Development of Business Institutions

The first labor unions were created in the Medieval Europe and received the titles ?guilds?. Their aim was to unite the workers of the specific profession (usually blacksmiths, fishermen, carpenters, builders and merchants.) The main objective of such unions was to ensure the overall protection of the union members from the arbitrary and uncontrolled actions of the sovereigns of the cit). To be more exact, the “holder” of the city was absolutely free to exercise all kinds of jurisdiction over the residents of the city. Most notably, it concerned the policy of tax collection. Due to the fact that the fixed amounts of the due payments were not stipulated, the owners of the city discreetly determined the payments that were subject to compulsory collection. Naturally, it was detrimental to the development of the first business institutions and finally those unions achieved their goals and the powers of the city authorities were regulated and limited (the most significant accomplishment is the Magdeburg Law).

However, nowadays the situation is blatantly different. The importance of the unions is no less significant, but their objective has been changed. They are nowadays designed to protect the interests of the employee against the arbitrary and discriminatory action of their employer). Another objective of the labor unions is to guarantee that the labor rights and privileges of their members are safeguarded and the encroachment from the side of the business owner is not tolerated under any circumstance). The first labor unions in the traditional context of this notion appeared at the dawn of the 20th century in the industrial states of the USA and in the countries of the former USSR. Both the scholars and the international business practitioners have a convergent opinion that the existence of those institutions significantly channeled the development of the business environment of those countries.

Development of Business Institutions

Moreover, contemporarily the importance of the labor unions cannot be neglected due to the important fact that nowadays the vast majority of the business industries have become human resources oriented. To be more exact, the skills and the qualifications of the staff have become a crucial ingredient to the formula of business success. Whilst a hundred years ago the staff could have been easily dismissed irrespective of the opinions of the unions, nowadays the layoff may result in the bankruptcy of the enterprise because of the business re-orientation to the informational and technological sectors, in which the individual professional traits of the employee dominate.

The aim of this paper is to outline the positive and the negative influence which is exercised by the existence and the activity of the labor unions on the contemporary international business environment.

The Positive Influence of the Labor Unions

Various scholars and business practitioners fervently advocate the idea that since the labor unions was created, the industrial process of the business institutions have been simplified to the greatest extent. The key aspect of the positive influence is the intensified cooperation between the owner of the enterprise and the people who directly contribute to the development and the prosperity of the enterprise. In other words, the authorities of the labor unions are the conductors which convey the messages of the managers to the staff and the considerations of the staff to the business owners and the managers. Following this algorithm, the conflicting situations between the two agents are resolved more promptly and effectively, which ultimately results in the enhancement of the industrial performance of the company.

Another positive aspect of the establishment of the wide set of labor unions in the international business environment is the additional guarantees to the observance of the rights and privileges of the staff. Naturally, almost all companies have declared that they have and that they actively promote the policy of social responsibility. However, after the state authorities conduct thorough inspections it becomes evident that the declaration of the social responsibility promotion is nothing but nothing proclamations of the firms. However, the cooperation with the labor unions is the way to demonstrate that the opinion of those, on whom the social responsibility policy institutions are channeled, is highly valued and considered. This is the way the state authorities and the prospective and existing customers of the business entity are convinced that the firm is socially friendly and fully complies with the existing and projecting public mandatory regulations of the state.

It has been numerously asserted by the international and the domestic scholars that the establishment of the labor unions and other similar employee-oriented institutions is one of the ways the democracy is practically realized. Indisputably, democracy is one of the most fundamentally valued aspect of the domestic business environment of almost any state, in which the rule of law has been proclaimed. For the majority of the countries, the existence of the labor unions is mandatory under the law and shall the labor union is absent on the specifically reviewed enterprise, the government is very likely to organize the checks and the inspections to ascertain whether the working atmosphere of the specific business entity is fully consistent with the existing business law and with the industrial labor regulations of the particular country.

Moreover, however paradoxical it may seem to be, the countries in where the industrial participation of the labor unions is active are more effective economically, than those where the activity of the labor unions is declaratory or is not present at all. Therefore, the development and the practical operations of the business institutions are considerably better. This phenomenon is caused by the fact that the efforts and the activity of the employees is coordinated and controlled by the authorities, to whom they willingly and submissively submit. This concept is especially important when the economic hardships emerge on the horizon of the enterprise primarily due to the fact that the importance of the unpaid work or other forced limitations can be easily and understandably conveyed by the managers to the staff of the firm.

Overall, it can be recapitulated that the existence and active participation of the labor unions in the business cycle of the enterprise is important due to the fact that it contributes to the compliance with the emerging democratic standards, simplifies the intercourse with the government agencies and enhances the economic accomplishments (increases revenues) of the business institutions.

The Negative Aspect of the Labor Unions

Apart from contributing to the international business community positively, the negative consequences of the labor unions activity do exist. Although the majority of the international researchers and scholars converge in their opinion that role of labor unions is positive exclusively, the international and domestic practices clearly demonstrate that very often the interference of the labor unions prevent the business institutions from the resolution of the problematic situations.

To be more exact, articles of incorporation of the specific business entities provide that very often the decisions of the committees of the labor unions are mandatory in their natures and cannot be repelled by the managers of the company. Sometimes, especially when economic hardships and other crisis-related events emerge on the industrial horizon of the enterprise, the managers of the firm do have to take decision which may temporarily negatively affect the well-being of the laborers. To illustrate, sometimes there is the need to suspend the payment of the salary. In accordance with the articles of incorporation of the enterprises and the mandatory regulations of the government directly prohibits to do this action without the approval of the respective committee of the labor union. This procedure can be very complicated and can procrastinate for a long time, therefore leading to the bankruptcy of the enterprise.

In other words, considering the obligatory character of the decisions issued by the labor unions the managers are no longer free to take the actions which they assume necessary to be taken. However professional and skilled the managers may be, all their initiatives and attempts to safeguard the healthy working environment of the firm can be jeopardized by the interference of the union authorities, which are not preoccupied by the interests of the firm, but by the interests of the members of that union.


Having recapitulated the main points of both opinions, it becomes evident that although generally the impact exercised by the establishment and the activity of the labor unions is positive, serious imperfections still exist. In particular, it is obvious that the economic and financial indicators of the business activity of the enterprises are considerably enhanced and ultimately the revenues accrued by the companies are bigger comparing to the times those unions did not exist.

However, steep changes are to be taken in order to reach the top efficiency of those establishments. Unless the mandatory character of their decisions is not annihilated completely, they will continue to impede the implementation of the measures aimed at the overcome of the crisis-related events. Managers are no longer managers in the traditional context of this word, if their capacity to control the business is limited.

Overall, provided that the abovementioned negative aspects of the labor unions are removed, the labor unions are likely to become the integral elements of the effective business environment of the contemporary world.