Lesson 1

BUSINESS ETHICS AND SOCIAL RESPONSIBILITY

ORIGINS AND ROLES OF BUSINESS ORGANIZATIONS

 Throughout human history, people have traded and exchanged goods and services to fulfill their needs----food, water,
clothing, and shelter. In modern times, these needs have expanded to include education, safety, transportation and
medicine. With the improvement of the quality of life, opportunities to satisfy people’s wants have become abundant.
Instead of using public transportation to travel (a need) , one might want to drive a car (want); or a public pay phone to
communicate (a need), one might want to use the current mobile phone model (a want).

 Imagine a world without businesses. If the school cafeteria did not exist, you would have to cook your own food for lunch in
school. If car manufacturers did not, you would have to build your own vehicle to get from one place to another. If farmers
did not sell their crops, you would have to toil the land, plant your own crops, and harvest them so you would have food to
eat. Imagine making your own soap, toothpaste, shampoo, and clothes; or cutting your own hair, producing your own
medicine, and diagnosing your own illness. These are just some of the things that business organizations do to make your
life easier.

 Business organization exist to serve consumer’s needs, and in return, they make profit when people patronize their
products and services. They are an important component of the modern society as they contribute to the economy’s
growth, provide products for consumption, and offer employment to people.

 To take advantage of the opportunities presented by these needs and wants, some individuals have decided to use their
skills, efforts, and assets to provide goods and services to other people. A person who accepts the risks of operating a
business is called entrepreneur.

 Not all entrepreneurs would have the same skills, experience and assets, nor the capability to do all tasks. As a result, a
division of labor in the economic system occurs.

 Division of labor is the separation of tasks, which allows an individual to be an expert in one thing in order to improve
efficiency of society.

For example;

A farmer specializes in planting mango trees. He needs to find other entrepreneurs who will provide him with
containers to harvest the fruits, carriages to transport the crate of mangoes, or a market to sell the produce. While it is
possible to engage in all these tasks by himself, it would be inefficient and time consuming for the farmer to do so. Instead,
he can concentrate on learning farming techniques to increase yields or sweetness of the fruits.

 Division of labor is the source of interdependence of entrepreneurs and organizations, which results into increase in
trading. It also increases productivity of the organization and the individual worker.

The Concept of a Modern Corporation

 As a citizen of the Philippines, every Filipino is considered an entity. Everyone is given a name by his respective parents, and
issued a birth certificate. He/She fills his/her life with activities, and at his/her death, will be issued death certificate.

 Similarly, by registering a unique name for a business, an organization is formed and lawfully recognized by the
government. Each business organization is given a registration certificate that allows the organization to operate the
business and the owner or its representatives are required to submit documents to close down the business.

 A business organization is a group of individuals systematically united for the accomplishment of a common purpose or
undertaking for profit in any of the several ways allowed and regulated by law. As such, government agencies in the
 Philippines, like the Securities and Exchange Commission (SEC), exercise adequate supervision over business organization’s
activities and operations. Their role is to develop and foster good governance and enhance investor protection.

 Under the Corporation Code of the Philippines (BP blng.68), corporations are established, not only for private gains but also
as effective partners of the government in spreading the benefits of capitalism for the social and economic development of
the nation.

Roles of Business Organization in the Society

 Business organization have multiple roles in the society. Their main role is to provide products and services needed. Thy
also provide employment. The wages that employees receive are used to purchase other goods and services.

 Profits from the organizations are used to compensate stockholders. A percentage of the income is paid to the government
as taxes. The taxes are used to provide infrastructures (such as roads, water, hospital etc…) and pay for services (like
medical, law enforcement, sanitation, etc…) for the Filipinos.

 Business organizations also greatly affect society in many other ways. They serve as a catalyst to generate more income, as
individuals require more food, housing, equipment, and other services. Successful business contribute in the generation of
more jobs and income and boosts the economy of the nation.

 Business organization is an entity that aims to earn a profit by providing products to satisfy the need of the market.
Products can be tangible or physical objects, such as commodities. They can also be intangible or nonphysical things, such
as services .

 Businesses need to earn profits in order to stay in the market. Profit is the amount of money a business takes in after the
expenses needed to operate the business. (e.g. salaries, cost of raw materials, etc.) have been deducted from the revenue.
Revenue is the total amount of money a business earns during a given period of time by offering products to the market.

 For profit-organizations have the right to keep and use their profits as they choose within legal limits, because profit is the
reward for the risks they take in making and selling their products.

 If a business organization spends P15 on a bag of potato chips and then sell it for P20, it earns P5 for each bag of potato
chips sold.

 There are also organizations that are non in profit. Nonprofit organizations are formed for a specific purpose to serve the
common good of the public. These organizations do not have the fundamental purpose of earning profits, but they may
initiate activities that can help them raise funds for their advocacy. According to the world bank, NPOs are entirely or
largely independent of the government; are not operated for profit ; and exist to serve humanitarian, social, or cultural
interests.
 LESSON 1.1

FORMS OF BUSINESS ORGANIZATIONS

 Business organizations have different forms, depending on the type of ownership. These include sole proprietorship,
partnership, and corporation.

 In a sole proprietorship, the business is owned and operated by one individual. The owner has full authority on the business
and owns all assets and profits but, at the same time, is personally liable for all the obligation and losses. Sole
proprietorship is the simplest form of business organization and is the easiest to register through the Bureau of Trade
Regulation and Consumer Protection (BTRCP) of the Department of Trade and Industry (DTI).

A sole proprietorship can venture into different types of businesses. The possibilities are endless, here are some options:

 Online store

 Food cart franchise

 Free lance work – writer, illustrator, photographer, graphic artist or make up artist etc.

 In partnership, two or more persons bind themselves to contribute money, property, or industry to a common fund with
the intention of dividing the profits and sharing the liabilities among themselves. A partnership is registered with the
Securities and Exchange Commission (SEC). The most common partnerships are professional partnership such as law firms
and accounting firms.

Partnerships may either be general partnerships, where the partners have unlimited liability for the debts and obligations of
the business, or limited partnerships, where one or more general partners have unlimited liability and the limited partners
have liability only up to the amount of their capital contributions. The partnership is dissolved upon the death of a partner
or when a partner chooses to leave.

 For example, if Rue, Shawn, and William are partners in a coffee shop, and Rue decides to withdraw her investment to
venture into another business, the partnership will have to be dissolved.

 In a corporation 5 to 15 persons, who are called incorporators, hold at least one share and are bound by the articles of
incorporation filed with the SEC. the paid up capital of a Philippine corporation must not be less than P5000.

A corporation can be stock or non stock. A stock corporation has a divided into shares and is authorized to distribute to the
shareholders dividends or allotments of the surplus profits on the basis of the shares held. A non stock corporation is one
where no part of its income is distributable as dividends.

 Any profit of a that a non stock corporation earns is used to further promote the purpose of the organization. Non stock
corporations may be formed for charity, religious, educational, professional, or other similar purposes.

 Among the forms of business organizations, corporations have the most number of advantages, among which are as
follows:

1. Unlimited life. A corporation has unlimited life, as it may exists well beyond the lifespan of the original owners.

2. Credibility. Customers, suppliers, investors, and financial institutions may see a business as more credible it is a
corporation. A business that takes the effort and money to organize a corporation sends a signal that the company will be
around for a long time.

3. Ease of transferring ownership. Corporations can easily transfer ownership should the original owners decide to sell it by
transferring the company’s stock certificates to another shareholder.
 4. Protecting personal assets. Owner of a corporation is liable for business losses and debts up to the equivalent of their
investment in the corporation.

Business organization and the economy

 Economic conditions affect how business fare in the market. Changes in the economic and the political system can have an
impact on certain industries or the whole business system

 Economics is the study of how resources used in the production of goods and services are distributed for consumption
within a social system. Resources, which include natural, human and financial resources, are sometimes called factors of
production.

 Business organizations may also have intangible resources such as good brand equity for producing credible products. Their
goal is to turn these resources into competitive advantage that they can use in marketing their products.

Economic System

 An economic system describes how a society distributes its resources to produce goods and services. In this system, there is
an unlimited demand for goods and services, and the challenge is how to met this demand with a limited supply of
resources.

Types of Economic System

Capitalism

Communism

Socialism

Free Enterprise

 Free enterprise gives an opportunity for business organizations to succeed or fail based on the demand of the market.
Consumers can freely choose to pay for goods and services that they want. Business that can efficiently produce, distribute,
and market their products will most likely succeed, while those that do not offer what consumers seek may fail.

 There are certain areas that individuals and organizations must have in order for the free-enterprise system to work.

 Right to own private property. Individuals must have the right to own property and be able to pass it on to their heirs. This
right motives people to work hard so they can afford to buy properties.

 Right to own a business and keep all profits. Individuals and business organizations must have the right to earn profits and
be able to use the profits as they wish, within the limits of the society’s laws, principles, and value.

 Right to freedom of choice. Individuals must have the right to choose the career to pursue, the place to lie in, the goods and
services to purchase or take advantage of, and other benefits that are necessary for their business. Business organizations
must have the right to choose the location of their business, the goods, and services to offer, and the resources to use in
the production process among others.

The roles of business organization in the society

 The primary objective of business organizations is to develop, produce, and distribute goods and services to the market in
order to generate profits. But business organizations are not only meant to generate profits for themselves. They perform
important roles in the society, particularly in socioeconomic development. Among these roles are providing goods and
services, creating employment opportunities, advancing the economy, promoting sustainability, and investing in innovation
and excellence.
 It is important for companies to create shared value by playing a role in advancing socioeconomic development in societies,
according to Arancha Gonzales, executive Director of the International Trade Center, She emphasized that creating
economic value should be at the heart of a company’s activities. Corporate Social Responsibility (CSR), ensures that
companies not only care about profits but also care about how they can give back to society.

Providing goods and services

 Pharmaceutical companies improve the health of the citizens through the products that they develop. Produce and
distribute to the market. Health is an important social and economic asset. Worldwide, several advances in medicine and
health improvements have led to the reduction in mortality rates, discovery of cure or maintenance medicine for certain
diseases, development of effective vaccines, and other milestones.

Creating employment opportunities

 Martina owns a food cart that sells rice toppings. Initially, she was the only one who manned the food cart, she prepared
the inventory, cooked the food, and received payment from customers. She did this everyday, without a day off, so she
naturally felt exhausted after a few months. Thus, she decided to hire two assistants whom she trained to do everything
that she used to do by herself. Because her business is doing well, she then decided to open several food carts in different
locations.

 Business organizations, whether big or small, create employment opportunities. When consumers patronize the products of
business, these companies commit to providing better goods and services in order for the customers to continue buying
their products. As the companies grow, they hire more people in order to keep up with the demands of the market.

Advancing the economy

 The 1987 Philippine Constitution recognizes entrepreneurship or putting up businesses as an engine of economic growth.
Article XII, Section 1 highlights the role of private enterprises in supporting equitable distribution of income and wealth,
sustaining production of goods and services and expanding productivity, therefore raising the quality of life.

 When people have jobs or business, they have disposable income that they use to purchase more goods and services. The
income that the business generate advances the national economy.

 The growth of business process outsourcing (BPO) companies in the Philippines has significantly increased the service
exports of the country, according to a report published by the Bangko Central ng Pilipinas. The BPO industry in the
Philippines includes contact centers, medical and legal transcriptions, animation, software development/publishing.

 The Philippines is a favored location for BPO companies du to the workforce equipped with good English conversational
skills and a deeper understanding and appreciation of the Western culture. The industry’s growth is attributed to the
continued demand for offshore call centers.

 Big corporations are not the only ones that contribute to the economy. Micro, small, and medium enterprise (MSME) are
also important components of the economy. They stimulate development in rural and far-flung areas, supply or provide
support services to large enterprises, and serve as a breeding ground for new entrepreneurs.

Promoting sustainability

 Most CSR activities use sustainable development as a starting point for business organizations. This means that if a
company takes raw materials from the forest (e.g. timber), this will be replenished in the immediate future through
different means such as use of sustainable farming, replanting, etc. For most corporations, promoting sustainable
development and becoming environmentally sustainable make good business sense because of the following reasons:

Good management practice. Reducing wastes, using less toxic chemicals, improving energy efficiency, and other measures
to make a company environmentally friendly have been the goals of most companies. These measures have been widely
 recognized as cost-effective and more efficient practices for the company, which result in good management practice and
sound business advantage.

Adherence to government policy. The government sets, laws, regulations, and guidelines pertaining to sustainable practices
for corporations to follow. The legal costs and dealing with penalties when going against these government-mandated
policies may cause the company losses or worse , may even send the company to foreclosure.

Public opinion. A company that practices sustainable business methods maintains a good image in the eyes of the public. It
is important for a business organization to take care of its public image, as it equates to how credible the company is. Thus,
a negative public image brought on by, for example, environmental hazards because of harmful business practices can
affect the company’s market share, investor confidence, consumer trust, and the ability to attract future employees.

New opportunities. Adapting to sustainable business opportunities for companies. Automobile manufacturers now offer
more energy-efficient cars and have developed hybrid cars that can run on both gas nad electricity.

Investing innovation and excellence

 Companies often look for a “gap” in the market, a need that is currently not being served in order to offer a product that
would respond to this need. A real entrepreneur will always find ways to innovate and address an opportunity or a demand
gap in the market. Innovation is the product of consumer research and a good understanding and analysis of market need.
It is how you turn a unique idea into something with commercial value to achieve sustainable sales.

 Companies pour a lot of investments to make products that are new, differentiated, or an improvement of what the
consumers are currently enjoying.
 Lesson 2

Ethics and Business

 Business are pressured to make profits to maintain and grow their position in the market. Sometimes, they need to make
decisions that put them on a forked road:

Shall I do the right thing but put my business in jeopardy?

Shall I do something illegal and ensure that my business will prosper?

Shall I declare a lower income to pay less tax?

Shall I start a smear campaign to destroy my competitor.

 Controversies involving companies that do unethical business practices come out in the news from time to time.

Long work hours

Unhealthy workplace environment

Low wages

Unpaid workers

Insufficient benefits

……..and others are only some of the issues that you may see being reported on mainstream media. Although there are laws that
protect the workforce, they are not always implemented. Companies have codes of conduct, but they are not always observed.

Making Ethical Decisions

 Ethics enables a person to discern right from wrong.

 Derived from the G.W. ethos which means “character”, ethics is a branch of philosophy that involves “systematizing,
defending, and recommending concepts of right and wrong conduct”.

 Ethics involves understanding the differences between right and wrong concepts of actions and using principled decision-
making to choose actions that do not hurt others.

 Some people raise their eyebrows when applying ethics in business context because the nature of a business is to increase
profitability, which does not necessary mean that a company practices an ethical culture. However, leaders have come to
realize that unethical business practices do not bring good to the company.

For example:, ignoring safety concerns may incur losses for an automotive company due to lawsuits that may be filed against the
company. Harming the environment through chemical leaks and spills may force a company to close down.

 Unfair wages and labor practices may give a company a bad image in the eyes of consumers, at the very least.
  The concern today is not about the need or the rationale for ethics to be part of a business, but rather, about how ethics
should be integrated in the business practices. Business ethics gives emphasis on ethical decision-making. Decision made in
every aspect of the company must consider ethics, remembering the greater good and doing what is morally right.

 Leaders and managers are responsible for the creation of a corporate culture. This is the business environment created by
an organization to foster a common understanding of what the company advocates. The environment created by the
organization can encourage or discourage ethical behavior. Ethical business leadership provides this environment to create
circumstances where good people are able to do good deeds and bad people are prevented from doing bad decisions and
actions.

 Ethics covers how we act and how we live our lives at its most basic level. According to philosophers, how we should live
implies the practical side of ethics, which covers how we act, choose, behave, and do things.

 How we should act is the normative side of ethics, which deals with our reasoning on how we supposed to act in certain
situations.

 Ethics being a normative discipline deals with norms or those standards of appropriate and proper behavior.

 On the other hand, social sciences, such as psychology and sociology, look at the descriptive manner of people’s actions
rather than the normative manner. Descriptive manner provides an account of how and why we act the way we do.

 The “we” on how we should live may apply to two interpretations: “we” as a collective action, where individuals act and
decide together as a group to promote good for everyone; and “we” as individual actions based on a common
understanding of what is good.

 This meaning of ethics is based on one’s own value structures as define by moral systems. It is sometimes referred to as
morality, which is the aspect of ethics that pertains to personal integrity.

 How we should live? Refers to how we live together in consideration of the other members of the community. Society,
social institutions, and organizations are supposed to mold their cultures in consideration of justice, public policy, law, civic
virtues, organizational structure, and political philosophy. This molding of cultures by society is called social ethics.

Different Types of Values

 Financial values are concerned with monetary ends

 Legal values uphold the law

 Ethical values uphold human well-being.

Ethics and the Law

 Laws govern a country, and the citizens are expected to follow what the laws require, expect, or permit. Business
organizations have to follow regulations and rules set by the government and other governing bodies. The law provides
important legal considerations to ethical decision-making. However, legal norms and ethical norms are not equivalent and
the same.

 A company may pay entry-level workers with salary based on what the law mandates as the minimum wage. However, the
company may pay more or offer more benefits (e.g. rice, allowance, health insurance, etc) to provide better compensation
for minimum-wage earners. Paying what the law mandates conforms to legal values, but offering more benefits to
employees who need them satisfies ethical values.

 Some companies now run programs that focus on addressing their corporate social responsibility (CSR). CSR does not focus
merely complying with what is legal; it finds ways to make business practices better for all the stakeholders, including those
that they directly or indirectly impact.
THE ETHICAL CORPORATE CULTURE

 When you join an organization, whether it is a school club, a hobby group, a social media group, a church organization, your
class section, or even just a group of friends hanging out together, you will notice that in the group, there are certain
accepted behaviors and unwritten rules that need to be followed. If you fail to follow them, you will either be frowned
upon or be kicked out of the group.

 A certain culture exists in every organization. As a person who wants to fit in, you try to follow the norm in the group the
way the other members act, dress up, behave, speak, and other actions that may affect your decisions.

The Corporate Culture

 Much like the different groups that you are a member of, business organizations also have their own unique culture. Every
organization has a culture that consists of shared pattern of beliefs, expectations, and meaning that influence and guide the
thinking and behavior of the members of that organization. While culture shapes the people in the organization, the people
also contribute in shaping the culture of the organization.

 Organization or corporate culture is the system of shared actions, values, and beliefs that develops of its members

 There are business organization that expect employees to work for long hours and even on weekends if needed. There are
companies that have vibrant culture, where everyone’s creativity is honed and generating new and innovative ideas is
greatly encouraged. There are also companies with very traditional style of management where employees are required to
be in the office at certain time and are given disciplinary action if they are tardy for several times.

 While corporate culture is built and molded over time, it may still change depending on the leaders that move the company
forward. Change policies (e.g., dress code) can alter the way people behave or feel toward the company suddenly decides
to disallow casual attire on Fridays and require corporate attire as dress code all week , it may harbor ill feelings among
employees who may be looking forward to dressing up casually once a week. On the other hand, if the management
decides to change the dress code from strictly corporate to casual, it may appear that the current leaders are becoming
younger and bolder in their actions.

FUNCTIONS OF CORPORATE CULTURE

 A company’s culture guides the thinking, behavior, and decisions of its members according to the company’s beliefs and
values. According to Edgar H. Schein the two main reasons why culture develops in organizations is because of external
adaptation and internal integration.

 External adaptation requires the organizational culture to determine how the company will reach its goal, accomplish its
task, identify methods to achieve its goals, and place measures to cope through their shared experiences.

 For example:

Reaching sales targets in order to become competitive and profitable in the market uses a goal shared by all the
members of the organization.
  External challenges, such as economic downturn, bad weather , political issues, and government regulations that may affect
how the company achieves its goals, will have to be dealt with in accordance with the company’s culture.

 For example:

I f there is a delay in releasing the company’s imported raw materials from customs, should the company bribe
customs officials in order to expedite the process? The corporate culture will determine the answer to this question.

 Internal integration starts with the establishment of an identity that is unique to the business organization. Members
acquire this identity through their interaction with each other. This enables the members to work in harmony with each
other and to work toward advancing the company’s goal.

There are three important aspects of working together;

 First, the members decide who is member of the group and who is not

 Second, the members develop an informal understanding of acceptable and unacceptable behavior

 Third, the members separate “friends” from “enemies”. Managers should be equipped in ensuring harmony within the
team or organization. It is important for the members to understand what their roles are in achieving the company’s goals
and the penalties or incentives that they will get if they perform their roles in achieving the goals.

 A person who recently joined a business organization may not easily figure out the corporate culture.

Layers of Cultural Analysis

 The figure above, shows the different layers of cultural analysis which include observable aspects of culture (outer layer),
shared values (middle layer), and common cultural assumptions (innermost layer).

 Observable culture refers to the way things are done in an organization. This can be observed in daily activities or in specific
instances which include unique stories according to the company’s history, ceremonies, and corporate rituals.

Example

 Bingo, a search engine company, is known to consumers as a company that provides its employees with an environment
that feels like home. The office houses a TV, video games, free food, free internet, etc. The company’s rationale for this is
that happy employees are productive employees.
  Shared values refer to the common values that are meant to put together and motivate the members of the organization.
These include a deeper understanding of what the company stands for. For example , a company may be known for its
passion for innovation, green practices, or providing solutions to social issues.

Example

 Happy Filipino is a social business enterprise that aims to train mothers in the community to be financially independent and
entrepreneurial. All the people in the company are oozing with passion and are fully aligned to serve this segment as they
know exactly the plight of these mothers.

 Common cultural assumptions include the taken-for-granted truths that the members share as a result of a collective
experience with the organization. These assumptions are at the core of corporate culture, and are thus difficult to discern or
understand because they exist at a largely unconscious level, yet they provide the key to understanding why things happen
the way they do. As employees become ingrained in the culture, their actions that are based on the company beliefs and
values become everyday routines.

 These include quality of output , morality of employees, and innovativeness and excellence in carry out tasks, among
others. Hi

Example

 Orange company, a telecommunications company, has ingrained to their employees the value of innovation. Every time
employees meet in elevator, talk over lunch, or are anywhere else in the building, they unknowingly talk about the latest
trends in technology, specifically smart phones, tablets, and the current trends in the telecommunications industry.

ETHICAL LEADERSHIP AND MANAGEMENT

 There is no doubt that the leaders of a business organization serve as the role models of the beliefs, values, and behavior
that are expected from someone who represents the company. The top management sets the tone of the corporate
culture, and this has to be consistently adopted throughout the firm.

 There are two recognized types of corporate culture: compliance-based culture (traditional approach) and values-based
culture (integrity-based).

 Compliance-based culture focuses on following rules, laws, policies, and regulations as the primary responsibility of ethics.
It empowers legal counsel and auditing/accounting firms.

 Example:

GHI Bank in Muntinlupa City was cited by internal audit because it was not able to follow the company’s policy of dual
control, that is, there should always be two persons entering the vault. The CCTV footages showed that there were two instances in
May 2017 that the branch manager entered the vault alone.

 Valued-based culture reinforces a particular set of values rather than a particular set of rules. It is presumed that a company
with a values adopts its code of conduct with more regard for ethical values. Values based cultures also recognizes that
despite the rules set by the company’s code of conduct, there are situations where rules can be applied so the organization
will have to rely on the personal integrity of its workforce when decisions are to be made.

 Example:

Tina Garcia, a known actress of ABGM Network, always goes to her teleserye tapings on time, all the time. She got these values from
the TV Network because all the employees of the ABGM Network give a very high regard to punctuality. Although there is no formal
log-in process, all employees still come on time, all the time.
CODE OF ETHICS

 Now that you can clearly distinguish between acceptable and unacceptable practices, you need to be able to acquaint all
the members of the corporation of its ideal corporate culture. Corporate culture is defined as the values, standards
attitudes and beliefs shared by the members of an organization. The corporate culture of a company guides its members on
the proper way of handling business transactions and interacting with fellow members.

 A code of conduct or code of ethics is a list of guidelines and protocols based on the organization’s values. It articulates how
an employee should behave and imbibe the values of the organization at all times, and it also serves as a reference when
decisions are to be made:

Below are some guidelines in developing a code of conduct for an organization:

1. Understand the mission and vision of the organization. This will set the tone for the required conduct and behavior that the
members must know by heart.

2. Identify the values that the organization lives for.

3. Spell out different behaviors and values that an employee must follow in order to maintain the ethical values of the
organization.

4. Ensure proper enforcement of the code of conduct in order to maintain the ethical culture within the organization.

5. Outsiders, such as suppliers, distributors, subcontractors , and customers, must also understand the organization’s code of
conduct in order to avoid presenting the employees with actions that go against the code.

Below is a sample of Code of Conduct

 Baby Food Corporation upholds the distribution of healthy, and safe baby products (clothes, bath and body products, and
accessories) in the market. This code of conduct is drafted to strengthen the company’s ideals in serving our customers well
and in giving only the best products to our most important customers, the babies.

Use of Company Property

1. Employees must only use company properties for official business functions and not for personal gains.

2. Company properties are the employees’ resources. Everyone must engage proper use, care, maintenance, and operation of
these properties.

Common Organizational Cultures

1. Team-oriented Culture

A team-oriented culture prioritizes the employees’ happiness. These types of organizations believe that when an
employee is happy, they become more productive, and are thus more willing to go the extra mile for their company, and their
customers.
 A team-oriented culture is characterized by regular socializations with teammates in and outside of work,
employees who interact with different departments, and thoughtful feedback from employees during surveys.

2. Elite Culture

Organizations that have an elite culture hire only the best qualified individuals, and are expected to lead the way. This
results to fast growth for the company and new ways of doing things. In an elite culture environment, employees often prioritize
work, and are expected to work long hours. High-input individuals also move up the ranks quickly in this kind of culture.

3. Horizontal Culture

In a horizontal culture environment, everyone is encouraged to pitch in their ideas. This kind of culture is common
among younger companies. Your job title is not very important in horizontal cultures. Everybody has a voice in the company, and
ideas are discussed openly.

4. Conventional Culture

As the name suggests, companies who have a conventional culture work in a more traditional manner. Address
code is normally employed in companies that espouse this culture, and clearly-defined hierarchies are employed. Banks and schools
are examples of companies that have conventional cultures.

 Now that you have been familiarized with different types of corporate culture, it is time to understand how corporate
culture is introduced, especially to those who have been newly hired by the company. One such means is by crafting and
disseminating a proper code of ethics (or code of conduct).

CODE BASIS

A code of ethics sets the company’s mission, values, ethos , objectives, and responsibilities to guide employees on how to
deal with different scenarios in the workplace. As a benchmark, the written code of ethics serves as an expectation and guideline for
employee conduct.

Every code is different as it reflects the organization’s own essence. Some companies set short codes, some set general
guidelines, while others include examples of how to deal with particular situations.

The code should be simple, concise, and easily understood. It should be user friendly and written with the employees in
mind. The best code states expected behaviors.

The code of ethics applies to all employees. No one is exempted from following the rules and regulations of the company
policies. The code should be written, reviewed, and edited by a multidisciplinary team in order to make it consistent with all other
corporate policies. It should be revised and updated as appropriate.

Mission, Vision, Goals, and Principles

A brief mission, vision, goals, and principles reflects the commitment of what is important to the organization.

VISION
To see a better and healthier world through an organic and natural approach to farming.

MISSION

Cornwall foods aims

• To promote healthy living by providing our customers healthy, organic produce;

• To help the environment by using all-natural methods in growing our crops; and
 • To teach the people that there is an alternative to all the processed food being produced today.

Foundation and Principles of Business Ethics

 Ethics is a branch of philosophical thinking that investigates the set of questions that arises when one considers how to act.

 It is a system of moral standards that distinguishes right and wrong.

 Its objective is to evaluate practices by calling upon principles and giving advice on how to act morally in a given situation.

 To arrive at good judgments and recommendations, people study both moral and immoral behaviors to reach an ethical
choice.

 There are three distinct ethical theories: virtue ethics, deontological ethics, and consequential ethics.

1. Virtue ethics emphasizes virtuous, or moral character. It focuses on the desirable characteristics that a virtuous person
should embody. One’s action is a mere reflection of one’s morality.

2. Deontological ethics, often referred to as a duty ethics, emphasizes on adhering to ethical principles or duties and
obedience to some higher moral absolute. It assumes the existence of moral absolutes that make an action moral
regardless of circumstances.

3. Consequential bases the morality of an action upon the consequences of the outcome. However, the main contention of
this branch is what outcomes can be identified as objectively desirable. John Stuart Mill asserts that the desirability of an
action determines the net amount of happiness it brings.

Aristotle is considered the leading authority in virtue ethics and his teachings continue to influence modern
philosophies and applications. To understand Aristotle’s theories, you must also examine his predecessors and mentors
Plato’s and Socrate’s philosophical doctrines . The development of ethical theory has been a gradual accumulation of
thoughts by the classic Greek philosophers Socrates, Plato, and Aristotle. Confucius, a philosopher from the Eastern world,
also shared his wisdom on the concepts of virtue.

“True knowledge exists in knowing that you know nothing” – Socrates

 Philosopher

 Was a Greek thinker

 Believed that philosophy should achieve practical results for the grater good of society

 Attempted to established an ethical system based on human reason.

 He pointed out that choices are motivated by the person’s desire for happiness and that ultimate wisdom comes from
knowing oneself.

 The more a person knows, the greater his/her ability to reason and make choices that bring happiness.

 He is quoted to say he was ignorant because he had no ideas, but wise because he recognized his own lack of knowledge.
Instead of lecturing what he knows, he asked questions. This is called dialect method which compels the audience to think
 through a problem to a logical conclusion. This Socratic method is the groundwork for Western system of logic and
philosophy.

 Sentenced to death

 Before he died, he described death as the release of the soul trapped from the body.

“Knowledge is Virtue” --- Plato

 An enthusiastic student of Socrates wrote out the dialogues he had with his teacher.

 He explore the concepts of justice, beauty and equality.

 Born in aristocracy, he was taught by the best educators and he learned the doctrines of Pythagoras and Parmenides, which
would have helped develop the foundation for him to study sciences and philosophy (metaphysics and epistemology).

 According to Plato, one can be taught a virtue or qualities every person should have. Education teaches the appropriate
virtues, produces the ideal government, and brings forth morality.

 His writings are distinguished in three periods. The early periods focused on conveying Socrates’ philosophy and teachings.
Similar to his mentor, he believed in the pre-existence and immortality of the soul and that it is imprisoned in the body.

 Plato saw that the Athenian democracy was decaying and he wanted to rescue the people by reminding them that there
must be respect for law, leadership, and sound education. Plato outlined this in his treatise, stating that the ideal society
consists of three main classes of people: producers (craftsmen, farmers, artisans, etc) auxiliaries (warriors), and guardians
(rulers). A society is just when all three classes work harmoniously and perform its function. In this ideal society, the
philosopher king rules with knowledge

 The middle period of his writings focused on his own ideas on justice, rule, obedience, courage, and wisdom. The late
period explores the role of art, ethics, and morality.

 The foundation of modern democracy is largely based on Plato’s work on the use of reason to develop a fair and just society
focused on the equality of individuals.

“All the gold which is under or upon the earth is not enough to give in exchange for virtue”.

We are not studying in order to know what virtue is, but to become good, for otherwise there would b no profit in it” ----
Aristotle

 Was an exemplary student in Plato’s academy for 20 years. However, Aristotle did not inherit the position as the director of
the academy because he disagreed with some of Plato’s philosophical treatises.

 Founded his own school and spent most of the remainder of his life working as a teacher, researcher, and writer at the
Lyceum.

 As a philosopher, Aristotle believed that knowledge could be obtained by interacting with objects.

 He first used the term “ethics” to name a field of study developed by his predecessors.

 Ethics according to him, is the attempt to offer a rational response to how humans should best live.

 He emphasized the importance of developing excellence of character as the way to achieve excellent activity. (e.g. honest,
loyalty, and integrity. Person who possess excellent character therefore does the right thing at the right time and in right
way.

“What you do not wish for yourself, do not do to others” --- Confucius
 During the 6th century BC, he saw moral decline that has resulted from the deterioration of Chinese principles.

 He envisioned a better society where moral principles are based on the Golden rule.

 His reciprocity ethics were based on the concept of self-discipline. A leader must set a positive example, remain humble,
and treat his people with compassion.

 He also believed that he must teach people to live with integrity, diligence, and obedience.

 Suppose you belong to an influential political family in your town, and you are already being groomed to become a
politician someday. Your father would usually bring you along in his meetings and out-of-town trips to expose you to the
world of politics. He also lets you handle responsibilities in his office to train you in government work. Because of this, you
have been missing your classes in school and thus, ar at risk of failing in most of your subjects.

Philosophical Ethics

 Facing an ethical dilemma is oftentimes an uncomfortable situation. In worse cases, it may comprise your credibility and
dignity. It can make you feel lose face or lose your job. In times when you need to assess a situation if you are about to do
the right thing, most people would naturally find the answer in their religious beliefs or the value system they grew up with.

 However, this is a relative viewpoint, because if ethics is based on religion, and if different cultures have differing religious
beliefs, then what is ethically wrong in one belief may be ethically right in another.

Several frameworks may guide a person’s action, based on the source of moral activity.

Three Ethical Frameworks

Ethical Framework Source of Moral Activity

Utilitarianism -Making decisions based on ethical consequences
-Results-based approach
-The ends justify the means

Ethics of Principles and Rights -Making decisions based on principle, and not just on
consequences
-The ends do not justify the means
Virtue Ethics -Grounded on character traits and emphasizes moral
character in contrast to moral rules or consequences of
actions.

Utilitarianism: A Consequentialist (result-based) Approach

Utilitarianism holds that an action is judged based on its overall consequences. Tracing its roots to the 18 th and 19th
century social and political philosophy founded by Jeremy Bentham and John Stuart Mill, it is just as relevant in the 21 st
century.

It is also called the consequentialist approach to ethics and social policy that one should act in ways that produce
better consequences or results , regardless of the means taken to reach those results.

Principles:

1. A decision is morally right if it promotes the greatest good for the greatest number of people.

2. It is morally right if the net benefits over costs are greatest for all people affected, compared with the net benefits over
costs of all other possible choices.
3. It is morally right if its benefits are greatest for each individual and if these benefits outweigh the costs and benefits of
alternatives.

Two Types of Utilitarianism

. Rule based utilitarianism. General principles are used in making a decision on the greatest benefit that can be achieved
from an action.

 It uses rules to determine ethical behavior

 In business, companies usually have a confidentiality clause, where employees who share trade secrets, formulations,
company documents, etc., may be given sanctions or terminated when they divulge this information to a competitor or to
the public.

. Act-based utilitarianism. The decision is based on the likelihood of achieving greatest utility or good by analyzing particular
actions or behavior.

 Uses analysis of particular actions or behavior to determine what is the best behavior.

 In business, an employee of a company that manufactures milk tainted with melamine (a toxic industrial compound) may
choose to divulge this information to the media or public in order to save babies from dying. While it violates the
confidentiality clause of the company, the employee may feel that he or she is doing the right thing to serve the greater
good of more people.

 Utilitarianism is widely practiced in the government and business environments, because utilitarianism considers both the
collective interests as well as some particular interests, analyzes and formulates alternative choices based on the greatest
good of everyone involved in the decision , and estimates the cost and benefits of alternative choices for the affected
groups. No act is ever absolutely right or wrong in every situation as long as it produces the greatest good for the greatest
number of people.

Utilitarianism and Business Ethics

 Utilitarianism answers the fundamental question “What should we do?” which is always applicable in business because of
the many decisions that need to be done. In reference to maximizing overall good, business organizations are always on the
lookout for conducting cost-benefit analysis and making a decision based on the maximum benefits that can be achieved
with minimal cost.

 Business organizations can use utilitarianism by identifying the different stakeholders that will be affected by a decision,
calculate the costs and benefits for each group, and decide on a course of action that will generate the greatest good for
the greatest number.

 When an employee found out that melamine is being used in the milk that his or her company manufactures, there are
different

 stakeholders

 that will be affected by divulging this information:

1. The consumers will benefit from the employee’s action as the company will most likely be shut down, or the milk
manufactured will be withdrawn from the market, so the babies will stay safe.

2. The company may be closed down.

3. The employees will lose their jobs.

4. The suppliers of the company will lose a client.

 5. The environment may benefit if the company has dismal manufacturing practices.

Ethics of Principles and Rights

 Considering the greatest good in decision-making is definitely an ethical way of arriving at a decision, but is also important
to consider principles and not just consequences.

 The Philippine Constitution Republic Act No. 3019, or the Anti-Graft and Corrupt Practices Act, prohibits public officials from
receiving any gift in exchange for a favor. Thus, paying a bribe is not ethical based on principles and rights.

 Aside from the law, there are also rules, duties, and guidelines set by organizations and institutions which a member must
follow. As a student, it is your duty to pass your subjects, and not to cheat on the exams. As a daughter or son, it is your
duty to follow the instructions of your parents. As a friend, your are not to spread gossip about your friends. As a church
member you follow the rules on dress code or proper conduct during church service.

 Employees of an organization also follow set rules and regulations formulated by the company. These rules serve as a social
agreement or a contract that helps you function to get through your relationships with people.

Virtue Ethics

 Virtue can be described as the character traits that would constitute a good and meaningful life. Being happy, friendly,
joyful, and calm; preserving integrity and dignity; having good relationships; and possessing modest things are a few of the
characteristics of having a meaningful life.

 Virtue ethics is grounded on character traits and emphasizes moral character in contrast to moral rules (deontology) or
consequentialist approach in utilitarianism). It has roots in ancient Chinese and Greek philosophy and is recognized to have
been established by Plato and Aristotle. It focuses on the type of person you want to be grounded on good character,
motives, and core values, and not on the actions that should be taken.

 Virtue ethics focuses on your possessed moral traits and choice of actions.

 Ethics of principles and rights upholds that the ends do not always justify the means.