BUSINESS

ETHICS

BUSINESS ETHICS
~ Refers to standards of moral conduct, behavior and judgment in business.
~ Involves making the moral and right decisions while engaging in such business activities as
manufacturing and selling a product and providing a service to customers.

BUSINESS ETHICS
~ an area of corporate responsibility where businesses are legally bound and socially obligated
to conduct business in an ethical manner

Main Purpose
 To help business and would-be business to determine what business practices are right
and what are wrong.

IMPACT OF BUSINESS ETHICS

 ECONOMIC IMPACT
 SOCIAL IMPACT
 ENVIRONMENTAL IMPACT
 IMPACT ON BUSINESS MANAGERS
IMPACT OF BUSINESS ETHICS
ECONOMIC IMPACT
A business has an economic impact
on society through the wages it pays to
its employees, the materials that it
buys from their suppliers and the
prices it charges its customers.
IMPACT OF BUSINESS ETHICS
ENVIRONMENTAL IMPACT
Environmental protection is a key area
of business influence on society.
Businesses that implement good
environmental policies to use energy
more efficiently, reduce waste and in
general lighten their environmental
footprint can reduce their internal costs
and promote a positive image of their
company.
In particular, manager should
SOCIAL IMPACT
The social impact of corporate
governance contributes to the
ethical climate of society.
If businesses offer bribes to secure
work or other benefits, engage in
accounting fraud or breach regulatory
and legal limitations on their
operations, THE ETHICS OF
SOCIETY SUFFERS.
ECONOMIC IMPACT
IMPACT ON BUSINESS
MANAGERS
The concepts and principles for the
ethical conduct in business are
relegated to the managers of the
business enterprise.
 Acknowledge that his role is to serve the business enterprise and the
community
 Reveal the fact to his superior whenever his personal business of
financial interests conflict with those of the company
 Fully evaluate the likely effects on employees and the community of the
business plans for the future before taking a final decision
 Be actively concerned with the difficulties & problems of subordinates,
treat them fairly and by example, lead them effectively, assuring to all
the right of reasonable access and appeal to superior
 Avoid all abuse of executive power for personal gain, advantage or
prestige

“COMMON UNETHICAL PRACTICES

OF BUSINESS ESTABLISHMENTS”

The most common unethical practices are MISREPRESENTATION & OVER PERSUASION

DIRECTMISREPRESENTATION
1. DECEPTIVE PACKAGING

MISREPRESENTATION
~ takes many forms and is of many types. One type is the practice of placing the product in
containers of exaggerated sizes and misleading shapes to give false impression.

DIRECT MISREPRESEN TATION

2. MISBRANDING OR MISLABELING
~ the practice of making false statements on the label of a product or making its container
similar to a well-known product for the purpose of deceiving customer.

DIRECT MISREPRESENTATION
3. FALSE OR MISLEADING
~ advertising serves a useful purpose if it conveys the right information. If advertising does not
provide a useful or true service anymore to the customers, it can become the agent of
misprepresentation

ADULTERATION
~ the unethical practice of debasing a pure or genuine commodity by imitating or counterfeiting
it, by adding something to increase its bulk or volume, or by substituting an inferior product.

WEIGHT UNDERSTATEMENT
~ or Short Weighing
~ modus operandi of the sellers is to use 2 sets of scales one which gives the correct weight
and has been sealed by the authorities & another which looks identical but registers more
weight.

Measurement Understatement
~or Short Measurement.
~ the measuring stick or standard is shorter than the real length.
~ found in selling situations where price is depends on length such as selling textiles, electric
cords or wires.

QUANTITY UNDERSTATEMENT
~ or Short Numbering
~ In this unethical practice, the seller gives customer less than the number asked for or paid
for.

INDIRECT MISREPRESENTATION
~characterized by omitting adverse or unfavorable information about the
product or service

CAVEAT EMPTOR
~ when translated: “let the buyer beware”
~ it indirect misrepresentation & unethical because seller is a witness for the goods he is selling

DELIBERATE WITHHOLDING OF INFORMATION

~ no business transaction is fair where one of the parties does not exactly know what he is
giving away or receiving in return.

Over-Persuasion
~ process of appealing to the emotions of a prospective customer & urging him to buy an item
of merchandise he needs.
~ UNETHICAL : persuasion used for the sole benefit of selling a product without considering
the interest of the buyer.

UNETHICAL
 PRACTICES

OF EMPLOYEES

CONFLICT OF INTEREST
~ this arises when an employee who is duty bound to protect & promote the interests of his
employer violates by getting himself into a situation where he is influenced by what he can gain
personally.

Examples…
 Accepting cash and/or lavish gifts from a supplier, customer, competitor or contractor
 Uses or discloses confidential information for his or someone else’s personal gain.
 e.g revealing his employer’s formula or menu for well-liked food to a competitor.

DISHONESTY
~ business ethics is not just limited to business transactions but it also cover EMPLOYEE-
EMPLOYER RELATIONSHIP
~ especially when employee carries out his duties in the office with honesty.

UNETHICAL
 PRACTICES
Of Lower Level Managers

Claiming a vacation trip to be a business trip

~reporting his/her personal vacation as a business trip for the purpose of getting
reimbursement for his/her expenses.

Having employees do work unrelated to the business

~ exec. Officers & lower level managers ask company employees to do personal things for
them on company time in which it is unrelated to their employees’ job description.

LOOSE OR INEFFECTIVE CONTROLS

~ managers does not provide adequate controls to prevent/discourage employees to engage in
unethical practices.
~managers has the moral obligation to provide the proper control atmosphere so that his
subordinates will not be tempted to commit dishonest acts.

Unfair Labor Practices

 To interfere with, restrain or coerce employees in the exercise of their right to self-
organization.
 To require as a condition of employment that a person or an employee shall not join a
labor organization or shall withdraw from one to which he belongs
 To discriminate with regard to wages, hours of work, and other terms or conditions of
employment in order to encourage/discourage membership in any labor organization.
 To violate a collective bargaining agreement.

Making false claims about losses to free themselves from paying the compensation and
benefits provided by law.
 Making employees sign documents showing that they are receiving fully what they are
entitled to under the law when in fact they are only receiving a fraction of what they are
supposed to get.

SEXUAL HARASSMENT
~ demands, requests or otherwise requires sexual/explicit favors from employees or
subordinates regardless it is accepted or not.

UNETHICAL
PRACTICES
 OF BOARD OF DIRECTORS

PLAIN GRAFT
~ some of the Board of Directors help themselves to the earnings that otherwise would go to
other stockholders.

INTERLOCKING DIRECTORSHIP
~ often practiced by a person who holds directorial positions in two or more corporation that do
business with each other

DISLOYAL SELLING
~ this happens when this person is compelled to decide which of the two corporation’s interest
should be protected or upheld.

Negligence Duty
~ a more common failure than the breach of trust
~ this is when they fail to attend board meetings regularly.
~ this could result to betrayal of trust of the parties who elected them to their position

INSIDER TRADING
~ involves trading in a public company’s stock by someone who had non-public material
information about that non stock for any reason.

INSIDER TRADING
~ this is ILLEGAL when the material information is still non-public, and this sort of insider
trading comes with harsh consequences.

MATERIAL NON-PUBLIC INFORMATION

~ corporate news or information that has not yet been made public and which could also
have an impact on its share price.

MATERIAL NON-PUBLIC INFORMATION

~ any information that could substantially impact on investor’s decision to buy or sell the
security that has not been made available to the public.