BUSINESS ETHICS Why is Ethical Behavior Necessary?

Specific Principles of Professional Conduct

Ethics – set of moral principles and or values that govern • It is necessary for a society to function in an 1. Service to Others
the actions and decisions of an individual or group. orderly manner. 2. Integrity and Objectivity
3. Professional Competence
Characteristics and Values Associated with Ethical Why do people act unethically? 4. Solidarity and Teamwork
Behavior 5. Social and Civic Responsibility
Two primary reasons:
6. Global Competitiveness
Integrity – be principled, honored, upright, courageous and
1. The person’s standards are different from those of 7. Equality of All Professions
act on convictions; do not be twofaced, or adopt an end-
justifies-the-means philosophy. society as a whole
Business Ethics – standard of moral conduct, behavior and
2. The person chooses to act selfishly
judgment in business.
Honesty – be truthful, sincere, forthright, straightforward,
frank, candid; do not cheat, steal, lie. Categories of Ethical Principles
Purpose of Business Ethics
Trustworthiness and Promise Keeping – be worthy of trust, Principles of Personal Ethics
Main Purpose
abide by the spirit as well as letter of agreement; do not
• Basic justice, fairness
interpret agreements in an unreasonably manner in order • Help business and would-be business to
• Respect for the right of others
to create excuses. determine what business practices are right and
• Concern for the right of others
what are wrong.
Loyalty (Fidelity) and Confidentiality – be faithful and loyal; • Concern for the well-being on welfare of others
do not use or disclose information learned in confidence, • Benevolence, trustworthiness, honesty Special Purpose
safeguard influences and conflict of interest. • Compliance with the law
• Make businessmen realize that they cannot
Fairness and Openness – be fair and open minded, be Professional Ethics employ double standards to the action of other
willing to admit error; do not take advantage of another’s and to their own.
mistake or diversities. • Integrity, impartiality, objectivity • Show businessmen that common practices which
• Professional competence they have thought to be right because they see
Caring for Others – be caring, kind, compassionate; share • Confidentiality other businessmen doing it, are really wrong.
be giving, help those in need. • Professional behavior • Serve as a standard or ideal upon which business
Respect for Others – demonstrate respect for human • Avoidance of potential or apparent conflict of conduct should be based.
dignity, privacy, and the right to self-determination; do not interest
Scope and Impact of Business
patronize, embarrass, or demean. Business Ethics
- Business ethics covers all conduct, behavior and
Responsible Citizenship – obey just laws; when in a
• Fair competition judgement in business.
position of authority, openly respect and honor democratic
• Global as well as domestic justice - Include slightest deviation from what is right to
processes of decision making, avoid unnecessary or
• Social responsibility illegal and dishonest acts that are punishable by
secrecy of information, and assure that the others have all
• Concern for environment law.
information they need.
- What is legal may be unethical.
Code of Good Governance for the Profession in the - Business ethics is based on personal values and
Pursuit of Excellence – pursue excellence in all matters;
Philippines (E.O. No. 220, June 23,2003) standards of each person engage in business.
perform all task to the best of your ability; do not be content
with mediocrity; do not “win at any cost”. - There are still no uniform standards of right and
- Adopted by the PRC and the 42 professional
wrong from which all business may base their
Accountability – be accountable, accept responsibility for regulatory board.
actions.
decisions, for the foreseeable consequences. General Principle of Professional Conduct
Economic Impact – through wages, materials that it buys
- Professionals are required to have both ethical from suppliers and prices it charges to customers.
awareness and competency
Social Impact – contributes to the ethical climate of society. Some Unethical Practices of the Board of Directors 3. Determine who is affected by the outcome of the
dilemma and how each person or group is
Environmental Impact – the environmental initiatives of a 1. Plain Graft – the board help themselves to the affected
business leader often force competitors to take similar earnings that would otherwise go other 4. Identify the alternatives available to the person
action for an increased beneficial effect on the stockholders. who must resolve the dilemma
environment. 2. Interlocking Directorship – often practiced by a 5. Identify the likely consequences of each
person who holds directorial positions in two or alternative
Impact on Business Managers – although the manager is more corporation that do business with each 6. Decide the appropriate action
expected to act in the best interest of the business, he other.
cannot be expected to act in a manner that is contrary to 3. Negligence of Duty – common failure of the board, Corruption – the abuse of private and public office for
the law or to his conscience. could result to betrayal of trust of the parties who personal gain. Reinforced by other illegal practices such as
elected them to their positions. bid rigging, fraud, or money laundering, extortion.
Common Unethical Practices of Business Establishment
4. Insider Trading – involves trading in a public
Misrepresentation company’s stock by someone who has non-public • Corruption is receiving, asking for or giving any
material information. It can be legal or illegal gratification to induce a person to do a favor for
Direct Misrepresentation – actively misrepresenting about depending on when the insider makes the trade. private gain.
the product or customers. Illegal when the info is still non-public.
Forms of Corruption
1. Deceptive Packaging Some Unethical Practices of the Executive Officers and
2. Misbranding or Mislabeling • Paying bribe to win the public contract to build
Lower Level Managers
3. False or Misleading Advertising local highway.
4. Adulteration 1. Claiming vacation trip to be a business trip • Politician redirecting investment to his hometown
5. Weight understatement or short weighing 2. Having employees do work unrelated to the rather than to those in need.
6. Measurement understatement or short business • Official embezzling funds
measurement 3. Loose or Ineffective Controls • Company manager recruiter an ill-suited friend for
7. Quantity understatement or short numbering 4. Unfair labor practices a high level position
5. Making false claims about losses to free • Officials demanding bribes from ordinary citizens
Indirect Misrepresentation – characterized by omitting themselves from paying the compensation and • Salesman bribing the purchasing manager.
adverse or unfavorable information about the product or benefits provided by law
service. 6. Making employees sign documents showing that (At the end of the day, those hurt most by corruption are the
they are receiving fully what they are entitled to world’s weakest and most vulnerable)
1. Caveat Emptor
under the law when in fact they are only receiving
2. Deliberate Withholding of Information Why and How Does a Person Become Corrupt?
a fraction of what they are supposed to get
3. Passive Deception
7. Sexual harassment - Corruptions spread when there are opportunities,
Over-Persuasion when risk is minimal in comparison to benefits
Some Unethical Practices of Employees
obtained or is confronted with issues like: career
- Persuasion that is used for the sole benefit of advancement, earning of more income, and
1. Conflict of Interest
selling a product without considering the interest financial problems caused by illness, loos of
2. Dishonesty
of the buyer is not ethical. property.
Ethical Dilemma – a situation a person faces in which a
Corporate Ethics – also known as business ethics Ill Effects of Corruption
decision must be made about the appropriate behavior.
Unethical Practices of Corporate Management Economically,
Six-Step Approach to Resolving Ethical Dilemma
- Classified into two: practices of BOD & executive - Add up to 10% of the total cost of doing business
1. Obtain relevant facts.
officers in any part of the world
2. Identify the ethical issues from the facts.
- Could harm various stakeholders - Lead to waste in inefficient use of public resources
 - Corrodes public trust, undermines the rule of law, - The judiciary is formally independent, but the rich - Poor value realization and revenue management
and ultimately delegitimizes the state. and powerful have frequently influenced have caused the country’s overall resource
proceedings in civil and criminal cases. governance to be judged as ‘weak’
Other significant and serious effects of corruption are: - Is underfunded by the state and often depends on
local sponsors for resources and salaries, Prevention of Corruption
1. Lead to breakdown in social order and lives are
resulting in non-transparent and biased court
affected when ordinary people prevented from - A clean system is not a natural state of affairs.
decision.
receiving all the essential service they are entitled - Corruption comes from weakness of human
to. Police nature – greed, temptation, the desire to amass
2. Creates unfair competition and increases the cost wealth or to obtain business through unfair
of doing business. - Regarded as one of the most corrupt institutions means.
3. A cancer that spreads rapidly all over the body. in the country - Even with harsh penalties, corruption cannot be
- Company reports that they cannot rely on the eradicated completely
Characteristics of Corruption police services
1. Recipients and Payers – there are two sides of a Public Service
coin. 1. Clear Business Processes – having defined
2. Extortion – those having the authority in our - Three out of five business reported expecting to workflows, clear directives on financial approving,
society ask to be bribed or given us the give gifts in order to get things done, but only one authorities, and standard procurement
opportunity to bribe. On the ground of allegation: in ten reported expecting to give gifts to get an instructions can help flag irregularities in a
‘There is no escaping from it, for if you don’t pay, operating license business or organization
you are bound to fall behind.’ - Inefficient government bureaucracy is ranked as 2. Policy on Gifts and Entertainment
3. Lubricant of Society – paying bribes is equal to the most problematic factor for doing business in 3. Declaration of Conflict of Interest
ensure smoother operation in society the Philippines. 4. Convenient Corruption Reporting System
4. An Ethical Dilemma – the mere fact that both the
payer and recipient of bribes want to keep their Land Administration Efforts to Curb Corruption through Legislation
behavior secret shows thar such behavior is
- Property rights are formally recognized and 1. Anti-Graft and Corrupt Practices Act
generally considered to be improper.
protected in the Philippines, but in practice, the 2. Anti-Red Tape Act
5. Poverty Alleviation – those who on an operational
law is not always upheld 3. Revised Penal Code
level often have good opportunities to extract
4. Anti-Money Laundering Act
extra income or privileges from decisions they Tax Administration 5. Act Establishing a Code of Conduct and Ethical
might take of importance to entrepreneurs and
Standards for Public Officials and Employees
citizens - Officials at BIR are believed to be prone to
6. Government Procurement Reform Act
6. Culture – gifts are inherent to human relation and corruption and known for embezzlement and
7. United Nations Convention Against Corruption
therefore present in all culture. However corrupt extortion
payments are made in hiding. Vigilance of Civil Society
Customs Administration
7. Kindness among Friends – giving gift with a
certain condition. - Companies cite burdensome import procedures • Philippine society is active and is represented by
and corruption at the border as being among the a wide variety of different organizations.
The Philippines Corruption Report • CSO are normally not included in formal decision-
most problematic factors for importing
making, but they play a large role in initiating
- Ph loses P200 billion from smuggling and P400
Public Procurement legislation and steering debate congress.
billion from tax evasion.
• The Constitution guarantees freedoms of speech
- Diversion of public funds, as well as favoritism in and expression, but in practice these freedoms
Judicial System
the decisions of public officials, is very common are not consistently upheld.
- Bribes and irregular payment in return for
Natural Resources
favorable judicial decisions are common
 • The Philippines is the second most dangerous - Makati Business Club (MCB) and European Unified Code of Conduct for Business
country in the world for journalists to operate in, as Chamber of Commerce of the Philippines (ECCP)
measured by the number of journalists death. serve as Integrity Initiative Secretariat - Most significant accomplishments of the Integrity
• The existence of libel and defamation laws - A multisectoral campaign that seeks to Initiative
remains a problem and are frequently used by institutionalize integrity standards among various - Purpose: (1) harmonizes existing ethical
officials and powerful individuals to try to silence sectors of society – business, government, standards among business operating in the
judiciary, academe, youth, civil society, church Philippines, (2) formally communicates the
journalists.
and media. signatories’ commitment to upholding high
Current Issues on Corruption / Fraudulent Activities in the - Aims to help in diminishing, if not fully eradicating standards of ethics in all business transactions
Philippines the various cycle of corruption in the Philippines
- Hopes to build trust in government, a more
- “Senate Probe of SEA Games Venue Contract
equitable society and fair market conditions 1. Top Management
Press” Philippine Inquirer, November 11, 2020,
- Through this, the Philippines will become a 2. Human Resources
Melvin Gascon
benchmark in the transformational process of any 3. Sales and Marketing
- “Smuggled tobacco products cornered half of
country regarded as highly corrupt to one that 4. Finance and Accounting
apprehended goods in 2020” Philippine Inquirer,
fosters an ethical and progressive business 5. Procurement
January 19, 2021, Ben O. De Vera
environment 6. Logistics
- “New ‘pastillas’ raps tag alleged brains” Philippine
- An Integrity Compliance Handbook containing the 7. Implementation and Monitoring
Inquirer, November 6, 2020, Nikka G. Valenzuela
key documents and toolkits in Integrity Initiative
- “45 BI employees in ‘pastillas’ scam suspended” Some Principles for the Conduct of Business
was published
Philippine Inquirer, October 28, 2020, Nikka
- Hoped that the problem of massive graft and
Valenzuela 1. Towards the employees
corruption in the Philippines will be minimized if
- “NBI: PhilHealth, dialysis center officials 2. Towards the customer
not totally eliminated
‘conspired’” Philippine Inquirer, January 13, 2021, 3. Towards the supplier
Marlon Ramos Corporate Values 4. Towards the owners and other providers of capital
- “43 PhilHealth officers quit” Philippine Inquirer, 5. Towards the local and national government
October 9, 2020, Tina G. Santos - It is therefore important that the organization’s 6. Towards society in general
- “Sandigbayan junks plea of Enrile aide” Philippine values, and its code of conduct, address the legal
Inquirer, January 22, 2021, Nikka G. Valenzuela and other obligations owed to important Survey of Laws Advocating Business Ethics
- “Credit Card Fraud Cases Surgery 29%” stakeholders
RA 7394 “The Consumer Act of the Philippines” approved
Philippine Inquirer, February 3, 2021, Doris - Managing, protecting, and enhancing reputation
on April 13, 19192
Dumlao-Abadilla has become one of the greatest challenges facing
today’s board. RA 3720 “The Food, Drug and Cosmetics” approved on
Initiatives to Improve Business Ethics and Reduce - The reputation of a business is a critical factor in June 22, 1963
Corruption the determination of its value
RA 8293 “The Intellectual Property Code of the Philippines”
- Improvement of business ethics is a common Need for a Code of Conduct effective January 1, 1998
concern of everybody.
- We cannot effectively remind businessmen and - A formal expression of the organization’s values Covers:
professional of their ethical responsibility to each and ethics.
other, to their customers and clients. - It should: (1) guide directors and senior 1. Copyrights and related rights
- Unethical practices are very present. executives, (2) promote responsibility and 2. Trademarks and service marks
accountability of individuals, (3) ensure 3. Geographic indications
The Integrity Initiative Program (2010) compliance with legal and other obligations 4. Industrial designs
5. Patents
- Was organized after the Philippines received
6. Lay-out designs of Integrated Circuits
grant from Siemens.
7. Protection of Under