“A government can run like a corporation and fulfill stakeholder expectations. ” Do you agree? (Use Singapore as an example.
) Modern day corporations have not just an obligation to its bottom line but they are accountable towards the stakeholders as well. The accountability is even greater in the context of a country as the purpose of the government is to serve these stakeholders, mainly its citizens who put them there through voting power and the businesses which generate economic wealth for the country.Singapore Incorporated is one of the many names given to the affluent South East Asian state that runs its country like a profit making entity, driving remarkable growth through virtues of a private corporation, efficiency and competition. One of the main challenges the Singapore government faces is managing its goal of economic progression while fulfilling stakeholder expectations to ensure political survivability and that its responsibilities as a government to the people are discharged.There are definitely advantages and disadvantages to running a country in a corporate manner but the key is if it is possible to take actions to address stakeholders in the midst of a profit-making agenda and perhaps if it is easier to do so in a corporate governance setting. A key characteristic and purpose of a corporation is its profit-making bottom line.
Singapore has consistently achieved positive economic growth in the last few decades to become one of the most affluent countries in the world. Such growth can be best achieved by the profit making mentality of a corporation.A country that is in growth is definitely better off than a country that is in recession. Singapore has a GDP of $326. 8 billion dollars in 2011. With such wealth, the country will not be constraint by the lack of financial resources to fulfil stakeholder’s obligations. It is better equipped to protect its market stakeholders during times of economic instability as well.
During the 2009 global economic crisis, Singapore managed to pull through and lessen the impact by falling back on its reserves. It implemented policies like the $20. billion Resilience Budget, tax rebates and the Special Risk-Sharing Initiative (SRI) to ensure that businesses have access to credit to stay afloat. A corporation seeks to expand and hire more employees to work toward the goal of profit maximisation. That is true in the context of Singapore as well. With the country moving towards an aging population and increasing demand for labour, immigration policies have been put in place to attract foreign talents. Aging population is an issue in Singapore with seniors (65 years old and above) making up 8.
% of the population in 2010 and a projection that the amount will hit 18. 7% in 2030. This has a negative impact on the people in the country, with the workforce taking on a higher burden of increased spending in healthcare expenditure and welfare schemes for the aged. Expanding the workforce accordingly to equalise the ratio of adults to seniors will reduce the burden on the working adult to support the elderly. A shortage in workforce will push up cost of businesses and contribute to an intense competition for talent.Large multi-national corporations (MNCs) would be able to adapt and complete more effectively then smaller businesses like the small medium enterprises (SMEs) due to the difference in their resources. The economy will be hollowed out of SMEs and grow at their expense. This approach of hiring more workers from overseas will help SMEs to stay afloat by ensuring that the shortfall in the labour market is met.
Despite the expected benefits, there has still been much public discussion on the social implications of the foreign talent influx.This is due to the poor implementation of the policy like the high pace of the influx as well as the lack of follow-up strategies to assimilate them into the society. It resulted in the depression of wages amongst the workforce as well due to the sharp increase in supply over the recent years.
If the policies had been implemented effectively, the corporate trait of hiring and expansion could have been successful in fulfilling the stakeholders’ expectations, not just the businesses’ but the citizens’ as well.There are other steps that the government can take to address stakeholder’s concerns without affecting its profit margins like strengthening communications. Corporations can manage their stakeholder relationships well by having a pro-active role in conducting dialogue with its stakeholders. Recently the Singapore government is playing a more active part to engage the people of Singapore especially through the use of Social Media. The Prime minister, Mr Lee Hsien Long, created his facebook page as a channel to communicate better to the people as well as hear for them to air their concerns.
There was also the “Ask the PM” exercise conducted on Singapolitics. sg where questions are sent and the top 10 was chosen by the people for the Prime Minister to address. These are examples of pro-active stakeholder engagement that can take place even with the country running like a corporation. It will help the government gain awareness of societal expectations and act on it before they lose the confidence of society. Running on a profit making bottom line means that operating expenses need to be reduced when possible and luxuries of a socialist state are not affordable.Singapore’s expenditure on education is only 3. 8% of its GDP whereas OECD countries spend on average 6% of their GDP. In the area of healthcare, only 37.
3% of the cost is subsidised by the government whereas in other South Asian countries like Taiwan and South Korea they subsidise up to twice that amount. Such prudence is detrimental to the society as by making healthcare unaffordable, health risk becomes co-related to financial risk. People should not have to pay too much for healthcare as it puts them in danger of being bankrupted by their own illness.
The tendency to run cost low to maximise profit is there when a government runs like a corporation and it compromises on its stakeholders. The government can step in to increase its expenditure and pay for the spending from increasing progressive taxes and drawing some from surpluses. Drawing from its surplus for social spending goes against the conservative nature Singapore handles its money but it is important to find a balance between the two objectives. An advantage that corporations do not have, government have the ability to exercise their legislative powers to implement policies that can aid in their corporate cause.
In order to raise funds for investing purposes, Singapore having adapt a no foreign debt policy, can make its people lend the government money. A perfect example is the Central Provident Fund policy where Singaporeans are mandated by law to save up for their retirement in government accounts. The money saved is then used by the countries’ Sovereign Wealth Fund, Temasek Holdings, for investments purposes. When gains from investments are made, it will go into the government’s treasury.When losses are made, the government can just raise taxes to make up for the deficit and that puts its people in an undesirable situation where they bear the financial risk but do not have a share in any of the rewards. It also creates a moral hazard such that there is less motivation by the decision makers to avoid risk. Temasek Holdings stakes 30% of its portfolio in local companies like SMRT, Singapore Power and Singtel.
Some of these companies are monopolies in their respective markets and they can afford to raise the prices of their goods and services to maximise profits, leaving consumers to foot the higher prices.It creates the situation where the money you lent is used to make money from you. This is unethical. The government, with stake interest in these companies, have the ability to grant them monopoly status due to its role as a regulator. It can create instances of conflict of interests between its role as a regulator and profit-making machine, like when the government paid Singtel $1. 5 billion SGD for the loss of its monopoly in the late 1990’s. Private businesses cannot complete as well when their competitor is backed by the government. Such corporate agendas compromise on its stakeholders for profit margins, harming the relationship.
In conclusion, despite some failures by the government to meet these stakeholder’s expectations due to its preference to run like a business entity, it is possible for them to achieve a compromise for its stakeholders. The relationship between making money and satisfying stakeholders can be reciprocal and inter-dependent. A government cannot achieve one without the other therefore there is a need for them to find a balance between the two. For the government to run like a corporation, it’s not a question on whether they could fulfil stakeholder’s expectation. They should.