Political environment refers to the influence exerted by the three political institutions:
Legislature, Executive, Judiciary
The legislature decides on the particular course of action. Government is the executive and its job is to implement whatever was decided by parliament. The judiciary has to ensure that both the legislature and executive function in public interest and within the boundaries of constitution. Legal and political environment provides in framework within which the business is to function and its existence depends on the success with which it can face the various challenges constructed out of political and legal framework. The overall success of the business will depends the political stability in the country. There are some factors which may cause political instability e.g., Civil war, declaration of emergency in the country, changes in the form or structure of administration of government etc.
Political Institutions: Under the democratic form of political system, there are three major institutions viz. Legislature, executive and Judiciary.
Legislature: Legislature is the most powerful institution. The main powers vested in the legislature are as follows:
Policy making, law making, approval of budgets, executive control, to act as a mirror of public opinion.
In today’s economics, particularly of developing countries like relevance of a protective legal environment for business assumes immense proportions as it is very foundation of every investment decision. The business has to be within the law of the land. Every aspect of the businessfrom its birth till death is covered under the laws to ensure that not only profit is earned in a justified and fair way but also to ensure that in the attainment of business interests the interest of each person is fully protected and the profits of business are distributed in a manner beneficial to the society.
Executive: Government is the executor body of the laws which are framed by the legislature. According to E.V. Schneider, “Government is that institution by which men everywhere seek to order society, that is, to control the structureand functioning of society.” In simple words, the role of the Government is to shape, direct and control and the business activities. The translations of the objective of any laws to the reality depend as much upon the law itself as on its implementation. The implementation of the law in its word and spirit only can ensure the realization of its true objectives.
Judiciary: The third political institution is judiciary. The Judiciary sees to it that the exercise of authority by the executive is according to the general rules lay down by the legislature. It is the power of Judiciary to settle legal disputes that affects business considerable. Following are a few examples of the disputes which are often referred to courts for settlement and their verdicts are sought:
Disputes between employer and employee, Disputes between employer and employer, Disputes between employee and employee, Disputes between employer and public, Disputes between employer and government.
In some cases the courts of Justice protect the citizens from unlawful acts passed by the legislature and arbitrary acts done by the Government on the executive. The term responsibility, obligation or duties are all used interchangeably in the context relations between Government and business. The relationship between these two can be explained with the help of the chart given on the next page.