Business and society

BUSINESS
An organization or economic system where goods and services
are exchanged for one another or for money.
Every business requires some form of investment and enough
customers to whom its output can be sold on a consistent basis in
order to make a profit.

Government
A group of people that governs a community or unit. It sets
and administers public policy and exercises executive, political
and sovereign power through customs, institutions, and laws
within a state.

Society
A large group of people who live together in an
organized way, making decisions about how to do things
and sharing the work that needs to be done.

Business Ecosystem
Business strategist James Moore adopted this biological concept in
his 1993 Harvard Business Review article “Predators and Prey: A
New Ecology of Competition” through which he paralleled
companies operating in the increasingly interconnected world of
commerce to a community of organisms adapting and evolving to
survive.
Moore suggested that a company be viewed not as a single firm in
an industry, but as a member of a business ecosystem with
participants spanning across multiple industries.

A business ecosystem is the network of organizations
-including suppliers, distributors, customers,
competitors, government agencies, and so on —
involved in the delivery of a specific product or
service through both competition and cooperation.
The idea is that each entity in the ecosystem affects and
is affected by the others, creating a constantly evolving
relationship in which each entity must be flexible and
adaptable in order to survive, as in a biological

Business - Government - Society (BGS Model)
1. The Market Capitalism Model
2. The Dominance Model
3. The Countervailing Forces Model
4. The Stakeholder Model

The Market Capitalism Model
This is the classic capitalism model, as described by Adam
Smith.

In this model, the business must ensure its operational viability and
profitability by producing good quality products, and keeping on top
of changes in market forces – such as consumer demand, price
movements of raw materials, as well as interest rate and exchange
rate movements.
In this model, The business is mainly concerned with
making money. The market capitalism model operates
on the principle of demand and supply, and minimal
government intervention, or laissez faire.

Under this state of perfect competition, consumers can
find businesses that provide similar goods and services.
Thus, businesses are unlikely to over price their goods
and services.
Business greed is also reined in by consumers who will
buy their goods from another business that is providing
the product at a cheaper price.

The key features of the market capitalism model
1. The management’s main responsibility and ethical
duty is towards the shareholders… in promoting the
interests of owners and investors.
2. The amount of profits made is thus the key measure
of corporate performance.
3. Government Regulation is kept to minimal.
4. The business is assumed to be benevolent ,
promoting social welfare on its own accord.

The Dominance model focuses on the defects and
inefficiencies of capitalism, which encourages greed and
business ruthlessness. It thus offers a damning critique of
the market capitalism model.
In particular, the Dominance model highlights the reality that
businesses can and do abuse their power. In this model, the
concentration of economic power enables big businesses to
dominate politics.

It is this collusion between business and government that
leads to the implementation of pro-business public
policies, resulting in exploitation of workers, greater
income disparities, and blatant disregard for interests of
the people.
Asset concentrations are in the hands of big businesses
resulting in a monopoly or oligopoly situation and the
close relationship between business and government
leads to rampant corruption.

The countervailing forces model offers a counter
example to the dominance model.
In this model, power is fluid… which means no single
entity – whether business, government, or society –
will ever fully dominate.
The power – and fortunes – of any one entity can rise or
fall, depending on the particular environmental
conditions at that point in time.

Unlike the market capitalism model, where market forces reign
supreme, non-market forces can influence as well as exert an
impact on business in the countervailing forces model.
Because businesses cannot be fully in control of the changes in its
operating environment, they must be flexible enough to respond to
any changes.
As a result, many of the businesses take a short to medium view in
its operations. This makes the business reactive, rather than
proactive, in its dealings with other groups in society.

In this model, the business is at the center of a web of
mutual relationships with persons, groups, and entities
called stakeholders.
In particular, this model highlights the symbiotic
relationships between the business and its
stakeholders.

Primary stakeholders are made up of a small number
of constituents who are immediately affected by any
decision the business makes. At the same time, any
decisions the primary stakeholders make can also
directly impact the business.
Examples of primary stakeholders are stockholders,
customers, employees, communities in which the
business operates, as well as governments.

Secondary stakeholders are made up of a broad range of
constituents whose impact on the business is likely to
be smaller.
These could be groups in society such as activist
groups, trade associations, Labour unions and the
businesses’ direct competitors.
In the stakeholder model, the business is seen taking a
proactive stance in managing its environment.

In particular, the business has an ethical duty towards
its multiple stakeholders. And it must manage its
business to make them all better off.
To do this, the business will need to balance its quest
for profitability against its responsibility towards the
multiple stakeholders.

"Business ethics is the study of business situations,
activities, and decisions where issues of right and
wrong are addressed."

Triple Bottom Line (TBL)
The triple bottom line (TBL) is a concept which
broadens a business' focus on the financial bottom line
to include social and environmental considerations. A
triple bottom line measures a company's degree of social
responsibility, its economic value and its environmental
impact.

Eg: A Welder
(Personal protective equipment)

TBL is the idea that it is possible to run an organization in a way
that not only earns financial profits but also betters people’s
lives and helps the planet. The elements of the triple bottom line
are referred to as "people, profits and planet."
People + Planet = Social + Environmental Responsibility
It can be challenging to maximize financial returns while also
doing the greatest good for the people and the environment.

The CSR concept came into common use in the late
1960s and early 1970s, it encourages organizations to
consider the interests of society by taking responsibility
for the impact of the organization's activities on
consumers, employees, shareholders, communities and
the environment in all aspects of its operations.

CSR LAWS IN INDIA
The Companies Act, 2013The Companies Act, 2013, a successor to The Companies Act, 1956, made
CSR a compulsory act. Under the notification dated 27.2.2014, under Section
135 of the new act, CSR is compulsory for all companies- government or
private or otherwise, provided they meet any one or more of the following
fiscal criterions:
The net worth of the company should be Rupees 500 crores or more
The annual turnover of the company should be Rupees 1000 crores or more
Annual net profits of the company should be at least Rupees 5 crores.
If the company meets any oneany one of the three fiscal conditions as stated above,
they are required to create a committee to enforce its CSR mandate, with at
least 3 directors, one of whom should be an independent director.

The responsibilities of the above-mentioned committee will be:
 Creation of an elaborate policy to implement its legally
mandated CSR activities. CSR acts should conform to
Schedule VII of the Companies Act, 2013.
 The committee will allocate and audit the money for different
CSR purposes.
 It will be responsible for overseeing the execution of different
CSR activities.
 The committee will issue an annual report on the various CSR
activities undertaken.

 CSR policies should be placed on the company’s official
website, in the form and format approved by the committee.
 The board of directors is bound to accept and follow any CSR
related suggestion put up by the aforementioned committee.
 The before mentioned committee must regularly assess the
net profits earned by the company and ensure that at least 2
percent of the same is spent on CSR related activities.
 The committee must ensure that local issues and regions are
looked into first as part of CSR activities.

FEATURES OF CSR LAWS
The broad and important features of the CSR laws are as follows:
Quantum of money utilized for CSR purposes are to be compulsorily
included in the annual profit-loss report released by the company.
The CSR rules came into force on 1st April 2014 and will include subsidiary
companies, holdings and other foreign corporate organizations which are
involved in business activities in India.
CSR has been defined in a rather broad manner in Schedule VII of
Companies Act, 2013. The definition is exhaustive as it includes those specific
CSR activities listed in Schedule VII and other social programmes not listed in
schedule VII, whose inclusion as a CSR activity is left to the company’s
discretion

Structure of the state government
 Executive: State Executive comprises the governorgovernor
and the chief minister with his council of Ministersand the chief minister with his council of Ministers.
The Governor of each state is appointed by the
President for a period of five years. Executive power
of the state is vested in the governor. But the actual
powers for proper functioning of the state are vested
in the CM and his council of ministers.

 Judiciary: State high courtsState high courts have jurisdiction over the
whole state. In the states, the judicial setup is headed by the
chief justice. He manages and controls the entire judicial
system of the state pertaining to criminal, civil and all other
forms of litigation. State high courts have to, however, report
to the Supreme Court of India, which may override the high
court’s findings and judgments.

 Legislature: Each state has a legislative assembly. It consists of
the governor and one House or two Houses, as the case may be.
In seven states, the state government’s legislature is bicameral.
These states are Bihar, Andhra Pradesh, Telangana, Jammu and
Kashmir, Karnataka, Maharashtra and Uttar Pradesh. These
states have two Houses known as legislative council and
legislative assembly. The rest of the states are unicameral.
There is only one House known as legislative assembly. State
Legislature or State Assemblies are headed by the CM.

Roles and Responsibilities of the state governments
 Internal security: The state governments have to maintain the internal
security, law and order in the state. Internal security is managed through
state police.
 Public order: States have jurisdiction over police and public order
 Education: Providing a public education system, maintaining school
buildings and colleges, employment of teachers, providing help to under
privileged students all come under the education department of the state.
 Agriculture: The state governments have to provide support for farmers,
funds for best farming practices, disease prevention and aid during disasters
such as floods or droughts.

 Finances: State legislature handles the financial powers of the state,
which include authorisation of all expenditure, taxation and
borrowing by the state government. It has the power to originate
money bills. It has control over taxes on entertainment and wealth, and
sales tax.
 Reservation of bills: The state governor may reserve any bill for the
consideration of the President.
 Transport: State government runs the rains, trams, bus and ferry services
and other public transportation in the cities and towns of the States.
 Water supply: Water supply to cities and towns for drinking, including
irrigation for farmers, is the responsibility of the State governments.
 Budget: State governments make budget for state.

Role of Government in Business
 Permission to Form
The function of this registration is usually to define the financial
liability the owners of the company have. It limits their risk to
the amount they have invested in that particular organization.
Registration also allows the government to monitor companies
to execute its other functions in the business world.

 Contract Enforcement
Businesses contract with other businesses. These contracts may
be complex, such as mergers, or they may be as simple as a
warranty on supplies purchased. The government enforces
these contracts. Companies bring one another to court just as
individuals do. An oral agreement can constitute a contract,
but usually only a written agreement is provable. If one party
fails or refuses to meet its obligation under a contract, a
company will turn to the legal system for enforcement.

 Consumer Protection
The government’s role in business includes protecting the
consumer or customer. When a vendor fails to honor the
guarantee, the purchaser has recourse in the law. Likewise,
when a product causes harm to an individual, the courts may
hold the vendor or manufacturer responsible.

 Employee Protection
Many state and federal agencies work to protect the rights of
employees. The Occupational Health and Safety
Administration, for example, is an agency under the
Department of Labor. Its mission is to ensure a safe and
healthful work environment. The Equal Opportunity
Commission protects employees from discrimination

 Environmental Protection
It is the government's role to regulate industry and thereby
protect the public from environmental externalities.
 Taxation
Governments at all levels tax businesses, and the resulting
revenue is an important part of government budgets. Some
revenue is taxed at the corporate level, then taxed as personal
income when distributed as dividends. This is in no way
inappropriate, since it balances the tax burden between the
company and individual and allows the government to tax
more equitably.

 Investor Protection
Government mandates that companies make financial
information public, thereby protecting the rights of investors
and facilitating further investment. This is generally done
through filings with the Securities and Exchange Board of
India.

Types of NGOs
 By orientation
 By level of operation

Charitable Orientation often involves a top-down
paternalistic effort with little participation by the
"beneficiaries".
It includes NGOs with activities directed toward
meeting the needs of the poor -distribution of food,
clothing or medicine; provision of housing, transport,
schools etc.
Such NGOs may also undertake relief activities during a
natural or man-made disaster.

Service Orientation includes NGOs with activities such
as the provision of health, family planning or education
services in which the programme is designed by the
NGO and people are expected to participate in its
implementation and in receiving the service.

Participatory Orientation is characterized by self-help projects
where local people are involved particularly in the implementation
of a project by contributing cash, tools, land, materials, labour etc.
In the classical community development project, participation
begins with the need definition and continues into the planning
and implementation stages.
Cooperatives often have a participatory orientation

Empowering Orientation is where the aim is to help poor
people develop a clearer understanding of the social, political and
economic factors affecting their lives, and to strengthen their
awareness of their own potential power to control their lives.
Sometimes, these groups develop spontaneously around a
problem or an issue, at other times outside workers from NGOs
play a facilitating role in their development.
In any case, there is maximum involvement of the people with
NGOs acting as facilitators.

NGO Types by level of operation:
Community-based Organizations (CBOs) arise out of people's
own initiatives. These can include sports clubs, women's
organizations, neighborhood organizations, religious or
educational organizations. There are a large variety of these,
some supported by NGOs, national or international NGOs, or
bilateral or international agencies, and others independent of
outside help.
Some are devoted to rising the consciousness of the urban poor
or helping them to understand their rights in gaining access to
needed services while others are involved in providing such
services.

Citywide Organizations include organizations such as the Rotary
or lion's Club, chambers of commerce and industry, coalitions of
business, ethnic or educational groups and associations of
community organizations. Some exist for other purposes, and
become involved in helping the poor as one of many activities,
while others are created for the specific purpose of helping the
poor.

National NGOs include organizations such as the Red Cross,
YMCAs/YWCAs, professional organizations etc. Some of these
have state and cuty branches and assist local NGOs.
International NGOs range from secular agencies such as Save
the Children organizations, OXFAM, CARE, Ford and
Rockefeller Foundations to religiously motivated groups.
Their activities vary from mainly funding local NGOs,
institutions and projects, to implementing the projects
themselves.

Socio-economic implications of Indian Constitution

Socio-economic implications of Indian Constitution
1. Preamble of Constitution and Business:
It serves as a key to the Constitution. Whenever the judiciary is in
doubt about any particular provision of the Constitution it refers
to the preamble to find out the real intentions of the framers of the
Constitution. The preamble of the Indian Constitution guarantees
to its every citizen:
Social, Economic and Political Justice to every citizen.
Liberty of Thought, Expression, Belief, Faith and Worship
Equality of Status and of Opportunity

2. Fundamental Rights and Business
The fundamental rights are superior to ordinary laws; they can be
altered only through constitutional amendments. Originally, the
fundamental Rights were seven but in 1978, through the 44th
amendment of the constitution, the right to property was removed
from the list of fundamental rights.
Right to Equality (Articles 14 to 18):
The Constitution clearly provides that the state shall not deny to
any person equality before law or the equal protection of law
within the territory of India. It cannot discriminate against any
citizen on grounds of religion, race, caste, sex, and place of
birth or any of them.

Right to Freedom (Articles 19 to 22)
Six fundamental rights in the nature of ‘freedom’ are guaranteed to the citizens
in the article (originally there were seven, but now right to property is deleted).
(i) Freedom of speech and expression.
(ii) Freedom of peaceful assembly without arms.
(iii) Freedom of association.
(iv) Freedom of movement throughout the territory of India.
(v) Freedom to reside or settle any part of the territory.
(vi) Freedom to practice any profession, or to carry on any occupation, trade or
business.
The right to freedom is also applied equally in business. The businessmen can express their
problems freely to the government and can get a solution to it. Similarly, every citizen has the right
to choose any business or profession and can form unions, and conduct meetings.

Right against Exploitation (Articles 23 to 24):
The economic importance of right against exploitation is
(i) The government takes necessary steps to remove bonded
Labour.
(ii) The Factories Act help to prevent exploitation of women and
children employees.
(iii) The owner of the factories are guided to make provision for
safety and welfare of the workers and they compulsorily appoint a
Labour welfare officer, if in the factory 500 or more workers are
employed.

Right to Freedom of Religion (Articles 25 to 28):
The Economic importance of the right to freedom of religion is
(i) The government cannot spend tax money for the development
of any religion.
(ii) Nobody can be compelled to pay tax for the welfare of any
specific religion.
(iii) No one shall be forced to transfer of property or any
agreement of a business nature in the name of a particular
religion.

Cultural and Educational Rights (Articles 29 to 30):
The economic importance of cultural and educational
rights are:
(i) The state does not discriminate to give economic
assistance to the minority institutions.
(ii) The aided institution cannot refuse admission to any
of the citizens on the ground that he belongs to a
particular caste, religion, language or region.

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

3. Directive Principles of State Policy:
The phrase ‘Directive Principles of State Policy’ means the
principles which the states should keep in mind while framing the
laws and formulating policy.
(i) To provide adequate means of livelihood for all the citizens.
(ii) To secure equal pay for work to both men and women.
(iii) To protect the workers, especially children.
(iv) To regulate the economic system of the country that it does not lead to
concentration of wealth and means of production.
(v) To make provision for securing right:: to work, to education and to public
assistance in cases of unemployment, old age, sickness and similar other cases.
(vi) To ensure a decent standard of living and facilities of leisure for all
workers.

4. Constitutional Provisions Regarding Trade,
Commerce and Intercourse within the Territory of
India:
Articles 301 to 307 of Constitution of India deals with the
constitutional provisions regarding Trade and Commerce. The
framers of the Indian Constitution were fully conscious of the
importance of maintaining the economic unity of the Union of
India.
Free movement and exchange of goods throughout the territory
of India was essential for the Economic Unity of the country
which alone could sustain the progress of the country.

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