Chapter 6

1. What is business ethics (BE)?

It refers to standards of moral conduct, behavior and judgment in business

which involves making the moral and right decision.

2. How is BE related to CSR?

Business ethics is an area of corporate social responsibility where business

are legally bound and socially obligated to conduct business in an ethical manner.

3. What is the basis of BE?

It is based on personal values and standards of each person engaged in

business.

4. Main purpose of BE

Its main purpose is to help business and would-be business to determine

what business practices are right and what are wrong.

5. Special purpose of BE

1. Make businessmen realize that they cannot employ double standards to the
actions of others and their own.

2. Show businessmen that common practices which they have thought to be

right because they see other businessmen doing it, are really wrong.

3. Serve as a standard or ideal upon which business conduct should be

based.

6. Is there a universal standard code of ethics?

No, there is not.

7. Coverage of BE

It covers all conduct, behavior and judgment in business.

8. What does BE involve?

It involves making the right choices while engaging in business activities.

9. Meaning of fair business competition?

It means achieving success solely by offering better products, services and

terms than the competitor.

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10. What is the impact of BE in the economy, society, environment, and
business managers?

Economic Impact – through wages it pays to its employees, the materials that
it buys from their suppliers and the prices it charges its customers

Social Impact – contributes to the ethical climate of society

Business Managers – the concepts and principles for the ethical conduct in
business are relegated to the managers of the business enterprise

11. What are the ethical challenges in today's world?

The inherent conflict between ethics and the pursuit of profit is more
pronounced.

Chapter 7

1. What are the common unethical practices of business establishments?

Classify and summarize each.

1. MISINTERPRETATION

A. Direct Misinterpretation means actively misrepresenting about the

product or customers
 Deceptive Packaging takes many forms and types including
placing the product in containers of exaggerated sizes and
misleading shapes and slack –fill packaging.
 Misbranding or Mislabeling is making false statements on the
label of a product or making its container similar to a well-known
product.
 False or Misleading Advertising greatly exaggerates the virtues
of a product and tells only half of the truth or sings praises to its
non-existent virtues.
 Adulteration is debasing a pure commodity by imitating or
counterfeiting it, by adding something to increase its volume, or by
substituting an inferior product for a superior one for profit or gain.
 Weight understatement or Short weighing means weighing scale
is tampered with or something is unobtrusively attached to it so that
the scale registers more than the actual weight.
 Measurement understatement or Short measurement means
that the measuring stick or standard is shorter than the real length
or smaller in volume than the standard.
 Quantity understatement or Short numbering is when the seller
gives the customer less than the number asked for or paid for.

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 B. Indirect Misinterpretation means omitting unfavorable information about
the product or service.
 Caveat emptor means “let the buyer beware” where the seller is
not obligated to reveal any defect in the product or service he is
selling and is considered as passive deception.
 Deliberate Withholding of Information means one of the parties
does not exactly know what he is giving away or receiving in return.
 Passive Deception is business ignorance where the businessman
is unable to provide the customer with the complete information that
the latter needs to make a fair decision.

2. OVER-PERSUASION means persuasion for the sole benefit of selling a

product without considering the interest of the buyer.
1. Urging a customer to satisfy a low priority need for merchandise
2. Playing upon intense emotional agitation to convince a person to
buy
3. Convincing a person to buy what he does not need just because he
has the capacity or money to do so

2. What are the classifications of unethical practices of corporate

management? Summarize each.

Board of Directors

1. Plain Graft – Board of Directors help themselves to the earnings that

otherwise would go to other stockholders.
2. Interlocking Dictatorship – practiced by a person who holds directorial
positions in two or more corporation that do business with each other
which may include conflict of interest and disloyal selling.
3. Insider Trading – occurs when a broker or another person with access to
confidential information uses that information to trade in shares and
securities of a corporation.
4. Negligence of Duty – they fail to attend board meetings regularly that could
result to betrayal of trust of the parties who elected them to their positions.

Executive Officers and Lower Level Managers

1. Claiming a vacation trip to be a business trip – reporting vacations as a

business trip so he can get reimbursement for his expenses including his
family‟s.
2. Having employees do work unrelated to the business – asking company
employees to do personal things for them on company time.
3. Loose or ineffective controls – not providing adequate controls to remove
temptation and to prevent or discourage employees from engaging in
unethical practices.
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 4. Unfair labor practices – the Labor Code lists the following as unfair labor
practices:
a. To interfere with, restrain or coerce employees with their right of
self-organization;
b. To require as a condition of employment that an employee shall not
join labor organization or withdraw from one;
c. To contract out services or functions by union members when such
will interfere with, restrain employees with their rights to self-
organization;
d. To initiate, donate, assist or otherwise in with the formation of any
labor organization, including giving financial support to it;
e. To discriminate with wages, hours of work, and others in order to
encourage or discourage membership in any labor organization;
f. To dismiss, discharge, or prejudice or discriminate, against an
employee, for having given or being about to give testimony under
the Labor Code;
g. To violate the duty to bargain collectively as prescribed by the
Labor Code;
h. To pay negotiation or attorney‟s fees to the union or its officers or
agents as part of the settlement of any issue in collective bargaining
or any other dispute;
i. To violate or refuse to comply with voluntary arbitration awards or
decisions relating to implementation of collective bargaining
agreement;
j. To violate a collective bargaining agreement
5. Making false claims about losses to free themselves from paying the
compensation and benefits provided by law - employers claim non-
existent losses so they can be exempted from paying the minimum wage
and emergency-cost-of-living allowances.
6. Making employees sign documents showing that they are receiving fully
what they entitled to under the law when in fact they are only receiving a
fraction of what they are supposed to get.
7. Sexual Harassment – person, having authority over another in a work,
training, or education environment, demands, requests, or otherwise
requires sexual favor, regardless of whether the demand, request or
requirement for submission is accepted or not by the object.

Employees

1. Conflicts of Interest – an employee who is duty bound to protect and

promote the interests of his employer gets himself into a situation where
his decision is influenced by what he can gain personally from it rather
than his employer.

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 2. Dishonesty – it covers employee-employer relationship when respect to an
employee‟s honesty as he carries out his assigned duties in the office is
affected.

3. What are the some unethical practices of employees?

Conflict of interest and Dishonesty.

Chapter 8

1. What is an ethical dilemma?

A situation a person faces in which a decision must be made about the

appropriate behavior.

2. How to solve ethical dilemmas?

Six-step approach to resolve ethical dilemmas:

1. Obtain the relevant facts

2. Identify the ethical issues from the facts.
3. Determine who is affected by the outcome of the dilemma and how each
person or group is affected.
4. Identify the alternatives available to the person who must resolve the
dilemma.
5. Identify the likely consequences of each alternative.
6. Decide the appropriate action.

Chapter 9

1. What is corruption? Specific and broad definition

Corruption is the abuse of private and public office for personal gain. It
includes acts of bribery, embezzlement, nepotism, kickbacks and state capture.

In a broader definition, it is the misuse of entrusted power (by heritage,

education, marriage, election, appointment) for private gain. It covers not only the
politician and the public servant but also the CEO, CFO and but other employees of
the company.

2. What are some forms of corruption?

 A company paying a bribe to win the public contract to build the local highway,
despite proposing a sub-standard offer.
 A politician redirecting investments to his hometown rather than to the region
most in need.
 Public official embezzling funds for school renovation to build his private villa.

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  A private company manager recruiting an ill-suited friend for a high level
position.
 Local officials demanding bribes from ordinary citizens to get access to a new
water pipe.
 A salesman bribing the purchasing manager of a company to give preference
to his products.

3. Why and how does a person become corrupt?

When there are opportunities, when risk is minimal compared to benefits or

when one is confronted with issues like career advancement, earning of more
income, and financial problems caused by illness, loss of property, etc.

4. What are the ill effects of corruption?

Economically,

 Adds up to 10% of the total cost of doing business and 25% procurement
cost in developing countries
 Leads inefficient use of public resources
 Corrodes public trust, undermines rule of law, and delegitimizes the state
 Leads to apathy, discontent, and radical extremism and terrorist groups

Other significant and serious repercussions:

1. Breakdown in social order and lives are affected

2. It creates unfair competition an increases the cost of doing business and
causes businesses to flee from the country.
3. Spreads rapidly especially in developing and underdeveloped countries.

5. What are the characteristics of corruption?

a. Recipients and payers

b. Extortion

c. Lubricant of society

d. An ethical dilemma

e. Poverty alleviation

f. Culture

g. „Kindness among friends‟

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6. Summarize and explain The Philippine Corruption Report.

In 2016, Philippines loses P200 billion for smuggling and P400 billion from tax
evasion perpetuated through collusion with some personalities in government
agencies.

Judicial System

Corruption risks are high in judicial system. The judiciary is formally

independent, but the powerful influenced proceedings in civil and criminal cases.
Bribes, irregular payments, nepotism, favoritism, and impunity occur. Companies do
not have sufficient faith in the independence of the judiciary. Low salaries for judicial
officials and the fact that it is underfunded by the state are said to perpetuate the
problem of bribery.

Police

The police force is widely regarded as one of the most corrupt institutions in
the country. Police and military engaging in corruption, extortion, and local rackets
are widespread. Companies report that they cannot rely on the police services.

Public Services

Companies content with a high corruption risk when dealing with public
services. In 2017, half of business executives reported being asked for bribe by
someone in the government. Civil servants often do not have the resources or
abilities to fulfill their tasks free from corruption and red tape.

Land Administration

Two out of five companies report expecting to give gifts when obtaining
construction permit. Businesses have insufficient confidence on the protection of
property rights. Corruption and arbitrariness in the application of the law are
common. The court system is slow to resolve land disputes. Expropriation is
possible, but coming to a mutually acceptable price can be a lengthy process.

Tax administration

One in seven companies expects to give gifts in meeting tax officials. Tax
regulations are among the most problematic factors for conducting business in the
Philippines. Officials at the BIR are prone to corruption and known for embezzlement
and extortion. Businesses rate BIR‟s commitment to fighting corruption as poor.

Customs Administration

Companies indicate that irregular bribes and payments in import and export
procedures are very common. A quarter of companies expect to give gifts when
obtaining import license. Border compliance costs in the Philippines are significantly
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higher than the regional average, whereas time required is in line with the regional
average.

Public Procurement

Procurement sector is subject to rampant corruption, irregularities, and

inconsistent implementation of legislation. Two in five companies indicate that most
companies in their sector give bribes in order to win contracts. Local-level public
procurement lacks transparency and fostering corruption through the misuse of pork
barrel system.

Natural Resources

Poor value realization and revenue management have caused the country‟s
overall resource governance to be judged as „weak‟. Extractive Industries
Transparency Initiative (EITI) since joining in 2013. While transparency has
improved, poor regulation and overlapping policy responsibilities between local and
central governments have meant that small-scale mining is still a contentious issue.

7. What laws have been enacted to curb corruption?

 Anti-Graft and Corrupt Practices Act

 Anti-Red Tape Act
 Revised Penal Code
 Anti-Money Laundering Act
 Act Establishing a Code of Conduct and Ethical Standards for Public
Officials and Employees
 Government Procurement Reform Act
 United Nations Convention Against Corruption

8. What is the role of civil society in the fight against corruption?

Philippine civil society is active and is represented by a wide variety of

different organizations. Public participation is high and Civil Society Organizations
(CSOs) enjoy a high level of social capital. CSOs play a large role in initiating
legislation and steering debate in Congress. There are a multitude of watchdog
organizations monitoring implementation of policy including the media environment.

Chapter 10

1. How to improve business ethics?

It is imperative that all parties involved – manufacturers, sellers, consumers,

government, and relevant organizations must participate in improving business
ethics, and there should be a concerted effort on the part of everybody.

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2. What is the integrity initiative campaign (IIC)?

It is a multisectoral campaign that seeks to institutionalize integrity standards

among various sectors of society – business, government, judiciary, academe,
youth, civil society, church and media.

3. What is the objective of the IIC?

It aims to help in diminishing, if not fully eradicating, the vicious cycle of

corruption in the Philippines. Also, it hopes to build trust in government, a more
equitable society and fair market conditions.

4. What is the significance of the corporate values?

It is important that the organization‟s values address the legal and other
obligations towards important stakeholders, because it enhances the reputation of a
business in the determination of its values.

5. What is a code of conduct?

It is a formal expression of the organization‟s values and ethics.

6. Under the unified code of conduct for business (integrity initiative), what is
the code of conduct for the following groups? (summarize)

a) Top management

 Consistently demonstrating the value of conducting business with integrity

 Strongly communicates organization‟s position against bribery, corruption,
and unethical business practices
 Supports integrity practices and allocates sufficient resources

b) Human resources

 Instill culture of integrity among employees

 Employees have the right to file and respond to complaints against practices
suspected to be illegal or unethical
 Have appropriate tools to confidentially receive, monitor, and act on internal
and external complaints
 Employees filing complaints will be protected from all types of retaliation
 Instituted training programs on business ethics in all levels of the organization

c) Sales and marketing

 Communicate rules and guidelines on giving gifts, entertainment, tokens, and

contribution from organizations

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  Employees and all third parties are not permitted to offer as well as demand
or accept concessions in order to obtain any undue advantage in the conduct
of business
 Abide by existing laws when transacting with government agencies

d) Finance and accounting

 Require employees to ensure that all books and records are complete and
accurate
 Financial records conform to standard accounting principles, comply with SEC
requirements, and abide by anti-money laundering laws
 Pay taxes in compliance with all laws

e) Procurement

 Track record of integrity and compliance with existing laws, provide equal
opportunities for all suppliers, and prohibits collusion between employees and
suppliers
 Enter into integrity pacts with supplier and ensure that they comply with the
provisions of pact
 Contracting a third party to bribe or commit corrupt practices on behalf of the
company is strictly prohibited

f) Logistics

 Comply with laws and regulations pertaining to supply chain management.

 Do not tolerate any breaches in existing laws in exchange for undue
advantage
 Employees are not penalized for refusing to pay bribes

g) Implementation and Monitoring

 Align operations to the principles contained in the Code and periodically

assess and monitor compliance to it.

7. Summarize the Bishops-Businessmen's Conference Philippines Code of

Ethics for the Philippine Business.

The Code of Ethics for the Philippine Business contains a Preamble which
states that the Code of Ethics has been formulated impelled by the belief that man
has a dignity that must be respected, and that all resource of the earth has been
created for his growth and development.

The Concepts encapsulate its primary purpose of meeting society‟s human

needs by providing goods and services as efficiently as possible:

 All business is essentially an expression of human relationships.

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  The stakeholders contribute to the performance of the business and are
entitled to receive the proper worth of their contributions.
 The resources employed by a business are financial, technological and
human.
 Business enterprise has a public responsibility to use all its resources
efficiently.
 Competition and incentives are essential for the maintenance and
improvement of the quality of goods and services.
 Any right or authority enjoyed by or entrusted to business presupposes, and is
justified by, corresponding duties, responsibilities, and performance.

Principles for the Conduct of Business include:

 Toward the Employees – business shall recognize the unique position

of employees as individuals with a vital stake in their work
 Towards the Customers – business shall strive after a quality in the
production of goods and services and deliver the product in the quality,
quantity, and time agreed upon
 Towards the Suppliers – business shall ensure that terms of all
contracts be clearly stated and honored in full
 Towards the Owners and Other Providers of Capital – provide an
adequate rate of return to those contributing capital and use financial
resources efficiently
 Towards the Local and National Government – participate in the
discussion of proposed legislation and its implementation, propose
sound policies in the use of human and material resources
 Towards Society in General – businessmen shall recognize in their
decision-making the interest of the general public, and realizing that
they are utilizing to an important degree the nation‟s resource

Survey of Laws Advocating Business Ethics

 RA 7394 “The Consumer Act of the Philippines”

approved on April 13, 1992

 RA 3720 “The Food, Drug and Cosmetics”

approved on June 22, 1963

 RA 8293 “The Intellectual Property Code of the Philippines

effective January 1, 1998

The Intellectual Property Rights Law covers

1. Copyright and Related Rights
2. Trademarks and Service Marks
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 3. Geographic Indications
4. Industrial Designs
5. Patents
6. Lay-out-Designs (Topographic) of Integrated Circuits
7. Protection of Undisclosed Information

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