Legal Environment - Essay Example

? Legal Environment Introduction Government regulations have emerged as an ever-present constituent in several aspects of life. Regulations have become a key element in multiple fields such as economy, politics and business. Regulations denote delivering rules and frameworks for conducting different activities. The key justification for the regulations imposed by government is that they facilitate to protect the benefits of stakeholders and public at large. The regulations are intended to ensure that public interests are maintained and preserved. Based on this aspect, the essay describes whether regulations are necessary particularly in the area of business. Furthermore, the essay also intends to explore if an individual is capable of self-regulation and how ethics can influence the regulation process. Issue The main concern in the context of government regulations in business area is that whether such regulations are necessary. The problem with respect to regulations is that thorough imposing them, the activities of people become delimited and thus managed by the government, thereby violating the rights of individuals. By regulations, the choices of people to conduct certain commercial activities are also restricted. Besides, it has also been argued that low regulations in business and low government intrusion can facilitate people and businesses to earn more revenue and thus they can spend more on economic development. However, to a certain extent government regulations in business is necessary in order to support productive business practices. Reasoning According to Jefferson (2012), human beings are able to live in a society, govern themselves by self-imposed regulations and secure the pleasure of life, freedom, property and peace. The basic reasoning behind self-regulation is that people have absolute rights regarding life and liberty to pursue happiness. Government regulations, if considered necessary, are introduced to secure the sanctification of these rights. The main reasoning behind regulations is that government has a responsibility to oversee the activities of people, because they cannot be trusted for making the proper choices. In the context of business, government regulations are used to control such activities which can otherwise result in business and ultimately market failure. For certain individuals, self-regulation is a contradictory element of business, but it also provides several advantages in the field of business. The five potential benefits of self-regulation are immediacy, flexibility, obedience, cooperative interests of industry and resources. On the other hand, self-regulation also has several disadvantages which comprise conflict of interest, insufficient consents, under enforcement, international competition and inadequate resources. Evidently, self-regulations comprise both benefits and limitations. Thus, it is neither an integrally effective nor an ineffective way to govern business conducts. The key challenge is to derive the condition in which self-regulation can be regarded as the proper strategy to encourage ethical behavior and also to find ideal methods of planning self-regulatory organizations. In reaction to corporate frauds, it is reasonable to decide who should regulate the behavior of business organizations and business transactions. In this context, it can be stated that it is not a simple choice to follow either government regulation or self-regulation, rather it is a query of how self-regulation can be utilized (Coglianese et al., 2004). Even if self-regulations have received blame from public due to corporate frauds, it cannot be uninhibited completely. As an alternative, the solution would be to change the inner governance system of the self-regulatory organizations by permitting them new power or altering the level of government observation (Coglianese et al., 2004). Analysis Several sectors of businesses have long complained regarding government regulations and their restrictive characteristics. Government regulations are often quoted as impairment to organizational profit and waste of valuable time and effort. Government regulations have been denounced, side-stepped and violated by several businesses when laws such as corporate income tax and anti-trust laws were implemented. In an ever-increasing storm of regulations businesses have both thrived as well as suffered due to government intrusion. Concurrently, consumers have been protected by the same regulations by the prevention of exploitive business practices (Beale, 2004). During the implementation of anti-trust regulations in the early 20th century, followed by periodic increases in income tax and more and more complex laws, government has been able to conveniently administer the business activities. Business organizations usually oppose increased government regulations and observe them as a way to destabilize the profitability and hinder the business operations. In this context, it can be stated that over many years, several organizations have abused the revenue to maintain or increase the market value of share. They have breached migration regulations by recruiting undocumented employees and also violated environmental regulations by unlawfully managing wastes along with emitting polluted materials into atmosphere (Beale, 2004). Corporate Fraud and Sarbanes Oxley Act The justification of government regulations can be validated by recent corporate fraud in organizations such as Enron, Lehman Brothers and WorldCom among others. Traditionally, self-regulatory principles have played a vital role in regulating commercial activities and performances of professionals who are involved in business dealings. Since 1930s, the business regulations were expressly accredited by self-regulatory units such as New York Stock Exchange (NYSE) and National Association of Securities Dealers (NASD). Moreover, the activities of auditors and lawyers were also subject to oversight by these self-regulatory units. In the event of corporate scandals, it is reasonable to state that the structure of self-regulation is inadequate in the business context (Rolf, 2005). In light of corporate scandal, Sarbanes Oxley Act was enacted by the government in order to regulate accounting, auditing and business responsibilities. However, several business organizations have opposed the law by claiming that compliance with the Sarbanes Oxley Act is quite challenging, time consuming and would not lead to the desired outcome, i.e. safety of stockholders against corporate fraud. Moreover, there are a number of ethical influences which create an impact on regulation and deregulation procedure. Often regulations become a substitute for taking right path when difference between complying with the law and performing ethically becomes unclear (Michael, 2006). Regulations have several limitations. For example, one of the key limitations of regulations is scope, because regulations are usually regarded as a response to past catastrophes and thus cannot be developed to address the crisis that people are unable to anticipate. The other limitation of regulation is component, i.e. the complexity and clarity of regulations determine whether it would be successful in controlling the behavior of people. The inherent characteristics of regulations make it challenging for organizations to decide and to do the right conduct. Thus, to a certain extent regulations might undermine the ethical decision making (Michael, 2006). The ethical aspects have also brought in the challenge regarding how to regulate. In other words, government faces a choice about selecting principles and regulations. To be precise, the ethical gaps are involved in corporate frauds which have emanated directly or indirectly from government regulations. It is not the point that regulations should be abolished. Regulations are and will act as an indispensable controller for conducting business activities. Indeed, people must not oversee the ways government regulations can make certain possible freedom and influence ethics. Regulations should not only take in the form of specific instructions and guidelines that tell the organizations and auditors about what is acceptable and what is unacceptable, rather regulations must have extensive objectives and purposes (Coglianese et al., 2004). Conclusion In conclusion, it can be stated that government regulation is not a foe of business, it can provide several benefits through delivering financial support and other forms of facilities to the business. Simultaneously, government regulations can also be termed as a friend of public and act according to the best interests of people. While businesses at times compete against certain features of government regulations, they can also approve other commercial necessities if specific business objectives are precisely demarcated. The conflict i.e. whether to regulate or not to regulate might never be resolved as businesses become more multifaceted and as technology becomes more advanced, the characteristics of government regulations will become more severe. Government regulations and intrusions might be justifiable in the sense that it provides benefits to both businesses and consumers in different ways. References Beale, H. B. R. (2004). Home-based business and government regulation. Small Business Administration, 1-96. Coglianese, C., Healey, T. J., Keating, E. K., & Michael, L. (2004). The role of government in corporate governance. Harvard University, 1-45. Jefferson, T. (2012). Self-Government. Retrieved from http://famguardian.org/Subjects/Politics/ThomasJefferson/jeff0600.htm Michael, M. L. (2006). Business ethics: the law of rules. Harvard University, 1-33. Rolf, C. A. (2005). Efficacy of the Sarbanes-Oxley act in curbing corporate fraud. Rivier College Online Academic Journal, 1(1), 1-16. Read More