Bucot, Maria Alizah L.

Governance, Business Ethics, Risk Management and Internal Control

Rocero, Angela Louise Ms. Josephine Ong

BUSINESS ETHICS
DEFINITION OF ETHICS
Ethics is derived from the Greek word “Ethos” which means “custom” or “character”. Ethos is as
a philosophical science that deals with the morality of human conduct.

- Moral principles that govern a person's behavior or the conducting of an activity.

- It is the study that enables a rational being to distinguish or differentiate what is right from what
is wrong

- Ethics is only possible because we can act against our nature, based on our conscience. It stops
us from simply describing what is likely to happen, and allows us to make judgements about what
should happen. Of all the ways you might act, which is the best? Of all the possibilities, which one
should you bring into reality? That’s the question ethics seeks to answer.

- Ethics asks us to take responsibility for our beliefs and our actions, and live a life that’s our own.

- To put it simply, ethics represents the moral code that guides a person's choices and behaviors
throughout their life

WHAT IS BUSINESS ETHICS

- The concept of business ethics began in the 1960s as corporations became more aware of a
rising consumer-based society that showed concerns regarding the environment, social causes,
and corporate responsibility.

- Business ethics refers to implementing appropriate business policies and practices with regard
to arguably controversial subjects.

- ethical principles are universal standards of right and wrong prescribing the kind of behavior an
ethical company or person should and should not engage in.

- In business, how people judge your character is critical to sustainable success because it is the
basis of trust and credibility. Both of these essential assets can be destroyed by actions which
are, or are perceived to be unethical. Thus, successful executives must be concerned with both
their character and their reputation.
IMPORTANCE OF BUSINESS ETHICS
1. Corresponds to Basic Human Needs:

The basic need of every human being is that they want to be a part of the organization which
they can respect and be proud of, because they perceive it to be ethical. Everybody likes to be
associated with an organization which the society respects as a honest and socially responsible
organization. The HR managers have to fulfill this basic need of the employees as well as their
own basic need that they want to direct an ethical organization. The basic needs of the employees
as well as the managers compel the organizations to be ethically oriented.

2. Credibility in the Public:

Ethical values of an organization create credibility in the public eye. People will like to buy the
product of a company if they believe that the company is honest and is offering value for money.
The public issues of such companies are bound to be a success. Because of this reason only the
cola companies are spending huge sums of money on the advertisements now-a-days to convince
the public that their products are safe and free from pesticides of any kind.

3. Credibility with the Employees:

When employees are convinced of the ethical values of the organization they are working for,
they hold the organization in high esteem. It creates common goals, values and language. The HR
manager will have credibility with the employees just because the organization has creditability
in the eyes of the public. Perceived social uprightness and moral values can win the employees
more than any other incentive plans.

4. Better Decision Making:

Respect for ethics will force a management to take various economic, social and ethical aspects
into consideration while taking the decisions. Decision making will be better if the decisions are
in the interest of the public, employees and company’s own long term good.

5. Profitability:

Being ethical does not mean not making any profits. Every organization has a responsibility
towards itself also i.e., to earn profits. Ethical companies are bound to be successful and more
profitable in the long run though in the short run they can lose money.

6. Protection of Society:

Ethics can protect the society in a better way than even the legal system of the country. Where
law fails, ethics always succeed. The government cannot regulate all the activities that are
harmful to the society. A HR manager, who is ethically sound, can reach out to agitated
employees, more effectively than the police.

CONTROVERSIAL SUBJECTS
- Some issues that come up in a discussion of ethics include corporate governance, insider
trading, bribery, discrimination, social responsibility, and fiduciary responsibilities.

Examples of situations:
- It shall be unlawful for an insider to sell or buy a security of the issuer, while in possession of
material information with respect to the issuer or the security that is not generally available to
the public. Insider" means (a) the issuer; (b) a director or officer (or any person performing similar
functions) of, or a person controlling the issuer; gives or gave him access to material information
about the issuer or the security that is not generally available to the public; (d) A government
employee, director, or officer of an exchange, clearing agency and/or self-regulatory organization
who has access to material information about an issuer or a security that is not generally available
to the public; or (e) a person who learns such information by a communication from any forgoing
insiders.

- consider the matter of quality control for a company that manufactures electronic components
for computer servers. These components must ship on time, or the manufacturer of the parts
risks losing a lucrative contract. The quality-control department discovers a possible defect, and
every component in one shipment faces checks. Unfortunately, the checks may take too long,
and the window for on-time shipping could pass, which could delay the customer's product
release. The quality-control department can ship the parts, hoping that not all of them are
defective, or delay the shipment and test everything. If the parts are defective, the company that
buys the components might face a firestorm of consumer backlash, which may lead the customer
to seek a more reliable supplier.

PRINCIPLES OF BUSINESS ETHICS

1. HONESTY.

Be honest in all communications and actions. Ethical executives are, above all, worthy of trust
and honesty is the cornerstone of trust. They are not only truthful, they are candid and forthright.
Ethical executives do not deliberately mislead or deceive others by misrepresentations,
overstatements, partial truths, selective omissions, or any other means and when trust requires
it they supply relevant information and correct misapprehensions of fact.
2. INTEGRITY

Maintain personal integrity. Ethical executives earn the trust of others through personal
integrity. Integrity refers to a wholeness of character demonstrated by consistency between
thoughts, words and actions. Maintaining integrity often requires moral courage, the inner
strength to do the right thing even when it may cost more than they want to pay. The live by
ethical principles despite great pressure to do otherwise. Ethical executives are principled,
honorable, upright and scrupulous. They fight for their beliefs and do not sacrifice principle for
expediency.

3. PROMISE-KEEPING

Keep promises and fulfill commitments. Ethical executives can be trusted because they make
every reasonable effort to fulfill the letter and spirit of their promises and commitments. They
do not interpret agreements in an unreasonably technical or legalistic manner in order to
rationalize non-compliance or create justifications for escaping their commitments.

4. LOYALTY

Be loyal within the framework of other ethical principles. Ethical executives justify trust by being
loyal to their organization and the people they work with. Ethical executives place a high value
on protecting and advancing the lawful and legitimate interests of their companies and their
colleagues. They do not, however, put their loyalty above other ethical principles or use loyalty
to others as an excuse for unprincipled conduct. Ethical executives demonstrate loyalty by
safeguarding their ability to make independent professional judgments. They avoid conflicts of
interest and they do not use or disclose information learned in confidence for personal
advantage. If they decide to accept other employment, ethical executives provide reasonable
notice, respect the proprietary information of their former employer, and refuse to engage in
any activities that take undue advantage of their previous positions.

5. FAIRNESS

Strive to be fair and just in all dealings. Ethical executives are fundamentally committed to
fairness. They do not exercise power arbitrarily nor do they use overreaching or indecent means
to gain or maintain any advantage nor take undue advantage of another’s mistakes or difficulties.
Ethical executives manifest a commitment to justice, the equal treatment of individuals,
tolerance for and acceptance of diversity. They are open-minded; willing to admit they are wrong
and, where appropriate, they change their positions and beliefs.

6. CARING

Demonstrate compassion and a genuine concern for the well-being of others. Ethical executives
are caring, compassionate, benevolent and kind. They understand the concept of stakeholders
(those who have a stake in a decision because they are affected by it) and they always consider
the business, financial and emotional consequences of their actions on all stakeholders. Ethical
executives seek to accomplish their business objectives in a manner that causes the least harm
and the greatest positive good.

7. RESPECT FOR OTHERS

Treat everyone with respect. Ethical executives demonstrate respect for the human dignity,
autonomy, privacy, rights, and interests of all those who have a stake in their decisions; they are
courteous and treat all people with equal respect and dignity regardless of sex, race or national
origin. Ethical executives adhere to the Golden Rule, striving to treat others the way they would
like to be treated.

8. LAW ABIDING

Obey the law. Ethical executives abide by laws, rules and regulations relating to their business
activities.

9. COMMITMENT TO EXCELLENCE

Pursue excellence all the time in all things. Ethical executives pursue excellence in performing
their duties, are well-informed and prepared, and constantly endeavor to increase their
proficiency in all areas of responsibility.

10. LEADERSHIP

Exemplify honor and ethics. Ethical executives are conscious of the responsibilities and
opportunities of their position of leadership and seek to be positive ethical role models by their
own conduct and by helping to create an environment in which principled reasoning and ethical
decision making are highly prized.

11. REPUTATION AND MORALE

Build and protect the company’s good reputation and the morale of its employees. Ethical
executives understand the importance of their own and their company’s reputation as well as
the importance of the pride and good morale of employees. Thus, they avoid words or actions
that that might undermine respect and they take affirmative steps to correct or prevent
inappropriate conduct of others.

12. ACCOUNTABILITY

Be accountable. Ethical executives acknowledge and accept personal accountability for the
ethical quality of their decisions and omissions to themselves, their colleagues, their companies,
and their communities.