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What Are Checks and Balances?
Checks and balances are various procedures set in place to reduce mistakes, prevent improper behavior, or decrease the risk of centralization of power. Checks and balances usually ensure that no one person or department has absolute control over decisions, clearly define the assigned duties, and force cooperation in completing tasks.
The term is most commonly used in the context of government but also refers to limiting power in businesses and organizations.
KEY TAKEAWAYS
Checks and balances refer to the separation of power to avoid one entity or body wielding too much power.
Checks and balances can help reduce mistakes and prevent improper behavior in organizations.
Checks and balances are most commonly used in the context of government, for example in the U.S. government through the establishment of the executive branch, the legislative branch, and the judicial branch.
Checks and balances are important in businesses and other organizations where one individual can make decisions that affect operations, such as the CEO or a majority shareholder.
The idea of checks and balances dates back as far as the Roman empire.
How Checks and Balances Work
The U.S. government exercises checks and balances through its three branches: the legislative, executive, and judicial branches. It operates as a constitutionally limited government and is bound to the principles and actions that are authorized by the federal—and corresponding state—constitution.
Checks and balances are important in businesses and other organizations where one individual can make decisions that affect operations. Checks and balances can cost more money and decrease efficiency but can be critical in helping to identify internal and external theft.
By separating the duties of various employees into clearly defined roles, businesses and organizations are better able to ensure that rogue employees or executives cannot harm a business without the intervention of other employees. Having these types of internal controls in a business can help improve operational efficiency.
Internal control systems of publicly listed businesses in the U.S. use checks and balances. This is a requirement of the Sarbanes Oxley Act. The directors of such businesses have a legal obligation to ensure a proper system of internal control that includes checks and balances.
Checks and Balances in the World Economy
The United Nations has six internal institutions: the International Court of Justice, the General Assembly, the Economic and Social Council, the Trusteeship Council, the UN Secretariat, and the Security Council.
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Each of these institutions has different responsibilities, such as maintaining international peace, policy review and recommendations on economic, social, and environmental issues, and an international court.
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The individuals working in these bodies and the bodies themselves cannot influence each other. Given that the UN has a wide global influence, impacting most nations around the world, it's critical that different directives are handled by different groups so as to avoid a concentration of power.
The UN's voting system and veto power policy allow individual countries to check the power of other countries.
Example of Checks and Balances
The U.S. Constitution provides checks and balances for the U.S. government through the separation of powers between its three branches: the legislative branch, the executive branch, and the judicial branch. The Constitution gives specific abilities to each one of these three branches to ensure that no one section of the government could obtain excessive unchecked power.
Checks and balances are practiced by the U.S. government in the following ways. First, the legislative branch is the part of the government that makes laws, but the executive branch gives veto power to the president, allowing the president to keep the legislative branch in check.
In addition, the judicial branch, the part of the government that interprets the laws put into effect by the legislative branch, can deem certain laws unconstitutional making them void.
Executive Orders
Executive orders are often declared for the benefit of the country and are rarely considered unconstitutional. They are enacted solely by the president as head of the executive branch of government.
The Bottom Line
Without checks and balances, one branch of government can grow too powerful and problematic. In the U.S., three branches of the federal government effectively have a set of checks and balances: the legislative branch as Congress (the House of Representatives and the Senate), the Supreme Court as the judicial branch, and the Office of the President as the Executive Branch. Other world governments and international bodies like the United Nations also have checks and balances in place.
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