SAN JOSE COMMUNITY COLLEGE

San Jose Malilipot, Albay

Good Governance and Social

Responsibility
2nd Semester S.Y. 2021-22

Hans O. Bellen
Instructor
COURSE CODE:

COURSE DESCRIPTION:
SEMESTER /TERM: 2nd
The course deals with the basic conceptual themes and ideas about the
interaction of business and society. It will tackle issues such as business
and the social, ethical, natural environment; business and stakeholders;
and current social issues that somehow affect business operations.

COURSE TITLE: GOOD GOVERNANCE AND SOCIAL RESPONSIBILITY

MODULE I

At the end of the module the students will be able to:

 Understand and explain organizational theory, structure, design, centralization/decentralization,
and levels.
 Discuss the implications of government regulation.
 Enumerate the advantages and disadvantages of a government planned economic activity.
 Enumerate and discuss the legal and administrative barriers to entrepreneurship.
 Differentiate income distribution and wealth distribution as well as discuss the different causes of
economic inequality.
 Identify the different political dimensions relating to business.
 Explain the meaning of corporate social responsibility and ethical behavior of enterprises.
 Explain the role and influence of government and different pressure groups on corporate policy.

INTRODUCTION

“One of the greatest delusions in the world is the hope that

the evils in this world are to be cured by
legislation.”
-Thomas B. Reed (1886)

UNDERSTANDING THE ORGANIZATIONAL ENVIRONMENT

Organizations are complex adoptive systems that use people, tasks and technologies to achieve
specified goals and objectives. Structuring the organization represents the division and distribution of
work among members of the organization, and the coordination of their activities in such a way that they
are directed towards achieving the declared goals and objectives of the organization.
Organizational theory attempts to explain how organization works by defining the common
features that organizations share, by collecting data and by analyzing them, assessing “what works where-
and why?”. It is important to understand that structure and management of organization will differ
depending on the following: the sector they operate (public, private, non-profit), the stakeholder
configuration, the particular strategic goals and the objectives they set themselves.
ORGANIZATIONAL THEORY
Organizational theory is especially useful for people who manage organizations, or who aspire to
do so in the future. But whether or not you are a manager, for example, if you work in public health, you
will be working with organizations (like hospitals, charities, local and national government etc.) so you
need to understand them. It enables the manager to see that his organization and its problems are rarely
wholly unique.
Organizations, especially large organizations are generally ‘complex’, having many inter-related
facets and areas that need to be coordinated, managed together to achieve efficiencies and effectiveness in
achieving stated goals and objectives. Organizations also need to be ‘adoptive’, they need to respond to
ongoing changes in the environment in which they operate (i.e. the political, social, economic and
technological conditions) that together form the environment in which organizations operate.
 Even if you do not aspire to be a manager, organizational theory should be of interest to you for
it’s around us. Organizational theory can help explain how they work and why they work in the ways they
do.
Drucker suggests three criteria for effective organizations:
a. They must be organized for business performance.
b. Their structure should contain the least number of management levels.
c. Organizational structure should facilitate training and testing for future organization leaders.
ORGANIZATIONAL STRUCTURE
Organization structure is the pattern of relationships among positions in the organization among
members of the organization. The purpose of structure is the division of work among the members of the
organization, and the coordination of their activities so that they are directed towards achieving the same
goals and objectives of the organization. Structures defines tasks and responsibilities, work roles and
relationships and channels of communication.
Objectives of an Organizational Structure

 Accountability for areas of wok undertaken by groups and individual members of the
organization
 Coordination of different parts of the organization and different areas of work
 Effective and efficient organizational performance including resource utilization
 Monitoring the activities of the organization
 Flexibility in order to respond to changing environmental factors
 The social satisfaction of members of the organization
Dimensions of Organizational Structure
Child (1988) suggests six major dimensions as components of an organization structure:

 Allocation of individual tasks and responsibilities, job specialization and definition

 Formal reporting relationships, levels of authority and spans of control
 Grouping together of sections, departments, divisions and larger units
 Systems for communication of information, integration of effort and participation
 Delegation of authority and procedures for monitoring and evaluating the action
 Motivation of employees through systems for performance appraisal
Consequences of Structural Deficiencies (Child):

 Low motivation and morale

 Late and inappropriate decisions
 Conflict and lack of coordination
 Poor response to new opportunities and external change
 Rising costs- e.g. diseconomies of scale
Principles of Organizational Design and Diagnosis
Mintzberg suggests that organizational structures fall into five basic categories:

 Simple structure: a centralized, perhaps autocratic arrangement typical of the entrepreneur-

founded company. Little hierarchy or control exercised by the chief executive.
 Machine bureaucracy: best at mass produced tasks and is characterized by many layers of
management and formal procedures
 Professional bureaucracy: likely to include some parts of the administration is set by independent
professional bodies. It tends to be more democratic and more highly motivated, with its lines of
authority is less clearly set.
 Divisionalized form of bureaucracy: applies more to multinational or industrial corporations
where a small central core controls key guidelines for a number of otherwise autonomous units.
 Adhocracy: often found in new technology industries, which need constantly to innovate and
respond to quickly changing markets.
Types of Organizational Structure
This is essentially the process by which the organization’s mission is divided into discrete roles
tasks of individuals within the organization. There are different ways of doing this. All essentially by
grouping key activities in the organization and then allocating roles/tasks to individuals. This can fall into
following categories:

 Functional
 Product/service
 Geographical
 Divisional
 Matrix
Functional- grouping of major functions e.g. contracting, information, finance, personnel and public
health in health authorities
Advantages:

 Increases utilization and coordination of groups of people with technical/specialized expertise

 Increases development and career opportunities for people in departments

Disadvantages
 Encourages sectional interests conflicts
 Difficult for organization to adapt to product/service diversification
Product/Service- grouping by service/product. For example, in a hospital, into orthopedic, surgical,
psychiatric rather than medical, nursing, paramedical, hotel services (functional).
Advantages:

 Increases diversification
 Adaptability increased if service/product requires technical knowledge or large equipment

Disadvantage:
 Encourages service conflicts
Geographical- a national service develops regions, areas or district authorities.
Advantage:

 More responsive and local/regional issues and different cultures, national/local laws.

Disadvantage:
 Can lead to localities/regions conflicting with each other
Divisional- grouping of services and/or geography and functionality (but with functions such as finance,
personnel, planning retained at headquarters).
Advantages:

 Suitable for international companies who are highly diversified, working in more than one
country. For example, a pharmaceutical company with divisions in each country producing and
marketing products developed by the parent company.
 Corporate strategic control with production and marketing independence at divisions

Matrix- grouping of projects and functions

Advantages:

 Combines vertical and lateral lines of communication and authority

 Stability and efficiency (of mechanistic structure) with flexibility and informality (of inorganic
structure)
  Emphasizes that all project aims are all-important

Disadvantages:
 Potential conflict between project leader and functional leader regarding resources
 Project may be jeopardized if project members as well as leaders enter the conflict on opposite
sides
 Does not tolerate diversification well

CENTRALIZATION AND DECENTRALIZATION

Centralization when all the power of decision making rests at a single point in the organization
ultimately in the hands of one person or group, the structure is centralized. If the power is dispersed
among many people/groups, it is known as decentralized or distributed.
Advantages:

 Frees top management of routine everyday decisions to concentrate on strategic responsibilities

 Decisions are more local, quicker, more responsive to clients
 Increased awareness of cost effectiveness through the organization
 Increased motivation and satisfaction by junior management

disadvantages:
 Requires good communication and adequate control to and from the center
 Need for center coordinate/integrate
 Can lead to inequity in treatment of clients
 Need individuals willing to take additional
responsibilities In general, large organizations leans towards:

 Less centralization
 More specialization
 More rules and procedures to be followed
LEVELS OF THE ORGANIZATION
According to Drucker, organizations are layered into three main levels:

 The technical level of the organization is concerned with specific operations and defined tasks,
with actual jobs to be done, and with performance of the technical function.
 The managerial level (or organizational level) is concerned with the coordination and integration
of work, at the technical level, e.g. resource allocation, administration and control of the
operations of the technical function.
 The community level (or institutional level) is concerned with the broad objectives and the work
of the organization as a whole. Decisions made at this level will include the selection of
operations, development of organizations in relation to external agencies and the wider social
environment.
MINTSBERG’S NINE DESIGN PARAMETERS
Design assumes discretion, an ability to alter the system. In the case of the organizational
structure, design means ‘turning those knobs’ that influence the division of labor and the coordinating
mechanisms thereby affecting how the organization functions. Consider the following questions, which
are the basic issues of structural design:
a. How many tasks should a given position in the organization contain, and how specialized should
each task be?
b. To what extent should the work content of each position be standardized?
c. What skills and knowledge should be required for each position?
d. On what basis should positions be group into units and units into larger units?
e. How large should each unit be; how many people should report to a given manager?
f. To what extent should the output of each position or unit be standardized?
 g. What mechanisms should be stablished to facilitate mutual adjustment among positions and
units?
h. How much decision power should be delegated to the mangers of line units down the chain of
authority?
i. How much decision power should pass from the line managers to the staff specialists and
operators?
These nine design parameters are the basic components of organizational structure and they fall
into four broad groupings:
Groups Design Parameters Related Concepts
Design of Job specialization Basic division of labor
positions Behavior formalization Standardization of work content
System or regulated flows
Training and indoctrination Standardization of skills
Design of Unit grouping Direct supervision
superstructure Administrative division of labor
Systems of formal authority, regulated flows,
informal communication, and work constellations
Organogram
Unit size System of informal communication
Direct supervision
Span of control
Design of lateral Planning and control Standardization of output
linkages systems System of regulated flows
Liaison devices Mutual adjustment
Systems of informal communication, work
constellations, and ad hoc decision processes
Design of decision Vertical decentralization Administrative division of labor
making processes Systems of formal authority, regulated flows, work
constellations, and ad hoc decision processes
Horizontal decentralization Administrative division of labor
Systems of informal communication, work
constellations, and ad hoc decision processes

ORGANIZATIONAL RELATIONSHIPS

Work Design
Work can be combined in various forms. Decisions on the methods of groupings will consider:
 The need for coordination
 The identification of clearly defined divisions of work economy
 The process of managing activities
 Avoiding conflict, and
 the design of work organization which takes account of the nature of staff employed, their
interests and job satisfaction
Formal
 line vertical flow of authority
 functional- between specialists in advisory positions and line management teams
 staff- personal assistants to senior members
Span of Control- number of direct reports. Influencing Factors:
 nature of organization, complexity of work, range of responsibilities
 ability of personal qualities e.g. capacity of the manager
 time available to spend with subordinates
 ability and training subordinates
 effectiveness of coordination, communication, control systems
 physical location of subordinates
 People- Organizational Relationships

People and Organizational Relationships

Classification of objectives
Tasks and element functions
Division of work and grouping of people
Centralization and decentralization
Principles of organization
Span of control
Maintain and of the socio-technical system and effectiveness of the organization
the balance scalar
as chain
a whole
Formal organizational relationships
Line and staff organization
Project teams and matrix organization

FACTORS AFFECTING THE ORGANIZATIONAL STRUCTURE SELECTION IN

MULTINATIONAL CORPOPRATIONS
The organization structure of the business environment is an approach that helps and guides in
organizing the employees of the organization into structured and organized pattern for better coordination
and communication. The structure in a multinational company defines the architecture of the business
competence, functional relationship, and management function. It helps in reducing confusion in the
business environment and supports in carrying out the business function smoothly and efficiently.
The organizational environment consists of all those factors that influences the organizational
working and thus can also influence the organizational structure since in each country and geographical
areas the organizational environment would change. The external organizational environment that would
influence the organizational structure is the economic, political and legal, socio-economic, technological
and natural factors. All these factors of organizational external environment affect the selection of
organizational structure since organizational structure which the organization chooses directly or
indirectly would be affected by the changes in these factors (Baumueller, 2007)
The external factors that affect the organization structure are the economic factor which provides
information about the market size and the competitor’s strategy and the manner in which organization
should be structured to meet the company’s objectives. The demand and supply for the product or service
along with the wages and salary structure have an impact on the organizational structure of the company.
The organization structure is also affected by various political and legal factors and should be in
accordance with the norms and policies of the government.
The company also has to pay due importance to the various socio-economic factors and the
physiographic and demographic factors as all the factors have direct impact on the organizational
structure. The company should keep into consideration the culture, values and beliefs of the society and
accordingly plan for the structure in order to meet out the objectives.
 The natural environment by which the multinational companies surround also influence their
organizational structure since multinational companies operate at different geographical locations which
have differences in the timings, weather conditions and does not match with the subsidiary operating in
another country which thus, becomes a crucial point at the time of selection of organizational structure
(Baumueller, 2007)
The internal factors like the size of the company have a great impact on choosing and selecting
the organizational structure. The size of the company can be defined by the geographic and product range
of the company. The company size can be defined as the area of operation that is the region covered by
the company.
The company’s product range and services also have a direct impact on the organizational
structure of the company. The company has to plan for various departments and units in order to carry out
the business operations in an appropriate manner and has to select the best organizational structure for
coordination and communication among the various branches (Moran, Harris & Moran, 2007)
Apart from these factors one of the factors that influence the selection of organizational structure
by multinational companies are their strategy. The strategy that the company is using should be an
indicator of which organizational structure to adopt since with each of the different strategies there is a
specific organizational structure that should be followed to accomplish the task with more efficiency.
There are different types of strategies that multinational companies can adopt while launching the product
in the new or the old market that includes the differentiation strategy, cost leadership strategy, focus
strategy etc.
REGULATION
Regulation is the administrative process of writing and passing laws that, to a certain extent,
restrain some fundamental rights of businesses. It can be distinguished from principal legislation by
elected legislative body. Regulation can take many forms: legal restrictions promulgated by a government
authority, self-regulation by an industry in which the type of business belongs such as through a trade
association, social regulation, and market regulation. One can consider regulation as actions of imposing
sanctions or penalties to the extent permitted by the law.

AREAS OF GOVERNMENT REGULATION OF BUSINESS

RELEVANT TO THE EXISTENCE OF BUSINESS

The State Will Take Charge of Economic Activity
A centrally planned economy is one where all major economic decisions are under the control of
the government. This type of economy is typically associated with communist and socialist ideals. In
contrast to a free market or capitalist economy, a centrally planned economy does not allow the supply
and demand of the market to define prices, wages, or the production of goods.
The theory behind a centrally planned economy begins with the idea that the market is not a
measure of what is best for the country. Subject to whim, trend, and a myriad of options, the free market
can slow or even impede the goals of a central government. By having the state run the economy, the
government is able to enact the programs, schemes, and plans deemed as best for the country by the
leaders.
Most modern economies include a mix of centrally planned and free market behavior. While the
government may control certain areas of economy, much of the market runs at the impulse of the people.
In such economy, a person has the right to start a private business, thanks to the free market, but may
have to pay business taxes and charge a sales tax based on the centrally planned aspects.
Advantages of Planned Economy
A. Driven for Collective Benefits. Government decided economies can be proposed to serve
communal rather than individual needs. Following that system, rewards, and other benefits are to be
distributed according to the price that the state credits to the service performed. A planned economy
eradicates the individual profit motives as the driving force of production and rests it in the hands of
government planners to determine the appropriate production of different sets of goods.
 B. Economies of Scale. A government run economy would endeavor to replace a number of firms
with a single firm the whole economy. This makes the business the sole beneficiary on the advantage of
single market, arbitrary pricing, and unilateral product offering.
C. Inherently Protected. Government planned economy is not subject to major downside of market
economies and market-oriented mixed economies. A planned economy, theoretically, does not suffer
from business cycles; it does not experience crises of overproduction. From the modern perspective, it
does not result in assets bubbles and massive misallocations of resources such as the South-Sea bubble in
Britain, the dot-com bubble of the late 1990s or the housing bubble of mid-2000s.

D. Stability. When government is charge, long term venture can be made without fear of a market
downward spiral which can easily lead to abandonment of a project. This is especially important where
returns are risky, in some advance economies, one of the examples would be running a prison which
decisions vary and are dependent from one administration to another.

Disadvantages of Planned Economic Activity

A. Inefficient Use of Resources. Critics of planned economies are pushing the idea that planners
cannot detect consumer preferences, shortages, and surpluses within the ideal level of accuracy and
therefore cannot efficiently coordinate production. From the modern viewpoint, production shortage or
surplus is proof of a mismatch between supply and demand, a clear and convincing evidence of wastage
in term of government resources.
B. Restrained of Democracy in Trade. Given that central planning overcame its built-n inhibitions of
incentives and innovation, it would nevertheless be unable to maximize economic democracy and self-
management, which some believes are concept that are more rationally consistent, reliable and just than
ordinary ideas of economic freedom.

Imposition of Legal and Administrative Barriers

Based on research the following are the identified and recurring legal and administrative barriers
to entrepreneurship common to ASEAN countries (Adopted from Administrative Barriers to
Entrepreneurship by Elena Suhir).

A. Disproportionate Licensing and Regulatory Requirements. The regulatory and licensing barriers
are perennial in today’s system whereby one must obtain approval from the authorities to embark on even
the smallest tasks. When entrepreneurs attempt to seek legal redress to register, they soon discover a
different level of hurdles: some choose to pay bribes, keep prices artificially low and force competitors
out of business. Some entrepreneurs lobby the government for redress, but governments rarely act against
the abuser(s). The weak rule-of-law mechanisms do not punish corruption, it helps propagate it and rather
only serve to reinforce the administrative barriers. The common pattern of conducting business by Small
and Midsize Enterprise(SMEs) in some Asian Countries and in the Philippines in particular, trivially
consists of three options for the entrepreneur: (1) enter the informal sector by paying bribes each step of
the way, (2) secure and utilize “connections” in government, and/or (3) obtain a government position and
abuse the system of authority to one’s benefit.
B. Excessive, Complex, and Arbitrary Taxation. The taxation system can sometimes be complex,
subject to abuse by government officials (and businesses) and appears to change frequently. The net
effect of an excessive, abusive, and arbitrary system of taxation is that SMEs find it virtually impossible
to conform to all the laws and tax regulations, making the informal initiative and creative legal deviations
the only chance to survive in the market. Tax sometimes is the major reason of the capital flight that hurts
the overall economy.
C. Inadequate Banking System and Poor Practices. Inadequate banking system can also impose
impossible demands on entrepreneurs. Issues involving timeframes, and terms credit for repayments are
sometimes prohibitive, collateral is difficult to provide, and finding a guarantor to help secure a loan is
very difficult. However, we cannot blame this banking practice considering that one of the underlying
reasons also for the poor banking practices is the high risk of delinquency or bad loans.
D. Lack of Government’s Commitment to Reduce Administrative Barriers. A good mass within the
business community and even those outside of business recognizes that the governments are doing little
to reduce administrative barriers impeding investment and trade. Some entrepreneurs are even silently
blaming the governments for having little and poor understanding of the importance of addressing these
problems.

REGULATIONS RELEVANT TO THE CONDUCT OF BUSINESS

The government has many business regulations in place to protect employees’ rights, protect the
environment and hold corporations accountable for the amount of power they have in this business-driven
society. Some of these regulations stand out more significantly than the others because of their relevance
to every employee, costumer, and society in general.

Advertising

Laws pertaining to marketing and advertising set in motion by the regulatory authority exist to
protect consumers and keep companies honest about their products. Advertising laws are made up of
dozens of tidbits under three main requirements: advertising must truthful and non-misleading; business
need to be able to back up claims made in advertisements at any time; and advertisements must be fair to
competitors and consumers.

Employment and Labor

Among the ever-changing regulations in business are employment laws. These laws pertain to
minimum wages, benefits, safety, and health compliance, working conditions, equal employment
opportunity, and privacy regulations cover the largest area of subjects of all business regulations. There
are also several required benefits, including unemployment insurance, workers’ compensation insurance
and employee social security assistance which is mandatory and applicable generally to all employees.

Environmental

The carbon footprint of business on the environment is regulated by the Department of

Environment and Natural Resources (DENR). The DENR enforces environmental laws passed by the
government. This is done through frequent inspections and environmental audit. The Environmental
Management Bureau (EMB) and other offices and bureau exist to help businesses small and large alike
achieve environmental compliance and should serve as a resource more than an enforcer.

Privacy

Sensitive information is usually collected from employees and costumers during hiring and
business transactions, and privacy laws prevent businesses from disclosing this information freely.
Information collected can include social security number, address, name, health conditions, credit card
and bank numbers and personal history. Not only do various laws exist to keep businesses from spreading
this information, but people can sue companies for disclosing sensitive information.

Safety and Health

The safety and health laws ensures that employers provide safe and sanitary work environments
through frequent inspections and a grading scale. A company must meet specific standards in order to
stay in business. In accordance with legal provisions, employers must provide hazard-free workplaces,
avoiding employee physical harm and death, through incorporating these in procedures manual.

POLITICAL ENVIRONMENT OF BUSINESS

Regardless of how attractive the economic prospects of a particular country or regions are, doing
business there might prove to be financially devastating if the host government imposes heavy financial
consequential penalties on a company.

The political environment in which the firm operates will have a significant impact on a
company’s international operating activities. The greater the level of involvement of the company in a
foreign market, the greater the need to monitor the political climate of the countries where business is
conducted since this political climate will affect among others the marketability of the company’s
product, the inflow of investments and more importantly valuation of share price.

Changes in government more often result in changes in policy and attitudes towards foreign
business. Bearing in mind that a foreign company operates in a host country at the discretion of the
government concerned, the government can encourage foreign activities by offering attractive
opportunities and incentives for investment and trade, or discourage its activities by imposing
disincentives and restrictions such as unfriendly stricter regulations and import quotas, etc.

One of the primary concerns to an investor should be the stability of the target country’s political
environment. One of the surest indicators of political instability is a frequent change in regime. Although
a change in government need not to be accompanied violence, it is often precursor of change in policy
towards business, particularly international business.

CORPORATE SOCIAL RESPONSIBILITY AND ORGANIZATIONS

Corporate social responsibility (CRS) can be defined as the “economic, legal ethical, and
discretionary expectations that society has of organizations at a given point in time” (Carroll and
Buchholtz 2003). The concept of corporate social responsibility means that organizations have moral,
ethical and philanthropic responsibilities in addition to their responsibilities earn a fair return for
investors. A traditional view of the corporation suggests that its primary, if not sole, responsibility is to its
owners, or stockholders. However, CSR requires organizations to adapt a broader view of its
responsibilities that includes not only stockholders, but many other constituencies as well, including
employees, suppliers, customers, the local community, local, and national governments, environmental
groups, and other special interest groups.

Corporate social responsibility is related to but not identical with business ethics. While CSR
encompasses the economic, legal, ethical, and discretionary responsibilities of organizations, business
ethics usually focuses on the moral judgements and behavior of individuals and groups within
organizations. Thus, the study of business ethics may be regarded as a component of the larger study of
corporate responsibility.

CONTEMPORARY SOCIAL ISSUES

` Corporations deal with various social issues and problems both directly related to their operation
and not. It would not be possible to satisfactorily describe all the social issues faced by business. This
section will just briefly discuss three contemporary issues that are of major concern: the environment,
global issues, and technology issues.

Environmental Issues

Corporations have long been criticized and even lambasted by some pressure groups for their
negative effect on the natural environment in terms of wasting natural resources and contributing to
environmental problems such as pollution and global warming. Other issues related to the natural
environment include irresponsible disposal of waste, deforestation, and land degradation. It is likely that
corporate responsibilities in this area will increase in the coming years.

Global Issues

The globalization of business appears to be an irreversible trend, but there are many opponents to
it. Critics suggest that globalization leads to the exploitation of developing nations’ workers, destruction
of the environment, and increased human rights abuses. They also argue that globalization primarily
benefits the wealthy and widens the gap between the rich and the poor.

Whether one is an opponent or a proponent of globalization, it does not change the fact that
corporations operating globally face daunting social issues. Many corporations have been stung by
revelations that their plants around the world were “sweatshops” and/or employed very young children.
This problem is complex societal standards and expectations regarding working conditions and the
employment of children vary significantly around the world. Corporations must decide which one is the
good and responsible option; adopting the standards of the countries in which they are operating or
imposing a common standard world-wide.

Dumping is also another delicate issue in globalization. Secondary products or variants are sold
to foreign countries at the price chokingly low for the host country businessman to compete thereby
killing industry.

Technical Issues

Another contemporary social issue relates to technology and its effect on society. For example,
the internet has opened up many new avenues for marketing goods and services, but has also opened up
the possibility of abuse by corporations. Issues of privacy and the security of confidential information
must be addressed. The marriage of science and technology has a very serious implications, this union
must be given “blank check” otherwise it can do limitless things.

Ethical Behavior in the Enterprise

When we hear the word ethical, several ideas come to mind, most notably good versus bad and
the right versus wrong. These are the six foundation of trust upon which ethical business practice is built:

Character

Character drives what we do when no one is looking. We can build our character through the way
we live by thinking good thoughts and performing good acts.

Ethics

Ethics refer to the set rules that describes what is acceptable conduct in society. Ethics serve as a
guide to moral daily living and helps corporation judge whether such behavior can be justified.

Integrity

To have integrity is to honest and sincere. Integrity is defined as adhering to a moral code in daily
decision making. Put simply, when people and businessman possess integrity, it means that they can be
trusted.

Laws

The law is a series of rules and regulations designed to express the needs of the people. Laws
frequently provide us with a sense of right and wrong and guide our behavior.

Morals

Morals are a set of rules or mode of conduct on which society is based. Certain moral elements
are universal, such as laws forbidding homicide and the basic duties of doing good and furthering the
well-being of others.

Values

Values are defined as acts, customs, and institutions that a group of people regard in a favorable
way.

ROLE OF THE STATE AND ITS IMPACT ON BUSINESS ORGANIZATIONS

Some sectors have criticized that the government regulatory parameters on the economy is
restrictively futile on some extent considering that, often, it not only lacks teeth but also has some
features that obstructs the full capability of the enterprise in terms of maximizing wealth. At present,
some of the most continuing debates in economics are only actually focused on the role of government.
 The importance of private ownership is perfectly consistent with what people believed about
personal freedom. People and the business sector believed in limiting the government’s authority over the
economic pursuits of individuals, including its role in the overall kingdom of economics.

In spite of this “leave us alone” attitude of business sector most people still want the government
to perform certain important tasks in the economy more importantly on regulation, and our legal system
provides a very sound fundamental structure which creates an atmosphere suited for this business
environment.

ROLE OF GOVERNMENT IN BUSINESS

The private sector is the chief economic force of every country, but it needs government
regulation. The government’s role in business is as old as the county itself; the constitutions gives the
government the power to regulate some commerce. Though the government’s role has increased over
time, the business community still enjoys considerable freedom. However, the government still exercises
its authority several ways.

Consumer Protection

When a vendor fails to honor the guarantee, the purchaser has recourse in the law. Likewise,
when a product causes harm to an individual, the courts may hold the vendor or the manufacturer
responsible. Labeling is another requirement the government imposes on marketers. Many foods, for
example, must display nutritional content on the packaging. Other manifestations of this protection are as
follows:

a. Businesses need the court system for protecting property rights, enforcing contracts, and
resolving commercial disputes.
b. Government protects consumers from businesses.
c. Government hears and corrects consumers’ complaint about business fraud and put into effect
recalls of substandard and dangerous products.
d. Government controls private companies’ actions to protect public health and safety.

Contract Enforcement

Businesses deal with other businesses. These contracts may be complex, such as mergers, or they
may be as simple as a warranty on supplies purchased. Companies bring one another to court just as
individuals do. An oral agreement can constitute a contract, but usually only a written agreement is
provable. If one party refuses to meet its obligation under a contract, a company will turn to the
government’s legal system for enforcement.

Employee Protection

Many agencies work to protect to protect the rights of employees. These rights cover the
following: regular employment, probationary employment, minimum employable age, prohibition against
stipulation of marriage, anti-sexual harassment law and many others.

Environmental Protection

When a marketing transaction impacts a third party besides the marketer and purchaser the effect
is called “externality”. The third party is often the environment. Thus, it is the government’s role to
regulate industry and thereby protect the public from environmental externalities. Whether the
government is effective in this role is a matter of much discussion.

Investor Protection

Government mandates that companies make financial information public, thereby protecting the
rights of investors and facilitating further investment. This is generally done through filings with the
Securities and Exchange Commission.
 The government certainly has the hand on what it wants the country to be perceived in the outside
world. Textbooks would tell us that the following issues are the specifics a government needs to address
well if its country wants to be considered business as well as investor friendly.

 Starting a Business
 Licenses
 Employing Workers
 Getting Credit
 Protecting Investors
 Paying Taxes
 Export Policy

Permission

The function of this registration is usually to define the financial stability the owners of the
company have. It limits their risk to the amount they have invested in that particular organization.
Registration also allows the government to monitor companies to execute its other functions in the
business world.

Taxation

Governments at all levels tax businesses, and the resulting revenue collected is an important part
of the government budgets. Some revenue is taxed at the corporate level, then taxed as personal income
when distributed as dividends. This is no way inappropriate, since it all balances the tax burden between
the company and individual and allows the government to tax more equitably.

ROLE OF GOVERNMENT POLICY

Government provides certain services-such as national defense, administration of justice,

education, environmental protection, public works and highways. The aforementioned services are
viewed as better suited for the government than private businesses although government certainly needs
help on the delivery of these services from private enterprises. When market is behaving like “dead
horse” wherein it is lowly irresponsive no matter how hard it is hammered by private initiative,
government comes to the rescue. Government also comes to the rescue in times wherein prices are so
high, so high that it is already hard to survive by the public. Rescue in the form of subsidies on certain
commodity to diminish its impact on people’s pocket, NFA rice distribution at lesser price is example of
this effort.

PRESSURE GROUPS

A pressure group is an organized group that seeks to influence not only government policy but
also private enterprises’ operating policy.

The following are the types of pressure groups which can become variables to consider in laying
down platform of government not only in government but also in private enterprises.

ECONOMIC PRESSURE GROUPS

Giant Private Corporations (the Giant Connection)

These corporations need to ensure that their interest is protected since large government contract
are often at stake. The relative size and power of these companies can sometimes rival to that of the
government and therefore, bring massive influence on political and economic decisions which affects
variety of business activities. With size and power, there is this implication of lobbying certain laws and
regulations, putting pressure on their once political beneficiaries who are now in position and to certain
degree, do some maneuvers to outdo their competitor through the use of “special connections”.
Professional Organizations

This is a powerful group bound by the common interests of its members. The Philippine Institute
of Certified Public Accountants (PICPA), the Philippine Medical Association (PMA) and the Integrated
Bar of the Philippines (IBP) are prime examples.

Trade Associations

Association of business with common interest to protect to is the simplest description of a trade
association. The increase in government’s initiative and other progressive laws has prompted an increase
in business representation from this group.

Trade Unions

One of the things that greatly influence the corporate governance principles and government
policies in the Philippine setting is in the area of labor and management. In the Philippines we have
several clusters of unions that can have pressure on governmental policies and company’s philosophy and
governance, one of which is Partido ng Manggagawa (PM), Associated Labor Union-Trade Union
Congress of the Philippines (ALU-TUCP) is another and many others that are working for the protection
of the labor sector.

PUBLIC PRESSURE GROUPS

These are groups that represent a cluster of the public on certain issues. The public had turned to
pressure groups since they are visibly vocal to issues that pat the hearts of a certain individuals. These
individuals have the belief that these pressure groups might be triumphant in changing what they believe
unacceptable, the most obvious present issue would be environmental and climate change issues.

SECTORAL PRESSURE GROUPS

Sectoral pressure group refers to groups which work to protect and advance the interest of
specific social groups in a certain society. At times they are crossbreed of political groups. Typical
example, in the Philippine setting, is the Gabriela which is for women and children specifically on
promoting equal opportunity for women.

RELIGIOUS/ATTITUDE PRESSURE GROUPS

They are considered as one of the most powerful groups. They share universal beliefs and
objectives on one issue, and they believe that their major role, aside from endorsing a politician and
lobbying Congress, is to mobilize support in the country for what they believe in and to support for
political office those who share their beliefs.

GOVERNMENTAL UNITS PRESSURE GROUP

The level of maturity of the system of administration and the development government agenda in
the last wo decades, and the enormity of the sums of money involved, has led to an expanded role being
played by the local government as administrative arms of the national government. This has led to a
greater degree of freedom and power for the Local Government Units (LGUs). This freedom gives rise to
the lobbying powers of the LGUs which sometimes left unbalance in favor of LGUs with stronger
connections.

INCOME AND WEALTH DISTRIBUTION

Income distribution is defined in economics descriptively as how a nation’s total economy is
dispersed amongst its population. Classical economists such as Adam Smith, Thomas Malthus and David
Ricardo were mainly concerned with income distribution, that is, the distribution of income between the
main factors of production, land, labor, and capital.
 Distribution of wealth is a comparison of wealth of various members or groups in a society. It
differs from the distribution of income in that it looks at the distribution of ownership of the assets in a
society, rather than the current income of members of that society. Defining the two economic terms
would easily lead us to one very important economic issue which owners of big corporations should
consider and should not just be indifferent about, the economic inequality.

Wealth distribution:

Rich

Middle Class

Poor

MAJOR CAUSES OF ECONOMIC INEQUALITY

There are many causes of economic inequality; the following are some of them both from the
basic to global perspective and from the micro and macro standpoint:

Culture and Religion

In many countries, individuals belonging to certain racial and ethnic minorities like the natives
are more likely to be more than others. Attributed causes to this include cultural differences amongst
different races, educational achievement gap and racism, and some instances cultural values and
religiosity level.

Development

According to Simon Kuznets, levels of economic inequality are in large part the result of stages
of development. Kuznets points out that countries with low levels of development have relatively equal
distributions of wealth. As a country develops, it acquires more capital, which leads to the owner of the
capital having more wealth and income and introducing inequality. This inequality is obviously
attributable to the dominance of the wealthy faction.

Diversity of Choices

When confronted with the choice between working harder to earn more money and or enjoying
more leisure time, equally capable individuals with identical earning potential often have different
choices. This leads to economic inequality even in an environment where perfect equality and abilities
exists. The swap between work and leisure is important specifically in the supply side of the labor market
in labor economics.

Education

Education, especially in an area where there is a

high demand for workers, creates high wages for those with
education. As a result, those who are unable to afford an
education, or choose not o pursue optional education,
generally receive much lower wages. ▪▪▪▪▪▪▪▪▪▪▪▪▪▪▪▪▪▪▪▪▪▪▪▪▪▪▪▪▪▪▪▪▪▪▪▪▪▪▪▪ Many economists
believe that a major reason the world has experienced
increasing levels of inequality is an Wealth
increase in the demand
for highly-skilled workers in high tech industries. They believe
that this has resulted in an increase in wages for those with
education but has not increased the ▪▪▪▪▪▪▪▪▪▪▪▪▪▪▪▪▪▪▪▪▪▪▪▪▪▪▪▪▪▪▪▪▪▪▪▪▪▪▪▪ wages of those without
education leading to greater inequality.
Population
Globalization

Globalization is a progression by which the worlds are unified into a single society and function.
It has been asserted that globalization supports productivity, cultural mix and cash flow into the
developing countries; however, there are some drawbacks of globalization that should not be overlooked:
unemployment, social degeneration and difficulty of competition.

Inflation

Some economists have theorized that high inflation, caused by a country’s monetary policy, can
contribute economic inequality. This theory argues that inflation of the money supply is a coercive
measure that favors those who already have an earning capacity, disfavoring those on fixed income or
with savings, thus aggravating inequality. They cite examples of correlation between inflation and
inequality and noted that inflation can be caused independently by “printing money”, suggesting
causation of inequality by inflation.

Labor Market

One of the major causes of economic inequality in modern market economies is the
determination of wages by the market. Inequality is rooted from the differences in the supply and demand
for different types of work. In an ideal world, worker’s wages will not be controlled by the labor and by
the employer but rather dictated by the market. The demand side of labor (employers) cannot afford to
offer a price below what the market is offering, otherwise it will be in danger of ongoing understaffed or
worse will have the lowest class of workforce in terms of quality.

Wealth Condensation

Wealth condensation is the theoretical process by which, under certain conditions, newly-created
wealth concentrates in the possession of already-wealthy individuals or entities. According to this theory,
those who already hold wealth have the means to invest in new sources of creating wealth or otherwise
leverage the accumulation of wealth, thus are the beneficiaries of the new wealth. Over time, wealth
condensation can significantly contribute to the persistence of inequality within society.
Name: Section/Block:

Identification:

On the space provided, supply the word/group of words/phrase being described/defined:

1. Refers to a progression by which the world is unified into a single society and
function.

2. The economic, legal, ethical and discretionary expectations that the society has of
organizations at a given point in time.

3. Series of rules and regulation designed to express the needs of the

people. 4. Association of businesses with common interest to protect.

5. Refers to groups which work to protect and advance the interest of specific social
groups in a certain society.

6. One of the contemporary social issues which talks about pollution, global warming,
fossil fuel, depletion of natural resources and the likes.

7. These are pressure groups that represent a cluster of the public on certain

issues. 8. It is something that drives what we do when no one is looking.

9. The act of adhering to the moral code in daily decision making.

10. Refers to a set of rules that describes what is acceptable conduct in society.

Enumeration

Causes of economic inequality

1.
2.
3.
4.
5.
Foundation from which ethical business can be built

6.
7.
8.
9.
10.

Types of pressure groups

11.
12.
13.
14.
15.

True or False

1. The primary sources of managerial “cluelessness” are personality disorders and IQ.
2. The explosive technological and social changes of recent years have simplified our lives and our
understanding of the world.
3. Modern organizations rely too much on an artistic approach to management and too little on an
engineering approach.
4. Customers are so used to misleading advertising that it does not infuriate them.
5. Sponsors of advertisements aimed at children must be especially careful to avoid misleading
messages.
6. An individual’s moral values and central, value-related attitudes clearly influence one’s business
behavior.
7. A personnel manager of a large company would probably agree that the more ethical the
company, the easier it is to attract good people.
8. Costumers can’t find out which firms are acting responsibly, and which are not.
9. During the early twentieth century, working conditions were deplorable by today’s standards.
10. Awareness of business’ social responsibilities has increased along with government involvement.
11. There are many more socially responsible businesses today than there were ten years ago.
12. In support of their position, proponents of the socioeconomic model argue that the businesses
should be allowed to ignore social issues.
13. One of the major reasons for improving product safety is the costumer’s demand for safe
products.

Multiple Choice

1. As a manager, you encountered and important problem that seems almost impossible to solve.
Top management would likely suggest that you
a. Hire a consultant who brings the right knowledge and expertise to the problem.
b. Stand out of the way and let someone else work with the issue.
c. Try using different lenses to analyze the problem and develop strategies.
d. Call a meeting of everyone who knows about the issue and make a group decision about what
to do.

2. It is argued that even the smartest managers take foolish actions in decision-making because they
a. Are too clever for their own good.
b. Have a parochial and distorted view of the problem at hand.
c. Are driven by self-love and ego, which stifle their ability to understand a situation correctly.
 d. Fall into the trap of personality foibles such as pride, haughtiness and unconscious need to
err.

3. As described, the actions of the successful manager as similar to a skilled carpenter using the
right tools for the job. Thus, a successful manager must
a. Make sure their organizations are “level” (i.e. balanced)
b. Possess a “diverse collection of high-quality implements (i.e. frames)” along with the
knowledge of when and how to use them.
c. “Measure twice but cut once” (i.e. not make hasty decisions).
d. Have the right wood (i.e. employees for the job.

4. The world that we perceive is for the most part

a. Constructed objectively.
b. Existing independent of us.
c. Constructed internally on the basis of individuals’ belief and perceptual filters.
d. Dependent upon the quality of our sight.

5. When defining an organization’s structure, the key consideration should involve

a. Allocation of responsibilities across different units and members as well as the integration of
these efforts in pursuit of common goals.
b. The number of organizational levels and their breadth.
c. The level of centralization versus decentralization of responsibilities.
d. Ways on how to effectively motivate organizational members to maximize their performance.
6. An organization’ structure should not be dependent upon
a. Its workplace
b. Goals
c. Emotional liability
d. Technology

7. Patriarchal organizations are characterized by a

a. Fixed division of labor
b. Hierarchy of offices
c. Set of rules governing performance
d. Dominant father figure or a ruler with almost unlimited authority and power

8. When designing the structure of an organization, creating roles and units yields the benefits of
specialization but creates problem of
a. Pay scales for the various roles.
b. How to motivate the employees in each unit.
c. Coordination and control.
d. Where to locate the different units.

9. Forecasting and measuring organizational performance is accomplished through

a. Planning and control systems
b. Rules and regulations
c. Formal authority
d. Standard operating procedure

10. Lateral coordination is often achieved through

a. Rules and regulations
b. Authority and delegation
c. Meetings and task forces
d. A clear chain of command

11. are becoming more prevalent is fast moving fields like biotechnology, where
knowledge is so complex and widely dispersed that organizations finds it impractical to exercise
initiatives alone.
a. Inter-organizational networks
 b. Matrix structures
c. Task forces
d. Rules and regulations

12. When deciding how to coordinate work roles and units in an organization it is best to
a. Use either vertical or horizontal coordination but not both.
b. Base the choice on the workers’ preference.
c. Base the choice on the leader’s preference.
d. Base the choice on the organization’s environment.

13. If employees are unclear about what they are supposed to do, they often tailor their roles around
a. The most professional standards
b. Personal preferences
c. Industry standards
d. Organizational goals

14. The contribution of Henry Mintzberg’s conception of structural possibilities is

a. A detailed prescription of how to structure an organization in response to different missions
and external challenges to envision organizations as webs of inclusion.
b. Clustering various functions into groupings and showing their relative size and clout in
response to different missions and external challenges.
c. To envision organizations as organic, circular architectural forms.
d. None of the above
15. When a process is reengineered,
a. Employees begin to make choices and decisions on their own.
b. Managers finally begin to act like bosses.
c. Workers become more willing to follow orders.
d. Jobs get narrower and more routine.