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Checks And Balances

Updated on January 24, 2024
Article byKhalid Ahmed
Reviewed byDheeraj Vaidya, CFA, FRM

Checks And Balances Definition

A checks and balances system refers to the self-regulatory mechanism of separation of powers between various persons or departments in a private organization or government to prevent absolute power use. Governments mostly use checks and balances to ensure that all departments can check and control each other’s powers.

Checks And Balances

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It is crucial to saving the democracy of a country by preventing the concentration of power in a single hand. Moreover, it enables accountability of every government organ or organization towards the public or investors. It also forms the basis of the separation of powers in the United States government. Private companies follow the rule to prevent their shares from fraud, forgery, or insider trading.

Key Takeaways

  • Checks and balances mean dividing powers amongst constitutional bodies equally to check abuse of power and self-regulate the bodies to prevent autocracy.
  • There is a cycle of checks and balances in action in various bodies like the legislature, judiciary, and executive.
  • Maintaining the rule of law and stability of a democratic government set up in a country and a company is important.
  • Without checks and balances, the government will not function properly, and chaos will occur.

Checks And Balances Explained

The checks and balances definition refers to the segregation of powers between various arms of the government or a business that checks each other’s power. It self-regulates the functions and prevents dictatorship. For example, checks and balances in constitution of the United States have called for the division of the American government into three organs – judicial, executive, and legislature. It gets important as every organ gets equal autonomous power to function in a manner that allows them to control each other’s erogenous power exercise.

As a result of checks and balances in constitution, a concept of separation of power came into being. Separation of power means that at every point of their functioning, each constitutional organ would not wield extraordinary power and remain subservient to the constitution. For example, the legislature has the power to accept any bill and pass it for the president’s consent as law. The president has the power to either accept the bill and sign it to make it a law or veto the bill. Moreover, there is a cycle of balances and checks in the US constitution as the legislature has:

  • The power to accept the nomination of a presidential candidate;
  • Pass the budget of the president’s ruling party;
  • Accept or reject the nomination of the Supreme Court chief justice, or impeach the chief justice;
  • Overturn the veto of the president by passing the bill with a 2/3rd majority;
  • Reject the declaration of illegality of the supreme court by modifying the bill to convert it into law.

Judiciary has the power to examine the constitutionality of any law and either recommend amendments or declare it constitutional.

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Checks And Balances Cycle

Here is the cycle of checks and balances:

Checks & Balances - Separation Of Power

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Legislature passes a law – President (executive branch) checks the legislature and the judiciary – the judiciary checks the executive and legislature – the legislature checks the judiciary and president.

Similarly, every private company has a mechanism of checks in place to control the accumulation of power in the organization to function smoothly. Without the mechanism of checks or balances

  • No democracy and company will exist for too long.
  • The nation will deteriorate.
  • Chaos and civil wars will occur.
  • Frauds in companies and nations may happen.
  • The company may face huge losses and close down.
  • Finally, countries may get destroyed.

Examples

Every company, organization, and government department has a mechanism to thwart any mismanagement, fraud, or authoritarianism in the government. Hence, let us go through the checks and balances examples below.

Example #1

Let there be a multinational IT company called Technokart Corporation based in the United States. It branches in six other countries, including two laptop parts manufacturing companies in France and Japan. The Japanese unit has Mr. David as finance manager, a native of Mexico, where the company has no subsidiary or branch. Hence David plans to open a new 6-million-dollar subsidiary office in Mexico.

David told the management that the new office would increase the business reach, profits, and brand image in Latin America. However, the company had a check and balance mechanism that mandated the approval of four other finance managers of four different subsidiary offices for any new office or branch.

After the four managers studied the proposal of David, they found it lacking in merits of high business growth, brand image, or profits. As a result, they scrapped the project of a new office building by David and decided to start a new training facility for staff and the public. David wanted to open a new office building in Mexico not to benefit the company but to work from his home country. Therefore, the checks and balances saved the IT company from irrelevant and monetary loss.

Instead, it endeavored to groom and train its workforce and the general public at large for a bright future and profits in the future.

Example #2

Another important example of checks and balances is the separation of powers in the government structure in every democratic country, especially the U.S. The legislative wing of the government in America gets the power to create laws. The president has the power to veto those laws. Likewise, the judicial can declare those laws unconstitutional. Also, the legislature can overturn the president’s veto using majority votes to pass those laws.

Judiciary has all its office bearers like the chief justice of the supreme court nominated by the president that has the legislature to approve before the appointment of the presidential nominees for the same. So, the legislature gets the power to approve the presidential nominations, impeach the president and manage the president’s budget for the state.

In a way, every government department gets separated from its powers. Still, each of these has the power to check the other in case of misuse of the authority by any other departments.

Checks And Balances Of Government

The checks and balances form the foundation of every democratic country globally. Particularly in America, the separation of powers is a mechanism that follows it. So let us understand the checks and balances of the government of America in the following section.

Every law in the U.S. originates in the legislative wing of the government called Congress. For this, any member of Congress presents a bill, which has to pass with the majority to get sent to the president of the USA for transformation into law.

If the president finds that the bill is not in the people’s interest or the country’s external affairs, the president has the power to veto it. However, the legislative wing has the power to counter the veto power of the president to regulate the powers of the president. Therefore, the legislature can overthrow the president’s veto by passing the same bill with a two-thirds majority. Furthermore, if the president feels no merit in the new law, they can challenge the law in the legislature for its repeal.

The supreme court will hear the government’s petition and decide the law’s constitutionality. Then, if it sees any lacuna or ant-national ethos in the bill, it may pronounce the law unconstitutional and repeal it. In this manner, every organ of democracy, whether the judiciary, the executive, or the legislature, gets self-regulated, and no organ gets to exert absolute power to control others. Hence, the checks and balances in government help stabilize the democracies; otherwise, dictatorship may crop up globally.

Frequently Asked Questions (FAQs)

What does checks and balances mean?

It means a mechanism of control within an organization to the government to check the powers of every department or unit so that no unit or department has all the power to become authoritative over the other.

How does checks and balances work?

It works by conferring equal powers to every unit or department and the ability to regulate each other to prevent abuse of power and dictatorship.

Why was checks and balances important?

Checks and balances become all the more important in the wake of abuse of power by one or more individuals to their advantage and the destruction of the nation or the organization. It is an integral part of the separation of powers of the judiciary, executive, and legislature in America.

Why do we have checks and balances?

We have checks and balances so that every organ can perform its duty autonomously without the interference of other departments, check the misuse of the power of other departments, and self-regulate the entire government or the organization.

This has been a guide to What is Checks And Balances and its definition. Here, we explain it in the context of the government, its cycle, and examples. You may also find some useful articles here:

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