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Partner, Attorney, Head of Dispute Resolution Practice, MITRAX
GR Management as a Way to Influence Decision-Making
The GR trend is fairly new in Ukraine; though it has been actively developing over the past 5-7 years. The interaction of private business entities with the government has always attracted major players with a desire to influence regulatory decision-making.
When a business reaches certain scale and significance, every CEO faces the issue of advancement to a new level, building bridges with state (municipal) bodies so as to promote the interests of the company at the highest government levels. If this is the case, how can this be done with the highest efficiency, and who should be enlisted to do it?
Lobbyist + PR manager = high level GR: a Paradox or Common Sense Formula?
In the context of clear (total or partial) absence of legislative regulation of GR, PR and lobbying in Ukraine, companies take the matter into their own hands, using industry experts to face tactical challenges and reach strategic goals within the existing legal framework. Some CEOs of quite successful companies, learning about the novel GR field, mistakenly believe that holding a couple of PR campaigns a year or hiring a lobbyist would be enough for effective interaction with the government. However, even a superficial analysis is enough for one to understand the fallacy of this perspective.
Expressing the company’s position, an expert in public relations is able to change the ideas of others about its activities in the desired direction. Public relations can be an operational and very serious tool for a communications strategy. A PR expert, adhering to the company’s policy in its relations with the public, can quite successfully influence specific officials holding certain posts in government bodies in purely legal ways.
There are many ways in which to implement long-term strategic tasks to maintain the corporate reputation, network and consolidate the company’s interests. Thus, a PR expert convinces specific target groups. Their main “domain” is the public and its opinion about the company, while the additional target is government structures as an opportunity to make a statement, gain good graces and support.
A lobbyist can ensure that the desired decision is approved by influencing, directly or indirectly, public authorities or local self-government. To achieve their goal, a lobbyist may use various methods, such as submitting petitions or individual appeals to state authorities, initiating expert reviews of various bills, draft resolutions, decisions, conducting an information campaign to influence public opinion, partial financing of an election campaign for a specific promising politician, participation in charity and other related projects.
But the priorities for a lobbyist are networking, outreach with a specific government structure or an official. At the same time, they often address specific, clearly posed issues such as adoption of a particular law or getting funding for a project, etc. instead of certain strategic long-term tasks.
A GR manager, being an expert in effective interaction with public authorities, supports the promotion of the company in a political environment, communicates with the authorities and public organisations.
As you can see, all three of the above types of experts are generally united by common functions, tasks and desired results. However, they occupy separate niches. If so, rather than replacing one expert with another, the option exists of professional reorientation if there is an urgent need to do this. However, there are two significant points to take into consideration.
First, one has to understand that neither a PR expert nor a lobbyist will completely cover those functions and tasks that are performed by the GR manager. They are in no way interchangeable. A common goal does not mean using the same methods to attain it. Moreover, by virtue of their trade, each of them has specific knowledge and skills.
Secondly, unlike public relations or lobbying, a company cannot outsource development of its GR strategy. An expert (at least one, although major companies may create entire departments to promote GR services) should be a regular full-time employee.
We believe that in the vast majority of cases, it is more profitable to use a company’s own resources to carry out GR tasks, while engaging third-party experts as needed to enhance the desired effect. By the way, in this case, we can make another reservation: this is beneficial if there is a need for constant, systemic interaction with regulatory institutions.
What do Companies Need GR Policy For?
The primary goal of a company practising GR policy is not to make a profit in its purest form. This is just a consequence rather than the pursued #1 goal. What benefits can this trendy field offer, and why is it becoming popular?
- Improving the status of the company. Recognition in political circles undoubtedly creates an image of trustworthiness. Decision-makers recognise the expert opinion of company professionals.
- Development and expansion of the client base via direct partnering with government bodies (local authorities) as counterparties or with private business entities through indirect mediation of authorities.
- The stability of a company actively employing GR. This is a result of the successful implementation of the first two components. The use of various methods and means of influence (see below) ensures the constant presence of representatives of the company in the activities of the regulator. By trying to be in the public eye as often as possible and becoming a household name, the company can become indispensable in certain aspects and be in high demand.
- The possibility of influencing regulatory decisions, while not directly but still indirectly affecting the company itself. Note that, in comparison with the activities of a lobbyist who seeks to influence decision-making from the outside, a GR expert is able to co-opt the regulator from the inside. That is, the secondary impact is replaced by primary, direct control over reality, thereby reducing regulatory risks.
As a result, the company gets the loyalty of the regulator, raising its value, including on the international level, in interactions with foreign business partners, good public relations, and the ability to sell the product to several customers (the latter depends on the specific nature, functionality and purpose for using this product).
Benefits for the Regulator
Interaction with an expert company undoubtedly provides specific benefits to the regulator as well. The unspoken, time-tested law of “you scratch my back, I’ll scratch yours” can only work when it is mutually beneficial. This is not about bribing individual officials, although, in fairness, it must be said that our mentality increases the risks in this context.
First of all, it is safe to talk about assistance in the policy-making process, since those who make regulatory decisions usually have neither enough time nor resources for that.
The ability to draw up and replenish the pool of candidates is another bonus of cooperation. To find qualified experts “from outside” and, if necessary, enlist them as part of your team is a fairly effective move by any government. “New blood” can bring in fresh perspectives, ideas, innovative solutions, which, again, will lead to a decrease in regulatory risks and an increase in the efficiency of regulatory activities.
Most Effective Forms of Implementation of GR Management
When implementing GR policy, do not “put all your eggs in one basket”, but use a variety of methods and ways instead. Never get fixated on any one type of interaction with the government (albeit time-tested). A company can use the following forms of implementation (but not limited to):
- Participation in specialised associations. Pros: there is a collaborative amplification of the promotion of ideas and legislative developments through the work of like-minded people as a single team. Cons: in case of a difference of interests and views, like-minded people of yesterday can become competitors in one niche group, which will inevitably lead to a conflict of interests.
- Work on the public council under the regulator. Pros: the company is involved in internal decision-making. Cons: often the opinion of the public council is more declarative, background in nature, and a decision can be adopted without the proposed options, amendments.
- To join an expert group or, even better, to become a sole narrow-focused expert. Pros: immediate direct influence on decision-making, an opinion to be regarded and taken into account. Cons: getting into this kind of a group of experts under specialised committees is an extremely difficult task due to the high level of competition.
All of the above contributes to the establishment of dialogue.
Legal GR: Development Prospects
The practice of not involving stakeholders, including for drafting bills, is gradually becoming a thing of the past. Best practices in EU countries have proven that public administration benefits as much when stakeholder participation is ensured to consider the whole spectrum of the issue: potential advantages, risks, other issues.
In 9 out of 10 cases, the company interacts with the regulator when drafting or amending regulatory documents. Therefore, legal GR has great potential for successful cooperation.
The existing regulatory framework is quite often so outdated that it falls behind (and sometimes runs counter to) the basic principles of regulation in a market economy. Therefore, the main emphasis is on updating existing legislation, taking into account the legal framework of EU countries. In this regard, GR cooperation is even more important in the context of the growing pace of implementation of Deep and Comprehensive Free Trade Areas.
It is no secret that such interaction between the state and business communities, as represented by reputable law firms, can change the regulatory environment, mitigate internal and external contradictions and… obtain lawful mutual benefits. Ultimately, the implementation of effective practices in industry regulations with a business-oriented approach through the development and adoption of bills and other regulatory documents is a win-win for all sides.
By the way, drafting legislative amendments is a very specific product. And a law firm can offer such an exclusive service by virtue of it possessing the necessary specialised knowledge in legal studies, audit, analysis with the available relevant know-how.