When a stakeholder seeks to influence the vote of an elected official, it is called “lobbying.” The people who do it are called lobbyists or just “the lobby,” (e.g., “the coal lobby”). Lobbying is a major tool for both representation and informational strategies. In fact, the Center for Responsive Politics reports that firms, labor unions, and other organizations spent over $3.2 billion (with a "b!") in 2015 to lobby Congress and federal agencies. This probably seems like a huge number, but spending was actually down slightly in 2015. Regardless, every year since 2008 has had spending levels been above $3 billion!
Effective lobbying involves access to lawmakers or administrative officials, and, once you get there, strategic information. Two types of information are involved: technical and political. Technical information is about the issue—data and predictions. Political information pertains to the effects of the alternatives on constituents (voters) of the office holder. (If you pass this bill, prices will rise/fall, jobs will be gained/lost, the environment will be saved/damaged).
Either way, to be effective, the information needs to be credible. To establish credibility, the officeholder may seek to verify the information with a third party (ideally by an opposing interest) or seek information from a source that is widely trusted by constituents. When data is backed by studies or data, it is more effective.
Of course, it is “both allowed and commonplace” for stakeholders to use information in a way that advocates their side of an issue! However, there are times when it would be immoral and possibly illegal to withhold information or make false claims. Responsible stakeholders remain highly mindful of this line.
Electoral support activities focus on providing resources that help candidates during elections. For example, endorsements, volunteer workers, help with get-out-the-vote campaigns, campaign contributions, and funding for political advertisements (for and against candidates) are all electoral support activities. Activities of this nature are widely used by unions and many interest groups but less so by firms, which tend to spend more on lobbying.
A major Supreme Court ruling in 2010 has worked to change this, however, at least for Federal Elections. As reported by the Center for Responsive Politics:
In a 5-4 ruling in the case of Citizens United v. Federal Election Commission, the court overturned a ban on corporate and union involvement in federal elections that had been in effect since the early 1900s. The ruling allows corporations, unions and other organizations to spend unlimited sums from their own treasuries to fund political advertisements advocating the election (or defeat) of specific federal candidates.
The money can only be used for independent expenditures -- not direct contributions to the candidates' campaigns. And whatever ads are produced can't be coordinated with the candidates -- though policing that is not an easy thing to do.
Months before the election, numerous groups on the left and right announced intentions to raise millions of dollars to run independent campaigns to help elect their preferred candidates. Some formed new "super PACs" whose donors were fully disclosed, but many corporations and wealthy individuals funneled the money through non-profit front groups that kept the identity of donors secret. Attempts by Democrats in Congress to require disclosure of those hidden donations were defeated, so the sources of that money may never be known.
By election day, outside groups reported raising and spending nearly $300 million -- more than 40 percent of which came from undisclosed sources. That unprecedented surge of outside money -- which favored conservative candidates by a 2:1 margin -- helped to topple Democratic incumbents all across the country and bring about the biggest GOP sweep on Capitol Hill since 1948.
Not required, but if you are interested, see OpenSecrets.org for more detail about PACs and current data related to PAC campaign contributions, broken down by sector, industry, and unique PAC.
Grassroot campaigns are based on the connection between constituents and their elected officials and may be used as part of an informational or representation strategy. Grassroots activities include letter writing campaigns (e-mail, post cards, letters), phone calling and grassroots lobbying (where individual stakeholders participate in lobbying efforts).
The effectiveness of grassroots activities depends largely on the supply-side of our analysis framework—numbers, coverage, resources and cost of organizing. The recent advent of low-cost, widely distributed mobile technology, however, has changed this equation dramatically. With no paper or postage, mass e-mail communications and social media campaigns are fast and without significant cost. With online blogs and surveys, information collection and dissemination is rapid and cheap. With social media, widespread organizing and information sharing is instantaneous and free.
Barack Obama’s 2008 campaign is widely viewed as revolutionizing Presidential digital organization in the U.S., and he utilized social media with great success in 2012 as well. The success of Donald Trump's 2016 campaign was made possible by social media, particularly through Twitter communication and news sharing on Facebook. Grassroots organization on social media played a major role in the surprising success of the "Brexit" campaign in 2016 that resulted in Britain's decision to exit the European Union. Researchers from Oxford University determined that:
...the campaign to leave had routinely outmuscled its rival, with more vocal and active supporters across almost all social media platforms. This has led to the activation of a greater number of Leave supporters at grassroots level and enabled them to fully dominate platforms like Facebook, Twitter and Instagram, influencing swathes (sic) of undecided voters...
Social media famously played a starring role in fomenting and publicizing the "Arab Spring" that began in 2010 and sent shockwaves through many Middle-Eastern countries.
From Obama's and Trump's top-down approach to the bottom-up organizing of the “Arab Spring” and Brexit, technology has unleashed nonmarket forces as never seen before!
This component of a nonmarket strategy involves forging a coalition with other stakeholders. Sometimes these coalitions may be longstanding and formalized, like trade associations or a Chamber of Commerce. Other times they may be ad hoc, joining together for a particular issue. Even with a coalition, however, the alignment of the stakeholders may not be ideal and may require negotiation. A well planned coalition can increase the effectiveness of the individual stakeholders on an issue by combining their numbers and resources.
Stakeholders may testify before regulatory agencies, congressional committees, administrative agencies, and courts. This testimony is “important not only because the information presented can affect regulatory decisions, but also because it creates a record that may serve as a basis for judicial review.” (Baron, 2010, p. 236).
In the public processes of regulatory agencies, stakeholders are given an opportunity to comment or otherwise contribute information to the process. The Pennsylvania Public Utility Commission (PUC) for example routinely “asks for comments” on policy. In The PUC Rate Making Process and the Role of Consumers, the PUC explains the many ways interested parties are invited to provide input into the rate making process:
Individual ratepayers may become formal parties by filling out a formal complaint form. Ratepayers may speak for themselves, or an attorney may represent individual ratepayers or groups of ratepayers. Consumers also can have their say informally by writing or calling the PUC or completing the objection/comment form. Consumers also may testify at public input hearings. By providing testimony, consumers place their views in the official record on the case. Public input hearings are conducted by the ALJ [Administrative Law Judge] in the utility’s service territory. Consumer testimony becomes part of the record on which the PUC will base its decision.
The right to comment on public sector action is fundamental to rulemaking at local, state, and federal levels, and allows all citizens to engage in public politics.
Public advocacy is communication directly to the public conveying a particular position on an issue. How a message is framed can be important. For example, “cap and trade,”dubbed by opponents as “cap and tax,” may be better served by the alternative “cap and dividend.” The "Clean Coal" campaign is a strong example of a carefully framed and well-funded message targeted directly at the general public. Firms, politicians, and interest groups can and often do engage in public advocacy.
Judicial actions are cases where a stakeholder is either a defendant or an initiator of legal action as part of a nonmarket strategy. The purpose of these cases may be to enforce or protect rights, obtain damages, or address unfair competitive practices. Lawsuits are often very costly, but rewards can be high, too. Judicial strategies may be used in courts, governed by statutory and common law, and in regulatory and administrative agencies, which are governed by administrative law.
In June 2011, for example, the Supreme Court ruled that climate change regulation is the business of the federal government (the Environmental Protection Agency, or EPA) and barred states from using public nuisance laws to try to force major utilities to cut greenhouse gas emissions from power plants. In doing so, the "high court sided with five large utilities in a suit brought by several states and three nonprofit land trusts over the facilities' emissions. The utilities--American Electric Power Co., Southern Company, Xcel Energy, Cinergy Corp., and the Tennessee Valley Authority--together release about 650 million tons of CO2 per year. That's a quarter of the CO2 emissions from the U.S. electricity-generating sector."
Ironically, though the utilities were technically victorious in this institutional arena in the abovementioned case, this ruling provided the authority for the Obama Administration's Clean Power Plan (CPP), which is a regulation propagated by the EPA that is projected to reduce the carbon pollution from U.S. power plants 32% below 2005 levels by 2030. The CPP is a nonmarket public political action that, if it comes to fruition, will likely have a significant impact on the national power market for the foreseeable future. The CPP's implementation was blocked by a 5-to-4 margin in the U.S. Supreme Court in February of 2016, and is currently awaiting judgment (as of January 2017) in the District of Columbia Circuit of the U.S. Court of Appeals.
This authority granted by the Supreme Court has also played a prominent role in the U.S.'s negotiations in, and ultimate adoption of, the 2015 Paris Agreement, which will have far-reaching impacts on energy markets worldwide. In fact, the Paris agreement also took place in an international institutional arena (though not judicial), under the auspices of the United Nation's Framework Convention on Climate Change (UNFCC).
Interest groups may use a firm’s annual shareholders meeting as an opportunity to question the company in a venue where the exchange will be reported to the public. (This would be considered private politics, because it does not take place in a government institutions.) Taking these actions an additional step, however, an interest group that is a shareholder may make a more formal filing with the Securities and Exchange Commission (SEC). This would be a move to public politics and is called a shareholder resolution.
To Read Now
- Visit The Forum for Sustainable and Responsible Investing and read "Shareholder Resolutions". (If you have a few minutes, explore this site more.)
- Read a summary of proxy materials by Broadridge, an investment consulting firm. (Also note the description of proxy statements.)