UNIT 3 - SOCIAL RESPONSIBILITY OF ENTREPRENEURS

Responsibility refers to the duty or obligation to satisfactorily perform or complete a task (assigned by someone, or
created by one’s own promise or circumstances) that one must fulfill, and which has a consequent penalty for failure.
Accountability refers to the obligation of an individual or organization to account for its activities, accept
responsibility for them, and to disclose the results in a transparent manner.
Accountability vs. Responsibility
- The main difference between responsibility and accountability is that responsibility can be shared while
accountability cannot. Being accountable not only means being responsible for something but also ultimately being
answerable for your actions. Also, accountability is something you hold a person to only after a task is done or not
done.
- In ethics and governance, accountability is answerability, blameworthiness, liability, and expectation of account-
giving, while responsibility may refer to being in charge, being the owner of a task or event.
- Responsibility can be before and/or after a task. Accountability owes an explanation, while responsibility does not
necessarily owe an explanation.

Chapter 8: Responsibilities and Accountabilities of Entrepreneurs

A. To the Employees
1. Pay wages and taxes.
- Pay employees at least the minimum hourly wage in the locality and pay each employee money owed from
working per pay period, including overtime, sick leave, and vacation wages.
- Paychecks should always be on time and without delay so the workers can meet individual financial
obligations.
- The government requires entrepreneurs to pay PhilHealth, Social Security, taxes out of employee wages for
each employee working their business.
2. Create and maintain a safe workplace.
- Create and maintain a safe working environment for employees as per standards.
- Make employees aware of areas in the business that have a high risk for injury and train employees in safety
procedures to minimize the risk of injury.
- Ensure each employee uses tools and equipment safe for small business’ particular industry.
- Continual inspection of facilities and employee knowledge of safety standards is necessary to make certain
the workplace remains as safe as possible.
3. Facilitate worker’s compensation insurance.
- When injuries occur through no fault of employees, entrepreneurs is responsible to file a claim with workers’
compensation insurance provider. The coverage provides for medical care and wage replacement for injured
employee.
- Businesses must treat their injured employee with respect and file the claim without attempting to cause a
delay in processing or attempt to deter the worker from filing a claim at all.
4. Enforce anti-discrimination law.
- ‘EEO’ stands for “Equal Employment Opportunity,’ which means that employees cannot be disadvantaged,
dismissed, or not given employment for any reason like culture, race, religion, country, age, gender, sexual
preference, disability, way of life, and beliefs.
- Any problems or issues that arise with guests or colleagues from overseas may require the involvement of
embassies, government agencies, local cultural groups, or diplomatic services to help resolve them.
5. Create and maintain a favorable working environment.
- Provide a healthy working environment, which respects each person and their opinion is considered.
- Give employees feedback and be honest with them.
6. Respect human rights.
7. Support career development.
8. Train and educate employees.
9. Manage performance.
- “What gets measured gets done”
10. Give rewards and benefits.
- Reward employees fairly and attractively.
B. To the government
1. Observe laws, rules, and regulations.
2. Pay taxes.
3. Follow environmental regulations.
4. Abide by labor laws.
 5. Avoid restrictive trade practices.
- Companies are forbidden from engaging in certain kinds of restrictive trade practices that limit competition
like monopolies.
6. Disclose financial statements.
7. Avoid corruption.
8. Assist in implementing socio-economic policies.
9. Help earn foreign exchange.
10. Advise the government.
- The business organization has to provide timely advice to the government in respect of framing important
policies such as industrial policy, import and export policy, licensing policy, etc.
11. Complete promptly government contracts.
12. Contribute to government treasury.
13. Contribute to political stability.
C. To the creditors
1. Give correct information.
2. Provide fair return on investment (ROI).
3. Strengthen share prices.
4. Honor fiduciary duties.
D. To the suppliers
1. Practice fair pricing and licensing.
2. Avoid coercion and litigation.
- Any business transaction with suppliers must be free from any form of coercion and unnecessary litigation.
3. Maintain stability.
4. Maintain confidentiality.
5. Pay on time.
6. Select suppliers with discernment.
E. To the consumers
1. Ensure quality of products and services.
2. Ensure consumer’s health and safety.
3. Provide easy-to-use products.
4. Provide free training.
5. Be fair with prices.
6. Be honest in advertising and marketing.
7. Be honest in dealings.
8. Attend to complaints.
- Attend to consumer complaints immediately.
- When major issues occur, employ a system for making quick and accurate decisions on steps and measures to
take, while placing top priority on not inconveniencing the consumers.
9. Service even after sales.
- The company is expected to provide after sale service for maintenance of goods during the period of
warranty.
- After sales service is essential and ensures long term growth and profits for the organization.
10. Respect customers’ time.
- Do not decide the time and venue when meeting a customer as per your availability and comfort.
11. Treat customers well.
12. Ensure regular supply.
13. Research and develop to increase customer satisfaction.
14. Avoid monopolistic competition.

F. To the general public

1. Be fiscally responsible.
- A company needs to enact and enforce guidelines of its own that does not only agree with the law but also
apply specifically to the company, to avoid misuse of company funds.
- When fiscal fraud occurs, there is a bond of trust between a consumer and a company that is broken.
2. Consider public input.
- Reach out to customers and benefit from the insight of what customers are looking for in product
improvements.
- Remain accountable to customers; otherwise, the company loses its customers and cease to exist.
3. Take care of the community.
G. To the environment
 1. Comply with environmental legislation.
2. Dispose waste properly.
3. Recycle.
4. Conserve and protect biodiversity.
5. Prevent and remedy damages to environment.
6. Report an incident.
7. Use scarce natural resources sparingly.

Chapter 9: Major Ethical Issues in Entrepreneurship

Ethical Issue – a problem or situation that requires a person or organization to choose between alternatives that
must be evaluated as right (ethical) or wrong (unethical)
Ethical Dilemma – arises in a situation concerning right or wrong when values are in conflict
A. Basic fairness
1. Gross negligence – failing to properly investigate a matter that affects the corporation and its shareholders
B. Personnel and consumer relations distribution dilemmas
1. Mistreating employees
2. Discrimination and harassment in the workplace
3. Conflicts of interest in family-run businesses that may cause ethical issues
4. Unethical employee behavior
5. Unethical working conditions
6. Side deals and sub-standard work
C. Fraud – financial misconduct; corporate misrepresentation
D. Unfair competition
1. Antitrust Law or Competition Law
- Antitrust violations constituting unfair competition occur when one competitor attempts to force others out of
the market or prevent others from entering the market, through tactics such as predatory pricing or exclusive
purchase rights to raw materials needed to make a competing product.
2. Trademark infringement
- The maker of a product uses a name, logo, or other identifying characteristics to deceive consumers into
thinking that they are buying the product of a competitor
3. Misappropriation of trade secrets
- One competitor uses espionage, bribery, or outright theft to obtain economically advantageous information in
the possession of another
4. Trade libel
- Spreading of false information about the quality or characteristics of a competitor’s products
5. Tortious interference
- Competitor convinces a party having a relationship with another competitor to breach a contract with, or duty
to the other competitor
6. Anti-competitive Practices
- One Preventing or reducing competition in a market
7. Dumping
- Selling a product in a competitive market at a loss for the hope of forcing other competitors out of the market
after which the company would be free to raise prices for a greater profit
8. Exclusive dealing
- Obliging a retailer or wholesaler to only purchase from the contracted supplier
9. Price fixing
- Colluding to set prices, effectively dismantling the free market
10. Refusal to deal
- Two companies agree not to use a certain vendor
11. Dividing territories
- An agreement of two companies to stay out of each other’s way and reduce competition in the agreed-upon
territories
12. Limit pricing
- Price is set by a monopolist at a level intended to discourage entry into a market
13. Tying
- Products that aren’t naturally related must be purchased together
14. Resale price maintenance
- Resellers are not allowed to set prices independently
15. Religious/minority group doctrine
 - Businesses must apply tribute to a significant part of the community in order to engage in trade with the
community
16. Absorption of a competitor or competing technology
- The powerful firm effectively co-opts or swallows its competitor rather than see it either compete directly or
be absorbed by another firm
17. Subsidies from government
- Support from government which allow a firm to function without being profitable, giving them an advantage
over competition or effectively barring competition
18. Regulations
- Placing costly restrictions on firms that less wealthy firms cannot afford to implement
19. Protectionism, tariffs, and quotas
- Give firms insulation from competitive forces
20. Patent misuse and copyright misuse
- obtaining a patent, copyright or other forms of intellectual property or using such legal devices to gain an
advantage in an unrelated market
21. Digital rights management
- digital rights management which prevents owners from selling used media, as would normally be allowed by
the first sale doctrine
22. Enhancing the addictiveness

E. Unfair communication
- Lying; Presenting misleading file notes; Concealing large debts: Obstruction of justice by shredding documents that
could be used for legal issues; Deliberately concealing large losses in projects; Reporting false stories;
Underreporting of profit; Provision of unsuitable financial advice to customers

F. Nonrespect of agreements (Breach of Contract)

- A legal cause of action in which a binding agreement or bargained for change is not honored by one or more of the
parties to the contract by non-performance or interference with the other party’s performance

G. Environmental degradation
1. Deterioration of environment through depletion of resources such as air, water, and soil
2. Destruction of ecosystems
3. Extinction of wildlife

H. Contractualization
- Replacing of regular workers with temporary workers who receive lower wages with no or less benefits; they do the
work of regular workers for a specified and limited period of time; they never become regular employees even if
they get rehired repeatedly under new contracts

Chapter 10: Models and Frameworks of Social Responsibility in the Practice of Sound Business

A. Total Corporate Social Responsibility Framework

- This model indicates that total corporate social responsibility can be subdivided into four criteria: economic, legal,
ethical, and discretionary responsibilities.
 Figure 1: Total Corporate Social Responsibility - This is a model of evaluating an organization’s social performance.

a. Economic responsibilities
- The first criterion of social responsibility is economic responsibility.
- The business institution’s responsibility is to produce goods and services that a society wants and to maximize
profit for its owners and shareholders but it should not be treated as the only social responsibility as it could
lead companies into trouble.
b. Legal responsibilities
- Defines what society deems as important with respect to appropriate corporate behavior and businesses are
expected to fulfill their economic goals within the legal framework.
c. Ethical responsibilities
- Includes behavior that is not necessarily codified into law and may not serve the organization’s direct
economic interests
- To be ethical, organization’s decision makers should act with equity, fairness, and impartiality, respect the
rights of individuals, and provide different treatments of individual only when differences between them are
relevant to the organization’s goals and tasks.

d. Discretionary responsibilities
- The highest criterion of social responsibility because it goes beyond societal expectations to contribute to the
community’s welfare
- Purely voluntary and guided by an organization’s desire to make social contributions not mandated by
economics, laws, or ethics
- Include generous philanthropic contributions that offer no payback to the organization and are not expected.
B. The Four-Way Test Framework
Herbert J. Taylor (18 April 1893 – 1 May 1978)
- A business executive, civic leader, and sponsor of Christian organizations who belonged to the United States of
America
- Set out to save the Club Aluminum Products distribution company from bankruptcy
- He wrote down the following twenty-four words which he believed was a simple, easily remembered guide to
right conduct – a sort of ethical yardstick – which all of those who are in the company could memorize and apply
to what they thought, said and did:
1. Is it the truth?
2. Is it fair to all concerned?
3. Will it build goodwill and better friendships?
4. Will it be beneficial to all concerned?
- He called the above The Four-Way Test of the things one thinks, says or does.
THE FOUR-WAY TEST is the exemplary Framework of Corporate Social Responsibility and has been used and
emphasized by several public service organizations in the US and other countries for many years. It is short and
simple but has broad application to all types of organizational activities. In a given situation, all of these guidelines
may not be entirely satisfactory but they do provide a set of useful criteria that are easily remembered.
C. Criteria for Decision Making
 Most ethical dilemmas involve conflict between the needs of the part and of the whole the individual versus
the organization or the organization versus society as a whole. Managers faced with tough ethical choices often benefit
from a normative strategy to guide their decision making. Four of these approaches that are relevant to managers are
the following:
a. Utilitarian approach
- This is the ethical concept that moral behaviors produce the greatest good to the greatest number. Under this
approach, a decision maker is expected to consider the effect of each decision alternative on all parties and select
the one that optimizes the satisfaction of the greatest number of people.
b. Individualism approach
- This is the ethical concept that acts are moral if they promote the individual’s best long term interests which
ultimately leads to greater good.
c. Moral-rights approach
- This is the ethical concepts that moral decisions are those that best maintains the rights of those people affected
by them.
- Six moral rights that should be considered during decision making are:
1. The right of free consent.
2. The right to privacy.
3. The right of freedom of conscience.
4. The right of free speech.
5. The right of due process.
6. The right to life and safety.
d. Justice approach
- This is the ethical concept that moral decisions must be based on standards of equity, fairness, and impartiality.

Reference:
Jerusalem, V.L., Palencia, M.M., & Palencia, J.M. (2017). Business Ethics and Social Responsibility: Concepts, Principles, &
Practices of Ethical Standards. Manila, Philippines: Published and distributed by Fastbooks Educational Supply, Inc.