Business Ethics and Social Responsibility

1
The Role of Business in Social and Economic Development
Common Practices in Business Organizations

Module 004 The Role of Business in Social and

Economic Development:
Common Practices in Business Organization

The heart of any business or company success lies in its marketing campaign.
Most aspects of your business depend on successful marketing strategies.
At the end of this module, you will be able to:
1. Recognize the role of Marketing in a business;
2. Decipher ethical and unethical marketing practices in businesses;
3. Appreciate the value of bookkeeping and record keeping.
What is Marketing?
The overall marketing department covers advertising, public relations, promotions and
sales. Marketing is a process by which a product or service is introduced and promoted to
potential customers.

mar·ket·ing \ˈmär-kə-tiŋ\
definition of marketing

the process or technique of promoting, selling, and

distributing a product or service

https://www.merriam-webster.com/dictionary/marketing

THE IMPORTANCE OF MARKETING FOR THE SUCCESS OF A BUSINESS

Marketing is a process by which a product or service is introduced and promoted to

potential customers. Without marketing, your business may offer the best products
or services in your industry, but none of your potential customers would know
about it. Your products and services will be of no use to anyone. Without marketing,
sales are unattainable and the business may resort to a close down.

Getting Word Out in the market

For a business to succeed, the product or service it provides must be known to
potential buyers or customers. Unless your business is known in the market and

Course Module
have communication with your customers readily available, you have to use
marketing strategies to build product or service awareness.

Without marketing, your prospective customers may never be aware of your

offerings and your business may not be given the opportunity to progress and
succeed. Using marketing to promote your products and service there is a change of
being discovered by prospective customers.

Higher Sales and Revenue

Once your product, service or company are announced to prospective customers, it
increases your chances that consumers will make a purchase. As awareness
becomes a reality, it is also the point where new customers start to spread the word,
telling friends and family about this amazing new product they have discovered
through word of mouth.
Your sales will steadily increase as the word spreads. Without developing a
marketing strategies, sales may not ever happened; without sales, a company
cannot succeed; without marketing, the business may not have the opportunity to
flourish and gain revenue.

A Chance for a Healthy Competition

Marketing also promote in the marketplace a healthy completion. Marketing efforts
get the word out on pricing of products and services, which not only reaches the
intended consumers, but also reaches other companies competing for the
consumers’ business. As opposed to companies that have a monopoly on products
and services that can charge almost any price, marketing helps keep pricing
competitive for a business to try to win over consumers before its competition does.
Without competition, well known companies would continue to sell even at a higher
prince while lesser known companies or new companies would stand little chance
of ever becoming successful. Marketing facilitates the healthy competition that
allows even the small businesses and new businesses to be successful.

Protecting Company Reputation

The achievement of a company often can be connected to a good and solid
reputation. Marketing builds brand name recognition or product recall with a
company. When a company reaches the highest expectations of the public, its
reputation stands on firmer ground.

As your reputation grows, the business expands and sales increase. The reputation
of your company is built through vigorous participation in programs, effective
communication-externally and externally--and quality products or services, which
are created or supported by marketing efforts.
 Business Ethics and Social Responsibility
3
The Role of Business in Social and Economic Development
Common Practices in Business Organizations

Considerations
Even though marketing is hugely important for a business to achieve something, it
can also be very costly. During the beginning of its operation, a company might
spend as much as half of its sales on marketing programs. It might even have to
invest more to be able to gain more. After the first year, a marketing budget can
reach as much as 30 percent or sometimes even more, of the annual sales. A
marketing program that gives your company the best chance is a healthy mix of
different forms of marketing, such as website development, public affairs, print and
broadcast advertising, design and printing advertisements such as tarpaulin and
flyer, trade shows and other special events that may help in the promotion process.

UNETHICAL PRACTICES IN MARKETING:

Understanding the thin line between ethical and unethical marketing practices is
very important, whether you are playing the salesman role for doing your own
business marketing or you are hired to market an employer’s products or services.

Ethical marketing involves making truthful and honest declaration and making sure
to satisfy the needs of potential and existing customers. This will help boost
credibility and trust, develops brand loyalty, increases customer retention, and
prompts customers to spread word about the products or services you are
marketing.

Unethical marketing, on the other hand sends wrong interpretation about your
products and services. It will destroy your brand’s reputation, and possibly lead to
legal problems in the future. This explains why you should avoid unethical practices
in marketing.

Your first step towards ensuring that you avoid unethical marketing practices is to
know those practices. Many business owners and sales personnel have erroneously
engaged in unethical marketing practices just because they never knew what these
practices are in the first place. Here are ten common examples of unethical
marketing practices that you must always avoid when promoting your products or
services.

Course Module
Examples of Unethical Marketing Practices That Can Destroy your Business
Reputation:

1. Making false, exaggerated, or unverified declaration

In a anxious bid to force potential and existing customers to buy products or
services, some marketers use false statements, exaggerated benefits, or make
unverifiable declaration about their offers. A concrete example of this unethical
marketing strategy is in the weight loss industry, where marketers convince
potential buyers that a particular product can help them shed tons of pounds within
two weeks without exercise or dieting. Researching facts on this would help a
costumer realize how untruthful this might be.

2. Bending of facts to mislead or confuse potential customers

A typical example is when a food processing company claims that its products are
sugar-free or calorie-free and filled with vitamins and minerals when indeed they
contain sugar or calories. These companies are only trying to mislead potential
customers, since they are unlikely to buy the products if it is made known that they
contain sugar or calories and basically not as healthy as they claim it to be.

3. Concealing side effects of products or services

This unethical marketing practice is common in the natural remedies industry,
where most manufacturers deceive potential costumers that their products have no
side effects because they are made from natural products. In reality, most of these
products have been found to have side effects, especially when used over a long
period. In fact, there’s no product without side effects—it’s just that the side effects
might be unknown. It’s better to use this on the labels or advertisements, “There are
no known side effects” than to say that, “there are no side effects“.

4. Using men and women as sex symbols for promotion

If you scrutinize the television advertisements, billboard all around the street, and
magazine advertisements, there are common denominators; a half-naked person is
used to attract attention to the product or service being advertised. While it might
be intuitive to use models in advertisements for beauty products and cosmetics,
half-naked models use in promotion of gadgets, machinery, and other products not
related to the human body is definitely unethical.

5. Using customer panic tactics

Sales person in malls usually would offer products and unveil that promotions are
on a limited time and offer only. A costumer may often here, something like: “This
price is a limited-time offer. If you don’t buy now, you might have to pay much more to
buy it later because the offer will end up in two days time, and the price will go up by
tomorrow.” The only motive behind those statements is to prompt the potential
customer to make a decision on the spot. It is pressure the person into buying
something at the very moment out of fear and extreme demand and stress.
 Business Ethics and Social Responsibility
5
The Role of Business in Social and Economic Development
Common Practices in Business Organizations

6. Bad-mouthing competitors product

Emphasizing the negative aspects of your rival’s products in a bid to turn potential
customers towards your own products, a very unethical marketing practice and a
sign of desperation. To avoid this negative strategy, emphasize more on the aspects
that make your product offers stand out from the rest. That is more professional and
ethical.

7. Plagiarism of marketing communication taglines

Some businessman and salespersons engage in using the same marketing
communication of their competitors to market their own products or services. Being
creativity is a very important part of marketing, and using other businesses’
marketing communication taglines just makes your business a sham.

8. Undignified references to races, age, sex, or religion

If your marketing campaigned include lines that place people of certain age range,
sex, religion, nationality, or race at a higher level than others, then you are crossing
the bounds of ethical marketing. Ethical marketing must not have of any forms of
discrimination.

9. Cost Abuse
Charging a customer for much more than the actual value of a product or service is
unethical. For marketing efforts to remain with ethical limits; the prices of your
offers must be equal to or less than the value they give the customer. If the value is
less than the cost, it is considered unethical.

10. Spamming
Spamming is when you send unsolicited emails to potential customers, encouraging
them to buy your products or services. This is the commonest unethical marketing
practice done through online.

Course Module
WHAT IS BOOKEKEEPING?

definition of bookkeeping

Bookkeeping is the recording of financial transactions, and is

part of the process of accounting in business.

https://en.wikipedia.org/wiki/Bookkeeping

Bookkeeping is the recording of financial transactions, and is part of the process of

accounting in business. Transactions include purchases, sales, receipts, and
payments by an individual person or an organization/corporation.

IMPORTANCE OF BOOKKEEPING IN A BUSINESS

Bookkeeping is one side of the business that owners would not like to be involved
in. But in financial management, this is very crucial in sustaining and expanding a
business. Without bookkeeping, there is risk of cash flow crisis, wasting money,
messing up receipts and facing other financial information issues that could lead to
the closure of a business.

Whether the business owner would like it or not, bookkeeping is very essential in a
business. An accurate bookkeeping is a necessity for every business that hopes to
grow and make it in the competitive market. Many businesses which would
otherwise have been successful have been brought down by their failure to maintain
proper financial records. Proper track of cash flow is critically important for any
business and it is only possible if you have accurate financial records. Many
businesses that were seemingly profitable and growing have failed after being hit by
unexpected cash flow.

In most cases, expenses should always be paid for directly from the business bank
account and should ideally be submitted on a monthly or quarterly basis to an
internal bookekeeper, monitored by an accountant. This ensures that the person
doing the bookkeeping has an understanding of outgoings and can monitor them for
accounting and taxation purposes.

Accurate book keeping allows the owner to see whether or not your business is
actually making a profit or losing money. Although very important, It is surprising
how often business owners fail to keep track of this. As much as the business might
appear to be doing well in terms of cash flow if not well monitored it could be over
spending more than what the business is supposed to be spending. This will help a
business owner have a an understanding of how much progress the business has
made over time. You can look back and draw comparisons with previous business
 Business Ethics and Social Responsibility
7
The Role of Business in Social and Economic Development
Common Practices in Business Organizations

years. This can provide a greater understanding of the areas within the business
which make a profit and where costs might be trimmed down and minimized. This
kind of financial analysis can help you to avoid problems in the future. Bookkeeping
may seem such a big burden when a business is in a process of growth but it is
essential if you are to not only to survive but also prosper in a tough economic
environment. Many business ended closing down due to poor book keeping.

A proper bookkeeping system is essential to any business whether big or small in

order to manage its daily transaction and keeps the business running profitably. For
any successful business, the main obligation is to maximize profits, minimize any
loss and at the same time maintain its position as a responsible entity within the
society. Records are important possessions of a business. Good records
management not only helps protect records but also enhances organizations’
operational competence.

example of a simple bookkeeping:

figure 4. Journal
http://wbbbb-ams.blogspot.com/2012/04/journalizing-and-journal-entries.html

WHAT ARE RECORDS?

re·cord \ri-ˈkȯrd\
Definition of Record
definition of record to give evidence
https://www.merriam-webster.com/dictionary/record

An organization receives and processes tremendous amount of information day in

and day out but not all of them can be considered a record. A record is invariably
linked to an organization’s official business and maintained as evidence or
supporting documents. Accordingly, “records” can be defined as any recorded
information or data in any physical format or media created or received by an
organization during its course of official business and kept as evidence of polices,
Course Module
decisions, procedures, functions, activities and transactions. For example, a driving
licence application will be kept as a record by the Transport Department of the
Government as evidence of its business transaction.

WHAT IS RECORDS MANAGEMENT?

Records management refers to the whole range of activities which an organization
should perform to properly manage its records. Usually a company has its own
Records Department depending on its operational range. The key activities may
include setting records management policy, assigning responsibilities, establishing
and promulgating procedures and guidelines, as well as designing, implementing
and administering recordkeeping systems.

Why Is Records Management Important?

Records management is important because it supports an organization to:
- make decisions based on evidence;
- meet operational, legal and regulatory requirements;
- be open and accountable;
- enhance operational efficiency and effectiveness; and
- maintain organizational memory.

OBJECTIVE OF RECORDS MANAGEMENT POLICY

Good records management starts with a policy which reflects an organization’s

needs. The objective of the policy should be the creation and management of
authentic, reliable, complete and usable records which are capable of supporting
business functions and activities of the organization for as long as they are required.

Characteristics of a record:

a. Authenticity - an authentic record is one that can be proven to be what it declares

to be, to have been created or sent by the person purported to have created or sent
it; and to have been created or sent at the time purported.

b. Reliability - a reliable record is one whose contents can be trusted as a full and
accurate representation of the transactions, activities or facts to which they attest
and can be depended upon in the course of subsequent transactions or activities.

c. Integrity - the integrity of a record refers to its being complete and unaltered; and

d. Usability- a usable record is one that can be located, retrieved, presented and
interpreted anytime. It should be capable of subsequent presentation as directly
connected to the business activity or transaction that produced it
 Business Ethics and Social Responsibility
9
The Role of Business in Social and Economic Development
Common Practices in Business Organizations

Responsibilities of Records Management Department

Defining and assigning records management responsibilities and promulgating such

responsibilities within an organization are crucial to good records management and
to meeting the needs of internal and external stakeholders. The authorities and
responsibilities for records management of different employees within an
organization should also be clearly defined; that may including senior supervising
management, records managers, records management staff and all other employees
who create, receive and keep records as part of their daily work routine. It is
important that a company has concretely designated people to handle specific
department to ensure proper recording keeping.

Good Practices In Record Management

An organization should formulate and promulgate its records management policy.
Example, in the form of records management policy statement setting out what the
organization intends to do in respect of records management; formulate and
promulgate records management requirements, guidelines, procedures and best
practices for compliance and reference by its staff; review and improve records
management policy, recordkeeping systems, practices, guidelines and procedures
whenever appropriate; develop and provide records management training for its
staff; designate a senior officer as Corporate Records Manager to oversee its records
management and to establish and implement a proper records management
program within the organization; designate Assistant Corporate Records
Manager(s) to oversee records management matters in each section/unit; designate
a responsible staff to control the creation, naming and coding of new files to
facilitate accurate capturing and ready retrieval of records; and reflect in the job
descriptions of the staff concerned their assigned specific records management
roles and responsibilities for accountability and to facilitate evaluation.

Determining documents to be retained as records and how long they should be

stored

An organization should determine which documents created or received during

business processes should be retained as records into a recordkeeping system, and
how long they should be maintained within the system, based on an analysis of the
legal and regulatory environment, business and accountability requirements and
the risk of not capturing or retaining the records. This will ensure adequate and
necessary records are captured to meet business needs. This process is also
important since proper disposal of records facilitates easy retrieval of records in
active use, and minimizes costs for maintaining and storing records.
Course Module
An organization should establish records retention and disposal schedules for its
records to ensure systematic planning and orderly implementation of records
disposal after records have been kept for a certain period of time. Records retention
and disposal schedules are established and reviewed having regard to the
importance of the records, as follows:

a. Administrative value -Records that helps determine the policy and procedures
necessary to carry out the activities of an organization such as procedure directives,
rules and regulations

b. Operational value - Records documenting the activities and transactions of an

organization. For example, routine correspondence and technical data.

c. Legal value- Records required to define the rights and obligations of an

organization, its staff and individuals and organizations with which it deals. For
example, agreements, certificates and contracts.

d. Fiscal value- Records relating to the financial transactions of an organization and

especially those required for audit purpose. For example, loans.

e. Archival value - Records which should be preserved permanently.

BIR Retention Period

BIR issues rules on electronic storage of documents

Taxwise or Otherwise
By Marion D. Castañeda, 13 August 2014
the BIR issued Revenue Regulations (RR) No. 17-2013 requiring taxpayers to
preserve their books of accounts, including subsidiary books and other accounting
records, for a period of ten years counting either from the deadline to file the
return or, if filed after the deadline, from the date of the actual filing of the return.
Said regulation also requires the independent Certified Public Accountant (CPA)
who audited the records and certified the financial statements of the taxpayer to
maintain and preserve copies of the audited and certified financial statements for
the same 10-year period.
Under the recently issued RR No. 5-2014, the above requirements still remain.
However, after a period of five years reckoned from the filing deadline or date of
actual filing of the return, whichever is later, taxpayers now have the option to
retain only an electronic copy of the books of accounts, subsidiary books and other
accounting records subject to the maintenance of an Electronic Storage System
(ESS). This new RR sets out the requirements of an ESS, which are as follows:
 Business Ethics and Social Responsibility
11
The Role of Business in Social and Economic Development
Common Practices in Business Organizations

• Reasonable controls to ensure the integrity, accuracy, and reliability of the ESS;
• Reasonable controls to prevent and detect unauthorized creation, addition,
alteration, deletion or deterioration of electronically stored documents via the ESS;
• An inspection and quality assurance program evidenced by regular evaluations of
the ESS;
• A retrieval system that includes an indexing system; and
• The ability to reproduce legible and readable hard copies of the electronically
stored documents via the ESS.
If the taxpayer’s ESS fails to meet these requirements, the taxpayer shall be
required to maintain and preserve the original hardcopy of its books of accounts,
subsidiary books and other accounting records for the entire duration of the ten-
year retention period.
To ensure compliance with the above requirements, the RR authorizes the Revenue
District Office (RDO) having jurisdiction over the taxpayer to periodically initiate
tests of a taxpayer’s ESS. Such tests may include evaluation and review of: (a) the
taxpayer’s equipment and software (by actual use of the same); (b) the procedures
used by the taxpayer to prepare, record, transfer index, store, preserve, retrieve
and reproduce the documents stored using the ESS; and (c) the internal controls,
security procedures and documentation associated with the taxpayer’s ESS.
According to the RR, these tests do not fall under the purview of “examination” or
“inspection” of books and records as contemplated under the Tax Code since they
do not involve a determination of tax liability.
After performing the above tests, the authorized revenue examiner has three days
to inform the taxpayer of the results of the tests. Should there be any adverse
findings, the taxpayer may appeal to the Regional Director within ten days from
receipt of said findings. Upon submission of the appeal, the Regional Director shall
resolve the same within 30 days.
The ten-year retention period requirement on the part of the independent CPA has
also been relaxed under the revised rules. The external auditor can now opt to
retain only electronic copies of the audited and certified financial statements.
However, the RR also extends this retention requirement to the independent CPA’s
audit working papers. Notably, this exceeds the required retention period of audit
documentation under auditing standards, which is only for a period of five years
from the date of the auditor’s report. This author also cannot help but wonder at
the rationale and permissibility of the inclusion of audit working papers in the
retention requirement, considering that these working papers are the property of
the independent CPA. It does not form part of the accounting records of the audited
company which may be subject to examination by the BIR.
Many will welcome this new RR since it can be more practical and sound to keep
years-worth of documents electronically, as opposed to storing years-worth of
documents in hardcopy, which can fade away over time or be destroyed in
unfortunate circumstances. In terms of cost-effectiveness, taxpayers have to
Course Module
 evaluate whether retaining an ESS that meets the BIR’s requirements will be
cheaper in the long run. Certainly the indexing requirements of an ESS may help
ease the retrieval process during a tax audit which could help mitigate
administrative costs.
The BIR deserves credit for reconsidering its initial imposition and perhaps
heeding the pleas of taxpayers in terms of its previous retention requirements.
That said, the issue of whether a ten-year retention period is in keeping with what
the Tax Code requires, still remains. Taxation, in itself, is already a big burden for
taxpayers. Compliance with tax rules and regulations should not be more
burdensome than the taxes themselves.
Marion D. Castañeda is a senior consultant at the Tax Services Department of Isla
Lipana & Co., the Philippine member firm of the PwC network.

WHAT IS REPORTORIAL REQUIREMENTS

As a business owner, after registering with Department of Trade and Industry, for
sole proprietor, or Securities and Exchange Commission, for the partnership and
corporation, securing Barangay permit clearance and municipal permit clearance
and registering with the Bureau of Internal Revenue, Social Security System,
PhilHealth and Home Development Mutual Fund, must comply with the monthly,
quarterly and yearly statutory compliance of these government agencies. All
businesses must comply with the government requirements.

Example of reportorial requirement:

Reportorial requirements of corporations registered with the SEC:

- Annual GIS

Reportorial requirements of corporations for BIR:

- Monthly, quarterly and yearly income tax report
-
Reportorial requirements of corporations for LGU's:
- Yearly
Reportorial requirements of corporations for SSS:
Executing Monthly/Quarterly SSS Reports
SSS Monthly Contribution (R-5)

Reportorial requirements of corporations for PhilHealth:

 Business Ethics and Social Responsibility
13
The Role of Business in Social and Economic Development
Common Practices in Business Organizations

Employer's quarterly remittance report rf-1

Reportorial requirements of corporations for Pag-ibig:

Member's contribution remittance form (mcrf)

Figure 5: SEC Example of a Reportorial Report

Course Module
References and Supplementary Materials

Glossary
Competition: the activity or condition of competing.
Consideration: careful thought, typically over a period of time.
Reputation: a widespread belief that someone or something has a particular habit or
characteristic.
Revenue: income, especially when of a company or organization and of a substantial
nature.

References and Supplementary Materials

Books and Journals
David L. Kurtz, Louis E. Boone; 2010; Principles of Marketing; Cengage Learning
Philip Kotler and Kevin Lane Keller; Marketing Management ; Pearson; 2011

Online Supplementary Reading Materials

Good Records Management Practices; http://www.grs.gov.hk/ws/english/ engimages/
grmp_e.pdf; 2001; May 21, 2017

Manual on Reportorial Requirements; http://www.sec.gov.ph/wp-content/ uploads/

2015/10/Citizens-Manual-on-Reportorial-Requirements.pdf; May 21, 2017

SEC web site; http://www. sec.gov.ph; May 21, 2017

BIR issues rules on electronic storage of documents; http://www.pwc.com/

ph/en/taxwise-or-otherwise/2014/bir-issues-rules-on-electronic-storage-of-
documents.html; 2014; May 21, 2017

What are the business requirements a business owner must comply; http://
trendstatic.com/reportorial-requirements-that-a-business-owners-must-comply; May
22, 2017

Online Instructional Videos

Unethical Advertising; https://www.youtube.com/watch?v=PRNvhGND7Kc; 2011;
May 22, 2017