MODULE 1 CORRUPTION

CORRUPTION
 The dishonest use of one’s position or power to one’s advantage, especially for
money.
 Abuse of power for personal gain.

Transparency International (TI) - The world’s leading nongovernmental organization

fighting corruption.

How corruption harms the nation? (TI)

• It impedes sustainable development.
• It robs the children of today of the resources they will need to survive tomorrow.
• It decries the poor, the marginalized and least educated members of every society the
social, economic, and political benefits that should properly accrue to them.

Every peso lost to corruption is a peso removed from:

 Education
 Health care
 Social & other basic resources

The evil of corruption becomes worst when it is conceptualized within the stewardship
concept of government.

Stewardship concept
 The people entrust public wealth to government functionaries (elected and
appointed) who are the trustees.
 The people task and compensate the government officials and personnel to:
 Manage funds and resources judiciously
 Deliver the basic public services

Thus, it is the highest form of criminality for people who are entrusted with and
compensated to handle public funds and resources, to be the one’s who are in fact steal
these monies and assets.

Combating corruption
1. There must be a nationwide campaign to make the public aware about the existence
of corruption and how it affects the lives of individuals whether rich or poor.
2. There must be a holistic plan to combat corruption from prevention to discovery, to
prosecution and implementation of punishment.
3. There must be a spiritual renewal for the nation.
Corruption in the private sector Global Competitiveness Report (early 2000)
In terms of magnitude of irregular payments including bribery in public contracts.
Out of 102 countries,
No. 1 Bangladesh
No. 2 Philippines

 Public sector corruption – technically any violation of RA # 3019, Anti-Graft and

Corrupt Practices Act.
 Private sector corruption - Occurs when a manager or employee exercises a
certain power or influence over the performance of a function, task or
responsibility within a private organization or corporation.

Some forms:
 Bribery Occurs when a person gives money or favor to another person within the
organization or in another private firm to give the first party a contract, favor,
advantage, or to prevent a disadvantage to the same first party.
 Extortion Occurs when a person in a private organization solicits money or its
equivalent from a second private party to give the latter a contract, favor,
advantage or to prevent a disadvantage to the same second party.

Causes:
1. No one asks where one’s money comes from.
2. There’s lack of internal control and audit mechanisms in many private companies that
allow corruption to happen and get undetected.
3. There is lack of sufficient laws and regulations to combat corruption in the private
sector.
4. There is the perception that the law enforcement, prosecution and the judicial
system are not strong enough to catch, prosecute and convict the wrongdoers in the
private sector.

Moral Reformation
 Through leadership by example
 When a leader steals, everyone steals
 A culture of honesty and integrity must be built
 Officials (public, private)
 Religious officials
 Moral reformation will automatically correct the deficiencies in the law enforcement,
prosecution and judicial systems.
MODULE 2 DEVELOPMENT

Development: The process of improving the quality of human lives.

Important aspects:
1. Raising people’s living levels through relevant economic growth processes.
 Income
 Consumption levels of food
 Medical services, etc

2. Creating conditions conducive to the growth of people’s self-esteem through the

establishment of:
 Social, political and economic systems and
 Institutions that promote human dignity and respect.
3. Increasing people’s freedom by:
 Enlarging the range of their choice variables,as by increasing varieties of
consumer goods and services.

Determinants of Development
 Capital – produced utilized to produce another product
 Technology – modern technique or system of production
 Social structure – distribution of wealth and income among members of society
 Family system – “close family ties”
 Cultural values – “bahala na”, “ningas cogon”
 Religion – beliefs and attitudes of society
 Population
 Geography
 Corruption – inability of government employee to do what he is supposed to do
under the law.

Obstacles to development:
1. Lack of capital
2. Population
3. Man himself
 Should have good attitude
 Undisciplined
 Corruption

Economic development – progressive processes of improving human conditions.

 Development - process
 Growth – result
 Philippine economic development objectives:
1. To achieve economic stability
2. To achieve equitable distribution of the fruits of economic development
3. To achieve total human development for every Filipino

Rural development Programs: Key components.

 Farm-to-market roads
 Rural irrigation systems
 Bridges and other infrastructures
 Post harvest facilities
 Credit facilities

Goal: To foster economic growth in rural areas.

Developing the rural economies through rural development programs, is the
antidote to the unrestricted rural-to urban population migration.

Education should not be neglected as a vital component of any rural development

program.

Upgrading the attitude and values system of our rural folks is necessary, especially
the value of self-reliance.

Sustainable Development (SD) The development that meets the needs of present
generations without compromising the ability of future generations to meet their
own needs.

SD is not environmental protection alone. It is also concerned with:

 The attainment of social equity, and
 The promotion of lifestyle, values and technologies which reflect concern
for the earth, humanity and future generations.

Elements of SD
1. The integration of environmental considerations in economic policy-
making
2. A commitment to social equity
3. A reorientation of the term development to include qualitative
improvement.

Integration of environment and development

 Environment and development are inseparable.
 The economic development and the maintenance and improvement of
environmental quality must be pursued simultaneously.
 They should not run counter to each other but complement each other,
with both going in the same direction.
  Economic development cannot continue at the expense of environmental
quality.
 Development itself hinges on the availability of resources.
 Thus a nation that depletes its natural wealth in order to prosper will
eventually find that prosperity is threatened.

Social equity: Environmental problems cannot be effectively addressed without

considering the people who depend on the environment for survival.

If SD is to be achieved, poverty must be eradicated.

 The poor often contribute to and suffer from environmental
destruction.
Kaingeros practice slash and burn farming
The urban poor dump their garbage into rivers and consequently suffer
from water-borne diseases.
 Poor nation often exploit their resources to near depletion just to earn
export revenues.
 A great portion of these revenues however, goes to debt payments, leaving
social services inadequate.
 This results to further resource exploitation and the consequent environmental
degradation and even greater poverty.
 SD operates in the principle of an indivisible world
 Environmental problems cross national boundaries in such phenomena as acid
rain and global warming.
 The welfare of the poor both within and among nations is therefore a
global concern.

Reorienting development:
 Development must be reoriented to include qualitative improvements:
Standard of living – concerned simply with what can be bought with disposable
income.
Quality of life – includes event those things which cannot be bought at all, such
as clean air, adequate water, and favorable climatic conditions.

SD in the Philippines:
Dilemna: How to go about SD.
Obstacles:
 Diminishing resources
 Deteriorating environmental quality
 Widespread poverty
They are also the most important reasons to work for SD.
MODULE 3 CORPORATE GOVERNANCE

AGENCY CONCEPT

Corporate Governance - The way organizations are directed and controlled (Adrian
Cadbury)
Agency Concept - The main driver of which Corporate Governance is based on. •
In this concept, the corporate body is overseen by Directors who are appointed
by the owner i.e., the Shareholders

Standard Model
 Shareholders
 Directors
 Managers
 Supervisors
 Operational and Frontline Staff

STEWARDSHIP CONCEPT
• The Directors owe the responsibility to the parties who have vested interest in the
organization.
• They work for and on behalf of their master.

STANDARD PERFORMANCE ACCOUNTABILITY MODEL

PERFORMANCE ACCOUNTABILITY
Objectives Director’s Report
Policies Performance Review
Strategies Final Accounts
Plans Profit and Loss
KPIs Balance Sheet
Producers Accounting Policies
Performance report Statutory Disclosures

The standard performance accountability model needs three further refinements to

ensure the proper running of business:
1. Legislation and Regulations;
2. External publication of the final accounts prepared by the board;
3. A strong set of ethical standards.
MODEL 3
 Corporate Legislation and Regulations
• There are a raft of laws set by the Department of Trade and Industry (DTI)
and the Stock Exchange to guide the way business is conducted and the way
people are treated.
• - These are maximum working hours, minimum wage, anti-discrimination,
consumer protection, anti-competition, insider trading, health and safety, other
company regulations
 Final Accounts- checked by an external firm of accountants to ensure they show
a true and fair view of the company’s financial performance position,
 Ethical Standards - help define unacceptable conduct.

Disadvantage of Standard Model

 Fails to ensure that the risks of all the above have been assessed and addressed
to ensure they are unlikely to materialize

Disadvantage of Standard Performance/Accountability Model

 Assumes people are competent and honest and takes no account of the
fundamental pressures in society to place self-interest above absolute
legitimacy.
 Does not acknowledge the view that all players may not be competent
to understand and fully discharge their set responsibilities.

Disadvantage of Standard Model 3

 High ethical standards which is used to act as the that holds everything in
place are now more like a glue that slows everything down.
 In a two-year study by the Royal Society of Arts concluded: “The reports also
found that there is a confusion among many board members about roles,
responsibilities, managerial heirarchy, and levels of of authority as well as the
legislative framework that defines and set limits for their activities.”

Corporate Governance is the enhanced (and codified) process that is superimposed

over the basic performance/accountability model to try to counter the above problems
. It is constructed in recognition of the need to encourage business performance,
demonstrate that this performance is really earn and to encourage more openness in
assessing the reported results. Moreover, it is founded on good business sense as a
way of promoting sustainable realistic growth and enhanced corporate
performance

Stakeholders can be defined as the wide-range of people and groups affected by their
operations and presence.
Andrew Chambers has devised a “Court of Public Opinion” as consisting of key
figures including:
  Customers Regulators
 Financiers Business Partners
 Politicians Shareholders
 The Media Competitors
 Employees Government
 Business Leaders Local Communities

In general, there are two types of stakeholders:

• Those that have direct INFLUENCE on the organization
Investors Regulators
Customers Shareholders
• Those that have INTEREST in the organization
Local Community Groups Journalists

Ethical Codes (Adrian Cadbury)

- Provide guidance to employees
- To know what standards of conduct are expected of them and how to deal with
the kind of problems
- form of safeguard for their reputation

Examples of ethical codes

► Civil Service Code
 Constitutes a detailed set of provisions covering the conduct of civil servants and
covers most areas of concerns
 Civil servants should conduct themselves with integrity, impartiality and honesty

► The National Health Service (NHS)

► The Nolan Principles
 A set of standards that cover people in public life, be they ministers, civil
servants or people in the wider public sector.
 There are seven short but powerful principles used as the basis for developing
more detailed code for public sector organizations.
Seven Standards in the Nolan Principle:
•Selflessness
•Integrity
•Objectivity
•Accountability
•Openness
•Honesty
•Leadership

HUB is based on Three premises

► Investing in reputation is an investment with real return;
► Good reputation is sustained by consistent standards of conduct and operations; and
► Improving communications between a business and all its major stakeholders is a
prerequisite to enhancing reputation.

Whistleblowing
► The Public Interest Disclosure Act 1998 applies to England, Scotland and
Whales. Disclosures relate to crimes, breaches of legal obligations, miscarriages of
justice, dangers to health and safety or the environment and concealing information
relating to these items.
► Protected Disclosures should be made
 In good faith
 Not for personal gain
 Only after all relevant internal processes have been utilized

THREE MODELS OF CORPORATE GOVERNANCE FROM DEVELOPED CAPITAL MARKETS

Anglo-US Model
Players in Anglo-US model include management, directors, shareholders, government
agencies, stock exchanges, self-regulatory organizations and consulting firms, and
proxy voting. Of these, the three major players are the management, directors and
shareholders. They for-m the “corporate governance triangle

German Model
 German model prescribes two boards with separate members, German
corporations have a two-tiered board structure consisting of a management
board which is composed entirely of insiders.
 The size of supervisory board is set by law and cannot be changed by
shareholders
 Voting rights restrictions are legal

Board Compositions
Two-tiered board
Management Board Responsible for daily
“VORSTAND” management of the company

Supervisory Board Responsible for appointing the

“Aufsichtsrat” management board

Responsible for appointing

Employees/labor Union and
members to the supervisory
Shareholders
board
Japanese Model
 It is characterized by a high level of stock ownership by affiliated banks and
companies
 A banking system characterized by strong, long-term links between bank and
corporation
 A legal, public policy and industrial policy framework designed to support and
promote “Keiretsu”
 Board of Directors composed solely of insiders
 A comparatively low level of input of outsiders shareholders

KEY PLAYERS IN THE JAPANESE MODEL

1. Main Bank
2. Affiliated Company or Keiretsu
3. Management
4. Government

DIAGRAM
Outside Shareholders Independent Directors
Government Keiretsu
Management Bank

Module 4 ETHICS

Ethics – study of standards of behavior which promote human welfare and “the good”
How we behave
Business Ethics – study of standards of business behavior which promote human
welfare and “the good”

Moral Standards – what is right or wrong

Values - long lasting beliefs that guides society’s decision and actions
Ethics – branch of knowledge that deals with moral principles, values and behavior
Business Ethics – application of ethical principles in a day to day conduct of business to
examine and solve complex dilemmas.
Social Responsibility – obligation of a business organization to maximize its benefits to
all its stakeholders with minimal negative impact
Sarbanes-Oxley Act – passed by congress in 2002 made securities fraud a criminal act
stiffening the penalties for those found guilty of engaging in corporate fraud.

REPUBLIC ACT 6713

An act establishing a code of conduct and ethical standards for public officials
and employees, to uphold the time honored principle of public office being a public
trust, granting incentives and rewards for exemplary service, enumerating prohibited
acts and transactions and providing penalties for violations thereof and for other
purposes.

Section 3. Definition of Terms. - As used in this Act, the term:

(a) "Government" includes the National Government, the local governments, and
all other instrumentalities, agencies or branches of the Republic of the Philippines
including government-owned or controlled corporations, and their
subsidiaries.lawphi1.net

(b) "Public Officials" includes elective and appointive officials and employees,
permanent or temporary, whether in the career or non-career service, including military
and police personnel, whether or not they receive compensation, regardless of amount.

(c) "Gift" refers to a thing or a right to dispose of gratuitously, or any act or

liberality, in favor of another who accepts it, and shall include a simulated sale or an
ostensibly onerous disposition thereof. It shall not include an unsolicited gift of nominal
or insignificant value not given in anticipation of, or in exchange for, a favor from a
public official or employee.

(d) "Receiving any gift" includes the act of accepting directly or indirectly, a gift
from a person other than a member of his family or relative as defined in this Act, even
on the occasion of a family celebration or national festivity like Christmas, if the value of
the gift is neither nominal nor insignificant, or the gift is given in anticipation of, or in
exchange for, a favor.

(e) "Loan" covers both simple loan and commodatum as well as guarantees,
financing arrangements or accommodations intended to ensure its approval.

(f) "Substantial stockholder" means any person who owns, directly or indirectly,
shares of stock sufficient to elect a director of a corporation. This term shall also apply
to the parties to a voting trust.

(g) "Family of public officials or employees" means their spouses and unmarried
children under eighteen (18) years of age.

(h) "Person" includes natural and juridical persons unless the context indicates
otherwise.

(i) "Conflict of interest" arises when a public official or employee is a member of

a board, an officer, or a substantial stockholder of a private corporation or owner or has
a substantial interest in a business, and the interest of such corporation or business, or
his rights or duties therein, may be opposed to or affected by the faithful performance
of official duty.

(j) "Divestment" is the transfer of title or disposal of interest in property by

voluntarily, completely and actually depriving or dispossessing oneself of his right or
title to it in favor of a person or persons other than his spouse and relatives as defined
in this Act.

(k) "Relatives" refers to any and all persons related to a public official or
employee within the fourth civil degree of consanguinity or affinity, including bilas, inso
and balae.

Section 4. Norms of Conduct of Public Officials and Employees. - (A) Every public
official and employee shall observe the following as standards of personal conduct in
the discharge and execution of official duties:

(a) Commitment to public interest. - Public officials and employees shall always
uphold the public interest over and above personal interest. All government resources
and powers of their respective offices must be employed and used efficiently,
effectively, honestly and economically, particularly to avoid wastage in public funds and
revenues.

(b) Professionalism. - Public officials and employees shall perform and discharge
their duties with the highest degree of excellence, professionalism, intelligence and skill.
They shall enter public service with utmost devotion and dedication to duty. They shall
endeavor to discourage wrong perceptions of their roles as dispensers or peddlers of
undue patronage.

(c) Justness and sincerity. - Public officials and employees shall remain true to
the people at all times. They must act with justness and sincerity and shall not
discriminate against anyone, especially the poor and the underprivileged. They shall at
all times respect the rights of others, and shall refrain from doing acts contrary to law,
good morals, good customs, public policy, public order, public safety and public interest.
They shall not dispense or extend undue favors on account of their office to their
relatives whether by consanguinity or affinity except with respect to appointments of
such relatives to positions considered strictly confidential or as members of their
personal staff whose terms are coterminous with theirs.

(d) Political neutrality. - Public officials and employees shall provide service to
everyone without unfair discrimination and regardless of party affiliation or preference.

(e) Responsiveness to the public. - Public officials and employees shall extend
prompt, courteous, and adequate service to the public. Unless otherwise provided by
law or when required by the public interest, public officials and employees shall provide
information of their policies and procedures in clear and understandable language,
ensure openness of information, public consultations and hearings whenever
appropriate, encourage suggestions, simplify and systematize policy, rules and
procedures, avoid red tape and develop an understanding and appreciation of the
socio-economic conditions prevailing in the country, especially in the depressed rural
and urban areas.

(f) Nationalism and patriotism. - Public officials and employees shall at all times
be loyal to the Republic and to the Filipino people, promote the use of locally produced
goods, resources and technology and encourage appreciation and pride of country and
people. They shall endeavor to maintain and defend Philippine sovereignty against
foreign intrusion.

(g) Commitment to democracy. - Public officials and employees shall commit

themselves to the democratic way of life and values, maintain the principle of public
accountability, and manifest by deeds the supremacy of civilian authority over the
military. They shall at all times uphold the Constitution and put loyalty to country above
loyalty to persons or party.

(h) Simple living. - Public officials and employees and their families shall lead
modest lives appropriate to their positions and income. They shall not indulge in
extravagant or ostentatious display of wealth in any form.