States, with common citizens having the ability to advocate for particular causes and objectives as sanctioned by their motives. Due to the aforementioned statutes and implications, multiple public lobbyists tend to solicit their issues with respect to the inhabitants of the State, thereby making it possible for them to conclude and terminate the issues faced by the means of lobbying.
A more recent piece of law, the Lobbying Disclosure Act of 199528, is one of the most significant pieces of legislation governing the practice. This Act requires lobbyists to register with the Secretary of the Senate and the Clerk of the House of Representatives, disclose all information about themselves and their clients’ transactions, as well as details of any financial contributions of more than USD 10000 for lobbying activities in whole or in part, and communicate to them the details of any for-profit organizations’ involvement in lobbying activities, according to the Secretary of the Senate and the Clerk of the House of Representatives.
Despite the constitutional protection, there has been a growth in political patronage and capitalism in the United States, with companies having a significant stake and influence over politicians, resulting in the application of pro-corporate policies across the State. This is a detrimental consequence and outcome of the procedure, which may be regarded as a critical component toward the disintegration of the government’s democratic institutions and substandard.
2) The United Kingdom
Since the 1990s, there had been an increase in the field of professional lobbying, with nearly 14,000 individuals engaged and an approximate value of 2 billion pounds. Additionally, it has been observed that Lobbying is quite substantial in the United Kingdom. Taking the aforementioned into consideration, the House of Commons Public Administration Select Committee, in 2009, recommended the establishment of a formal registration of lobbyists and their businesses under a specific legislation, only to be rejected by the then-current administration. However, five years later, in 2014, the British Parliament approved the Transparency of Lobbying, Non-Party Campaigning, and Trade Union Administration Act29, which posed the requirement for professional lobbyists to be formally registered. Under this Act, the Office of the Registrar of Consultant Lobbyists (ORCL) was established and recognized as an independent statutory office with the duty of maintaining the register for the country. The Chartered Institute of Public Relations launched the UK Lobbying Register a year later, in 2015.
LOBBYING IN DEVELOPING COUNTRIES
By the means of a brief analysis of the statutes and regulations on the practice of lobbying within the developed countries like The United States of America and The United Kingdom, the current state of lack of regulations for lobbying pertains to the developing nations and the issues faced by the same regarding the practical implications of corporate lobbying. This is further analyzed below with examples of Brazil and India.
The rampant source of corruption has been the cause of studies done by the Transparency International and Latinobarometer which suggests high rates of undue influence on the decision-making process in countries such as Brazil. Furthermore, “the OECD recommends that in order to meet public expectations for transparency and integrity, countries must adopt lobby regulations, defining lobby as “’he oral or written communication with a public official to influence legislation, policy or administrative decisions’, often focuses on the legislative branch but that also takes place in the executive branch.”30
Although there is no explicit legislation in Brazil that governs lobbying, there are a number of regulations that have an indirect impact on lobbyists. In terms of legislative procedure, the Brazilian Federal Constitution states that parliament committees are responsible for connecting public audiences with civil society groups. There is also an internal regulation at the Legislative Branch, authored by the Low Chamber, that requires the registration of representatives of the government and civil society. However, it was never enforced. In 2007, just 146 entities, the majority of which were government agencies, had registered their representatives.31
“Lobbying regulations bring better results when lying in a wider regulatory framework for good governance, such as rules for electoral financing, information disclosure and other measures concerning transparency and openness of decision-making process, including open access to the schedule of public agents.”32 Hence, it can be inferred that simple processes would increase the transparency levels and information about application of Public Choice theory in Brazil.
In the case of Brazil, the significant factor in influencing and implementation of the Law on Access to Information emphasises the importance of regulation of lobbying through a piece of legislation constructed after congressional debates and over premises and accomplishments for other nations’ experiences, as well as a result of a broad process of public debate and engagement of society and the press. This regulation must establish a holistic solution of lobby registration, monitoring, and publicization that is suited to the realities of the public administration and the vested interests, residents, civil society organisations, and individuals in the policy – making process, while avoiding bureaucratic requirements that can obstruct the right to petition and freedom of expression.
While there is a specific legal formalisation regarding the profession of lobbying in the United States and Europe, India, despite being an adaptive beneficiary of the impacts of this industry, emerges to have maintained the inherent issue of adopting a legal framework to address the nuances of lobbying at bay as it truly represents the purpose of many to keep it constrained to the transitional zone. In fact, considering the ground reality of India, it is easier to parallel lobbying with bribery since the majority of people believe that engaging in corruption is required for having one’s work done through the governmental process.
However, can it be interpreted that this suggests that a lawful and transparent approach used to persuade a legislator to act favourably in the benefit of the general public good or a particular sector, or to oppose it by interest groups, non-governmental organisations, and individuals, is illegal? In terms of the status quo, the country’s political system remains reticent on this issue and bereft of any legislation pertaining to it.
With respect to the aforementioned query and analysis, a bill was introduced in the LokSabha in March 2013 regarding the regulation of lobbying primarily by Kailash Narayan Singh Deo a member of the BharatiyaJanata Dal. The basis of the bill was due to the outcome of the NiraRadia tapes disrepute33 and the revelations of Walmart paying bribes34 in India in order to maintain the lobbying pursuits in order to access the retail market in India. These controversies will further be discussed below in detail to analyse the requirement of lobbying regulations in India.
The introduction of the aforementioned Bill sparked certain controversies behind the validity of the reasoning behind the emulation of legalising activities of lobbying and defining the same as “an act of communication with and payment to a public servant with the aim of influencing”35 a legislative body, thereby also obscuring the lines of illegal gratification or bribery and legitimate lobbying. “This also stood in sharp conflict with the Prevention of Corruption Act, 1988, which prohibits a public servant from taking any gratification, other than legal remuneration, in respect of an official act.”36 Additionally, the Bill was reintroduced in the LokSabha in February 2016, by Kalikesh Narayan Singh Deo but however has not made any substantial progress since.
On one hand, the right of information provided to the inhabitants by the Indian Constitution is hampered and limits the possibility of critiquing the legal proceedings due to disproportionate information by the introduction of a legal regulation of lobbying. However, “on the other, it is in conflict the goal of ‘ease of doing business’, which is so eulogised by the current government
– this is because, while the practice is permissible in other developed jurisdictions after compliance with disclosures, it still brings connotations of corruption with it- self in India, thereby making it difficult for companies from such countries to push for the requisite regulatory changes they need to establish themselves in the Indian market in a legal fashion.”37
Unlike democracies such as the United States and nations such as the United Kingdom, Australia, and others, there are no laws in the country that recognise the validity of lobbying as a legitimate vocation. This is not to imply that the sector is not represented in the world’s greatest democracy. For many years, lobbying has been regarded as a tool for industry organisations, businesses, and pressure groups to engage and converse with the government prior to the publication of the National Budget each fiscal year. For decades, organisations such as the Federation of Indian Chambers of Commerce and Industry (FICCI), the Associated Chambers of Commerce in India (ASSOCHAM), and the Confederation of Indian Industry (CII) have sought to assist their members whilst also influencing crucial decisions and policy problems. These interactions do not ensue in secret, but rather in government offices, when experts strive to persuade leaders to accept a policy that they have proposed and how it would benefit a relatively wider number of people. This is also imperative to the government since these lobbyists provide information on public perception.
Another consequence of the lack of a legal framework for lobbying in India would be that numerous international and domestic businesses now act as corporate lobbyists, generally unregulated by the law since there is no clear view of what constitutes lobbying. As a result, there is a conspicuous lack of a transparent and establish legal procedural system in the nation, making lobbying an unethical conduct within the State.
THE DISREPUTES IN INDIA ABOUT LOBBYING
Several controversies in India have brought about the notion of lobbying as a negative form of influencing and bribery in the eyes of the public, thereby corrupting the concept of lobbying in practice within the State. Some of the most famous and landmark disrepute of the similar consideration are as follows:
In the renowned NiraRadia controversy, an experienced corporate lobbyist and close personal friend of the Indian politician, A. Raja campaigned for his appointment as Telecom Minister during the Manmohan Singh-led UPA-II government’s term (2009-2014). In 2008-09, the Income Tax Department tapped her phone records for 300 days in order to investigate a potential case of money laundering, tax evasion, and so on. The ‘NiraRadia Tapes’ were released by OPEN Magazine in 2010, bringing to light a huge nexus between top journalists, politicians, and companies. The lack of regulations regarding corporate lobbying in India was highlighted by the means of this controversy wherein the outcome of the lobbying led to the operative assignment by the Income Tax Department which thereby led to the negative implications of the procedures of lobbying in India.
2) Walmart Enticement39
The Walmart issue occurred under the UPA-II era, when the government was working to advocate for FDI reforms. As per the lobbying regulations in the United States of America, publicly traded corporations were required to report their lobbying expenditures. Nonetheless, the disclosure of major investments made since 2008 to kickstart the retail chain in Indian markets sparked outrage at in the company’s parent State, with widespread protest movements staged by then opposition parties led by the BharatiyaJanata Party (BJP) demanding the identification of those representatives and ministries whose billing withdrawals and monetary outcomes were transferred for this intent. However, due to the legality of the situation in the United States, Walmart was not held liable altogether.
Due of the aftermath of these major national cases, lobbying sparked interest in the eyes of the public who generally equated the same with bribery or untimely corruptive activities. However, this can be eradicated by the means of regulatory bodies set up in India to demonstrate and curb the acts under the practice of lobbying. Although obtaining a negative perspective, lobbying cannot be considered wholly immoral or unethical, specifically due to the regulatory means or rather lack thereof in the State. So far, the sole legislative effort that has been made was in 2015, was the filing of a restricted ‘The Disclosure of Lobbying Activities Bill, 2015′40 by Kalikesh Narayan Deo, a member of the BharatiyaJanata Party, as mentioned above, which described lobbying as a ‘communication with payment,’ indirectly associating it with bribery. Furthermore, under the Prevention of Corruption (Amendment) Act of 201841, such payments to public officials are equal to corruption and must not be legalised or authorised within the State.
The requirement of laws for lobbying to avoid such abstruseness within the State can be defined by the following trifecta of ratiocination:
- It will render the said sector public and consistent, keeping it directly accountable. Legalization of lobbying, analogous to Western legislation, may result in the disclosure requirements of all resources and expenditures in lobbying activities by these
- The collected data obtained from such revelations can be utilised for research and analysis objectives in analysing development or, more specifically, the process of any legislation from its formulation towards becoming the
- Finally, legalising the practise of lobbying will legitimize and regulate lobbying, which is an inherent component of law and policy-making, because it is inconceivable for a representative to have the necessary acumen and knowledge regarding all problems involving government and the security of
As discussed above, lobbying lacks any specific definition by the European Commission defines lobbying as any activity that is performed “with the objective of influencing the policy formulation and decision-making process.”42 However, multiple empirical studies of “interest group influence are notoriously difficult because of the complexities associated with operationalising the concept, obtaining data on corporate practices and measuring successful influence.”43
“Within the management literature, the majority of contemporary academic research on corporate lobbying focuses on the study of corporations’ alternatives regarding lobbying stratifies.”44 Furthermore, while some researchers examine lobbying in high-income nations and international policy-making contexts such as World Trade Organization (WTO) talks, few academic studies examine corporate lobbying in poor countries. Nonetheless, the current research offers a considerable foundation for building a theoretical framework to analyse corporate lobbying in developing countries. The following segment of the paper analyses the concept of Corporate Social Responsibility (CSR) with Corporate Lobbying in developing nations as well as the required means of regulation for the same.
CORPORATE LOBBYING AND CSR POLICIES
Henriques defines lobbying as “the classic function of lobbying is to influence specific legislation or regulation”45 as he prolongs the efforts of influence on the basis of judicial interpretation of regulations before or after the enforcement of legislation.
A contrast can also be established based on the type of policy that is sought, in addition to the end participants targeted by corporate lobbying. From the standpoint of CSR, it is critical to distinguish between corporate lobbying directly related to CSR, such as lobbying against binding CSR regulation, and lobbying practises related towards other pertinent and adjacent subjects, such as trade and investment agreements, public contracts, public procurement regulatory oversight, regulation of corporate incentives, marketing, and subsidies for public– private collaborations.
Corporate lobbying directly related to CSR can be observed in Shell’s campaign against the UN initiative to establish and define human rights responsibilities of companies by the means of lobbying. This effort, entitled as the UN Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with Regard to Human Rights, is extensively influenced by international non-governmental organisations (INGOs) and has the backing of certain corporations. Shell, together with the International Chamber of Commerce, the International Organization of Employers (IOE), the Council of International Business of the United States (US), and the Confederation of Business and Industry of the United Kingdom (UK), strongly opposed the UN Norms.46 However, it can be analysed that these UN norms, if applied on corporations, would ensue inappropriate accountabilities, as the standards of human rights must be considered voluntarily and not imposed by the law in any State. “The company further asserted that it was already implementing human rights standards and that, as a result, the UN Norms offered little added value. Shell’s reputation suffered greatly as a result of the debate on the UN Norms, particularly when a senior executive, Robin Aram, took a public position against the Norms in his role as representative of the International Chamber of Commerce.”47
However, companies such as ABB, Barclays Plc, Gap Inc., Hewlett Packard, MTV Networks Europe, National Grid Transco, Novartis, Novo Nordisk, Statoil and The Body Shop International, which are a part of the Business Leader Initiative for Human Rights (BLIHR) were diverged from Shell’s understanding of the same and agreed with the requirements of UN’s norms being mandated. “In a report launched in 2003, the BLIHR called for a single universal framework for corporate responsibility based on internationally recognized human rights standards, and noted that the UN Norms provided a useful starting point for developing such a framework.”48
The liberalisation of financial services under the General Agreement on Trade in Services is an example of a lobbying objective that is not intrinsically related to CSR, but to a related area that has implications for responsible business in poor nations (GATS). GATS agreements have been heavily influenced by large banks, insurance firms, and other financial service providers from the United States and the European Union (EU). Their lobbying activities were particularly effective because they were extensively coordinated by the Financial Leaders Group (FLG), which was formed for this reason in 1996. “To many developing countries, the European Union requested to remove all limitations on the commercial presence of foreign companies for a range of financial services, including the removal of limitations on full foreign ownership. In some cases, the European Union also requested to end specific government requirements intended to enhance financial stability or to stimulate access to financial services for poorer clients and smaller companies.”49
REGULATIONS OF CORPORATE LOBBYING
Various methods of government regulations with respect to the self-regulation and initiatives of corporations exist within developing nations for governance of the aforementioned issues. Some of those are discussed below:
1) Regulatory bodies by the Government
Lobbying is a legal aspect of the political and democratic process, and governments implement a variety of regulations to control corporate lobbying. These include lobbyist registration, rotating door rules, and disclosure requirements for campaign funding, lobbying positions, and payments to lobby corporations.
“Several members of the Organisation for Economic Co-operation and Development (OECD) have tried to regulate lobbying, with different levels of success. An increasing number of political systems have implemented lobbying regulations, notably the United States, Australia, Canada, Germany and the European Union.”50
A review of lobbying regulations in North America, Europe, and Australia reveals that they have evolved progressively. Lobbying regulation requirements have fluctuated from registering interests before parliamentary bodies to mandating full disclosure of lobbying activity. Regulatory regimes differ according to each political system’s cultural and constitutional basis. “The OECD (2008) argues that where transparency and integrity are the main goals of regulations, effectiveness is best achieved if definitions are broad and inclusive, and the ‘theatre of lobby activities is also defined broadly and inclusively’.”51 “Moreover, the OECD states that compliance is best secured if definitions and exemptions are unambiguous and clearly understood by lobbyists and public officials, practical in application and robust enough to support legal challenges.”52
2) Regulatory Efficacy
As previously stated, some industrialised and developed countries have sought to regulate various parts of corporate lobbying by mandating professional lobbyists to register, payments to lobby corporations, revolving door activities, and political donations. If more countries implement such regulations, openness will improve and some types of unfair influence will be reduced. However, none of the legislative frameworks established thus far force businesses to dis-close their lobbying stance, which significantly limits corporate responsibility. The enforcement of legislation aimed at regulating reckless types of policy influence by corporations is likely to be difficult and time-consuming. “As direct lobbying is an important channel but largely an informal process, it is difficult to detect and prove any violations of government regulation on direct lobbying.”53
Regulation of corporate lobbying by the government may result in a shift in lobbying techniques instead of a loss in corporate political power. Soft money donations to political parties, for example, were outlawed in the United States in 2002. As a result, unaffiliated groups were established to accept funds meant for political parties. These organisations are frequently referred to as “527 organisations” since the tax code provision that governs them is 527.
3) Business Accountability
The concept of ‘responsible lobbying,’ which may be characterised in a range of methods, has lately received attention in the realm of CSR. A emphasis on operational parameters alone, such as transparency regarding lobbying stances, is deemed insufficient by practitioners. The rationale for this is because the content of policy stances that corporations aim to promote is also significant. If a firm, for example, is open about how it is lobbying to promote its own interests at the expense of disadvantaged populations and society as a whole, this is not considered ethical corporate conduct. However, because various groups in society have opposing political goals, it may be hard to develop generally recognised moral standards to evaluate the substance of lobbying views.. “As a consequence, it may be more useful to define responsible lobbying as lobbying that is consistent with the policies and commitments espoused by a company.”54 Code of conduct, international standards and norms and business principles are inclusive in the aforementioned analysis.
In actuality, numerous operational issues are vital for major TNCs to execute appropriate lobbying practices. These are supplementary basis for evaluating responsible lobbying. “Apart from the alignment of lobbying positions with company strategies and commitments, the operational aspects include mapping who is lobbying on behalf of the company, adopting management systems to ensure that lobbying strategies are also implemented in practice, and being transparent about lobbying positions as well as practices.”55
The most significant of these would be that lobbying operations should be regulated by a particular set of binding business guidelines and regulations. While lobbying goals and policy stances should be made public, any political payments should be approved by stakeholders and recorded and assessed in yearly reports. Furthermore, corporations should declare their participation in industry representatives and other lobby groups and verify that these organisations adhere to the same criteria for ethical lobbying.
4) Corporation Reportage
“There seems to be a growing awareness in business of the need for well- grounded principles to guide political activity.”56 Auditing on specific types of lobbying is perhaps most likely the developed part of contemporary company methods to ethical lobbying. According to a 2005 study conducted by Sustainability and the World Wide Fund for Nature (WWF), around half of the world’s top corporations give at least some level of openness on their lobbying activities. “Many of the world’s largest companies are transparent about political donations, with some providing a great amount of detail, listing all individual recipients. However, no major company discloses the amount of money they pay to professional lobbyists.”57
Some TNCs also make considerable effort to ensure that their lobbying tactics do not conflict with their CSR standards. “However, in 2005, Sustainability found that none of the companies in their analyses had made an explicit link between corporate values and principles, corporate governance and other core business decision-making processes on the one hand, and the company’s approach to public policy on the other.”58. Recently, a few businesses have taken a far more holistic approach to public affairs reporting. Some of the world’s most powerful corporations are increasingly publicly stating their support for or opposition to certain policies that are important to their operations. “Yet only a few explain how these positions relate to their CSR policies or to broader and longer- term business objectives.”59
CORPORATIVE CASE STUDIES
This segment of the research paper analyses and highlights corporate lobbying in practice as well as with respect to CSR policies of firms in various industries across the globe.
1) Pharmaceutical Industry
The pharmaceutical sector exemplifies the lack of appropriate corporate lobbying policies. The pharmaceutical industry’s lobbying is especially important for developing nations because of its impact on intellectual property rights, which directly impacts the availability of low-cost generic medications in these nations. For example, in recent years, the United States has deduced a number of bilateral agreements with developing countries that require them to enable stronger protection of intellectual property than required by the World Trade Organization’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).
The Centre for Research on Multinational Corporations (SOMO) highlights the multifaceted methods of lobbying in developing nations like India and Brazil by the corporations but the lack of consistency in the practice of their existing CSR policies enforced by the corporations and the absence of action taken by the nation’s government on such flexibility. “Whereas several companies indicated where the responsibility for lobbying efforts lies within the company, only GlaxoSmithKline (GSK) stated that it also has a system in place to align lobbying activities with its access-to-medicines policy. This CSR policy of GSK, however, does not extend to lobbying undertaken on its behalf by pharmaceutical industry associations.”60 This is a significant restriction on the same because these organisations are the primary conduit through which the pharmaceutical sector influences government policies in developing nations. “Out of the 20 companies, only GSK and Novartis have stated that they were not lobbying developed country governments to press for so-called TRIPS-plus legislation in their bilateral negotiations with developing countries.”61
Even though pharmaceutical firms have specific CSR policies in place regarding lobbying stances, the efficacy of such declarations may be constrained. GSK, for example, has questioned the TRIPS-plus idea, while Novartis has been chastised for launching litigation in poor nations that strengthen patent protection while restricting the manufacturing of considerably cheaper generic medications. “In 2005, Novartis initiated a lawsuit to force Argentina to adopt TRIPS-plus legislation.”62 In the next year, the corporation filed a lawsuit in India to dispute both, Indian patent law provision that claimed to hinder the innovation and the decision made by the Indian patent office to deny a patent for its anti-cancer medication Glivec due to a lack of ‘inventiveness’ and extra effectiveness. ”A High Court decision in 2007 dismissed the former aspect of the case, while, at the time of writing, the Intellectual Property Appellate Board is considering the decision to reject the patent. Novartis also petitioned to the High Court for a new technical member to replace the Controller General of the Indian Patent Office who had originally rejected the patent.”63
However, it must be stated that these procedures are beyond enough to maintain that all lobbying activities are compatible with a firm‘s viewpoint on access to medications. Addressing political influence through leading organisations that is contrary to individual firms’ CSR pledges remains a critical issue. Such paradoxes and problems remain, despite the significant criticism of the pharmaceutical industry’s involvement and the importance of strong intellectual property rights in developing nations that has developed in recent years.
2) Comparison of Ford and Volkswagen
The examples of Volkswagen and Ford demonstrate how details relating to corporate lobbying in CSR reports may range from insignificant to very substantial comments. Both firms use the GRI core indication for reporting on corporate lobbying, and their reports have been externally validated as completely compliant with the GRI requirements.
However, Ford does not generally publish its broad ideals with respect to lobbying perspectives, topics on which it is lobbying, and stances it takes on such matters. Although, it does offers information on the company’s engagement and stance in industry-wide collective lobbying procedures, the firm does not clearly report on the relationship between its lobbying stance and its CSR practises. Nonetheless, Ford’s disclosing on lobbying stances and tactics may be seen as a great practise, comparatively in certain cases.
However, the Ford’s sustainability report is comparatively more detailed over the years. One such excerpt can be observed in the 2006/7 report which states that”
“Ford supports the reduction of vehicle CO2 emissions … However, the entire automobile industry is united in opposition to the AB 1493 rules [of California] because they constitute state fuel economy standards…. State-by-state regulation of fuel economy is unworkable because it raises the prospect of an unmanageable patchwork of state standards.”
Thus, Ford does not just reveal its broad ideals regarding lobbying stances, subjects on which it is lobbying, and positions it takes on these matters, I t also issues data on the company’s engagement and stance in industry-wide collaborative lobbying strategies. However, the corporation does not clearly report on the relationship between its lobbying views and its CSR initiatives. Nonetheless, Ford’s disclosure of lobbying viewpoints and activities may be seen as best practise.
Despite the fact that lobbying is rarely merged with corporate CSR management and operational systems, several firms do give disclosure on certain elements of lobbying. Political contribution disclosure appears to be the most developed element of CSR practise in terms of
lobbying. Independent company lobbying and constituency development, as well as different collaborative methods, tend to have a considerably higher effect and contribute for a much larger part of lobbying budgets. Direct lobbying by corporate executives and collective lobbying techniques remain a closed system, the former because the lobbying itself can be totally disguised, and the latter as the role and participation of particular corporations can be difficult to demonstrate.
Various governments of high-income countries have sought to control certain elements of corporate lobbying, such as professional lobbyist registration and payments to lobby companies, revolving door tactics, and political donations. Although national legislation can never entirely govern policy influence, the implementation of such regulatory legislation by additional countries may substantially improve transparency and minimise some types of excessive influence. The present regulation, however, does not compel TNCs to declare their policy opinions, severely restricting corporate accountability for lobbying tactics. Furthermore, because the nature of lobbying techniques makes it difficult to uncover infractions, enforcing lobbying rules may be challenging in these situations.
In this context, public choice theory offers an insight as to how individuals might go about incorporating an extra participant to provide a higher level of dependability to current practise. The PCT broadens political decision-making beyond interest groups and politicians, including citizens as active stakeholders. According to PCT, this leads in government legislation that usually focuses on fulfilling the needs of different stakeholders equitably, without offering undue benefits to specific groups based on policy demand.
Lobbying rules may well be best implemented if the criteria and exclusions are explicit and comprehensible by lobbyists and public officials and authorities, pragmatic in implementation, and substantial enough to withstand legal repercussions. However, if disclosure and accountability are the primary objectives of the aforementioned laws, definitions that are wide and encompassing, including all relevant routes of policy influence, are more likely to achieve success.
Self-regulation measures and specific business rules, in the end, are imperative in order to enhance the uniformity of CSR policies and lobbying activities, in both developing and developed nations. Disclosing lobbying views, sponsoring comprehensive research by research
organizations, CSOs, and academia students, and re-evaluating a company’s involvement into its trade groups are among steps that may be undertaken to draw the two closer together. Particularly in light of controversies involving Walmart, it is becoming increasingly important to maintain openness in corporate interactions. Although there are presently regulations in place to prevent inordinate political contributions and corruption, one of the underlying advantages of having a brief and well-defined framework for lobbying is that residents are cognizant of policy decisions and can devised strategies to protect their own interests.
Regardless of the fact that many transnational corporations (TNCs) have adopted detailed corporate social responsibility (CSR) policies over the past decade, the majority of these firms do not include ethical elements of corporate lobbying in their corporate strategies or codes of conduct. While political contributions64 and policy influence to support human rights are occasionally acknowledged as CSR concerns65, attempts to rigorously link corporations lobbying with CSR objectives are frequently absent. “While several CSR reporting regimes, such as the Global Reporting Initiative (GRI), give recommendations for documenting lobbying strategies and activities, TNCs do not provide full data on their corporate lobbying strategies and actions, with a few exceptions.”66 As noted, the absence of coherence in corporate policy can be concerning for developing countries.
Consequently, the various outcomes of analysing corporate lobbying structures in high-income and low-income countries whilst considering CSR policies of companies can be observed through the course. However, it should be noted that the current lack of lobbying regulations has also created various loopholes and misuse of the practise. Notwithstanding the illicit misuse of corporate lobbying, various positive impact on the CSR policy as an overall corporate strategy for sustainability from the perspectives of consumers as well as lobbying acts unrelated to CSR directly but for public policies and representations can also be observed.
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