Ethical Issues and Problems in Business and the Corporate World

Lesson 4

  Business

is a productive human activity that brings beneficial contribution to both people and society. produces employment, fair deals, creativity, advancement of technology, customer satisfaction, among others. is also an activity that provides an opportunity for some unscrupulous people to take advantage of others:

  Business

  Ironically, however, business

e.g. the abuse of fiduciary relationship between employers and employees and between the buyers and the sellers

1. Sexual Harassment

and other purposes. the Congress of the Philippines enacted the Anti-Sexual Act of 1995     For Declaring sexual harassment unlawful in the employment.What is Sexual Harassment?   This is an issue in the corporate world that must be looked into because it can create a hostile and unhealthy workplace for the employees. this reason. . education or training environment.

all forms of sexual harassment in the employment. applicants for employment. students or those undergoing training. and uphold the dignity of workers. instruction or education. education or training environment are hereby declared unlawful. this end. guarantee full respect for human rights.Anti-Sexual Act of 1995   “The State shall value the dignity of every individual. employees.”   Towards . enhance the development of its human resources.

The Civil Right Act of 1964 of United States of America   This is where our law was patterned defines sexual harassment as:   ”Unwelcome sexual advances. unreasonably interferes with an individual’s work performance or creates an intimidating. requests for sexual favors. hostile or offensive work environment. and other verbal or physical conduct of a sexual nature constitutes sexual harassment when submission to or rejection of this conduct explicitly or implicitly affects an individual’s employment.” .

trainor or any other person who. teacher. request or requirement for submission is accepted by the object of said act. employee.” . manager. instructor. supervisor. influence or moral ascendancy over another in a work or training or education environment demands. regardless of whether the demand.Republic Act No. professor. agent of the employer. having authority. 7877   Defines   sexual harassment as: Employer. requests or otherwise requires any sexual favor from the other. coach.

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 retaliation or a flexing of the new power. also happens because some organizations and managers allow it to happen. sexual .   This   Historically. harassment has always occurred but there used to be no label for such behavior.

things continue to change.  The industrial revolution brought about changes in the traditional function of men and women which greatly increased gender specialization and formed a new kind of workplace in the western world. responsibility of men and women became more specialized. the past decades. More and more women joined the workforce.   The   In . They moved into jobs that were traditionally held by men.

harassment is committed by a male against a female. Sexual harassment is one of the effect of this shift. it may be an expression of retaliation or flexing of the new power.   When   When .  As a result of these changes. the balance is shifting. it may be a response to real or imagined loss of power. committed by a woman towards a man.

  .  Quid Pro Quo harassment Harassment that creates a hostile environment 2.Two Types of Sexual Harassment 1.

      e. A manager uses his authority to grant pay increases and promotions as a means to extort sexual favors from an employee.1. pay raise). Quid Pro Quo harassment   This means “this for that” (something for something) This is defined as requiring a sexual favor or interaction as a condition of employment or in exchange for an employment benefit (such as promotion. “go to bed with me and you will get that promotion you want.” .g.. transfer.

abuses include verbal. marital status. offensive. or hostile environment in the workplace that interferes with work performance. Harassment that creates a hostile environment   In the hostile environment type of harassment. national origin. or disability.   This . religion. sexual orientation. type of harassment may be based on race.2. veteran status. age. physical and visual conduct that creates an intimidating. sex.

Some examples of a hostile environment
1.  2. 



Unwanted touching, patting, and pinching against a person Comments about your body, leering, wolf whistling, insults of a sexual nature, persistently pestering for a date. Displaying or circulating pornographic pictures with the intention of harassing someone / Posting of explicitly sexual materials Workplace blackmail- i.e. suggestion that sexual favors may further your career (or refusal may hinder it)

5. Green jokes 6. Obscene letters 7. Sexual propositions 8. Suggestive looks

The profiles of the Victim and the Harasser:

The victim as well as the harasser may be a woman or a man. The victim does not have to be of the opposite sex. The harasser can be the victim’s supervisor, an agent of the employer, a supervisor in another area, a co-worker, or a non-employee. The victim does not have to be the person harassed but could be anyone affected by the offensive conduct. The harasser’s conduct must be unwelcome.




Harassment also occurs between customer/client and providers. The victim should use any employer complaint mechanism or grievance system available. Although the victim of sexual harassment and the person accused of sexual harassment may be peers. more frequently the victim is in a position of lesser power than the accused.       . The most common example is the boss-subordinate situation.  It is helpful for the victim to directly inform the harasser that the conduct is unwelcome and must stop.

The result revealed that 80%of the persons interviewed believed they have been sexually harassed. The study also showed that used of words.     . and gestures were the type of harassment which created a hostile environment or offensive work environment. jokes.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.

  It affected the individuals harassed and the person accused. who may be innocent. It can also affect the bottom line of the employer.   . such case can generate costly lawsuits. managers and co-workers. unfavorable publicity or the invasion of privacy. and affect the entire life of an organization and its members.

secure.How to Prevent Sexual Harassment in the Workplace   A significant step an organization can take in preventing sexual harassment in the workplace is through creating a safe. positive work environment by putting into practice a strong sexual harassment policy. example for policy development are:   Some .

1.  3.  A broad anti-harassment/positive environment policy that includes a statement that specifically addresses sexual harassment A separate sexual harassment policy that covers all organizational members Separate sexual harassment policy.  . one that addresses non-management employees and one that addresses management 2.

scared. dreadful publicity.   If not dealt with. disgraced performing well.  Sexual harassment is very costly and causes low morale among employees and decrease in productivity. people are incompetent of   Annoyed. sexual harassment may result in costly lawsuits. and ruin of an organization image that took years to establish. .

want a secure office.   Most . male and female. free from threats and apprehension.  Riddance of sexual harassment will come through the commitment of the organization and employees. person.

Even if the company already has a well-written policy.Communicating the Sexual Harassment Policy   The best policy is ineffective if it is not communicated well. it is important to expose it regularly through:         Permanent posting on bulletin board Memos Articles in the organization’s newsletter Meeting and trainings   Training program may come up with various topics to support the anti-harassment programs and to assure each employee of a safe and harassment-free workplace environment .

The Problem of Just Wage .2.

    Being compensated for a work done or for services rendered is the very essence of ‘work’. .   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.Work and Compensation   Work is said to be for the purpose of obtaining economic gain for the laborer.   Most agreed that work is directed to the promotion of life.

shares on profits.  Compensation One is willing to work in exchange for remuneration or rewards he will receive from working. Thus. harvest or commercial goods. the general concern is that justice should be a substance of compensation.     The main objective of compensation is to create a system of rewards that is equitable to the employer and employee. .   It can be in the form of wages. in-kind payments and other remunerative fringe benefits.   Such remuneration may include both financial and non-financial compensation.

“a just wage is the legitimate fruit of labor.”   A   The . just wage is defined as the remuneration which is enough to support the wage-earner is reasonable and frugal comfort. Catholic Church tells us.The Question of Just Wage   A number of people all over the world commented on its definition and have argued on the appropriate criteria to consider in setting the so-called ‘Just Wage’.

00 P 345.00   Manufacturing   Establishments regularly employing less than 10 workers P 345.00 P 367.00 .00 P22.00 P 404.00 P22.00 P22.00   Retail/Service less   P 345.00 P 367.00 P 367.00 P22.00 P22.00   Agriculture (Plantation and Non Plantation)     Private   Hospitals with bed capacity of 100 or less Establishments employing 15 workers or P 345.00 P 367.DAILY MINIMUM WAGE RATES National Capital Region (NCR) Effective 01 July 2010   Non-Agriculture   P 382.

as indicated in letter “g” Sec 3 of Art. the workers are entitled to a living wage”   “That . XIII.Philippine Constitution   Spread in various parts of the 1987 Philippine Constitution are specific pronouncements and mandates on the protection and promotion of the rights of workers in the public and private sectors.

considering existing regional disparities in the cost of living and other socio-economic factors. . The minimum wage rates shall be adjusted in a fair and equitable manner. 6727   The Wage Rationalization Act declared the policy of the State to rationalize the fixing of minimum wages and to promote productivity-improvement and gain-sharing scheme to ensure a decent standard of living for the workers and their families.Republic Act No.

determination of wages must also be adequate and just.Government Agencies Involved   In our country.   National Wage and Productivity Commission (NWPC)   Regional Tripartite Wages and Productivity 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.   .

should be paid in accordance with laws and regulations issued by the government. It requires that employers pay at least the minimum wage. External Market Factor   These 2.Factors to consider in Formulation of Fair Wages 1. . Laws and Regulations   Workers refers to the supply and demand for labor and the so-called economic conditions and underemployment.

  . Prevailing Industry Rate Some claim that paying workers the average of what other companies are paying for the same job result in a fair wage. However not all companies have a minimum wage high enough to maintain a decent standard of living. Cost of Living   The 4. A fair wage should be sufficient to meet the increase in cost of living. cost of living relates to basic maintenance needs and it must be seriously considered in formulation of wages.Factors to consider in Formulation of Fair Wages 3.

. and the skills requirements of the job are probably the most considerable determinants of fair wage.Factors to consider in Formulation of Fair Wages 5. and the organization’s profitability to justify its ability to provide fair wages to its workers should be considered. nature of the job itself entails the formulation of a just wage. Organizational Factors   Assessment 6. the size of the company. Duties. responsibilities. Job Factor   The of what type of industry the organization operates.

Factors to consider in Formulation of Fair Wages 7. Individual Performance   The trend is that individual performance or productivity ratings affects the determination of wage/salary increases. .

and businesses usually conclude that they are legally and morally right when they fulfill their mutual agreement with the employees.Some Issues on Just Wage   The minimum wage mandated by the government is not a guarantee of a just and fair wage. difference hinder the formulation of a perfectly common definition of fair wage. Some communities have a higher cost of living than others.   Organizations   Geographical .

is not usually met by majority of the employers. the prevailing rate in industry alone could not perfectly establish a just wage. skills. have different interpretations of the justifiable pay for certain job position.  Wage indexation to cost of living. and tasks.   Companies . Thus. where wage is automatically adjusted with the increases of cost of living.

3. Gift Giving and Bribery .

is normally observed during special occasions like Christmas. gift to customers. and sometimes even during birthdays. New Year.   Giving   It . clients and business partners is a common practice in the business community.GIFT-GIVING   Is merely an act of extending goodwill to an individual in an effort to share something with particular others.

  3.  To show appreciation for a favor received To effectively establish goodwill with business partners.  .Reasons why business usually engage in gift-giving 1. To advertise To compete effectively against competitors 2.  4.

The following are the common forms of Gift-Giving   Samples   Raffle   Patronage awards coupons / certificates   Rebates / cash refund   Padding expense accounts   Premiums   Prizes (rewards)   Tie-up promotions   Allowance   Free goods   Tips .

Is Gift-Giving Ethical or Unethical?   Business gift of clients and business associates can raise conflict of interest problems. intentionally or not. clear point is that those who cross that line. end up in big trouble.   The   It . and knowing where to draw the line. is indeed difficult to determine the morality of giving gift. between what is right and wrong. is not always easy.

  Most agree that accepting and receiving bribe is a violation of professional ethics. just as not all cases of taking another’s property should be considered theft. all examples of giving and accepting gift and amenities qualify as bribery. but we may not always find it easy to determine what is and is not a bribe.   Not .

  5.  Value of the gift Purpose of the gift Circumstances under which the gift was given or received Position between or relationship of the giver and receiver Acceptable business practice in the industry Company policy Laws and Regulations .  7.  6.Factors in Determining the Morality of Gift-Giving 1.  4.  3.  2.

is intended to induce people inside the business or other organizations to make decisions that would be justifiable according to normal business or other criteria. was the identified to be a form of corruption and is generally immoral and for most is illegal.BRIBERY   It is defined as a practice of giving renumeration 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   It .

  Renumerations, termed

as bribes, can be in a form of money, gift, entertainment, or preferential treatment. of bribery:

  Example

A motorist offered a certain amount of money to a police officer in order not to be issued a ticket for speeding.   A construction company shared percentage of its income to a civil servant in order to win a contract.   A narcotics smuggler bribed a judge to lessen criminal penalties.

Bribery is obviously unethical because of the following reasons:
  It

is generally used as an instrument to gain personal or corporate advantage. corrupts the concept of justice and equality

  It

  Bribery

produces cynicism and a general distrust of institution

  It

destroys people’s trust in the integrity of professional services, of government and the courts, of law enforcement, religion, and anything it touches. treats people as commodities whose honor can be bought and sold. It thus tends to degrade the respect we owe to other human beings.

  It

4. The Morality of Advertising

  Advertising plays a very significant role in marketing goods and services.   Without   Sometimes. even . the consumers would not be aware of the presence of diverse products and services available in the market. advertising. the mere presence of advertising can sell a product due to consumer perception that a heavily advertised product is a product of “good value”.

benefits and how it might serve the needs and wants of individuals.famous marketing guru . goods. . or services by an identified sponsor”   Wells and Burnett likewise defined advertising as:   “paid non-personal communication from an identified sponsor using mass media to persuade or influence and audience”   The primary purpose of advertising is to inform potential buyers of the availability of a certain product by providing relevant information on its uses.  Philip Kotler .defines advertising as:   “any paid form of non-personal presentation and promotion of ideas.

in the attempt to persuade consumers. the use of advertising today has not been serving its intended purpose since very little information is conveyed to consumers and more often the information is not even useful. the advertisements become deceptive. and manipulative. only becomes immoral when. advertising in itself is not bad or immoral since it helps achieve the goals of both the seller and buyer.   From   It . the point of morality.  However. misleading.

are also shortcomings to this approach since the truth in advertising can be contrasted with either falsehood or lying. Lying is immoral while falsehood is not necessarily immoral. advertisement that conveys truthful information is morally permissible.   An   There . and that is “truth”. If an advertisement contains false statement and “lies”. then it is said to be immoral.  There is only one criterion in evaluating the morality of advertising.

    An example of this is one where pictures from the box of the product do not look the same as the contents of the product. individual words. lie. the picture is said to be deceptive.Some Issues in Advertising Deceptive Advertising These are those which either make a false statement and therefore. or objects that can deceive our eye and mind. . in this case. or which represents the product without making any statement.   This may not occur not only through sentences but also through pictures.

  Weasel words are used to avoid from a direct or straightforward statement. can be.   We are usually accustomed to ads that contain phases like: help. . are used to imply what cannot be said.Use of Weasel Words   The use of weasel words is often complementary to ambiguity in advertising. up to. help stop   Like. help prevent. as much as. fight.   One example of a commonly used weasel word is “Help”   Help means to aid or assist.

  For example.” that it “upsets the stomach less frequently” or is “superior to any other nonprescription painkiller on the market” contradict evidence that all analgesics are effective to the same degree.Exaggeration   Consumers might also be misled through exaggeration. This occurs when advertisements tend to make false claims of the benefits of the goods or services which is actually unsupported by valid evidences. . claims that a pain reliever provides “extra pain relief” or is “50 percent stronger than aspirin.

prestige. self-esteem and the most pervasive of all are sexual pitches. Taflinger defines psychological appeal as a visual or aural influence on subconscious mind and emotions. curiosity.   Richard F.       Psychological appeal does not have to make sense. It influences by implying that doing what is suggested will satisfy a subconscious desire. personal enjoyment. masculinity. femininity. Some psychological appeals that advisers use to motivate people to buy products are: power. . and often should not have to be effective. approval. imitation.Psychological Appeals There are some advertisements that are directed at arousing human emotional needs rather than reason. acceptance.

Children generally remember what they see.000 TV commercials every year. Moreover.   The average child is exposed to more than 40.   Children are special group of consumers who do not regard reason. movies and television shows are being linked to the selling of toys and other items featured in commercials with character stamped on various products. .Ads Directed at Children Most advertisers have recognized that advertising to children is effective and eventually became a big business recently.         The aim of advertisers is for the children to pester their parents to buy things for them. Kids are the most pure consumers in that they tend to interpret ads literally.

cosmetics. devices and hazardous substance. the Department of Health is the agency that oversees these products   With . drugs. respect to food.”   The Department of Trade and Industry is responsible for enforcing the provisions of the act.Philippine Law on Advertising CONSUMER ACT OF THE PHILIPPINES   Article 108 of the act declares that “The State shall protect the consumer from misleading advertisements and fraudulent sale promotion practices.

television. or other medium for the purpose of inducing or which is likely to induce directly or indirectly the purchase of consumer product and services. deceptive or misleading advertisement by Philippine mail or in commerce by print.” . Deceptive and Misleading Advertisement   Article 108 states that : it shall be unlawful for any person to disseminate or to cause the dissemination of any false. radio. outdoor advertisement.False.

composition. or safety. device or hazardous substance that is false. Cosmetics.  . Device or Hazardous Substance 1. or device. drugs. quantity. or is likely to create an erroneous impression regarding its character.Special Requirements for Food. drugs. merit. Where a standard has been prescribed for a food. cosmetic. cosmetic.  3. misleading. unless the product actually complies with the prescribed standard. Drugs. 2. no person shall advertise any article or substance in a manner that is likely to be mistaken for such product.  No claim in the advertisement should be made that is not contained in the label or approved by DOH It is unlawful to advertise any food. value. or deceptive.

or hazardous substance may not make use of any reference to any laboratory report of analysis required to be submitted to the Department of Health. cosmetic. or hazardous substance may be allowed unless such product is duly registered and approved by DOH. device. No advertisements for any food. . device. cosmetic. Cosmetics.Special Requirements for Food. Drugs. drugs. Advertisement of any food. 5. Device or Hazardous Substance 4. drugs. unless such laboratory report is duly approved by DOH.

Philippine Association of National Advertisers (PANA)   In 1958. the PANA has been engaged in a continuing campaign to regulate abuses committed by untruthful advertisers. Since then. PANA issued a Code of Ethics which includes the following statement of general principles:   The . advertisers formed the Philippine Association of National Advertisers (PANA).

advertising aims to inform the consumer and help him buy intelligently. it cannot permit those practices that tend to impair this confidence. Hence. Good advertising recognizes both its economic and social responsibility to help reduce distribution costs and to serve the public interest. advertising depends for its success on public confidence.  Good  Good .

made on the merits of the product or service advertised. rather than by the disparagement of competition.  Good  Good . advertising seeks public acceptance on the basis of positive and constructive statements. and trustworthy. advertising conforms not only to the laws but also to the generally accepted standards of good taste and decency and to moral and aesthetic sentiments of the country. Good advertising tells the truth. honest. It is accurate.

 Good

advertisement does not allow any activity that involves the exploitation of the goodwill, attached to any other firm, product or service. It does not imitate or stimulate trademarks, firm names, packages, labels and such advertising devices as illustration, copy, layouts, or slogan. advertising helps to dignify the individual and contribute to the building of a civilized society.

 Good

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. three-fourths of the people in the survey believe that a romance at the office is acceptable. believe that it is uncalled for and unprofessional to mingle romance with business purposes.

  About

  However, other

  It   Office .What is Office Romance?   It is defined as a relationship between two people who are employed by the same organization. romance is likely to happen as long as men and women work together. is characterized by mutual attraction between the parties and a desire for a personal. romantic relationship.

The Company’s Stand   The company is trapped in the middle of office romances present in the organization. they   This . do not want a workplace where employees are uncomfortable to work. 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. management does not want to interfere unduly with their employee’s personal life and their right for privacy.   Top   Conversely.

        . Employees tend to view work as fun even when pressures begin to pile up. Love and companionship in the office give the employees the relief and reason to overcome problems that come along their way. Romance becomes the reason to keep their jobs. mutual support to each other at work.Benefits of Office Romance   These benefits include friendship. Employees involved in a love relationship overcome rough times at work because of mutual support and inspiration. and other personal experiences.

Disadvantages of Office Romance   Damaged   Disturb professional reputations co-workers in productivity   Changes   Dating the boss affairs   Extramarital .

Ethical Issues in Office Romance   Interventions Some companies want to restrict their employees to engage in office romance. .   Policies regarding office romance need to be decided with vigilant thought and prudence.   For example: some companies may allow relations between coworkers with the same rank.     Legal   / Ethical Considerations When one or both involved parties are required to leave the company. Others are in favor of the positive effects of office romance. in order to respect the rights of all members of the organization. this risks legal encounters. but may want to lessen the bad effects.

  One of the persons involve in a failed romance may seek vengeance.   There are few reasons why this issue may exist.  Sexual   Harassment Sexual harassment may sometimes arise when a bad workplace romance is terminated. may try to revive. a harassment. One may consider flirting acceptable which may eventually lead to a romance. or would want to remove the other person involved. while another may consider it offensive and therefore.   There may be misinterpretation on the part of each party. .

6. The Problem of Fair Pricing .

a fair price is one that man has not yet resolved. One should assess the factors on which the price is based and the processes that determine it. though some factors are considered such as: a)  The cost of material b)  Operating and marketing expenses c)  A reasonable profit margin     These factors constitute to set price fairly though it is not enough to provide a precise answer on what a fair price is.  In general. .

  B.  C.    True cost of the product is concealed Suggested retail price Use of electronic scanners Promotional pricing Follow the leader pricing Price gouging Price fixing The “Suki” system of the Filipino business compromises the fair price of a regular customer from the new ones.  G.  D.  E. .  F.Ethical Issues in Fair Price A.

7. Trade Secrets and Corporate Disclosure .

and documents memorializing important negotiations     . and other competitively valuable information.TRADE SECRET   A trade secret is the legal term for confidential business information. Examples of trade secret include customers identities and preferences. That piece of information allows the company to compete effectively. manufacturing processes. vendors. employee data. financial information. marketing strategies. company finances. production cost or sales data. product pricing. These includes essentially any confidential business information such as customer lists.

and other illegal matters. breach of fiduciary obligation. A wrongful taking can occur in a variety of manners. secret law prevents misappropriation. the taking of information would be wrongful when the taking is a breach of contract.   Trade   For .Trade Secret Act   The Trade Secret Act prevents wrongful taking of confidential or secret information. theft. example. of trade secret information. wrongful taking.

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 information he needs to enter into a transaction fairly.     The first basis speaks of information required for a fair transaction. A transaction is considered fair if the person has the appropriate information needed for the transaction .

But a person is permitted to do something that “might” cause others harm. it is clear that a person is not morally permitted to harm others.2.   . The second basis speaks of the moral responsibility of the person.   As stated in the law. Each person has the right to those actions of others that will seriously and adversely affect him or her.

8. Product Misrepresentation .

  Intentional Misrepresentation – a scenario whereby the person is fully aware or deliberately misrepresents things. It is a situation where the person involved believes that it is the right and acceptable things to do.Misrepresentation   Misrepresentation is observed when there is a transformation of information to misinformation. It is commonly called as white lie.  Unintentional misrepresentation – a scenario whereby the person is not aware and does not deliberately act on misrepresenting things. There are two types of misrepresentation: 1. 2. . commonly known as lying.

takes place when the person’s action are not in congruence with his thoughts with the intention to deceive others.   A lie therefore. .   It happens when somebody tries to convince others with untrue statements. Augustine   defines lying as: A speech that is contrary to what the person is thinking with the intention to deceive. themselves. do not believe in.Definition of Lying   Lying can be defined as the act of making others believe something that they.   St.

is the act of making a statement from which false conclusions may be drawn eventually misleading others.   Statement like: I was at the office around 8:00 a.   This is often observed in advertising a product to be the “best-seller” brand. .Types of Lying Use of ambiguous terms   It Use of false statements   It is the act of deliberately using vague terms or open-ended statements that can have several meanings to mislead people that one is telling the truth.m.

  This act is sometimes observed in some crime scenes wherein a witness conceals he truth for the sake of his own security.Type of Lying Through action   It Suppression of correct information   It is a type of lying where the person gets caught in the act of wrongdoing.   Example: when someone is caught red-handed of stealing and still denies the accusation is an intentional or unintentional act of hiding the correct information which eventually mislead others. .

It is characterized by omitting adverse information about the product or service. Direct misrepresentation   It is characterized by actively misrepresenting something about the product or service.Business Practices Involving Misrepresentation and Lying Other Type of Misrepresentation 1. Indirect misrepresentation   . 2. It gives the business a bad name because deception and lying are used in the process of selling the product to the customers. It is passive deception and not as obvious compared to direct misrepresentation. But it still contributes to the impression that businessmen are liars and are out to make quick moey.

Some examples of misrepresentation Direct Misrepresentation   Deceptive Indirect Misrepresentation   Caveat packaging   Adulteration   Misbranding or mislabeling   Short weighing   Short-changing   Short measuring   Short numbering   Misleading advertisement Emptor (let the buyer beware)   Deliberately withholding information   Business ignorance .

9. The Morality of Labor Strike .

an ordinary usage. is a tactic often employed by labor unions during collective bargaining with an employer. the term strike is often used to describe all work stoppages. regardless of the origin of the dispute.   This   In .Strike Action or Strike   It describe collective action undertaken by groups of workers in the form of a refusal to perform work.

Workers go on strike for different reasons:   For higher compensation   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  Conditions for employment include wages. and several other circumstances that affect the work of the workers. hours. and safety. sanitation. .

.What are the Basic Rights of Employees?   LABOR   This CODE OF THE PHILIPPINES is an act to strengthen the constitutional rights of workers to self-organization and free collective bargaining and to penalize unfair labor practices.

  It may include preventing transports from entering or living in an institution or a company. is a strike affecting all areas of a labor force across many industries. . typically throughout an entire country or a large section thereof. but refuse to work.TYPES OF STRIKE Sit-down Strike   This General Strike   This is a strike in which workers show up to work.

. refers to a concerted refusal to work undertaken by a union to assert its members’ right to particular job assignments and to protest the assignment of disputed work to members of another union or to unorganized workers.TYPES OF STRIKE Sympathy Strike   This Jurisdictional Strike   This is a strike initiated by workers in one industry and supported by workers in a separate but related industry.

is against the will of the leadership of the union.TYPES OF STRIKE Economic Strike   This Wildcat Strike   This is based on a demand for better wages or benefits than the employer wants to provide. or without a unon. .

is a kind of strike forcing employers to recognize and deal with them. .TYPES OF STRIKE Slow down Strike   This Recognition Strike   This is a form of work stoppage in which employees deliberately reduce their individual production.

Is There a Right to Strike?   The right to strike is integral to the process of wage bargaining in an industrial economy. employee has a right to withhold his labor services from an employer if he does not like the pay and benefits the employer offers. who are willing to work for a strike and the employer who wishes to hire them have a legitimate right to do so.   Any   Workers .

10. Whistle-Blowing .

Whistle-Blowing   This is the disclosure by an employee of confidential information which relates to some danger.   Whistle-blower   This is someone in an organization who witnesses behavior by members that is either contrary to the mission of the organization. fraud. or other illegal or unethical conduct connected with the workplace. or threatening to the public interest. be it of the employer or his fellow employees. and who decides to speak out publicly about it. .

employee. . Run counter to the defined purpose of the institution or organization. and Informs the public of this facts.Whistle-blower   He is a person. Are in violation of human rights. or officer of any institution who believes that he has been ordered to perform some act or he obtained knowledge that the institution is engaged in activities which: a)  b)  c)  d)  Are believed to cause unnecessary harm to third parties.

Types of Whistle-Blowing Internal Whistle-Blowing   This External Whistle-Blowing   This occurs within the organization. . regulatory body. It is going “over the head of immediate supervisors to inform higher management of the wrongdoing. public interest groups.” occurs outside the organization. or non-government organization. It is revealing illegal and immoral activities within the organization to outside individuals or groups such as media men.

B.  C.  D. Alumni – those who blow the whistle on former employers.Kinds of External Whistle-blowing A.  . Open – whistle-blower discloses his identity Anonymous – whistle-blower who does not disclose his identity.  Current – those who blow the whistle on present employers.

External Whistle-Blower  External whistle-blowers experience each of the following forms of retaliation:  Lost their job or were forced to retire  Received negative job performance evaluations  Had work more closely monitored by supervisors  Were criticized or avoided by co-workers  Were blacklisted from getting another job in their field .

Internal Whistle-Blower  Internal whistle-blowing produces less retaliation but also experience severe emotional effects of their whistle blowing activity:  Severe depression on anxiety  Feeling of isolation or powerless  Distrust of others  Declining physical health  Severe financial decline  Problems with family relations .

11. Multi-level Marketing (MLM) and Pyramiding .

This is also known as direct selling companies. and they in turn. thus the word “multi-level Marketing” gets a percentage on the price of the product being sold. recruit others to help them.   It   Each . is a system of selling through many levels of distributors.Multi-Level Marketing   Multi-level marketing is a system of selling in which one signs up other people to assist him.

  Common         companies of this type are: Avon Cosmetics Triumph International Sara Lee Direct Selling Tupperware Phils. .   Most became successful because the main focus of their activities is the product sale.

participants attempt to make money solely by recruiting new participants into the program.   The . hallmark of these schemes is the promise of skyhigh returns in a short period of time for doing nothing other than handling over your money and getting others to do the same.Pyramiding   In the classic “pyramid” scheme.

  Pyramid schemes focus on the exchange of money and recruitment. person you bring to your pyramid is promised future monetary rewards or bonuses based on your advancement up the structure. the heart of each pyramid is typically a representation that new participants can recoup their original investments by inducing others to make the same investments.   At   Each .

  The fraudsters behind the pyramid scheme may go to great lengths to make the program look like a legitimate Multi-level marketing program. 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. But eventually the pyramid will collapse. Many losers pay for a new winners. these fraudsters simply use money coming in from new recruits to pay off early stage investors. But despite their claims to have legitimate products or services to sell. lose their money.     . At some point the schemes get too big.

  At . starts with one person that encourages six participants to join. The pyramid will collapse when no new participants can be recruited.  Pyramid   It operates on recruitment. The 6 recruits will again get six to join making the number involved 36 and will recruit and recruit till they reach 1296 participants in the pyramid. the 13th level they need to have 13 billion new recruits which is impossible to sustain the pyramid.

The Difference between Multi-Level Marketing and Pyramid .

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

Enormous efforts to sell are exerted. 6. 7. 7. .MULTI-LEVEL MARKETING (MLM) PYRAMID 6. Earnings are ultimately tied to product consumption of end users.Bonus entitlements are based on goods absorbed by members within the structure. Recruitment is optional. 9. 8. 10. products are sold to the consuming public. Sponsoring participants earn nothing by mere sponsoring. 10. Earning are tied to the act of recruitment. 8. Little effort or no effort is being made to sell to the public. 9. Largely. Recruiting participants get benefits from recruitment. Products are consumed internally within the organization. Bonuses are based on sales to final users who are not members of the scheme.

then beware.  The Direct Selling Association of the Philippines or DSAP presented the final 8-point test to determine a pyramiding company. to them.   According . if the answer to any of these statements is no.You might just be a victim of a pyramiding scam.

  Do the products have fair market value? 4.  Will you receive commission on the joining fees of your prospects? 7.  Is there a product return policy? 6.  Are there legitimate products? 2. will participants still make money? .  If recruitment is to be stopped today.  Is there and intent to sell the products? 3.  Is there a correlation between recruiting and distributor’s commissions? 8.  Is there a compelling reason to buy the products being offered? 5.1.

the only money that may be made isn’t from the product or service but from the losses of people down the organization . It is designed to recruit so many salespeople. its gears will grind up the money. time and entrepreneurial energy of the wellmeaning who joined to supplement their income.   Pyramid’s design can saturate the market with no one noticing. who in turn will attempt to recruit more salespeople. When the inevitable destiny occurs. It is unstoppable. and so on until the market is saturated. a human “churning” machine with no “off button”. Out of control by design.Market saturation: An inherent problem in a pyramid.

 Too much materialism and greed. 3. They con the public. 2.Moral issues in pyramiding 1. making them believe that they are a legitimate MLM. The . intentions are bad.

53   states of RA 7394 (the Consumer Act of the Philippines) that chain distribution 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.Legal Issues of Pyramiding  The Department of Trade and Industry or DTI can take action under two existing laws.   Art.

Tips to consider when you make your decision before joining a plan: 1. Just because a promoter of a plan makes a claim doesn’t mean it is true.  Beware the 8 point test presented in this chapter. Ask the promoter of the plan to substantiate claims with hard evidence especially when the claims abut the product or your potential earnings seem to good to be true. .  Consult 2. of plan that claim to sell miracle products or promise enormous earnings.

The only wealth gained by any participant is a loss by another participant. Remember that no amount of personal testimonial and affirmation that there is money to gain in pyramiding will dispute the fact that pyramiding. 4. Do not pay or sign any contract in an “opportunity meeting” or any other high-pressure situation. doesn’t create new wealth.3. . Insist on taking your time to think over a decision to join.

12. Unfair Competition .

  Some . firm can just relax and quality will   Without suffer. competition becomes bad only when it eliminates a competitor like in cutthroat competition. competition.   Thus.Is competition good or bad?   Competition is healthy and can be a motivation for firms to produce better products or offer better services. practices include under cost selling or selling their products below cost just to get rid of their competitors.

Different Kinds of Competition Monopoly   Defined Oligopoly A situation where there are few sellers for a product or service.   It is and extreme type of imperfect competition characterized by an lack of competition and a lack of viable substitute goods.   It is a type of imperfect competition where they can not dictate price like a monopoly can but the members of an oligopoly often turn into friendly competitors. since it is in all the members interest to maintain a stable market and profitable prices. .   as a market situation where there is only one provider of a kind of product or service.

  The prices are dictated by the law of supply and demand which states that when the supply is scare.Different Kinds of Competition Perfect Competition It is a situation in which no firm or consumer is large enough to dictate prices. the prices will go the same way   . the prices go up and when the demand goes down.

  In a business competition. competition is a rivalry to serve the customer .  In short. two contenders fighting hurl directly at each other.Difference Between a War and Competition   In a war. two or more parties are vying for the opportunity to provide the customer’s needs whether it’s a product or service.

Attaining success in business through the merits of its products or services. . behavior and judgment. Doing business with the goal of profit without regard to others.Difference between Fair and Unfair Competition   Fair competition is doing business under ethical rules of conduct.   Unfair competition is unethical business practice.

patents. trademarks and service marks.  Caveat emptor or indirect misinterpretation by withholding information from the buyer.  Defamation of a competitor or badmouthing a competitor to a consumer.  Business interference to prevent competitor from continuing with it’s business process or business contract. .  Anti-competitive market practices such as under cost selling to kill the competitor.In general. unfair competition consists of:  Deceptive trade practices such as misinterpretation and false advertising.  Violation of intellectual property right such as copyrights.

facilitate transfer of technology. and ensure market access for our products. attract foreign investments.Government Measures: The Intellectual Property Code of the Philippines (R. 8293)   It aims to provide an intellectual property and industrial property system which will enhance the development of domestic and creative activity. .A.

8293 is specifically about unfair competition on the use of trademarks.  Article   168 of R. has property right in the goodwill of the said goods identified. and trade names. This article states that a person who has identified 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.A. and will protected as any other property rights. . service marks.

The following shall be deemed guilty of unfair competition: A. which would likely influence buyers to believe that the products being offered are those of a manufacturer or dealer other than the actual manufacturer. . either in the goods themselves or in the wrapping of the packages.  Any person who is selling his goods and gives the general appearance of the goods of another.

induces the false belief that such person is offering the services of another who has identified such services in the mind of the public.  Any person who. by any artifice.B. 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. or device. services. C.  . or business of another.

13. Money Laundering .

robbery.     . racketeering. and terrorism. fraud. including illegal arms sales.What is Money Laundering?   Money Laundering is the process of disguising illegally obtained money so that the funds appear to come from legitimate sources or activities. drug trafficking. Money laundering occurs in connection with a wide variety of crimes. The principal objective of money laundering is to convert cash to some other form of asset to conceal the illegal sources or origin of cash income.

gambling. needed to show a legitimate source for these monies. prostitution.  The Term "money laundering” is said to originate from Mafia ownership of Laundromats in the United States. and bootleg liquor.   Gangsters   They . there were earning huge sums in cash from extortion.

size of the money laundering problem totals more than $500 billion annually worldwide.   Estimated   Clearly . It is also clear that money laundering extends far beyond hiding drug profits.  One of the ways in which they were able to do this was by purchasing outwardly legitimate business and by combining their illicit earnings with the legitimate earnings they received from these businesses. the problem is enormous. This is a staggering amount and detrimental by any calculation to the financial systems involved.

.Money Laundering Process   Money laundering is a diverse and often complex process.physically placing bulk cash proceeds. It basically involves three independent steps that often occur simultaneously: 1. It is during the placement stage that physical currency enters the financial system and illegal proceeds are most vulnerable to detection. Placement .

illicit funds are integrated with monies from legitimate commercial activities as they enter the mainstream economy. Integration – providing an apparently legitimate explanation for the illicit proceeds. Layering – separating the proceeds from criminal activity from their origins through layers of complex financial transaction. . During the final stage in the laundering process.2. Layering describes an activity intended to obscure the trail which is left by “dirty” money. 3.

are serious. or bribes to public officials. acquire control of large sectors of the economy through investments. and ultimately the democratic institutions of society. economic and political influence of criminal organizations can weaken the social fabric. crime can infiltrate financial institutions. collective ethical standards.   Organized   The .Impact of Money Laundering in Society   The possible social and political costs of money laundering. if left unchecked or dealt with effectively.

Laundering enables criminal activity to continue. money laundering has devastating social consequences.   Organized . money laundering is inextricably linked to the underlying criminal activity that generated it. and arms dealers and other criminals to operate and expand their criminal empires. terrorism. Laundered funds provide financial support for drug dealers.  Most fundamentally.

How can the Government prevent it?   The Financial Action Task Force (FATF) on Money Laundering has identified certain “choke” points in money laundering process that the launderer finds difficult to avoid and where he is vulnerable to detection.  Transfer to and from the financial system Cross-border flows of cash .  3. The Choke points identified are: 1.    Entry of cash into the financial system 2.

The FATF monitors members progress in implementing anti-money laundering measures.Financial Action Task Force (FATF)   The   role of Financial Action Task Force (FATF) is a multiple disciplinary body that brings together the policy-making power of legal. and counter-measures and promotes the adoption and implementation of FATF anti-money laundering standards globally. techniques. reviews and reports on laundering trends. financial. And law enforcement experts from its members.   .

Conflict of Interest .14.

Does not apply to past and future interests. ordinarily financial. There must be an interest.Conflict of Interest   This occurs when a person act in a way that is to his advantage at the expense of the employing organization. Applies not only to the personal financial interest of the individual but also to the interest of others with whom the individual has substantial common financial interest if these interests are relevant to the functions to be performed. It means something more than individual bias.       . Applies only to current interests. that could be directly affected by the work of the committee.

you are the purchasing agent of your department and you accept a case of liquor from a major supplier. substantial gifts are another. Self. .Dealing   For 2. Accepting Benefits   Bribery example. Another instance is using your government position to get a summer job for your daughter is one example.Types of Typical Conflict of Interest 1. you work for the government and use your official position to secure a contract for a private consulting company you own. For example.

the 4. This could be as obvious as stealing office supplies for home use.Types of Typical Conflict of Interest 3. Using your employer’s property for private advantage   professional solicits benefits in exchange for using her influence to unfairly advance the interest of a particular party. it does not . In the first case. Or it might be a bit more subtle. the employer’s permission eliminates the conflict. using software which is licensed to your employer for private consulting work of your own. Influence Peddling   Here. say. while in the second.

is a risky situation can be one in which a person who resigns from a public or private employment and goes into business in the same area. . Outside employment or Moonlighting   An 6.Types of Typical Conflict of Interest 5. Post-employment   Here example would be setting up a business on the side that is in direct competition with your employer.

but it could also be another sort of interest. 2. Often this is a financial interest.Key Elements: 1. to provide a special advantage to a spouse or child. namely. by interfering with objective professional judgment.  There is a private or personal interest.  . Conflict of interest interferes with professional responsibilities in a special way. say.

15. Inside Trading .

is being prohibited by the rules and regulations of the Security and Exchange Commission (SEC)   It .Inside Trading   This refers to the significant facts that have not yet made public and are likely to affect stock prices.

SEC defines insider as: 1.  the issuer a director or officer of. gives or gave him access to material information about the issuer or the security that is not generally available to the public A government employee. or a person controlling the issuer. clearing agency and/or self-regulatory organization who has access to material information about an issuer or a security that is not generally available in public. officer of an exchange.  4. .  2.  3. A person who learns such information by a communication from any of the foregoing insiders.

  The . (breach of loyalty) 2. at the expense of the firm.Moral Arguments   De George cites 2 aspects of this particular problem: 1.  One is that of someone within the firm using information for his own private gain. (conflict of interest) use of information by someone within the firm to secure personal advantage over those not in the firm.

renders the transaction b/w two contracting parties as unfair.   It   It . promotes greed and personal gain at the expense of others.Ethical Issues Relating to Insider Trading   It violates fiduciary relationships b/w insiders and outside clients.

which is central to business management. they may seriously damage its interests.  Professor   Jennifer Moore argues that insider trading is wrong because it undermines the fiduciary relationship. but many ways of profiting from insider information do not benefit the company at all.   . She contends by saying that employees have a duty to act in the interests of the firm and its shareholders. Indeed.

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