GOVERNMENT IN BUSINESS

PURPOSE OF GOVERNMENT IN BUSINESS

First is public safety and welfare. Many industries are regularly reviewed and overseen because their activities, if they go awry, can have significantly harmful effects to human health, financial well-being, or community structure.

The second reason is protection of industry. Many regulations are in place to protect those who have developed their business correctly; licensing, permits, and inspections by the government weed out undesirables or criminal activities that undercut honest industries.

The third reason is revenue generation. Many programs require certification or licensing that businesses must pay for in order to operate. The funds collected go to pay for the government programs that perform the oversight of the particular industry. However, in many cases, some portion of revenue is also sidetracked to general government purposes and is, effectively, a tax.

20th Century DevelopmentRegulation of business in the 20th century has developed at multiple government levels through the form of commissions. Government departments and agencies are still heavily involved. However, commissions are seen as more responsive, and board members can, in many cases, be from private industry, providing a receptive face to business interests in government. Doing so also provided the government with decisions-makers who intimately understood business issues and how they may conflict with new regulations or changes. This approach also allows for a much cheaper resolution of legal conflicts than taking regulation challenges to the court system through a formal lawsuit.

20th Century DevelopmentRegulation of business in the 20th century has developed at multiple government levels through the form of commissions. Government departments and agencies are still heavily involved. However, commissions are seen as more responsive, and board members can, in many cases, be from private industry, providing a receptive face to business interests in government. Doing so also provided the government with decisions-makers who intimately understood business issues and how they may conflict with new regulations or changes. This approach also allows for a much cheaper resolution of legal conflicts than taking regulation challenges to the court system through a formal lawsuit.

ADVANTAGE AND DISADVANTAGEOF GOVERNMENT IN BUSINESS

Government entities purchase goods and services from the private sector, but they also form partnerships with businesses. The government provides financial stability to the project while the business provides its expertise,technology and other assets such as land or manufacturing capacity.

Financial CapacityThe enormous taxing authority of the federal government, as well as the states, allows these entities to allocate funds in the many millions and even billions of dollars to projects and partnerships. Putting together financing packages this large is difficult for the private sector to do alone. For example, funding an NFL football stadium is a project that can require more than $1 billion to complete

Funding Projects for the Public GoodWithout government involvement in the form of directly financing a project or providing loan guarantees or other assistance, certain projects that have a positive impact on society would not get done -- or at the very least, they would get done more slowly. The U.S. Department of Energy, for example, provides loan guarantees for clean-energy companies, including those harnessing solar and wind power. The DOE is responsible for repayment of the loans in the event the company defaults. These types of government/business partnerships can spur development of new technologies that might struggle to obtain initial support from the private venture capital community -- and create jobs in the process.

PrestigeFor a business, participating in a high-profile partnership with the government can add prestige and visibility, making it easier to obtain private-sector clients in the future. Being able to include the federal, state or local government on a client list is a valuable marketing tool.

Low Financial RiskDepending on one customer for the majority of a company's revenue is considered risky by most business owners. If the customer runs into financial difficulty, payments due to the company could be at risk. When partnering with the government, this risk is lessened because governments have ongoing revenues from taxes collected and also have borrowing capacity to meet their obligations.

Slow Pace of BureaucracyThe approval process from the business's standpoint can be extremely slow, involving multiple meetings and presentations over a protracted period of time. Government entities have formal bidding processes that require the submission of detailed proposals that are reviewed by multiple departments. For private companies used to acting quickly, building a relationship with a government entity can seem like an extremely slow process.

Government Chooses Who WinsCritics of business and government partnerships say that they sometimes circumvent the free enterprise system and allow the government to choose which companies are the winners in the funding process, rather than the company having to be vetted by the professional investment community. The issue is whether government officials have the necessary investment skills to make wise use of taxpayer funds in these business partnerships.

Political Shifts Can Negate PartnershipsThe leadership in the federal, state and local government can change with each election. The new leaders might not be inclined to proceed with government and business partnerships established by their predecessors. In some cases, the terms of previous deals might be renegotiated because of budgetary concerns within the government entity.

Presidential Decree No. 2029Defining Government-owned or Controlled Corporations and identifying their role in National Development

A government-owned or controlled corporation is a stock or a non-stock corporation whether performing government or propriety functions, which is directly chartered by a special law or if organized under the general corporation law is owned or controlled by the government directly or indirectly through a parent coproration of subsidiary corporation, to the extent of at least a majority of its outstanding capital stock or of its outstanding voting capital stock.

1. A Parent Coproration- is one which is created by special law. A parent company has control of the management and operation of a subsidiary company. It is also referred to as “holding company”.- has enough voting stock to influence of the board of directors and control the management and operations of the subsidiary company.

A parent company may be involved in the ownership and control of the subsidiary company for a variety of reasons.   For example, a parent company may have spun off the subsidiary into a new separate company to reduce the overhead and streamline the operating costs.  Alternatively, a parent company may buy shares as well as control of a company to enable it to integrate and coordinate its activities with other subsidiary businesses under the control of the parent company.

2. Subsidiary Corporation- is one created pursuant to law where at least a majority of the outstanding capital stock or outstanding voting capital stock of which is owned by parent government corporations and/or other government-owned subsidiaries.

Subsidiary companies are companies owned by a parent company. Subsidiary companies are separate2. legal entities created by the parent company or another party. Subsidiaries are not divisions of the parent company -- divisions are incorporated into the parent company and not legally separate. A subsidiary company is sometimes referred to as a “daughter company” to the parent or holding company. A subsidiary company can have controlling interests in its own set of subsidiary companies.

3. Acquired Asset Corporation- Is one organized under the general corporation lawa. under private ownership at least a majority of the shares of stock of which were conveyed to government corporation in satisfaction of debts incurred with a government financial institution, whether by foreclosure or otherwise.

b. As a subsidiary corporation of a government corporation organized exclusively to own and manage, or lease, or operate specific physical assets acquired by a government financial institution in satisfaction of debts incurred therewith, and which in any case by enunciated policy of the government is required to be disposed of to private ownership within a specified period of time

4. Affiliate Corporation- is one where the total government ownership comprises less than the majority of its outstanding capital stock and its outstanding voting capital stock.