(Newswise) — Government regulation remains pivotal in balancing competition and fairness in business. But how are these decisions made, and what factors define the relationship between business and government? In the following Q&A, Norm Bishara, professor of business law and ethics, shares his insights on the complexities of government regulation and ethical business practice.
Historically, what roles have public policy and corporate regulation played in shaping business practice?
From their earliest iterations, corporations were really creations of the monarch or the state, usually to spread financial risk and to accomplish some social good, like exploration and trade. In exchange for the privileges and benefits of the corporate form, the company owed some duties to the state, like transferring value back in the form of taxes and services.
Not surprisingly, that push and pull has become more complex as governance and business activity have become more sophisticated. Regulation, like it or not, is still a meaningful way to maintain everything from consumer protection, public health, workplace safety, environmental protection, and fair competition, alongside collecting taxes that support the infrastructure and stability in successful commercial systems like the United States.
As we see in the public debate right now, there are very different perspectives on how much regulation is too much in terms of harming business activity, which might hamper innovation and even national security, among other concerns. The tenor of the business-regulator relationship can range from adversarial to collaborative. Either end of the spectrum is arguably a healthy part of our businesses and policy environment.
How has that relationship changed over time?
There are ebbs and flows in the strength of regulation and government oversight, with an increase in that oversight coming out of crises and after public outcry. These are things like new labor protection laws addressing the ills of the Industrial Revolution or antitrust rules after huge abuses of corporate power came to light in the United States toward the end of the 19th century.
There is also a remarkable and long-lasting debate over the role of business and society and what responsibilities companies have to society beyond just following the law. This debate has recently come roaring back into the political realm, along with a feeling of policy whiplash these days. Just a few years ago, companies were pushing ahead full steam with governance policies on diversity, for example. However, those efforts are now in a dramatic retreat in response to immense political pressure and even regulatory scrutiny.
Yet, some underlying things have not fundamentally changed. Businesses still very much prefer to have more predictability in their relationships with policymakers and regulators so they can make long-term strategic investments. Businesses also generally want to be perceived as positive forces in society, at a minimum, to support aspects of their employee recruiting and retention, and to avoid negative attention. However, the trend right now is for them to stay in their lane and avoid any seemingly unsettled social or political issues.
Are there any major shifts on the horizon?
In terms of trends, the push to bring manufacturing back to the United States is also happening during an unprecedented rise in automation and artificial intelligence capabilities, as well as new energy usage demands. This is a recipe for an interesting and uncertain time that will impact the type and nature of work that is done and the workforce skills needed for employees to stay relevant and successful. There will be new jobs we can’t predict, but also some social upheaval and job loss. I’m particularly interested in how this future of work is going to play out for employees and what companies and governments can do together to ease this transition and make sure that there is some balance between business interests and innovation, and fairness for workers. It isn’t good for anyone to have millions of displaced and disaffected workers. It is also a bit simplistic to have that burden fall on our outdated government support systems and hope for the best.
What role can public-private partnerships play in tackling major business and public policy challenges today? Are we seeing more or less collaboration than we have in the past?
The potential for these sorts of partnerships remains, and whether there are more of these is hard to say. The model we are seeing is essentially a Venn diagram showing the sector blur where public, private, and non-profit sectors are increasingly overlapping and evolving in ways that each arena is taking on elements of the others. Think of the calls for businesses to have a social impact or to enter the realm of government services, and government and non-profits being subjected to the rigors of business management techniques.
There is both wide acceptance of the notion that government should be more efficient and can learn from the private sector, but also some growing awareness that sometimes the goals of government can’t be judged by the yardstick of business efficiency. For example, privately run prisons have been controversial to some. However, I question whether most Americans will embrace the privatization of the U.S. Postal Service or cuts to Medicare when they personally experience the changes.
What role does transparency play in building trust between businesses and the local or federal government? What can businesses and business leaders do to improve some of these policies?
Transparency is key to trust across institutions and businesses, no doubt. At its core, the idea is that we need an accurate version of how government and business are operating, with the users of this information being citizens, policymakers, businesses, investors, etc. Transparency is a prerequisite to good governance and decision making, but it is not the end of the effort. The immense pressure of government workers and agencies we are seeing at this moment can’t change the reality that it takes time to identify the policy pain points and the best solutions, rather than rushing into changes that might have some negative impacts that are not appreciated at first. These changes are potentially going to hurt individuals and cause havoc that can’t be easily reversed. Businesses can demand that the bureaucracy that we have in place already stays above politics and produces reliable data. For example, companies rely on apolitical research from all sorts of entities like the Bureau of Labor Statistics and the Congressional Budget Office.
You serve as the faculty director of the Carson Scholars program. What are some key insights students typically gain from their interactions with policymakers and business leaders in the program?
For nearly 20 years, the goal of the Carson Scholars program has been to educate students on how to navigate the public policy process effectively. If they understand the system and the levers that businesses have at their disposal, they can engage effectively and achieve a competitive advantage. The opposite is also true. If companies don’t engage, they risk being subjected to policies that are bad for their business. This insight is part of the DNA of the program, which was designed by Ross School of Business alum David Carson, BBA ’55, and founding faculty director George Siedel, and it holds true today. It is about understanding good policy and not getting bogged down in the politics of any given moment.
The program also exemplifies the sort of experiential learning that Michigan Ross has pioneered. Students come away with an accurate sense of how business and government should work together — and how they often fail — to achieve business and social aims. They get a detailed background on campus and then see how Washington functions by interacting closely with policy makers, including senators right on Capitol Hill, regulators, lobbyists, think tank experts, and a range of policy advocates. The program will evolve in the coming years to adapt to some funding changes, but the core experience of getting immersed in D.C. has to remain.
How do you foresee programs like Carson Scholars influencing future business leaders’ roles in shaping corporate governance?
There is no substitute for putting students in the middle of the sometimes unpredictable and chaotic environment of Washington, D.C. When Carson Scholars move through their careers, they bring along an appreciation for how well-run, future-focused companies can structure their operations and empower leaders to navigate the public policy landscape. They also understand how to proactively advocate for their interests and their stakeholders, or risk falling behind. This can mean building the structures and assembling the right team of advocates and experts — both internally and often from outside the company — to responsibly protect the company’s interests.
My hope is that we find new ways to leverage the impressive business and policy expertise at Ross across the faculty and centers to share the same insights with more students as part of their Michigan education. Now more than ever, Michigan-Ross is poised to be a trusted source of information and convergence point for public policy and business leaders.
