What Is the Meaning of Checks & Balances?

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Checks and balances are used in governments and corporate environments to make sure that one branch doesn't get too much power. Learn about the different goals and objectives of various parts of a company with help from a portfolio manager in this free video on money management and personal finances.

Part of the Video Series: Investing & Money Management
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Our forefathers were pretty smart. Hi this is Roger Groh at Groh Asset Management. They setup a system of government where no one branch of the three had total power. That way if one of them got out of line, the other two could exercise whatever power was inherent to them to bring the third back into line. An example, if congress went haywire well perhaps the supreme court could rule against them. If the president went off and started spending a lot of money, well congress could cut him off because they control all of the money. Corporately also there's a natural system of checks and balances where you have the management team, you have the customers and you have the shareholders. Each with their own goals and objectives. The one overriding one being to deliver products that people want to buy. So it works not only in government but certainly at the corporate level. Hope that helps, I'm Roger Groh with Groh Asset, thank you very much for spending time with me.

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