Understanding Political Parties & Companies: Holding Co. and Operating Co. – Series 2

Politics and economics are deeply intertwined, sharing many similarities in terms of systems, structures, processes, and regulations. Political activities within a party system and economic activities within a corporate system have much in common. By examining both, we can gain a clearer and more practical understanding of politics, especially since only a small group is directly involved at the upper levels. Many people discuss these topics without complete knowledge or experience.

In a democratic system, the people choose to form political parties and elect Members of Parliament (MPs) to represent both the party and the people in Parliament. In a free capitalist business system, shareholders can form a holding company and appoint directors to represent them, establish policies, and oversee the operations of the subsidiaries. In politics, the operating company is akin to the government.

Both are organisations that manage governance. They are the entities responsible for executing the policies and decisions set forth by the political party in government, and the holding company in business. Importantly, political parties have no executive power in the government, just as holding companies have no executive power over their subsidiaries. This separation of powers is commonly practiced in developed nations. The operating company, or the government in political terms, is usually managed by professional executives, who are essentially employees.

Political parties create policies and bring them to Parliament to be enforced by the government, just as holding companies bring decisions to the board of their operating companies to be implemented by the subsidiaries.

Political parties have a board structure, appointed through a selection process by its members. Similarly, holding companies have boards of directors appointed by shareholders. Both also establish various committees or divisions to assist in governance. It’s crucial to remember that a party is a separate entity from its members, just as a company is a separate entity from its shareholders. Members cannot use party power or assets as if they were their own personal property. Likewise, shareholders cannot treat company assets as personal belongings. For instance, if an owner takes money from a company without proper authorisation, it constitutes a breach of trust, and using assets for personal gain is mismanagement.

This understanding is particularly important when discussing issues of abuse of power or corruption within political parties or companies. Using assets for personal use, even from a fully owned private company, is technically illegal. Taking your own money might not be wrong from a moral perspective, but legally, if the company belongs to others and a manager does the same, it constitutes a breach of trust. Simply put, it’s wrong from a legal perspective even if the company is privately owned, and it’s a breach of both law and morality if the company belongs to someone else. The same applies to political party funds, whether donations or personal contributions to the party. Misunderstandings on this matter are common in the media, often manipulated for political purposes. It’s vital to distinguish between what is illegal and what is unethical. While they may overlap, conflating the two is dangerous.

It’s important to understand decision-making processes in politics, which must follow systems, structures, and regulations to be legitimate. The same applies to companies. Therefore, when people assume that decisions are easily made by a single individual like a chairman, president, prime minister, or CEO, they are mistaken. While the prime minister and CEO hold significant power, they are still subject to checks, balances, and controls through the system, structure, and process. This is why collective responsibility is emphasized, even though the prime minister or CEO takes accountability.

For those evaluating the implementation, success, or failure in politics, parties, or companies, understanding the system, structure, and processes is essential to making correct judgments, offering opinions, critiques, and constructive suggestions. Without this knowledge, it can lead to destructive outcomes. Knowledge of truth and justice is the foundation for progress.

In the next series, we will explore how organizations set policies, directions, and monitor execution, specifically focusing on:

• Political Parties
• Parliament
• Government Execution

And in business:

• Holding Companies
• Execution by Operating Companies

Hopefully, this series will enhance understanding, improve the quality of discussions, critiques, and suggestions, particularly in the media, and help avoid manipulation.