Government and Corporate

Governance
CG and Government
• Government plays a key role in the corporate governance by defining
the legal environment and sometimes by directly influencing
managerial decisions.
• political economy forces that produce the laws, the enforcement
mechanisms, the bankruptcy processes, and the ability of powerful
managers to influence legislation will profoundly shape corporate
governance.
CG and Government
Different Roles of Government in the Economy:
• The regulatory role
• The promotional role
• The entrepreneurial role
• The planning role
CG and Government
Forms of Government Regulation:
• General direction and regulation of investment activity in private enterprise.
This is achieved through economic planning and industrial licensing policy.
• Regulation of investment, location, size and expansion of individual enterprises
and specific industries through a well-defined policy of industrialization.
• Regulation of prices of commodities and industrial products through legislative
authority and systematic investigations into cost structures and mark-ups.
• Regulation of monopolies and unfair trade practices or restrictive practices
through legislation.
• Regulation of wages and bonus for employees in private sector to minimize
exploitation, ensure reasonable standards of living and maintain peace and
harmony in industry.
• Regulation of specific norms of business activity such as speculation in shares
and commodities or imports/exports, etc.
Scope of Government’s Relations with Business
■ It prescribes the rules of the game.
■ It is the major purchaser of the output of the business.
■ It uses its contracting power to get the business do things it wants.
■ It promotes and subsidizes business.
■ It is an architect of economic growth.
■ It protects interests of the society against the business exploitation.
■ It directly manages large areas of private business.
■ It is a national security protector.
Govt. have to be Proactive in the Following Areas
1. The Government should ensure that stakeholders’ interests are protected by
continuous monitoring of companies, to see that they do not cheat their the
stakeholders.
2. The Government should make laws to govern companies, to undertake all
the activities within the rules of the game. It should also make sure that all
companies adhere to rules, as for example—MRTP (Monopolies and
Restrictive Trade Practices) Act.
3. This Act enables the government to regulate industries wherein none of the
private companies becomes a monopoly by indulging in practices that would
adversely affect consumer interests.
4. Government has appointed regulators to regulate several sectors, to monitor
the activities of companies, to allow them to a have fair competition in the
market and also to save them from disputes when problems arise.