Major businesses cannot afford to be without organized and effective government affairs operations. Elected officials and regulators increasingly are introducing more aggressive and more wide-ranging measures that significantly impact business interests. Government relations also can help a business advance its own interests and improve profitability. Below are eight basic but essential areas that a business should consider when developing a multifaceted government affairs strategy:
Strengthening In-House Government Affairs: Corporations vary tremendously in the support they provide for government affairs departments, largely depending on the nature of the industry, size of the company, public policy questions involved, and leadership’s attitude towards the political process. Major businesses generally have at least one division or office with externally oriented tasks that direct or supervise governmental lobbying, grassroots lobbying, coalition building, public relations and political activity to ensure positive relationships with state and local communities. A key internal consideration is whether a corporation’s government affairs staff will report to general counsel within the company’s legal department or fall under a communications or public affairs division. The former approach is advisable when a business is consistently confronting complex legislative or regulatory proposals, and it helps to guard against conflicts of interest if there are different outside professionals involved.
The key advantage of an in-house government relations apparatus is the company’s direct capability to create and maintain its own organizational identity and visibility. This entails a responsibility to develop its own relationships with officeholders and establish an organizational presence in key state houses and, in some instances, the U.S. Capitol. Companies with substantial interests in a number of states also have to decide how to cover them, with an emphasis on jurisdictions where they have a substantial physical presence and where markets are significant, as well as jurisdictions that traditionally are bellwether states on regulatory matters, such as New York, New Jersey, California and, to a lesser extent, Michigan, Illinois and Massachusetts.
Utilizing Contract Lobbyists: Contract lobbyists generally represent multiple clients instead of a single organization. They may be sole practitioners, members of larger lobbying firms, law firm attorneys, or members of other multi-service groups. An important benefit of utilizing contract lobbyists, in conjunction with a strengthened internal government affairs operation for direction and supervision, is that the business need not “start from scratch” in developing relationships with key stakeholders across many jurisdictions. A strong contract lobbyist will offer multiple services, including research, budget analysis, bill drafting, grassroots organizing, legislative and regulatory monitoring, workshops, receptions, media and newsletters, and association management.
An organization’s reputation can be shaped in part by that of the lobbyist it hires. Employing a highly influential contract lobbyist can (though does not always) provide instant status, provided that contract lobbyist commits to expending on behalf of the client the time and capital needed to succeed. In other instances, a business may wish to employ lower-profile political lobbyists. Lobbyists with substantial experience in the Capitol or state capitals, particularly former officeholders and staff, generally have established themselves and their credentials over the course of years. Lawyer-lobbying firms typically promote the fact that they are governed by rules of professional standards on conflicts of interest and representation of client interests, which non-attorney lobbyists may not be. Whatever route the client company takes, it should obtain references and client lists and try to conduct interviews before any engagement.
A deep understanding of the relevant jurisdiction’s legislative and regulatory process is essential. Contract lobbyists should have strong relationships on both sides of the aisle, be generally known for having clout, and be held in high repute by the jurisdiction’s stakeholders. A group practice, rather than a sole practitioner, can sometimes provide better coverage because, generally speaking, the more lobbyists, the broader their contacts with decision makers are likely to be. At the state level, a major business should employ contract lobbyists at a minimum in jurisdictions where it has a substantial physical presence or where the markets are larger.
Relying on Trade Associations: Association lobbyists – both in-house and contract – represent business, professional and trade associations and can be quite valuable to businesses. National associations typically are headquartered in Washington, D.C. or sometimes New York, while state associations typically are headquartered in state capitals. Smart companies are not only members of trade and business associations but are actively involved in them. The policies of trade associations usually are made by boards of directors upon the advice of legislative affairs committees, so active participation in trade associations is advisable.
Companies inevitably will need to act independently of their trade associations and cannot afford to rely exclusively on trade groups to represent their interests because an association may not take a position on an issue if there is a lack of consensus among its membership. At the same time, even if a company has the full capacity to lobby on an issue on its own, on some matters the business may prefer that an association take the lead on the issue, particularly if it is controversial and the company believes the issue may impact its reputation or standing.
Building Key Relationships in Your Backyard: Organizations sometimes fail to build relationships with their local elected officials until they need assistance from those officials. A corporation should act affirmatively, take advantage of its location, and embrace a role as a business ambassador to elected officials at all levels. This connection can take the form of initial outreach by the CEO or a senior official and needs to be followed up with contact by an in-house staff member who will work directly with and be responsive to the elected official and his or her staff. A company should aim to be one of the first calls that an elected official makes on an issue of import to that company’s industry. It is much easier to approach an elected official with whom one has an existing relationship when a problem arises.
Although company executives tend to connect with higher-ranking elected officials, it is also important to maintain a strong relationship with local officials where their corporations operate. Elected officials are ambitious, and failure to establish and maintain these local relationships can be a missed opportunity both in the present and the future.
Setting an Agenda: An important early exercise will be identification of the business’s interests that currently are at stake. Are there issues that should be initiated by the company? Which issues should be monitored? What relationships are needed by the company that it does not yet possess? What is the regulatory and political climate at the federal level and in key state jurisdictions? What is the budgetary climate in key jurisdictions that may impact issues such as taxation or cuts to prescription drug services?
The reality is that few companies have the luxury of “playing offense” – that is, being proactive with government affairs. Rather, companies are generally concerned with monitoring the political environment, identifying potential threats and designing suitable defenses. Two initial questions will be, “What existing legislation or proposed regulations will hurt us?” and “How do we get into the act early enough to have an impact?” There should be collaborative discussions of these preliminary considerations that should include business leadership, in-house government affairs staff, contract lobbyists and, wherever appropriate, staff of the various trade associations.
Establishing a Political Action Committee: Because elections are critical to officeholders, lobbyists and in-house government affairs operations are well-served to pay close attention to the electoral landscape. Attendance at events such as fundraisers is often seen as a part of the process, can develop goodwill, and allows for networking. Because direct corporate contributions are permitted in some jurisdictions but are precluded in others, political action committees (PACs) can be established by businesses to collect contributions for purposes of making campaign expenses. Campaign contributions have been identified as a means to help elect supporters, improve access and in some instances even defeat opponents. A political action committee can also have relevance in “I & R” (citizen-driven initiative and referendum) jurisdictions when an issue of import to the business may be on the ballot.
Developing “Outside” Strategies: Leaders of the company should be committed to a renewed focus on government affairs, prepared to budget time for implementation of the strategy, and willing to travel to various jurisdictions, visiting with leaders in key jurisdictions and within their home communities. The company should have high visibility at annual events or conferences where a sizeable number of relevant stakeholders in that jurisdiction gather.
Successful businesses are also committed to putting time and energy into coalition building and even developing relationships with public interest lobbyists and those representing nonprofits and single-issue groups whose clients normally have no commercial, material or governmental interests and instead are largely philosophical and ideological. To that end, a business with a renewed emphasis on government affairs should also begin to consider developing its own grassroots organization base that would allow the corporation whenever appropriate or necessary to mobilize employees, stockholders, retirees, suppliers, vendors, customers or clients over an important government affairs cause.
An effective media and press relations strategy also is always part and parcel of a strong government affairs operation. Electronic, print and social media are all highly capable of driving governmental action; a press and media relations team and strategy for the company will be essential.
Ensuring Compliance with Ethics, Lobbying and Campaign Finance Laws: The rules and culture of lobbying have changed. In most jurisdictions, strict rules govern the entertaining of officeholders, travel, gifts, awards and campaign contributions. Any expansion of government affairs should be done in conjunction with a thorough examination of the relevant ethics, conflicts of interest, and campaign finance restrictions at the federal level and in key jurisdictions. The rise of “pay to play” restrictions, which generally preclude the award of government contracts to vendors that have made campaign contributions to certain officeholders or party committees, is especially worth reviewing to protect against the disqualification of business contracts.
Conclusion
A company expanding its government affairs department is making a smart and necessary investment and must be in it for the long term. Businesses should walk before they run in the following manner: (1) build a strong internal office with talented, experienced full-time staff; (2) invest in highly reputable contract lobbyists to be their government affairs ambassadors in key jurisdictions; (3) become active in federal and state trade associations; (4) develop local relationships; (5) set a priority agenda concerning federal and state issues of importance currently in the legislative and regulatory arenas; (6) develop “outside” strategies to advance that agenda; (7) consider increasing the company’s political activity by establishing a political action committee, while at the same time (8) ensuring full compliance with all applicable ethics and campaign finance laws and regulations.
A major goal of expanding government affairs operations is that ultimately, the company will be more in control of addressing legislative and regulatory issues of import and have more control over its own reputation among political stakeholders.
Published February 18, 2015.
