Business and Government Context - Example

Business and Government Context Professor’s Name University The City and State Table of Contents Table of Contents 2 Executive Summary 2 Business and Government Context 4 Introduction 4 Roles of Government and Business 4 Defining the Corporation 5 The Impact of Globalization 6 Government and Business Complexities 8 Government Recommendations 11 Conclusion 13 References 14 Executive Summary This report takes the position that governments should be more aggressive to prevent the rentals pursuit of profits and power by some corporates. A key role of the government is protecting society from exploitation or other social harms that businesses may present. However, globalization has made it difficult to fulfill this obligation as the focus on profits by corporates has not shifted. Companies have also advanced a high rate to understand and dominate the political-economic scene through increased lobbying. Globalization and the politics at play have facilitated numerous and significant unethical conducts by corporates. Moreover, they have overlapped the obligations of government by using their resources to influence political decision-making. Business and Government Context Introduction The world is changing rapidly as globalization, industrialization, and technology advance at a high rate. However, predicting the future of the world has become more challenging than ever. This is based on the continued complexities between governments, businesses, and the civil society. At the center of all this is the manner businesses are willing to use unethical or unmoral methods as a pursuit of power and profit. Corporations in numerous situations apply unethical methods such as environmental pollution, avoiding tax, and child labor among others just to make profits and gain increased dominance in the market. The following paper takes the position that governments should be more aggressive to prevent the pathological pursuit of profit and power illustrated by some corporations. The paper will apply academic literature to illustrate why governments should be more aggressive. It begins by describing the roles government and businesses in the whole idea of pursuing numerous interests. Additionally, the paper focuses on identifying and discussing the establishment of corporates and their nature. Also, it will focus on the impact of globalization in terms of promoting unethical behavior. The report will continue to illustrate the political-economic issues that lobbying has developed. Also, it will conclude with numerous recommendations on how government can enhance their actions. Roles of Government and Business To begin with, it is no doubt that there exist multiple challenges and complexities in governments themselves and their relationship with businesses, but they remain the only protection people have against corporate power and exploitation (Lussier & Sherman, 2013, p. 133). Governments have a role in terms of influencing businesses in terms of establishing the rules, laws, and regulation of how business can conduct their operations. They also have the role of protecting societies’ interests from exploitation from businesses. In terms of beliefs, the governments and businesses differ significantly (Lussier & Sherman, 2013, p. 133). Businesses are more concerned about self-interest, minimal responsibilities imposed by society, and emphasis on inequality (Gourevitch & Shinn, 2005, p. 122). For the government, it focuses on group interests, increased obligations to society, and equality of people. Nonetheless, the emergence of globalization in the past few decades has resulted in total shift and twist of these roles and beliefs. Businesses have grown tremendously as part of the globalization of the world to gain increased power and profits that has colluded the government’s role in terms of regulation and protecting societies from exploitation (Gourevitch & Shinn, 2005, p. 122). Globalization is described as a process of integration and interaction between people, businesses, and governments. It is both driven and aided by international trade and information technology respectively. The recent changes in the global economy and how international businesses and governments interact have developed a shift in the traditional roles that governments should play in terms of influencing businesses. Defining the Corporation Before digging deeper into the changing roles of governments and their influence on businesses, it is important to focus on the rise of corporations in terms of power and profit through increased globalization. A corporation is defined as an organization that is legally recognized by the government as being legally existent and a separate entity from its owners or shareholders (BACKER, 2015, p. 15). This means that shareholders do not bear any individual liability for the corporations operations or conduct. A historical foundation of corporations is based on maximizing the greater good of the public through the ability to provide a collective solution for multiple interests. Moreover, the corporation is developed on legal duty of relentlessly pursuing its own self-interest. The social responsibility or role of any corporation is that of maximizing its profits (Friedman, 2007, p. 173). Corporations are unlike other business forms such sole proprietorships where the individual owner or owners of a legally recognized organization are held liable for their business’s conduct or operation. Besides, it also differs from non-profit organizations that are specifically established to support worthy causes of enhancing the world and societies. Therefore, a corporation is recognized a singular entity or a person and as such is regarded to have some rights. In all these definition, one point remains clear, that the corporation is based on an economical foundation of generating profits at all costs although under defined laws and moral expectations (Lussier & Sherman, 2013, p. 136). As independent organizations, corporations have historically thrived in the essence of self-regulation where they were previously granted freedom, independence, and autonomy (Teegan, Doh & Vachani, 2004, p. 479). This led to the increased rise of corporate giants with increased profits and power. Nonetheless, the modern corporate giants have developed in different stages of ascertaining their economic foundations through enhanced self-regulation. Due to increased corporate scandals such as IBM products being used in German concentration camps and Monsanto creating products that were hazardous to humans and animals, the corporates responded by introducing corporate social responsibility (CSR) and recently the focus on corporate governance. However, this does not clearly illustrate the expectations of society in terms of conducting their operations in an ethical manner. Overall, corporate giants have change immensely in their tactics, but what still remains clear is their pursuit for profits and power at all costs. The Impact of Globalization Globalization has played a critical role in empowering corporates and enhancing their ability to participate in unethical behavior. The emergence of a globalized economy means that multinationals can open up branches anywhere in the world. Nonetheless, there is a huge complexity in terms of how different governments influence their business and their ability to play their roles as part of influencing businesses. There are different types of government and government structures as well as the economic policies. As globalization occurs, corporates are taking the opportunity to exercise their duty of making profits by chance (BACKER, 2015, p. 156). One of the main impacts of globalization is increased inequality between developed and developing nations. Based on the loose and unbalanced response from governments, the only people who have benefited from globalization are the elite and corporate giants. Even as globalization was encouraged on purely positive intents, it rarely gave the outcome most people were expecting. For instance, as a means of reducing costs, multinationals outsourced their services to other countries where labor costs were lower, illustrating the relentless pursuit of profits. Apple Inc. which is a respected company was exposed for the poor working conditions faced by employees who manufactured their iPhone products overseas in China (Duell, 2012). One of the main reasons that such unethical behavior was happening is the effect of globalization. Globalization has flourished at the benefit of multinationals and at the cost of society. This is especially in terms of finances. Tax collection levels in about 30 of the richest nations in the world from corporates fell from 37.6% to 30.8% between 1996 and 2003 (World Commission on the Social Dimension of Globalization, 2004, p, 39). This represents a huge loss in terms of public finances that are needed for the government to carry out its obligations to the civil society. In addition, globalization is still continuing to increase the impact on taxes as most developed nations continue to lose out in the profits being generated by companies. A part of the main challenge is that increased differences in government policies are struggling to keep up with their goals and future prospects. Most developing countries such as in the Asian region are attracting Foreign Direct Investment as a means of boosting their economies by offering tax incentives. Currently, corporate giants such as Google, Apple, and Microsoft have overseas branches or secondary companies that are not taxable in their home country the U.S in terms of income. Additionally, Australian mining giants such as Rio Tinto and BHP Billiton have established multiple organizations and subsidiaries in Singapore where they are offered special status as incentives that offer them the ability not to pay income taxes for a certain period of time that is in years. For instance, Rio Tinto businesses in Singapore were offered a Development and Expansion Incentive status that predestined that they would only pay 5% of tax until the year 2022 (Chenoweth, 2015). More worrying is the tax planning applied by corporate giants such as BHP, which sends its untaxed profits from Singapore to Switzerland BHP company and is taxed a minimal 2.5% and the rest of the profits are paid out in terms of dividends that are not taxable to its Netherlands branch (Chenoweth, 2015). This type of tax planning has been used by a few corporate giants mostly in the Fortune’s to 100 companies. This illustrates the growing challenge of stopping or reducing the corporates pursuit for profit and power. Moreover, it is the more reason that the government should be aggressive in terms of regulation. Government and Business Complexities Governments have complex relationships and ties with businesses that have shaped all manners of economic trade and political systems. As such, the government has a role in terms of protecting businesses from the general public in terms of ensuring conducting its business legally. In developing countries, governments are more focused on enhancing their overall economies than other roles to society and the greater public. Developing economic gains requires a close collaboration with businesses as well as close negotiations (Gray, Harymawan & Nowland, 2016, p. 25). Overall, the main complexities between governments and businesses surround political economy. Politics is an old age tactic of convincing the greater public on issues that are perceived to be of benefit for the many. It is considered as the application of power to gain advantage over other and acquire scarce resources for the benefit of self-interest (PEARCE, JL, DE CASTRO, JO, & GUILLÉN, MF 2008, p. 45). Therefore, the government is developed on the basis of having power over a certain territory or country. Therefore, governments practice increased politics to manage the interest of its citizens and other stakeholders. The government operates in different structures including the formal and informal segments. Nonetheless, increased globalization has increasingly changed the manner in which politics and these government structures are developed and applied. For instance, in America, following the industrialization revolution, businesses amassed increased profits that proved to be too costly to the greater American population in the 19th century. In the 1960s, the U.S government introduced compliance, taxation, and labor reforms that severely affected corporations at that time. Corporations will flourish in a free market where government regulation is reduced and self-regulation is encouraged (Dahan, et al., 2015, p. 665). Faced with this challenge of increased government regulation, corporates responded by creating external political influencers through lobbyists. Lobbyists came from the need of corporations to negotiate on how much the government can regulate the market or corporation activities. America is one of the pioneers of lobbying where at first it was used to effectively reduce taxes, roll back regulation, eliminated major labor regulation reforms, and steered public opinion to favor reduced government intervention in the economy (Nace, 2005, 56). At first, corporations had been used to operating without government intervention in the 18th and 19th century (Nace, 2005, 56). However, after government intervention through regulation and compliance was introduced, corporations used lobbying to keep the government away. This has since changed with rise of globalization in the 20th century. Corporations have now realized the true value of lobbying in terms of determining new ways that corporations can work with government. However, for corporations, the main motivation to engage the government to work collaboratively is in terms of increasing their profits or self-interest (Farnsworth & Holden, 2006, p. 473). A great example of this is when American pharmaceuticals opposed the government’s proposal to introduce a prescription drug benefit in the Medicare insurance program based on the argument that the government would have greater bargaining power by purchasing drugs in bulk, which means a reduction in profits sometime around the 1990s. In 2000, the pharmaceuticals lobbied for the support of the idea, but strictly banned bulk purchasing resulting in a maximization of profits to the pharmaceutical corporations. Currently, corporate giants have used the same lobbying system to attain a new level status of power as that of the government (Nace, 2005, 56). Political strategies in the modern corporation are a strategic investment in protecting its pursuit for increased profits. Nonetheless, all these changes have come at the cost of societies across the world. Lobbying has provided a strong force of power for corporates to minimize the intervention or regulation government can exert on their operations or in compliance and regulation of the economy. Many of the unethical behaviors or conducts illustrated by corporate giants have all been covered up or by-passed through increased lobbying. For instance, one of main state-corporate environmental crimes is the 2010 Gulf of Mexico oil spill by BP. According to Bradshaw (2014, p. 168), the incident can be conceptualized as a state-corporate environmental crime based privately contracted oil spills and the heighted collaboration and partnerships between government and giant corporations. The scandal involved the use of excess toxins in an effort to cover-up the oil spill as well as blocking the media and public access to response efforts. Importantly, lobbying involves a crucial amount of secrecy where meeting are held in secret and closed board rooms far away from media and public access (Bradshaw, 2014, p. 173). The concept of state-corporate crimes is where governments and its institutions partner with corporate giants to exert social harm. In the BP oil spill, the high intensity of private corporations and contractors made it difficult for government agencies to effectively manage and coordinate response efforts. The result was an excessive use of toxins to contain the oil to a point that the government responded with a directive from the Environmental Protection Authority. Nonetheless, due to the shear influence and power of BP, they simply refused to find an alternative toxin arguing that they were not in a position to make effective tests (Bradshaw, 2014, p. 178). The EPA was disappointed and urged the company to reduce the use of such toxins as a desperate move in their frantic effort to protect the environment. This illustrates how corporations have gained increased power in terms of leveraging their interests over those of the government. The same case applies to companies such as BAT, which was never put to trial for unethical behavior in terms of illegal trades, child labor, and smuggling allegations after its top executives and experts lobbied for the company’s increased interest in helping the UK government in addressing smoking-related health problems (Fooks, et al., 2011 p. 6). Overall, businesses have evolved in terms of political-economic issues illustrating continuous emergence of unethical conduct despite government regulation. Government Recommendations Governments have also failed to be aggressive in terms of influencing businesses. Government is at the mercy of corporate giants based on the impact of globalization. Developing countries have reaped much in terms of FDI and employment abilities as well as net incomes. This has placed increased pressure on government as to how they can regulate corporations. In the fight against environmental damage, governments are constrained by the increased need for business to prosper and meet economic goals over the need of protecting the environment and natural resources for future generations. Even in the political debate, unethical issues such as increased environmental pollution and greenhouse gas emissions remains a controversial issues. In Australia, there is a political and business divide in terms of ideologies regarding climate change. Arguments presented illustrate the differing approaches to climate change (Storm, 2009, p. 1012). However, there is a clear gap in what the actions governments are undertaking. The issue of promoting social and environmental responsibility is not yet viewed as an important agenda for most governments. For instance, there lacks proper funding for the institutions and political agents that are likely to trigger influence and reforms in terms of taming corporates from pursuing power and politics. This involves institutions such as non-profit organizations and government agencies. Again, governments such as the U.S spend more on irrelevant agendas such as military weapon than what is dedicated to reducing social, environmental, and political harms or corporate unethical behaviors (Pemberton, 2008, p. 15). Stiglitz (2008), argues that coordination is a key challenge due to lack of effective policy. He argues that for instance there is increased lack of coordination between builders and consumers because they cannot install energy saving lights since consumers will be dissatisfied and accessing such bulbs for later replacement is a challenge since they are not stocked in retail stores due to lack of demand. However, a government regulation requiring all building to have energy efficient bulb could effectively create demand for such bulbs and ensure that builders install only such bulbs. Governments can effectively change the current situation of powerful and rich corporations by empowering their own institutions and non-profit institutions (Teegan, Doh & Vachani, 2004p. 475) . According to the World Commission on the Social Dimension of Globalization (2004, p. 112), governments should hire experts and empower other institutions to champion political-economic reforms that are geared towards ensuring societies are protected from corporates hunger for profits and power. What the government needs is a stronger team in terms of policy development to ensure that they reduce their dependence on lobbyist. Moreover, significant investment should also be increased for government agencies in ensuring that they have adequate resources to enforce, monitor, and regulate corporate conduct in an effective and seamless manner. Conclusion In conclusion, governments need to be more aggressive to prevent the relentless pursuit of profit and power by corporates. Currently, the government-corporate relationship has been shaped by globalization. The result is a multifaceted framework of regulation, compliance laws, policy, and partnerships that have overlapped the traditional roles of each entity. The impact of the complexities has illustrated continued unethical behavior or conduct by businesses. Moreover, they have provided for new avenues where governments are forced or find themselves being unethical to achieve common goals. Corporates have the resources and strategies to pursue their duty of making profits. However, governments are constrained by how they are formed in terms of politics to voting. This means that governments are increasing becoming underpowered, but still remain as the most effective solution. As such, governments should become more aggressive in terms of regulation, compliance, tax laws, and policy development. References BACKER, LC 2015, 'Regulating Multinational Corporations: Trends, Challenges, and Opportunities', Brown Journal of World Affairs, vol. 22, no. 1, pp. 153-173. Bakan, J 2004, The corporation : the pathological pursuit of profit and power / Joel Bakan, New York : Free Press, c2004. Bradshaw, EA 2014, 'STATE-CORPORATE ENVIRONMENTAL COVER-UP: THE RESPONSE TO THE 2010 GULF OF MEXICO OIL SPILL', State Crime Journal, vol. 3, no. 2, p. 163. Chenoweth, N 2015, How BHP and Rio Tinto channelled billions through Singapore. Australian Financial Review. 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