Why and How European Businesses Engage in Lobbying - Essay Example

Using an extended example of an issue or an industry, discuss why and how European businesses engage in lobbying Contents Contents 2 Thesis ment3 Introduction 3 Discussion 4 Summary 10 Conclusion 10 Appendix 11 References 13 Thesis statement The main aim of this report is to discuss and evaluate the reasons and the ways in which the businesses in the European countries engage in different kinds of lobbying activities. The report is supported with evidences from a particular industry segment. The chosen industry segment for this write up is the banking sector of Europe. The banking sector is chosen because this segment of industry is known to have significant effects on lobbying, especially in financial lobbying. Therefore, the thesis statement formulated for the project is “To identify, discuss and evaluate the main reasons as to why the European companies, especially those operating in the financial sector engage in lobbying and the ways in which they do so”. Introduction Lobbying is the act of taking suitable actions by lobbyist groups including corporate organizations to influence or control the decisions made by government officials, mainly the members of different regulatory institutions and other legislators. Though the morality and ethics of lobbying are highly debated topics across the globe, yet the influence and level of lobbying activities are increasing at an accelerated basis over the years. The European Council defines lobbying as a combined effort which is aimed at influencing the decision making and policy formulation by corporate organizations with a view to obtain some kind of designated result from the elected representatives and the government authorities. Lobbying, in a wider sense involves public affairs related activities and public actions like demonstrations conducted by different institutions like consultancies, business organizations, non-profit based organizations, think-tanks, lawyers, advocate groups and associations. In contrast, from a more restrictive view, lobbying includes the protection of the economic interests and benefits of the corporate sector through the use of its influence and weight age on the global and national platforms. Lobbying activities are considered to be important corporate strategies for different multinational enterprises because they have become necessary factors for the success and sustainability of these companies in the evolving global business situations. Since, the external influences in the business environment largely control the success, failure and continuity of any business, therefore, more and more businesses are focusing on exerting their power on the economic and political reform designing and implementation so that they can achieve an appropriate degree of control over these aspects and thus maintain their economic interests in a dynamic business landscape. Discussion Lobbying is multi-level strategy which takes place in more than one venue. There are multiple layers of governance involved in the process of lobbying and the various individual and corporate lobbying actors focus on influencing various levels of governance for influencing the external business environment to a suitable degree. The governance levels involved and targeted in the lobbying process by the corporations are the European Union, the European Parliaments, the international organizations and authorities as well as the local and national governments. Though lobbying is considered by some as a part of corruption, yet it is common in major countries across the world including the European Union. Lobbying is extremely common in many influential sectors of the European countries like the automobile industry, oil and gas industry, financial industry and many more. The norms of European Union are strongly influenced by the organizations functioning in the nation. Though the aims of lobbying of different organizations remain the same, yet the strategies and channels of lobbying for the different lobbyist groups are distinct. The strategies of lobbying used by the local authorities, NGOs, social movements, business organizations and other varied social interest groups are much differentiated. There are specific values, priorities and organizational requirements associated with the lobbying processes involving the different lobbyist groups (Zetter, 2011). Figure 1: Lobbyist groups (Source: Zetter, 2011) Lobbying is a common and politically impactful activity within the European Union. As such, the powerful business organizations in the country engage in substantial degree of lobbying activities to ensure better control over the regulatory and political environment of the businesses. The European Union is a globally influential entity which covers a wide area of policy making. Thus, the business environment in the EU has both direct and indirect influences on the global business environment which acts as big incentive for the lobbyists to actively invest in these activities (Geiger, 2006). The enlargement and the increasing power of the European Union in 2004 had been a major breakthrough in the development of lobbying policies and activities in the country. According to a report by the European Parliament, the value of the lobbying activities and invitations are likely to reach 10,000 Euros per week by 2014 (Desmond, 2010). In the year 2003, there were more than 1500 lobbyists in the country which included corporations, associations, NGOs, lawyer, consultants etc. in Brussels. The main aim of this lobbyist was to influence the legislations in the European Union. There are more than 2600 special interest authorities and groups related to lobbying in Brussels alone. the distribution of these groups include consultants (20%), international organizations (5%), national associations (10%), think tanks (1%), regional representations (6%), companies (13%), European Trade Federations (32%) and non-profit groups (11%). Lobbying is common at the European level and also within the prevailing states of the nation (McCormick, 2011). Lobbying activities at the European Union level has many distinct and specific characteristics (Karr, 2007). The lobbying process can be accessed on the basis of the success of these activities as well as the overall decisions making process involved in the same. Lobbying by the business organizations in the nation are often considered as the positive elements that add value to the overall, social and business environment of the countries in Europe. The policy makers in the European Union encourage the participation of the lobbyist groups as economic and social actors in the process of policy formulation and implementation (Klemens, 2011). The lobbyist groups including the business organizations use a number of resources to strengthen their position as lobbyists. The financial means are used as the main resources for the lobbyists. Other than these, the companies use a number of other resources like representation, legitimacy, expertise, information, knowledge and so on. Among all these resources, expertise, information and legitimacy are considered to be the most critical resources that can be used by the lobbying companies to influence and access the decision makers in the country (Coen and Richardson, 2009). There are three major channels of direct and indirect lobbying in the European Union (Kretschmer and Schmedes, 2010). The first avenue includes the routine lobbying activities of the lobbying groups done to influence the national delegations in the European Union. The second avenue of lobbying is mostly used by the interest groups to involve many working groups of the Council. The third way of influencing the European Council by the lobbying groups is by influencing the European Council directly through the national governments. The business organizations in the nation extensively use the direct and indirect channels of lobbying to influence and control the regulations that impact their business actives and operations (Lux, Crook and Woehr, 2011). The business organizations target the chairman of the European committee and the reporter as the main entities to be influenced or controlled in the lobbying process. The financial industry in the European countries spends more than 120 million Euros per year in the foray of lobbying initiatives. According to a report presented by the Corporate Europe Observatory (CEO) of the financial industry in the European Union, the lobbying process conducted by the European organizations command tremendous resources for lobbying and avails privileged access to the main decision makers in the domain of political and legal reforms made in the country. The financial segment of the European Union significantly lobbies the decisions makers in EU through the use of more than 800 corporate organizations and groups including the business associations, consultancies and public relation offices (Raquel, Mazza and Scholz, 2009). The European Parliament is also an important authority which makes and implements policies and reforms to control the overall political and regulatory environment in the nation. As such, the lobbying groups also focus on influencing the members of the European Parliament. The influence and control on the European Parliament is achieved by involving the members of the same in the business activities. The financial markets are extremely influential and powerful in the global economic and business environment. The impact of the financial sector became more apparent after the economic downturn of 2008 which led to a financial crisis which was a major blow to the economies of different countries across the globe including the European Union. Financial lobbying has been a “fire power” in the nation which continuously tries to control the reforms that are restrictive for the business environment. The companies operating in the financial sector of the country have been resisting certain regulatory and political reforms over the last few years mainly with respect to issues like banking regulation, credit rating agencies, derivatives, accounting rules etc. The financial industry of the European Union spends more than 120 million Euros every year and employs more than 1800 lobbyists including institutional and individual lobbying groups (Wiszowaty, 2006). Figure 2: Lobbying spending by sector 1998-2014 (Source: Zetter, 2011) The European Commission is the main regulating authority for the policies and reforms in the country which directly affect and control the external business environment in the European countries. The European Commission creates the roles and policies for the financial sector. Therefore, the financial companies, banks and other financial organizations in the European countries seek to influence the reforms and policies related to the financial regulations through having some degree of say in the decisions made by the European Commission (Gelak, 2008). The European Commission has established links with the lobbyist groups through two main types of interfaces created through the official advisory entities and consultation groups. These corporate groups and entities are known as the expert groups in lobbying. Summary The lobbying process by different companies is driven by the urge to reduce the external influencing factors that may affect the continuity and success of a business. The companies functioning in the different countries of the European Union focus on lobbying activities as a part of their objective to maintain a beneficial and sustainable position by minimizing the external factors that may change the route of the business and also to maintain their control over the political and economic guidelines and reforms. The political and regulatory requirements are mandatory for a company, especially in the present business scenario when ethics and compliance are given a high level of importance by the global consumer groups. Therefore, in order to maintain an ethical and responsible image for themselves, the national and multinational companies have started focusing on extensive lobbying practices. Lobbying has been accepted as a part of the policy formulation process of the European Union. This is applicable in all the states of the union. Lobbying is acknowledged as a significant part of the decision making process of the government authorities because lobbying activities provide necessary information to the decision makers which facilitates informed decision making. The European Council effectively considers lobbying as a form of interest representation and advocacy. For this purpose, the European Council tries to make the regulatory requirements and policies consistent with the functioning of the lobbyist groups in the union. Conclusion It can be concluded that diplomatic lobbying has become essential in today’s corporate world. Lobbying is seen as a necessary strategy for survival. Since the political and economic reforms implemented in different business sectors affect a business significantly, therefore, the organizations operating in the modern world have to consider lobbying strategies as a part of their corporate strategy to ensure the continuity, profitability and future success for the business. Lobbying in the European Union is also supported by the government authorities of the nation to a certain extent because of the increased conglomeration and streamlining of the government reforms and the business activities in the nation. Also, the lobbying methods help to create a win-win situation for both the corporate and the government authorities. The lobbying process helps to attract high levels of investments from the companies functioning in the country and thus enables a better maintenance of corporate funds in the country. the corporations are also interested in engaging in lobbying practices because this help them to support their economic interests and make them more free from being controlled by the political and regulatory norms and policies. Appendix In the course of conducting this report, I have gained a sufficient amount of knowledge about lobbying. I have researched on the processes and activities of lobbying with special focus given on the companies operating in the European Union. The study has helped me to gain much insight about the corporate and financial lobbying processes. I have identified the main reasons as to why the corporations operating in the global business environment invest their time and resources in lobbying despite the fact that lobbying is a much criticized and controversial corporate activity. I have gained an understanding that it has become mandatory for the companies to invest in the lobbying processes to ensure that their interests are maintained and to ensure that they achieve better sustainability. The study has helped me to understand the various dimensions of lobbying and to evaluate the role of the financial institutions and companies in the European Union in the formulation and implementation of the economic, political and regulatory reforms. I have studied the lobbying activities conducted by the companies in the European Union over the last 10 years and have identify the main reasons and ways of lobbying by these companies. In overall, this study has helped me to gain an in depth knowledge and an extensive knowledge about the role of the financial sector in the European Union in the much controversial lobbying process in the nation. References Coen, D. & Richardson, J. 2009. Lobbying the European Union: Institutions, Actors and Issues. London: OUP. Desmond, D. 2010. Ever Closer Union: An Introduction to European Integration, 4th Edition. Houndmills: Palgrave Macmillan. Geiger, A. 2006. EU Lobbying handbook, a guide to modern participation in Brussels. Karriere: Helios Media GmbH. Gelak, D. 2008.  Lobbying and Advocacy: Winning Strategies, Resources, Recommendations, Ethics and Ongoing Compliance for Lobbyists and Washington Advocates. Stamford: Cengage. Karr, K. 2007. Democracy and lobbying in the European Union. Frankfurt: Campus Verlag. Klemens, J. 2011. Lobbying in the new Europe. Successful representation of interests after the Treaty of Lisbon. New York: Wiley. Kretschmer, H. & Schmedes, H. 2010.  Enhancing Transparency in EU Lobbying? How the European Commissions Lack of Courage and Determination Impedes Substantial Progress. Internationale Politic und Gesellschaft. Vol. 21(1). pp. 112-122. Lux, S., Crook, T. & Woehr, D. J. 2011. Mixing Business with Politics: A Meta-Analysis of the Antecedents and Outcomes of Corporate Political Activity. Journal of Management, Vol. 37(1), pp. 223-247. McCormick, J. 2011. Understanding the European Union: A Concise Introduction, 5th Edition. Houndmills: Palgrave Macmillan. Raquel, M. A., Mazza, W. & Scholz, S. 2009. Measuring Rates of Return for Lobbying Expenditures: An Empirical Case Study of Tax Breaks for Multinational Corporations. Journal of Management, Vol. 24(1), pp. 100-104. Wiszowaty, M. 2006. Legal Regulation of Lobbying in New Members States of the European Union. Houndmills: Palgrave Macmillan. Zetter, L. 2011. Lobbying: The art of Political Persuasion. London: Harriman House Limited. Read More