UNIT IV UNIT V – ETHICS, CSR & CORPORATE GOVERNANCE (10-Marks

Detailed Notes)
1. Managing Ethics
Managing ethics involves creating a comprehensive system that supports
ethical behavior across the organization. It refers to defining, implementing,
and enforcing ethical principles and values.
Key Elements:
 Code of Ethics: A formal document outlining acceptable behavior.
 Ethical Leadership: Leaders set the tone for ethical behavior.
 Training Programs: Regular employee training on ethics.
 Whistleblower Protection: Secure channels for reporting unethical
behavior.
 Audit and Monitoring: Regular assessment of ethical compliance.
Outcome: Promotes trust, reduces misconduct, and enhances organizational
culture.
2. Framework of Organizational Ethics
This refers to the internal structure and processes that influence ethical
behavior in a company. It is a combination of individual values,
organizational culture, leadership behavior, and external compliance
requirements.
Components:
 Individual Ethics: Personal beliefs and values.
 Organizational Culture: Shared norms and expectations.
 Policies and Procedures: Codes of conduct, ethics manuals.
 Leadership Example: Role models in management.
 Reward Systems: Reinforcing ethical behavior.
Importance: Ensures alignment between corporate objectives and ethical
conduct.
3. Framework of Organizational Theories
Organizational theories provide different lenses to understand how ethical
practices can be designed and implemented in businesses.
Definition: Organizational theory is the study of organizational structures,
systems, and processes, and how they influence human behavior and
performance, including ethics.
Theories:
 Classical Theory: Focuses on productivity, with ethics taking a
secondary role.
  Behavioral Theory: Emphasizes employee well-being and ethical
relations.
 Systems Theory: Views the organization as an ethical subsystem within
a broader system.
 Contingency Theory: Suggests that ethical behavior depends on
situational factors.
Relevance: Helps leaders adopt suitable ethical frameworks according to
their organizational context.
4. Ethics Across Cultures
Definition: Ethics across cultures refers to how different societies define
what is right or wrong in business, and how global companies adapt ethical
practices across cultural boundaries.
Key Challenges:
 Cultural Relativism vs. Universalism: Whether ethics are culture-
specific or global.
 Communication Gaps: Language and perception differences.
 Legal Differences: What is legal in one country may not be ethical in
another.
 HR Policies: Managing a diverse workforce fairly.
Example: A U.S. company operating in Japan must balance its anti-bribery
policy with Japan's gift-giving culture.
5. Factors Influencing Business Ethics
Definition: Business ethics are influenced by various internal and external
factors that shape the moral behavior of individuals and organizations.
Key Influences:
 Personal Morality: Individual upbringing and values.
 Corporate Culture: Ethical tone set by leadership.
 Industry Norms: Accepted practices in the field.
 Legal Environment: Regulatory and compliance requirements.
 Stakeholder Pressure: Expectations from employees, customers,
society.
 Globalization: Managing ethics across borders.
 Technological Advancement: Data privacy and AI ethics.
Conclusion: A blend of individual and organizational factors determine
ethical conduct.
6. Ethical Decision-Making Process
Definition: Ethical decision-making is the process of evaluating and choosing
among alternatives in a manner consistent with ethical principles.
Steps:
1. Recognize the ethical dilemma.
2. Collect relevant facts.
3. Identify stakeholders involved.
4. Evaluate alternatives based on ethical principles.
5. Make and implement the decision.
6. Review the decision’s impact.
Ethical Models:
 Utilitarian Approach: Maximize overall good.
 Rights-Based Approach: Respect individual rights.
 Justice Approach: Fair treatment.
 Virtue Ethics: Focus on character and integrity.
Application: Encourages transparency and accountability.
7. Ethical Values and Stakeholders
Definition: Ethical values are moral principles that guide behavior, while
stakeholders are individuals or groups impacted by business decisions.
Businesses must uphold core ethical values while balancing the interests of
various stakeholders.
Core Values:
 Integrity
 Accountability
 Respect
 Fairness
Stakeholder Groups:
 Internal: Employees, managers, shareholders
 External: Customers, suppliers, government, society
Stakeholder Theory: Ethical business practices increase long-term success
and trust.
8. Corporate Social Responsibility (CSR)
Definition: CSR refers to a company’s responsibility to contribute to social
and environmental well-being beyond legal requirements.
Types of CSR:
 Environmental: Eco-friendly operations
 Philanthropic: Charitable contributions
 Ethical: Fair trade, labor practices
  Economic: Long-term value creation
Legal Mandate in India:
 Companies Act, 2013 mandates 2% of net profits for CSR.
Examples:
 TATA Group’s educational and health initiatives.
 ITC’s e-Choupal project for rural development.
Benefits: Enhanced brand reputation, customer loyalty, risk management.
9. Corporate Governance: Structures and Reforms in Boards
Definition: Corporate governance is the system by which companies are
directed and controlled to ensure accountability, fairness, and transparency
in a firm’s relationship with its stakeholders.
Structures:
 Board of Directors: Strategic guidance
 Audit Committee: Oversees financial reporting
 Nomination Committee: Manages board appointments
 Independent Directors: Provide objective oversight
Major Reforms in India:
 Companies Act, 2013 – Introduced mandatory independent directors,
board committees
 SEBI Clause 49 – Enhanced board disclosure norms
 Kotak Committee – Suggested stronger compliance and board
effectiveness
Benefits: Prevents fraud, improves investor confidence, enhances
performance.
10. Case Study: Tata Group – Business Ethics and CSR
Definition: A case study is an in-depth analysis of a real-life situation used
to illustrate key principles or practices.
Background: Tata Group is known for its commitment to ethical values and
social responsibility.
Ethical Practices:
 Tata Code of Conduct governs all employees.
 Emphasis on fairness, transparency, and integrity.
CSR Initiatives:
 Tata Trusts focus on education, health, livelihood.
 Major contributions to rural development and women empowerment.
Impact:
  Strong reputation in India and globally.
 Long-term stakeholder trust.
 Business sustainability through ethical practices.
Conclusion: Tata exemplifies how ethics and CSR can coexist with
profitability and growth.
End of Unit V – Expanded 10-Mark Notes with Definitions

Factories Act, 1948- Definition of Factory (Section 2(m))

According to Section 2(m) of the Factories Act, 1948, a "factory" means any premises:
 Where 10 or more workers are working or were working on any day of the
preceding 12 months and a manufacturing process is carried on with the aid of
power, or
 Where 20 or more workers are working or were working on any day of the
preceding 12 months and a manufacturing process is carried on without the aid
of power.
Objectives of the Factories Act, 1948
1. Regulate Working Hours: No adult worker shall be required to work more
than 48 hours a week and must be given at least one holiday every week.
2. Ensure Health: The Act mandates cleanliness, disposal of wastes, ventilation,
and adequate lighting to maintain health standards.
3. Ensure Safety: Prohibits young persons under 18 from working on dangerous
machines; requires machinery to be fenced and emergency exits provided.
4. Welfare Provisions: Includes provisions for restrooms, drinking water,
canteens, washing facilities, and first-aid appliances.
5. Minimum Wage Provision: Ensures workers receive at least the statutory
minimum wage.
6. Legal Compliance and Penalties: Non-compliance attracts penalties; duties
and responsibilities of employers and managers are defined.
Administrative Measures
1. Formation of Child Labour Committee in factories employing more than 20
workers.
2. Appointment of Conciliation Officers to resolve disputes.
3. Designation of Labour Officers to oversee compliance with the Act.
Scope of the Act
 Applicable to factories using power with 10 or more workers.
 Also applicable to factories without power having 20 or more workers.
 Mandatory factory registration and license from the State Labour Department.
Norms for Workers’ Welfare
1. Working Hours: Maximum of 48 hours/week with weekly off.
2. Health: Clean working environment with proper drainage, lighting, and
ventilation.
3. Safety: Safe machinery, emergency exits, and fencing.
4. Welfare: Facilities like washing areas, canteens, and first-aid.
5. Penalties: Under no circumstances factories owners can breach norms of d
Factories Act1948 or else p

Duties/Obligation of Occupier (Employer)

1. Notification: Inform authorities before opening, reopening, or appointing new
managers.
2. Safety Committee (Sec 41-G): Mandatory for hazardous processes with equal
worker and management participation.
3. Danger Notification (Sec 41-H): Warn workers about imminent dangers.
4. Worker Amenities (Sec 42–49): Provide canteens, lunch rooms, creches, etc.
5. Annual Leave (Sec 79): Provide leave in accordance with Industrial Disputes
Act.
6. Safety Survey (Sec 91-A): Conduct surveys related to safety and health.
Duties of Factory Manager
1. Danger Notification (Sec 41-H): Report imminent dangers and take
immediate action.
2. Work Notice (Sec 61): Display details of working hours, shifts, and group
assignments.
3. Register of Workers (Sec 62): Maintain updated worker records.
4. Annual Leave (Sec 79): Manage leave schedule and records.
5. Disease Notification (Sec 89): Report occupational diseases promptly.
6. Safety Survey (Sec 91-A): Oversee safety and health inspections.
Penalties under the Act
 Sec 92: General penalty – up to 2 years imprisonment or Rs. 2 lakh fine.
 Sec 94: Repeat offence – up to 3 years imprisonment or Rs. 2 lakh fine.
 Sec 95: Obstruction of inspector – up to 6 months imprisonment or Rs. 10,000
fine.
 Sec 96: Wrongful disclosure – 6 months imprisonment or Rs. 10,000 fine.
 Sec 97: Workers creating nuisance – Rs. 500 fine.
  Sec 98: False fitness certificate – 2 months imprisonment or Rs. 10,000 fine.
 Sec 99: Dual child employment – Rs. 1,000 fine to the responsible adult.
Health & Safety Provisions as per Factories Act Safety Measures (Under
the Factories Act, 1948)

 Section 11: Cleanliness in every factory Section 21: Fencing the

Machinery
 Section 12: Disposal of effluents and wastes Section 22: Work on or Near
Machinery in Motion
 Section 13: Ventilation and Temperature Section 23: Employment on
Dangerous Machines
 Section 14: Dust and Fume Section 24: Devices for Cutting
off Power
 Section 15: Artificial Humidification Section 25: Self-Acting
Machinery
 Section 16: Overcrowding Section 26: Casing of New
Machinery
 Section 17: Lighting Section 27: Prohibition of
Employment of Women and .
Children Near Cotton-Openers.
 Section 18: Drinking Water
Industrial Employment (Standing Orders) Act, 1946
Standing orders” refer to a set of regulations that govern the terms of employment
and the conduct of both workers and employers within industrial establishments.
These orders play a crucial role in bringing clarity and consistency to employment
conditions, encompassing various aspects such as work hours, holidays, workplace
behavior, disciplinary procedures, and other essential facets of employment.
In India, the Industrial Employment (Standing Orders) Act of 1946 mandates that
employers in industrial establishments with one hundred or more employees formally
dene the conditions of employment
Objectives 1. To establish uniformity in terms and conditions of employment.
2. To cultivate harmonious relations between employers and employees.
3. To ensure that conditions of service are clearly communicated to
workers.
4. To regulate recruitment, discharge, disciplinary actions, leave,
holidays, and other pertinent aspects concerning workers.
Applicability
 Mandatory for establishments with 100+ workers.
 Can be extended to smaller units by government notification.
Key Provisions
  Employers must draft and get standing orders approved.
 Content includes worker classification, work hours, leave, and dismissal
procedures.
 Modifications require government approval.
 Non-compliance attracts penalties.
Payment of Wages Act, 1936
The Payment of Wages Act, 1936, is a law in India designed to ensure that workers
receive their wages promptly and fairly. It establishes the framework for the payment
of wages to certain categories of employees, particularly in industries like factories,
railways, and mines.
Objective- To ensure timely and fair wage payments to workers in certain industries.
 Applies to establishments with 10 or more workers.
 Wages must be paid within 7 days after wage period.
 Permitted deductions: fines, loans, PF contributions.
 Wage payments via cash, cheque, or bank transfer.
 Requires maintenance of wage records.
 Provides redressal mechanism for wage-related grievances.
Payment of Bonus Act, 1965
The Payment of Bonus Act aims to provide for the payment of bonuses to employees
based on the profits of the organization or on the basis of production or productivity. It
is intended to promote a sense of participation and incentive among workers,
encouraging higher productivity and performance.
Objective-To ensure employees receive bonuses based on company profits or
productivity.
 Applies to establishments with 20+ employees.
 Eligibility: employee must earn <= Rs. 21,000/month and work at least 30 days.
 Minimum bonus: 8.33% of annual salary.
 Maximum bonus: 20% of annual salary.
 Bonus must be paid within 8 months from year-end.
 Disqualified: employees dismissed for misconduct.
Competition Act, 2002
The Competition Act, 2002, is a legislation in India aimed at promoting and
maintaining fair competition in the marketplace. Its primary objective is to prevent
practices that have an adverse effect on competition, protect consumer interests, and
ensure a level playing field for businesses.
Objective- To prevent anti-competitive practices and promote fair market
competition.
  Prohibits collusive agreements (e.g., price fixing).
 Prevents abuse of dominant market position.
 Regulates mergers and acquisitions.
 Establishes the Competition Commission of India (CCI).
 Imposes penalties for violations.
Right to Information Act (RTI), 2005
The Right to Information Act (RTI), enacted in 2005 in India, is a significant piece of
legislation that empowers citizens to seek information from public authorities. Here’s
an overview of its key aspects:
Objective- Empowers citizens to access information from public authorities and
ensures transparency.
 Applies to government and government-funded bodies.
 Citizens can request info within 30 days; urgent cases in 48 hours.
 Exemptions include national security, personal privacy.
 Mandatory appointment of Public Information Officers (PIOs).
 Appeals handled by Information Commissions.
 Penalties for PIOs who deny info without reason.