Research Paper on "Corporate Finance"

Research Paper 11 pages (3740 words) Sources: 5

[EXCERPT] . . . .

Corporate Finance

Over the last several years, various private security contractors have been increasingly utilized, by a number of corporations and government entities. Where, their roles and responsibilities have been evolving, because of the changing nature of threats that is being faced. One place where this can clearly be seen is in Iraq and Afghanistan, as the number of private security contracts being utilized in both countries currently stands at 18,000. Where, the roles and responsibilities have varied dramatically as most will: protect convoys, provide security for various military / private corporations and protect high ranking government / corporate officials. This is significant, because the use of private security contractors has become a part of supporting various corporate and government objectives around the world. However, the problem is that many private security contractors are often viewed as above the law. Where, they conduct their various activities with near impunity in a theater of operations. Evidence of this can be seen with the 2007 incident involving Blackwater Security killing 17 civilians in Iraq and the Armor Group (the contractor that protects the U.S. embassy) engaging in various hazing rituals. (Whitelaw, 2010) As a result, many different critics have begun to question the use of private security contractors by: corporations and governments. To fully understand the role of private security contractors requires examining: if these companies are war profiteers and if they will be able to sustain their finances, while providing services that they may not be necessary in the future. To determine this, well will look at: the market for private security contractors, key companies in the industry, the differences in working with government vs. private corporations, if these companies are profiting at the expense of the tax payers and possible roles that these organizations will play in the future. Together, these different elements will provide the greatest insights, as to how the role of private security contractors is changing the way corporations and governments view the issue of security, in numerous countries around the world.

The market for security contractors

The use of private security contractors has been a part of government policy going back to the days of the American Revolution. Where, the U.S. Army would rely on the services, of private citizens; in providing a number of different support roles, as a part of completing their operational mission. For the most part this arrangement would be limited, with private citizens and corporations helping to support the military in a rather limited way. Then, after the downfall of the Soviet Union, this relationship would change, as the military would face a changing role in their operations and the way various activities were conducted. As they would be forced to deal with: smaller budgets and fewer personnel, to conduct different operations around the world. This would create a vacuum between the needs of the military and the realities of the nation. When you combine this with the fact that the U.S. military would decline by 700 thousand personnel during this time, is it easy to see how private security contractors would play a more important role. Where, they could hire former military personnel and address the obvious short falls that the military was facing. As these companies could provide; an effective solution for the different challenges. After the 911 terrorist attacks, the military began to use private contractors beyond the need of support, as they would be used to address various threats that were faced to soft targets. This is when terrorists would often attack: the different civilian, corporate and government infrastructure. The fact that the military did not have enough personnel to address these different challenges; meant that private security contractors would begin to play a more important role, after Operation Enduring Freedom in Afghanistan and Operation Iraqi Freedom (the initial invasions of Iraq / Afghanistan). (Crofford, 2006) This is important, because the different cut backs and shortages of personnel; would mean that the use of private security contractors would become very common.

Key companies in the industry

When you look at the total number of private security contractors, is it is clear, that the majority have similar kinds of focus, yet offer various specialized services. A few of the most notable contractors include: Global Strategies Group, Golan, Blackwater, Armor Group, International Security / Defense Systems, MVM and MPRI. The overall mission of the contractors will change, depending upon the objective of the organization. For example, MVM started out as a small private security contractor. However, over the years its role and missions have continued to evolve, with the company offering a variety of service including: security, translation and logistical services. When you compare this with other contractors such as: Golan, it is obvious that they are focused on more specific security services. With the company offering former counter terrorism and special operations personnel, to conduct a variety of security related services. This is significant, because it shows how the overall role of private security is continuing to evolve, among some of the major players in the industry. As the shortage of key civilian and military personnel, are creating various opportunities for these companies to fill numerous gaps. At which point, the overall nature of the relationship between: the security contactor / government / private business will change, as these services will become a part of daily life in many countries. ("PMC's," n.d.)

The differences in working with government vs. corporations

When private security corporations are working with a variety of governments, they will face increased amounts of scrutiny in regards to: their actions and activities. This is because the use of private security contractors has often been compared with mercenaries (who have impunity from the law). Where, the military and the governments that are hiring them; have limited to no responsibility in addressing various issues they create. The reason why, is because private security contractors are considered to be non-combatants. This means that they are not subject to various procedures and standards; that soldiers along with employees (who are hired directly by the government) must go through. As a result, private security contractors will coordinate less with military and government officials. This increases the chances of friendly fire and the possibility that civilians, could indirectly become caught up in the cross fire. A good example of the carefree attitude that many of these different contractors have, can be seen by looking no further than a study that was conducted by Rand Corporation. Where, they found that 50% of the diplomatic personnel reported private security contractors having a lack of sensitivity to the country they are in and their culture. Out of this number, 38% of respondents said that they felt private security contractors have no respect for local or international law. (Dunnigan, 2010) This is important, because it shows how private security contractors have less accountability when working with government. As they are needed by: the military (to complete its mission) and various government personnel (for protection). Where, the government's dependency on them, has allowed their personnel to be more aggressive, because there are no standards and accountability.

In the case of corporations, the role of private security contractors is more limited. Where, they will focus on providing protective services of different corporate executives and securing numerous properties / interests of company. This means, that the organizations will provide services that will protect the security of different company assets (such as: protecting certain properties from intruders). However, the use of private security contractors have been continuing to evolve, as many corporations will often hire them for damage control or to prevent access to certain areas that could be embarrassing. A good example of this occurred with BP, during the Gulf of Mexico oil spill. What happened was, the company wanted to prevent reporters and environmentalists from having access to oily beaches. To prevent this from occurring, they would hire Blackwater Security, to block entry of unauthorized individuals, from having access to these beaches. (Rawnesely, 2010) This is significant, because it shows how numerous corporations have begun using private security contractors beyond their intended purposes. Where, they are being utilized to help companies keep embarrassing incidents away from the public. This is important, because it shows how the use of private security contractors are continuing to evolve, where they are increasingly being used as hired muscle to keep people in line (during a number of challenging events).

Are these companies profiting at the expense of the tax payers?

The various abuses that are occurring at the hands of some private security contractors, have to lead to calls that they are fleecing the American tax payer. As their impunity from prosecution and their aggressive actions, shows that they are making money off various tragedies. Yet, when you look further beneath this statement, it is clear that private security contactors do provided a valuable service that many in: the military, private business and government feel is worth the costs. This is because many of the personnel that are hired by these… READ MORE

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