ETHICS

BUSINESS
ORIGINS AND ROLES OF BUSINESS • English word: bisigne “care, anxiety,
ORGANIZATION occupation”
• Adjective: bisig “careful, anxious, occupied,
BUSINESS ORGANIZATIONS diligent”
• Sole Proprietorship • Occupation, engagement of work
• Partnership • Engage in purposeful activity
• Corporation • An activity that one does with care and
• Cooperatives diligence

HUMAN HISTORY FIRST USE OF TERM “BUSINESS”

• HUMANS TRADED AND EXCHANGED • Trade and commercial engagements (1727)
GOODS AND SERVICES TO FULFILL • MODERN TIMES – CONTEMPORARY
NEEDS ERA, term “business” is associated with
• Food, Water, Clothes, Shelter enterprise, trade or for-profit organization

IN MODERN TIMES; BUSINESS

NEEDS HAVE EXPANDED • Activity of making, buying, selling goods and
• Education services in exchange of money
• Transportation • Amount of activity done by a store, company,
• Medicine factory, etc.
• Safety
ROLES OF BUSINESS IN SOCIETY
NEEDS versus WANTS • Fundamental role is to satisfy human needs by
creating products and services
ENTREPRENEUR
• Uses skills, efforts, assets to provide goods and 1.) PROVIDE EMPLOYMENT
services • Wages of employees – to purchase other goods
• Organizes and operates business and services
• Accepts risk of running a business • Profits from organizations – compensate
stockholders
DIVISION OF LABOR • Percentage of income – paid to the government
• Separation of tasks as taxes
• Assignment of different parts of manufacturing • Taxes – to provide infrastructure (roads, water,
process and task to different people hospitals), and pay services (medical, law
• Allow individual to be expert in one thing to enforcement, sanitation) in the country
improve efficiency in society
• Source of interdependence of entrepreneurs SUCCESSFUL BUSINESS
and organizations • Contribute more jobs and income to the
generation
RESULTS OF DIVISION OF LABOR • Boost the economy of the country
• Increase in trading
• Increase productivity of organization and
individual worker

CYCLE OF ORGANIZATION TAX

• Entrepreneurs pay taxes to governing bodies
• Government uses tax to pay for things people
need such as education, health care, &
recreational facilities
ROLES OF BUSINESS IN SOCIAL
ECONOMIC DEVELOPMENT
BUSINESS DEFINITION
• An organization or economic system where
goods and services are exchanged for one
another or for money
• Every business requires form of investment
and enough customers to whom outputs can be
sold consistently to make profit
• Can be privately owned, non-profit, state-
owned
BASIC FORMS OF BUSINESS
ORGANIZATIONS
1.) SOLE PROPRIETORSHIP
• Also known as sole trader
• Owned by one person and operates for their
benefit
• Owner may operate business alone or with
other people
• UNLIMITED LIABILITY for all obligations
incurred by costs or judgements against business
• ALL ASSETS of the business BELONG TO
THE SOLE PROPRIETOR
• Vast majority of business start out as sole
proprietorship
ADVANTAGES
• Easiest and least expensive (EASIEST, LEAST
EXPENSIVE)
• Sole proprietors in complete control, can make
decisions within parameters of the law
(COMPLETE CONTROL, DECISION WITHIN
LAW)
• Profit flow directly to owner’s personal tax
return (PROFIT TO OWNER’S PERSONAL
TAX RETURN)
• Easy to dissolve
DISADVANTAGES
• Unlimited liability, legally responsible for all
debts. Personal assets are at risk
• Raising funds are limited to using personal
savings or consumer loans
• Hard time attracting high-caliber employees,
those who are looking for opportunities to own a
part of a business
• Employee benefits are not deductible from
business income such as medical insurance
2.) PARTNERSHIP
• Owned by 2 or more people
• Each partner has unlimited liability to debts
incurred by the business
• Partners should have a legal agreement that set
forth how decisions will be made, profits will be
shared, disputes will be solved and how future
partners will be admitted
• Decide up front how much time and capital
will be needed
ADVANTAGES
• Easy to establish, time should be invested in
developing partnership agreement
• More than 1 owner, ability to raise funds
increase
• Profits flow directly to owner’s personal tax
return
• Prospect employees will be attracted if given
chance to become a partner
• Business will benefit from partner who has
complementary skills
DISADVANTAGES
• Partners are jointly and individually liable for
actions of other partners
• Profits must be shared with partners
• Decisions are shared; disagreements can occur
• Some employee benefits are not deductible
from income on tax returns
• Partnership have a limited life; may end on
withdrawal or death or partner
3.) CORPORATION
• Have limited liability
• Business have separate legal personality from
owners
• Government owned or privately owned; Profit
or non-profit
• Privately owned; for-profit, owned by
shareholders (elect board of directors),
corporation hire managerial staff
• Privately owned; for-profit, held by small
group, publicly held, publicly traded shares on
stock exchange
ADVANTAGES • Members providing more involvement or
• Shareholders have limited liability investment will still only get one vote
• Shareholders are only responsible for their • Extension record keeping is necessary
investment
• Can raise additional funds by sale of stock
• Can deduct cost of benefits it provides to
employees

DISADVANTAGES
• Process of incorporation requires more time
and money
• Monitored by government and local agencies;
may have more paperwork to comply with
regulations
• Incorporating may result to higher taxes.
Dividends paid to shareholders are not
deductible from income; income can be taxed
twice

4.) COOPERATIVE
• Referred to as “co-op”
• limited liability business for-profit or non-
profit
• Owners are called “members” and share
authority in decision-making
• Operated by group of individuals to their
mutual benefit
• May be incorporated or unincorporated

ADVANTAGES
• Inexpensive to register
• Owned and controlled by members
• All members have equal vote in general
meeting regardless of investment or involvement
• All members must be active
• Limited liability
• Profit distribution (surplus earnings) to
members is carried in proportion. May be in
form of shares or cash

DISADVANTAGES
• Longer decision-making process
• Requires member to participate
• Less incentive
• Possible conflict between members
• Formed to provide service to members rather
than return on investment; may be difficult to
attract potential members seeking financial
return
• Limited distribution of profit; may prohibit
distribution of surplus
CORE PRINCIPLES OF GOOD CORPORATE 12.) Close minded
GOVERNANCE
MORALITY
PERSONALITY • Latin; “mos” (Plural: “mores”)
• Consist of all qualities that makes a person • Refer to one’s disposition, character,
distinct temperament, manners, customs, proper
• Inborn trait behavior in society
• refer to quality of rightness or wrongness of
CHARACTER action in society
• Set of moral and mental qualities/beliefs that
makes a person distinct ETHICS
• Learned behavior (may vary in situation; may • Greek: “ethos” – character, habit, place
be purposely changed) • “ethimos” – regularity, routine

PERSONALITY AND CHARACTER ETHOS

• Related but not the same • Character product of what someone does
regularly and repeatedly that became a habit
GOOD PERSONALITY • Linked with how someone lives in relation
• Vital with others
• Likeable, interesting, pleasant to be with
ETHICS
NEGATIVE PERSONALITY • Specialized discipline
• Being selfish
• Laziness and excuses SUBJECT ETHICS
• Inability to empathize • Study of good and evil, right and wrong, just
• Being quick to anger (temperamental) and unjust
• Practical science designed to test logically the
GOOD CHARACTER action’s quality of rightness or wrongness
• Integrity
• Honesty ETHICS TALK ABOUT THE FOLLOWING
• Courage 1.) How we behave as humans versus animals
• Loyalty and other creatures
• Fortitude 2.) Our life with its complications, difficulties,
• Others that promote good behavior and brokenness
3.) Capacity to resolve complications,
BAD CHARACTER difficulties, face problems, grit with life’s
1.) Lack of moral and ethical strength brokenness
2.) Commit evil acts; acts that make you less of
a person ETHICS VS MORALS
3.) Controlling, coward, cruel, cynical, EHTICS • Rules that social system provide,
defensive, dishonest, disloyal, disorganized, dictated by society
disrespectful, evil, foolish, gossipy, greedy, MORALS • Our own principle
hostile, boastful
4.) Avoid and doesn’t deal with conflict ETIQUETTE
5.) Power-tripping • Dependent on culture; ethnicity
6.) Never shows vulnerability 1.) Appropriate behavior anywhere you go
7.) Never takes accountability 2.) Right and expected behavior
8.) Doesn’t listen 3.) Allow you to behave and interact correctly in
9.) Chronic sarcasm social environment (Social etiquette, eating,
10.) Not following through meeting, bathroom, corporate, wedding, etc)
11.) Impatient
ETHICS VS ETIQUETTE • Respect
ETHICS • Obeying the law
• Refer to moral principles that govern our • Excellence
behavior • Being a leader
• Can mean different things to different people • Morale
• Related to principle • Accountable

ETIQUETTE 1.) HONESTY – Absence of lying, cheating,

• Indicate proper and polite way to behave theft
• Differ according to culture, religion, country, 2.) INTEGRITY – Quality of having strong
etc. moral principles; moral uprightness
• Related to behavior 3.) KEEPING PROMISES – Managers don’t go
out of situation and commitment
BUSINESS ETHICS 4.) LOYALTY – Strong feeling of support; no
• Practice of what is morally and ethically right selfish desires; company info is kept confidential
in conduct of business in workplace 5.) FAIRNESS – Impartial and just treatment;
• Essentially doing what is right in any business behavior without favoritism, discrimination
transaction 6.) CARING – Displaying kindness and concern
• Study of appropriate business policies and 7.) RESPECT – Courteous all the time
practices regarding controversial subjects 8.) OBEYING THE LAW – No one is above the
• Provide ethical standards in the workplace law
• Allow individual to be prepared in dealing with 9.) EXCELLENCE – Outstanding or extremely
ethical problems likely to arise in their career good; continuous improvement in everything
10.) BEING A LEADER – Role models; high
BUSINESS PRACTICES/CONTROVERSIAL level of integrity; firm and flexible decisions;
SUBJECTS guided by ethical principles
• Corporate governance 11.) MORALE – Confidence, enthusiasm,
• Insider trading discipline of people in particular time
• Bribery 12.) ACCOUNTABLE – Being held responsible
• Discrimination for one’s actions
• Corporate social responsibility
• Fiduciary responsibilities TRANSPARENCY
• Provide clear, factual, timely information
ETHICAL STANDARDS • Stakeholders are informed about company
• Credibility activities, plans, and involved risk in strategies
• Good image to organization
• Attract customers and applicants CORPORATE GOVERNANCE
• Employees remain loyal •. System of rules, practices, and processes
directed and controlled by business
CORE PRINCIPLES • Guiding principles on specific issues
• Ideas and visions which members of • Help members to make better decisions
community are expected to share and adhere to • Guidance on how company want members to
behave
12 CORE PRINCIPLES OF BUSINESS • Main factor that determines integrity of
ETHICS company
• Honesty • Heart and soul of the company
• Integrity • Managing interests of all stakeholders
• Keeping promises
• Loyalty GOOD COROPORATE GOVERNANCE
• Fairness 1.) operate more efficiently
• Caring 2.) Higher firm valuation and share
3.) Mitigate risk and safeguard against
mismanagement
4.) Better access to external finance
5.) Lower cost of capital and interest rates on
loans
6.) have better ability to attract customers

GOOD CORPORATE GOVERNANCE

(ADDITIONAL DETAILS)
• Important to socioeconomic development of
the nation
• Increase access to capital; encourages new
investments
• Boost economic growth
• Provide employment opportunities
• Stronger enterprises; stronger economy

COMMON PRACTICES IN BUSINESS

ORGANIZATION

1.) Employee Conduct (Accountability)

• Duties and responsibilities must be followed by
employees as condition of employment

2.) Equal Opportunity (Fairness)

• Equal opportunity law (Policies that promote
fair treatment in workplace)

3.) Computer Use (Transparency,

Accountability)
• Computer use policies (Limit to unnecessary
and time-wasting internet surfing, and social
media usage)

4.) Non-competition (Fairness)

• Non-competition agreement

5.) Finance and Accounting (Transparency)

• Accounting Policies
• How money is handled
• How acquisitions and liabilities are recorded
• Example: clear guidelines on purchases, petty
cash disbursements and recording
ETHICAL CHALLENGES IN DOING
BUSINESS
ETHICAL CONCERNS
• Racism, Sexism, Slavery
INAPPROPRIATE PRACTICES AND
POLICIES
• Discrimination, humiliation of people,
destructiveness, acts of violence
UNETHICAL/INAPPROPRIATE BUSINESS
PRACTICES AND POLICIES (12)
1.) Bribery
• Act of taking and receiving something with
intention of influencing recipient in favorable to
the briber
• Grease Money – “Padulas na pera.”
2.) Conflict of Interest
• Derive personal benefit
• Example: Using company information for
personal gain
3.) Harassment
• TWO TYPES
• QUID PRO QUO – A favor for a favor
• Hostile Work Environment
– Feeling of being unwelcome
– Sexual comments
– Inappropriate touching or behavior
– Difficult and uncomfortable environment
4.) Forced Overtime
• 8 Hours
(EXEMPTIONS TO THE RULE)
• War; national local emergency
• Prevent loss of life or property; imminent
danger to public safety
• Urgent work to be performed
• Prevent loss or damage to perishable goods
• Prevent serious obstruction or prejudice to
business
5.) Accounting Manipulation – Accounting
books are manipulated; false financial
statements
6.) Overbilling – Charging more than actual
price
7.) Misleading Advertisements – Samples of
products which product can’t deliver
8.) Making False Claims – Take credit for
personal gain
9.) Customer Service Failures – Failure to
comply the needs of the customers
10.) Lay Off – Employer can terminate you
without reason
11.) High Executive Compensation – Higher
salary to executives instead ow workers
12.) Shortchange of Materials – Shortchanging
raw materials that are used for lower cost
PRACTICE YOU SHOULD OBSERVE IN
WORKPLACE
• Do not touch people inappropriately
• Never date someone who works for you
• Do not demean others or make suggestive
comments
• Watch your language
• Watch jokes that seem humorous to some but
may offend others
• BEST WAY TO PREVENT HARASSMENT:
Educate everyone
GOOD POLICIES AND ETHICAL
PRACTICES IN BUSINESS
• Comply with reportorial requirements
mandated by government agencies
• Practice proper decorum
• Be sensitive to smells and scents that may be
unpleasant to others
• Company properties and assets are not for
personal use
• Employees should use communication
infrastructure properly and appropriately
• Employees should act in best interest of the
employer
• Confidential information should be protected
and not divulged to anyone
• All financial and accounting records should be
accurate, truthful, and reliable