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IFET COLLEGE OF ENGINEERING

DEPARTMENT OF MANAGEMENT STUDIES


BA7402 BUSINESS ETHICS, CORPORATE SOCIAL RESPONSIBILITY AND
GOVERNANCE
MBA II-SEM-4

UNIT 3
PART A
UNIT III LEGAL ASPECTS OF ETHICS
Political legal environment; Provisions of the Indian
constitution pertaining to Business; Political setup major
characteristics and their implications for business; Prominent
features of MRTP & FERA. Social cultural environment and
their impact on business operations, Salient features of
Indian culture and values.

POLITICAL LEGAL ENVIRONMENT


1.what is meant by environment in business?
The combination of internal and external factors that influence a company's operating situation. The business
environment can include factors such as: clients and suppliers; its competition and owners and improvements in
technology and laws and government activities and market social and economic trends.
2.what is meant by legal aspects of ethics?
"Legal ethics" in the India is generally understood to primarily apply to lawyers, while codes of professional
responsibility also apply in a derivative sense (directly) to non-lawyers who work with lawyers, such as
paralegals or private investigators. In India the practice of law is regulated by the governments of the individual
states and territories.
2.what is political environment?
The political environment is the state, government and its institutions and legislations and the public and private
stakeholders who operate and interact with or influence that system. The stability of the political environment
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and government will impact on the prioritization of mental health policy in relation to other policies, the
funding available to mental health and the time frames in which policies and programmes can be realized.

3.what is meant by legal environment?

This refers to set of laws, regulations, which influence the business organisations
and their
operations. Every business organisation has to obey, and work within the
framework of
the law. The important legislations that concern the business enterprises include:
(i) Companies Act, 1956
(ii) Foreign Exchange Management Act, 1999
(iii) The Factories Act, 1948
(iv) Industrial Disputes Act, 1972
(v) Payment of Gratuity Act, 1972
(vi) Industries (Development and Regulation) Act, 1951
(vii) Prevention of Food Adulteration Act, 1954
5.what are all the features of Ethical business Environment
Business environment is the sum total of all factors external to the business firm
and
that greatly influence their functioning.
It covers factors and forces like customers, competitors, suppliers, government,
and
the social, cultural, political, technological and legal conditions.
The business environment is dynamic in nature, that means, it keeps on
changing.
(d) The changes in business environment are unpredictable. It is very difficult to
predict
the exact nature of future happenings and the changes in economic and social
environment.
6.write down the importance of ethical business environment
The interaction between the business and its environment would identify
opportunities for and threats to the business. It helps the business enterprises for
meeting the challenges successfully. The interaction with the environment leads
to opening up new frontiers of growth for the business firms. It enables the
business to identify the areas for growth and expansion of their activities. It helps
the firms to analyse the competitors strategies and
formulate their own strategies accordingly
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7.what is meant by Economic conditions.


The economic conditions of a nation refer to a set of economic factors that have
great influence on business organisations and their operations. These include
gross domestic product, per capita income, markets for goods and services,
availability of capital, foreign exchange reserve, growth of foreign trade, strength
of capital market etc. All these help in improving the pace of economic growth.
8.Write down the economic policy framed by government

All business activities and operations are directly influenced by


the economic policies framed by the government from time to time. Some of the
important economic policies are:
(i) Industrial policy
(ii) Fiscal policy
(iii) Monetary policy
(iv) Foreign investment policy
(v) Export Import policy (Exim policy)
The government keeps on changing these policies from time to time in view of
the
developments taking place in the economic scenario, political expediency and the
changing requirement

9.what is meant by economic system.


The world economy is primarily governed by three types of economic systems,
viz., (i) Capitalist economy; (ii) Socialist economy; and (iii) Mixed economy. India
has adopted the mixed economy system which implies co-existence of public
sector and private sector.
Economic developments taking place in the economic scenario, political
expediency and the
changing requirement. Every business firm has to function strictly within the
policy
framework and respond to the changes therein.

10.what is social environment


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The social environment of business includes social factors like customs,


traditions, values,
beliefs, poverty, literacy, life expectancy rate etc. The social structure and the
values that a
society cherishes have a considerable influence on the functioning of business
firms. For
example, during festive seasons there is an increase in the demand for new
clothes, sweets,
fruits, flower, etc. Due to increase in literacy rate the consumers are becoming
more
conscious of the quality of the products

11.what is meant by technological environment


Technological environment include the methods, techniques and approaches
adopted for
production of goods and services and its distribution. The varying technological
environments
of different countries affect the designing of products. For example, in USA and
many
other countries electrical appliances are designed for 110 volts. But when these
are made
for India, they have to be of 220 volts.

12.what is meant by Demographic Environment?


This refers to the size, density, distribution and growth rate of population. All
these factors
have a direct bearing on the demand for various goods and services. For example
a
country where population rate is high and children constitute a large section of
population,
then there is more demand for baby products. Similarly the demand of the people
of cities
and towns are different than the people of rural areas. The high rise of population
indicates
the easy availability of labour.

13.what is meant by Natural Environment

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The natural environment includes geographical and ecological factors that


influence the
business operations. These factors include the availability of natural resources,
weather
and climatic condition, location aspect, topographical factors, etc. Business is
greatly
influenced by the nature of natural environment. For example, sugar factories are
set up
only at those places where sugarcane can be grown. It is always considered
better to
establish manufacturing unit near the sources of input.

14.what are all the social responsibility of business


Social responsibility of business refers to the obligation of business enterprises to
adopt policies and plans of actions that are desirable in terms of the expectation,
values and interest of the society. It ensures that the interests of different groups
of the
public are not adversely affected by the decisions and policies of the business.

PROVISIONS OF THE INDIAN CONSTITUTION PERTAINING TO


BUSINESS
4. State the major provisions of Indian constitution applicable to business.
1.Preamble of Constitution and Business
2.Economic Justice
3.Liberty of Thought, Expression, Belief, Faith and Worship:
4.Equality of Status and of Opportunity
5.Right to Equality (Articles 14 to 18)
6.Right to Freedom (Articles 19 to 22)
1.what is meant by rights to equality
Articles 14 to 18 deal with right to equality. The constitution clearly provides that the state shall not deny
to any person equality before law or the equal protection of law within the territory of India. It cannot
discriminate against any citizen on grounds of religion, race, caste, sex and place of birth or any of them.
It means that every citizen has access to shops, public restaurants, hotels, places of public entertainment
etc. and is free to use well, tanks, road and places of public resort maintained at state funds.
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2.Write a note on rights to Freedom


Articles 19 to 22 enumerates certain positive rights conferred by the Constitution in
order to promote the ideal of liberty promised in the preamble. Six fundamental rights in
the nature of freedom are guaranteed to the citizens. The right to freedom is also
applied equally in business. The businessmen can express their problems freely to the
government and can get a solution to it. Similarly, every citizen has the right to choose
any business or profession and can form unions, and conduct meetings.
3. what is meant by Right against Exploitation
Articles 23 to 24 deal with the right against exploitation and seek to prevent exploitation
of weaker sections of society by unscrupulous persons as well as the state. Article 23
prohibits traffic in human beings, involuntary work without payment and other forms of
forced labour. Article 24 prohibits the employment of children below 14 years of age in
factories and hazardous occupations, employing women employees in night shifts in
factories etc.
4. what is rights to freedom of religion
Articles 25 to 28 deal with the right to freedom of religion. Subject to public order,
morality, health etc., the citizens enjoy freedom of conscience and are free to profess,
practise and propagate any religion. However, the state can regulate or restrict the
economic, financial, political or other secular activities associated with religious
practices. No citizen can be compelled to pay any taxes the proceeds of which are to be
spent for the promotion or maintenance of any particular religion or religious domination.
5.write a short note on Cultural and Educational Rights
Article 29 stipulates that the State shall not impose upon it any culture other than the
community s own culture. A minority community has the right to preserve its culture and
religious interests. Article 30 confers upon a minority community the right to establish
and administer educational institutions of its choice.A notable feature of the educational
and cultural right is that unlike other fundamental rights, it is not subject to any
restriction, except that the State can make special provisions for the advancement of
any socially and educationally backward classes of citizens.

6. What is Rights to Constitutional Remedies (Article 32)

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This right has been described by Dr. Ambedkar as the heart and soul of the Constitution.
In tact the mere declaration of fundamental rights is useless unless effective remedies
are available for their enforcement. This has been ensured under Article 32 which grants
the right to move the Supreme Court by appropriate proceedings for the enforcement of
the rights conferred by the Constitution.

POLITICAL SET UP
1.What is political system.

A political system is a system of politics and government. It is usually compared to


the legal system, economic system, cultural system, and othersocial systems.
However, this is a very simplified view of a much more complex system of categories
involving the views: who should have authority, how religious questions should be
handled, and what the government's influence on its people and economy
2.what is meant by Authoritarianism

In authoritarian governments, the people have no power or


representation and it is characterized by absolute or blind obedience to [formal]
authority, as against individual freedom and related to the expectation of
unquestioning obedience. The elite leaders handle all economic, military, and
foreign relations. Dictatorships are examples of authoritarianism.
Totalitarianism is the most extreme form of authoritarianism because it
controls all aspects of life including communication between citizens, censors
the media, and threatens by means of terror.

3.what is monarchies in political system


A monarchy is a government controlled by a king or queen determined by a
predisposed line of sovereignty.* In the modern world there are two types of
monarchies, absolute monarchies and constitutional monarchies. An absolute
monarchy works like a dictatorship in that the king has complete rule over his
country.* A constitutional monarchy gives the royal family limited powers and
usually works in accordance with an elected body of officials.* Social
revolutions of the 18th, 19th, and 20th century overthrew the majority of
existing monarchies in favor of a more democratic governments and the rise of
the lower-class.
4. what is Democracy in political system
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A democracy is a form of government in which the citizens create and vote for laws
directly or indirectly via representatives.* The idea of democracy stems back from
ancient Greece and the profound works of ancient academics. However, the presence
of democracy does not always mean citizens wishes will be equally represented. For
example, in many democratic countries immigrants, and racial and ethnic minorities
do not receive the same rights as the majority citizens.

MRTP & FERA


1.what is meant by MRTP Act.
The Monopolies and Restrictive Trade Practices Act, 1969, aims to prevent concentration
of economic power to the common detriment, provide for control of monopolies and
probation of monopolistic, restrictive and unfair trade practice, and protect consumer
interest. Monopolistic trade practice is that which represents abuse of market power in
the production and marketing of goods and services by eliminating potential competitors
from market and taking advantage of the control over the market by charging
unreasonably high prices, preventing or reducing competition, limiting technical
development, deteriorating product quality or by adopting unfair or deceptive trade
practices.
2.what is restrictive trade practices in MRTP
A restrictive trade practice is a trade practice, which
1. Prevents, distorts or restricts competition in any manner; or
2. Obstructs the flow of capital or resources into the stream of production; or
3. Which tends to bring about manipulation of prices or conditions of delivery or
effected the flow of supplies in the market of any goods or services, imposing on the
consumers unjustified cost or restrictions.

3.what are all the monopolistic trade practices


A monopolistic trade practice is one, which has or is likely to have the effect of:
1. maintaining the prices of goods or charges for the services at an unreasonable
levelby limiting, reducing or otherwise controlling the production, supply or
distribution of goods or services;
2. unreasonably preventing or lessening competition in the production, supply or
distribution of any goods or services whether or not by adopting unfair method or fair
or deceptive practices;
3. limiting technical development or capital investment to the common detriment;
4. deteriorating the quality of any goods produced, supplied or distribute; and
5. increasing unreasonablyi.

the cost of production of any good; or

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ii.

charges for the provision, or maintenance,of any services; or

iii.

the prices for sale or resale of goods; or

iv.

the profits derived from the production, supply or distribution of any goods or
services.

A monopolistic trade practice is deemed to be prejudicial to the public interest, unless it is


expressly authorized under any law or the Central Government permits to carry on any such
practice.

What are all the features of MRTP Act

Regulating expansions, mergers and amalgamations and appointment of directors in


respect of dominant undertakings' having assets of rupees one crore and
more and of undertakings which by themselves or with inter-connected
undertakings have assets of not less than Rs. 20 crores in value.
ii) Regulating the standing of new undertakings which would become interconnected undertakings of such existing undertakings the total assets of which
exceed Rs. 20 crores.
iii) Control over and prohibition of monopolistic and restrictive trade practices as are
found to be prejudicial to public interest.

What is unfair trade practices

The following may result in an unfair trade practice:

False representation and misleading advertisement of goods and services.


Falsely representing second-hand goods as new.

Misleading representation regarding usefulness, need, quality, standard, style etc of


goods and services.

False claims or representation regarding price of goods and services.

Giving false facts regarding sponsorship, affiliation etc. of goods and services.

Giving false guarantee or warranty on goods and services without adequate tests.

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What is meant by FERA?

The Foreign Exchange Regulation Act (FERA) was legislation passed by the Indian
Parliament in 1973 by the government of Indira Gandhi and came into force with
effect from January 1, 1974. FERA imposed stringent regulations on certain kinds of
payments, the dealings in foreign exchange and securities and the transactions which
had an indirect impact on the foreign exchange and the import and export of currency.
[1]
The bill was formulated with the aim of regulating payments and foreign exchange.[2]

What are all the objectives of FERA Act

To regulate certain payments.


To regulate dealings in foreign exchange and securities.
To regulate transactions, indirectly affecting foreign exchange.
To regulate the import and export of currency.
To conserve precious foreign exchange.
The proper utilization of foreign exchange so as to promote the economic
development of the country.

FERA :

Regulated in India by the Foreign Exchange Regulation Act(FERA),1973.

Consisted of 81 sections.

FERA Emphasized strict exchange control.

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Control everything that was specified, relating to foreign exchange.

Law violators were treated as criminal offenders.

Aimed at minimizing dealings in foreign exchange and foreign securities.

What are all the features of FERA

All branches of foreign companies (except air lines and shipping companies) seeking
approval under FERA have to convert themselves into Indian companies.
ii. A minimum permissible foreign share holding limit of 74 per cent will be allowed to
companies engaged in manufacturing any item listed in Appendix-I of 1973 Industrial
Policy or predominantly export-oriented or engaged in any industry using
sophisticated technology or tea plantation or manufacturing companies engaged in
trading provided trading constitutes less than 25 per cent of ex-factory value of
production or has a turnover of less than Rs. 5 crores.
iii. A permissible foreign share holding of 40 per cent will be allowed for companies
engaged in other manufacturing items which neither use sophisticated technology nor
are listed in Appendix I.
However, these companies will have the option to change the charter of their
manufacturing operations or by becoming predominantly export oriented or by
manufacturing items listed in Appendix I. In such cases the maximum permissible
share holding would be 74 per cent.
iv. If a company is 100 per cent export-oriented, a foreign share holding exceeding 74
per cent may be allowed.
v. Airlines and shipping companies as well as banking companies are exempted.
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vi. Since 1985, due to Governments liberal economic policies, legislations like FERA
and MRTP have become more and more irrelevant.

Socio Cultural Environment And Their Impact On Business Operations

Socio-cultural environment is a collection of social factors affecting a business and


includes social traditions, values and beliefs, level of literacy and education, the
ethical standards and state of society, the extent of social stratification, conflict and
cohesiveness, and so forth.
Socio-cultural environment consists of factors related to human relationships and the
impact of social attitudes and cultural values on the business of the organization. The
beliefs, values and norms of a society determine how individuals and organisations
should be inter-related.
The core beliefs of a particular society tend to be rigid. It is difficult for businesses to
change these core values, which become a determinant of its functioning. Some of the
important factors and influences operating in this environment are as follows:
a) Social concerns, such as the role of business in society, environmental pollution,
corruption, use of mass media, and consumerism.
b) Social attitudes and values, such as expectations of society from business, social
customs, beliefs, rituals and practices, changing lifestyle patterns, and materialism.
c) Family structure and the changes in it, attitude towards and within the family, and
family values.
d) Role of women in society, position of children and adolescents in family and
society.

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e) Educational levels, awareness and consciousness of rights, and work ethics of


members of society.

Salient features of Indian culture and values.


The culture of India is the way of life of the people of India.
India's languages,religions, dance, music, architecture, food, and customs differ from
place to place within the country. The Indian culture, often labeled as an
amalgamation of several cultures, spans across the Indian subcontinent and has
been influenced by a history that is several millennia old.[1][2] Many elements of India's
diverse cultures, such as Indian religions, yoga and Indian cuisine, have had a
profound impact across the world.

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