Relationship between Government and Business Organizations

Government and business institutions in a country in many ways are interrelated and interdependent on each other. In today’s global economy, its businessmen and entrepreneurs are the driving forces of the economy.

In planned economy or even in market economy government holds control of shaping the business activates of a country.

For maintaining a steady and upward economic growth The Government must try to make the environment for business organizations suitable.

And the organizations must follow the laws of governments’ to run the businesses smoothly and making sure there is a level playing field.

Relationship between Government and Business Organizations

The main goal of businesses is to make profit and governments’ goal is to ensure economic stability and growth. Both of them are different but very co-dependent.

For this the government and organizations or businesses always tries to influence and persuade each other in many ways for various matters.

A balanced relationship between the government and businesses is required for the welfare of the economy and the nation.

Let’s see how government and business organizations try to influence each other.

How Business Organizations Influences the Government

Organizations try to force the government to act in ways that benefits the business activities. Of Course for that an organization must go through in a legitimate way. But sometimes we see that organizations try to go over the line.

Any ways, these are the common methods that business organizations us to influence government policies.

  • Personal Conducts and Lobbying

    The corporate executives and political leaders and government officials are in the same social class. This creates a personal relationship between both parties. Also organizations formally forms group to present its issues to government bodies.

  • Forming Trade Unions And Chamber Of Commerce

    Trade unions and chamber of commerce are associations of business organizations with common interest. They work to find the common issues of organizations and present reports, holds dialogue to discuss on them with government bodies.

  • Political Action Committees

    Recently in the 2012 US elections, the term “super PACs” was a common topic in many discussions. Political action committees (PACs) or are special organizations formed to solicit money and distribute to political candidates.

    Most times the rich executives donate money to the political candidates whose political views are similar to them.

  • Large Investment

    The companies if can make a very large investment in industries or projects, them could somehow effect the government policies.

    We see these very often in developing countries where foreign corporate wants to invest in these countries.

    These works in other way around, where government tries to implement polices to attract foreign investment.

How Government Influences the Business Organizations

The government attempts to shape the business practices through both directly and indirectly implementing rules and regulations.

The government most often directly influences organizations through establishing regulations, laws and rules that dictate what organizations can and cannot do.

To implement legislation, the government generally creates special agencies to monitor and control certain aspects of business activity.

For example, environment protection agency handles Central Bank, Food and Drug Administration, Labor Commission, Securities and Exchange Commission and many more. These agencies directly creates, implements laws and monitors its application in organization.

Governments sometimes take an indirect approach to shape the activities of business organizations. These are also done by implementing laws or regulations but they are not always mandatory.

For instance, the government sometimes tries to change organizations polices by their tax codes. Government could give tax incentives to companies that have an environment friendly waste management system in production factory.

Or, tax incentives could be provided to companies that has established its production facilities in a less developed region in the country. As a result, more often the businesses would probably do so.

However these regulation and its implementation must be at a optimal degree.