Business Ethics and

Social Responsibility
Quarter 1 – Module 3:
Code of Ethics and Business
Conduct
Business Ethics and Social Responsibility
Alternative Delivery Mode
Quarter 1 – Module 3: Code of Ethics and Business Conduct
First Edition, 2020

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Business Ethics and
Social Responsibility
Quarter 1 – Module 3:
Code of Ethics and Business
Conduct
Introductory Message
For the facilitator:

Welcome to the Business Ethics and Social Responsibility/Grade 12 Students

Alternative Delivery Mode (ADM) Module on Code of Ethics and Business Conduct.

This module was collaboratively designed, developed and reviewed by educators

both from public and private institutions to assist you, the teacher or facilitator in
helping the learners meet the standards set by the K to 12 Curriculum while
overcoming their personal, social, and economic constraints in schooling.

This learning resource hopes to engage the learners into guided and independent
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learners acquire the needed 21st century skills while taking into consideration their
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In addition to the material in the main text, you will also see this box in the body of
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You also need to keep track of the learners' progress while allowing them to manage
their own learning. Furthermore, you are expected to encourage and assist the
learners as they do the tasks included in the module.

ii
 For the learner:

Welcome to the Business Ethics and Social Responsibility/Gr 12 Alternative Delivery

Mode (ADM) Module on Code of Ethics and Business Conduct.

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this module.

The following are some reminders in using this module:

1. Use the module with care. Do not put unnecessary mark/s on any part of the
module. Use a separate sheet of paper in answering the exercises.
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activities included in the module.
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We hope that through this material, you will experience meaningful learning and
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 What I Need to Know

This module was designed and written with you in mind. It is here to help you
master the nature of Business Ethics and Social Responsibility, a specialized subject
in Accountancy, Business and Management Strand. The scope of this module
permits it to be used in many different learning situations. The language used
recognizes the diverse vocabulary level of students. The lessons are arranged to
follow the standard sequence of the course. But the order in which you read them
can be changed to correspond with the textbook you are now using.

The module will help you understand the topic:

 Code of Ethics and Business Conduct

After going through this module, you are expected to:

1. Understand the common practices in business organizations.

2. Craft a simple “Codes of Ethics” or “Codes of Right Conduct”
3. Formulate a “code of ethics” that reflect core principles derived from analyses.

1
 What I Know

True or False. Read each statement carefully and identify which is true or false.

Write your answer before each number.

1. A code of ethics sets out an organization's ethical guidelines and best

practices to follow for honesty, integrity, and professionalism.
2. A code of business conduct is different to code of ethics.
3. For members of an organization, violating the code of ethics can result in
sanction including termination.
4. In some industries, including banking and finance, specific laws govern
business conduct. In others, a code of ethics may be voluntarily adopted.
5. It is okay to violate code of ethics of a business.
6. Progressive Discipline is a procedure in which increasingly stiffer penalties
are imposed for repeated acts of indiscipline.
7. Suspension is a period which the employee is not allowed to work and will
receive compensation when it has been determined that the employee’s
performance of duty or personal conduct is unsatisfactory.
8. A company can perform well even without a code of ethics or business
conduct.
9. Human resource is one of the people responsible for ensuring that the
employees are following the code of ethics.
10. Code of ethics are anchored to the company’s Vision, Mission, and Philosophy
Lesson
Codes of Ethics and
3 Business Conduct

Last time, you have learned the core principles of good corporate
governance. Let us review.

Fairness in the context of a business organization involves balancing the

interests involved in all decision-making including any decisions related to
hiring, firing (including the investigatory process), and the compensation and
rewards system.

Accountability in the context of a business organization is the obligation to

demonstrate that work has been conducted in compliance with agreed rules
and standards or to report fairly and accurately on performance results vis-
à-vis mandated roles and/or plans.

Transparency is defined as being authentic in the way an organization

manage themselves externally – to stakeholders, to prospective customers and
talent, and within the community.
Stewardship refers to taking responsibility for the business and the effects it
has on the world around it.

Notes to the Teacher

You can review the past lesson by giving situations where you can apply different principles.
 What’s In

What we hold sacred in this country is VALUE, not VALUES.

- From the movie, “John Q”

Business and Ethics are always interconnected. Ethics serves as our guide in
doing things right. In conducting business, we are bound to follow ethical standards
of the company.

Now, let use define ethics and business ethics.

Ethics came from the Greek word ethos which means “character, habit,
dwelling place.” It is the study of what is good and evil, right, and wrong, and just
and unjust. Ethics is the branch of philosophy that deals with morality. That is why
we known Ethics as the Moral Science or Moral Philosophy. It refers to the theory of
morality of right conduct.

Business Ethics

 the study of what is right and wrong on human behavior and conduct in
business.

 It is the study of perceptions of people about morality, moral norms, moral

rules, and ethical principles as they apply to peoples and institutions in
business.

 is the study, evaluation, analysis and questioning of ethical standards,

policies, moral norms, and ethical theories that managers and decision
makers use in resolving moral issues and ethical dilemmas affecting business.
For better understanding of the relationship between business and ethics, read the
selection below:

THE COLLAPSE OF ENRON

Enron Corporation was an American energy company based in Texas, USA,
which collapsed in November to December 2001. Through accounting loopholes, the
creation of special purpose entities, and faulty financial reporting, it hid billions of
dollars in debt from failed deals and projects. Also, it fell into the trap of forgetting
the primary focus of the business- to provide some good and service for others – and
became a mere cash accumulator. As a result of its demise, billions of dollars of
shares, retirement benefits, and pension funds were lost, as well as tens of thousands
of jobs.
Just prior to its implosion, Enron had only one goal; to be the largest
company in the world. But why? Why is the point of being the largest? For what end?
When Enron set that goal, it had already begun to lose its way. It became close to
impossible to identify or define the company’s mission; how it was making its
money, what exactly it was selling etc. whole becoming a commodity market –
maker (which was not its original function) is laudable, Enron even forgot that being
a commodity market – maker was its new primary function and concentrated on
becoming the biggest company in the world. Forgetting its major purpose, it appears
it took on projects simple to accumulate wealth – for the company and the
executives even forgetting its obligation to its shareholders.
Source: Racelis, A. 2017. Business Ethics and Social Responsibility. Rex Bookstore, Manila.

What’s New

What Is a Code of Ethics?

A code of ethics is a guide of principles designed to help professionals conduct

business honestly and with integrity. A code of ethics document may outline the
mission and values of the business or organization, how professionals are
supposed to approach problems, the ethical principles based on the
organization's core values, and the standards to which the professional is held.
 American ethical codes were first called creeds or credos and those in the
1980s were considered legalistic and more likely to talk about ethics and or the
reputation pf the company (Benson, 1989)

How about Business Conduct?

A code of conduct is a set of organizational rules or standards regarding

organizational values, beliefs, and ethics, as well as matters of legal compliance
that govern the conduct of the organization and its members.

The Code of Business Conduct and Ethics is applicable to and

mandatory for all Employees at all levels, regardless of their individual role,
position, or practice, including officers and staff.

Types of Business Codes

You can break business ethical codes into three broad categories that are
based upon the approach each takes in maintaining ethical and legal
compliance. Let us take a short look at each.

Codes of conduct typically prohibit behavior and inform employees what is

expected of them. Codes of conduct often outline penalties for failure to comply
with the code. Common topics include conflicts of interest, political
contributions, and acceptance of gifts.

Codes of practice attempt to explain and illustrate the values and principles
of the business. Instead of providing strict rules to follow, codes of practice
educate employees on how things are done in the business. These codes attempt
to empower the employee by making the employee an ethical decision maker.

Codes of ethics codify the values and principles of the company and define
the responsibilities, duties, and obligations organizational members have to the
organization and its stakeholders.

There is code of ethics for teachers, accountants, engineers, lawyers, doctors,

nurses, and all other professionals to ensure that they are following the same
ethical standards in their professional practice.
Sections of Code of Ethics / Conduct

1. Company Vision, Mission, and Philosophy

2. Code of Conduct Purpose
3. Scope
4. Responsibility / Accountability
5. Implementation
6. Types of Disciplinary Action/Penalty
7. Compliance of Labor Code

Steps in creating corporate code of ethics

1. Review sample codes of ethics that similar business use.

2. Review other documents related to your business, including the firm’s
mission statement and any specific policies new hires receive as part of
their orientation.
3. Think about the ethical dilemmas that face not only your company, but
also its competitors. These ethical issues vary by industry, and it is
important to directly address them in the company’s code of ethics.
4. Address potential workplace issues, such as office romances and
nepotism, in your code of ethics.
5. Ask a lawyer to review the proposed code of ethics before putting it in force

Sample code of ethics

SM Prime Code of Business Conduct and Ethics

The Code of Ethics states the principles that guide the Company’s directors,
officers and employees in the performance of their duties and responsibilities,
and in their transactions with investors, creditors, customers, contractors,
suppliers, regulators and the general public. It also underscores the Company’s
commitment to promote and protect the welfare of its employees, customers
and the communities where its businesses operate and emphasizes the need to
protect, sustain and enhance the environmental, social and economic
resources needed to deliver long-term growth.

SM Prime has developed company policies and programs in line with the
principles of Code of Ethics.

Customer and Community Welfare Programs

Employee Wellness and Development Programs
Environment and Sustainability Programs

Through the Policy on Accountability, Integrity and Vigilance (PAIV) the

Company provides an environment where concerns and issues regarding
violation of the Code of Ethics, corporate policies, law or regulation may be
raised freely within the organization.

On an annual basis, the Human Resources Department requires all employees

to take the 3-part Corporate Governance program. This program gives
employees an overview of the Company’s Corporate Governance Framework,
policies, and various components which are also contained in an internal
portal for employees’ easy access and reference. It also covers the importance
of ethics in the business, informs employees of their rights and obligations, as
well as the principles and best practices in the promotion of good work ethics.

This specifically includes the following:

1. Confirmation – to confirm that employees have read and understood and

agrees to comply with the Company’s Code of Ethics, Insider Trading Policy,
Conflict of Interest Policy, and Guidelines on Acceptance of Gifts and Travel
Sponsored by Business Partners (Anti-Corruption Policy), among others.

2. Disclosure Survey - to disclose each employees’ affiliations, interests,

relationships, and/or transactions which are relevant for full disclosure of all
actual, apparent or possible conflicts of interest.

3. e-Learning Courses (self-paced learning) – to be familiarized with the

provisions of Code of Ethics and other specific policies in upholding corporate
governance in the workplace.
What will happen if we violate the code of ethics and business conduct of a
business?

Human Resource must adhere to the highest standards of personal and

professional conduct to faithfully carry out their responsibilities, gain the
respect of management and employees and ensure the company follows the law.
They should carry their responsibilities with Accountability, Fairness, Integrity
and Professional Development. Supervisors are also responsible for monitoring
employees' conduct for providing honest and timely feedback when an employee
fails to meet expectations. If an employee violates, a disciplinary action will be
imposed.

Progressive Discipline - A procedure in which increasingly stiffer

penalties are imposed for repeated acts of indiscipline. A system of escalating
responses intended to correct the negative behavior rather than to punish the
employee. Its goal is to improve the employee’s performance.

Steps in Progressive Discipline

a. Verbal warning - A disciplinary measure in which a manager

reprimands an employee that his or her performance is
unacceptable. This action is still noted for documentation purposes.

b. Written warning - A letter written to an employee as a

disciplinary measure. A written warning describes the performance
problems or work violations of the employee in specific detail and
explains the consequences to the employee if his or her performance
does not improve within a specified period.

c. Suspension – A period which the employee is not allowed to work

and will not receive compensation when it has been determined that
the employee’s performance of duty or personal conduct is
unsatisfactory. Temporary deprivation or interruption of position,
power and or privileges.

d. Termination - The termination of the employment relationship, at

the direction of the employer, related to an actions/s or omission/s
by the employee that has irreparably damaged the relationship
between the employer and employee.
Factors that can affect decision:

1. The seriousness of the offense and the relationship to the employee’s

duties.

2. The employee position and level of responsibility (ex: supervisor,

manager)

3. The employee’s past disciplinary record

4. The employee’s past work record and years of service

5. The effect of the offence on the supervisor’s confidence in the employee.

6. The consistency of the penalty imposed on other employees

What is It

KEY TAKEAWAYS

 Ethics refers to the theory of morality of right conduct.

 Business Ethics is the study of what is right and wrong on
human behavior and conduct in business.

 A code of ethics sets out an organization's ethical guidelines and

best practices to follow for honesty, integrity, and professionalism.

 For members of an organization, violating the code of ethics can

result in sanction including termination.

 In some industries, including banking and finance, specific laws

govern business conduct. In others, a code of ethics may be
voluntarily adopted.

 Codes of conduct typically prohibit behavior and inform

employees what is expected of them.

 Codes of practice attempt to explain and illustrate the values

and principles of the business.

 Codes of ethics codify the values and principles of the company

and define the responsibilities, duties, and obligations
organizational members have to the organization and its
stakeholders.
 What’s More

Activity 3.1 Understanding Code of ethics More

1. What is the difference between code of ethics and code of conduct?

2. Give examples of corporate codes of ethics in some Philippine firms.

3. How corporate code of ethics affect the employee’s performance and

behavior?

What I Have Learned

Activity 3.2 Directions: Write E if the statement is Ethical and U if

the statement is Unethical.

1. Extending lunch/snack breaks.

2. Using foul language on your classmates in and out of the school

premises.

3. Lying inside the school.

4. Obeying school’s rules and regulations.

5. Engaging in negative gossip about someone you work with.

6. Developing professional relationship with co-workers.

7. Using or taking company’s supplies for personal purposes.

8. Showing initiative without being told.

9. Encourage classmates to study hard and never give up.

10. Conducting personal business during working hour.

 What I Can Do

How do you and your family cope up with the financial crisis that we are
encountering while we are trying to overcome the pandemic?

Even at home, you can organize any form of business ownership for you to cope
up with the financial crisis you are encountering. Look for the opportunities
brought about by the pandemic. Seize that opportunity! You will be surprised
that you turned the impossible to possible and Write a simple company Code of
Ethics using the sections of code of ethics/conduct given above that you will
going to implement.

CODE OF ETHICS
1. Company Vision, Mission, and Philosophy

2. Code of Conduct Purpose

3. Scope

4. Responsibility/Accountability

5. Implementation

6. Types of disciplinary Action/Penalty

7. Compliance of Labor Code

 Assessment
Multiple Choice.

Directions: Carefully read the given statements after each question. Encircle
the letter of the correct answer.
1. Which of the following is the study and practice of decisions about what is
good, or right?
a. Law b. Morals c. Ethics d. business
2. A businessman who owns a medical store in a small town is the only outlet
that sells face shield. There is a great necessity and high demand for the use of
the item due to COVID-19 pandemic, so he charges irrational amount of price to
the item. The community gets mad of the situation. This business practice is
most likely:
a. Ethical because it is not illegal for the owner to set its prices based on
maximizing profits.
b. Ethical because the owner focuses only on the impact of decisions on his
business.
c. Unethical because business operates in a community and communities
have expectations for behavior of individuals, groups, and businesses.
d. None of the above.
3. Which of the following are the functions of a Code of Ethics?
a. It can express a shared commitment on the part of a professional society’s
members to strive and to satisfy certain ethical standards and principles.
b. It is a guide of principles designed to help professionals conduct business
honestly and with integrity.
c. It can serve as a guide or reminder in specific situations.
d. All of the above.
4. Which of the following is a practice of fair treatment of workers at workplace?
a. Recreation facilities at the workplace.
b. Rights of workers to fairness and dignity.
c. Right of workers to have a share in company’s profit.
d. None of the above.
5. Ethical issues do not exist in school because the field involves primarily
objective data.
a. True
b. False
 Additional Activities

Case study

GORDON GEKKO and “Greed is Good”

In 2012, the U.S. Federal Bureau of Investigation (FBI) used Michael

Douglas in a Public Service Announcement (PSA) to encourage viewers to report

securities fraud and insider trading to the agency. Douglas says in the PSA:

“Our economy is increasingly dependent on the success and integrity of the

financial markets. As conceived by director Oliver Stone, Gekko is a slimy

embodiment of all that was wrong with American capitalism. When we first met

him, he is pacing around his glitzy Manhattan office, barking orders and

juggling phone calls. He is a lion of the business world, an alpha male famous

for his cunning and financial acumen. Gecko is also a major-league crook who

trades in insider information and manipulates markets as easily as other people

make conversation. “Greed is good”, he pronounces at one shareholder’s

meeting. “Greed is right. Greed works, greed clarifies and captures the

evolutionary spirit.”

Gekko’s Greed is good; greed is right” mantra hovered over the 2008

global financial crisis. In the meltdown’s immediate aftermath, executive

compensation amounts on Wall Street and elsewhere seemed to mock the

damage done by a focus on a short – term profits. Greed’s toxic power in a work

culture can start out as an aphrodisiac, motivating people3 to work harder to

succeed. All too quickly it takes on a narcissistic drive that leaves customers,

colleagues, and codes of conduct thrown to the side of the road and under

the wheels.
Rationalizations, willful blindness, and betrayal are the outcomes. Reputation

is severely damaged. Trust and confidence lost.

But the first thing to note about Gekko’s speech is how little of it is

actually about greed – roughly the last third of the speech. The first two third is

a critique of the complacency of overpaid corporate executives. Gecko is advising

Teldar’s shareholders that the people is responsible for protecting their interests

– Teldar’s executives and Board – have been doing a bad job. If shareholders

allow executives and Boards to operate inefficiently, rather than using what little

power they have to improve their lot, then they are grossly inefficient

themselves and are doing a very bad job.

Source: Racelis, A. 2017. Business Ethics and Social Responsibility. Rex Bookstore, Manila.

Guide questions:

1. What are some unethical practices or behavior mentioned in the case?

2. How can a corporate code of ethics help a company to be ethical?

3. If you are given a chance to give solution to the problem, how are you
going to do so?
 References:

Holdings, S. P. (n.d.). smprime.com. Retrieved from code of business conduct and

ethics: https://¬www.smprime.com/¬code-business-conduct¬-and-ethics

Racelis, A. (2017). Business Ethics and Social Responsibility. Manila: Rex Bookstore.

study.com. (n.d.). Code of Business Conduct: Ethics, Standards & Examples.

Retrieved from study.com:https://study.com/academy/lesson/code-of-
business-conduct-ethics-standards-examples.html

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