Ethical

 Issues  and  Problems  in  

Business  and  the  Corporate  World  

Lesson  4  
 Introduc:on    
•  Business  is  a  produc:ve  human  ac:vity  that  brings  
beneficial  contribu:on  to  both  people  and  society.  

•  Business  produces  employment,  fair  deals,  crea:vity,  

advancement  of  technology,  customer  sa:sfac:on,  
among  others.  

•  Ironically,  however,  business  is  also  an  ac:vity  that  

provides  an  opportunity  for  some  unscrupulous  people  
to  take  advantage  of  others:  
–  e.g.  the  abuse  of  fiduciary  rela:onship  between  employers  
and  employees  and  between  the  buyers  and  the  sellers          
1.  SEXUAL  HARASSMENT    
 What  is  Sexual  Harassment?  

•  This  is  an  issue  in  the  corporate  world  that  must  be  
looked  into  because  it  can  create  a  hos:le  and  
unhealthy  workplace  for  the  employees.  

•  For  this  reason,  the  Congress  of  the  Philippines  

enacted  the  An:-­‐Sexual  Act  of  1995  

– Declaring  sexual  harassment  unlawful  in  the  

employment,  educa:on  or  training  environment,  
and  other  purposes.    
 An:-­‐Sexual  Act  of  1995  

•  “The  State  shall  value  the  dignity  of  every  individual,  

enhance  the  development  of  its  human  resources,  
guarantee  full  respect  for  human  rights,  and  uphold  
the  dignity  of  workers,  employees,  applicants  for  
employment,  students  or  those  undergoing  training,  
instruc:on  or  educa:on.    

•  Towards  this  end,  all  forms  of  sexual  harassment  in  

the  employment,  educa:on  or  training  environment  
are  hereby  declared  unlawful.”    
 The  Civil  Right  Act  of  1964    
of  United  States  of  America      
•  This  is  where  our  law  was  paVerned  defines  sexual  
harassment  as:  

– ”Unwelcome  sexual  advances,  requests  for  sexual  

favors,  and  other  verbal  or  physical  conduct  of  a  
sexual  nature  cons:tutes  sexual  harassment  when  
submission  to  or  rejec:on  of  this  conduct  explicitly  or  
implicitly  affects  an  individual’s  employment,  
unreasonably  interferes  with  an  individual’s  work  
performance  or  creates  an  in:mida:ng,  hos:le  or  
offensive  work  environment.”  
 Republic  Act  No.  7877  
•  Defines  sexual  harassment  as:  

– Employer,  employee,  manager,  supervisor,  agent  of  

the  employer,  teacher,  instructor,  professor,  coach,  
trainer  or  any  other  person  who,  having  authority,  
influence  or  moral  ascendancy  over  another  in  a  work  
or  training  or  educa:on  environment  demands,  
requests  or  otherwise  requires  any  sexual  favor  from  
the  other,  regardless  of  whether  the  demand,  request  
or  requirement  for  submission  is  accepted  by  the  
object  of  said  act.”    
 Why  Sexual  Harassment  Occurs?  

•  Sexual  harassment  occurs  due  to  power  struggle  

between  men  and  women  as  a  response  to  a  real  or  
imagined  loss  of  power  or  as  an  expression  of  
retalia:on  or  a  flexing  of  the  new  power.  

•  This  also  happens  because  some  organiza:ons  and  

managers  allow  it  to  happen.    

•  Historically,  sexual  harassment  has  always  occurred  

but  there  used  to  be  no  label  for  such  behavior.    
•  The  industrial  revolu:on  brought  about  changes  in  
the  tradi:onal  func:on  of  men  and  women  which  
greatly  increased  gender  specializa:on  and  formed  a  
new  kind  of  workplace  in  the  western  world.  

•  The  responsibility  of  men  and  women  became  more  

specialized.  

•  In  the  past  decades,  things  con:nue  to  change.  More  

and  more  women  joined  the  workforce.    They  moved  
into  jobs  that  were  tradi:onally  held  by  men.          
•  As  a  result  of  these  changes,  the  balance  is  shibing.  
Sexual  harassment  is  one  of  the  effect  of  this  shib.  

•  When  harassment  is  commiVed  by  a  male  against  a  

female,  it  may  be  a  response  to  real  or  imagined  loss  
of  power.  

•  When  commiVed  by  a  woman  towards  a  man,  it  may  

be  an  expression  of  retalia:on  or  flexing  of  the  new  
power.        
 Two  Types  of  Sexual  Harassment    

1.  Quid  Pro  Quo  harassment  

2.  Harassment  that  creates  a  hos:le  

environment      
 1.  Quid  Pro  Quo  harassment  

•  This  means  “this  for  that”    (something  for  something)    

•  This  is  defined  as  requiring  a  sexual  favor  or  interac:on  

as  a  condi:on  of  employment  or  in  exchange  for  an  
employment  benefit  (such  as  promo:on,  transfer,  pay  
raise).  

•  A  manager  uses  his  authority  to  grant  pay  increases  

and  promo:ons  as  a  means  to  extort  sexual  favors  
from  an  employee.  
–  e.g.,  “go  to  bed  with  me  and  you  will  get  that  promo:on  
you  want.”    
 2.  Harassment  that  creates  a  hos:le  
environment      
•  In  the  hos:le  environment  type  of  harassment,  
abuses  include  verbal,  physical  and  visual  conduct  
that  creates  an  in:mida:ng,  offensive,  or  hos:le  
environment  in  the  workplace  that  interferes  with  
work  performance.    

•  This  type  of  harassment  may  be  based  on  race,  

religion,  na:onal  origin,  sex,  age,  marital  status,  
veteran  status,  sexual  orienta:on,  or  disability.      
 Some  examples  of  a  hos:le  environment    
1.  Unwanted  touching,  pagng,  and  pinching  against  a  
person  
2.  Comments  about  your  body,  leering,  wolf  whistling,  
insults  of  a  sexual  nature,  persistently  pestering  for  
a  date.  
3.  Displaying  or  circula:ng  pornographic  pictures  with  
the  inten:on  of  harassing  someone  /  Pos:ng  of  
explicitly  sexual  materials  
4.  Workplace  blackmail-­‐  i.e.  sugges:on  that  sexual  
favors  may  further  your  career  (or  refusal  may  
hinder  it)      
5.  Green  jokes  

6.  Obscene  leVers    

7.  Sexual  proposi:ons    

8.  Sugges:ve  looks    
 The  profiles  of  the  Vic:m  and  the  
Harasser:  
1.  The  vic:m  as  well  as  the  harasser  may  be  a  woman  or  a  
man.  The  vic:m  does  not  have  to  be  of  the  opposite  sex.  

2.  The  harasser  can  be  the  vic:m’s  supervisor,  an  agent  of  
the  employer,  a  supervisor  in  another  area,  a  co-­‐worker,  
or  a  non-­‐employee.    

3.  The  vic:m  does  not  have  to  be  the  person  harassed  but  
could  be  anyone  affected  by  the  offensive  conduct.  

4.  The  harasser’s  conduct  must  be  unwelcome.  

•  It  is  helpful  for  the  vic:m  to  directly  inform  the  
harasser  that  the  conduct  is  unwelcome  and  must  stop.  

•  The  vic:m  should  use  any  employer  complaint  

mechanism  or  grievance  system  available.  

•  Although  the  vic:m  of  sexual  harassment  and  the  

person  accused  of  sexual  harassment  may  be  peers,  
more  frequently  the  vic:m  is  in  a  posi:on  of  lesser  
power  than  the  accused.  

•  The  most  common  example  is  the  boss-­‐subordinate  

situa:on.  Harassment  also  occurs  between  customer/
client  and  providers.    
 How  Sexual  Harassment  Affects  the  
Workplace  
•  In  the  study  made  by  Rexbook  Magazine  in  1981:    

– 140,000  men  and  women  were  interviewed  pertaining  

to  sexual  harassment.  

– The  result  revealed  that  80%of  the  persons  

interviewed  believed  they  have  been  sexually  
harassed.  

– The  study  also  showed  that  used  of  words,  jokes,  and  
gestures  were  the  type  of  harassment  which  created  a  
hos:le  environment  or  offensive  work  environment.  
– It  affected  the  individuals  harassed  and  the  person  
accused,  who  may  be  innocent;  such  case  can  
generate  costly  lawsuits,  unfavorable  publicity  or  
the  invasion  of  privacy.  

– It  can  also  affect  the  boVom  line  of  the  employer,  
managers  and  co-­‐workers,  and  affect  the  en:re  
life  of  an  organiza:on  and  its  members.      
 How  to  Prevent  Sexual  Harassment  in  
the  Workplace    

•  A  significant  step  an  organiza:on  can  take  in  

preven:ng  sexual  harassment  in  the  
workplace  is  through  crea:ng  a  safe,  secure,  
posi:ve  work  environment  by  pugng  into  
prac:ce  a  strong  sexual  harassment  policy.    

•  Some  example  for  policy  development  are:    

1.  A  broad  an:-­‐harassment/posi:ve  
environment  policy  that  includes  a  statement  
that  specifically  addresses  sexual  harassment  

2.  A  separate  sexual  harassment  policy  that  

covers  all  organiza:onal  members  

3.  Separate  sexual  harassment  policy,  one  that  

addresses  non-­‐management  employees  and  
one  that  addresses  management  
•  Sexual  harassment  is  very  costly  and  causes  
low  morale  among  employees  and  decrease  in  
produc:vity.  

•  Annoyed,  scared,  disgraced  people  are  

incompetent  of  performing  well.  

•  If  not  dealt  with,  sexual  harassment  may  result  

in  costly  lawsuits,  dreadful  publicity,  and  ruin  
of  an  organiza:on  image  that  took  years  to  
establish.      
•  Riddance  of  sexual  harassment  will  come  
through  the  commitment  of  the  organiza:on  
and  employees.    

•  Most  person,  male  and  female,  want  a  secure  

office,  free  from  threats  and  apprehension.    
 Communica:ng  the    
Sexual  Harassment  Policy    
•  The  best  policy  is  ineffec:ve  if  it  is  not  communicated  
well.  Even  if  the  company  already  has  a  well-­‐wriVen  
policy,  it  is  important  to  expose  it  regularly  through:  
– Permanent  pos:ng  on  bulle:n  board    
– Memos    
– Ar:cles  in  the  organiza:on’s  newsleVer  
– Mee:ng  and  trainings  
• Training  program  may  come  up  with  various  topics  
to  support  the  an:-­‐harassment  programs  and  to  
assure  each  employee  of  a  safe  and  harassment-­‐
free  workplace  environment    
2.  THE  PROBLEM  OF  JUST  WAGE  
 Work  and  Compensa:on    
•  Work    
– is  said  to  be  for  the  purpose  of  obtaining  economic  
gain  for  the  laborer.    
– Most  agreed  that  work  is  directed  to  the  promo:on  of  
life.  
– The  duty  to  preserve  one’s  life  implies  the  duty  to  
work  and  that  each  has  a  personal  duty  to  take  care  of  
himself  and  not  to  be  a  burden  to  other.  

•  Being  compensated  for  a  work  done  or  for  services  

rendered  is  the  very  essence  of  ‘work’.  
•  Compensa:on    
– One  is  willing  to  work  in  exchange  for  remunera:on  or  
rewards  he  will  receive  from  working.  
– Such  remunera:on  may  include  both  financial  and  
non-­‐financial  compensa:on.  
– It  can  be  in  the  form  of  wages,  shares  on  profits,  
harvest  or  commercial  goods,  in-­‐kind  payments  and  
other  remunera:ve  fringe  benefits.  

•  The  main  objec:ve  of  compensa:on  is  to  create  a  

system  of  rewards  that  is  equitable  to  the  
employer  and  employee.  Thus,  the  general  
concern  is  that  jus$ce  should  be  a  substance  of  
compensa$on.    
 The  Ques:on  of  Just  Wage    
•  A  number  of  people  all  over  the  world  commented  on  its  
defini:on  and  have  argued  on  the  appropriate  criteria  to  
consider  in  segng  the  so-­‐called  ‘Just  Wage’.    

•  A  just  wage  is  defined  as  the  remunera:on  which  is  

enough  to  support  the  wage-­‐earner  is  reasonable  and  
frugal  comfort.  

•  The  Catholic  Church  tells  us,  “a  just  wage  is  the  legi:mate  
fruit  of  labor.”    
 DAILY  MINIMUM  WAGE  RATES  
Na;onal  Capital  Region  (NCR)  
Effec;ve  01  July  2010  

•  Non-­‐Agriculture  
–  P  382.00  P22.00  P  404.00  
•   Agriculture  (Planta:on  and  Non  Planta:on)  
–  P  345.00  P22.00  P  367.00    
•  Private  Hospitals  with  bed  capacity  of  100  or  less  
–  P  345.00  P22.00  P  367.00    
•  Retail/Service  Establishments  employing  15  workers  or  
less  
–  P  345.00  P22.00  P  367.00    
•  Manufacturing  Establishments  regularly  employing  less  
than  10  workers  
–  P  345.00  P22.00  P  367.00  
 Philippine  Cons:tu:on  

•  Spread  in  various  parts  of  the  1987  Philippine  

Cons:tu:on  are  specific  pronouncements  and  
mandates  on  the  protec:on  and  promo:on  of  
the  rights  of  workers  in  the  public  and  private  
sectors,  as  indicated  in  leVer  “g”  Sec  3  of  Art.  
XIII.  

•  “That  the  workers  are  en:tled  to  a  living  

wage”      
 Republic  Act  No.  6727  

•  The  Wage  Ra:onaliza:on  Act  declared  the  policy  

of  the  State  to  ra:onalize  the  fixing  of  minimum  
wages  and  to  promote  produc:vity-­‐improvement  
and  gain-­‐sharing  scheme  to  ensure  a  decent  
standard  of  living  for  the  workers  and  their  
families.  The  minimum  wage  rates  shall  be  
adjusted  in  a  fair  and  equitable  manner,  
considering  exis:ng  regional  dispari:es  in  the  
cost  of  living  and  other  socio-­‐economic  factors.  
 Government  Agencies  Involved    
•  In  our  country,  determina:on  of  wages  must  also  be  
adequate  and  just.    

•  Na:onal  Wage  and  Produc:vity  Commission  (NWPC)  

•  Regional  Tripar:te  Wages  and  Produc:vity  Boards  
(RTWPB)  

– These  determine  the  minimum  wage  for  Filipino  

workers  
– They  handle  the  minimum  wage  rates  of  the  workers  
of  each  and  every  region  of  the  country.  
 Factors  to  consider  in    
Formula:on  of  Fair  Wages  
1.  External  Market  Factor     2.  Laws  and  Regula;ons  

•  These  refers  to  the  supply   •  Workers  should  be  paid  in  
and  demand  for  labor  and   accordance  with  laws  and  
the  so-­‐called  economic   regula:ons  issued  by  the  
condi:ons  and   government.  It  requires  that  
underemployment.     employers  pay  at  least  the  
minimum  wage.    
 Factors  to  consider  in    
Formula:on  of  Fair  Wages  
3.  Cost  of  Living     4.  Prevailing  Industry  Rate  

•  The  cost  of  living  relates  to   •  Some  claim  that  paying  
basic  maintenance  needs   workers  the  average  of  what  
and  it  must  be  seriously   other  companies  are  paying  
considered  in  formula:on  of   for  the  same  job  result  in  a  
wages.  A  fair  wage  should   fair  wage.  However  not  all  
be  sufficient  to  meet  the   companies  have  a  minimum  
increase  in  cost  of  living.   wage  high  enough  to  
maintain  a  decent  standard  
of  living.  
 Factors  to  consider  in    
Formula:on  of  Fair  Wages  
5.  Organiza;onal  Factors     6.  Job  Factor    
•  Assessment  of  what  type  of   •  The  nature  of  the  job  itself  
industry  the  organiza:on   entails  the  formula:on  of  a  
operates,  the  size  of  the   just  wage.  Du:es,  
company,  and  the   responsibili:es,  and  the  
organiza:on’s  profitability   skills  requirements  of  the  
to  jus:fy  its  ability  to   job  are  probably  the  most  
provide  fair  wages  to  its   considerable  determinants  
workers  should  be   of  fair  wage.      
considered.    
 Factors  to  consider  in    
Formula:on  of  Fair  Wages  
7.  Individual  Performance    

•  The  trend  is  that  individual  

performance  or  produc:vity  
ra:ngs  affects  the  
determina:on  of  wage/
salary  increases.    
 Some  Issues  on  Just  Wage  

•  The  minimum  wage  mandated  by  the  government  is  

not  a  guarantee  of  a  just  and  fair  wage.  

•  Organiza:ons  and  businesses  usually  conclude  that  

they  are  legally  and  morally  right  when  they  fulfill  
their  mutual  agreement  with  the  employees.  

•  Geographical  difference  hinder  the  formula:on  of  a  

perfectly  common  defini:on  of  fair  wage.  Some  
communi:es  have  a  higher  cost  of  living  than  others.    
•  Wage  indexa:on  to  cost  of  living,  where  wage  
is  automa:cally  adjusted  with  the  increases  of  
cost  of  living,  is  not  usually  met  by  majority  of  
the  employers.    

•  Companies  have  different  interpreta:ons  of  

the  jus:fiable  pay  for  certain  job  posi:on,  
skills,  and  tasks.  Thus,  the  prevailing  rate  in  
industry  alone  could  not  perfectly  establish  a  
just  wage.  
3.  GIFT  GIVING  AND  BRIBERY      
 GIFT-­‐GIVING      
•  Is  merely  an  act  of  extending  goodwill  to  an  individual  in  
an  effort  to  share  something  with  par:cular  others.    

•  Giving  gib  to  customers,  clients  and  business  partners  is  

a  common  prac:ce  in  the  business  community.      

•  It  is  normally  observed  during  special  occasions  like  

Christmas,  New  Year,  and  some:mes  even  during  
birthdays.      
 Reasons  why  business  usually    
engage  in  gib-­‐giving    
1.  To  show  apprecia:on  for  a  favor  received    

2.  To  effec:vely  establish  goodwill  with  business  

partners.  

3.  To  adver:se    

4.  To  compete  effec:vely  against  compe:tors  

 The  following  are  the  common    
forms  of  Gib-­‐Giving    
•  Samples     •  Patronage  awards  
•  Raffle  coupons  /   (rewards)  
cer:ficates     •  Tie-­‐up  promo:ons      
•  Rebates  /  cash   •  Allowance  
refund   •  Free  goods  
•  Padding  expense   •  Tips    
accounts    
•  Premiums    
•  Prizes    
 Is  Gib-­‐Giving  Ethical  or  Unethical?  

•  Business  gib  of  clients  and  business  associates  can  

raise  conflict  of  interest  problems,  and  knowing  
where  to  draw  the  line,  between  what  is  right  and  
wrong,  is  not  always  easy.    

•  The  clear  point  is  that  those  who  cross  that  line,  
inten:onally  or  not,  end  up  in  big  trouble.  

•  It  is  indeed  difficult  to  determine  the  morality  of  

giving  gib.    
•  Most  agree  that  accep:ng  and  receiving  bribe  
is  a  viola:on  of  professional  ethics,  but  we  
may  not  always  find  it  easy  to  determine  what  
is  and  is  not  a  bribe.    

•  Not  all  examples  of  giving  and  accep:ng  gib  

and  ameni:es  qualify  as  bribery,  just  as  not  all  
cases  of  taking  another’s  property  should  be  
considered  theb.    
 Factors  in  Determining  the    
Morality  of  Gib-­‐Giving    
1.  Value  of  the  gib  
2.  Purpose  of  the  gib  
3.  Circumstances  under  which  the  gib  was  given  or  
received    
4.  Posi:on  between  or  rela:onship  of  the  giver  and  
receiver    
5.  Acceptable  business  prac:ce  in  the  industry    
6.  Company  policy    
7.  Laws  and  Regula:ons        
 BRIBERY    
•  It  is  defined  as  a  prac:ce  of  giving  renumera:on  for  
performance  of  an  act  that  is  inconsistent  with  the  work  
contract  or  the  nature  of  the  work  one  has  been  hired  to  
perform.  

•  It  is  intended  to  induce  people  inside  the  business  or  

other  organiza:ons  to  make  decisions  that  would  be  
jus:fiable  according  to  normal  business  or  other  criteria.  

•  It  was  the  iden:fied  to  be  a  form  of  corrup:on  and  is  
generally  immoral  and  for  most  is  illegal.        
•  Renumera:ons,  termed  as  bribes,  can  be  in  a  form  of  
money,  gib,  entertainment,  or  preferen:al  treatment.    

•  Example  of  bribery:    

– A  motorist  offered  a  certain  amount  of  money  to  a  
police  officer  in  order  not  to  be  issued  a  :cket  for  
speeding.  
– A  construc:on  company  shared  percentage  of  its  
income  to  a  civil  servant  in  order  to  win  a  contract.  
– A  narco:cs  smuggler  bribed  a  judge  to  lessen  criminal  
penal:es.      
 Bribery  is  obviously  unethical  because  
of  the  following  reasons:  

•  It  is  generally  used  as  an  instrument  to  gain  

personal  or  corporate  advantage.  

•  It  corrupts  the  concept  of  jus:ce  and  equality    

•  Bribery  produces  cynicism  and  a  general  

distrust  of  ins:tu:on    
•  It  destroys  people’s  trust  in  the  integrity  of  
professional  services,  of  government  and  the  
courts,  of  law  enforcement,  religion,  and  
anything  it  touches.  

•  It  treats  people  as  commodi:es  whose  honor  

can  be  bought  and  sold.  It  thus  tends  to  
degrade  the  respect  we  owe  to  other  human  
beings.        
4.  THE  MORALITY  OF  ADVERTISING    
•  Adver:sing  plays  a  very  significant  role  in  
marke:ng  goods  and  services.    

•  Without  adver:sing,  the  consumers  would  not  

be  aware  of  the  presence  of  diverse  products  
and  services  available  in  the  market.    

•  Some:mes,  even  the  mere  presence  of  

adver:sing  can  sell  a  product  due  to  consumer  
percep:on  that  a  heavily  adver:sed  product  is  
a  product  of  “good  value”.    
•  Philip  Kotler  -­‐  famous  marke:ng  guru  -­‐  defines  adver:sing  
as:    
–  “any  paid  form  of  non-­‐personal  presenta:on  and  promo:on  of  
ideas,  goods,  or  services  by  an  iden:fied  sponsor”  

•  Wells  and  BurneV  likewise  defined  adver:sing  as:  

–  “paid  non-­‐personal  communica:on  from  an  iden:fied  sponsor  
using  mass  media  to  persuade  or  influence  and  audience”    

•  The  primary  purpose  of  adver:sing  is  to  inform  poten:al  

buyers  of  the  availability  of  a  certain  product  by  providing  
relevant  informa:on  on  its  uses,  benefits  and  how  it  might  
serve  the  needs  and  wants  of  individuals.      
•  However,  the  use  of  adver:sing  today  has  not  
been  serving  its  intended  purpose  since  very  liVle  
informa:on  is  conveyed  to  consumers  and  more  
oben  the  informa:on  is  not  even  useful.  

•  From  the  point  of  morality,  adver:sing  in  itself  is  

not  bad  or  immoral  since  it  helps  achieve  the  
goals  of  both  the  seller  and  buyer.    

•  It  only  becomes  immoral  when,  in  the  aVempt  to  

persuade  consumers,  the  adver:sements  become  
decep:ve,  misleading,  and  manipula:ve.      
•  There  is  only  one  criterion  in  evalua:ng  the  morality  
of  adver:sing,  and  that  is  “truth”.    

•  An  adver:sement  that  conveys  truthful  informa:on  

is  morally  permissible.  If  an  adver:sement  contains  
false  statement  and  “lies”,  then  it  is  said  to  be  
immoral.  

•  There  are  also  shortcomings  to  this  approach  since  

the  truth  in  adver:sing  can  be  contrasted  with  either  
falsehood  or  lying.  Lying  is  immoral  while  falsehood  
is  not  necessarily  immoral.            
 Some  Issues  in  Adver:sing    

Decep;ve  Adver;sing    
•  These  are  those  which   •  An  example  of  this  is  one  
either  make  a  false   where  pictures  from  the  box  
statement  and  therefore,   of  the  product  do  not  look  
lie,  or  which  represents  the   the  same  as  the  contents  of  
product  without  making  any   the  product,  in  this  case,  
statement.  
the  picture  is  said  to  be  
•  This  may  not  occur  not  only   decep:ve.      
through  sentences  but  also  
through  pictures,  individual  
words,  or  objects  that  can  
deceive  our  eye  and  mind.    
 Use  of  Weasel  Words  
•  The  use  of  weasel  words  is   •  Help  means  to  aid  or  assist.    
oben  complementary  to   •  We  are  usually  accustomed  
ambiguity  in  adver:sing.     to  ads  that  contain  phases  
•  Weasel  words  are  used  to   like:  help,  fight,  help  
avoid  from  a  direct  or   prevent,  help  stop  
straighvorward  statement.     •  Like,  can  be,  up  to,  as  much  
•  One  example  of  a   as,  are  used  to  imply  what  
commonly  used  weasel   cannot  be  said.      
word  is  “Help”  
Exaggera;on    
•  Consumers  might  also  be   •  For  example,  claims  that  a  pain  
misled  through   reliever  provides  “extra  pain  
exaggera:on.  This  occurs   relief”  or  is  “50  percent  
when  adver:sements  tend   stronger  than  aspirin,”  that  it  
to  make  false  claims  of  the   “upsets  the  stomach  less  
frequently”  or  is  “superior  to  
benefits  of  the  goods  or   any  other  nonprescrip:on  
services  which  is  actually   painkiller  on  the  market”  
unsupported  by  valid   contradict  evidence  that  all  
evidences.   analgesics  are  effec:ve  to  the  
same  degree.    
Psychological  Appeals    
•  There  are  some   •  Psychological  appeal  does  not  
adver:sements  that  are   have  to  make  sense,  and  oben  
directed  at  arousing  human   should  not  have  to  be  
emo:onal  needs  rather  than   effec:ve.  
reason.     •  Some  psychological  appeals  
•  Richard  F.  Taflinger  defines   that  advisers  use  to  mo:vate  
psychological  appeal  as  a   people  to  buy  products  are:  
visual  or  aural  influence  on   power,  pres$ge,  personal  
subconscious  mind  and   enjoyment,  masculinity,  
emo:ons.  It  influences  by   femininity,  curiosity,  imita$on,  
implying  that  doing  what  is   acceptance,  approval,  self-­‐
suggested  will  sa:sfy  a   esteem  and  the  most  
subconscious  desire.   pervasive  of  all  are  sexual  
pitches.    
Ads  Directed  at  Children  
•  Most  adver:sers  have   •  The  aim  of  adver:sers  is  for  the  
children  to  pester  their  parents  to  
recognized  that  adver:sing   buy  things  for  them.  Children  
to  children  is  effec:ve  and   generally  remember  what  they  
eventually  became  a  big   see.    
business  recently.     •  Kids  are  the  most  pure  consumers  
in  that  they  tend  to  interpret  ads  
•  Children  are  special  group   literally.    
of  consumers  who  do  not   •  Moreover,  movies  and  television  
regard  reason.   shows  are  being  linked  to  the  
selling  of  toys  and  other  items  
•  The  average  child  is  exposed   featured  in  commercials  with  
to  more  than  40,000  TV   character  stamped  on  various  
products.      
commercials  every  year.    
 Philippine  Law  on  Adver:sing    
CONSUMER  ACT  OF  THE  PHILIPPINES    

–  Ar:cle  108  of  the  act  declares  that  “ The  State  shall  protect  
the  consumer  from  misleading  adver:sements  and  
fraudulent  sale  promo:on  prac:ces.”  

•  The  Department  of  Trade  and  Industry  is  responsible  

for  enforcing  the  provisions  of  the  act.    

•  With  respect  to  food,  drugs,  cosme:cs,  devices  and  

hazardous  substance,  the  Department  of  Health  is  the  
agency  that  oversees  these  products          
 False,  Decep:ve  and    
Misleading  Adver:sement    
•  Ar:cle  108  states  that  :  it  shall  be  unlawful  for  
any  person  to  disseminate  or  to  cause  the  
dissemina:on  of  any  false,  decep:ve  or  
misleading  adver:sement  by  Philippine  mail  or  in  
commerce  by  print,  radio,  television,  outdoor  
adver:sement,  or  other  medium  for  the  purpose  
of  inducing  or  which  is  likely  to  induce  directly  or  
indirectly  the  purchase  of  consumer  product  and  
services.”    
 Special  Requirements  for  Food,  Drugs,  
Cosme:cs,  Device  or  Hazardous  Substance      
1.  No  claim  in  the  adver:sement  should  be  made  that  is  not  
contained  in  the  label  or  approved  by  DOH  

2.  It  is  unlawful  to  adver:se  any  food,  drugs,  cosme:c,  device  or  
hazardous  substance  that  is  false,  misleading,  or  decep:ve,  or  
is  likely  to  create  an  erroneous  impression  regarding  its  
character,  value,  quan:ty,  composi:on,  merit,  or  safety.    

3.  Where  a  standard  has  been  prescribed  for  a  food,  drugs,  

cosme:c,  or  device,  no  person  shall  adver:se  any  ar:cle  or  
substance  in  a  manner  that  is  likely  to  be  mistaken  for  such  
product,  unless  the  product  actually  complies  with  the  
prescribed  standard.    
 Special  Requirements  for  Food,  Drugs,  
Cosme:cs,  Device  or  Hazardous  Substance    
4.  Adver:sement  of  any  food,  drugs,  cosme:c,  device,  
or  hazardous  substance  may  not  make  use  of  any  
reference  to  any  laboratory  report  of  analysis  
required  to  be  submiVed  to  the  Department  of  
Health,  unless  such  laboratory  report  is  duly  
approved  by  DOH.  

5.  No  adver:sements  for  any  food,  drugs,  cosme:c,  

device,  or  hazardous  substance  may  be  allowed  
unless  such  product  is  duly  registered  and  approved  
by  DOH.        
 Philippine  Associa:on  of  Na:onal  
Adver:sers  (PANA)  
•  In  1958,  adver:sers  formed  the  Philippine  
Associa:on  of  Na:onal  Adver:sers  (PANA).  
Since  then,  the  PANA  has  been  engaged  in  a  
con:nuing  campaign  to  regulate  abuses  
commiVed  by  untruthful  adver:sers.    

•  The  PANA  issued  a  Code  of  Ethics  which  

includes  the  following  statement  of  general  
principles:  
 Good  adver:sing  recognizes  both  its  economic  
and  social  responsibility  to  help  reduce  
distribu:on  costs  and  to  serve  the  public  
interest.    

 Good  adver:sing  depends  for  its  success  on  

public  confidence.  Hence,  it  cannot  permit  
those  prac:ces  that  tend  to  impair  this  
confidence.    
 Good  adver:sing  tells  the  truth.  It  is  accurate,  honest,  
and  trustworthy.    

 Good  adver:sing  conforms  not  only  to  the  laws  but  

also  to  the  generally  accepted  standards  of  good  taste  
and  decency  and  to  moral  and  aesthe:c  sen:ments  of  
the  country.    

 Good  adver:sing  seeks  public  acceptance  on  the  basis  

of  posi:ve  and  construc:ve  statements,  made  on  the  
merits  of  the  product  or  service  adver:sed,  rather  than  
by  the  disparagement  of  compe::on.        
 Good  adver:sement  does  not  allow  any  
ac:vity  that  involves  the  exploita:on  of  the  
goodwill,  aVached  to  any  other  firm,  product  
or  service.  It  does  not  imitate  or  s:mulate  
trademarks,  firm  names,  packages,  labels  and  
such  adver:sing  devices  as  illustra:on,  copy,  
layouts,  or  slogan.    

 Good  adver:sing  helps  to  dignify  the  

individual  and  contribute  to  the  building  of  a  
civilized  society.      
5.  OFFICE  ROMANCE    
•  Surveys  says  that  somewhere  from  25-­‐33  
percent  of  the  employees  at  a  given  company  
have  had  office  romances  once  in  their  
careers.  
•  About  three-­‐fourths  of  the  people  in  the  
survey  believe  that  a  romance  at  the  office  is  
acceptable.  
•  However,  other  believe  that  it  is  uncalled  for  
and  unprofessional  to  mingle  romance  with  
business  purposes.  
 What  is  Office  Romance?  

•  It  is  defined  as  a  rela:onship  between  two  

people  who  are  employed  by  the  same  
organiza:on.  
•  It  is  characterized  by  mutual  aVrac:on  
between  the  par:es  and  a  desire  for  a  
personal,  roman:c  rela:onship.  
•  Office  romance  is  likely  to  happen  as  long  as  
men  and  women  work  together.        
 The  Company’s  Stand    
•  The  company  is  trapped  in  the  middle  of  office  romances  
present  in  the  organiza:on.    

•  Top  management  does  not  want  to  interfere  unduly  with  

their  employee’s  personal  life  and  their  right  for  privacy.  

•  Conversely,  they  do  not  want  a  workplace  where  

employees  are  uncomfortable  to  work.    

•  This  is  why  a  lot  of  companies  come  up  with  a  policy  that  
covers  office  romances  and  educate  all  employees  or  the  
guidelines  and  effects  through  trainings  and  seminars.      
 Benefits  of  Office  Romance    
•  These  benefits  include  friendship,  mutual  support  to  each  other  at  
work,  and  other  personal  experiences.    

•  Employees  involved  in  a  love  rela:onship  overcome  rough  :mes  at  

work  because  of  mutual  support  and  inspira:on.  

•  Employees  tend  to  view  work  as  fun  even  when  pressures  begin  to  
pile  up.  

•  Romance  becomes  the  reason  to  keep  their  jobs.  

•  Love  and  companionship  in  the  office  give  the  employees  the  relief  
and  reason  to  overcome  problems  that  come  along  their  way.    
 Disadvantages  of  Office  Romance    

•  Damaged  professional  reputa:ons    

•  Disturb  co-­‐workers  

•  Changes  in  produc:vity    

•  Da:ng  the  boss  

•  Extramarital  affairs    
 Ethical  Issues  in  Office  Romance    
•  Interven;ons  
–  Some  companies  want  to  restrict  their  employees  to  engage  in  
office  romance.  Others  are  in  favor  of  the  posi:ve  effects  of  
office  romance,  but  may  want  to  lessen  the  bad  effects.  
–  For  example:  some  companies  may  allow  rela:ons  between  co-­‐
workers  with  the  same  rank.  

•  Legal  /  Ethical  Considera;ons    

–  When  one  or  both  involved  par:es  are  required  to  leave  the  
company,  this  risks  legal  encounters.  
–  Policies  regarding  office  romance  need  to  be  decided  with  
vigilant  thought  and  prudence,  in  order  to  respect  the  rights  of  
all  members  of  the  organiza:on.    
•  Sexual  Harassment    
– Sexual  harassment  may  some:mes  arise  when  a  
bad  workplace  romance  is  terminated.  
– There  are  few  reasons  why  this  issue  may  exist.  
– One  of  the  persons  involve  in  a  failed  romance  
may  seek  vengeance,  may  try  to  revive,  or  would  
want  to  remove  the  other  person  involved.  
– There  may  be  misinterpreta:on  on  the  part  of  
each  party.  One  may  consider  flir:ng  acceptable  
which  may  eventually  lead  to  a  romance,  while  
another  may  consider  it  offensive  and  therefore,  a  
harassment.          
6.  THE  PROBLEM  OF  FAIR  PRICING    
•  In  general,  a  fair  price  is  one  that  man  has  not  yet  
resolved,  though  some  factors  are  considered  such  
as:    
a)  The  cost  of  material    
b)  Opera:ng  and  marke:ng  expenses    
c)  A  reasonable  profit  margin    

  These  factors  cons:tute  to  set  price  fairly  though  it  

is  not  enough  to  provide  a  precise  answer  on  what  a  
fair  price  is.    
  One  should  assess  the  factors  on  which  the  price  is  
based  and  the  processes  that  determine  it.    
 Ethical  Issues  in  Fair  Price    

A.  True  cost  of  the  product  is  concealed    

B.  Suggested  retail  price    
C.  Use  of  electronic  scanners  
D.  Promo:onal  pricing    
E.  Follow  the  leader  pricing    
F.  Price  gouging  
G.  Price  fixing      

  The  “Suki”  system  of  the  Filipino  business  compromises  

the  fair  price  of  a  regular  customer  from  the  new  ones.    
7.  TRADE  SECRETS  AND  CORPORATE  
DISCLOSURE    
 TRADE  SECRET    
•  A  trade  secret  is  the  legal  term  for  confiden:al  business  
informa:on.  That  piece  of  informa:on  allows  the  company  
to  compete  effec:vely.  

•  Examples  of  trade  secret  include  customers  iden::es  and  

preferences,  vendors,  product  pricing,  marke:ng  strategies,  
company  finances,  manufacturing  processes,  and  other  
compe::vely  valuable  informa:on.  

•  These  includes  essen:ally  any  confiden:al  business  

informa:on  such  as  customer  lists,  financial  informa:on,  
employee  data,  produc:on  cost  or  sales  data,  and  
documents  memorializing  important  nego:a:ons    
 Trade  Secret  Act    
•  The  Trade  Secret  Act  prevents  wrongful  taking  of  
confiden:al  or  secret  informa:on.  

•  Trade  secret  law  prevents  misappropria:on,  

wrongful  taking,  of  trade  secret  informa:on.  A  
wrongful  taking  can  occur  in  a  variety  of  manners.  

•  For  example,  the  taking  of  informa:on  would  be  

wrongful  when  the  taking  is  a  breach  of  contract,  
breach  of  fiduciary  obliga:on,  theb,  and  other  illegal  
maVers.          
 CORPORATE  DISCLOSURE    
•  According  to  De  George:    
– The  moral  basis  for  corporate  disclosure  rests  
primarily  on  the  following  arguments:  

1.  Each  person  has  the  right  to  the  informa:on  he  needs  to  
enter  into  a  transac:on  fairly.  

–  The  first  basis  speaks  of  informa:on  required  for  a  fair  

transac:on.  
–  A  transac:on  is  considered  fair  if  the  person  has  the  
appropriate  informa:on  needed  for  the  transac:on          
2.  Each  person  has  the  right  to  those  ac:ons  of  
others  that  will  seriously  and  adversely  affect  
him  or  her.  

– The  second  basis  speaks  of  the  moral  

responsibility  of  the  person.    
– As  stated  in  the  law,  it  is  clear  that  a  person  is  not  
morally  permiVed  to  harm  others.  But  a  person  is  
permiVed  to  do  something  that  “might”  cause  
others  harm.    
8.  PRODUCT  MISREPRESENTATION    
 Misrepresenta:on    
•  Misrepresenta:on  is  observed  when  there  is  a  
transforma:on  of  informa:on  to  misinforma:on.    

There  are  two  types  of  misrepresenta:on:  

1.  Inten:onal  Misrepresenta:on  –  a  scenario  whereby  the  
person  is  fully  aware  or  deliberately  misrepresents  things,  
commonly  known  as  lying.  
2.  Uninten:onal  misrepresenta:on  –  a  scenario  whereby  the  
person  is  not  aware  and  does  not  deliberately  act  on  
misrepresen:ng  things.  It  is  a  situa:on  where  the  person  
involved  believes  that  it  is  the  right  and  acceptable  things  
to  do.  It  is  commonly  called  as  white  lie.        
 Defini:on  of  Lying    
•  Lying  can  be  defined  as  the  act  of  making  others  believe  
something  that  they,  themselves,  do  not  believe  in.    
•  It  happens  when  somebody  tries  to  convince  others  with  
untrue  statements.    

•  St.  Augus$ne  defines  lying  as:  

– A  speech  that  is  contrary  to  what  the  person  is  
thinking  with  the  inten:on  to  deceive.  
– A  lie  therefore,  takes  place  when  the  person’s  ac:on  
are  not  in  congruence  with  his  thoughts  with  the  
inten:on  to  deceive  others.          
 Types  of  Lying    

Use  of  ambiguous  terms   Use  of  false  statements    

•  It  is  the  act  of  deliberately   •  It  is  the  act  of  making  a  
using  vague  terms  or  open-­‐ statement  from  which  false  
ended  statements  that  can   conclusions  may  be  drawn  
have  several  meanings  to   eventually  misleading  
mislead  people  that  one  is   others.    
telling  the  truth.   •  This  is  oben  observed  in  
•  Statement  like:  I  was  at  the   adver:sing  a  product  to  be  
office  around  8:00  a.m.     the  “best-­‐seller”  brand.  
 Type    of  Lying    
Suppression  of  correct  
Through  ac;on     informa;on    
•  It  is  a  type  of  lying  where   •  It  is  an  inten:onal  or  
the  person  gets  caught  in   uninten:onal  act  of  hiding  
the  act  of  wrongdoing.     the  correct  informa:on  
•  Example:  when  someone  is   which  eventually  mislead  
caught  red-­‐handed  of   others.    
stealing  and  s:ll  denies  the   •  This  act  is  some:mes  
accusa:on       observed  in  some  crime  
scenes  wherein  a  witness  
conceals  he  truth  for  the  
sake  of  his  own  security.      
 Business  Prac:ces  Involving  Misrepresenta:on  and  Lying    

Other  Type  of  Misrepresenta:on    

1.  Direct  misrepresenta:on    
–  It  is  characterized  by  ac:vely  misrepresen:ng  
something  about  the  product  or  service.  It  gives  the  
business  a  bad  name  because  decep:on  and  lying  are  
used  in  the  process  of  selling  the  product  to  the  
customers.  
2.  Indirect  misrepresenta:on  
–  It  is  characterized  by  omigng  adverse  informa:on  
about  the  product  or  service.  It  is  passive  decep:on  and  
not  as  obvious  compared  to  direct  misrepresenta:on.  
But  it  s:ll  contributes  to  the  impression  that  
businessmen  are  liars  and  are  out  to  make  quick  money.  
 Some  examples  of  
misrepresenta:on    
Direct  Misrepresenta;on     Indirect  Misrepresenta;on  
•  Decep:ve  packaging     •  Caveat  Emptor  (let  the  
•  Adultera:on     buyer  beware)  
•  Misbranding  or  mislabeling     •  Deliberately  withholding  
•  Short  weighing     informa:on    
•  Short-­‐changing     •  Business  ignorance    
•  Short  measuring    
•  Short  numbering    
•  Misleading  adver:sement    
9.  THE  MORALITY  OF  LABOR  STRIKE  
 Strike  Ac:on  or  Strike    
•  It  describe  collec:ve  ac:on  undertaken  by  groups  of  
workers  in  the  form  of  a  refusal  to  perform  work.  

•  This  is  a  tac:c  oben  employed  by  labor  unions  during  

collec:ve  bargaining  with  an  employer.    

•  In  an  ordinary  usage,  the  term  strike  is  oben  used  to  
describe  all  work  stoppages,  regardless  of  the  origin  
of  the  dispute.    
 Workers  go  on  strike  for  different  
reasons:  
•  For  higher  compensa:on    
•  To  improve  the  workplace    
•  For  shorter  working  days    
•  To  stop  their  wages  from  going  down    
•  For  more  benefits    
•  Because  they  think  their  company  has  been  unfair  

 Condi:ons  for  employment  include  wages,  hours,  

sanita:on,  and  safety,  and  several  other  circumstances  
that  affect  the  work  of  the  workers.    
 What  are  the  Basic  Rights  of  
Employees?  

•  LABOR  CODE  OF  THE  PHILIPPINES  

•  This  is  an  act  to  strengthen  the  cons:tu:onal  

rights  of  workers  to  self-­‐organiza:on  and  free  
collec:ve  bargaining  and  to  penalize  unfair  
labor  prac:ces.  
 TYPES  OF  STRIKE    

Sit-­‐down  Strike     General  Strike    

•  This  is  a  strike  in  which   •  This  is  a  strike  affec:ng  all  
workers  show  up  to  work,   areas  of  a  labor  force  across  
but  refuse  to  work.     many  industries,  typically  
•  It  may  include  preven:ng   throughout  an  en:re  
transports  from  entering  or   country  or  a  large  sec:on  
living  in  an  ins:tu:on  or  a   thereof.  
company.  
 TYPES  OF  STRIKE    

Sympathy  Strike     Jurisdic;onal  Strike    

•  This  is  a  strike  ini:ated  by   •  This  refers  to  a  concerted  
workers  in  one  industry  and   refusal  to  work  undertaken  
supported  by  workers  in  a   by  a  union  to  assert  its  
separate  but  related   members’  right  to  par:cular  
industry.   job  assignments  and  to  
protest  the  assignment  of  
disputed  work  to  members  
of  another  union  or  to  
unorganized  workers.    
 TYPES  OF  STRIKE    

Economic  Strike     Wildcat  Strike    

•  This  is  based  on  a  demand   •  This  is  against  the  will  of  the  
for  beVer  wages  or  benefits   leadership  of  the  union,  or  
than  the  employer  wants  to   without  a  unon.  
provide.  
 TYPES  OF  STRIKE    

Slow  down  Strike     Recogni;on  Strike    

•  This  is  a  form  of  work   •  This  is  a  kind  of  strike  
stoppage  in  which   forcing  employers  to  
employees  deliberately   recognize  and  deal  with  
reduce  their  individual   them.  
produc:on.      
 Is  There  a  Right  to  Strike?  

•  The  right  to  strike  is  integral  to  the  process  of  wage  
bargaining  in  an  industrial  economy.  

•  Any  employee  has  a  right  to  withhold  his  labor  

services  from  an  employer  if  he  does  not  like  the  pay  
and  benefits  the  employer  offers.  

•  Workers  who  are  willing  to  work  for  a  strike  and  the  
employer  who  wishes  to  hire  them  have  a  legi:mate  
right  to  do  so.    
10.  WHISTLE-­‐BLOWING    
 Whistle-­‐Blowing    
•  This  is  the  disclosure  by  an  employee  of  confiden:al  
informa:on  which  relates  to  some  danger,  fraud,  or  
other  illegal  or  unethical  conduct  connected  with  the  
workplace,  be  it  of  the  employer  or  his  fellow  employees.  

•  Whistle-­‐blower    
– This  is  someone  in  an  organiza:on  who  witnesses  
behavior  by  members  that  is  either  contrary  to  the  
mission  of  the  organiza:on,  or  threatening  to  the  
public  interest,  and  who  decides  to  speak  out  publicly  
about  it.      
 Whistle-­‐blower    
•  He  is  a  person,  employee,  or  officer  of  any  ins:tu:on  
who  believes  that  he  has  been  ordered  to  perform  some  
act  or  he  obtained  knowledge  that  the  ins:tu:on  is  
engaged  in  ac:vi:es  which:  

a)  Are  believed  to  cause  unnecessary  harm  to  third  

par:es;  
b)  Are  in  viola:on  of  human  rights;  
c)  Run  counter  to  the  defined  purpose  of  the  ins:tu:on  
or  organiza:on;  and    
d)  Informs  the  public  of  this  facts.  
 Types  of  Whistle-­‐Blowing    

Internal  Whistle-­‐Blowing     External  Whistle-­‐Blowing    

•  This  occurs  within  the   •  This  occurs  outside  the  
organiza:on.  It  is  going   organiza:on.  It  is  revealing  
“over  the  head  of   illegal  and  immoral  ac:vi:es  
immediate  supervisors  to   within  the  organiza:on  to  
inform  higher  management   outside  individuals  or  
of  the  wrongdoing.”   groups  such  as  media  men,  
public  interest  groups,  
regulatory  body,  or  non-­‐
government  organiza:on.  
 Kinds  of  External  Whistle-­‐blowing    
A.  Current  –  those  who  blow  the  whistle  on  present  
employers.  

B.  Alumni  –  those  who  blow  the  whistle  on  former  

employers.  

C.  Open  –  whistle-­‐blower  discloses  his  iden:ty    

D.  Anonymous  –  whistle-­‐blower  who  does  not  disclose  

his  iden:ty.    
 External  Whistle-­‐Blower    
 External  whistle-­‐blowers  experience  each  of  
the  following  forms  of  retalia:on:  

 Lost  their  job  or  were  forced  to  re:re  

 Received  nega:ve  job  performance  evalua:ons    
 Had  work  more  closely  monitored  by  supervisors    
 Were  cri:cized  or  avoided  by  co-­‐workers  
 Were  blacklisted  from  gegng  another  job  in  their  
field      
 Internal  Whistle-­‐Blower    
 Internal  whistle-­‐blowing  produces  less  retalia:on  but  
also  experience  severe  emo:onal  effects  of  their  whistle  
blowing  ac:vity:  
 Severe  depression  on  anxiety    
 Feeling  of  isola:on  or  powerless    
 Distrust  of  others    
 Declining  physical  health    
 Severe  financial  decline    
 Problems  with  family  rela:ons    
11.  MULTI-­‐LEVEL  MARKETING  
(MLM)  AND  PYRAMIDING    
 Mul:-­‐Level  Marke:ng  
•  Mul:-­‐level  marke:ng  is  a  system  of  selling  in  which  
one  signs  up  other  people  to  assist  him,  and  they  
in  turn,  recruit  others  to  help  them.  

•  It  is  a  system  of  selling  through  many  levels  of  

distributors,  thus  the  word  “mul:-­‐level  Marke:ng”  

•  Each  gets  a  percentage  on  the  price  of  the  product  

being  sold.  This  is  also  known  as  direct  selling  
companies.  
•  Common  companies  of  this  type  are:    
– Avon  Cosme:cs    
– Triumph  Interna:onal    
– Sara  Lee  Direct  Selling  
– Tupperware  Phils.  

•  Most  became  successful  because  the  main  

focus  of  their  ac:vi:es  is  the  product  sale.  
 Pyramiding  

•  In  the  classic  “pyramid”  scheme,  par:cipants  

aVempt  to  make  money  solely  by  recrui:ng  
new  par:cipants  into  the  program.    

•  The  hallmark  of  these  schemes  is  the  

promise  of  sky-­‐high  returns  in  a  short  period  
of  :me  for  doing  nothing  other  than  
handling  over  your  money  and  gegng  
others  to  do  the  same.  
•  Pyramid  schemes  focus  on  the  exchange  of  
money  and  recruitment.  

•  At  the  heart  of  each  pyramid  is  typically  a  

representa:on  that  new  par:cipants  can  
recoup  their  original  investments  by  inducing  
others  to  make  the  same  investments.  

•  Each  person  you  bring  to  your  pyramid  is  

promised  future  monetary  rewards  or  bonuses  
based  on  your  advancement  up  the  structure.      
•  The  fraudsters  behind  the  pyramid  scheme  may  go  to  
great  lengths  to  make  the  program  look  like  a  
legi:mate  Mul:-­‐level  marke:ng  program.    

•  But  despite  their  claims  to  have  legi:mate  products  or  

services  to  sell,  these  fraudsters  simply  use  money  
coming  in  from  new  recruits  to  pay  off  early  stage  
investors.    

•  But  eventually  the  pyramid  will  collapse.    At  some  

point  the  schemes  get  too  big,  the  promoter  cannot  
raise  enough  money  from  new  investors  to  pay  earlier  
investors,  and  many  people  except  those  at  the  very  
top  of  the  pyramid,  lose  their  money.  Many  losers  pay  
for  a  new  winners.  
•  Pyramid  operates  on  recruitment.    

•  It  starts  with  one  person  that  encourages  six  

par:cipants  to  join.  The  6  recruits  will  again  get  six  to  
join  making  the  number  involved  36  and  will  recruit  
and  recruit  :ll  they  reach  1296  par:cipants  in  the  
pyramid.    

•  At  the  13th  level  they  need  to  have  13  billion  new  
recruits  which  is  impossible  to  sustain  the  pyramid.  
The  pyramid  will  collapse  when  no  new  par:cipants  
can  be  recruited.  
 The  Difference    
between    
Mul:-­‐Level  Marke:ng    
and    
Pyramid    
 MULTI-­‐LEVEL  MARKETING  (MLM)   PYRAMID  

1. Legal   1. Illegal    
2. Income  generated  only  on   2. Income  is  generated  solely  
product  sales.   on  the  process  of  recrui:ng  
others  into  the  pyramid.  
3. Provides  training  
program.   3. No  training  program.  
4. Few  retail  sales  and  high  
4. Consumable,  reasonably   cost,  slower  moving  
priced  quality  products.   products.  
5. Services  legi:mate   5. No  legi:mate  economic  
economic  func:on  such   func:on  such  as  no  
as  a  channel  of   economic  benefits,  but  a  
distribu:on  for  rela:vely   mere  transfer    of  money  
small  or  new  companies   from  one  person  to  another  
with  excellent  products.   without  legi:mate  business.  
 MULTI-­‐LEVEL  MARKETING  (MLM)   PYRAMID  

6.    Sponsoring  par:cipants   6.    Recrui:ng  par:cipants  get  

earn  nothing  by  mere   benefits  from  recruitment.  
sponsoring.  Recruitment  is   7.    Earning  are  :ed  to  the  act  
op:onal.   of  recruitment.  
7.    Earnings  are  ul:mately  :ed     8.    LiVle  effort  or  no  effort  is  
to  product  consump:on  of   being  made  to  sell  to  the  
end  users.   public.  
8.    Enormous  efforts  to  sell  are   9.    Products  are  consumed  
exerted.   internally  within  the  
9.    Largely,  products  are  sold  to   organiza:on.  
the  consuming  public.   10.Bonus  en:tlements  are  
10.  Bonuses  are  based  on  sales   based  on  goods  absorbed  
to  final  users  who  are  not   by  members  within  the  
members  of  the  scheme.   structure.  
•  The  Direct  Selling  Associa:on  of  the  
Philippines  or  DSAP  presented  the  final  8-­‐
point  test  to  determine  a  pyramiding  
company.    

•  According  to  them,  if  the  answer  to  any  of  

these  statements  is  no,  then  beware.  You  
might  just  be  a  vic:m  of  a  pyramiding  scam.  
1. Are  there  legi:mate  products?  
2. Is  there  and  intent  to  sell  the  products?  
3. Do  the  products  have  fair  market  value?  
4. Is  there  a  compelling  reason  to  buy  the  products  
being  offered?  
5. Is  there  a  product  return  policy?  
6. Will  you  receive  commission  on  the  joining  fees  
of  your  prospects?  
7. Is  there  a  correla:on  between  recrui:ng  and  
distributor’s  commissions?  
8. If  recruitment  is  to  be  stopped  today,  will  
par:cipants  s:ll  make  money?  
 Market  satura:on:  An  inherent  
problem  in  a  pyramid.  
•  Pyramid’s  design  can  saturate  the  market  with  no  
one  no:cing.  It  is  designed  to  recruit  so  many  
salespeople,  who  in  turn  will  aVempt  to  recruit  more  
salespeople,  and  so  on  un:l  the  market  is  saturated.  
It  is  unstoppable,  a  human  “churning”  machine  with  
no  “off  buVon”.  Out  of  control  by  design,  its  gears  
will  grind  up  the  money,  :me  and  entrepreneurial  
energy  of  the  well-­‐meaning  who  joined  to  
supplement  their  income.  When  the  inevitable  
des:ny  occurs,  the  only  money  that  may  be  made  
isn’t  from  the  product  or  service  but  from  the  losses  
of  people  down  the  organiza:on  
 Moral  issues  in  pyramiding  

1. Too  much  materialism  and  greed.  

2. They  con  the  public,  making  them  believe  that  they  

are  a  legi:mate  MLM.  

3. The  inten:ons  are  bad.  

 Legal  Issues  of  Pyramiding  
 The  Department  of  Trade  and  Industry  or  DTI  can  take  ac:on  
under  two  exis:ng  laws.  

 Art.  53  of  RA  7394  (the  Consumer  Act  of  the  Philippines)    
 states  that  chain  distribu:on  plans  or  plans  or  pyramid  
sales  shall  not  be  employed  in  the  sale  of  consumer  
products.  

 RA  3883  or  Business  Name  Law  

 which  empowers  DTI  to  cancel  license  of  any  business  
which  does  not  conform  with  the  registered  business  
name  or  style.  
 Tips  to  consider  when  you  make  your  
decision  before  joining  a  plan:  
1.  Consult  the  8  point  test  presented  in  this  chapter.  

2. Beware  of  plan  that  claim  to  sell  miracle  products  or  
promise  enormous  earnings.  Just  because  a  
promoter  of  a  plan  makes  a  claim  doesn’t  mean  it  is  
true.  Ask  the  promoter  of  the  plan  to  substan:ate  
claims  with  hard  evidence  especially  when  the  claims  
abut  the  product  or  your  poten:al  earnings  seem  to  
good  to  be  true.  
3.  Do  not  pay  or  sign  any  contract  in  an  
“opportunity  mee:ng”  or  any  other  high-­‐
pressure  situa:on.  Insist  on  taking  your  :me  
to  think  over  a  decision  to  join.  

4.  Remember  that  no  amount  of  personal  

tes:monial  and  affirma:on  that  there  is  
money  to  gain  in  pyramiding  will  dispute  the  
fact  that  pyramiding,  doesn’t  create  new  
wealth.  The  only  wealth  gained  by  any  
par:cipant  is  a  loss  by  another  par:cipant.  
12.  UNFAIR  COMPETITION  
 Is  compe::on  good  or  bad?    
•  Compe::on  is  healthy  and  can  be  a  mo:va:on  for  firms  
to  produce  beVer  products  or  offer  beVer  services.    

•  Without  compe::on,  firm  can  just  relax  and  quality  will  

suffer.      

•  Thus,  compe::on  becomes  bad  only  when  it  eliminates  a  

compe:tor  like  in  cuVhroat  compe::on.    

•  Some  prac:ces  include  under  cost  selling  or  selling  their  

products  below  cost  just  to  get  rid  of  their  compe:tors.  
 Different  Kinds  of  Compe::on  

Monopoly     Oligopoly    
•  Defined  as  a  market   •  A  situa:on  where  there  are  
situa:on  where  there  is   few  sellers  for  a  product  or  
service.    
only  one  provider  of  a  kind   •  It  is  a  type  of  imperfect  
of  product  or  service.     compe::on  where  they  can  
not  dictate  price  like  a  
•  It  is  and  extreme  type  of   monopoly  can  but  the  
imperfect  compe::on   members  of    an  oligopoly  
characterized  by  an  lack  of   oben  turn  into  friendly  
compe:tors,  since  it  is  in  all  
compe::on  and  a  lack  of   the  members  interest  to  
viable  subs:tute  goods.   maintain  a  stable  market  and  
profitable  prices.  
 Different  Kinds  of  Compe::on  

Perfect  Compe;;on    
•  It  is  a  situa:on  in  which  no  
firm  or  consumer  is  large  
enough  to  dictate  prices.    
•  The  prices  are  dictated  by  
the  law  of  supply  and  
demand  which  states  that  
when  the  supply  is  scare,  
the  prices  go  up  and  when  
the  demand  goes  down,  the  
prices  will  go  the  same  way  
 Difference  Between  a  War  and  
Compe::on  
•  In  a  war,  two   •  In  a  business  compe::on,  
two  or  more  par:es  are  
contenders  figh:ng  hurl   vying  for  the  opportunity  to  
directly  at  each  other.   provide  the  customer’s  
needs  whether  it’s  a  
product  or  service.    

   In  short,  compe::on  is  a  rivalry  to  serve  the          

       customer  
 Difference  between  Fair  and  Unfair  
Compe::on  

•  Fair  compe::on  is   •  Unfair  compe::on  is  

doing  business  under   unethical  business  
ethical  rules  of  conduct,   prac:ce.  Doing  business  
behavior  and  judgment.   with  the  goal  of  profit  
AVaining  success  in   without  regard  to  
business  through  the   others.  
merits  of  its  products  or  
services.  
In  general,  unfair  compe::on  consists  
of:  
 Decep:ve  trade  prac:ces  such  as  misinterpreta:on  and  
false  adver:sing.  
 Business  interference  to  prevent  compe:tor  from  
con:nuing  with  it’s  business  process  or  business  contract.  
 An:-­‐compe::ve  market  prac:ces  such  as  under  cost  
selling  to  kill  the  compe:tor.  
 Defama:on  of  a  compe:tor  or  badmouthing  a  compe:tor  
to  a  consumer.  
 Caveat  emptor  or  indirect  misinterpreta:on  by  
withholding  informa:on  from  the  buyer.  
 Viola:on  of  intellectual  property  right  such  as  copyrights,  
patents,  trademarks  and  service  marks.  
 Government  Measures:    

The  Intellectual  Property  Code  of  the  Philippines    

(R.A.  8293)  

– It  aims  to  provide  an  intellectual  property  and  

industrial  property  system  which  will  enhance  the  
development  of  domes:c  and  crea:ve  ac:vity,  
facilitate  transfer  of  technology,  aVract  foreign  
investments,  and  ensure  market  access  for  our  
products.  
•  Ar:cle  168  of  R.A.  8293    
– is  specifically  about  unfair  compe::on  on  the  use  
of  trademarks,  service  marks,  and  trade  names.  
This  ar:cle  states  that  a  person  who  has  iden:fied  
in  the  mind  of  the  public  the  good  he  
manufacturers  or  deals  in,  his  business  from  those  
of  others,  whether  or  not  a  registered  mark  is  
employed,  has  property  right  in  the  goodwill  of  
the  said  goods  iden:fied,  and  will  protected  as  
any  other  property  rights.  
The following shall be deemed guilty of unfair competition:

A.  Any  person  who  is  selling  his  goods  and  gives  

the  general  appearance  of  the  goods  of  
another,  either  in  the  goods  themselves  or  in  
the  wrapping  of  the  packages,  which  would  
likely  influence  buyers  to  believe  that  the  
products  being  offered  are  those  of  a  
manufacturer  or  dealer  other  than  the  actual  
manufacturer.    
B.  Any  person  who,  by  any  ar:fice,  or  device,  
induces  the    false  belief  that  such  person  is  
offering  the  services  of  another  who  has  
iden:fied  such  services  in  the  mind  of  the  
public.  

C.  Any  person  who  shall  make  false  statement  in  

the  course  of  trade  or  shall  commit  any  other  
act  in  bad  faith  to  discredit  the  goods,  
services,  or  business  of  another.    
13.  MONEY  LAUNDERING    
 What  is  Money  Laundering?    
•  Money  Laundering  is  the  process  of  disguising  illegally  
obtained  money  so  that  the  funds  appear  to  come  from  
legi:mate  sources  or  ac:vi:es.    

•  Money  laundering  occurs  in  connec:on  with  a  wide  variety  of  

crimes,  including  illegal  arms  sales,  drug  trafficking,  robbery,  
fraud,  racketeering,  and  terrorism.  

•  The  principal  objec:ve  of  money  laundering  is  to  convert  cash  
to  some  other  form  of  asset  to  conceal  the  illegal  sources  or  
origin  of  cash  income.  
•  The  Term  "money  laundering”  is  said  to  originate  
from  Mafia  ownership  of  Laundromats  in  the  United  
States.    

•  Gangsters  there  were  earning  huge  sums  in  cash  

from  extor:on,  pros:tu:on,  gambling,  and  bootleg  
liquor.    

•  They  needed  to  show  a  legi:mate  source  for  these  

monies.  
•  One  of  the  ways  in  which  they  were  able  to  do  this  was  
by  purchasing  outwardly  legi:mate  business  and  by  
combining  their  illicit  earnings  with  the  legi:mate  
earnings  they  received  from  these  businesses.  

•  Es:mated  size  of  the  money  laundering  problem  totals  

more  than  $500  billion  annually  worldwide.  This  is  a  
staggering  amount  and  detrimental  by  any  calcula:on  to  
the  financial  systems  involved.  

•  Clearly  the  problem  is  enormous.  It  is  also  clear  that  
money  laundering  extends  far  beyond  hiding  drug  profits.      
 Money  Laundering  Process  

•  Money  laundering  is  a  diverse  and  oben  complex  

process.  It  basically  involves  three  independent  steps  
that  oben  occur  simultaneously:  

1.  Placement    -­‐    physically  placing  bulk  cash  proceeds.  It  

is  during  the  placement  stage  that  physical  currency  
enters  the  financial  system  and  illegal  proceeds  are  
most  vulnerable  to  detec:on.  
2.  Layering  –  separa:ng  the  proceeds  from  criminal  
ac:vity  from  their  origins  through  layers  of  
complex  financial  transac:on.  Layering  describes  
an  ac:vity  intended  to  obscure  the  trail  which  is  
leb  by  “dirty”  money.  

3.  Integra:on  –  providing  an  apparently  legi:mate  

explana:on  for  the  illicit  proceeds.  During  the  
final  stage  in  the  laundering  process,  illicit  funds  
are  integrated  with  monies  from  legi:mate  
commercial  ac:vi:es  as  they  enter  the  
mainstream  economy.    
 Impact  of  Money  Laundering  in  
Society    
•  The  possible  social  and  poli:cal  costs  of  money  
laundering,  if  leb  unchecked  or  dealt  with  effec:vely,  are  
serious.    

•  Organized  crime  can  infiltrate  financial  ins:tu:ons,  

acquire  control  of  large  sectors  of  the  economy  through  
investments,  or  bribes  to  public  officials.  

•  The  economic  and  poli:cal  influence  of  criminal  

organiza:ons  can  weaken  the  social  fabric,  collec:ve  
ethical  standards,  and  ul:mately  the  democra:c  
ins:tu:ons  of  society.  
•  Most  fundamentally,  money  laundering  is  
inextricably  linked  to  the  underlying  criminal  ac:vity  
that  generated  it.  Laundering  enables  criminal  
ac:vity  to  con:nue.  

•  Organized  money  laundering  has  devasta:ng  social  

consequences.  Laundered  funds  provide  financial  
support  for  drug  dealers,  terrorism,  and  arms  dealers  
and  other  criminals  to  operate  and  expand  their  
criminal  empires.  
 How  can  the  Government    
prevent  it?  
•  The  Financial  Ac:on  Task  Force  (FATF)  on  Money  Laundering  
has  iden:fied  certain  “choke”  points  in  money  laundering  
process  that  the  launderer  finds  difficult  to  avoid  and  where  
he  is  vulnerable  to  detec:on.  

•  The  Choke  points  iden:fied  are:    

1.  Entry  of  cash  into  the  financial  system  
2.  Transfer  to  and  from  the  financial  system  
3.  Cross-­‐border  flows  of  cash  
 Financial  Ac:on  Task  Force  (FATF)  

•  The  role  of  Financial  Ac:on  Task  Force  (FATF)  

–  is  a  mul:ple  disciplinary  body  that  brings  together  the  policy-­‐
making  power  of  legal,  financial.  And  law  enforcement  experts  
from  its  members.  

–  The  FATF  monitors  members  progress  in  implemen:ng  an:-­‐money  

laundering  measures;  reviews  and  reports  on  laundering  trends,  
techniques,  and  counter-­‐measures  and  promotes  the  adop:on  and  
implementa:on  of  FATF  an:-­‐money  laundering  standards  globally.  
14.  CONFLICT  OF  INTEREST    
 Conflict  of  Interest    
•  This  occurs  when  a  person  act  in  a  way  that  is  to  his  advantage  at  
the  expense  of  the  employing  organiza:on.  

•  It  means  something  more  than  individual  bias.  There  must  be  an  
interest,  ordinarily  financial,  that  could  be  directly  affected  by  the  
work  of  the  commiVee.  

•  Applies  only  to  current  interests.  Does  not  apply  to  past  and  future  
interests.  

•  Applies  not  only  to  the  personal  financial  interest  of  the  individual  
but  also  to  the  interest  of  others  with  whom  the  individual  has  
substan:al  common  financial  interest  if  these  interests  are  relevant  
to  the  func:ons  to  be  performed.  
Types  of  Typical  Conflict  of  Interest    

1.  Self-­‐  Dealing     2.    Accep;ng  Benefits    

•  For  example,  you  work  for   •  Bribery  is  one  example;  
the  government  and  use   substan:al  gibs  are  another.  
your  official  posi:on  to   For  example,  you  are  the  
secure  a  contract  for  a   purchasing  agent  of  your  
private  consul:ng  company   department  and  you  accept  
you  own,  Another  instance   a  case  of  liquor  from  a  
is  using  your  government   major  supplier.  
posi:on  to  get  a  summer  
job  for  your  daughter  
Types  of  Typical  Conflict  of  Interest    
4.  Using  your  employer’s  property  
3.  Influence  Peddling     for  private  advantage  
•  Here,  the  professional   •  This  could  be  as  obvious  as  
solicits  benefits  in  exchange   stealing  office  supplies  for  
for  using  her  influence  to   home  use.  Or  it  might  be  a  bit  
unfairly  advance  the   more  subtle,  say,  using  
interest  of  a  par:cular   sobware  which  is  licensed  to  
your  employer  for  private  
party.   consul:ng  work  of  your  own.  
In  the  first  case,  the  
employer’s  permission  
eliminates  the  conflict;  while  
in  the  second,  it  does  not  
 Types  of  Typical  Conflict  of  Interest    
5.  Outside  employment  or  
Moonligh;ng     6.  Post-­‐employment    
•  An  example  would  be   •  Here  is  a  risky  situa:on  can  
segng  up  a  business  on  the   be  one  in  which  a  person  
side  that  is  in  direct   who  resigns  from  a  public  or  
compe::on  with  your   private  employment  and  
employer.   goes  into  business  in  the  
same  area.  
 Key  Elements:    

1.  There  is  a  private  or  personal  interest.  Oben  

this  is  a  financial  interest,  but  it  could  also  be  
another  sort  of  interest,  say,  to  provide  a  
special  advantage  to  a  spouse  or  child.  

1.  Conflict  of  interest  interferes  with  

professional  responsibili:es  in  a  special  way,  
namely,  by  interfering  with  objec:ve  
professional  judgment.          
15.  INSIDE  TRADING    
 Inside  Trading    

•  This  refers  to  the  significant  facts  that  have  

not  yet  made  public  and  are  likely  to  affect  
stock  prices.  

•  It  is  being  prohibited  by  the  rules  and  

regula:ons  of  the  Security  and  Exchange  
Commission  (SEC)      
 SEC  defines  insider  as:  
1.  the  issuer  
2.  a  director  or  officer  of,  or  a  person  controlling  the  issuer;  
gives  or  gave  him  access  to  material  informa:on  about  the  
issuer  or  the  security  that  is  not  generally  available  to  the  
public  
3.  A  government  employee,  officer  of  an  exchange,  clearing  
agency  and/or  self-­‐regulatory  organiza:on  who  has  access  to  
material  informa:on  about  an  issuer  or  a  security  that  is  not  
generally  available  in  public.  
4.  A  person  who  learns  such  informa:on  by  a  communica:on  
from  any  of  the  foregoing  insiders.  
 Moral  Arguments    

•  De  George  cites  2  aspects  of  this  par:cular  

problem:  
1.  One  is  that  of  someone  within  the  firm  using  
informa:on  for  his  own  private  gain,  at  the  
expense  of  the  firm.  (conflict  of  interest)  
2.   The  use  of  informa:on  by  someone  within  
the  firm  to  secure  personal  advantage  over  
those  not  in  the  firm.  (breach  of  loyalty)  
 Ethical  Issues  Rela:ng  to    
Insider  Trading    
•  It  violates  fiduciary  rela:onships  b/w  insiders  
and  outside  clients.  

•  It  promotes  greed  and  personal  gain  at  the  

expense  of  others.  

•  It  renders  the  transac:on  b/w  two  contrac:ng  

par:es  as  unfair.  
•  Professor  Jennifer  Moore    
– argues  that  insider  trading  is  wrong  because  it  
undermines  the  fiduciary  rela:onship,  which  is  
central  to  business  management.  

– She  contends  by  saying  that  employees  have  a  

duty  to  act  in  the  interests  of  the  firm  and  its  
shareholders,  but  many  ways  of  profi:ng  from  
insider  informa:on  do  not  benefit  the  company  at  
all.  Indeed,  they  may  seriously  damage  its  
interests.