Government, Regulation & Business Ethics

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Government, Regulation & Business Ethics

The issue of business relations with government has increasingly become a key issue of business ethics. Some of the many questions raised are * Is it acceptable for corporations to use their considerable power tp shape government policy? * Is the government jeopardizing its role in protecting the public interest when politicians sit on the board of corporations? The government has a crucial role to play in establishing the ‘rules of the game’ by which we judge business ethics.

When we talk about the government, we know that the government is involved in issuing laws related to business practices. Business ethics tend to begin where the law ends. This means that the governments establish the baseline of acceptable practice in business. When talking about ‘the government’, we must be aware that we are actually referring to a group of different actors, institutions, and processes at various levels – transnational/ national/ regional/ local.

Laws are basically concerned with what the society may deem as appropriate or inappropriate. It’s important to recognize that law is only one aspect of the broader area of regulation of business. Regulation is all about rules governing business behavior. It includes laws and acts, but also pertains to other forms of formal or informal rule making & enforcement. Originally, most regulation would be issued and enforced by governmental bodies such as parliament/ministries. But, its important to clearly state that regulation is no longer the exclusive prerogative of the government. It can be delegated to other parties. So, regulation is basically – about certain types of rules, and it operates through governmental as well as non-governmental actors.

On one hand, businesses like to complain about an over-active government, because it demands excessive taxes or restricts their activities by blocking mergers. On the other hand, business also expects the government to be constantly active in protecting their interests, such as improving the infrastructure or keeping foreign competitors out of the market. While politicians like to surround themselves with powerful business leaders and are quite aware that a powerful economy helps their chances at the ballot box, they also must consider the interests of the people who expect governments to ‘police’ business and to make sure that it benefits the society. We must therefore differentiate between the two roles of the government.

Government represents an entire community, since its elected by the citizens. In this role as the elected representative of citizens’ interests, the government mainly defines the conditions for the license-to-operate business. This is most visible where the government tries to restrict business by asking to recycle rather than dump waste; impose taxes on corporate profits. If the governing authorities forbid a merger, they thus avoid the gradual emergence of monopolies, making sure there is still competition and as such, a free market. Most of the regulatory functions of the government have an enabling role. The degree of geovernmental responsibility varies from a passive approach, where the government just sets the rules and controls the compliance of economic actors, (eg. UK) to a forceful role in industrial policy by actively interfering with the economy. (eg. Germany/France)

Government can also be seen as an actor with interests of its own. One reason is that the governments have a self-interest to be re-elected. The governments are foremost interested in a booming economy. Bill Clinton - “It’s the economy, stupid” - the government’s success will most likely be judged on the basis if the performance of the economy. This actually makes the governments very dependent on business. Govt is not only dependent on business, but also competes with business. Eg. Privatization of telecommunication, ownership of TV companies (publicly funded companies such as BBC...
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