A recent McKinsey survey show that among companies whose primary market is in the European Union or the United States, less than a quarter of respondents say their companies are effective at developing and executing strategies for engaging with all relevant government stakeholders.
The results show that government actions have a significant effect on companies’ economic value: 34% of respondents say 10% or more of their operating income is at stake. Some government actions, such as providing infrastructure and access to capital, are likelier to have a positive than a negative effect on company finances. However, passing laws and setting policies—the actions executives say most often affect their companies’ economic value—have an overall negative effect. Respondents whose primary markets are in developing economies are more positive than others, however, about the effect of government actions, such as the passage of laws and enforcement of rules.
Given this value at risk, it’s promising that 71% of respondents say companies should proactively and regularly engage with government, but it’s less encouraging that only 43% say their companies actually do so.
Some of the reasons for the relative lack of engagement may be executives’ own views of government. More than 75% agree that business must be actively involved in shaping government policy to succeed and that it’s beneficial for companies to be as transparent as possible with government, but large shares also express frustration with government along various dimensions.
When companies do engage with government, executives indicate they’re not particularly good at it. Engaging with the governments of their companies’ primary-market countries is a top-three priority for only 30% of CEOs—although the figure rises to nearly 60% in China. More are involved in overseeing their companies’ efforts to engage: almost two-thirds of respondents say their CEOs either sponsor those efforts personally or oversee the group that does so.
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According to McKinsey, the survey received responses from 1,167 executives representing the full range of industries, regions, and functional specialties.
Detailed survey results may be found on McKinsey Quarterly: www.mckinseyquarterly.com