Idea Transcript
Business, Government & Society
14MBA24
BUSINESS, GOVERNMENT AND SOCIETY Subject Code : 14MBA24
IA Marks : 50
No. of Lecture Hours / Week : 04 Total Number of Lecture Hours : 56
Exam Hours : 03 Exam Marks : 100
Practical Component : 01 Hour / Week Objectives: • To enable students to understand the challenges and complexities faced by businesses and their leaders as they endeavor maximize returns while responsibly managing their duties to stakeholders and society. • To help students to understand the rationale for government interventions in market systems. • To help students develop an understanding of Social Responsibility and make their own judgments as to the proper balance of attention to multiple bottom lines. • To help students develop the skills needed to work through ethical dilemmas Practical Components: • Students are expected to study any five CSR initiatives by Indian organizations and submit a report for the same. • A group assignment on “The relationship between Business, Government and Society in Indian Context and relating the same with respect the models studied in Module 1. • Case studies/Role plays related ethical issues in business with respect to Indian context. RECOMMENDED BOOKS: • Business, Government, and Society: A Managerial Perspective, Text and Cases – John F. Steiner, 12/e, McGraw-Hill, 2011. • Business and Government – Francis Cherunilam, HPH. • Corporate Governance: principles, policies and practices – Fernando A. C, 2/e, Pearson, 2011. • Business Ethics and Corporate Governance - Ghosh B. N, Tata McGraw-Hill, 2012. Business Law for Managers, Goel P. K, Biztantra, 2012. • Corporate Social Responsibility: A Study of CSR Practices in Indian Industry, Baxi C. V & Rupamanjari Sinha Ray, Vikas Publishing House, 2012.
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REFERENCE BOOKS: • Business and Society - Lawrence and Weber, 12/e, Tata McGraw- Hill, 2010. • Business Ethics - Bajaj P. S & Raj Agarwal, Biztantra, 2012. • Corporate Governance - Keshoo Prasad, 2/e, PHI. • Corporate Governance, Ethics and social responsibility - Balachandran V, & Chandrashekharan V, 2/e, PHI, 2011. • Corporate Governance – Machiraju H. R, HPH. • Business Ethics and Corporate Governance – Prabakaran S, Excel BOOKS. • Corporate Goverance – Badi N. V, Vrinda Publications, 2012. • Civic Sense – Prakash Pillappa, Excel BOOKS, 2012.
Module I: The Study of Business, Government and Society (BGS) Importance of BGS to Managers – Models of BGS relationships – Market Capitalism Model, Dominance Model, Countervailing Forces Model and Stakeholder Model – Global perspective – Historical Perspective Module II: Corporate Governance Introduction, Definition, Market model and control model, OECD on corporate governance, A historical perspective of corporate governance, Issues in corporate governance, relevance of corporate governance, need and importance of corporate governance, benefits of good corporate governance, the concept of corporate, the concept of governance, theoretical basis for corporate governance, obligation to society, obligation to investors, obligation to employees, obligation to customers, managerial obligation, Indian cases Module III: Public Policies The role of public policies in governing business, Government and public policy, classification of public policy, areas of public policy, need for public policy in business, levels of public policy Module IV: Environmental concerns and corporations History of environmentalism, environmental preservation-role of stakeholders, international issues, sustainable development, costs and benefits of environmental regulation, industrial pollution, role of corporate in environmental management, waste management and pollution
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control, key strategies for prevention of pollution, environmental audit, Laws governing environment Module V: Business Ethics Meaning of ethics, business ethics, relation between ethics and business ethics, evolution of business ethics, nature of business ethics, scope, need and purpose, importance, approaches to business ethics, sources of ethical knowledge for business roots of unethical behavior, ethical decision making, some unethical issues, benefits from managing ethics at workplace, ethical organizations Module VI: Corporate Social Responsibility Types and nature of social responsibilities, CSR principles and strategies, models of CSR, Best practices of CSR, Need of CSR, Arguments for and against CSR, CSR Indian perspective, Indian examples Module VII: Business Law Business Law: Law of contract - meaning of contract, agreement, essential elements of a valid contract. Law of agency- meaning, creation and termination of agency. Bailment and Pledge meaning, rights and duties of bailor and bailee. Sale of Goods Act 1930: Definition of Sale, Sale v/s Agreement to Sell, Goods, Condition and Warranties, Express and Implied Condition, “Doctrine of Caveat Emptor”, Right and duties of Unpaid Seller. Meaning, scope and objectives of - Intellectual property law, law relating to patents, law relating to copyrights, law relating to trade mark.
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TABLE OF CONTENTS:
MODULE NUMBER
PARTICULARS
PAGE NUMBER
1
The Study of Business, Government and
5-11
Society (BGS) 2
Corporate Governance
12-23
3
Public Policies
24-34
4
Environmental concerns and corporations
35-56
5
Business Ethics
57-66
6
Corporate Social Responsibility
67-79
7
Business Law
80-120
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Module 1 The Study of Business, Government and Society (BGS) Importance of BGS to Managers – Models of BGS relationships – Market Capitalism Model, Dominance Model, Countervailing Forces Model and Stakeholder Model – Global perspective – Historical Perspective
******************************************************************************
Introduction:
In the universe of human endeavor, we can distinguish subdivisions of economic, political, and social activity—that is, business, government, and society—in every civilization throughout time. Interplay among these activities creates an environment in which businesses operate. The business–government–society (BGS) field is the study of this environment and its importance for managers. Importance of BGS to Mangers: To be successful a company/manager must be responsive to both the economic and noneconomic environments Society will punish and constrain those who don’t
In the business environment it is challenged by the rise of state-owned oil companies With government, it is restricted by laws and regulations in each country in which it does business. In the social environment it is closely monitored by environmental, human rights, and consumer groups–some of which are actively hostile.
What is the business-government-society (BGS) field and what is its importance? The field is explained as the study of interrelationships among its three elements, each of which is defined. These interrelationships change over time.
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Business is a broad term encompassing a range of actions and institutions. It covers management, manufacturing, finance, trade, service, investment, and other activities. Entities as different as a hamburger stand and a giant corporation are businesses. The fundamental purpose of every business is to make a profit by providing products and services that satisfy human needs. Government refers to structures and processes in society that authoritatively make and apply policies and rules. Like business, it encompasses a wide range of activities and institutions at many levels, from international to local. The focus of this book is on the economic and regulatory powers of government as they affect business. Society A society is a network of human relations that includes three interacting elements: (1) ideas, (2) institutions, and (3) material things. Ideas, or intangible objects of thought, include values and ideologies. Values are enduring beliefs about which fundamental choices in personal and social life are correct. Cultural habits and norms are based on values. Ideologies —for example democracy and capitalism—are bundles of values that create a certain world view. They establish the broad goals of life by defining what is considered good, true, right, beautiful, and acceptable. Ideas shape every institution in a society. Institutions are formal patterns of relations that link people together to accomplish a goal. They are essential to coordinate the work of individuals who have no personal relationship with each other. 14 In modern societies, economic, political, cultural, legal, religious, military, educational, media, and familial institutions are salient. There are multiple economic institutions including financial institutions, the corporate form, and markets. Collectively, we call these business.
Values, or enduring beliefs about which fundamental life choices are correct. Ideologies, or bundles of values that create worldviews. Institutions are formal patterns of relationships that link people together to accomplish a goal. A range of institutions is necessary to support markets. Material things are the tangible artifacts of a society.
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Financial
Political
Cultural
Corporations
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Judicial
Regulatory
Marke t Media
The BGS field is important to managers, because to succeed they must be responsive to forces in both their economic and noneconomic environments. The history of ExxonMobil illustrates the powerful impact not only of market forces, but of government and social values. Business must comply with a social contract, that is, an imaginary, unwritten agreement between business and society that defines basic duties and responsibilities of business.
Four basic models of the BGS relationship are set forth. Market capitalism model: Market capitalism model depicts the relationship as a set of arrangements in accord with the assumptions of classical capitalism. It is assumed that social responsibility is measured primarily as economic performance that enhances social welfare. In traditional market capitalism model financial capital is invested to buy or hire physical capital like land and labour from households. This physical capital is used to create products which are then sold to households generating a surplus or financial “returns” on investment which belongs to the investor of capital allowing the cycle to then repeat itself and ultimately resulting in increasing wealth accumulation in the hands of those who are capital rich.
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markets are ancient. Market economies, or economies in which people produce mainly for trade, not subsistence, developed in the 1700s. The Wealth of Nations in 1776. It first explained the nature of the market economy, which he called “commercial society.” capitalism was only later applied to Smith’s work by Karl Marx. Originally a derisive term, it has lost its negative connotation.
small owner-run businesses into systems of managerial capitalism dominated by smaller numbers of large corporations run by hierarchies of salaried managers.
measure practice. Dept of MBA, SJBIT
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ntly attacked. The enduring criticisms are these.
ects get too much emphasis.
Dominance Model: The dominance model represents society as a pyramid. Atop it, business and government dominate. This is the model of business critics. It suggests that business has too much unchecked power.
Fig : Technology & Business Dominance Model.
Countervailing forces model: The countervailing forces model shows flows of power and influence among environmental factors, the public, government, and corporations. It represents a pluralist vision in which the power of business is checked and controlled.
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Stakeholder model: The stakeholder model sets the corporation at the center of a set of mutual relationships with persons and groups. It promotes the idea that firms have ethical duties and social responsibilities toward a wide range of stakeholders due to their impacts on them. Stakeholder – those for whom the firm’s operations have benefited or burdened Primary and Secondary Stakeholders Public – anyone who thinks they have an interest in your business
Primary stakeholders affect or are affected by the corporation immediately, continuously, and powerfully.
Secondary stakeholders include a wide range of entities that are less affected by a firm or have less power to affect it. Dept of MBA, SJBIT
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Criticism of the Stakeholder Model Not realistic Idealistic Who is a legitimate stakeholder and what are they entitled to? What objective measure do you use to measure performance? Global perspective: Today global capitalism animates the planetary stage, creating movements of people, money, goods & information that , in turn, beget conflicts as some benefit more & others less or not at all. Every government finds its economic & social welfare policies judged by world markets. Every corporation has a home country. Historical perspective: History is the study of phenomena moving through time. The BGS relationship is a stream of events, of which only one part exists today. It is important for many reasons. It helps us to see that today’s’ BGS relationship is not like that of other eras; that current ideas & institutions are not the only alternative; that historical forces are irrepressible.
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MODULE 2 Corporate Governance (8 Hours) Introduction, Definition, Market model and control model, OECD on corporate governance, A historical perspective of corporate governance, Issues in corporate governance, relevance of corporate governance, need and importance of corporate governance, benefits of good corporate governance, the concept of corporate, the concept of governance, theoretical basis for corporate governance, obligation to society, obligation to investors, obligation to employees, obligation to customers, managerial obligation, Indian cases ****************************************************************************** Corporate governance involves regulatory and market mechanisms, and the roles and relationships between a company’s management, its board, its shareholders and other stakeholders, and the goals for which the corporation is governed. Lately, corporate governance has been comprehensively defined as "a system of law and sound approaches by which corporations are directed and controlled focusing on the internal and external corporate structures with the intention of monitoring the actions of management and directors and thereby mitigating agency risks stemming from the devious deeds of these corporate officers" Corporate Governance at HCL HCL believes that strong corporate governance practices should be integral to all activities of its Group Companies to ensure efficient conduct of the affairs of the Companies, while upholding the core values of transparency, integrity, honesty, and accountability. The annual “Directions” meet where the CEO of HCL Technologies interacts with all employees and arrive at the strategic direction the company needs to take, and the HCL Global Meet where its customers, investors, analysts all interact together in a free flowing discussion, are just two examples of how transparency
has
become
a
part
of
the
HCL
Enterprise
culture.
The HCL corporate governance practices have matured over the 32 year journey of the Enterprise; and are in compliance with the requirement of the revised guidelines on corporate governance stipulated in Clause 49 of the Listing Agreement with the Stock Exchanges. Dept of MBA, SJBIT
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Two models of Corporate Governance
Outsider (MARKET/shareholders) model
Insider (CONTROL/stakeholders) model
Outsider (shareholders) model
A priority to market regulation
the owners of firms tend to have a transitory interest in the firm
The absence of close relationships between shareholders and management
the existence of an active `market for corporate control´ - takeovers, particularly hostile ones
the primacy of shareholder rights over those of other organisational groups
The insider model
The priority to stakeholders control
The owners of firms tend to have an enduring interest in the company
They often hold positions on the board of directors or other senior managerial positions
The relationships between management and shareholders are close and stable
There is little by way of a market for corporate control
the existence of formal rights for employees to influence key managerial decisions
The myopic market model The myopic market model shares a common view with the agency theory that the corporation should serve shareholders’ interests only. However, the model criticizes the Anglo-American model of corporate governance as being fundamentally fl awed by an over -concern with a shortterm interest—short-term return on investment, short-term corporate profi ts, short-term management performance, short-term stock market prices, and short-term expenditures, due to huge market pressures. This model argues that the current corporate governance systems encourage managers to focus on short-term performance by sacrifi cing long-term value and competitive capacity of the corporation. One of the features of the system is that the evaluation of both corporate performance Dept of MBA, SJBIT
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and managerial efforts is heavily reliant on short-term fi nancial measurements, often judged on a 1 year basis, sometimes even on a quarterly basis. Managers are forced to pay more attention to short-term earning data and forecasts and less attention to long-term investment spending such as R & D. It is also argued that the stock market is not a good indicator of corporate performance because it is unable to cope with uncertainty and thus routinely misprices assets. The Myopic Market Model Supporters of the myopic model believe that the excessive concern for short-term gains is the consequence of capital failure. This model suggests that maximization of shareholder welfare is not the same as share price maximization because the market system tends to undervalue long-term expenditures. These long-term investments may well lead to the increase of the shareholder welfare. Because of the myopic nature in the corporate structure, managers are forced to take short-term decisions in pumping up share prices, or otherwise risk the company to hostile takeover bid. This in turn will put managers’ private interest at stake. In addition, some supporters argued that this myopic market structure actually increased the cost of capital in the US compared to countries like Japan and Germany which rely on indirect finance from commercial banks. Myopic model advocates propose the creation of an environment wherein shareholders and managers are encouraged to share long-term performance horizons (Keasey et al., 1997). They believe that both managers and shareholders will develop long-term interests with the help of “relationship” investors, namely, investors who are locked into the long-term position. However, to lock in shareholders by increasing their exit cost will make shareholders more vulnerable to poor corporate governance. Furthermore, this measure will certainly impede the market efficiency by preventing takeover attempts, which is supposed to function as a mechanism to eliminate inefficient managers. Consequently, several scholars, such as Blair and Marsh offer empirical evidence to dismiss the notion of market myopia. OECD Principles of corporate governance Contemporary discussions of corporate governance tend to refer to principles raised in three documents released since 1990: The Cadbury Report (UK, 1992), the Principles of Corporate Governance (OECD, 1998 and 2004), the Sarbanes-Oxley Act of 2002 (US, 2002). The Cadbury and OECD reports present general principals around which businesses are expected to operate to Dept of MBA, SJBIT
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assure proper governance. The Sarbanes-Oxley Act, informally referred to as Sarbox or Sox, is an attempt by the federal government in the United States to legislate several of the principles recommended in the Cadbury and OECD reports.
Rights and equitable treatment of shareholders: Organizations should respect the rights of shareholders and help shareholders to exercise those rights. They can help shareholders exercise their rights by openly and effectively communicating information and by encouraging. shareholders to participate in general meetings.
Interests of other stakeholders: Organizations should recognize that they have legal, contractual, social, and market driven obligations to non-shareholder stakeholders, including employees, investors, creditors, suppliers, local communities, customers, and policy makers.
Role and responsibilities of the board: The board needs sufficient relevant skills and understanding to review and challenge management performance. It also needs adequate size and appropriate levels of independence and commitment.
Integrity and ethical behaviour: Integrity should be a fundamental requirement in choosing corporate officers and board members. Organizations should develop a code of conduct for their directors and executives that promotes ethical and responsible decision making.
Disclosure and transparency: Organizations should clarify and make publicly known the roles and responsibilities of board and management to provide stakeholders with a level of accountability. They should also implement procedures to independently verify and safeguard the integrity of the company's financial reporting. Disclosure of material matters concerning the organization should be timely and balanced to ensure that all investors have access to clear, factual information. Historical Importance: Fundamentally, there is a level of confidence that is associated with a company that is known to have good corporate governance. The presence of an active group of independent
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directors on the board contributes a great deal towards ensuring confidence in the market. Corporate governance is known to be one of the criteria that foreign institutional investors are increasingly depending on when deciding on which companies to invest in. It is also known to have a positive influence on the share price of the company. Having a clean image on the corporate governance front could also make it easier for companies to source capital at more reasonable costs. Unfortunately, corporate governance often becomes the centre of discussion only after the exposure of a large scam. Issues in CG:
Distinguishing between BOD & Management
Composition of BOD
Seperation of Roles
Appointments
Remunerations
Audit
Relevance of CG:
Issue of integrity
Bonus Culture
Regulatory framework
Director’s training
Need & Importance of CG:
Impact of Globalisation
Economic changes
Change in the structure of Shareholding
Financial Reporting
Shareholder’s net wealth & worth
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Benefits of Corporate Governance 1. Good corporate governance ensures corporate success and economic growth. 2. Strong corporate governance maintains investors’ confidence, as a result of which, company can raise capital efficiently and effectively. 3. It lowers the capital cost. 4. There is a positive impact on the share price. 5. It provides proper inducement to the owners as well as managers to achieve objectives that are in interests of the shareholders and the organization. 6. Good corporate
governance
also
minimizes
wastages,
corruption, risks
and
mismanagement. 7. It helps in brand formation and development. 8. It ensures organization in managed in a manner that fits the best interests of all.
Theoretical basis for CORPORATE GOVERNANCE: Agency Theory: states that employees or managers in organisations can be self-interested
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Stewardship Theory : states, it has roots from sociology & psychology & also” a steward protects & maximizes shareholders wealth through firm performance, because by doing so, the stewards utility functions are maximized” Stakeholder Theory : has emphasiszed on “ any group or individual who can affect or is affected by the achievement of the organisations objectives” Sociological theory : is based on the theory that company is the part of the society & it should work for society’s well-being
The Stakeholder Model This model is regarded as the most fundamental challenge to the principal-agent model since it emphasizes that the purpose of firm should be defined broader than the mere maximization of shareholder welfare. Thus, corporate governance should refer to the design of institutions to make managers internalize all stakeholders’ welfare (Vives, 2000). Other parties who have interests in the firm’s long-term success, should also be taken into account when a firm’s objective function is defined. These stakeholders include employees, suppliers and customers. Supporters of this model believe that this stakeholder approach is more equitable and socially efficient ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT (OECD) Organisation for Economic Co-operation and Development (OECD) shall promote policies designed: o to achieve the highest sustainable economic growth and employment and a o rising standard of living in member countries, while maintaining financial stability, and thus to contribute to the development of the world economy; o to contribute to sound economic expansion in member as well as non-member countries in the process of economic development; and o to contribute to the expansion of world trade on a multilateral, non-discriminatory basis in accordance with international obligations. The OECD Principles of Corporate Governance were endorsed by OECD Ministers in 1999 and have since become an international benchmark for policy makers, investors, corporations and other stakeholders worldwide. They have advanced the corporate governance agenda and provided specific guidance for legislative and regulatory initiatives in both OECD and non Dept of MBA, SJBIT
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OECD countries. The Financial Stability Forum has designated the Principles as one of the 12 key standards for sound financial systems. The Principles also provide the basis for an extensive programme of cooperation between OECD and non-OECD countries and underpin the corporate governance component of World Bank/IMF Reports on the Observance of Standards and Codes (ROSC). What is special about the OECD Principles and Methodology?
Emphasise “functional equivalence” - the means used to achieve the desired outcomes might vary, depending on: o Legal and institutional frameworks o Economic conditions & market structures o Political and socio-cultural environment
Therefore, the Principles can be applied in any jurisdiction
Effect on overall economic performance, market integrity and incentives for market participants to be considered
Assessments require an evaluation of: o Scope and content of laws, regulations & voluntary codes o Company practices – how widespread is adherence to Principles? o Accessibility and effectiveness of remedies o Efficiency & effectiveness of regulatory supervision & enforcement 3. Priorities in the Guidelines
3.1 Ensure a level-playing field with the private sector
3.2 Reinforce the ownership function within the state administration
3.3 Improve transparency of SOEs’ objectives and performance
Strengthen and empower SOE boards
Provide equitable treatment of non-controlling / minority shareholders
3.1 Ensure a level-playing field with the private sector
Separate regulation and the shareholding function
Transparency of special obligations
Harmonization in legal forms
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More flexibility in capital structures
Competitive conditions in access to finance
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3.2 Reinforce ownership function within the state administration
Centralization / coordination of the ownership function
Clear and disclosed ownership policy
No direct interference in day-to-day activities
Let boards carry out their responsibilities
Accountability secured
Effective exercise of ownership rights
3.3 Improve transparency of SOEs’ objectives and performance
Consistent and aggregate disclosure
Reinforced internal audit
Independent external audit
High quality standards for accounting and audit
Disclosure as listed companies
Disclosure of material information, including financial assistance from the state, transactions with related entities and risk factors
3.4 Strengthen and empower SOE boards
Structured and skill-based nomination process
Clear mandate and full responsibility
Able to appoint CEO
Able to exercise independent judgment o limit number of state representatives on the board o separation between Chair and CEO
Systematic evaluation of board 3.5 Provide equitable treatment of non-controlling minority shareholders
Important for State’s capacity to attract outside funding
Impact on valuation of SOEs
Relevant for the general perception of the State as an owner
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Prevents the State pursuing objectives outside the SOE’s interests 4. A new pillar to the OECD CG work
Dissemination and discussion in non-OECD countries o Priority topic in both the Asian and Russian Roundtable o Dedicated country meeting and policy dialogue in China, Ukraine and Egypt o Presentation of the Guidelines in other Roundtables (MENA, Latin America, SEE and Eurasia)
Follow-up on OECD country work o Co-operation on Korean reforms o Thematic issues such as aggregate reporting on nomination and evaluation for SOE boards 5. The Asian Network on CG of SOEs
Initiated in May 2005 as new activity of the Asian Roundtable on CG, in order to: o Raise awareness on CG of SOEs o Evaluate existing CG policy framework of SOEs o Influence policymaking in Asia by providing a forum for peer policymakers o Support CG reforms in SOE
The Asian Network will meet in 2006 and 2007 to discuss each of the 6 chapters of the Guidelines
Intention to draft (i) a Policy Brief providing concrete policy recommendations and (ii) a comparative report
Obligation towards stake holder: businesses should consider all stakeholders' interests that are affected by a business practice. A stakeholder is any party affected by a business practice. Accordingly, the stakeholder approach to business ethics emphasizes the mapping out of the various parties affected by a business practice. But this approach is limited since there is no clear formula provided for how to prioritize the various interests once they are mapped out. Should all stakeholder's interests be treated equally -- along the lines of a utilitarian calculus? Few defenders of the stakeholder approach advocate Dept of MBA, SJBIT
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treating all interests equally. Alternatively, should the stockholders' interests have special priority? If this route is taken, then the stakeholder principle is merely an extension of the profit principle. Perhaps the best way to arrive at more concrete moral obligations in business is to list them issue by issue. This is the strategy behind corporate codes of ethics which address specific topics such as confidentiality of corporate information, conflicts of interest, bribes, and political contributions. Moral Obligations or obligations towards society:. The main reason for rejecting the position that businesses must abide by supra-legal moral principles is that it is an unreasonable expectation. The argument is as follows: (1) A moral obligation is valid only if an agent can be reasonably expected to perform that obligation. (2) In our society, business people cannot be reasonably expected to perform obligations above what the law requires. (3) Therefore, in our society, business people do not have moral obligations above what the law requires. The basis of premise one is the general moral principle that ought implies can. That is, we are only obligated to perform those actions which we are capable of performing. The notion of what we are "capable of performing" has been understood several ways in ethical discussions. At minimum, it entails that it must be logically possible for us to perform an action. For example, I cannot be obligated to become a married bachelor since this is a logically impossible task. Further, the principle also entails that an action must be physically possible for me to perform. For example, it is physically impossible for me to rid the entire world of disease, hunger, and poverty. Given my limited physical abilities, I would have to be a miracle worker to accomplish these tasks. Therefore I am not morally obligated to perform these actions which are beyond my physical abilities. Although the ought implies can principle entails the requirement of both logical and physical possibility, these two implications are so self-evident that from a normative stand point they are almost trivial.
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Obligations towards investors: To promote transparency & to protect shareholders investments Obligations towards Employees: fair practices, equal opportunities, empowerment Obligations towards Customers: before / after sales services, quality products.
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MODULE 3 Public Policies The role of public policies in governing business, Government and public policy, classification of public policy, areas of public policy, need for public policy in business, levels of public policy, elements of public policy, the corporation and public policy, framing of public policy, business and politics levels of involvement, business, government, society and media relationship government regulations in business, justification of regulation, types of regulation, problems of regulation ****************************************************************************** Public policy is the principled guide to action taken by the administrative executive branches of the state with regard to a class of issues in a manner consistent with law and institutional customs. In general, the foundation is the pertinent national and substantial constitutional law and implementing legislation such as the US Federal code. Further substrates include both judicial interpretations and regulations which are generally authorized by legislation. Other scholars define it as a system of "courses of action, regulatory measures, laws, and funding priorities concerning a given topic promulgated by a governmental entity or its representatives."[2] Public policy is commonly embodied "in constitutions, legislative acts, and judicial decisions. The recognition that social policy is not just the outcome of simple welfare considerations, but rather a key instrument in the process of development, which works in association with economic policy as part of a broader strategy, is an important step towards working out mechanisms for its greater spread and effectiveness. However, in order to ground social policy more firmly within development strategy and work out the links between it and more straightforward macroeconomic policy, it is necessary to be aware of the political economy contexts within which both sets of policy are developed and evolve.
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What is public/social policy? In essence, social policy or rather, the complex web of related policies, schemes and institutions that are concerned with the social conditions of economic activity Reflects the broad social contract between capital and labour. In developing economies this refers to the social contract between capital and labour specifically for the management of the development project. The latter in turn has been defined for much of the past half century, as the project of increasing material welfare for most of the citizenry through economic development, using the agency of the nation state. For many developing countries, including India, this project remains partially or largely unfulfilled. Although this state of incompletion still has not prevented it from being very nearly abandoned in several instances. The second important, and related, role of social policy is of course that of legitimization . Not only of the state, but of the development project itself. This need for legitimization arises both for the long run process and in terms of short run crisis management. Thus, over the long run, or planning horizon, it is especially important in growth trajectories that rely on high investment and savings rates, thereby suppressing current consumption in favour of high growth for larger future consumption, and which therefore imply sacrifices typically made by workers and peasants. In such a scenario, social policy that is directed towards providing basic needs and social services to those who are otherwise deprived of the gains from economic growth in terms of increased current consumption would be not just important but even necessary to ensuring social stability and continuity of the process itself. Role of PP in governing Business: PP act as guidelines with both constitutional & nondemocratic governments role that promotes economic growth. th
The Indian development experience in the second half of the 20 century The post Independence development experience of India has always excited much interest, not least because, while India is one of the poorest countries in the world in terms of per capita income, it is also the world.s largest liberal democracy. Furthermore, it has managed to retain this political system, however inadequate and flawed, while many democratic experiments in other Dept of MBA, SJBIT
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countries have foundered and occasionally collapsed. This raises the obvious question: to what extent has this influenced the nature of social policy in India? Have the pressures on the state that result from democratic functioning meant greater attention to particular types of social policy, and which social groups or classes have they benefited? Why has democracy itself not resulted in greater attention to the provision of basic goods and minimally acceptable levels of public services for all citizens? Government & public policy in the Indian development process Political theorists may be tempted to draw insights from the rather haphazard pattern of social policy implementation in India, finding in its very lack of direction and vision some association with the chaotic democratic polity within which it occurred, and the variegated demands which were sought to be fulfilled at different points of time. Most social policy provisioning has not been universal in terms of actual effects, even when it has been declared as such. Rather, it has been directed to specific (and restricted) target groups. And almost always, these groups included those with sufficient political voice, such as urban organised workers, or increasingly in the 1990s, particular caste groupings. There have also been much trumpeted attempts to include (in however limited a fashion) a small proportion of those who naturally appear to be .deserving., such as households under the poverty line, women from lower income groups, and so on. However, because such provisioning, whether in terms of protective legislation or in terms of actual resource transfers, has been extremely limited relative to the scale of requirement, it has meant that social policy has not been a basic instrument of development strategy in the manner outlined in the previous section. Rather, it has emerged essentially in the form of ad hoc responses to particular demands emanating from groups that (at least temporarily) have acquired some degree of political voice. The more significant forms of social policy in the Indian context have included: agrarian reform; food procurement and distribution; education; employment creation through public works; affirmative action in the form of reservation for public services employment and educational institutions; antipoverty programmes directed towards small asset creation or micro credit; changes in forms and structures of governance through decentralisation and some devolution of resources
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Government actions Shaping public policy is a complex and multifaceted process that involves the interplay of numerous individuals and interest groups competing and collaborating to influence policymakers to act in a particular way. These individuals and groups use a variety of tactics and tools to advance their aims, including advocating their positions publicly, attempting to educate supporters and opponents, and mobilizing allies on a particular issue. Public policy is an attempt by a government to address a public issue by instituting laws, regulations, decisions, or actions pertinent to the problem at hand. Numerous issues can be addressed by public policy including crime, education, foreign policy, health, and social welfare. While public policies are most common in the United States, several other countries, such as those in the United Kingdom, implement them as well. The process to create a new public policy typically follows three steps: agenda-setting, option-formulation, and implementation; the timeline for a new policy to be put in place can range from weeks to several years, depending on the situation. Public policies can also be made by leaders of religious and cultural institutions for the benefit of the congregation and participants, and the term can also refer to a type of academic study that covers topics such as sociology, economics, and policy analysis. Classification of PP: Policy addresses the intent of the organization, whether government, business, professional, or voluntary. Policy is intended to affect the 'real' world, by guiding the decisions that are made. Whether they are formally written or not, most organizations have identified policies.[citation needed] Policies may be classified in many different ways. The following is a sample of several different types of policies broken down by their effect on members of the organization. Distributive policies Distributive policies extend goods and services to members of an organization, as well as distributing the costs of the goods/services amongst the members of the organization. Examples
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include government policies that impact spending for welfare, public education, highways, and public safety, or a professional organization's benefits plan. Regulatory policies Regulatory policies, or mandates, limit the discretion of individuals and agencies, or otherwise compel certain types of behavior. These policies are generally thought to be best applied when good behavior can be easily defined and bad behavior can be easily regulated and punished through fines or sanctions. An example of a fairly successful public regulatory policy is that of a speed limit. Constituent policies Constituent policies create executive power entities, or deal with laws. Constituent policies also deal with Fiscal Policy in some circumstances. Miscellaneous policies Policies are dynamic; they are not just static lists of goals or laws. Policy blueprints have to be implemented, often with unexpected results. Social policies are what happens 'on the ground' when they are implemented, as well as what happens at the decision making or legislative stage. When the term policy is used, it may also refer to:
Official government policy (legislation or guidelines that govern how laws should be put into operation)
Broad ideas and goals in political manifestos and pamphlets
A company or organization's policy on a particular topic. For example, the equal opportunity policy of a company shows that the company aims to treat all its staff equally.
The actions the organization actually takes may often vary significantly from stated policy. This difference is sometimes caused by political compromise over policy, while in other situations it is caused by lack of policy implementation and enforcement. Implementing policy may have Dept of MBA, SJBIT
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unexpected results, stemming from a policy whose reach extends further than the problem it was originally crafted to address. Additionally, unpredictable results may arise from selective or idiosyncratic enforcement of policy. Types of policy analysis include:
Causal (resp. non-causal)
Deterministic (resp. stochastic, randomized and sometimes non-deterministic)
Index
Memoryless (e.g. non-stationary)
Opportunistic (resp. non-opportunistic)
Stationary (resp. non-stationary)
These qualifiers can be combined, so for example you could have a stationary-memoryless-index policy. Areas of PP: It includes the economic management, Labour mgmt. relations,Welfare state,Shaping up of PP those affect Corporate sector. For ex:
Company Policy
Communications and Information Policy
Human resource policies
Privacy policy
Public policy
Defense policy
Domestic policy
Economic policy
Education policy
Energy policy
Environmental Policy
Foreign policy
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Health policy
Housing policy
Information policy
Macroeconomic policy
Monetary policy
Population policy
Public policy in law
Science policy
Security policy
Social policy
Transportation policy
Urban policy
Water policy
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Need for PP: the need for PP is defined under different dimensions. They are
Social Forces
Economic Forces
Political forces
Tech forces Levels of public policy making: As a quasi-federal polity, public policy in India is made at three levels--
Central, State and Local. good policy-making process" would meet the following criteria:-
i) the problems and issues confronting a sector are subjected to expert analysis;
ii) information on overlaps and trade-offs with other sectors is systematically gathered and made available to policy-makers;
iii) opposing points of view within and between sectors , are properly articulated, analysed and considered and those likely to benefited or harmed are identified and their reactions anticipated;
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iv) decisions are made with due legal authority, after consultation of those likely to be affected, and with the involvement of knowledgeable persons in the sector(s) concerned;
v) those responsible for implementation are systematically involved in the process, but are not allowed to take control of it;
vi) policy-makers and /or their advisers have the honesty, independence, intellectual breadth and depth to properly consider and integrate multiple perspectives and help arrive at optimal policy choices within a reasonable time.
Competitive environment Forces
Elements of PP & The Process: It includes inputs from various dimensions of BGS, Goals set by the organization,usage of various tools, implementation & execution. When new public policies are created, there are generally three key things involved in the process: the problem, the player, and the policy. The problem is the issue that needs to be addressed, the player is the individual or group that is influential in forming a plan to address the problem in question, and the policy is the finalized course of action decided upon by the government. Typically the general public will make the government aware of an issue through writing letters and emails, or making phone calls, to local government leaders; the issue is then brought forward during government meetings and the process for creating new public policies begins. The rational model for the public policy-making process can typically be divided into three steps: agenda-setting, option-formulation, and implementation. Within the agenda-setting stage, the agencies and government officials meet to discuss the problem at hand. In the second stage, optionformulation, alternative solutions are considered and final decisions are made regarding the best policy. Consequently, the decided policy is implemented during the final stage; in most cases, once public policies are in place, they are widely open to interpretation by non-governmental players, including those in the private sector. Implied within this model is the fact that the needs of the society are a priority for the players involved in the policy-making process; also, it is believed that the government will follow through on all decisions made by the final policy.
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Unfortunately, those who frame the issue to be addressed by policy often exert an enormous amount of influence over the entire process through their personalities, personal interests, political affiliations, and so on. The bias is extenuated by the players involved. The final outcome of the process, as well as its implementation, is therefore not as effective as that which could result from a purely rational process. Overall, however, public policy continues to be a vital tool in addressing social concerns. Framing of PP or Policy cycle In political science, the policy cycle is a tool used for the analyzing of the development of a policy item. It can also be referred to as a "stagist approach", "stages heuristic" or "stages approach". It is a fiction rather than the actual reality of how policy is created, but has been influential in how people look at policy in general. It was developed as a theory from Harold Lasswell's work. It includes the following stages: 1. Agenda setting (Problem identification) 2. Policy Formulation 3. Adoption 4. Implementation 5. Evaluation Corporation & PP: It limits powers of democratic government with the usage of constitution & law. It also has to limit powers of Non-democratic monarchy, Dictatorship etc. Political levels of Involvement: Direct, Indirect & Personal A comparison of the reality of policy-making in India with the theoretical framework outlined in the preceding section shows the following shortcomings:
Excessive Fragmentation in Thinking and Action One of the main problems with policy-making in India, is extreme fragmentation in the structure. For example, the transport sector is dealt with by five departments/Ministries in the government Dept of MBA, SJBIT
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of India whereas in the US and UK it is a part of one department (Department of Transport and Public Works in the US and Department of Environment, Transport and Regions in the UK). Similar examples exist in the energy, industry and social welfare sectors as well. Such fragmentation fails to recognize that actions taken in one sector have serious implications on another and may work at cross purposes with the policies of the other sector. Besides, it becomes very difficult, even for closely related sectors, to align their policies in accordance with a common overall agenda. Excessive overlap between policy making and implementation Another problem is the excessive overlap between implementation, program formulation and policy making which creates a tendency to focus on operational convenience rather than on public needs. Policy-making in Indian ministries occurs at the levels of Director and above, but the most important level (crucial for consideration of cross-cutting impacts) is that of the Secretaries to the Government of India, who are their Ministers’ “policy advisers-in-chief”. However, as mentioned earlier, the very same Secretaries spend a large part of their time bogged down on routine day-today administration of existing policy. Time is spent anticipating and answering parliamentary questions, attending meetings and functions on implementation issues etc. Partly the problem is symptomatic of over-centralisation—excessive concentration of implementation powers at the higher levels of the Ministries. Partly, it is also due to such officers being more comfortable with implementation matters than with policy making. The result is that sub-optimal policies, where adequate attention has not been paid to citizen needs, tend to emerge.
BGS & Media Relationship: Government represents citizens of a country. Businessmen understand that govt has all the powers to accept or deny the favourable conditions for them. Today the societal impacts are directly associated with governmental policies & their effectiveness on business organisations. Media in turn connects all the three by bringing out the outcomes to the society. Government Regulations in Business: It refers to all measures that are aimed at defining & laying down the limits to an enterprise & controlling the economic activities in a country. It consists of: Dept of MBA, SJBIT
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Policies for macro-environment
Policies for micro-environment
Laws in general
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Justification of regulations: various reasons are
Market failure
Natural monopolies
Ethical Arguments
Types of regulations: They are broadly classified as
Economic regulations : Primitive form of regulation. Specific in nature, associated with securities.
Social Regulations: Aimed to meet social goals to protect consumers, employees
Problems: Cost Benefit: they add cost to organization Effectiveness : evaluation is the biggest challenge Deregulation: Stakeholders resistance Policy confusion: No clarity of application & scope of policy
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MODULE 4
Environmental concerns and corporations History of environmentalism, environmental preservation-role of stakeholders, international issues, sustainable development, costs and benefits of environmental regulation, industrial pollution, role of corporate in environmental management, waste management and pollution control, key strategies for prevention of pollution, environmental audit, Laws governing environment.
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Environmental concerns and corporations As the world starts to globalize, it is accompanied by criticism of the current forms of globalization, which are feared to be overly corporate-led. As corporations become larger and multinational, their influence and interests go further accordingly. Being able to influence and own most media companies, it is hard to be able to publicly debate the notions and ideals that corporations pursue. Some choices that corporations take to make profits can affect people all over the world. Sometimes fatally. History of environmentalism As we look into the history of environmentalism, we can say that the concern for the protection of environment has recurred in different forms, in several parts of the world, long time ago. In the Middle East, writing that mainly concerns with environmental pollution were found in Arabic medical treatises and were written during the Arab Agricultural Revolution. They were primarily concerned with air, water, soil contamination, solid waste mishandling as well as environmental assessments of certain localities. We can say that this was the beginning of environmentalism. Looking at the environmentalism history, Edward I, the king of England also banned or prohibited the burning of sea coal in 1272 after its smoke became a main problem. Considering the origin of environmentalism, in Europe, the first large scale, current environmental laws came into being in Dept of MBA, SJBIT
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the form of British Alkali Acts. The laws were passed in the year 1863 in order to regulate harmful air pollution given off by the Leblanc process which was used to produce soda ash. With the growth of industrialization air and water pollution also increase. In the history of environmentalism, the beginning of environmental movement in United States can be dated back to 1739 when Benjamin Franklin as well as other Philadelphia residents cited "public rights," requested the Pennsylvania Assembly to stop or restrict waste dumping as well as for removing workplaces from Philadelphia's commercial district. The US movement continues till 1800s with the concerned for the protection of natural resources of the West. John Muir and Henry David Thoreau were the main philosophical contributors to this movement. In the history of environmentalism, environmental ideas became more popular with the beginning of 20th century. During this century efforts were being made to save wildlife and National Park Service was formed in 1916 by US president Woodrow Wilson. In 1972, the United States Environmental Protection Agency banned the agricultural use of DDT. People become more concerned with the problems of air pollution and petroleum spills as well as environmental interest grew in larger number. In India Chipko movement was formed in the year 1970. In 1979, James Lovelock, the former NASA scientist, published Gaia: A new look at life on Earth. Now, environmentalism has also changed to deal with new issues such as global warming and genetic engineering. “stakeholders” role in the global environmental governance process The term “stakeholders” is not a clear-cut or legal concept, so its scope needs to be defined. On the basis of the dictionary definition, stakeholders could be defined here as all the parties taking part in the international institutions’ deliberative and decision-making processes. The first parties concerned in these processes are obviously the Member States of these institutions. Yet the notion of “stakeholders” extends beyond just the State participants formally involved in the decisionmaking processes. So although the States remain the principal stakeholders, work o n extending participation in global governance processes focuses on other stakeholders in addition to the States. The States have the formal capacity of members or contracting parties and are represented in international institution bodies by their central governments. However, stakeholders may also
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encompass other State structures and public representatives such as elected representatives, including parliaments, local authorities and their respective international associations. Stakeholders:
Public opinion
NGO’s
Business community
Government
Media
Corporations
A healthy environment is needed for a healthy life. Resources found in the environment, such as water, air, and soil can become easily contaminated, creating hazards that can affect health. Queenslanders risk being exposed to these environmental hazards through their daily activities at home and other places. Queensland Health is strongly committed to securing better health outcomes for all Queenslanders in natural and built environments, by reducing the impacts of environmental hazards and ensuring standards for environmental resources are protective of health. International issues: Sustainability is the key to preventing or reducing the effect of environmental issues. There is now clear scientific evidence that humanity is living unsustainably, and that an unprecedented collective effort is needed to return human use of natural resources to within sustainable limits. For humans to live sustainably, the Earth's resources must be used at a rate at which they can be replenished. Concerns for the environment has prompted the formation of Green parties, political parties that seek to address environmental issues. Initially these formed in Australia, New Zealand and Germany but are now present in many other countries.
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Environmental preservation: Developing countries are affected by the relocation of polluting industries from the developed it the developing ones. Similarly, several products which are banned in the developed nations are marketed in the under developed world. The dumping of nuclear and hazardous wastes in developing countries and the shifting of polluting industries to the developing countries impose heavy social costs on them. The exploitation of the natural resources of the developing countries to satisfy the global demand also often causes ecological problems. When the multinationals employ in the developing nations polluting technologies which are not allowed in the developed countries or do not care for the ecology as much as they do in the developed nations, it is essentially a question of ethics. Another serious problem is that developed nations some times raise environmental issues as a trade barrier or a coercive measure rather than for genuine reasons. Costs and benefits of environmental regulation:
Cost-benefit analysis of environmental regulation plays a key role in determining how to achieve our environmental goals without imposing unnecessary costs on the economy. First, agencies should be required to use a checklist of good empirical practices and should promote decentralized evaluations of data and research. Second, absent compelling systematic evidence to the contrary, agencies should presume that consumers are best able to make their own energy-saving decisions, and should focus on regulations that address the harm that people impose on others. Third, a sixmonth early regulatory review process should be established for particularly important regulations
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to allow sufficient time for a thorough cost-benefit analysis and the incorporation of the results into the final regulations. It is the systematic calculation & comparision of the costs & benefits of the proposed regulation. Costs are reduction in human welfare. Benefits are increases in human welfare.
Advantages:
It forces methodological consideration of each impact a policy will have on social welfare.
It disciplines thinking, though it does not always result in clear choices.
The studies show that the net social of a regulation in monetary terms.
It injects rational calculation into emotional arguments.
cost analysis can play an important role in legislative and regulatory policy debates on protecting and improving the natural environment, health, and safety. Although formal benefit-cost analysis should not be viewed as either necessary or sufficient for designing sensible public policy, it can provide an exceptionally useful framework for consistently organizing disparate information, and in this way, it can greatly improve the process and hence the outcome of policy analysis. If properly done, benefit-cost analysis can be of great help to agencies participating in the development of environmental regulations, and it can likewise be useful in evaluating agency decision making and in shaping new laws. Forms of pollution The major forms of pollution are listed below along with the particular contaminant relevant to each of them:
Air pollution:- the release of chemicals and particulates into the atmosphere. Common gaseous pollutants include carbon monoxide, sulfur dioxide, chlorofluorocarbons (CFCs) and nitrogen oxides produced by industry and motor vehicles. Photochemical ozone and
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smog are created as nitrogen oxides and hydrocarbons react to sunlight. Particulate matter, or fine dust is characterized by their micrometre size PM10 to PM2.5.
Light pollution:- includes light trespass, over-illumination and astronomical interference.
Littering:- the criminal throwing of inappropriate man-made objects, unremoved, onto public and private properties.
Noise pollution:- which encompasses roadway noise, aircraft noise, industrial noise as well as high-intensity sonar.
Soil contamination occurs when chemicals are released by spill or underground leakage. Among the most significant soil contaminants are hydrocarbons, heavy metals, MTBE, herbicides, pesticides and chlorinated hydrocarbons.
Radioactive contamination, resulting from 20th century activities in atomic physics, such as nuclear power generation and nuclear weapons research, manufacture and deployment. (See alpha emitters and actinides in the environment.)
Thermal pollution, is a temperature change in natural water bodies caused by human influence, such as use of water as coolant in a power plant.
Visual pollution, which can refer to the presence of overhead power lines, motorway billboards, scarred landforms (as from strip mining), open storage of trash, municipal solid waste or space debris.
Water pollution, by the discharge of wastewater from commercial and industrial waste (intentionally or through spills) into surface waters; discharges of untreated domestic sewage, and chemical contaminants, such as chlorine, from treated sewage; release of waste and contaminants into surface runoff flowing to surface waters (including urban runoff and agricultural runoff, which may contain chemical fertilizers and pesticides); waste disposal and leaching into groundwater; eutrophication and littering. AIR/ INDUSTRIAL POLLUTION - AN ETHICAL PERSPECTIVE
We cannot live more than a few minutes without air. We must breathe whatever air is available around us, regardless of its quality. The fragile inner surface of the lungs where
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oxygen passes into the bloodstream and carbon dioxide is given off is particularly sensitive to toxins and irritants. Air pollution is thus of immediate concern to every human being.
Apart from those who voluntarily pollute their own air through smoking, most air pollution is inflicted by others, usually without recourse or compensation. It therefore goes against such universal moral precepts as the golden rule to do unto others as you would have others do unto you, and in theory should be punishable by law in most states if the guilty source could be identified. However since air quality usually reflects the sum of many diffuse sources, identifying the responsible party is difficult, and since almost everyone undertakes activities that release pollutants, we are all collectively responsible as well.
Different types of air pollutants reflect distinct ethical challenges. Air pollution from industrial sources is a significant problem in most countries. Since these are usually identifiable point sources, they are relatively easy to regulate. Several approaches are available to industry: pollution prevention through changes in operating practices, improved and preventive maintenance, or changes in raw materials; building good air pollution control systems into new or modified production processes; improving or replacing air pollution control systems in existing facilities; and reducing air pollution and improving energy efficiency through process change (which often lowers costs as well). The industry must weigh the cost of these measures, reflected directly in its balance sheet, against the benefits to the public for which it receives no return apart from the temporary good will that comes when a nuisance has been abated. While a responsible business will implement all reasonable measures to avoid harm to others, unscrupulous operators will simply hope that their emissions are unnoticed or untraceable.
Government experience in the development and implementation of air pollution prevention or reduction suggests that the multi-stakeholder cooperative approach has long range benefits, with government, industry, and NGOs agreeing on requirements with support and advice from technical and health experts, adopting an implementation time line, and undertaking periodic reviews and assessments of implementation progress. Where the government is honest and efficient, the businesses trustworthy, and the NGOs altruistic in their representation of the public interest, this works well.
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The air pollution created by multiple small sources, whether motor vehicle exhausts, home and building heating systems, or agricultural wastes, can only be controlled by changes in consumer behaviour and in product technologies. There is often a circular debate whether consumer demand should lead to new products, or whether business should develop less polluting products and educate the consumers in their desirability. This usually reflects the morally questionable desire to pass the responsibility for change off to someone else while profiting from the status quo. Reinforcing ethical behaviour and strengthening corporate responsibility can thus strengthen action to reduce air pollution.
Industrial pollution is pollution which can be directly linked with industry, in contrast to other pollution sources. This form of pollution is one of the leading causes of pollution worldwide; in the United States, for example, the Environmental Protective Agency estimates that up to 50% of the nation's pollution is caused by industry. Because of its size and scope, industrial pollution is a serious problem for the entire planet, especially in nations which are rapidly industrializing, like China. This form of pollution dates back to antiquity, but widespread industrial pollution accelerated rapidly in the 1800s, with the start of the Industrial Revolution. The Industrial Revolution mechanized means of production, allowing for a much greater volume of production, and generating a corresponding increase in pollution. The problem was compounded by the use of fuels like coal, which is notoriously unclean, and a poor understanding of the causes and consequences of pollution. There are a number of forms of industrial pollution. One of the most common is water pollution, caused by dumping of industrial waste into waterways, or improper containment of waste, which causes leakage into groundwater and waterways. Industrial pollution can also impact air quality, and it can enter the soil, causing widespread environmental problems.
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numerous manufacturing plants pour off undiluted corrosives, poisons, and other noxious byproducts. The construction industry discharges slurries of gypsum, cement, abrasives, metals, and poisonous solvents. Another pervasive group of contaminants entering food chains is the polychlorinated biphenyl (PCB) compounds, components of lubricants, plastic wrappers, and adhesives. In yet another instance of pollution, hot water discharged by factories and power plants causes so-called thermal pollution by increasing water temperatures. Such increases change the level of oxygen dissolved in a body of water, thereby disrupting the water's ecological balance, killing off some plant and animal species while encouraging the overgrowth of others. Causes:
Production
of
electricity,
Nuclear
waste,
over-industrialisation
Effects: Global Warming, Air pollution, water pollution, Soil pollution Adverse air quality can kill many organisms including humans. Ozone pollution can cause respiratory disease, cardiovascular disease, throat inflammation, chest pain, and congestion. Water pollution causes approximately 14,000 deaths per day, mostly due to contamination of drinking water by untreated sewage in developing countries. An estimated 700 million Indians have no access to a proper toilet, and 1,000 Indian children die of diarrhea every day. Nearly 500 million Chinese lack access to safe drinking water. 656,000 people die prematurely each year in China because of air pollution. In India, air pollution is believed to cause 527,700 fatalities a year. Studies have estimated that the number of people killed annually in the US could be over 50,000. Oil spills can cause skin irritations and rashes. Noise pollution induces hearing loss, high blood pressure, stress, and sleep disturbance. Mercury has been linked to developmental deficits in children and neurologic symptoms. Older people are majorly exposed to diseases induced by air pollution. Those with heart or lung disorders are under additional risk. Children and infants are also at serious risk. Lead and other heavy metals have been shown to cause neurological problems. Chemical and radioactive substances can cause cancer and as well as birth defects. Role of corporates in environmental management: •
To check pollution
•
Effective installation of pollution control devices
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•
To be ethical.
•
It is widely recognised that firms, though better management practices, can play a major role in
•
addressing many environment problems. Companies have strong incentives to do so. On the one hand, they are influenced by a variety of external pressures (e.g. from customers, socially concerned investors, environmental interest groups and regulators), one the other hand firms’ own stakeholders increasingly expect ‘their’ company to behave in a socially responsible manner. Consequently, an increasing number of companies have taken steps to assess, monitor and report on their environmental performance.
•
Along with the global trend of green business and green living, more and more companies have been attaching great importance to protecting the environment. An effective means to achieve and demonstrate sound environment performance is to adopt an Environmental Management System (EMS) and produce environmental performance reports.
Waste Management: Waste is the by-product of house-hold, industrial & environmental issues. It refers to the collection , processing, recycling, transport & monitoring of waste. The term usually relates to materials produced by human activity, and the process is generally undertaken to reduce their effect on health, the environment or aesthetics. Waste management is a distinct practice from resource recovery which focuses on delaying the rate of consumption of natural resources. The management of wastes treats all materials as a single class, whether solid, liquid, gaseous or radioactive substances, and tried to reduce the harmful environmental impacts of each through different methods. Rapid industrialization last few decades have led to the depletion of pollution of precious natural resources in India depletes and pollutes resources continuously. Further the rapid industrial developments have, led to the generation of huge quantities of hazardous wastes, which have further aggravated the environmental problems in the country by depleting and polluting natural resources. In fact, man today is caught in the vicious circle of increasing wants, declining resources and increasing waste being generated by the industries and municipalities is posing a problem of enormous dimensions. The domestic and industrial effluents are contributing in enhancing this problem. It might become the biggest problem if it is not dealt with immediately. Therefore, Dept of MBA, SJBIT
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rational and sustainable utilization of natural resources and its protection from toxic releases is vital for sustainable socioeconomic development. Hazardous waste management is a new concept for most of the Asian countries including India. The utilization of resources and generation of waste is for beyond the limit that the biosphere was made to carry. Pollution control
recycling reusing reducing mitigating preventing compost
Key strategies for prevention: Installing Pollution control devices
Dust collection systems o Baghouses o Cyclones o Electrostatic precipitators Scrubbers o Baffle spray scrubber o Cyclonic spray scrubber o Ejector venturi scrubber o Mechanically aided scrubber o Spray tower o Wet scrubber Sewage treatment o Sedimentation (Primary treatment) o Activated sludge biotreaters (Secondary treatment; also used for industrial wastewater) o Aerated lagoons o Constructed wetlands (also used for urban runoff) Industrial wastewater treatment o API oil-water separators o Biofilters o Dissolved air flotation (DAF) o Powdered activated carbon treatment o Ultrafiltration Vapor recovery systems Phytoremediation
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Greenhouse gases and global warming Carbon dioxide, while vital for photosynthesis, is sometimes referred to as pollution, because raised levels of the gas in the atmosphere are affecting the Earth's climate. Disruption of the environment can also highlight the connection between areas of pollution that would normally be classified separately, such as those of water and air. Recent studies have investigated the potential for long-term rising levels of atmospheric carbon dioxide to cause slight but critical increases in the acidity of ocean waters, and the possible effects of this on marine ecosystems. Most polluted places in the developing world The Blacksmith Institute, an international non-for-profit organization dedicated to eliminating lifethreatening pollution in the developing world, issues an annual list of some of the world's worst polluted places. In the 2007 issues the ten top nominees, already industrialized countries excluded, are located in Azerbaijan, China, India, Peru, Russia, Ukraine and Zambia. Benefits of Corporate Environmental Management The benefits of corporate environmental management are many. In the view of management, it can fulfill supply-chain requirements, ensure continual environmental improvement, help to reduce legislative non-compliance, promote staff environmental awareness and increase financial savings resulting from resource saving and cost reduction. From the public relations perspective, it can improve the company image, and enhance favourable customer relationships. Along with the global trend of green business and green living, more and more companies have been attaching great importance to protecting the environment. An effective means to achieve and demonstrate sound environment performance is to adopt an Environmental Management System (EMS) an produce environmental performance reports. You can find useful information in this article.
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Environmental Management System An Environmental Management System (EMS) can help a corporation to improve its environmental performance and thus stay competitive in the environmentally conscious world business market. In general, a corporation will go through 3 steps in setting up its EMS.
Conduct an initial environmental audit to evaluate the current environmental performance.
Set its own environmental policy as well as objectives and targets.
Map out an environmental programme to translate the targets into concrete action plans.
EMS Certification The ISO 14000 EMS certification is internationally recognised. To assist the Small and Medium Enterprises (SMEs) to develop their own EMS, the Environmental Protection Department (EPD) has launched support packages on environmental management information and ISO 14001 EMS specifically for SMEs of the construction and electrical/electronic sectors.
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A successful EMS also involves periodic audit and review to ensure its effectiveness and achieve continual environmental improvement. EPD also launched a simple guide helping SMEs to conduct environmental audits. Environmental Performance Reporting Businesses are also encouraged to produce their own environmental performance reports to inform shareholders, investors, potential business partners, customers as well as the general public how they have contributed to achieving a sustainable environment. Evidence has shown that environmental performance reporting can be a useful marketing tool in winning business opportunities as some companies are more willing to work with those who have a proven record in environmental management. It can also boost the corporate image. To facilitate the business to produce good quality environmental performance report, EPD has set up a cyber helpdesk which includes step-by-step guide, tips for successful reports, international best practices, and other useful resource materials. Compliance Assistance Centre The CAC offers a wide range of services, including advice on environmental regulatory requirements, practical solutions to common pollution problems, updated compliance guides, green practices and environmental management tools. Hazardous Waste Management Asbestos The term "asbestos" is used to describe a group of naturally occurring minerals composed of long, thin fibres and fibre bundles. The mineral has high tensile strength, good insulating properties and is a fire retardant. However, medical information has indicated that inhalation of asbestos fibres may result in serious health issues including cancers in human.
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Construction materials such as AC sheeting and roofing which contain asbestos fibres have been widely used in Pacific island countries for housing and building construction, and even though health concerns have led to their phase-out, they are still found in many buildings. The Pacific is subject to periodic catastrophic weather and geological events such as tsunamis and cyclones which are highly destructive to built infrastructure. As a consequence, asbestos containing materials are, or may become a significant waste and human health issue in many Pacific countries and management and disposal of asbestos in the region is critical to the maintenance of long-term community health. Environmentally sound asbestos disposal options are likely to be restricted to either local disposal in a secure landfill; transport to and disposal in an offshore secure landfill; or disposal of concrete encased asbestos containing materials at sea. Stabilisation of asbestos in occupied buildings prior to its eventual removal should be considered an urgent priority by national governments to minimize future exposure of the public to asbestos fibres. Electrical & Electronic Waste E-waste typically refers to end-of-life electrical and electronic products including computers, printers, photocopy machines, television sets, washing machines, radios, mobile phones and toys, which are made of sophisticated blends of plastics, metals, and other materials. Due to the demand for newer technology, the life-span of electrical and electronic products is progressively decreasing. Consequently, older and out-dated items are becoming obsolete and being discarded in large quantities and at increasing rates worldwide. The extent of the E-waste problem in the Pacific has not been comprehensively documented, but the limited information available indicates that the use of electrical and electronic equipment is increasing significantly on an annual basis in Pacific island countries. Electrical and electronic waste contains hazardous but also valuable and scarce materials such as metal and alloys which can be recovered and recycled. Proper management and disposal of E-waste is important to the long-term protection of local and regional Pacific environments, as well as to the maintenance of long-term regional sustainability. Dept of MBA, SJBIT
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Medical Waste Management Health care activities lead to the production of waste that, if poorly managed, may lead to adverse community health effects. These wastes include infectious wastes, body part wastes, chemical or pharmaceutical wastes, expired pharmaceuticals, soiled bandages and dressings, contaminated sharps
and
radioactive
and
cytotoxic
wastes
and
broken
thermometers.
Medical wastes are typically poorly managed in the Pacific, and are usually disposal of through low temperature combustion in pits within hospital compounds or by uncontrolled dumping in landfills. Improper disposal of medical wastes can result in contamination of water supplies or aquatic environments and burning of medical wastes at low temperatures results in the release of toxic pollutants to the air. Landfill dumping of medical wastes results in unacceptable community health risks and expired drugs may be acquired by children or scavengers if disposed in a landfill. There
may
also
be
ineffective
separation
of
medical
waste
at
source.
In many cases where medical waste incinerators exist, they are often incorrectly operated, have technical problems or there is a lack of trained operators or a shortage of money for diesel fuel. Often the incinerators are donated, but they do not comply with best available technology or practices. An integrated framework to manage pharmaceuticals and progressively implement routine medical waste disposal through controlled high temperature incineration is essential for infection control and protection of the health of many smaller Pacific island communities.
Environmental audit: Environmental audit is a general term that can reflect various types or evaluations intended to identify environmental compliance and management system implementation gaps, along with related corrective actions. In this way they perform an analogous (similar) function to financial audits. There are generally two different types of environmental audits: compliance audits and management systems audits. Compliance audits tend to be the primary type in the US or within US-based multinationals.
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Environmental compliance audits As the name implies, these audits are intended to review the site's/company's legal compliance status in an operational context. Compliance audits generally begin with determining the applicable compliance requirements against which the operations will be assessed. This tends to include federal regulations, state regulations, permits and local ordinances/codes. In some cases, it may also include requirements within legal settlements. Compliance audits may be multimedia or programmatic. Multimedia audits involve identifying and auditing all environmental media (air, water, waste, etc.) that apply to the operation/company. Programmatic audits (which may also be called thematic or media-specific) are limited in scope to pre-identified regulatory areas, such as air. Audits are also focused on operational aspects of a company/site, rather than the contamination status
of
the
real
property.
Assessments,
studies,
etc.
that
involve
property
contamination/remediation are typically not considered an environmental audit. ISO 14001 ISO 14001 is a voluntary international standard for environmental management systems ("EMS"). ISO 14001:2004 provides the requirements for an EMS and ISO 14004 gives general EMS guidelines. An EMS meeting the requirements of ISO 14001:2004 is a management tool enabling an organization of any size or type to: 1. Identify and control the environmental impact of its activities, products or services; 2. Improve its environmental performance continually, and 3. Implement a systematic approach to setting environmental objectives and targets, to achieving these and to demonstrating that they have been achieved. Environmental Auditing in India The Supreme Audit Institution (SAI) in India is headed by the Comptroller and Auditor General (CAG) of India who is a constitutional authority. The CAG of India derives his Dept of MBA, SJBIT
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mandate from Articles 148 to 151 of the Indian Constitution. The CAG's (Duties, Powers and Conditions of Service) Act, 1971 prescribes functions, duties and powers of the CAG. While fulfilling his constitutional obligations, the CAG examines various aspects of government expenditure and revenues. The audit conducted by CAG is broadly classified into Financial, Compliance and Performance Audit. Environmental audit by SAI India is conducted within the broad framework of Compliance and Performance Audit. 2. Environment protection in India The Ministry of Environment & Forests is the nodal agency in the administrative structure of the Central Government of India, for the planning, promotion, coordination and overseeing the implementation of environmental and forestry programmes. The Ministry is also the Nodal agency in the country for the United Nations Environment Programme (UNEP). In the states, the Department of Environment and Forest is the main agency for implementation of environment programmes. The principal activities undertaken by Ministry of Environment & Forests consist of • conservation & survey of flora, fauna, forests and wildlife; • prevention & control of pollution; • afforestation and regeneration of degraded areas; and • protection of environment, in the frame work of legislations. Major policy initiatives by Ministry of Environment and Forests include: • National Environment Policy, 2006; • National Conservation Strategy and Policy Statement on Environment and Development, 1992; • Policy Statement for Abatement of Pollution; • National Forest Policy etc.,. Ministry of Environment and Forests has enacted more than 50 rules/ regulations/notifications for control of water pollution, air pollution, environment protection, animal welfare, wildlife etc.,. Laws governing environment: Environmental laws In the Constitution of India it is clearly stated that it is the duty of the state to ‘protect and improve the environment and to safeguard the forests and wildlife of the country’. It imposes a duty on every citizen ‘to protect and improve the natural environment including forests, lakes, rivers, and wildlife’. Reference to the environment has also been made in the Directive Principles of State Policy as well as the Fundamental Rights. The Department of Environment was established in Dept of MBA, SJBIT
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India in 1980 to ensure a healthy environment for the country. This later became the Ministry of Environment and Forests in 1985. Following is a list of the environmental legislations that have come into effect: General Forest and wildlife Water Air General 1986 - The Environment (Protection) Act authorizes the central government to protect and improve environmental quality, control and reduce pollution from all sources, and prohibit or restrict the setting and /or operation of any industrial facility on environmental grounds. 1986 - The Environment (Protection) Rules lay down procedures for setting standards of emission or discharge of environmental pollutants. 1989 - The objective of Hazardous Waste (Management and Handling) Rules is to control the generation, collection, treatment, import, storage, and handling of hazardous waste. 1989 - The Manufacture, Storage, and Import of Hazardous Rules define the terms used in this context, and sets up an authority to inspect, once a year, the industrial activity connected with hazardous chemicals and isolated storage facilities. 1989 - The Manufacture, Use, Import, Export, and Storage of hazardous Micro-organisms/ Genetically Engineered Organisms or Cells Rules were introduced with a view to protect the environment, nature, and health, in connection with the application of gene technology and microorganisms. 1991 - The Public Liability Insurance Act and Rules and Amendment, 1992 was drawn up to provide for public liability insurance for the purpose of providing immediate relief to the persons affected by accident while handling any hazardous substance. Dept of MBA, SJBIT
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1995 - The National Environmental Tribunal Act has been created to award compensation for damages to persons, property, and the environment arising from any activity involving hazardous substances. 1997 - The National Environment Appellate Authority Act has been created to hear appeals with respect to restrictions of areas in which classes of industries etc. are carried out or prescribed subject to certain safeguards under the EPA. 1998 - The Biomedical waste (Management and Handling) Rules is a legal binding on the health care institutions to streamline the process of proper handling of hospital waste such as segregation, disposal, collection, and treatment. 1999 - The Environment (Siting for Industrial Projects) Rules, 1999 lay down detailed provisions relating to areas to be avoided for siting of industries, precautionary measures to be taken for site selecting as also the aspects of environmental protection which should have been incorporated during the implementation of the industrial development projects. 2000 - The Municipal Solid Wastes (Management and Handling) Rules, 2000 apply to every municipal authority responsible for the collection, segregation, storage, transportation, processing, and disposal of municipal solid wastes. 2000 - The Ozone Depleting Substances (Regulation and Control) Rules have been laid down for the regulation of production and consumption of ozone depleting substances.
2001 - The Batteries (Management and Handling) Rules, 2001 rules shall apply to every manufacturer, importer, re-conditioner, assembler, dealer, auctioneer, consumer, and bulk consumer involved in the manufacture, processing, sale, purchase, and use of batteries or components so as to regulate and ensure the environmentally safe disposal of used batteries. 2002 - The Noise Pollution (Regulation and Control) (Amendment) Rules lay down such terms and conditions as are necessary to reduce noise pollution, permit use of loud speakers
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or public address systems during night hours (between 10:00 p.m. to 12:00 midnight) on or during any cultural or religious festive occasion 2002 - The Biological Diversity Act is an act to provide for the conservation of biological diversity, sustainable use of its components, and fair and equitable sharing of the benefits arising out of the use of biological resources and knowledge associated with it Forest and wildlife 1927 - The Indian Forest Act and Amendment, 1984, is one of the many surviving colonial statutes. It was enacted to ‘consolidate the law related to forest, the transit of forest produce, and the duty leviable on timber and other forest produce’. 1972 - The Wildlife Protection Act, Rules 1973 and Amendment 1991 provides for the protection of birds and animals and for all matters that are connected to it whether it be their habitat or the waterhole or the forests that sustain them. 1980 - The Forest (Conservation) Act and Rules, 1981, provides for the protection of and the conservation of the forests. Water 1882 - The Easement Act allows private rights to use a resource that is, groundwater, by viewing it as an attachment to the land. It also states that all surface water belongs to the state and is a state property. 1897 - The Indian Fisheries Act establishes two sets of penal offences whereby the government can sue any person who uses dynamite or other explosive substance in any way (whether coastal or inland) with intent to catch or destroy any fish or poisonous fish in order to kill. 1956 - The River Boards Act enables the states to enroll the central government in setting up an Advisory River Board to resolve issues in inter-state cooperation.
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1970 - The Merchant Shipping Act aims to deal with waste arising from ships along the coastal areas within a specified radius. 1974 - The Water (Prevention and Control of Pollution) Act establishes an institutional structure for preventing and abating water pollution. It establishes standards for water quality and effluent. Polluting industries must seek permission to discharge waste into effluent bodies. The CPCB (Central Pollution Control Board) was constituted under this act. 1977 - The Water (Prevention and Control of Pollution) Cess Act provides for the levy and collection of cess or fees on water consuming industries and local authorities. 1978 - The Water (Prevention and Control of Pollution) Cess Rules contains the standard definitions and indicate the kind of and location of meters that every consumer of water is required to affix. 1991 - The Coastal Regulation Zone Notification puts regulations on various activities, including construction, are regulated. It gives some protection to the backwaters and estuaries. Air 1948 – The Factories Act and Amendment in 1987 was the first to express concern for the working environment of the workers. The amendment of 1987 has sharpened its environmental focus and expanded its application to hazardous processes. 1981 - The Air (Prevention and Control of Pollution) Act provides for the control and abatement of air pollution. It entrusts the power of enforcing this act to the CPCB . 1982 - The Air (Prevention and Control of Pollution) Rules defines the procedures of the meetings of the Boards and the powers entrusted to them. 1982 - The Atomic Energy Act deals with the radioactive waste. 1987 - The Air (Prevention and Control of Pollution) Amendment Act empowers the central and state pollution control boards to meet with grave emergencies of air pollution. 1988 - The Motor Vehicles Act states that all hazardous waste is to be properly packaged, labelled, and transported.
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Module 5 Business Ethics Meaning of ethics, business ethics, relation between ethics and business ethics, evolution of business ethics, nature of business ethics, scope, need and purpose, importance, approaches to business ethics, sources of ethical knowledge for business roots of unethical behavior, ethical decision making, some unethical issues, benefits from managing ethics at workplace, ethical organizations ****************************************************************************** Meaning of ethics The basic concepts and fundamental principles of right human conduct. It includes study of universal values such as the essential equality of all men and women, human or natural rights, obedience to the law of land, concern for health and safety and, increasingly, also for the natural environment. See also morality. Ethics, also known as moral philosophy, is a branch of philosophy that involves systematizing, defending, and recommending concepts of right and wrong conduct. The term comes from the Greek word ethos, which means "character". Ethics is a complement to Aesthetics in the philosophy field of Axiology. In philosophy, ethics studies the moral behavior in humans, and how one should act. Ethics may be divided into four major areas of study:
Meta-ethics, about the theoretical meaning and reference of moral propositions and how their truth values (if any) may be determined;
Normative ethics, about the practical means of determining a moral course of action;
Applied ethics, about how moral outcomes can be achieved in specific situations;
Descriptive ethics, also known as comparative ethics, is the study of people's beliefs about morality;
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Business ethics Business ethics (also corporate ethics) is a form of applied ethics or professional ethics that examines ethical principles and moral or ethical problems that arise in a business environment. It applies to all aspects of business conduct and is relevant to the conduct of individuals and entire organizations. Business ethics has both normative and descriptive dimensions. As a corporate practice and a career specialization, the field is primarily normative. Academics attempting to understand business behavior employ descriptive methods. The range and quantity of business ethical issues reflects the interaction of profit-maximizing behavior with non-economic concerns. Interest in business ethics accelerated dramatically during the 1980s and 1990s, both within major corporations and within academia. For example, today most major corporations promote their commitment to non-economic values under headings such as ethics codes and social responsibility charters. Adam Smith said, "People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices." Governments use laws and regulations to point business behavior in what they perceive to be beneficial directions. Ethics implicitly regulates areas and details of behavior that lie beyond governmental control. Ethical issues include the rights and duties between a company and its employees, suppliers, customers and neighbors, its fiduciary responsibility to its shareholders. Issues concerning relations between different companies include hostile take-overs and industrial espionage. Related issues include corporate governance;corporate social entrepreneurship; political contributions; legal issues such as the ethical debate over introducing a crime of corporate manslaughter; and the marketing of corporations' ethics policies. Evolution of business Business ethical norms reflect the norms of each historical period. As time passes norms evolve, causing accepted behaviors to become objectionable. Business ethics and the resulting behavior evolved as well. Business was involved in slavery, colonialism, and the cold war. Dept of MBA, SJBIT
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Relation between ethics and business ethics: Ethics asks the question, “How should I live my life?”, and it uses moral philosophy and moral reasoning to explore and answer that question. Business ethics asks, “How should a business live its life?” or more appropriately, “How should a business behave?”, and it uses moral philosophy and moral reasoning to explore and answer that question. The key word in all the above questions is “should.” The relationship between business and ethics is intrinsically entwined. A successful company is one which can effectively recognize and cultivate the relationship which exists between the two. Businesses that exhibit and promote strong corporate codes of ethics are more prosperous in the long run because they show a commitment to an expectation of sound moral behavior. This demonstrates a dedication to society, customers, employees and the business itself. It also enhances a company's reputation if they become commonly known as an ethical company, and this brings more value to the organization. The relationship between business and ethics is intrinsically entwined. A successful company is one which can effectively recognize and cultivate the relationship which exists between the two. Businesses that exhibit and promote strong corporate codes of ethics are more prosperous in the long run because they show a commitment to an expectation of sound moral behavior. This demonstrates a dedication to society, customers, employees and the business itself. It also enhances a company's reputation if they become commonly known as an ethical company, and this brings more value to the organization. EVOLUTION OF BUSINESS ETHICS, The term 'business ethics' came into common use in the United States in the early 1970s. By the mid-1980s at least 500 courses in business ethics reached 40,000 students, using some twenty textbooks and at least ten casebooks along supported by professional societies, centers and journals of business ethics. The Society for Business Ethics was started in 1980. European business schools
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adopted business ethics after 1987 commencing with the European Business Ethics Network (EBEN). In 1982 the first single-authored books in the field appeared. Firms started highlighting their ethical stature in the late 1980s and early 1990s, possibly trying to distance themselves from the business scandals of the day, such as the savings and loan crisis. The idea of business ethics caught the attention of academics, media and business firms by the end of the Cold War. However, legitimate criticism of business practices was attacked for infringing the "freedom" of entrepreneurs and critics were accused of supporting communists. This scuttled the discourse of business ethics both in media and academia. CHARACTERISTICS/Nature OF BUSINESS ETHICS The following are the important features of business ethics:1. Business ethics are the principles, which govern and guide business people to perform business functions and in that sense business ethics is a discipline 2. It is considered both as a science and an art. 3. It continuously test the rules and moral standards and is dynamic in nature . 4. It is based on theological principles such as sincerity, human welfare, service, good behavior etc. 5. It is based on reality and social customs prevailing in business environment. 6. It studies the activities , decisions and behavior which are related to human beings 7. It has universal application because business exists all over the world 8. Many of the ethical principles develop the personal dignity 9. Business ethics keeps harmony between different roles of businessman, with every citizen, customer, owner and investors. Societal Level: concern for poor & downtrodden Stakeholder level: Employees, Customers, Shareholders, Banks, Government Need or Importance of Business Ethics
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1. Stop business malpractices : Some unscrupulous businessmen do business malpractices by indulging in unfair trade practices like black-marketing, artificial high pricing, adulteration, cheating in weights and measures, selling of duplicate and harmful products, hoarding, etc. These business malpractices are harmful to the consumers. Business ethics help to stop these business malpractices. 2. Improve customers' confidence : Business ethics are needed to improve the customers' confidence about the quality, quantity, price, etc. of the products. The customers have more trust and confidence in the businessmen who follow ethical rules. They feel that such businessmen will not cheat them. 3. Survival of business : Business ethics are mandatory for the survival of business. The businessmen who do not follow it will have short-term success, but they will fail in the long run. This is because they can cheat a consumer only once. After that, the consumer will not buy goods from that businessman. He will also tell others not to buy from that businessman. So this will defame his image and provoke a negative publicity. This will result in failure of the business. Therefore, if the businessmen do not follow ethical rules, he will fail in the market. So, it is always better to follow appropriate code of conduct to survive in the market. 4. Safeguarding consumers' rights : The consumer has many rights such as right to health and safety, right to be informed, right to choose, right to be heard, right to redress, etc. But many businessmen do not respect and protect these rights. Business ethics are must to safeguard these rights of the consumers. 5. Protecting employees and shareholders : Business ethics are required to protect the interest of employees, shareholders, competitors, dealers, suppliers, etc. It protects them from exploitation through unfair trade practices. 6. Develops good relations : Business ethics are important to develop good and friendly relations between business and society. This will result in a regular supply of good quality goods and services at low prices to the society. It will also result in profits for the businesses thereby resulting in growth of economy. 7. Creates good image : Business ethics create a good image for the business and businessmen. If the businessmen follow all ethical rules, then they will be fully accepted Dept of MBA, SJBIT
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and not criticised by the society. The society will always support those businessmen who follow this necessary code of conduct. 8. Smooth functioning : If the business follows all the business ethics, then the employees, shareholders, consumers, dealers and suppliers will all be happy. So they will give full cooperation to the business. This will result in smooth functioning of the business. So, the business will grow, expand and diversify easily and quickly. It will have more sales and more profits. 9. Consumer movement : Business ethics are gaining importance because of the growth of the consumer movement. Today, the consumers are aware of their rights. Now they are more organised and hence cannot be cheated easily. They take actions against those businessmen who indulge in bad business practices. They boycott poor quality, harmful, high-priced and counterfeit (duplicate) goods. Therefore, the only way to survive in business is to be honest and fair. 10. Consumer satisfaction : Today, the consumer is the king of the market. Any business simply cannot survive without the consumers. Therefore, the main aim or objective of business is consumer satisfaction. If the consumer is not satisfied, then there will be no sales and thus no profits too. Consumer will be satisfied only if the business follows all the business ethics, and hence are highly needed. 11. Importance of labour : Labour, i.e. employees or workers play a very crucial role in the success of a business. Therefore, business must use business ethics while dealing with the employees. The business must give them proper wages and salaries and provide them with better working conditions. There must be good relations between employer and employees. The employees must also be given proper welfare facilities. 12. Healthy competition : The business must use business ethics while dealing with the competitors. They must have healthy competition with the competitors. They must not do cut-throat competition. Similarly, they must give equal opportunities to small-scale business. They must avoid monopoly. This is because a monopoly is harmful to the consumers. IMPORTANCE OF BUSINESS ETHICS Dept of MBA, SJBIT
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There may be many reasons why business ethics might be regarded as an increasingly important area of study, whether as students interested in evaluating business activities, or as managers seeking to improve their decision-making skills. It is generally viewed that good business ethics promote good business. 1 The power and influence of business in society is greater than ever before. Business ethics helps us to understand why this is happening, what its implications might be, and how we might address this situation. 2 Business has the potential to provide a major contribution to our societies, in terms of producing the products and services that we want, providing employment, paying taxes, and acting as an engine for economic development and thereby increases the goodwill. 3 Business malpractices have the potential to inflict enormous harm on individuals, on communities and on the environment. Through helping us to understand more about the causes and consequences of these malpractices, business ethics helps to create mutual trust and confidence in relationship. 4 The demands being placed on business to be ethical by its various stakeholders are constantly becoming more complex and more challenging. Business ethics provides the means to appreciate and understand these challenges more clearly, in order that firms can meet these ethical expectations more effectively. Business ethics can help to improve ethical decision making by providing managers with the appropriate knowledge and tools that allow them to correctly identify, diagnose, analyse, and provide solutions to the ethical problems and dilemmas they are confronted with. 6 A business can prosper on the basis of good ethical standards and it helps to retain the business for long years. 7 Business ethics can provide us with the ability to assess the benefits and problems associated with different ways of managing ethics in organizations. 8 In the age of complexity in business fileds , competition is increasing day by day Good ethical standard helps the business to face the challenges
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Profit-motive approach
Legal Approach
Moral Obligations
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Sources of Ethical knowledge for business roots of unethical behavior:
Religion: PRINCIPLES OF BUSINESS ETHICS The Principles of business ethics developed by well known authorities like Cantt, J. S.Mill, Herbert Spencer, Plato, Thomas Garret, Woodrad, Wilson etc are as follows 1. Sacredness of means and ends : The first and most important principles of business ethics emphasize that the means and techniques adopted to serve the business ends must be sacred and pure.It means that a good end cannot be attained with wrong means, even if it is beneficial to the society. 2. Not to do any evil: It is unethical to do a major evil to another or to oneself , whether this evil is a means or an end. 3. Principle of proportionality: This principle suggests that one should make proper judgment before doing anything so that others do not suffer from any loss or risk of evils by the conducts of business. 4. Non co-operation in evils: It clearly points out that a business should with any one for doing any evil acts . that 5. Co-operation with others This principles states that business should help others only in that condition when other deserves for help 6. Publicity: According to W. Wilson, anything that is being done or to be done, should be brought to the knowledge of everyone. If everyone knows, none gets opportunity to do an unethical act. 7. Equivalent price: According to W. Wilson , the people are entitled to get goods equivalent to the value of money that he will pay. 8. Universal value: According to this principle the conduct of business should be done on the basis of universal values. 9. Human dignity: As per this principle , man should not be treated as a factor of production and human dignity should be maintained. Dept of MBA, SJBIT
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10. Non violence : If businessman hurts the interests and rights of the society and exploits the consumer by overlooking their interests this is equivalent to violence and unethical act. Cultural experience: It refers to the set of values, rules & beleifs among generations to be followed. Ethical Decision Making: the process includes
Recognizing an issue a an ethical one
Making ethical judgment
Resolving to do the ethical Thing
Actually Acting ethically
Some unethical Issues:
Bribery
Deception
Black Money
Theft
Dishonest
Tax evasion
Corruption
Advantages of Managing Ethics in Workplace 1. Significant improvement to society Application of business ethics helps to avoid many evils from the society. It includes child labour, unscrupulous price fixing, harassment of employees, poverty and starvation of employees etc. 2. Cultivate strong team work and productivity Ethical programme helps to tune employee behavior in accordance with the values preferred by leaders of the organization. It helps to build openness, integrity and a sense of oneness among all. Employees feel strong alignment between their values and those of the organization and they react with strong motivation and performance. Dept of MBA, SJBIT
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3. Support Employee Growth Ethics programme help employees to face reality, both good and bad in the organization and themselves. They feel full confidence to admit and deal with whatever comes their way. 4. Insurance policy Ethical programs help to ensure that policies are legal. Ethical principles are often applied to current, major ethical issues and become legislation. A major intent of well designed personnel policies is to ensure ethical treatment of employees. 5. Avoid Penal action Ethical programs help to detect issues and violations early so that they can be reported or addressed which helps to avoid subsequent penal actions and lower fines. 6. Helps in Quality Management, Strategic planning and diversity management Ethical programme identify favorite values and ensure organizational behaviors which are associated with those values. This complex effort can be aligned with values, including quality management, strategic planning and diversity management
Ethical organisations: Are business entities that have incorporated ethics & values in the bloodstream of the organisation. Management embodies the vision. Characteristcs:
Leadership
Integrity
Values
Respect
Loyalty
Concern
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Module 6
Corporate Social Responsibility Types and nature of social responsibilities, CSR principles and strategies, models of CSR, Best practices of CSR, Need of CSR, Arguments for and against CSR, CSR Indian perspective, Indian examples
******************************************************************************
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INTRODUCTION: Corporate social responsibility (CSR, also called corporate conscience, corporate citizenship, social performance, or sustainable responsible business/ Responsible Business) is a form of corporate self-regulation integrated into a business model. CSR policy functions as a built-in, selfregulating mechanism whereby a business monitors and ensures its active compliance with the spirit of the law, ethical standards, and international norms. CSR is a process with the aim to embrace responsibility for the company's actions and encourage a positive impact through its activities on the environment, consumers, employees, communities, stakeholders and all other members of the public sphere who may also be considered as stakeholders. Corporate executives have struggled with the issue of the firm’s responsibility to its society. Early on it was argued by some that the corporation's sole responsibility was to provide a maximum financial return to shareholders. It became quickly apparent to everyone, however, that this pursuit of financial gain had to rake place within the laws of the land. Though social activist groups and others throughout the 1960s advocated a broader notion of corporate responsibility, it was not until the significant social legislation of the early 1970s that this message became indelibly clear as a result of the creation of the Environmental Protection Agency (EPA), the Equal Employment Opportunity Commission (EEOC). The Occupational Safety and Health Administration (OSHA), and the Consumer Product Safety" Commission (CPSC). Types of CSR:
Environmental
Human Rights
Financial
Political
Nature of CSR: It has a positive approach, multi-dimensional in nature, above all it’s not an alternative
Economic and Legal Components of Corporate Social Responsibility Dept of MBA, SJBIT
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Economic Components
Legal Components
(Responsibilities)
(Responsibilities)
1. It is important to perform in a manner consistent with maximizing earnings per share
1. It is important to perform in a manner consistent with expectations of government and law.
2. It is important to be committed to being 2. It is important to comply with various federal, as profitable as possible.
state, and local regulations.
3. It is important to maintain a strong
3. It is important to be a law-abiding corporate
competitive position.
citizen.
4. It is important to maintain a high level
4. It is important that a successful firm be defined
of operating efficiency.
as one that fulfills its legal obligations.
5. It is important that a successful firm be defined as one that is consistently profitable.
5. It is important to provide goods and services that at least meet minimal legal requirements.
THE PYRAMID OF CORPORATE SOCIAL RESPONSIBILITY For CSR to be accepted by a conscientious business person, it should be framed in such a way that the entire ranges of business responsibilities are embraced. It is suggested here that four kinds of social responsibilities constitute total CSR: economic, legal, ethical And philanthropic. Furthermore these four categories or components of CSR might be depicted as a pyramid. To be sure. all of these kinds of responsibilities have always existed to some extent. but it has only been in recent years that ethical and philanthropic functions have taken a significant place. Each of these four categories deserves closer consideration.
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Economic Responsibilities Historically. business organizations were created as economic entities designed to provide goods and services to societal members. The profit motive was established as the primary incentive for entrepreneurship. Before it was anything else, business organization was the basic economic unit in our society. As such, its principal role was to produce goods and services that consumers needed and wanted and to make an acceptable profit in the process. At some point the idea of the profit motive got transformed into a notion of maximum profits, and this has been an enduring value ever since. All other business responsibilities are predicated upon the economic responsibility of the firm, because without it the others become moot considerations. Legal responsibilities are also depicted.. A company's first responsibility is its economic responsibility -- that is to say, a company needs to be primarily concerned with turning a profit. This is for the simple fact that if a company does not make money, it won't last, employees will lose jobs and the company won't even be able to think about taking care of its social responsibilities. Before a company thinks about being a good corporate citizen, it first needs to make sure that it can be profitable. Legal Responsibilities A company's legal responsibilities are the requirements that are placed on it by the law. Next to ensuring that company is profitable, ensuring that it obeys all laws is the most important responsibility, according to the theory of corporate social responsibility. Legal responsibilities can range from securities regulations to labor law, environmental law and even criminal law. Society has not only sanctioned business to operate according to the profit motive; at the same time business is expected to comply with the laws and regulations promulgated by federal, state, and local governments as the ground rules under which business must operate. As a partial fulfillment of the "social contract" between business and society firms are expected to pursue their economic missions within the framework of the law. Legal responsibilities reflect a view of "codified ethics" in the sense that they embody basic notions of fair operations as established by our lawmakers. They are depicted as the next layer on the pyramid to portray their historical development, but they are appropriately seen as coexisting with economic responsibilities as fundamental precepts of the free enterprise system. Dept of MBA, SJBIT
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Figure 2 Ethical and Philanthropic Components of Corporate Social Responsibility
Ethical Components
Philanthropic Components
(Responsibilities)
(Responsibilities)
1. It is important to perform in a manner
1. It is important to perform in a manner
consistent with expectations of societal mores
consistent with the philanthropic and
and ethical norms.
charitable expectations of society.
2. It is important to recognize and respect new or evolving ethical moral norms adopted by society.
2. It is important to assist the fine and performing arts.
3. It is important to prevent ethical norms from 3. It is important that managers and employees being compromised in order to achieve
participate in voluntary and charitable
corporate goals.
activities within their local communities.
4. It is important that good corporate citizenship be defined as doing what is expected morally or ethically.
4. It is important to provide assistance to private and public educational institutions.
5. It is important to recognize that corporate
5. It is important to assist voluntarily those
integrity and ethical behavior go beyond mere
projects that enhance a community’s "quality
compliance with laws and regulations.
of life."
Philanthropic Responsibilities Philanthropy encompasses those corporate actions that are in response to society’s expectation that businesses be good corporate citizens. This includes actively engaging in acts or programs to promote human welfare or goodwill. Examples of philanthropy include business contributions to financial resources or executive time, such as contributions to the arts, education, or the
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community. A loaned-executive program that provides leadership for a community’s United Way campaign is one illustration of philanthropy. The distinguishing feature between philanthropy and ethical responsibilities is that the former are not expected in an ethical or moral sense. Communities desire firms to contribute their money, facilities, and employee time to humanitarian programs or purposes, but they do not regard the firms as unethical if they do not provide the desired level. Therefore, philanthropy is more discretionary or voluntary on the part of businesses even though there is always the societal expectation that businesses provide it. CSR Principles & Strategies: The broad principles accepted by managers are :
Corporations are economic Institutions run for profit.
Follow multiple bodies of Law.
Act ethically
Meet legitimate needs of stakeholders.
Comply with norms
Maintain high standards of integrity.
Strategies: Organisations can adopt a variety of strategies towards CSR. They are Obstructionist/ opponent strategy: Such sort of Organisations respond by denying or avoiding responsibility for their actions Defensive Strategy: Complying CSR in order to survive Accomodative Strategy: Willingly Doing CSR activity Proactive Strategy: Such firms do CSR activity for their societal concern
Models of CSR: Stakeholder model: inclines towards protecting stakeholders Dept of MBA, SJBIT
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Business ethics Model: following business functions ethically Corporate Citizenship Model : Following the ethically & standardized ways of philanthropy Best Practices of CSR : Set measurable goals, encourage stakeholder engangement, always assess Business Lifecycle, Sustainability Branding etc Need for CSR Orientation toward Stakeholders Now that we have a basic understanding of me three ethical types or approaches, we will propose profiles of what the likely stakeholder orientation might be toward the major stakeholder groups using each of the three ethical approaches. Our goal is to accentuate the moral management approach by contrasting it with the other two types. Basically, there are five major stakeholder groups that are recognized as priorities by most firms, across industry lines and in spite of size or location: owners (shareholders), employees, customers, local communities, and the society-at-large. Although the general ethical obligation to each of these groups is essentially identical (protect their rights, treat them with respect and fairness), specific behaviors and orientations arise because of the differing nature of the groups. In an attempt to flesh out the character and salient features of the three ethical types and their stakeholder orientations, Figures 5 and 6 summarize the orientations these three types might assume with respect to four of the major stakeholder groups. Because of space constraints and the general nature of the society-at-large category, it has been omitted.
Figure 5 Three Moral Types and Orientation Toward Stakeholder Groups: Owners and Employees
Type of Management
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Orientation Toward Owner/Shareholder Stakeholders
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Shareholders are minimally treated and given short shrift. Focus is on maximizing positions of executive groups-maximizing executive compensation, perks, benefits. Golden parachutes are more important Immoral Management than returns to shareholders. Managers maximize their positions without shareholders being made aware. Concealment from shareholders is the operating procedure. Self-interest of management group is the order of the day. No special thought is given to shareholders: they are there and must be minimally accommodated. Profit focus of the business is their reward. Amoral Management No thought is given to ethical consequences of decisions for any stakeholder group, including owners. Communication is limited to that required by law. Shareholders' interest (short- and long-term) is a central factor. The best way to be ethical to shareholders is to treat all stakeholder claimants in Moral Management
a fair and ethical manner. To protect shareholders, an ethics committee of the board is created. Code of ethics is established. promulgated. and made a living document to protect shareholders' and others' interests.
Type of Management
Immoral Management
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Orientation Toward Employee Stakeholders
Employees are viewed as factors of production to be used, exploited, manipulated for gain of individual manager or company. No concern is
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shown for employees' needs/rights/expectations. Short-term focus. Coercive, controlling, alienating. Employees are treated as law requires. Attempts to motivate focus on increasing productivity rather than satisfying employees' growing maturity needs. Employees still seen as factors of production but Amoral Management remunerative approach used. Organization sees self-interest in treating employees with minimal respect. Organization structure, pay incentives, rewards all geared toward short- and medium-term productivity. Employees are a human resource that must be treated with dignity and respect. Goal is to use a leadership style such as Moral Management
consultative/participative that will result in mutual confidence and trust. Commitment is a recurring theme. Employees' rights to due process, privacy, freedom of speech, and safety are maximally considered in all decisions. Management seeks out fair dealings with employees.
By carefully considering the described stakeholder orientations under each of the three ethical types, a richer appreciation of the moral management approach should be possible. Our goal here is to gain a fuller understanding of what it means to engage in moral management and what this implies for interacting with stakeholders. To be sure, there are other stakeholder groups to which moral management should be directed, but again, space precludes their discussion here. This might include thinking of managers and non-managers as distinct categories of employees and would also embrace such groups as suppliers, competitors, special interest groups, government, and the media. Arguments:
Changed Public expectations
Better environment for business
Public Image
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Avoidance of regulation
Moral responsibility
Profit Maximization
Lack of Social Skills
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CSR- Indian Perspectives India began with a mixed economy consisting of state-owned public sector, and private sector subject to industrial licensing and many administrative controls on imports; exports; foreign exchange etc. Between 1950 and 1990, the economy grew at only 3.5% per annum. But Indian economy has witnessed a high growth path of 8% in 21st century. But on the other hand inflation rose above 12% which affect the poor more. Sustained Inclusive Growth requires an optimal blend of three sets of Actors and their respective responsibilities (Athreya, 2009). The first is Government Social Responsibilities (GSR) and the initiatives taken by government. But to achieve the above, corporates need to go hand in hand. The second is Corporate Social Responsibilities (CSR) which includes providing customer value; shareholder returns; and employee satisfaction. CSR approaches and strategies are based on – the ethical beliefs of the founding fathers, – business areas in which the companies operate, – the socio-economic environment, – opportunities emerging over long periods of their existence. – visibility(Global) – perception of customer oversight – Tied up with philanthropy and community development. – Community influence and paternalism among traders-turned entrepreneurs. – Foundations within companies that follow the Gandhian ideology of – “giving back to society”. In a developing country( India): •Focus on nation building Dept of MBA, SJBIT
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•Socio-economic development •Rural development •Employment •Education •Health care •Community support Front runners in India Birlas & Tatas- Led by philosophies of nation building & trusteeship • Hero Honda, Hindustan Unilever, ITC, Maruti Udyog etc- Fuse local business standards with the Partner/Parent company’s thrust • BHEL, ONGC, NTPC- Public sector-true to the reasons of being set up • IT, IT ES, Pharma, Life science etc- emerging companies/sector- Spread the positive spill over of their growth and success. CSR audit CSR auditing is a means to corporate social accounting. By CSR auditing the organizations show their commitment to systematic assessment and reporting of meaningful activities of the company which have social impact (Morimoto, Ash & Hope, 2005). About the extra-curricular contribution of Indian business for Indian society has been remarkably silent. CSR auditing becomes important because it shows performance gap, the gap between the corporate performance and potential of recent standards and guidelines. CSR auditing creates social transparency and encourage responsible decision making. Research has reported the demands of CSR report to be insufficient (social accountability system).. Examples of CSR: Voluntary Hazard Elimination Companies involved with social responsibility often take action to voluntarily eliminate production practices that could cause harm for the public, regardless of whether they are required by law. For example, a business could institute a hazard control program that includes steps to protect the public from exposure to hazardous substances through education and awareness. A plant that uses Dept of MBA, SJBIT
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chemicals could implement a safety inspection checklist to guide staff in best practices when handling potentially dangerous substances and materials. A business that makes excessive noise and vibration could analyze the effects its work has on the environment by surveying local residents. The information received could be used to adjust activities and develop soundproofing to lessen public exposure to noise pollution. Community Development Companies, businesses and corporations concerned with social responsibility align with appropriate institutions to create a better environment to live and work. For example, a corporation or business may set up a foundation to assist in learning or education for the public. This action will be viewed as an asset to all of the communities that it serves, while developing a positive public profile.
Philanthropy Businesses involved in philanthropy make monetary contributions that provide aid to local charitable, educational and health-related organizations to assist under-served or impoverished communities. This action can assist people in acquiring marketable skills to reduce poverty, provide education and help the environment. For example, the Bill and Melinda Gates Foundation focuses on global initiatives for education, agriculture and health issues, donating computers to schools and funding work on vaccines to prevent polio and HIV/AIDS. Creating Shared Value Corporate responsibility interests are often referred to as creating shared value or CSV, which is based upon the connection between corporate success and social well-being. Since a business needs a productive workforce to function, health and education are key components to that equation. Profitable and successful businesses must thrive so that society may develop and survive. Dept of MBA, SJBIT
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An example of how CSV works could be a company-sponsored contest involving a project to improve the management and access of water used by a farming community, to foster public health. Social Education and Awareness Companies that engage in socially responsible investing use positioning to exert pressure on businesses to adopt socially responsible behavior themselves. To do this, they use media and Internet distribution to expose the potentially harmful activities of organizations. This creates an educational dialogue for the public by developing social community awareness. This kind of collective activism can be affective in reaching social education and awareness goals. Integrating a social awareness strategy into the business model can also aid companies in monitoring active compliance with ethical business standards and applicable laws.
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Module 7 Business Law Business Law: Law of contract - meaning of contract, agreement, essential elements of a valid contract. Law of agency- meaning, creation and termination of agency. Bailment and Pledge meaning, rights and duties of bailor and bailee. Sale of Goods Act 1930: Definition of Sale, Sale v/s Agreement to Sell, Goods, Condition and Warranties, Express and Implied Condition, “Doctrine of Caveat Emptor”, Right and duties of Unpaid Seller. Meaning, scope and objectives of - Intellectual property law, law relating to patents, law relating to copyrights, law relating to trade mark. ***************************************************************************** INTRODUCTION: As we approach the new century, our world is increasingly described as a global village and our times as the post-geography era. Political boundaries are becoming less of a barrier in the face of the explosive growth of global investment and trade. Almost hundred investment laws and over a thousand bilateral investment treaties have extended to foreign investors, legal treatment equal, or similar to, that enjoyed by local investors. The right to national treatment is progressively finding its way to becoming part of customary international law. In these circumstances, it is no longer appropriate to speak of the need for a separate legal framework for international business distinct from that applicable to domestic business. What is needed is a legal framework that allows private business, regardless of whether it is domestic or foreign, to grow and prosper. If your business is going to succeed you need to ensure that it is legally sound. This means that you need to get legal advice from a registered law firm or solicitor. This guide outlines what kind of legal advice you will need to get and why it is so important to get it.
Why you need legal advice
The main forms of advice
What else a solicitor will help with
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Why need legal advice Yes, getting legal advice is an additional cost to your business but it can save you a lot more money in the long run. It is much easier to sort legal issues out at the beginning of your business instead of later when they can be more problematic and more costly. If you and your business are fully aware of relevant laws and regulations then it gives a sounder foundation to your venture. It shows that your business is built to last and has the ability to anticipate and react to change.
It is an extra cost for your company but getting legal advice now will save you time and money in the long run
It gives a solid foundation to your business and means you are prepared for the What else a solicitor will help with
They will act for you in a legal dispute and if you have to go to court. They can also give you advice if you have a website and are unsure about its legal ins and outs. They can also give you advice on financial matters such as how to keep your taxes to a minimum.
A solicitor will represent you if you become involved in a legal dispute and have to go to court
The effects of a flawed legal system on the business environment may be found in many areas which are only too familiar to businessmen. Here are some examples of what usually happens in the absence of appropriate and enforced legal rules: " The effects on contracts: Respect for contractual obligations will be left entirely to the good will of the contracting parties, agreements will be binding only to the extent their beneficiaries have effective power to make them so, and resorting to extra-legal means will become an ordinary method of enforcement. * The effect on property rights: Individuals and corporations will tend to acquire only the assets over which they can maintain effective property rights. Many will prefer to liquidate their assets and keep them in the form of deposits or portfolio investments abroad, putting pressure on the value of the local currency.
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" Effect on corporations: Most companies will take the form of closed corporations where shares are held by reliable friends and relatives, thus barring the formation of large domestic joint-stock companies and depriving ordinary citizens of opportunities to own stock portfolios. " Effect on the banking system: Banks will lend only to those who can offer real assets as collateral, or to those who have effective, namely political, power in the society, thus limiting the growth of the banking sector and of new investment while reinforcing the concentration of wealth. Debt recovery will become a major problem for banks, threatening their very existence. Both the banking system and the capital market will not properly function in the absence of an adequate regulatory framework strictly supervised by efficient agencies. Furthermore, different types of financial mechanisms will emerge, promising quick and lucrative returns, but ending in failures which may affect the economy as a whole. " Effect on the transfer of technology: The inflow of foreign direct investment, which normally introduces more modern technology, will slow down. Weak protection of intellectual property rights will stifle invention and the development of new ideas.
* Effect on transaction costs: Enterprises will avoid competitive bidding as a normal method of procurement, preferring to deal with familiar and reliable sources. They will also tend to seek favors from public officials through illegal means.
" Effect on ongoing legislation and regulation: Weak or ineffective laws usually lead to the enactment of further laws and regulations. An over-regulated economy undermines new investment, increases the cost of existing ones, and leads to the spread of corruption. The multiplication of laws and regulations also reduces their quality and the chances of their enforcement. The absence of judicial review, or its high cost, and delays in the administration ofjustice add to the negative impact. * Effect on the extent of criminal offenses in the economic sphere:Weak, ineffective, or excessive laws lead to tax evasion, smuggling, and the growth of organized crime.
What is Business Law? Businesses interact in many and varied ways. To name just a few types of business transactions, there are contracts, mergers and acquisitions, leasing, etc. How these Dept of MBA, SJBIT
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transactions are carried out is overseen by Business Law. Additionally, how businesses are formed is a large part of Business law. This area of law is very wide-ranging, although it deals primarily with defining the rights and responsibilities of businesses, rather than enforcing these laws.
LAW OF CONTRACT: We enter into contracts day after day. Taking a seat in a bus amounts to entering into a contract. When you put a coin in the slot of a weighing machine, you have entered into a contract. You go to a restaurant and take snacks, you have entered into a contract. In such cases, we do not even realise that we are making a contract. In the case of people engaged in trade, commerce and industry, they carry on business by entering into contracts. The law relating to contracts is to be found in the Indian Contract Act, 1872. The law of contracts differs from other branches of law in a very important respect. It does not lay down so many precise rights and duties which the law will protect and enforce; it contains rather a number of limiting principles, subject to which the parties may create rights and duties for themselves, and the law will uphold those rights and duties. Thus, we can say that the parties to a contract, in a sense make the law for themselves. So long as they do not transgress some legal prohibition, they can frame any rules they like in regard to the subject matter of their contract and the law will give effect to their contract. WHAT IS A CONTRACT? Section 2(h) of the Indian Contract Act, 1872 defines a contract as an agreement enforceable by law. Section 2(e) defines agreement as “every promise and every set of promises forming consideration for each other.” Section 2(b) defines promise in these words: “When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal when accepted, becomes a promise.” From the above definition of promise, it is obvious that an agreement is an accepted proposal. The two elements of an agreement are: (i) offer or a proposal (ii) an acceptance of that offer or proposal. What agreements are contracts? All agreements are not studied under the Indian Contract Act, as some of them are not contracts. Only those agreements which are enforceable at law are contracts.
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The Contract Act is the law of those agreements which create obligations, and in case of a breach of a promise by one party to the agreement, the other has a legal remedy. Thus, a contract consists of two elements: (i) an agreement (ii) legal obligation, i.e., it should be enforceable at law. However, there are some agreements which are not enforceable in a law court. Such agreements do not give rise to contractual obligations and are not contracts. Examples (1) A invites B for dinner in a restaurant. B accepts the invitation. On the appointed day, B goes to the restaurant. To his utter surprise A is not there. Or A is there but refuses to entertain B. B has no remedy against A. In case A is present in the restaurant but B fails to turn-up, then A has no remedy against B. (2) A gives a promise to his son to give him a pocket allowance of Rupees one hundred every month. In case A fails or refuses to give his son the promised amount, his son has no remedy against A.
In the above examples promises are not enforceable at law as there was no intention to create legal obligations. Such agreements are social agreements which do not give rise to legal consequences. This shows that an agreement is a broader term than a contract. And, therefore, a contract is an agreement but an agreement is not necessarily a contract.
ESSENTIAL ELEMENTS OF A VALID CONTRACT We have seen that the two elements of a contract are: (1) an agreement; (2) legal obligation. Section 10 of the Act provides for some more elements which are essential in order to constitute a valid contract. It reads as follows: “All agreements are contracts if they are made by free consent of parties, competent to contract, for a lawful consideration and with a lawful object and are not hereby expressly declared to be void.” Dept of MBA, SJBIT
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Thus, the essential elements of a valid contract can be summed up as follows 1. Agreement. 2. Intention to create legal relationship. 3. Free and genuine consent. 4. Parties competent to contract. 5. Lawful consideration. 6. Lawful object. 7. Agreements not declared void or illegal. 8. Certainty of meaning. 9. Possibility of performance. 10. Necessary Legal Formalities. These essential elements are explained briefly. 1. Agreement As already mentioned, to constitute a contract there must be an agreement. An agreement is composed of two elements—offer and acceptance. The party making the offer is known as the offer or, the party to whom the offer is made is known as the offeree. Thus, there are essentially to be two parties to an agreement. They both must be thinking of the same thing in the same sense. In other words, there must be consensus-ad-idem. 2. Intention to create legal relationship As already mentioned there should be an intention on the part of the parties to the agreement to create a legal relationship. An agreement of a purely social or domestic nature is not a contract. 3. Free and genuine consent The consent of the parties to the agreement must be free and genuine. The consent of the parties should not be obtained by misrepresentation, fraud, undue influence, coercion or mistake. If the consent is obtained by any of these flaws, then the contract is not valid. 4. Parties competent to contract The parties to a contract should be competent to enter into a contract. According to Section 11, every person is competent to contract if he (i) is of the age of majority, (ii) is of sound mind, and Dept of MBA, SJBIT
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(iii) is not disqualified from contracting by any law to which he is subject. Thus, there may be a flaw in capacity of parties to the contract. The flaw in capacity may be due to minority, lunacy, idiocy, drunkenness or status. If a party to a contract suffers from any of these flaws, the contract is unenforceable except in certain exceptional circumstances. 5. Lawful consideration The agreement must be supported by consideration on both sides. Each party to the agreement must give or promise something and receive something or a promise in return. Consideration is the price for which the promise of the other is sought. However, this price need not be in terms of money. In case the promise is not supported by consideration, the promise will be nudum pactum (a bare promise) and is not enforceable at law. Moreover, the consideration must be real and lawful. 6. Lawful object The object of the agreement must be lawful and not one which the law disapproves. 7. Agreements not declared illegal or void There are certain agreements which have been expressly declared illegal or void by the law. In such cases, even if the agreement possesses all the elements of a valid agreement, the agreement will not be enforceable at law. 8. Certainty of meaning The meaning of the agreement must be certain or capable of being made certain otherwise the agreement will not be enforceable at law. For instance, A agrees to sell 10 metres of cloth. There is nothing whatever to show what type of cloth was intended. The agreement is not enforceable for want of certainty of meaning. If, on the other hand, the special description of the cloth is expressly stated, say Terrycot (80 : 20), the agreement would be enforceable as there is no uncertainly as to its meaning. However, an agreement to agree is not a concluded contract. 9. Possibility of performance The terms of the agreement should be capable of performance. An agreement to do an act impossible in itself cannot be enforced. For instance, A agrees with B to discover treasure by magic. The agreement cannot be enforced. 10. Necessary legal formalities
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A contract may be oral or in writing. If, however, a particular type of contract is required by law to be in writing, it must comply with the necessary formalities as to writing, registration and attestation, if necessary. If these legal formalities are not carried out, then the contract is not enforceable at law.
CLASSIFICATION OF CONTRACTS:
Contracts may be classified in terms of their (1) validity or enforceability, (2) mode of formation, or (3) performance. 1. Classification according to validity or enforceability Contracts may be classified according to their validity as (i) Valid, (ii) Voidable, (iii) Void contracts or agreements, (iv) Illegal, or (v) Unenforceable. A contract to constitute a v alid contract must have all the essential elements discussed earlier. If one or more of these elements is/are missing, the contract is voidable, void, illegal or unenforceable. An unenforceable contract is neither void nor voidable, but it cannot be enforced in the court because it lacks some item of evidence such as writing, registration or stamping. For instance, an agreement which is required to be stamped will be unenforceable if the same is not stamped at all or is under-stamped. In such a case, if the stamp is required merely for revenue purposes, as in the case of a receipt for payment of cash, the required stamp may be affixed on payment of penalty and the defect is then cured and the contract becomes enforceable. If, however, the technical defect cannot be cured the contract remains unenforceable, e.g., in the case of an unstamped bill of exchange or promissory note. Contracts which must be in writing. The following must be in writing, a requirement laid down by statute in each case:
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(a) A negotiable instrument, such as a bill of exchange, cheque, promissory note (The Negotiable Instruments Act, 1881). (b) A Memorandum and Articles of Association of a company, an application for shares in a company; an application for transfer of shares in a company (The Companies Act, 1956). (c) A promise to pay a time-barred debt (Section 25 of the Indian Contract Act, 1872). (d) A lease, gift, sale or mortgage of immovable property (The Transfer of Property Act, 1882). Some of the contracts and documents evidencing contracts are, in addition to be in writing, required to be registered also. These are: 1. Documents coming within the purview of Section 17 of the Registration Act, 1908. 2. Transfer of immovable property under the Transfer of Property Act, 1882. 3. Contracts without consideration but made on account of natural love and affection between parties standing in a near relation to each other (Section 25, The Indian Contract Act, 1872). 4. Memorandum of Association, and Articles of Association of a Company, Mortgages and Charges (The Companies Act, 1956). 2. Classification according to mode of formation There are different modes of formation of a contract. The terms of a contract may be stated in words (written or spoken). This is an express contract. Also the terms of a contract may be inferred from the conduct of the parties or from the circumstances of the case. This is an implied contract (Section 9). Example If A enters into a bus for going to his destination and takes a seat, the law will imply a contract from the very nature of the circumstances, and the commuter will be obliged to pay for the journey. We have seen that the essence of a valid contract is that it is based on agreement of the parties. Sometimes, however, obligations are created by law (regardless of agreement) whereby an obligation is imposed on a party and an action is allowed to be brought by another party. These obligations are known as quasi-contracts. The Indian Contract Act, 1872 describes them as “certain relations resembling those created by contract”. Examples (1) A supplies B, a minor, with necessaries suitable to his condition in life. A is entitled to be reimbursed from B’s property. Dept of MBA, SJBIT
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(2) A supplies the wife and children of B, a minor, with necessaries suitable to their condition in life. A is entitled to be reimbursed from B’s property. (3) A, a tradesman, leaves goods at B’s house by mistake. B treats the goods as his own. B is bound to pay A for them. In all the above cases, the law implies a contract and a person who has got benefit is under an obligation to reimburse the other. 3. Classification according to performance Another method of classifying contracts is in terms of the extent to which they have been performed. Accordingly, contracts are:
executed,
executory
unilateral
bilateral.
An executed contract is one wholly performed. Nothing remains to be done in terms of the contract. A Unilateral Contract is one wherein at the time the contract is concluded there is an obligation to perform on the part of one party only. Example A makes payment for bus fare for his journey from Bombay to Pune. He has performed his promise. It is now for the transport company to perform the promise. A Bilateral Contract is one wherein there is an obligation on the part of both to do or to refrain from doing a particular thing. In this sense, Bilateral contracts are similar to executory contracts. An important corollary can be deduced from the distinction between Executed and Executory Contracts and between Unilateral and Bilateral contracts. It is that a contract is a contract from the time it is made and not from the time its performance is due. The performance of the contract can be made at the time when the contract is made or it can be postponed also. Classification/Types of Contracts From the point of view of enforceability (a) Valid contracts (b) Voidable contracts (c) Void contracts or agreements Dept of MBA, SJBIT
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(d) Illegal agreements (e) Unenforceable Agreements (Certain contracts must be in writing) 2. According to Mode of Formation (a) Express contract (b) Implied contract (c) Quasi-contracts 3. According to Performance (a) Executed (b) Executory (c) Uni-lateral (d) Bi-lateral OFFER/PROPOSAL A proposal is defined as “when one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal.” [Section 2 (a)]. An offer is synonymous with proposal. The offeror or proposer expresses his willingness “to do” or “not to do” (i.e., abstain from doing) something with a view to obtain acceptance of the other party to such act or abstinence. Thus, there may be “positive” or “negative” acts which the proposer is willing to do. Examples (1) A offers to sell his book to B. A is making an offer to do something, i.e., to sell his book. It is a positive act on the part of the proposer. (2) A offers not to file a suit against B, if the latter pays A the amount of Rs. 200 outstanding. Here the act of A is a negative one, i.e., he is offering to abstain from filing a suit. HOW AN OFFER IS MADE? An offer can be made by (a) any act or (b) omission of the party proposing by which he intends to communicate such proposal or which has the effect of communicating it to the other (Section 3). An offer can be made by an act in the following ways: (a) by words (whether written or oral). The written offer can be made by letters, telegrams, telex messages, advertisements, etc. The oral offer can be made either in person or over telephone.
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(b) by conduct. The offer may be made by positive acts or signs so that the person acting or making signs means to say or convey. However silence of a party can in no case amount to offer by conduct. An offer can also be made by a party by omission (to do something). This includes such conduct or forbearance on one’s part that the other person takes it as his willingness or assent. An offer implied from the conduct of the parties or from the circumstances of the case is known as implied offer. Acceptance: is defined as the willingness to accept Specific and General Offer An offer can be made either: 1. to a definite person or a group of persons, or 2. to the public at large. The first mode of making offer is known as specific offer and the second is known as a general offer. In case of the specific offer, it may be accepted by that person or group of persons to whom the same has been made. The general offer may be accepted by any one by complying with the terms of the offer. The celebrated case of Carlill v. Carbolic Smoke Ball Co., (1813) 1 Q.B. 256 is an excellent example of a general offer and is explained below. Essential requirements of a valid offer An offer must have certain essentials in order to constitute it a valid offer. These are: 1. The offer must be made with a view to obtain acceptance [Section 2(a)]. 2. The offer must be made with the intention of creating legal relations. 3. The terms of offer must be definite, unambiguous and certain or capable of being made certain (Section 29). The terms of the offer must not be loose, vague or ambiguous. Offer vis-a-vis declaration of intention to offer A person may make a statement without any intention of creating a binding obligation. It may amount to a mere declaration of intention and not to a proposal. Revocation or Withdrawal of a tender. A tenderer can withdraw his tender before its final acceptance by a work or supply order. This right of withdrawal shall not be affected even if there is a clause in the tender restricting his right to withdraw. A tender will, however, be irrevocable Dept of MBA, SJBIT
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where the tenderer has, on some consideration, promised not to withdraw it or where there is a statutory prohibition against withdrawal Special terms in a contract. The special terms, forming part of the offer, must be duly brought to the notice of the offeree at the time the offer is made. If it is not done, then there is no valid offer and if offer is accepted, and the contract is formed, the offeree is not bound by the special terms which were not brought to his notice. The terms may be brought to his notice either: (a) by drawing his attention to them specifically, or (b) by inferring that a man of ordinary prudence could find them by exercising ordinary intelligence. (a) the examples of the first case are where certain conditions are written on the back of a ticket for a journey or deposit of luggage in a cloak room and the words. “For conditions see back” are printed on the face of it. In such a case, the person buying the ticket is bound by whatever conditions are written on the back of the ticket whether he has read them or not. Cross Offers Where two parties make identical offers to each other, in ignorance of each other’s offer, the offers are known as cross-offers and neither of the two can be called an acceptance of the other and, therefore, there is no contract. Termination or Lapse of an Offer An offer is made with a view to obtain assent thereto. As soon as the offer is accepted it becomes a contract. But before it is accepted, it may lapse, or may be revoked. Also, the offeree may reject the offer. In these cases, the offer will come to an end. Essential Requirements of a Valid Offer 1. Must be made with a view to obtain acceptance. 2. Must be made with the intention of creating legal relations. 3. Terms of offer must be definite, unambigous and certain or capable of being made certain. 4. It must be distinguished from mere declaration of intention or an invitation to offer. 5. It must be communicated to the offeree. 6. The offer must not contain a term the non-compliance of which may be assumed to amount to acceptance. 7. A tender is an offer as it is in response to an invitation to offer. Dept of MBA, SJBIT
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8. The Special terms, forming part of the offer, must be duly brought to the notice of the offeree at the time the offer is made. 9. Two identical cross-offers do not make a contract.
(1) The offer lapses after stipulated or reasonable time. [Section 6(2)] The offer must be accepted by the offeree within the time mentioned in the offer and if no time is mentioned, then within a reasonable time. The offer lapses after the time stipulated in the offer expires if by that time offer has not been accepted. If no time is specified, then the offer lapses within a reasonable time. What is a reasonable time is a question of fact and would depend upon the circumstances of each case.
2. An offer lapses by the death or insanity of the offerer or the offeree before acceptance. Section 6(4) provides that a proposal is revoked by the death or insanity of the proposer, if the fact of his death or insanity comes to the knowledge of the acceptor before acceptance. Therefore, if the acceptance is made in ignorance of the death, or insanity of offerer, there would be a valid contract. Similarly, in the case of the death of offeree before acceptance, the offer is terminated. 3. An offer terminates when rejected by the offeree. 4. An offer terminates when revoked by the offerer before acceptance. 5. An offer terminates by not being accepted in the mode prescribed, or if no mode is prescribed, in some usual and reasonable manner. 6. A conditional offer terminates when the condition is not accepted by the offeree. 7. Counter offer. An offer terminates by counter-offer by the offeree. When in place of accepting the terms of an offer as they are, the offeree accepts the same subject to certain condition or qualification, he is said to make a counter-offer. The following have been held to be counter-offers: (i) Where an offer to purchase a house with a condition that possession shall be given on a particular day was accepted varying the date for possession (ii) An offer to buy a property was accepted upon a condition that the buyer signed an agreement which contained special terms as to payment of deposit, making out title completion date, the agreement having been returned unsigned by the buyer Dept of MBA, SJBIT
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(iii) An offer to sell rice was accepted with an endorsement on the sold and bought note that yellow and wet grain will not be accepted (iv) Where an acceptance of a proposal for insurance was accepted in all its terms subject to the condition that there shall be no assurance till the first premium was paid. Consent : (Free consent)
meaning of consent: it means an act of assenting to an offer. According to section 13, "Tow or more persons are said to consent when they agree upon the same thing in the same thing in same sense." Thus, consent involves identity of minds in respect of the subject matter of the contract. In English Law, this is called 'consensus-ad-idem'.
Effect of Absence of consent: Free
consent:
Meaning of consent: it means an act of assenting to an offer. According to section 13, "Tow or more persons are said to consent when they agree upon the same thing in the same thing in same sense." Thus, consent involves identity of minds in respect of the subject matter of the contract. In English Law, this is called 'consensus-ad-idem'.
Meaning of Free consent: It is one of the essential elements of a valid contract as it is evidenced by section 10 which provides that all agreements are contracts if they are made by the free consent of the parties... according to section 14, consent is said to be free when it is not caused by (a) Coercion, or (b)Undue influence, or (c) Fraud, or (d) Misrepresentation, or (e) Mistake.
Void Agreements: A void contract, also known as a void agreement, is not actually a contract. A void contract cannot be enforced by law. Void contracts are different from voidable contracts, which are contracts that may be (but not necessarily will be) nullified. An agreement to carry out an illegal act is an example of a void contract or void agreement. For example, a contract between drug dealers and buyers is a void contract simply because the terms Dept of MBA, SJBIT
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of the contract are illegal. In such a case, neither party can go to court to enforce the contract. A void contract is void ab initio, i e from the beginning while a voidable contract can be voidable by one or all of the parties Law of Agency: Meaning: The law of agency is an area of commercial law dealing with a set of contractual, quasi-contractual and non-contractual fiduciary relationships that involve a person, called the agent, that is authorized to act on behalf of another (called the principal) to create legal relations with a third party. Succinctly, it may be referred to as the relationship between a principal and an agent whereby the principal, expressly or implicitly, authorizes the agent to work under his control and on his behalf. The agent is, thus, required to negotiate on behalf of the principal or bring him and third parties into contractual relationship. This branch of law separates and regulates the relationships between:
agents and principals (internal relationship), known as the principal-agent relationship;
agents and the third parties with whom they deal on their principals' behalf (external relationship); and
principals and the third parties when the agents purport to deal on their behalf.
Liability Liability of agent to third party If the agent has actual or apparent authority, the agent will not be liable for acts performed within the scope of such authority, so long as the relationship of the agency and the identity of the principal have been disclosed. When the agency is undisclosed or partially disclosed, however, both the agent and the principal are liable. Where the principal is not bound because the agent has no actual or apparent authority, the purported agent is liable to the third party for breach of the implied warranty of authority.
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Liability of agent to principal If the agent has acted without actual authority, but the principal is nevertheless bound because the agent had apparent authority, the agent is liable to indemnify the principal for any resulting loss or damage. Liability of principal to agent If the agent has acted within the scope of the actual authority given, the principal must indemnify the agent for payments made during the course of the relationship whether the expenditure was expressly authorized or merely necessary in promoting the principal's business. Duties An agent owes the principal a number of duties. These include:
a duty to undertake the task or tasks specified by the terms of the agency;
a duty to discharge his duties with care and due diligence;
An agent must not accept any new obligations that are inconsistent with the duties owed to the principal. An agent can represent the interests of more than one principal, conflicting or potentially conflicting, only after full disclosure and consent of the principal. An agent must not usurp an opportunity from the principal by taking it for himself or passing it on to a third party. In return, the principal must make a full disclosure of all information relevant to the transactions that the agent is authorized to negotiate. Termination The internal agency relationship may be dissolved by agreement. Under sections 201 to 210 of the Indian Contract Act 1872, an agency may come to an end in a variety of ways:
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1. Withdrawal by the agent – however, the principal cannot revoke an agency coupled with interest to the prejudice of such interest. An agency is coupled with interest when the agent himself has an interest in the subject-matter of the agency, e.g., where the goods are consigned by an upcountry constituent to a commission agent for sale, with poor to recoup himself from the sale proceeds, the advances made by him to the principal against the security of the goods; in such a case, the principal cannot revoke the agent’s authority till the goods are actually sold and debts satisfied, nor is the agency terminated by death or insanity (illustrations to s. 201); 2. By the agent renouncing the business of agency; 3. By discharge of the contractual agency obligations. Alternatively, agency may be terminated by operation of law: 1. By the death of either party; 2. By the insanity of either party; 3. By the bankruptcy (insolvency) of either party; The principal also cannot revoke the agent’s authority after it has been partly exercised, so as to bind the principal (s. 204), though he can always do so, before such authority has been so exercised (s. 203). Further, under s. 205, if the agency is for a fixed period, the principal cannot terminate the agency before the time expired, except for sufficient cause. If he does, he is liable to compensate the agent for the loss caused to him thereby. The same rules apply where the agent, renounces an agency for a fixed period. Notice in this connection that want of skill, continuous disobedience of lawful orders, and rude or insulting behavior has been held to be sufficient cause for dismissal of an agent. Further, reasonable notice has to be given by one party to the other; otherwise, damage resulting from want of such notice, will have to be paid (s. 206). Under s. 207, the revocation or renunciation of an agency may be made expressly or implicitly by conduct. The termination does not take effect as regards the agent, till it becomes known to him and as regards third party, till the termination is known to them (s. 208). When an agent’s authority is terminated, it operates as a termination of subagent also (s. 210) Dept of MBA, SJBIT
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Agency relationships Agency relationships are common in many professional areas.
employment.
financial advice (insurance agency, stock brokerage, accountancy)
contract negotiation and promotion (business management) such as for publishing, fashion model, music, movies, theatre, show business, and sport.
An agent in commercial law (also referred to as a manager) is a person who is authorized to act on behalf of another (called the principal or client) to create a legal relationship with a third party. BAILMENT The rightful possession of goods by one who is not the owner Delivery of goods by one person to another For some purpose, Upon a contract that they shall be returned or disposed off according to the directions of the person delivering them
Delivery upon contract In the Indian context, delivery of goods should be made for some purpose and upon a contract that when the purpose is accomplished the goods shall be returned to the bailor. It follows that if a person’s goods go into the possession of another without contract, there is no bailment DUTIES OF A BAILOR: Duty of Gratuitous Bailor The bailor is bound to disclose to the bailee faults in the goods bailed, of which the bailor is aware. Duty of Bailor for reward The bailor is responsible for such damage, whether he was or was not aware of the existence of such faults in the goods bailed. DUTIES OF A BAILEE Dept of MBA, SJBIT
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Duty of reasonable care*: In all cases of bailment**, the bailee is bound to take as much care of the goods bailed to him as a man of ordinary prudence would, under similar circumstances take, of his own goods of the same bulk, quality and value as the goods bailed. *Care which the nature and quality of the articles requires **Whether gratuitous or for reward
Right to compensation: If the bailor has no right to bail the goods, or to receive them back or to give directions respecting them and the bailee is exposed to some loss Right to necessary expenses or remuneration Right of lien: Particular Lien General Lien (exercised by Bankers, Factors, Wharfingers, Attorneys of High Court, Policy Brokers) Right to sue If a third person wrongfully deprives the bailee of the use or possession of the goods bailed PLEDGE The bailment of goods as security for payment of debt or performance of a promise. Pledge is a special kind of bailment The chief basis of distinction is the object of the contract Bailment is to provide a security for a loan or for the fulfillment of an obligation Bailor is called the pawnor Bailee is called the pawnee Delivery of possession is a necessary element in the making of a pawn Delivery may be actual or constructive Dept of MBA, SJBIT
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Delivery of documents of title is equally effective to create a pledge Pledge is a conveyance pursuant to a contract
Delivery and advance need not be simultaneous Pledge may be perfected by delivery after the advance is made Delivery may be made before or in contemplation of an advance Rights of the Pawnee Right of retainer: Until dues are paid (interest & expenses) Right to extraordinary expenses: Expenses incurred for the preservation of the goods No right of retainer, he can only sue to recover Right of sale when pawnor defaults: After giving pawnor reasonable notice of sale If proceeds are less than the amount due, pawnor is still liable to pay the balance & if proceeds are greater than the amount due, the pawnee shall pay over the surplus to the pawnor
SALE OF GOODS ACT -1930 This Act may be called the Sale of Goods Act, 1930. It extends to the whole of India (except the State of Jammu and Kashmir). It shall come into force on the 1st day of July, 1930 Definitions .- In this Act, unless there is anything repugnant in the subject of content(1) ‘buyer" means a person who buys or agrees to buy goods, (2) "delivery" means voluntary transfer of possession from one person to another. Applications of provisions of Act 9 of 1882.- The unrevealed provisions of the Indian Contract Act, 1872 save insofar as they are inconsistent with the express provisions of this Act, shall continue to apply to contracts for sale of goods. Sale vs agreement to sell: (1) A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price. There may be a Dept of MBA, SJBIT
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contract of sale between one part-owner and another. (2) A contract of sale may be absolute or conditional (3) Where under a contract of sale the property in the goods in transferred from the seller to the buyer, the contract is called a sale, but where the transfer of the property in the goods is to take place at a future time or subject to some condition thereafter to be fulfilled, the contract is called an agreement to sell. (4) An agreement to sell becomes a sale when the time elapses or the conditions are fulfilled subject to which the property in the goods is to be transferred. Contract of Sale how made -. (1) A contract of sale is made by an offer to buy or sell goods for a price and the acceptance of such offer. The contract may provide for the immediate delivery of the goods or immediate payment of the price or both, or for the delivery or payment by instalments, or that the delivery or payment or both shall be postponed. (2) Subject to the provisions of any law for the time being in force, a contract of sale may be made in writing or by word of mouth, or partly in writing and partly by word of mouth or may be implied from the conduct of the parties.
Goods: (1) The goods which form the subject of a contract of sale may be either existing goods, owned or possessed by the seller, or future goods. (2) There may be a contract for the sale of goods the acquisition of which by the seller depends upon a contingency which may or may not happen. (3) Where by a contract of sale the seller purports to effect a present sale of future goods, the contract operates as an agreement to sell the goods. Goods perishing before making of contract.- Where there is a contract for the sale of specific goods, the contract is void if the goods without the knowledge of the seller have, at the time when the contract was made, perished or become so damaged as no longer to answer to their description in the contract. Dept of MBA, SJBIT
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Goods perishing before sale but after agreement to sell.- Where there is an agreement to sell specific goods, and subsequently the goods without any fault on the part of the seller or buyer perish or become so damaged as no longer to answer to their description in the ag reement before the risk passes to the buyer, the agreement is thereby avoided. Ascertainment of price.(1) The price in a contract of sale may be fixed by the contract or may be left to be fixed in manner thereby agreed or may be determined by the course of dealing between the parties. (2) Where the price is not determined in accordance with the foregoing provisions, the buyer shall pay the seller a reasonable price. What is a reasonable price is a question of fact dependent on the circumstances of each particular case. Agreement to sell at valuation.(1) Where there is an agreement to sell goods on the terms that the price is to be fixed by the valuation of a third party and such third party cannot or does not make such valuation, the agreement is thereby avoided. Provided that, if the goods or any part thereof have been delivered to, and appropriated by, the buyer, he shall pay a reasonable price therefore (2) Where such third party is prevented from making the valuation by the fault of the seller or buyer, the party not in fault may maintain a suit for damages against the party in fault.
Stipulations as to time.- Unless a different intention appears from the terms of the contract, stipulations as to time of payment are not deemed to be of the essence of a contract of sale. Whether any other stipulations as to time is of the essence of the contract or not depends on the terms of the contract. Condition and warranty.(1) A stipulation in a contract of sale with reference to goods which are the subject thereof may be a condition or a warranty. (2) A condition is a stipulation essential to the main purpose of the contract, the breach of which gives rise to right to treat the contract as repudiated. (3) A warranty is a stipulation collateral to the main purpose of the contract, the breach of which Dept of MBA, SJBIT
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gives rise to a claim for damages but not to a right to reject the goods and treat the contract as repudiated. (4) Whether a stipulation in a contract of sale is condition or a warranty depends in each case on the construction of the contract. When condition to be treated as warranty.1) Where a contract of sale is subject to any condition to the fulfilled by the seller, the buyer may waive the condition or elect to treat the breach of the condition as a breach of warranty and not as a ground for relating the contract as repudiated. (2) Where a contract of sale is not severable and the buyer has accepted the goods or part thereof, the breach of any condition to be fulfilled by the seller can only be treated as a breach of warranty and not as a ground for rejecting the goods and treating the contract as repudiated, unless there is a term of the contract, express or implied, to that effect. (3) Nothing in this section shall affect the case of any condition or warranty fulfilment of which is excused by law by reason of impossibility of otherwise. Implied undertaking as to tile, etc.- In a contract of sale, unless the circumstances of the contract are such as to show a different intention there is(a) an implied condition on the part of the seller that, in the case of a sale, he has a right to sell the goods and that, in the case of an agreement to sell, he will have a right to sell the goods at the time when the property is to pass. (b) an implied warranty that the buyer shall have and enjoy quiet possession of the goods. (c) an implied warranty that the goods shall be free from any charge or encumbrance in favour of any third party not declared or known to the buyer before or at the time when the contract is made. Sale by description.- Where there is a contract for the sale of goods by description, there is an implied condition that the goods shall correspond with the description, and, if the sale is by sample as well as by description, it is not sufficient that the bulk of the goods corresponds with the sample if the goods do not also correspond with the description. Sale by sample.(1) A contract of sale is a contract for sale by sample where there is a term in the contract, express or implied, to that effect. Dept of MBA, SJBIT
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(2) In the case of a contract for sale by sample there is an implied condition (a) that the bulk shall corresponded with the sample in quality. (b) that the shall have a reasonable opportunity of comparing the bulk with the sample. (c) that the goods shall be free from any defect, rendering them un-merchantable, which would not be apparent on reasonable examination of the Effects of the Contract Goods must be ascertained.- Where there is a contract for the sale of unascertained goods, no property in the goods is transferred to the buyer unless and until the goods are sanctioned. Property passes when intended to pass.- (1) Where there is a contract for the sale of specific or ascertained goods the property in them is transferred to the buyer at such time as the parties to the contract intend it to be transferred. (2) For the purpose of ascertaining the intention of the parties regard shall be had to the terms of the contract, the conduct of the parties and the circumstances of the case. (3) Unless a different intention appears, the rules contained in Section 20 to 24 are rules for ascertaining the intention of the parties as to the time at which the property in the goods is to pass to the buyer. Specific goods in a deliverable state.- Where there is an unconditional contract for the sale of specific goods in a deliverable state, the property in the goods passes to the buyer when the contract is made, and it is immaterial whether the time of payment of the price or the time of delivery of the goods, or both, is postponed. Specific goods to be put into a deliverable state.- Where there is a contract for the sale of specific goods and the seller is bound to do something to the goods for the purpose of putting them into a deliverable state, the property does not pass until such thing is done and the buyer has notice thereof. Specific goods in a deliverable state, when the seller has to do anything thereto in order to ascertain price.- Where there is a contract for the sale of specific goods in a deliverable state, but the seller is bound to weigh, measure, test or do some other act or thing with reference to the goods for the purpose of ascertaining the price, the property does not pass until such act or thing is done and the buyer has notice thereof. Sale of unascertained goods and appropriation.- (1) Where there is a contract for the sale Dept of MBA, SJBIT
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of unascertained or future goods by description and goods of that description and in a deliverable state are unconditionally appropriated to the contract, either by the seller with the assent of the buyer or by the buyer with the assent of the seller, the property in the goods thereupon passes to the buyer. Such assent may be expressed or implied, and may be given either before or after the appropriation is made. (2) Delivery to carrier.- Where, in pursuance of the contract, the seller delivers the goods Goods sect on approval or ‘on sale or return’- when goods are delivered to the buyer on approval or on sale or return or other similar terms, the property therein passes to the buyer(a) when he signifies his approval or acceptance to the seller to does not other act adopting the transaction. (b) if he does not signify his approval or acceptance to the seller but retains the goods without giving notice of rejection, then, if a time has been fixed for the return of the goods, on the expiration of such time, and, if not time has been fixed, on the expiration of a reasonable time. Reservation of right of disposal.- (1) Where there is a contract for the sale of specific goods or where goods are subsequently appropriated to the contract, the seller may, by the terms of the contract or appropriation, reserve the right of disposal of the goods until certain conditions are fulfilled. In such case, notwithstanding the delivery of the goods to a buyer, or to a carrier or other bailee for the purpose of transmission to the buyer, the property in the goods does not pass to the buyer until the conditions imposed by the seller are fulfilled. (2) Where goods are shipped or delivered to a railway administration for carriage by railway and by the bill of landing or railway receipt, as the case may be, the goods are deliverable to the order of the seller or his agent, the seller is prima facie deemed to reserve the right of disposal. (3) Where the seller of goods draws on the buyer for the price and transmits to the buyer the bill of exchange together with the bill of lading or, as the may be, the railway receipt, to secure acceptance to payment of the bill of exchange, the buyer is bound to return the bill of lading or the railway receipt if he does not honour the bill of exchange, and, if he wrongfully retains the bill of lading or the railway receipt, the property in the goods does not pass to him. Doctrine of Caveat emptor
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Under the principle of caveat emptor, the buyer could not recover damages from the seller for defects on the property that rendered the property unfit for ordinary purposes. The only exception was if the seller actively concealed latent defects or otherwise made material misrepresentations amounting to fraud. Before statutory law, the buyer had no express warranty ensuring the quality of goods. Common law requires that goods must be "fit for the particular purpose" and of "merchantable quality" but this implied warranty can be difficult to enforce and may not apply to all products. Hence, buyers are still advised to be cautious. Performance of the Contract Duties of seller and buyer.- It is the duty of the seller to deliver the goods and of the buyer to accept and pay for them, in accordance with the terms of the contract of sale. Payment and delivery are concurrent conditions.- Unless otherwise agreed, delivery of the gods and payment of the price are concurrent conditions, that is to say, the seller shall be ready and willing to give possession of the goods to the buyer in exchange for the price, and the buyer shall be ready and willing to pay the price in exchange for possession of the goods. Delivery.- Delivery of goods sold may be made by doing anything which the parties agree shall be treated as delivery or which has the effect of putting the goods in the possession of the buyer or of any person authorised to hold them on his behalf. Effect of part delivery.- A delivery of part of goods, in progress of the delivery of the whole has the same effect, for the purpose of passing the property in such goods, as a delivery of the whole, but a delivery of part of the gods, with an intention of severing it from the whole, does not operate as a delivery of the remainder. Buyer to apply for delivery.- Apart from any express contract, the seller of goods in not bound to deliver them until the buyer applies for delivery. Rules as to delivery.- (1) Whether it is for the buyer to take possession of the goods or for the seller to send them to the buyer is a question depending in each case on the contract, express or implied, between the parties. Apart from any such contract, goods sold are to be delivered at the place at which they are the time of the sale, and goods agreed to be sold are to be delivered at the place at which they are at the time of the agreement to sell, if not then in existence, at the Dept of MBA, SJBIT
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place at which they are manufactured or produced. (2) Where under the contract of sale the seller is bound to send the goods to the buyer, but no time for sending them is fixed, the seller is bound to send them within a reasonable time. (3) Where the goods at the time of sale are in the possession of a third person, there is no delivery by seller to buyer unless and until such third person acknowledges to the buyer that he holds the goods on his behalf. Provided that nothing in this section shall affect the operation of the issue or transfer of any document of title to goods. (4) Demand or tender of delivery may be treated as ineffectual unless made at a reasonable hour. What is a reasonable hour is a question of fact. (5) Unless otherwise agreed, the expense of and incidental to putting the goods into a deliverable state shall be borne by the seller. Delivery of wrong quantity.- (1) Where the seller delivers to the buyer a quantity of good less than he contracted to sell, the buyer may reject them, but if the buyer accepts the goods so delivered he shall pay for them at the contract rate. (2) Where the seller delivers to the buyer a quantity of goods larger than he contracted to sell the buyer may accept the goods included in the contact and reject the rest, or he may reject the whole. If the buyer accepts the whole of the goods so delivered, he shall pay for them at the contract rate. (3) Where the seller delivers to the buyer the gods he contract to sell mixed with goods of a different description not included in the contract., the buyer may accept the goods which are in accordance with the contract and reject the rest, or may reject the whole. (4) The provisions of this section are subject to any usage of trade, special agreement or course of dealing between the parties. Installment deliveries.- (1) Unless otherwise agreed, the buyer of goods is not bound to accept delivery thereof by instalments. (2) Where there is a contract for the sale of goods to be delivered by stated instalments which are to be separately paid for, and the seller makes no delivery or defective delivery in respect of one or more instalments, or the buyer neglects or refuses to take delivery of or pay for one or more instalments, it is a question in each cased depending on the terms of the contract and the Dept of MBA, SJBIT
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circumstances of the case, whether the breach of contract is a repudiation of the whole contract, or whether it is a severable breach giving rise to a claim for compensation, but not a right to treat the whole contract as repudiated. Delivery to carrier or wharfinger.- (1) Where, in pursuance of a contract of sale, the seller is authorised or required to send the goods to he buyer, delivery of the goods to a carrier, whether named by the buyer or not, for the purpose of transmission to the buyer, or delivery of the goods to a wharfinger for safe custody, is prima facie deemed to be a delivery of the goods to the buyer. (2) Unless otherwise authorised by the buyer, the seller shall makes such contract with the carrier or wharfinger on behalf of the buyer as may be reasonable having regard to the nature of the goods and the other circumstances of the case. If the seller omits so to do, and the goods are lost or damaged in course of transit or whilst in the custody of the wharfinger, the buyer made decline to treat the delivery to the carrier or wharfinger as a delivery to himself, or may hold the seller responsible in damages. (3) Unless otherwise agreed, where goods are sent by the seller to the buyer by a route involving sea transit, in circumstances in which it is usual to insure, the seller shall give such notice to the buyer as may enable him to insure them during their sea transit and if the seller fails so to do, the goods shall be deemed to be at his risk during such sea transit. Risk where goods are delivered at distant place.- Where the seller of goods agrees to deliver them at his own risk at place other than that where they are when sold, the buyer shall, nevertheless, unless otherwise agreed, take any risk of deterioration in the goods necessarily incident to the course of transit. Buyer’s right of examining the goods.- (1) Where goods are delivered to the buyer which he has not previously examined, he is not deemed to have accepted them unless and until he has a reasonable opportunity of examining them for the purpose of ascertaining whether they are in conformity with the contract. (2) Unless otherwise agreed, when the seller tenders delivery of goods to the buyer, he is bound, on request, on request, to afford the buyer a reasonable opportunity of examining the goods for the purpose of ascertaining whether they are in conformity with the contract, Buyer not bound to return rejected goods.- Unless otherwise agreed, where goods are delivered to the buyer and he refuses to accept them, having the right so to do, he is not bound to Dept of MBA, SJBIT
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return them to the seller, but it is sufficient it he intimates to the seller that he refuses to accept them. Buyer not bound to return rejected goods.- Unless otherwise agreed, where goods are delivered to the buyer and he refuses to accept them, having the right so to do, he is not bound to return them to the seller, but it is he intimates to the seller that he intimates to the seller that he refuses to accept them. Liability of buyer for neglecting or refusing delivery of goods.- When the seller is ready and willing to deliver the goods and requests the buyer to take delivery, and the buyer does not within a reasonable time after such request take delivery of the goods , he is liable to the seller for any loss occasioned by his neglect or refusal to take delivery and also for a reasonable charge for the care and custody of the goods. Provided that nothing in this section shall affect the rights of the seller where the neglect or refusal of the buyer to take delivery amounts to a repudiation of the contract. Rights of unpaid seller against the goods "Unpaid seller" defined.- (1) The seller of goods is deemed to be an "unpaid seller" within the meaning of this Act(a) When the whole of the price has not been paid or tendered. (b) When a bill of exchange or other negotiable instrument has been received as conditional payment, and the conditions on which it was received has not been fulfilled by reason of the dishonour of the instrument or otherwise. Unpaid seller’s rights.- (1) Subject to the provisions of this Act and of any law for the for the time being in force, notwithstanding that the property in the goods may have passed to the buyer, the unpaid seller of goods, as such, has by implication of law. (a) a lien on the goods for the period while he is in possession of them, (b) in case of the insolvency of the buyer a right of stopping the goods in transit after he has parted with the possession of them. (c) a right of re-sale as limited by this Act. (2) Where the property in goods has not passed to the buyer, the unpaid seller has, in addition to his other remedies, a right of withholding delivery similar to and co-extensive with his rights of lien and stoppage in transit where the property has passed to the buyer. Dept of MBA, SJBIT
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Intellectual Property Law: Intellectual property (IP) refers to creations of the mind: inventions, literary and artistic works, and symbols, names, images, and designs used in commerce. Intellectual property relates to items of information or knowledge, which can be incorporated in tangible objects at the same time in an unlimited number of copies at different locations anywhere in the world. The property is not in those copies but in the information or knowledge reflected in them. Intellectual property rights are also characterized by certain limitations, such as limited duration in the case of copyright and patents. Countries generally have laws to protect intellectual property for two main reasons. One is to give statutory expression to the moral and economic rights of creators in their creations and to the rights of the public in accessing those creations. The second is to promote creativity, and the dissemination and application of its results, and to encourage fair trade, which would contribute to economic and social development. IP is divided into two categories: Industrial property, which includes inventions (patents), trademarks, industrial designs, and geographic indications of source; and Copyright, which includes literary and artistic works such as novels, poems and plays, films, musical works, artistic works such as drawings, paintings, photographs and sculptures, and architectural designs. Rights related to copyright include those of performing artists in their performances, producers of phonograms in their recordings, and those of broadcasters in their radio and television programs. The innovations and creative expressions of indigenous and local communities are also IP, yet because they are “traditional” they may not be fully protected by existing IP systems. Access to, and equitable benefit-sharing in, genetic resources also raise IP questions. The Two Branches of Intellectual Property: Industrial Property and Copyright Intellectual property is usually divided into two branches, namely industrial property, which broadly speaking protects inventions, and copyright, which protects literary and artistic works. Industrial property takes a range of forms. These include patents to protect inventions, and industrial designs, which are aesthetic creations determining the appearance of industrial products. Industrial property also covers trademarks, service marks, layout-designs of integrated circuits, Dept of MBA, SJBIT
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commercial names and designations, as well as geographical indications, and protection against unfair competition. Copyright relates to artistic creations, such as books, music, paintings and sculptures, films and technology-based works such as computer programs and electronic databases. In most European languages other than English, copyright is known as author’s rights. The expression copyright refers to the main act which, in respect of literary and artistic creations, may be made only by the author or with his authorization. That act is the making of copies of the work. The expression author’s rights refers to the creator of the artistic work, its author. It thus underlines the fact, recognized in most laws, that the author has certain specific rights in his creation which only he can exercise (such as the right to prevent a distorted reproduction). Other rights (such as the right to make copies) can be exercised by other persons, for example, a publisher who has obtained a license from the author. While other types of intellectual property also exist, it is helpful for present purposes to explore the distinction between industrial property and copyright in terms of the basic difference between inventions and literary and artistic works. Inventions may be defined in a non-legal sense as new solutions to technical problems. These new solutions are ideas, and are protected as such; protection of inventions under patent law does not require that the invention be represented in a physical embodiment. The protection accorded to inventors is, therefore, protection against any use of the invention without the authorization of the owner. Even a person who later makes the same invention independently, without copying or even being aware of the first inventor’s work, must obtain authorization before he can exploit it. Unlike protection of inventions, copyright law protects only the form of expression of ideas, not the ideas themselves. The creativity protected by copyright law is creativity in the choice and arrangement of words, musical notes, colors and shapes. So copyright law protects the owner of property rights against those who copy or otherwise take and use the form in which the original work was expressed by the author.
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Works Protected by Copyright For the purposes of copyright protection, the term “literary and artistic works” is understood to include every original work of authorship, irrespective of its literary or artistic merit. The ideas in the work do not need to be original, but the form of expression must be an original creation of the author. The Berne Convention for the Protection of Literary and Artistic Works (Article 2) states: “The expression ‘literary and artistic works’ shall include every production in the literary, scientific and artistic domain, whatever may be the mode or form of its expression”. The Convention goes on to list the following examples of such works:
books, pamphlets and other writings;
lectures, addresses, sermons;
dramatic or dramatico-musical works;
choreographic works and entertainments in dumb show;
musical compositions with or without words;
cinematographic works to which are assimilated works expressed by a process analogous to cinematography;
works of drawing, painting, architecture, sculpture, engraving and lithography;
photographic works, to which are assimilated works expressed by a process analogous to photography;
works of applied art; illustrations, maps, plans, sketches and three-dimensional works relative to geography, topography, architecture or science;
“translations, adaptations, arrangements of music and other alterations of a literary or artistic work, which are to be protected as original works without prejudice to the copyright in the original work..
collections of literary or artistic works such as encyclopaedias and anthologies which, by reason of the selection and arrangement of their contents, constitute intellectual creations, are to be protected as such, without prejudice to the copyright in each of the works forming part of such collections.”
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Member countries of the Berne Union, and many other countries, provide protection under their copyright laws for the above categories of works. The list, however, is not intended to be exhaustive. Copyright laws also protect other modes or forms of expression of works in the literary, scientific and artistic domain, which are not included in the list. Computer programs are a good example of a type of work which is not included in the list in the Berne Convention, but which is undoubtedly included in the notion of a production in the literary, scientific and artistic domain within the meaning of Article 2. Indeed, computer programs are protected under the copyright laws of a number of countries, as well as under the WIPO Copyright Treaty (1996). A computer program is a set of instructions, which controls the operations of a computer in order to enable it to perform a specific task, such as the storage and retrieval of information. The program is produced by one or more human authors, but in its final “mode or form of expression,” it can be understood directly only by a machine (the computer), not by humans. Multimedia productions are another example of a type of work not listed in the Berne Convention, but which clearly comes within the notion of creations in the literary, scientific and artistic domain. While no acceptable legal definition has been developed, there is a consensus that the combination of sound, text and images in a digital format, which is made accessible by a computer program, embodies an original expression of authorship sufficient to justify the protection of multimedia productions under the umbrella of copyright. Rights Protected The most important feature of any kind of property is that the owner may use it exclusively, i.e., as he wishes, and that nobody else can lawfully use it without his authorization. This does not, of course, mean that he can use it regardless of the legally recognized rights and interests of other members of society. Similarly the owner of copyright in a protected work may use the work as he wishes, and may prevent others from using it without his authorization. The rights granted under national laws to the owner of copyright in a protected work are normally exclusive rights to authorize a third party to use the work, subject to the legally recognized rights and interests of others.
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There are two types of rights under copyright. Economic rights allow the rights owner to derive financial reward from the use of his works by others. Moral rights allow the author to take certain actions to preserve the personal link between himself and the work. Most copyright laws state that the author or rights owner has the right to authorize or prevent certain acts in relation to a work. The rights owner of a work can prohibit or authorize:
its reproduction in various forms, such as printed publications or sound recordings;
the distribution of copies;
its public performance;
its broadcasting or other communication to the public;
its translation into other languages;
its adaptation, such as a novel into a screenplay.
These rights are explained in more detail in the following paragraphs. Reproduction, distribution and related rights The right of the copyright owner to prevent others from making copies of his works without his authorization is the most basic right protected by copyright legislation. The right to control the act of reproduction – be it the reproduction of books by a publisher, or the manufacture by a record producer of compact discs containing recorded performances of musical works - is the legal basis for many forms of exploitation of protected works. Other rights are recognized in national laws in order to ensure that this basic right of reproduction is respected. Many laws include a right specifically to authorize distribution of copies of works. Obviously, the right of reproduction would be of little economic value if the owner of copyright could not authorize the distribution of the copies made with his consent. The right of distribution usually terminates upon first sale or transfer of ownership of a particular copy. This means, for example, that when the copyright owner of a book sells or otherwise transfers ownership of a copy of the book, the owner of that copy may give the book away or even resell it without the copyright owner’s further permission. Dept of MBA, SJBIT
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Another right which is achieving increasingly wide recognition, and is included in the WIPO Copyright Treaty, is the right to authorize rental of copies of certain categories of works, such as musical works in sound recordings, audiovisual works, and computer programs. This became necessary in order to prevent abuse of the copyright owner’s right of reproduction when technological advances made it easy for rental shop customers to copy such works. Finally, some copyright laws include a right to control importation of copies as a means to prevent erosion of the principle of territoriality of copyright; that is, the legitimate economic interests of the copyright owner would be endangered if he could not exercise the rights of reproduction and distribution on a territorial basis. Translation and adaptation rights The acts of translating or adapting a work protected by copyright also require authorization from the rights owner. Translation means the expression of a work in a language other than that of the original version. Adaptation is generally understood as the modification of a work to create another work, for example adapting a novel to make a film; or the modification of a work for different conditions of exploitation, e.g., by adapting a textbook originally written for university students to make it suitable for a lower level. Translations and adaptations are themselves works protected by copyright. So in order to publish a translation or adaptation, authorization must be obtained both from the owner of the copyright in the original work and from the owner of copyright in the translation or adaptation. The scope of the right of adaptation has been the subject of significant discussion in recent years because of the greatly increased possibilities for adapting and transforming works which are embodied in digital format. With digital technology, manipulation of text, sound and images by the user is quick and easy. Discussions have focused on the appropriate balance between the rights of the author to control the integrity of the work by authorizing modifications, and the rights of users to make changes which seem to be part of a normal use of works in digital format.
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Moral rights The Berne Convention (Article 6bis) requires Member countries to grant to authors: (i) the right to claim authorship of the work (sometimes called the right of paternity); and (ii) the right to object to any distortion or modification of the work, or other derogatory action in relation to the work, which would be prejudicial to the author’s honor or reputation (sometimes called the right of integrity). These rights are generally known as the moral rights of authors. The Convention requires them to be independent of the author’s economic rights, and to remain with the author even after he has transferred his economic rights. It is worth noting that moral rights are only accorded to individual authors. Thus even when, for example, a film producer or a publisher owns the economic rights in a work, it is only the individual creator who has moral interests at stake. Limitations on Rights The first limitation is the exclusion from copyright protection of certain categories of works. In some countries, works are excluded from protection if they are not fixed in tangible form. For example, a work of choreography would only be protected once the movements were written down in dance notation or recorded on videotape. In certain countries, the texts of laws, court and administrative decisions are excluded from copyright protection. The second category of limitations concerns particular acts of exploitation, normally requiring the authorization of the rights owner, which may, under circumstances specified in the law, be carried out without authorization. There are two basic types of limitations in this category: (a) free use, which carries no obligation to compensate the rights owner for the use of his work without authorization; and (b) non-voluntary licenses, which do require that compensation be paid to the rights owner for non-authorized exploitation. Examples of free use include:
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quoting from a protected work, provided that the source of the quotation and the name of the author is mentioned, and that the extent of the quotation is compatible with fair practice;
use of works by way of illustration for teaching purposes; and
use of works for the purpose of news reporting.
In respect of free use for reproduction, the Berne Convention contains a general rule, rather than an explicit limitation. Article 9(2) states that Member States may provide for free reproduction in special cases where the acts do not conflict with normal exploitation of the work and do not unreasonably prejudice the legitimate interests of the author. As noted above, many laws allow for individuals to reproduce a work exclusively for their personal, private and non-commercial use. However, the ease and quality of individual copying made possible by recent technology has led some countries to narrow the scope of such provisions, including through systems which allow certain copying, but incorporate a mechanism for payment to rights owners for the prejudice to their economic interests resulting from the copying. In addition to the specific categories of free use set out in national laws, the laws of some countries recognize the concept known as fair use or fair dealing. This allows use of works without the authorization of the rights owner, taking into account factors such as the nature and purpose of the use, including whether it is for commercial purposes; the nature of the work used; the amount of the work used in relation to the work as a whole; and the likely effect of the use on the potential commercial value of the work. Non-voluntary licenses allow use of works in certain circumstances without the authorization of the owner of rights, but require that compensation be paid in respect of the use. Such licenses are called non-voluntary because they are allowed in the law, and do not result from the exercise of the exclusive right of the copyright owner to authorize particular acts. Non-voluntary licenses were usually created in circumstances where a new technology for the dissemination of works to the public had emerged, and where the national legislator feared that rights owners would prevent the development of the new technology by refusing to authorize use of works. This was true of two non-voluntary licenses recognized in the Berne Convention, which allow the mechanical reproduction of musical works and broadcasting. The justification for non-voluntary licenses is, Dept of MBA, SJBIT
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however, increasingly called into question, since effective alternatives now exist for making works available to the public based on authorizations given by the rights owners, including in the form of collective administration of rights. Law of Copyright Copyright does not continue indefinitely. The law provides for a period of time during which the rights of the copyright owner exist. The period or duration of copyright begins from the moment when the work has been created, or, under some national laws, when it has been expressed in a tangible form. It continues, in general, until sometime after the death of the author. The purpose of this provision in the law is to enable the author’s successors to benefit economically from exploitation of the work after the author’s death. In countries party to the Berne Convention, and in many other countries, the duration of copyright provided for by national law is as a general rule the life of the author plus not less than 50 years after his death. The Berne Convention also establishes periods of protection for works such as anonymous, posthumous and cinematographic works, where it is not possible to base duration on the life of an individual author. There is a trend in a number of countries toward lengthening the duration of copyright. The European Union, the United States of America and several others have extended the term of copyright to 70 years after the death of the author. Ownership, Exercise and Transfer of Copyright The owner of copyright in a work is generally, at least in the first instance, the person who created the work, i.e. the author of the work. But this is not always the case. The Berne Convention (Article 14bis) contains rules for determining initial ownership of rights in cinematographic works. Certain national laws also provide that, when a work is created by an author who is employed for the purpose of creating that work, then the employer, not the author, is the owner of the copyright in the work. As noted above, however, moral rights always belong to the individual author of the work, whoever the owner of economic rights may be.
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The laws of many countries provide that the initial rights owner in a work may transfer all economic rights to a third party. (Moral rights, being personal to the author, can never be transferred). Authors may sell the rights to their works to individuals or companies best able to market the works, in return for payment. These payments are often made dependent on the actual use of the work, and are then referred to as royalties. Transfers of copyright may take one of two forms: assignments and licenses. Law of Patents A patent grants an inventor exclusive rights to make, use, sell, and import an invention for a limited period of time, in exchange for the public disclosure of the invention. An invention is a solution to a specific technological problem, which may be a product or a process. Patents protect an invention from being made, sold or used by others for a certain period of time. There are three different types of patents in the United States: - these patents protect inventions that have a specific function, including things like chemicals, machines, and technology. - these patents protect the unique way a manufactured object appears. - these patents protect plant varieties that are asexually reproduced, including hybrids. Inventors may not assume that their creation is patented unless they apply and are approved for a patent by the US Patent and Trademark Office. This process can be complex and time consuming. It is a good idea to hire an intellectual property attorney to make sure you file the appropriate paperwork and get the patent you need to protect your invention and make it profitable. Copyright A copyright gives the creator of an original work exclusive rights to it, usually for a limited time. Copyright may apply to a wide range of creative, intellectual, or artistic forms, or "works". [14][15] Copyright does not cover ideas and information themselves, only the form or manner in which Dept of MBA, SJBIT
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they are expressed. Copyrights protect the expressive arts. They give owners exclusive rights to reproduce their work, publicly display or perform their work, and create derivative works. Additionally, owners are given economic rights to financially benefit from their work and prohibit others from doing so without their permission. It is important to realize that copyrights do not protect ideas, only how they're expressed. Industrial design rights An industrial design right protects the visual design of objects that are not purely utilitarian. An industrial design consists of the creation of a shape, configuration or composition of pattern or color, or combination of pattern and color in three dimensional form containing aesthetic value. An industrial design can be a two- or three-dimensional pattern used to produce a product, industrial commodity or handicraft. Law relating to Trademarks A trademark is a recognizable sign, design or expression which identifies products or services of a particular source from those of others. Trademarks protect the names and identifying marks of products and companies. The purpose of trademarks is to make it easy for consumers to distinguish competitors from each other. Trademarks are automatically assumed once a business begins using a certain mark to identify its company, and may use the symbol TM without filing their symbol or name with the government.
There are strict laws in place to protect intellectual property rights. When intellectual property rights are violated, it is important to hire an intellectual property lawyer. An experienced attorney can help you sue for damages that include lost royalties. If your case is successful, the person who violated your intellectual property rights may be required to pay for all of your legal fees in addition to compensating you for using your work without your permission.
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