Republic of the Philippines

POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

Office of the Vice President for Academic Affairs
College of Business Administration

INSTRUCTIONAL MATERIALS FOR

BUMA 20033: GOOD GOVERNANCE AND
CORPORATE SOCIAL RESPONSIBILITY

COMPILED BY:

Prof. Paul Timothy S. Garcia

Prof. Bonifacio P. Echauz

PUP A. Mabini Campus, Anonas Street, Sta. Mesa, Manila 1016

Direct Line: 335-1730 | Trunk Line: 335-1787 or 335-1777 local 000
Website: www.pup.edu.ph | Email: inquire@pup.edu.ph

THE COUNTRY’S 1st POLYTECHNICU

 INTRODUCTION

This instructional materials aims to enable students grasps the relevance and impact of
good governance and corporate social responsibility in our society nowadays. Lessons 1 will be
discussing CSR framework, its definition, key principles and arguments. Lesson 2 will be
discussing stakeholder’s relationship. Lesson 3 is about corporate governance and its purpose.
Lesson 4 will be discussing the relationship of government and business. Lesson 5 is about the
role of ethics in business, Lesson 6 will enlighten us about the impact of corporate philanthropy
in our country. Lesson 7 will be discussing sustainability and other global issues that affect
companies. Lastly lesson 8 is about globalization and its impact to company’s initiatives towards
corporate social responsibility.
Students are expected to answer all activities/assessments required at the end of each
lesson and accomplish the final exam attached in this instructional materials.

COURSE OUTCOMES

• Acquire and demonstrate an understanding on the evolution of corporate governance

• Demonstrate the corporate, economic, and social challenges of Corporate Social
Responsibility.
• Illustrate and explain levels of social responsibility and analyze the stakeholders involved
• Analyze the role and function of business in society.
• Evaluate a CSR program considerate to all stakeholders, encompassing all levels of
social responsibilities
• Create a CSR program to all stakeholders involving all levels of social responsibilities
 TABLE CONTENTS

LESSON 1- CORPORATE SOCIAL RESPONSIBILTY FRAMEWORK 1

TOPIC 1- CORPORATE SOCIAL RESPONSIBILITY DEFINED 1
TOPIC 2- KEY PRINCIPLES OF CSR 2
TOPIC 3- CSR PYRAMID 2
TOPIC 4- ARGUMENTS IN SUPPORT AND AGAINST CSR 6
LESSON 2- STRATEGIC MANAGEMENT OF STAKEHOLDER RELATIONSHIPS 8
TOPIC 1- STAKEHOLDERS DEFINED 8
TOPIC 2- IDENTIFICATION OF KEY STAKEHOLDERS 9
TOPIC 3- TACTICS TO MAINTAIN POSITIVE STAKEHOLDER RELATIONSHIP 11

LESSON 3- CORPORATE GOVERNANCE 13

TOPIC 1- CORPORATE GOVERNANCE DEFINED 13
TOPIC 2- KEY CORPORATE ACTORS 14
TOPIC 3- KEY RESPONSIBILITIES OF THE BOARD OF DIRECTORS AND MANAGEMENT 15

TOPIC 4- GUIDING PRINCIPLES OF CORPORATE GOVERNANCE 18

LESSON 4- LEGAL, REGULATORY AND POLITICAL ISSUES 20

TOPIC 1- GOVERNMENT’S INFLUENCE ON BUSINESS 20
TOPIC 2- BUSINESS INFLUENCE ON GOVERNMENT AND POLITICS 22

LESSON 5- BUSINESS ETHICS 24

TOPIC 1- THE NATURE OF BUSINESS ETHICS 24
TOPIC 2- CHARACTERISTICS AND ADVANTAGAES OF BUSINES ETHICS 26
TOPIC 3- ETHICAL ISSUES IN BUSINESS 28

LESSON 6- STRATEGIC PHILANTHROPY 30

TOPIC 1- STRATEGIC PHILANTHROPY DEFINED 30
TOPIC 2- THE BENEFITS OF PHILANTHROPY AND VOLUNTEERISM 31
TOPIC 3- CORPORATE PHILNATHROPY PROGRAMS 34
LESSON 7- SUSTAINABILITY ISSUES 43
TOPIC 1- GLOBAL ENVIRONMENTAL ISSUES 43
TOPIC 2- CORPORATE PRACTICES TOWARDS SUSTAINABILITY 45

LESSON 8- CSR STANDARDS AND CORPORATE ETHICAL VIRTUES 48

TOPIC 1- CORPORATE ETHICAL VIRTUES MODEL 48
TOPIC 2- EMBEDDING CORPORATE VIRTUES INTO CSR STANDARDS 49
TOPIC 3- FROM CORPORATE VIRTUES MODEL TO CSR STANDARDS 50
GRADING SYSTEM 53
REFERENCES 53
LESSON 1- CORPORATE SOCIAL RESPONSIBILITY FRAMEWORK

OVERVIEW
Corporate social responsibility (CSR) is also often referred to as business responsibility
and an organization's action on environmental, ethical, social and economic issues. You need to
think of CSR simply as ensuring that your business is aware of its impacts, is accountable for its
actions, and that it undertakes these actions in a responsible manner. Furthermore, a well-run
business is transparent in its decision-making and processes and this makes for good
governance.

LEARNING OUTCOMES
By the end of this lesson, you should be able to:
• Define corporate social responsibility
• Explain the key principles of CSR
• Understand the CSR pyramid
• Discuss the arguments in support and against CSR

COURSE MATERIALS

TOPIC 1- CORPORATE SOCIAL RESPONSIBILITY DEFINED

Corporate social responsibility (CSR) is a self-regulating business model that helps a
company be socially accountable to itself, its stakeholders, and the public. By practicing
corporate social responsibility, also called corporate citizenship, companies can be conscious of
the kind of impact they are having on all aspects of society, including economic, social, and
environmental.
To engage in CSR means that, in the ordinary course of business, a company is operating in
ways that enhance society and the environment, instead of contributing negatively to them.
Corporate social responsibility is a broad concept that can take many forms depending on the
company and industry. Through CSR programs, philanthropy, and volunteer efforts, businesses
can benefit society while boosting their brands.
As important as CSR is for the community, it is equally valuable for a company. CSR activities
can help forge a stronger bond between employees and corporations; boost morale; and help
both employees and employers feel more connected with the world around them.
Corporate social responsibility is important to both consumers and companies and programs are
a great way to raise morale in the workplace.
For a company to be socially responsible, it first needs to be accountable to itself and its
shareholders. Often, companies that adopt CSR programs have grown their business to the

1
point where they can give back to society. Thus, CSR is primarily a strategy of large
corporations.
Also, the more visible and successful a corporation is, the more responsibility it has to set
standards of ethical behavior for its peers, competition, and industry.

TOPIC 2- KEY PRINCIPLES OF CSR

• Sustainability
- This is concerned with the effect which action taken in the present has upon the
options available in the future. If resources are utilized in the present then they are
no longer available for use in the future, and this is of particular concern if the
resources are finite in quantity. Thus raw materials of an extractive nature, such as
coal, iron or oil, are finite in quantity and once used are not available for future use.
At some point in the future therefore alternatives will be needed to fulfill the functions
currently provided by these resources. This may be at some point in the relatively
distant future but more immediate concern is the fact that as resources become
depleted then the cost of acquiring the remaining resources tends to increase, and
hence the operational costs of organization tend to increase.

• Accountability
- This is concerned with an organization recognizing that its actions affect the external
environment, and therefore assuming responsibility for the effects of its actions. This
concept therefore implies in quantification of the effects of action taken.

• Transparency
- As a principle, means that the external impact of the actions of the organization can
be ascertained from the organization’s reporting and pertinent facts are not disguised
within that reporting. Thus all the effects of the actions of the organization, including
external impacts, should be apparent to all from using the information provided by
the organization’s reporting mechanism.

TOPIC 3- CSR PYRAMID

Carroll's CSR Pyramid is a simple framework that helps argue how and why
organizations should meet their social responsibilities.
The key features of Carroll's CSR Pyramid are that:

• CSR is built on the foundation of profit – profit must come first

• Then comes the need for a business to ensure it complies with all laws & regulations
• Before a business considers its philanthropic options, it also needs to meet its ethical
duties

2
 For CSR to be accepted by a conscientious business person, it should be framed in such a
way that the entire range of business responsibilities are embraced. It is suggested here that
four kinds of social responsibilities constitute total CSR: economic, legal, ethical and
philanthropic. Furthermore these four categories or components of CSR might be depicted as a
pyramid.

Archie Carroll’s Pyramid of Corporate Social Responsibility

Economic Responsibilities
Historically business organizations were created as economic entities designed to
provide goods and services to societal members. The profit motive was established as the
primary incentive for entrepreneurship. Before it was anything else, business organization was
the basic economic unit in our As such, its principal role was to produce goods and services that
consumers needed and wanted and to make an acceptable profit in the process. At some point
the idea of the profit motive got transformed into a notion of maximum profits, and this has been
an enduring value ever since. All other business responsibilities are predicated upon the
economic responsibility of the firm, because without it the others become moot considerations.

Legal Responsibilities
Society has not only sanctioned business to operate according to the profit motive; at the
same time business is expected to comply with the laws and regulations promulgated by
federal, state, and local governments as the ground rules under which business must operate.
As a partial fulfillment of the "social contract" between business and society firms are expected
to pursue their economic missions within the framework of the law. Legal responsibilities reflect
a view of "codified ethics" in the sense that they embody basic notions of fair operations as

3
established by our lawmakers. They are depicted as the next layer on the pyramid to portray
their historical development, but they are appropriately seen as coexisting with economic
responsibilities as fundamental precepts of the free enterprise system.

Ethical Responsibilities
Although economic and legal responsibilities embody ethical norms about fairness and
justice, ethical responsibilities embrace those activities and practices that are expected or
prohibited by societal members even though they are not codified into law. Ethical
responsibilities embody those standards, norms, or expectations that reflect a concern for what
consumers, employees, shareholders, and the community regard as fair, just, or in keeping with
the respect or protection of stakeholders' moral rights. In one sense, changing ethics or values
precede the establishment of law because they become the driving force behind the very
creation of laws or regulations.
For example, the environmental, civil rights, and consumer movements reflected basic
alterations in societal values and thus may be seen as ethical bellwethers foreshadowing and
resulting in the later legislation. In another sense, ethical responsibilities may be seen as
embracing newly emerging values and norms society expects business to meet, even though
such values and norms may reflect a higher standard of performance than that currently
required by law. Ethical responsibilities in this sense are often ill-defined or continually under
public debate as to their legitimacy, and thus are frequently difficult for business to deal with.
Superimposed on these ethical expectations emanating from societal groups are the implied
levels of ethical performance suggested by a consideration of the great ethical principles of
moral philosophy. This would include such principles as justice, rights, and utilitarianism. The
business ethics movement of the past decade has firmly established an ethical responsibility as
a legitimate CSR component. Though it is depicted as the next layer of the CSR pyramid, it
must be constantly recognized that it is in dynamic interplay with the legal responsibility
category.
That is, it is constantly pushing the legal responsibility category to broaden or expand
while at the same time placing ever higher expectations on business persons to operate at
levels above that required by law.

Philanthropic Responsibilities
Philanthropy encompasses those corporate actions that are in response to society’s
expectation that businesses be good corporate citizens. This includes actively engaging in acts
or programs to promote human welfare or goodwill. Examples of philanthropy include business
contributions to financial resources or executive time, such as contributions to the arts,
education, or the community. A loaned-executive program that provides leadership for a
community’s United Way campaign is one illustration of philanthropy. The distinguishing feature
between philanthropy and ethical responsibilities is that the former are not expected in an
ethical or moral sense. Communities desire firms to contribute their money, facilities, and
employee time to humanitarian programs or purposes, but they do not regard the firms as
unethical if they do not provide the desired level. Therefore, philanthropy is more discretionary
or voluntary on the part of businesses even though there is always the societal expectation that
businesses provide it.

4
 One notable reason for making the distinction between philanthropic and ethical
responsibilities is that some firms feel they are being socially responsible if they are just good
citizens in the community. This distinction brings home the vital point that CSR includes
philanthropic contributions but is not limited to them. In fact, it would be argued here that
philanthropy is highly desired and prized but actually less important than the other three
categories of social responsibility, In a sense, philanthropy is icing on the cake—or on the
pyramid, using our metaphor. It portrays the four components of CSR, beginning with the basic
building block notion that economic performance undergirds all else. At the same time, business
is expected to obey the law because the law is society's codification of acceptable and
unacceptable behavior. Next is business's responsibility to be ethical. At its most fundamental
level, this is the obligation to do what is right, just, and fair, and to avoid or minimize harm to
stakeholders (employees, consumers, the environment, and others).
Finally, business is expected to be a good corporate citizen. This is captured in the
philanthropic responsibility, wherein business is expected to contribute financial and human
resources to the community and to improve the quality of life. No metaphor is perfect, and the
CSR pyramid is no exception. It is intended to portray that the total CSR of business comprises
distinct components that, taken together, constitute the whole. Though the components have
been treated as separate concepts for discussion purposes, they are not mutually exclusive and
are not intended to juxtapose a firm’s economic responsibilities with its other responsibilities. At
the same time, a consideration of the separate components helps the manager see that the
different types of obligations are in a constant but dynamic tension with one another. The most
critical tensions, of course, would be between economic and legal, economic and ethical, and
economic and philanthropic. The traditionalist might see this as a conflict between a firm’s
"concern for profits versus its "concern for society," but it is suggested here that this is an
oversimplification. A CSR or stakeholder perspective would recognize these tensions as
organizational realities, but focus on the total pyramid as a unified whole and how the firm might
engage in decisions, actions, and programs that substantially fulfill all its component parts.
In summary, the total corporate social responsibility of business entails the simultaneous
fulfillment of the firm's economic, legal, ethical, and philanthropic responsibilities. Stated in more
pragmatic and managerial terms, the CSR firm should strive to make a profit, obey the law, be
ethical, and be a good corporate citizen.
Upon first glance, this array of responsibilities may seem broad. They seem to be in
striking contrast to the classical economic argument that management has one responsibility: to
maximize the profits of its owners or shareholders. Economist Milton Friedman, the most
outspoken proponent of this view, has argued that social matters are not the concern of
business people and that these problems should be resolved by the unfettered workings of the
free market system. Friedman's argument loses some of its punch, however, when you consider
his assertion in its totality. Friedman posited that management is "to make as much money as
possible while conforming to the basic rules of society, both those embodied in the law and
those embodied in ethical custom" (Friedman 1970). Most people focus on the first part of
Friedman's quote but not the second part. It seems clear from this statement that prof its,
conformity to the law, and ethical custom embrace three components of the CSR pyramid-
economic, legal, and ethical. That only leaves the philanthropic component for Friedman to
reject. Although it may be appropriate for an economist to take this view, one would not
encounter many business executives today who exclude philanthropic programs from their firms'
range of activities. It seems the role of corporate citizenship is one that business has no

5
significant problem embracing. Undoubtedly this perspective is rationalized under the rubric of
enlightened self-interest.

TOPIC 4- ARGUMENTS IN SUPPORT AND AGAINST CSR

Arguments in Support
Convinced that the corporation should be more than simply a profit machine, proponents
of social responsibility have offered the following arguments:

• Business is unavoidably involved in social issues.

- As social activists like to say, business is either part of the solution or part of the
problem. There is no denying that private business shares responsibility for
societal problems including unemployment, inflation, and pollution. Like everyone
else, corporate citizens must balance their rights and responsibilities.

• Business has the resources to tackle today’s complex societal problems.

- With its rich stock of technical, financial and managerial resources, the private
business sector can tip the scale in favor of solving society’s more troublesome
problems. After all, it is argued, without the support of society, business could not
have built its resource base in the first place

• A better society means a better environment for doing business.

- Business can enhance its long-run profitability by making an investment in
society today. In other words, today’s problems can turn into tomorrow’s profits

• Corporate social action will prevent government intervention.

- As evidenced by waves of antitrust, equal employment opportunity and pollution
control legislation, the government will force business to do what it fails to do
voluntarily.

Arguments Against
These arguments are based on the assumption that business should stick to what it
does best, that is, pursuing profit by producing marketable goods and services. Social goals
should be handled by other institutions such as family, school, church and government.

• Profit maximization ensures the efficient use of society’s resources.

- By buying goods and services, consumers collectively dictate where assets
should be deployed. Social expenditures amount to theft if stock holders equity.

• As an economic institution, business lacks the ability to pursue social goals.

- Gross inefficiencies can be expected if managers are forced to divert their
attention from their pursuit of economic goals.

6
 • Business already has enough power.
- Considering that business exercises powerful influence over where and how we
work and live, what we buy, and what we value, additional concentration of social
power in the hands of business is undesirable.

• Since managers are not elected, they are not directly accountable to the people.
- Corporate social programs can easily become misguided. The market system
effectively controls business’s economic performance, but it is a poor mechanism
for controlling business’s social performance.

ACTIVITIES/ASSESSMENTS
1. Write an essay about the importance of CSR and the role of the key principles in the
attainment of long term success for the company.
2. In your own words, discuss the four levels of responsibilities.
3. Give your own explanation about the different arguments in CSR

7
LESSON 2- STRATEGIC MANAGEMENT OF STAKEHOLDER
RELATIONSHIP

OVERVIEW
Stakeholders are crucial to the successful delivery of any organizational activity.
Successful activities are those whose important stakeholders perceive them to be successful.
The identification of the right stakeholders and the development of targeted communication to
meet the needs of the activity and the expectations of stakeholders, will lead to a higher level of
commitment and support from these stakeholders.
Stakeholders are more likely to support activities that they think will succeed; and are more
likely to withdraw support from activities that they perceive are not succeeding. Therefore, it is
essential to communicate relevant information to important stakeholders to provide them with
the perception the activity is being well managed. This can be achieved through targeted
communication that is aligned with their expectations and their information requirements

LEARNING OUTCOMES
By the end of this lesson, you should be able to:
• Define and identify stakeholders
• Discuss the tactics to maintain positive stakeholder relationships

COURSE MATERIALS

TOPIC 1- STAKEHOLDERS DEFINED

Stakeholder is a person or group that has an interest in a company and can either affect
or be affected by the business. The primary stakeholders in a typical corporation are its
investors, employees, customers and suppliers and other business partners. However, the
modern theory of the idea goes beyond this original notion to include additional stakeholders
such as a community, government or trade association.
Any individual or groups/group of individuals who believe and have an interest in an
organization’s ability to deliver intended results and affect or are affected by its outcomes are
called stakeholders. Stakeholders play an integral part in the development and ultimate success
of an organization.
An organization is usually accountable to a broad range of stakeholders, including shareholders,
who are an integral part of an organization’s strategy execution. This is the main reason
managers must consider stakeholders’ interests, needs, and preferences. A stakeholder is
anybody who can affect or is affected by an organization, strategy or project. They can be
internal or external and they can be at senior or junior levels.

8
TOPIC 2- IDENTIFICATION OF KEY STAKEHOLDERS
It is very important for any business to identify its key stakeholders and scope their
involvement as they play a vital role right from strategizing to implementation of outcomes
throughout the lifetime of a business.

Stakeholders can be of two types:

✓ Primary or Internal stakeholders
✓ External stakeholders

Primary or Internal Stakeholders

These are groups or individuals who are directly engaged in economic transactions within the
business, such as employees, owners, investors, suppliers, creditors, etc.
For example, employees contribute their skill/expertise and wish to earn high wages and retain
their jobs. Owners exercise control over the business with a view to maximizing the profit of the
business.

9
Secondary or External Stakeholders
These are groups or individuals who need not necessarily be engaged in transaction with the
business but are affected in some way from the decisions of the business, such as customers,
community, trade unions, and the government.
For example, the trade unions are interested in the organization’s well-being so that the workers
are well paid and treated fairly. Customers want the business to produce quality products at
reasonable prices.
Different stakeholders have different interests in the organization and the management has to
consider all their interests and create a synergy among them to achieve its objectives.
Identifying all of a firm’s stakeholders can be a daunting task. It is important to have the
optimum number of stakeholders, neither too many nor too few. Having too many stakeholders
will dilute the effectiveness of the company objectives by overwhelming decision makers with
too much information and authority.
Following are some effective techniques to identify key stakeholders:

• Brainstorming - This is done by including all the people already involved and aware
of the company and its objectives, and encouraging them to come out with their
ideas. Stakeholders can be brainstormed based on categories such as internal or
external.

• Determining power and influence over decisions - Identify the individuals or

groups that exercise power and influence over the decisions the firm makes. Once it
is determined who has a stake in the outcome of the firm’s decisions as well as who
has power over these decisions, there can be a basis on which to allocate
prominence in the strategy-formulation and strategy-implementation processes.

• Determining influences on mission, vision and strategy formulation - Analyze

the importance and roles of the individuals or groups who should be consulted as
strategy is developed or who will play some part in its eventual implementation.

• Checklist - Make a checklist or questions to help identify the more influential or

important stakeholders.

- Who influences the opinions about the company?

- Who has been involved in similar projects in the past?
- Which group will benefit from the successful execution of the strategy which may
be adversely affected?

• Involve the already identified stakeholders - Once the stakeholders are identified, it is
important to manage their interests and keep them involved and supportive. This is a
daunting task to be performed tactfully by managers so that the organization’s higher
objectives are not subordinated by individual interests.

10
TOPIC 3- TACTICS TO MAINTAIN POSTIVE STAKEHOLDER RELATIONSHIPS
A well-developed stakeholder communications plan is essential for building positive
stakeholder relationships. However, this leads to the question, what is an effective engagement
strategy? The key is to find a balance and ensure the right tactics suit the appropriate
stakeholders. If you get the process right, then your stakeholders will champion your project.
They will help your project reach positive outcomes and people will be more accepting of your
decisions. Fail to create effective stakeholder management and your project may end up costing
your thousands, millions or even billions. In this article, several factors to help you maintain
strong relationships with stakeholders.
1. Group your stakeholders
More often than not, stakeholders will fall into two groups. Those who:
- Have a vested interest in the project
- Are affected by the project outcomes

These two groups can be further split into those:

• Directly involved in the project
• Who have influence over decisions
• Who need to stay informed about the process and decisions

Grouping your stakeholders according to their level of decision-making will make it easier to
develop a tailored approach to engaging each group.

2. Clearly, communicate your project scope

Tell your stakeholders the process you will use to communicate information to them right from
the start. Also, clearly explain how you will engage with them in decisions. People are more
willing to listen when you tell them their influence over the final outcome, the decision-making
process, what is negotiable and what is not.

3. Gain your stakeholders trust right from the start

Stakeholder relationship management includes communicating with people early and often so
they fully understand the benefits of your project. Having an understanding of a situation means
people are more likely to support you when necessary. It also means even if stakeholders don’t
agree with the final decision, they have the benefit of understanding the process, history and the
trade-offs made. Therefore, they will be less likely to aggressively object at the final stage.
Social Pinpoint’s article about taking the community along the journey outlines the different
factors of why it’s important to engage right from the start.

11
4. Stay consistent with your messaging
Confusing your stakeholders is incredibly dangerous. Inconsistent messaging can lead to public
outrage, loss in trust, and a negative reputation. Your stakeholders value consistent messaging
and want to know they can rely on you for the most current and up-to-date information. If there
is a hurdle to overcome, your stakeholder will be more willing to help overcome the problem
rather than blame the issue for coming up. For more information, have a look at a recent we
wrote an article about consistent messaging to your stakeholders.
5. Meet up with stakeholders who are resistant to change
Wouldn’t the world be a much nicer place if we all agreed on everything? Unfortunately, if it
were true, we would lose creativity, innovation, and uniqueness. All projects will include people
who love, hate or want to shape or want to mould the project idea. It’s our job to find a way to
balance these differing views. One of the worst things that can happen is you’ve gone through
your engagement process, made a final decision and then you receive angry phone calls and
emails about the project outcomes. To prevent this from happening, it’s important to regularly
meet with key stakeholders who are resistant to change. The meeting could be in person, by
email or through a phone-call. Involving stakeholders in decisions and listening to concerns re-
emphasizes the benefits of the potential change.
In the instance where stakeholders are resistant to change, it’s important to discuss the project
scope. Some things aren’t negotiable and it’s important to show stakeholders what influence
they do have to shape the project.
6. Use data management systems to summarize key information
It all comes down to the power of reflection. If you have a meeting with a stakeholder then write
a summary of the event. What was the meeting about? What were the key findings? Are there
any actions? When is the next meeting? Use your data management system to its full potential.
7. Keep surprises to a minimum
Some of us love surprises but placing your stakeholders off -guard can result in a huge mistake
and can cost you from building positive stakeholder relationships. Most stakeholders like to be
given an early view of risks and issues. However, this doesn’t mean you need to present every
issue as it occurs. Go into the meeting solutions-based rather than problem-focused. Create
various options to resolve the issue and then ask stakeholders to add their input to create an
informed decision about the next step.

ACTIVITIES/ASSESSMENTS
1. Identify the different types of stakeholders and explain their relationship to the company.
2. In your own words, discuss the steps to maintain positive stakeholder relationship.

12
LESSON 3- CORPORATE GOVERNANCE

OVERVIEW
Corporate governance is the combination of rules, processes or laws by which
businesses are operated, regulated or controlled. The term encompasses the internal and
external factors that affect the interests of a company’s stakeholders, including shareholders,
customers, suppliers, government regulators and management. The board of directors is
responsible for creating the framework for corporate governance that best aligns business
conduct with objectives. Specific processes that can be outlined in corporate governance
include action plans, performance measurement, disclosure practices, executive compensation
decisions, dividend policies, procedures for reconciling conflicts of interest and explicit or implicit
contracts between the company and stakeholders. An example of good corporate governance is
a well-defined and enforced structure that works for the benefit of everyone conc erned by
ensuring that the enterprise adheres to accepted ethical standards, best practices and formal
laws. Alternatively, bad corporate governance is seen as poorly-structured, ambiguous and
noncompliant, which could damage the image or financial health of a business.

LEARNING OUTCOMES
By the end of this lesson, you should be able to:
• Define corporate governance
• Identify the key corporate actors
• Explain the key responsibilities of the board of directors and management
• Discuss the guiding principles of corporate governance

COURSE MATERIALS

TOPIC 1- CORPORATE GOVERNANCE DEFINED

Corporate governance is the system of rules, practices, and processes by which a firm is
directed and controlled. Corporate governance essentially involves balancing the interests of a
company's many stakeholders, such as shareholders, senior management executives,
customers, suppliers, financiers, the government, and the community. Since corporate
governance also provides the framework for attaining a company's objectives, it encompasses
practically every sphere of management, from action plans and internal controls to performance
measurement and corporate disclosure.
➢ Corporate governance is the structure of rules, practices, and processes used to direct
and manage a company.
➢ A company's board of directors is the primary force influencing corporate governance.
➢ Bad corporate governance can cast doubt on a company's reliability, integrity, and
transparency, which can impact its financial health.

13
Understanding Corporate Governance
Governance refers specifically to the set of rules, controls, policies, and resolutions put in place
to dictate corporate behavior. Proxy advisors and shareholders are important stakeholders who
indirectly affect governance, but these are not examples of governance itself. The board of
directors is pivotal in governance, and it can have major ramifications for equity valuation.
A company’s corporate governance is important to investors since it shows a company's
direction and business integrity. Good corporate governance helps companies build trust with
investors and the community. As a result, corporate governance helps promote financial viability
by creating a long-term investment opportunity for market participants.
Communicating a firm's corporate governance is a key component of community and investor
relations. On Apple Inc.'s investor relations site, for example, the firm outlines its corporate
leadership—its executive team, its board of directors—and its corporate governance, including
its committee charters and governance documents, such as bylaws, stock ownership guidelines
and articles of incorporation.
Most companies strive to have a high level of corporate governance. For many shareholders, it
is not enough for a company to merely be profitable; it also needs to demonstrate good
corporate citizenship through environmental awareness, ethical behavior, and sound corporate
governance practices. Good corporate governance creates a transparent set of rules and
controls in which shareholders, directors, and officers have aligned incentives.

TOPIC 2- KEY CORPORATE ACTORS

Effective corporate governance requires a clear understanding of the respective roles of
the board, management and shareholders; their relationships with each other; and their
relationships with other corporate stakeholders.
The Board of Directors
- Has the vital role of overseeing the company’s management and business
strategies to achieve long-term value creation. Selecting a well-qualified chief
executive officer (CEO) to lead the company, monitoring and evaluating the
CEO’s performance, and overseeing the CEO succession planning process are
some of the most important functions of the board.
The board delegates to the CEO-- and through the CEO to other senior
management-- the authority and responsibility for operating the company’s
business. Effective directors are diligent monitors, but not managers, of business
operations. They exercise vigorous and diligent oversight of a company’s affairs,
including key areas such as strategy and risk, but they do not manage or
micromanage — the company’s business by performing or duplicating the tasks
of the CEO and senior management team. The distinction between oversight and
management is not always precise, and some situations (such as a crisis) may
require greater board involvement in operational matters. In addition, in some
areas (such as the relationship with the outside auditor and executive
compensation), the board has a direct role instead of an oversight role.

14
Management,
Led by the CEO, is responsible for setting, managing and executing the strategies of the
company, including but not limited to running the operations of the company under the
oversight of the board and keeping the board informed of the status of the company’s
operations. Management’s responsibilities include strategic planning, risk management
and financial reporting. An effective management team runs the company with a focus
on executing the company’s strategy over a meaningful time horizon and avoids an
undue emphasis on short-term metrics.
Shareholders
Invest in a corporation by buying its stock and receive economic benefits in return.
Shareholders are not involved in the day to-day management of business operations,
but they have the right to elect representatives (directors) and to receive information
material to investment and voting decisions. Shareholders should expect corporate
boards and managers to act as long-term stewards of their investment in the
corporation. They also should expect that the board and management will be responsive
to issues and concerns that are of widespread interest to long-term shareholders and
affect the company’s long-term value. Corporations are for-profit enterprises that are
designed to provide sustainable long-term value to all shareholders.
Accordingly, shareholders should not expect to use the public companies in which they
invest as platforms for the advancement of their personal agendas or for the promotion
of general political or social causes. Some shareholders may seek a voice in the
company’s strategic direction and decision making- areas that traditionally were squarely
within the realm of the board and management. Shareholders who seek this influence
should recognize that this type of empowerment necessarily involves the assumption of
a degree of responsibility for the goal of long-term value creation for the company and all
of its shareholders.
Effective corporate governance requires dedicated focus on the part of directors, the
CEO and senior management to their own responsibilities and, together with the corporation’s
shareholders, to the shared goal of building long-term value.

TOPIC 3- KEY RESPONSIBILITIES OF THE BOARD OF DIRECTORS AND MANAGEMENT

An effective system of corporate governance provides the framework within which the
board and management address their key responsibilities.
Board of Directors
A corporation’s business is managed under the board’s oversight. The board also has direct
responsibility for certain key matters, including the relationship with the outside auditor and
executive compensation. The board’s oversight function encompasses a number of
responsibilities, including:
➢ Selecting the CEO. The board selects and oversees the performance of the company’s
CEO and oversees the CEO succession planning process.

15
➢ Setting the “tone at the top.” The board should set a “tone at the top” that demonstrates
the company’s commitment to integrity and legal compliance. This tone lays the
groundwork for a corporate culture that is communicated to personnel at all levels of the
organization.

➢ Approving corporate strategy and monitoring the implementation of strategic plans. The
board should have meaningful input into the company’s long-term strategy from
development through execution, should approve the company’s strategic plans and
should regularly evaluate implementation of the plans that are designed to create long-
term value. The board should understand the risks inherent in the company’s strategic
plans and how those risks are being managed.

➢ Setting the company’s risk appetite, reviewing and understanding the major risks, and
overseeing the risk management processes. The board oversees the process for
identifying and managing the significant risks facing the company. The board and senior
management should agree on the company’s risk appetite, and the board should be
comfortable that the strategic plans are consistent with it. The board should establish a
structure for overseeing risk, delegating responsibility to committees and overseeing the
designation of senior management responsible for risk management.

➢ Focusing on the integrity and clarity of the company’s financial reporting and other
disclosures about corporate performance. The board should be satisfied that the
company’s financial statements accurately present its financial condition and results of
operations, that other disclosures about the company’s performance convey meaningful
information about past results as well as future plans, and that the company’s internal
controls and procedures have been designed to detect and deter fraudulent activity.

➢ Allocating capital. The board should have meaningful input and decision making
authority over the company’s capital allocation process and strategy to find the right
balance between short-term and long-term economic returns for its shareholders.

➢ Reviewing, understanding and overseeing annual operating plans and budgets. The
board oversees the annual operating plans and reviews annual budgets presented by
management. The board monitors implementation of the annual plans and assesses
whether they are responsive to changing conditions.

➢ Reviewing the company’s plans for business resiliency. As part of its risk oversight
function, the board periodically reviews management’s plans to address business
resiliency, including such items as business continuity, physical security, cyber security
and crisis management.

➢ Nominating directors and committee members, and overseeing effective corporate

governance. The board, under the leadership of its nominating/corporate governance
committee, nominates directors and committee members and oversees the structure,
composition (including independence and diversity), succession planning, practices and
evaluation of the board and its committees.

16
 ➢ Overseeing the compliance program. The board, under the leadership of appropriate
committees, oversees the company’s compliance program and remains informed about
any significant compliance issues that may arise.

CEO and Management

The CEO and management, under the CEO’s direction, are responsible for the
development of the company’s long-term strategic plans and the effective execution of the
company’s business in accordance with those strategic plans. As part of this responsibility,
management is charged with the following duties.
➢ Business operations: The CEO and management run the company’s business under the
board’s oversight, with a view toward building long-term value.

➢ Strategic planning: The CEO and senior management generally take the lead in
articulating a vision for the company’s future and in developing strategic plans designed
to create long-term value for the company, with meaningful input from the board.
Management implements the plans following board approval, regularly reviews progress
against strategic plans with the board, and recommends and carries out changes to the
plans as necessary.

➢ Capital allocation: The CEO and senior management are responsible for providing
recommendations to the board related to capital allocation of the company’s resources,
including but not limited to organic growth; mergers and acquisitions; divestitures; spin-
offs; maintaining and growing its physical and nonphysical resources; and the
appropriate return of capital to shareholders in the form of dividends, share repurchases
and other capital distribution means.

➢ Identifying, evaluating and managing risks: Management identifies, evaluates and

manages the risks that the company undertakes in implementing its strategic plans and
conducting its business. Management also evaluates whether these risks, and related
risk management efforts, are consistent with the company’s risk appetite. Senior
management keeps the board and relevant committees informed about the company’s
significant risks and its risk management processes.

➢ Accurate and transparent financial reporting and disclosures: Management is

responsible for the integrity of the company’s financial reporting system and the accurate
and timely preparation of the company’s financial statements and related disclosures. It
is management’s responsibility— under the direction of the CEO and the company’s
principal financial officer — to establish, maintain and periodically evaluate the
company’s internal controls over financial reporting and the company’s disclosure
controls and procedures, including the ability of such controls and procedures to detect
and deter fraudulent activity.

17
 ➢ Annual operating plans and budgets: Senior management develops annual operating
plans and budgets for the company and presents them to the board. The management
team implements and monitors the operating plans and budgets, making adjustments in
light of changing conditions, assumptions and expectations, and keeps the board
apprised of significant developments and changes.

➢ Selecting qualified management, establishing an effective organizational structure and

ensuring effective succession planning: Senior management selects qualified
management, implements an organizational structure, and develops and executes
thoughtful career development and succession planning strategies that are appropriate
for the company.

➢ Business resiliency: Management develops, implements and periodically reviews plans

for business resiliency that provide the most critical protection in light of the company’s
operations.
1. Risk identification- Management identifies the company’s major business and
operational risks, including those relating to natural disasters, leadership gaps,
physical security, cyber security, regulatory changes and other matters.
2. Crisis preparedness- Management develops and implements crisis preparedness
and response plans and works with the board to identify situations (such as a
crisis involving senior management) in which the board may need to assume a
more active response role.
The CEO and management run the company’s business under the board’s oversight,
with a view toward building long-term value.
Management identifies the company’s major business and operational risks, including
those relating to natural disasters, leadership gaps, physical security, cyber security, regulatory
changes and other matters.

TOPIC 4- GUIDING PRINCIPLES OF CORPORATE GOVERANCE

Business Roundtable supports the following core guiding principles:
1. The board approves corporate strategies that are intended to build sustainable long-term
value; selects a chief executive officer (CEO); oversees the CEO and senior
management in operating the company’s business, including allocating capital for long-
term growth and assessing and managing risks; and sets the “tone at the top” for ethical
conduct.

2. Management develops and implements corporate strategy and operates the com pany’s
business under the board’s oversight, with the goal of producing sustainable long-term
value creation.

3. Management, under the oversight of the board and its audit committee, produces
financial statements that fairly present the company’s financial condition and results of
operations and makes the timely disclosures investors need to assess the financial and
business soundness and risks of the company.

18
 4. The audit committee of the board retains and manages the relationship with the outside
auditor, oversees the company’s annual financial statement audit and internal controls
over financial reporting, and oversees the company’s risk management and compliance
programs.

5. The nominating/corporate governance committee of the board plays a leadership role in

shaping the corporate governance of the company, strives to build an engaged and
diverse board whose composition is appropriate in light of the company’s needs and
strategy, and actively conducts succession planning for the board.

6. The compensation committee of the board develops an executive compensation

philosophy, adopts and oversees the implementation of compensation policies that fit
within its philosophy, designs compensation packages for the CEO and senior
management to incentivize the creation of long-term value, and develops meaningful
goals for performance-based compensation that support the company’s long-term value
creation strategy.

7. The board and management should engage with long-term shareholders on issues and
concerns that are of widespread interest to them and that affect the company’s long-term
value creation. Shareholders that engage with the board and management in a manner
that may affect corporate decision making or strategies are encouraged to disclose
appropriate identifying information and to assume some accountability for the long-term
interests of the company and its shareholders as a whole. As part of this responsibility,
shareholders should recognize that the board must continually weigh both short-term
and long-term uses of capital when determining how to allocate it in a way that is most
beneficial to shareholders and to building long-term value.

8. In making decisions, the board may consider the interests of all of the company’s
constituencies, including stakeholders such as employees, customers, suppliers and the
community in which the company does business, when doing so contributes in a direct
and meaningful way to building long-term value creation.

ACTIVITIES/ASSESSMENTS
1. Discuss the guiding principles of good governance.
2. Explain the key responsibilities of the board of directors and management

19
LESSON 4- LEGAL, REGULATORY AND POLITICAL ISSUES

OVERVIEW
Since businesses are strongly affected by public policies, it is in their best interest to stay
informed about public policies and to try to influence governmental decision making and public
policy. There are different general ways that businesses view and act on their relationship with
government. One perspective is for businesses to consider busine ss and government on “two
sides” and in opposition to each other. Some have argued that this was the prevailing dominant
mainstream business view in the aftermath of the Great Recession at the end of the first decade
of the twenty-first century. It has been characterized as the “antiregulatory” or “limited
government” view, and it has been associated with those who believe that free markets with a
minimal government role is best for the workings of the economy. This perspective most often
focuses businesses’ interactions with government on efforts to minimize government and
reduce the costs and burdens on private business and the general economy associated with
government taxes, regulations, and policies.
Another business perspective on government is that government should favor businesses and
incentivize business performance and investment because businesses are the main source of
jobs, innovation, and societal economic well-being, and therefore government should support
businesses with grants, tax credits, and subsidies.

LEARNING OUTCOMES
By the end of this lesson, you should be able to:
• Differentiate business influence in government with government’s influence in business

COURSE MATERIALS

TOPIC 1- GOVERNMENT’S INFLUENCE ON BUSINESS

Governments establish many regulations and policies that guide businesses. Some rules,
like minimum wage, are mandatory, while other policies may influence your business indirectly.
Businesses need to be flexible enough to respond to changing rules and policies. This is true
not only at the national level but more locally as well, as states and municipalities have their
own sets of rules. Indeed, there are also international treaties that can influence the way
companies do business.

20
 charge
Policy as a Market Catalyst
The government can implement a policy that changes the social behavior in the business
environment. For example, the government can levy taxes on the use of carbon-based fuels and
grant subsidies for businesses that use renewable energy. The government can underwrite the
development of new technology that will bring the necessary change. Imposing on a particular
sector more taxes or duties than are necessary will make the investors lose interest in that
sector. Similarly, tax and duty exemptions on a particular sector trigger investment in it and may
generate growth. For example, a high tax rate on imported goods may encourage local
production of the same goods. On the other hand, a high tax rate for raw materials hampers
domestic production.

Political Stability and Political Culture

Government policy will always depend on the political culture of the moment. Policy
crafted in a politically stable country will be different that formed in an unstable country. A stable
political system can make business-friendly decisions that promote local businesses and attract
foreign investors. Unstable systems present challenges that jeopardize the ability of government
to maintain law and order. This has a negative effect on the business environment.

Government Taxation and Spending

Governments get money to spend from taxation. Increased spending requires increases
in taxes or borrowing. Any tax increase will discourage investment, especially among
entrepreneurs, who take the risks of starting and managing businesses. Increased spending
also eats into the limited pool of savings, leaving less money for private investment. Reduction
in private investments shrinks production of goods and services. That, in turn, may lead to the
elimination of jobs.

Setting Interest Rates

Government policy can influence interest rates, a rise in which increases the cost of
borrowing in the business community. Higher rates also lead to decreased consumer spending.
Lower interest rates attract investment as businesses increase production. The government can
influence interest rates in the short run by printing more money, which might eventually lead to
inflation. Businesses do not thrive when there is a high level of inflation.

Regulations and Permits

Trade regulations, the federal minimum wage, and the requirements for permits or
licenses have effects on business. For example, periodic health inspections must be carried out
in all restaurants. Businesses might spend a lot of money and time to comply with regulations
that ultimately prove to be ineffective and unnecessary. Fair and effective regulations, however,
promote business growth.

21
TOPIC 2- BUSINESS INFLUENCE ON GOVERNMENT AND POLITICS
A general view of businesses and government relations is with business in partnership
with government in addressing societal matters. This is in contrast to government being the
regulator to ensure businesses act in a socially responsible manner.

Types of Business Responses

Once a business has an understanding of how government affects their operations and
profitability, it can formulate strategies for how best to interact with government. There are three
general types of business responses to the public policy environment—reactive, interactive, and
proactive.
Reactive responses involve responding to government policy after it happens. An interactive
response involves engaging with government policymakers and actors (including the media) to
try to influence public policy to serve the interests of the business. A proactive response
approach entails acting to influence policies, anticipating changes in public policy, and trying to
enhance competitive positioning by correctly anticipating changes in policy. For most
businesses, a combination of the interactive and proactive approaches is the best approach.
In meeting challenges from nongovernmental organizations (NGOs) and the media,
businesses may respond in a variety of ways, including the following:
➢ Confrontation It may aggressively attack either the message or the messenger, and in
extreme cases, business has felt justified to sue its critics for libel.

➢ Participation Business may develop coalitions or partnerships with NGOs, as

McDonald’s did with the Environmental Defense Fund (EDF; see the following
discussion) or as Home Depot did with the Rainforest Alliance (see the following
sidebar)

➢ Anticipation Business may adopt issues management programs to forecast emerging

issues and to adjust or change business practices in advance of the passage of stringent
laws or regulations.
When business is in a reactive response mode, it most often engages in confrontation of its
adversaries. When it assumes an interactive response mode, it participates in dialogues with
NGOs and the media and develops partnerships or coalitions to advance new policies and
programs. When business behaves in a proactive manner, it anticipates future pressures and
policy changes and adjusts its own internal corporate policies and practices before it is forced to
do so. While a reactive stance may sometimes work, it often only delays needing to engage in a
more interactive or proactive way. An interactive or proactive approach is usually a better way to
meet political and societal challenges while also protecting the reputation of the firm.

22
Tactics That Businesses Use to Influence Government
Businesses often engage in a variety of tactics to influence government policy. This
includes lobbying, political contributions, and interest group politics.

Business Lobbying
Businesses lobby in different ways. This can include lobbying of Congress and state legislatures
and executive branch agencies directly through its own government relations specialists,
through an industry trade association, through consultants, or through a combination of all those
avenues. Businesses may also engage in indirect or grassroots lobbying by appealing to its own
employees, stakeholders, or the general public to make their views known to policymakers. In
order to build a broad grassroots constituency, business may manage “issue advertising”
campaigns on top-priority issues, or purchase issue ads in media outlets that target public
policymakers or Washington insiders.
Business lobbying has a strong influence on public policies. There are more than 1,500 private
companies in the United States with public affairs offices in Washington, DC, and more than 75
percent of large firms employ private lobbyists to make their case for policies that can benefit
them. This includes more than 42,000 registered lobbyists in state capitals across the nation.
Business may engage in reactive defensive lobbying (defending its own freedom from
government regulation) or interactive lobbying (partnering with interest groups on policies that
the firm can benefit from). Businesses can also choose to engage in social lobbying, examples
of which include chemical companies with the best environmental track record joining
environmental NGOs in lobbying for an increased budget for the Environmental Protection
Agency (EPA) and retailers wanting to address consumer concerns joining interest groups in
pressuring the Consumer Product Safety Commission to adopt more stringent product safety
standards. Corporations showing a willingness to join such public interest coalitions can gain
reputational rewards from NGOs, the media, and public policymakers.

Political Contributions
Businesses also use campaign contributions to support their position and to try to influence
public policies that can help them increase profits. Seven of the ten largest corporations in the
world are oil companies, based on revenues. Their access to funds for lobbying and campaign
contributions gives them a significant voice in the political system and on policies that can
impact sustainable businesses.
There are a range of avenues a company might use in making political contributions. The most
transparent and legitimate is that of forming a political action committee (PAC) to which
voluntary contributions of employees are amassed and then given in legally limited amounts to
selected candidates. Not surprisingly, larger firms in regulated industries, or in industries
exposed to greater risk from changing public policies, such as oil companies in 2010 during and
after the British Petroleum (BP) Gulf of Mexico oil crisis, use PACs more often than other firms.
Beyond contributing directly to political candidates, firms can also advertise on ballot measure
campaigns, and those contributions can come from corporate assets and are subject to no legal
limitations.

23
Interest Group Participation
Business response can include participation in interest group politics. Interest groups play a key
role in all democratic systems of government. However, as an interest group is a group of
individuals organized to seek public policy influence, there is tremendous diversity within
interest groups. Business is just one of many interest group sectors trying to influence public
policy (see the discussion previously mentioned). Businesses will encounter interest groups that
may support or conflict with their position on an issue.

ACTIVITIES/ASSESSMENTS
1. Discuss the different tactics that businesses use to influence government
2. Explain the reasons why government has strong influence on business

24
LESSON 5- BUSINESS ETHICS

OVERVIEW
It’s in the best interest of a company to operate ethically. Trustworthy companies are
better at attracting and keeping customers, talented employees, and capital. Those tainted by
questionable ethics suffer from dwindling customer bases, employee turnover, and investor
mistrust. To be ethical means to know right from wrong and to know when you’re practicing one
instead of the other. We can say that business ethics is the application of ethical behavior in a
business context. Acting ethically in business means more than simply obeying applicable laws
and regulations: It also means being honest, doing no harm to others, competing fairly, and
declining to put your own interests above those of your company, its owners, and its workers. If
you’re in business you obviously need a strong sense of what’s right and wrong. You need the
personal conviction to do what’s right, even if it means doing something that’s difficult or
personally disadvantageous.

LEARNING OUTCOMES
By the end of this lesson, you should be able to:

• Discuss the nature of business ethics

• Explain the characteristics and advantages of business ethics
• Determine the ethical issues in business

COURSE MATERIALS

TOPIC 1- THE NATURE OF BUSINESS ETHICS

Ethics is a branch of social science. It deals with moral principles and social values. It
helps us to classifying, what is good and what is bad? It tells us to do good things and avoid
doing bad things. So, ethics separate the good and bad, right and wrong, fair and unfair, moral
and immoral and proper and improper human action. In short, ethics means a code of conduct.
Business Ethics means to conduct business with a human touch in order to give welfare to the
society. The businessmen must give a regular supply of good quality goods and services at
reasonable prices to their consumers. They must avoid indulging in unfair trade practices like
adulteration, promoting misleading advertisements, cheating in weights and measures, black
marketing, etc. They must give fair wages and provide good working conditions to their workers.
They must not exploit the workers. They must encourage competition in the market. They must
protect the interest of small businessmen. They must avoid unfair competition. They must avoid
monopolies. They must pay all their taxes regularly to the government. According to Andrew
Crane, “Business ethics is the study of business situations, activities, and decisions where
issues of right and wrong are addressed.” According to Raymond C. Baumhart, “The ethics of
business is the ethics of responsibility. The business man must promise that he will not harm
knowingly.” According to Wikipedia, “Business ethics (also corporate ethics) is a form of applied

25
ethics or professional ethics that examines ethical principles and moral or ethical problems that
arise in a business environment. It applies to all aspects of business conduct and is relevant to
the conduct of individuals and entire organizations.”

TOPIC 2- CHARATERISTICS AND ADVANTAGES OF BUSINESS ETHICS

Characteristics of Business Ethics
Code of conduct:
Business ethics is a code of conduct. It tells what to do and what not to do for the welfare of the
society. All businessmen must follow this code of conduct.
Based on moral and social values:
Business ethics is based on moral and social values. It contains moral and social principles
(rules) for doing business. This includes self-control, consumer protection and welfare, service
to society, fair treatment to social groups, not to exploit others, etc.
Gives protection to social groups:
Business ethics give protection to different social groups such as consumers, employees, small
businessmen, government, shareholders, creditors, etc.
Provides basic framework:
Business ethics provide a basic framework for doing business. It gives the social cultural,
economic, legal and other limits of business. Business must be conducted within these limits.
Voluntary:
Business ethics must be voluntary. The businessmen must accept business ethics on their own.
Business ethics must be like self-discipline. It must not be enforced by law.
Requires education and guidance:
Businessmen must be given proper education and guidance before introducing business ethics.
The businessmen must be motivated to use business ethics. They must be informed about the
advantages of using business ethics. Trade Associations and Chambers of Commerce must
also play an active role in this matter.
Relative Term:
Business ethics is a relative term. That is, it changes from one business to another. It also
changes from one country to another. What is considered as good in one country may be taboo
in another country.
New concept:
Business ethics is a newer concept. It is strictly followed only in developed countries. It is not
followed properly in poor and developing countries.

26
Advantages of Business Ethics
More and more companies recognize the link between business ethics and financial
performance. Companies displaying a “clear commitment to ethical conduct” consistently
outperform companies that do not display ethical conduct.
1. Attracting and retaining talent
People aspire to join organizations that have high ethical values. Companies are able to attract
the best talent and an ethical company that is dedicated to taking care of its employees will be
rewarded with employees being equally dedicated in taking care of the organization. The ethical
climate matter to the employees.
Organizations create an environment that is trustworthy, making employees willing to rely, take
decisions and act on the decisions and actions of the co-employees. In such a work
environment, employees can expect to be treated with respect and consideration for their
colleagues and superiors. It cultivates strong teamwork and Productivity and support employee
growth.

2. Investor Loyalty
Investors are concerned about ethics, social responsibility and reputation of the company in
which they invest. Investors are becoming more and more aware that an ethical climate
provides a foundation for efficiency, productivity and profits. Relationship with any stakeholder,
including investors, based on dependability, trust and commitment results in sustained loyalty.

3. Customer satisfaction
Customer satisfaction is a vital factor in successful business strategy. Repeat purchases/orders
and enduring relationship of mutual respect is essential for the success of the company. The
name of a company should evoke trust and respect among customers for enduring success.
This is achieved by a company that adopts ethical practices. When a company because of its
belief in high ethics is perceived as such, any crisis or mishaps along the way is tolerated by the
customers as a minor aberration. Such companies are also guided by their ethics to survive a
critical situation. Preferred values are identified ensuring that organizational behaviours are
aligned with those values. An organization with a strong ethical environment places its
customers’ interests as foremost. Ethical conduct towards customers builds a strong competitive
position. It promotes a strong public image.

4. Regulators government agencies

Regulators eye companies functioning ethically as responsible citizens. The regulator need not
always monitor the functioning of the ethically sound company. The company earns profits and
reputational gains if it acts within the confines of business ethics. To summaries, companies that
are responsive to employees’ needs have lower turnover in staff.

27
 ➢ Shareholders invest their money into a company and expect a certain level of return
from that money in the form of dividends and/or capital growth.
➢ Customers pay for goods, give their loyalty and enhance a company’s reputation in
return for goods or services that meet their needs.
➢ Employees provide their time, skills and energy in return for salary, bonus, career
progression, and learning.

TOPIC 3- ETHICAL ISSUES IN BUSINESS

Ethical problems and phenomena arise across all the functional areas of companies and
at all levels within the company.

1. Ethics in Compliance
Compliance is about obeying and adhering to rules and authority. The motivation for being
compliant could be to do the right thing out of the fear of being caught rather than a desire to be
abiding by the law. An ethical climate in an organization ensures that compliance with law is
fuelled by a desire to abide by the laws. Organizations that value high ethics comply with the
laws not only in letter but go beyond what is stipulated or expected of them.

2. Ethics in Finance
The ethical issues in finance that companies and employees are confronted with include:
In accounting
▪ window dressing, misleading financial analysis.
▪ Related party transactions not at arm’s length
▪ Insider trading, securities fraud leading to manipulation of the financial markets.
▪ Executive compensation.
▪ Bribery, kickbacks, over billing of expenses, facilitation payments.
▪ Fake reimbursements

3. Ethics in Human Resources

Human resource management (HRM) plays a decisive role in introducing and implementing
ethics. Ethics should be a pivotal issue for HR specialists. The ethics of human resource
management (HRM) covers those ethical issues arising around the employer-employee
relationship, such as the rights and duties owed between employer and employee.
The issues of ethics faced by HRM include:
▪ Discrimination issues i.e. discrimination on the bases of age, gender, race, religion,
disabilities, weight etc.
▪ Sexual harassment.
▪ Affirmative Action.
▪ Issues surrounding the representation of employees and the democratization of the
workplace, trade.

28
 ▪ Issues affecting the privacy of the employee: workplace surveillance, drug testing.
▪ Issues affecting the privacy of the employer: whistle-blowing.
▪ Issues relating to the fairness of the employment contract and the balance of power
between employer and employee.
▪ Occupational safety and health.
Companies tend to shift economic risks onto the shoulders of their employees. The boom of
performance-related pay systems and flexible employment contracts are indicators of these
newly established forms of shifting risk.
4. Ethics in Marketing
Marketing ethics is the area of applied ethics which deals with the moral principles behind the
operation and regulation of marketing. The ethical issues confronted in this area include:
▪ Pricing: price fixing, price discrimination, price skimming.
▪ Anti-competitive practices like manipulation of supply, exclusive dealing arrangements,
tying arrangements etc.
▪ Misleading advertisements
▪ Content of advertisements.
▪ Children and marketing.
▪ Black markets, grey markets.
5. Ethics of Production
This area of business ethics deals with the duties of a company to ensure that products and
production processes do not cause harm. Some of the more acute dilemmas in this area arise
out of the fact that there is usually a degree of danger in any product or production process and
it is difficult to define a degree of permissibility, or the degree of permissibility may depend on
the changing state of preventative technologies or changing social perceptions of acceptable
risk.
▪ Defective, addictive and inherently dangerous products and
▪ Ethical relations between the company and the environment include pollution,
environmental ethics, and carbon emissions trading.
▪ Ethical problems arising out of new technologies for eg. Genetically modified food
▪ Product testing ethics.
The most systematic approach to fostering ethical behavior is to build corporate cultures that
link ethical standards and business practices.

ACTIVITIES/ASSESSMENTS
1. Explain the advantages of business ethics
2. Discuss the different ethical issues in business

29
LESSON 6- STRATEGIC PHILANTROPHY

OVERVIEW
Strategic philanthropy is a unique and powerful way to combine your company goals
with your desire to increase the well-being of mankind. We call it strategic philanthropy. Two of
the more popular names are cause-related marketing or community partnering. No matter what
you call it, strategic philanthropy is a positioning that connects your company with a not-for-profit
organization or cause. In this way, while you are being helpful and working for the common
good in your community, your business is receiving parallel benefits. These benefits include
exposure, lead generation, employee retention and increases in performance and productivity.
They can even include benefits to your bottom line.

LEARNING OUTCOMES
By the end of this lesson, you should be able to:

• Define strategic philanthropy

• Understand the benefits of philanthropy and volunteerism
• Discuss the different corporate philanthropy programs

COURSE MATERIALS

TOPIC 1- STRATEGIC PHILANTROPY DEFINED

Strategic philanthropy is a business concept whereby companies perform charitable
deeds and receive indirect financial benefits from these actions. The process usually entails a
corporation's engaging in some sort of partnership, either for one project or on a long-term
basis, with a non-profit organization. In the process of strategic philanthropy, the corporation is
able to perform a good for society by using its funds or other resources to help a worthy cause.
The tangential benefit of this action is that the brand awareness of the company is increased
and the public may form a positive association with the company, both of which can help the
company's profits in the future.
Most large corporations are involved with different charitable causes. These corporations
can be important sources of funding for non-profit organizations, since they can provide the kind
of funding that the non-profits wouldn't be able to secure anywhere else. While a company
usually may not need any other reason to help charitable causes other than a simple desire to
help, it can secure some indirect benefits for its bottom line in the process. That's where the
concept of strategic philanthropy comes into play.
To execute strategic philanthropy, a company must form some sort of relationship with a non-
profit organization. This can occur simply when a corporation donates money to the non-profit's
cause of choice. A corporation may even be more directly involved with a charity, providing

30
valuable resources to the cause or even having their employees volunteer at an event. In
certain cases, a company may even strike up a long-term relationship with a non-profit group,
acting as a corporate sponsor.
One of the most important aspects of marketing is brand awareness, and strategic philanthropy
is an excellent way for companies to achieve this. Brand awareness basically means that, once
a consumer gets knowledge of a certain company and gets comfortable with it, he or she is
more likely to buy goods or services from that company. A positive relationship with a worthy
charity can certainly make consumers feel good about a specific corporation.
As a result, the strategic philanthropy performed by a corporation may stay in the minds of
consumers when they must decide between different alternatives to serve their needs. In this
way, not only does the company help out a worthy cause, but the cause-related marketing in
turn helps out sales and profits. Companies have to make sure to always put the charity's
benefit first in such arrangements, or else the effect on public perception might turn out to be the
opposite of what was intended.

TOPIC 2- THE BENEFITS OF PHILANTROPY AND VOLUNTEERISM

Participants in workplace volunteer activities are more likely to be loyal and satisfied
employee .By providing opportunities for employees to lend a helping hand and contribute to
charitable causes, workplaces can help foster their own sense of community.
Efforts to help employees with volunteerism and philanthropy commonly include:
✓ Providing paid time off for volunteer activities.
✓ Organizing volunteer events and days of service.
✓ Matching contributions to employees’ charitable donations.
These initiatives help employees strengthen bonds with colleagues and neighbors. Giving
back is especially important for companies looking to attract and retain younger workers—the
Millennial generation—who are keen on organizations that are active in philanthropy and service
to the community.
According to the 2015 Deloitte Millennial survey, 6 in 10 Millennials say the reason they chose
to work for their current employer was because they felt a sense of purpose there. Volunteer
and philanthropic opportunities highlight a company’s purpose and can help keep Millennials
engaged, according to proponents, who point to research showing that Millennials who
frequently participate in workplace volunteer activities are more likely to be proud, loyal and
satisfied employees, as compared to those who rarely or never volunteer.
“Companies are looking for better ways to engage young employees, and philanthropy is an
effective way to reach this demographic,” said Ty Walrod, co-founder and CEO of San
Francisco-based Bright Funds, a donating, matching and volunteering platform. “Employees are
looking for ways to contribute to the betterment of their local communities and to society as a
whole. The opportunity is to build a culture around empowering employees to see opportunities
and explore the most creative and effective ways to solve big challenges.”
Allowing employees to make contributions to charitable causes through payroll deductions is an
obvious first step, and matching those contributions can provide a nice incentive. “Eighty-four
percent of Millennials made a charitable donation in 2014, yet only 22 percent said their
donation was solicited through their company,” Walrod said.

31
The federal Office of Personnel Management’s Combined Federal Campaign is one of the best-
known examples of an annual workplace charity initiative. Services such as America’s Charities
can help employers select appropriate recipients.

Volunteer Activities
For a more hands-on approach, employers can develop a program to encourage volunteerism.
Footwear Company Timberland, based in Stratham, N.H., offers its employees 40 paid hours
per year to spend on volunteer activities. Although using those hours is not required, the
company keeps volunteerism and philanthropy front and center by sponsoring global service
days twice a year and smaller monthly service events to keep employees aware of and engaged
in opportunities to serve the community.
To measure the program’s impact, the company tracks both the total number of volunteer hours
put in by employees and the percentage of available volunteer hours that the staff actually used,
which indicates whether the activity is being valued by employees. “Tracking hours is very
important because it helps us set goals,” said Atlanta McIlwraith, Timberland’s senior manager
of community engagement and communications.
Littleton, Colo.-based Vertex Innovations Inc., which manages construction projects for the
wireless telecom industry, launched its first National Service Week in February 2016, in
partnership with the nonprofit group Feeding America. During the week of Feb.22-26, Vertex
Innovations team members across the U.S. are spending a half -day volunteering at their local
food banks, sorting, packing and stacking food donations.
“As corporate citizens, we take care of our neighbors," said Erica Smith, executive director of
charitable contributions at Vertex Innovations. “Feeding America is allowing us to achieve that in
one, unified effort on a national scale.”

The Role of Human Resource Management

Volunteer and philanthropy programs often, but not always, develop through the efforts
of HR staff. Senior leadership and the marketing department can also be key drivers of the
program. No matter who is involved, it is important for employers to consider a few things when
developing a program:

Select appropriate causes

“There should be agreement on what you stand for” and what the organization wants to support,
said Christen Graham, president of Giving Strong Inc., a social impact consulting firm based in
Portland, Maine. Many companies develop guidelines for acceptable activities—for example,
they may exclude political groups or events—and some try to balance local events with support
for national or international events or groups.

32
Set activity guidelines
The organization should establish clear parameters and rules for days of service. For example,
employees will have to follow certain rules when planning their days or hours of service and
work with their managers to avoid workplace disruptions. “It is just like a vacation that has to be
set up in advance,” said Tom Shaw, vice president of human resources for Triumph Bancorp in
Dallas. “Employees have to coordinate their volunteerism with their supervisor.”
Advance planning is particularly important if the organization wants to offer longer service
sabbaticals to employees. “How will you help employees take four or six months off in a way
that the business keeps going?” Graham asked.

Keep it voluntary
Employers should take care not to pressure employees to use service hours or to participate in
volunteer or philanthropy programs. Timberland’s McIlwraith recalled a competition among
business units to get employees more engaged with volunteerism. “Some managers took that a
little too far,” she said. “They never threatened anyone’s position, but some of them reached out
to employees to find out why they hadn’t signed up for the program.”
Such pressure puts employees in a difficult position, and they may feel forced to participate
when they would rather not.
Employers may face the opposite problem, too—not enough open slots at volunteer events for
all interested employees. Triumph Bancorp has been working with Living Water International to
dig fresh water wells in developing countries for the past few years. So far, 48 employees have
participated in several multiday trips to El Salvador. The company continues to pay employees
so that participants do not have to use their vacation time.
“People fill out an application for each trip, and we select employees from across the
organization so that no department or part of our company is overrepresented,” Shaw said. “If
they do not get selected, interested employees can apply the following year and we will give
second-time applicants extra consideration.”

33
TOPIC 3- CORPORATE PHILANTHROPY PROGRAMS

PHILIPPINE BUSINESS FOR SOCIAL PROGRESS (PBSP)

Philippine Business for Social Progress is the largest business-led NGO at the forefront of
strategic corporate citizenship and business sector leadership, contributing to sustainable
development and poverty reduction. Established in 1970, PBSP remains a consultant and
partner of choice of companies and donors.
PBSP scales up impact by adopting the Collective Impact strategy to solve large, complex,
systemic problems. PBSP organizes Platforms for Collective Engagements (PLACEs) to ensure
alignment and sustainability of initiatives by multiple stakeholders.
Responding to the changing landscape of CSR, PBSP’s brand of corporate citizenship taps into
the core business competencies of companies and promotes inclusive business as a strategy.
PBSP also continues to strategically engage companies through social investment, responsible
business practices, and philanthropy.
PBSP creates sustainable solutions to societal problems in its core program areas which are
Health, Education, Environment, and Livelihood and Enterprise Development. It also provides
off-the-shelf options for engagement of companies and their employees.
With a proven track record, PBSP provides end-to-end services in development consulting
which include project and grants management, events and backroom management

34
HEALTH PROGRAM
NutriSapat, Batang Angat
The Supplemental Feeding Program— dubbed as “NutriSapat, Batang Angat” — caters to
Filipino children who are below the ideal weight for their ages. These identified undernourished
children will be registered to be part of the group who will be given supplementary dietary
support for 120 days (or four months).
Aside from the provision of dietary supplement for the children, households within the target
communities will be educated on how to observe proper nutrition for their families, simple and
mindful ways to promote healthy eating habits among their children, and how to sustain their
own source of nutritious food through FAITH (Food Always In the Home) gardening – a specific
type of backyard gardening.

PBSP takes active participation in the implementation of activities under The Philippine Plan of
Action for Nutrition (PPAN) 2017-2022 to contribute to the fight against malnutrition among
children, through the supplemental feeding program. This is anchored in the 2030 Sustainable
Development Goals for promoting Maternal, Infant and Young Child Nutrition. PhilPAN consists
of programs that are nutrition-specific, nutrition-sensitive and enabling support programs.
PBSP is implementing this initiative as part of its flagship program to contribute to the reduction
of stunted and wasted children under five years of age, from the baseline of 33.4% and 7.1%,
respectively to 21.4% and less than 5% in 2022.
Aside from the supplemental feeding, another major component of this program is the backyard
gardening which is a complementary intervention at home. Communities especially the parents

35
of the undernourished children will be provided the necessary training and materials to install
and maintain their own source of fruits and vegetables within their location.
The main objective of the program is to contribute to the reduction of stunting and wasting
among children under five years of age in the Philippines while the specific objectives include:
✓ Improve the nutritional status of children under five years of age.
✓ Capacitate families to observe and promote healthy eating habits among their children.
✓ Promote food security in communities through capacitating the parents to install and
manage their own vegetable garden.
In its first year of implementation, PBSP successfully secured a partnership agreement with the
Department of Agriculture (DA) to combine efforts and help resolve malnutrition in the country.
Through DA’s “Gulayan sa Bakuran” program, target communities will be trained by experts in
the field on how to build and manage their own source of nutritious food.
Also, included in DA’s commitment is the provision of resources such as seeds, garden soil,
compost and initial garden tool as a start-up package or preliminary gardening production
support for all identified beneficiaries.

ENVIRONMENT PROGRAM
Water Alliance
On the brink of water insecurity, the Philippines is anticipated to have severe water shortage in
major river basins by 2025. About 16 million Filipinos still suffer from lack of access to safe
drinking water while fresh water resource continues to decline due to climate change, pollution,
and greater demand. This situation seriously impacts on people’s health, children’s education
and safety, and the homemaker’s time which could have been invested for household or
livelihood activities.
Confident in the strength of its membership, PBSP launched the Water Alliance in August 2015,
the Alliance is a partnership of businesses led by their CEOs with strong commitment to create
solutions to water problems in the Philippines. Since its launch, the Water Alliance has grown
and engaged other sectors to contribute in solving water security challenges. Today, the
Alliance has evolved into a multi sectoral consortium that includes private sector and business
networks, academe and research institutions, and social development organizations.

36
Francis Giles Puno, Chairman of the Water Alliance, discusses the interventions they are
undertaking to address water security issues at the Solb: Forum on Sustainable Solutions.
The Water Alliance continues to fulfill its commitment to convene the different sectors to spread
the awareness on water security challenges, and to identify and implement company wide and
collective measures that each institution and individual can do to help address the problem. An
action agenda was crafted to complement the government’s development plans and efforts.
Through the leadership of Mr. Francis Giles Puno, Water Alliance Chairman and First Philippine
Holdings President and CEO, the alliance aims to accomplish the following five-year targets
(2016-2021):
✓ Provide safe drinking water to 190 waterless communities;
✓ Encourage 140 companies to adopt measures to lower water footprint and treat
wastewater;
✓ Participate in policy development and advocacy, specifically support the creation of a
single regulatory body with agenda on water security; and
✓ Develop area-based solutions through research and assessment.
✓ A family beneficiary of a water system installed in San Martin, Bamban Tarlac.
Through social investments and core business approaches, the Alliance accomplished the
following as of 2018:

37
 ✓ Provided 39 communities including schools with potable water systems worth
PhP81,000,000 through funding support from the members.
✓ Campaigned for the advocacy of water footprint management and reduction, and
conducted two water demand management training participated by 21 companies and
academic institutions. The participants are on their way to crafting their organization’s
water footprint reduction program.
✓ Contributed in the discussions and consultations for the ongoing Philippine Water Supply
and Sanitation Master Plan.
✓ Prepared a compendium of existing research and studies by Ateneo De Manila
University, De La Salle University, and University of the Philippines Diliman in the
communities of Pandi in Bulacan, Mulanay in Quezon, and San I sidro in Leyte to
improve their water access.
✓ Developed a database of waterrelated studies and regional development plans. This
compilation serves as a storage of knowledge which can aid the Water Alliance and
other users in crafting solutions.
✓ 153 hectares of forest and mangrove covers were rehabilitated in Upper Marikina
Watershed, Buhisan Watershed, and mangrove areas in San Remigio, Cebu.
✓ Held last September 13, 2018, the Water Forum is an annual activity that serves as a
platform to educate, present solutions, and rally the various stakeholders. This forum
was co-organized with the Department of Science and Technology (DOST) and
Department of Environment and Natural Resources (DENR), and was attended by more
than 200 individuals from the private sector, academe, government, and NGOs.
The challenges on water security may be overwhelming but with all stakeholders onboard and
contributing their efforts, we can and will overcome the problem.

38
EDUCATION PROGRAM
Bayanihang Pampaaralan
The Bayanihang Pampaaralan is focused on capability building of public schools as well as
influencing systems of change to contribute to the attainment of desired education outcomes
and impact. This program shall enable HS graduates to be ready for work or entrepreneurship,
fit for jobs or ready for college.
In today’s economy, all young people have to navigate a complex landscape to make their way
through education and training and into work. Along the way, they meet many factors that
contribute to either good or poor outcomes. In the world of work, what they know is not enough,
they also need to demonstrate what they can do with what they know.
The Philippine education system is trying its best to prepare the youth to be future-ready. But
the enormity and complexity of the challenges facing the workforce of tomorrow call for deeper
public and private sector collaboration.
PBSP established the Bayanihang Pampaaralan Initiative as a platform to generate private
sector constituency that supports education reforms. After initially focusing its efforts and
significantly helping the Department of Education (DepEd) close the classroom gap in 2011, it
turned its attention to supporting Senior High Schools (SHS) produce graduates primed to join
the workforce. As its collective agenda, Bayanihang Pampaaralan provided corporate
executives an opportunity to participate in the discourse of the issues and needs to effectively
implement senior high school and to co-create solutions and opportunities for meaningful
engagement.

39
Bartending Course is one of the Senior High School TVL tracks supported by PBSP through the
Bayanihang Pampaaralan.
Through academe-industry conferences held in Manila, Cebu City, and Cagayan de Oro City,
emerging region-specific challenges and opportunities to enhance Senior High School
implementation and the facilitation of the students’ transition to the workforce were discussed.
These reinforced the sense of responsibility among the different stakeholders. Armed with a
better appreciation of the issues, there came about a strong desire and greater understanding of
the strategies and approaches that will respond to the schools’ and students’ needs. Going
beyond the traditional corporate philanthropy, solutions that created value for both the industry
and the academe were explored.

Through the Bayanihang Pampaaralan, PBSP donated ingredients for Baking and Pastry
Production Course at Pasay North High School Main.
Recognizing that the success of the SHS particularly the TechnicalVocational Education and
Training (TVET) program is hinged on the graduates’ successful entry into working life, it was
crucial to align education and training to economic policies and labor market demands in order
to enhance employability and productivity of the new entrants to the workforce. A job market
study was conducted which provided information surrounding skills demand by matching the
industries’ desired skills with the skills supplied through the SHS Program, and the appetite of
the business sector in accepting SHS graduates to fill up job openings. Career orientations were
also conducted to help students and their parents, who still influence the career choices of their
children, to appreciate the importance of choosing a career that is aligned not only to their
interests and aptitudes but also to the available curricular exits. Transition to employment was

40
greatly improved as demonstrated during the job fairs that were conducted in Cebu and
Cagayan de Oro. In Cebu, out of the 1,911 graduates who were interviewed, 1,516 were
qualified, 209 of whom were hired on the spot. In Cagayan de Oro, out of the 50 graduates, 21
were hired on the spot and a few others were requested to undergo interviews and recruitment
examinations after the job fair.

LIVELIHOOD PROGRAM
BRIDGe Project
Inclusive Business (IB) has been truly effective in uplifting the lives of poor Filipinos. People of
the Autonomous Region in Muslim Mindanao (ARMM) can attest to this success that was
documented through the implementation of the Brokering Business Investm ents in the
Bangsamoro to Achieve Inclusive Development and Growth (BRIDGe) Project. BRIDGe, a
project implemented by PBSP in partnership with Hineleban Foundation, Inc. and Regional
Board of Investments ARMM (RBOI-ARMM), developed the Business Sustainability Framework
in the Bangsamoro (see Figure 1) that serves as a guide for future investors on how to do
business in the region and an Investor’s Guide called CLICK, a toolkit for investors interested in
the Bangsamoro.

Several agricultural companies in ARMM have adopted the IB model and improved their
business operations in support of inclusivity. These companies, which include Matling
Corporation, Lamsan Corporation, MKAVI II, Agumil, and Al Sahar, to name a few, put
community engagement at the core of their business operations. Local residents, men and
women, are employed and receive competitive benefits. They are also provided sustainable
income through a cooperative. Their children are given scholarship and assured of jobs after

41
their graduation. Community efforts are also considered with their involvement in community-
based initiatives. These company practices and business models are compiled in a resource
book, entitled, Engaging with Bangsamoro Communities: The Key to Sustainable Business in
Muslim Mindanao. For the expansion of these models and in line with the growing interest of
companies to adopt inclusive business, PBSP launched the Inclusive Business Capacity
Building Fund during the Inclusive Business Leaders Conference last November. It is a grant
fund facility that will support the provision of capacity-building interventions and technical
assistance to farmers, fishermen, community producers, and other productive marginalized
groups for them to engage in IB projects of companies

ACTIVITIES/ASSESSMENTS
1. Make a reaction paper about the role of PBSP in our country, discuss their programs in
the area of health, education, environment and livelihood.

42
LESSON 7- SUSTAINABILITIY ISSUES

OVERVIEW
Of the three principles of CSR the one which is the most prominent at the present time is
sustainability. It is one that has recently become very important for all businesses. Sustainability
is concerned with the effect which action taken in the present has upon the op tions available in
the future. The rise of technological advancements and industrialization not only gave rise to our
modern civilization, but it also gave rise to a wide range of environmental issues and global
challenges. Environmental issues have become a common concern for people around the
globe. The growth of factories and businesses has contributed to wide-ranging environmental
damages, especially in the past few decades, and has affected the health, ecological balance,
and climatic conditions all over the globe. Modern technology has been progressing at
exponential rates, making mass production of goods as fast as possible. With rapid expansion
of businesses came exploitation and depletion of Earth’s resources and minerals, as well as
degradation of the environment.

LEARNING OUTCOMES
By the end of this lesson, you should be able to:

• Explain global sustainability issues and how businesses respond to environmental

responsibility

COURSE MATERIALS

TOPIC 1- GLOBAL ENVIRONMENTAL ISSUES

Green initiatives and sustainable investment
Industrialization did not happen overnight. It started with the industrial revolution in the 1700’s in
Europe, and quickly spread all over the world. During this time, the world went through a rapid
transformation, when people started using power machinery for building, manufacturing, and
harvesting. These machines needed fuel to run, and fossil fuels such as coal, petroleum and
natural gas became the primary source of energy. The global warming and the environmental
impacts that we are experiencing today are in part due to the rapid industrialization around the
globe that increased the amount of carbon, and other greenhouse gases in the atmosphere.
With rise in carbon and other greenhouse gases, the global temperature started to rise, causing
severe changes in weather patterns, water currents of the ocean, and wind patterns around the
globe. As a consequence, we have been experiencing extreme weather, record heat, droughts,
devastating hurricanes, and tsunamis in the coastal areas. Especially in the urban areas, the
negative impacts of rapid industrialization were clearly evident. Diseases like cholera, typhoid,
and other water and air-borne diseases quickly broke out. Unhealthy living conditions and
overcrowding of population in many cities of America threatened public health. People slowly
started realizing the importance of sustainable investment and preservation of natural

43
resources; economic development of human civilization would only go so far without harming
the human health and many dangerous risks.

Healthy sustainable food

Food grown locally by farmers using organic methods (without the use of chemicals, GMO’s, or
synthetic fertilizers) is the right choice for food production. It is safer for the environment,
ecology, and people’s health. Growing your own food is even better because you are able to
control the amount of chemicals you use for pest control measures, as well as regulate the use
of antibiotics, and fertilizers. The less processed and imported food you eat, the better it is for
your health and the environment. It’s important to first avoid food waste, but also use any
leftover or inedible food to make organic fertilizer (compost) for your garden.

Sustainable communities
Most Americans live in cities or the surrounding areas; people living in metropolitan areas
account for over 80% of the US population. The choices we make while we are living in cities
greatly impact the global economy, environment, and personal well-being. The bright side of
living in a city is that it creates efficiency of energy uses, and reduces the per person energy
and resource use, and reducing energy waste and pollution. By making our communities more
energy efficient, we can save money, protect natural resources, and improve our quality of life.

Clean water
Clean water availability is going to be a major health issue around the globe, as the world
population increases. The need for safe clean drinking water is likely to double in the next
decade, where the world population is expected to exceed nine billion. When water runs off our
roofs and streets, it gets contaminated with disease causing toxic chemicals, dirt, and germs
along the way. Many of our water resources can also become contaminated with pollutants if
proper protection and conservation measures are not taken. Unprotected water resources can
become vulnerable to pollution from industrial waste, factories, power plants, and other human
activities, leading to drinking water shortages and diseases around the globe. Protect and
conserve water as much as possible, reducing pollution, and water waste.

Environment and health

The environment that we live in has a profound effect on our health and well-being. No matter
how advanced we get technologically, if we fail to keep the environment clean, our progress and
development will not be positive development. All things that surround us can affect our health;
our drinking water, the air we breathe in, the soil we walk on, and the food that we eat, all have
a profound effect on our health, and how we will progress into the future. Environmental health
and environmental protection are very much related. If we do not protect our environment, we
cannot expect to benefit from it, and we cannot expect our environment to protect us.

44
Take action
The problems we are facing today around the globe, with climatic changes, changes to
ecosystems, and global warming, are all consequences of our actions. What we do today and
how we use our resources today can impact the globe in the future. We can all join forces now
and reduce or even reverse the negative impacts on the globe, if we act now. Please join us in
our battle against pollution. We are all able to do our part in preserving our earth, by using less
water, reducing food and water waste, reducing pollution, using less energy, and using more
sustainable products in our daily activities. It just takes a conscious decision to make a shift
towards greener products and services, and adopting habits that conserve natural resources,
and protects the environment that we are living in. There was never a better time to start taking
action than now.

TOPIC 2- CORPORATE PRACTICES TOWARDS SUSTAINABILTY

Why all businesses should embrace sustainability
Sustainability is becoming more important for all companies, across all industries. 62% of
executives consider a sustainability strategy necessary to be competitive today, and another
22% think it will be in the future.
Simply put, sustainability is a business approach to creating long-term value by taking into
consideration how a given organization operates in the ecological, social and economic
environment. Sustainability is built on the assumption that developing such strategies foster
company longevity.
As the expectations on corporate responsibility increase, and as transparency becomes more
prevalent, companies are recognizing the need to act on sustainability. Professional
communications and good intentions are no longer enough.

The following industry leaders illustrate what sustainability initiatives look like:
➢ Nike and Adidas have both stepped up seriously. Nike has focused on reducing waste
and minimizing its footprint, whereas Adidas has created a greener supply chain and
targeted specific issues like dyeing and eliminating plastic bags.
➢ Unilever and Nestlé have both taken on major commitments; Unilever notably on organic
palm oil and its overall waste and resource footprint, and Nestlé in areas such as
product life cycle, climate, water efficiency and waste.
➢ Walmart, IKEA and H&M have moved toward more sustainable retailing, largely by
leading collaboration across their supply chains to reduce waste, increase resource
productivity and optimize material usage. It also has taken steps to address local labor
conditions with suppliers from emerging markets.
➢ Pepsi and Coca-Cola have both developed ambitious agendas, such as increasing focus
on water stewardship and setting targets on water replenishment.
➢ In biopharma, Biogen and Novo Nordisk have both worked toward energy efficiency,
waste reduction, and other ecological measures. They have also focused on social
impact via partner initiatives in the areas of health and safety.

45
 ➢ In financial services we see how banks like ANZ and Westpac in Australia both advance
local communities with good sustainability practices and by embedding sustainability in
their business processes and culture.
➢ Car manufacturers like BMW and Toyota have made strides on energy efficiency and
pollution reduction, not to mention Tesla as an outsider really challenging the industry’s
overall footprint.
These firms have all made strong commitments to sustainability, in large part through
transparency and addressing material issues. They are embarking on a more sustainable
journey, and all firms should follow suit over the next decade.

Some practical recommendations

Just like with overall strategy there is no “one right solution” on sustainability. The best solution
depends on the ambitions and stakes at each company. Here are a few useful actions for all
management teams to improve sustainability practices.
1. Align strategy and sustainability: Management needs to make sure that the strategy of
the company and the sustainability efforts are aligned. Often we see divergence, which
of course makes the sustainability efforts fragile, lacking real commitment and
prioritization. There are many good examples. Take Unilever’s “Sustainable Living”
which has the ambition to decouple growth and output as well as reduce its resource
footprint by focusing on waste reduction, resource efficiency, sustainability innovation
and ecological sourcing (like in organic palm oil). Similarly, Toyota is well known for
innovation in hybrid engines, but less so for reducing their dependence of rare earth
minerals. These minerals were required for hybrid and electric engines. But by
developing alternative motor technologies Toyota reduced its import dependence and
operational risk, and in doing so reduced its financial risks in case of price increases.

2. Compliance first, then competitive advantage: First and foremost companies need to
address compliance, which often relates to regulations in waste management, pollution
and energy efficiency as well as human rights and labor responsibility. Compliance is
also an issue that concerns investors. Recent BCG/MIT data shows that investors
increasingly shy away from compliance risks. A full 44% of investors say that they divest
from companies with poor sustainability performance.

3. Reactive to proactive: Many of today’s leading companies in sustainability, like Nike,

Coca-Cola, Telenor, IKEA, Siemens and Nestlé have stepped up largely as a
consequence of a crisis. For example, Nike faced boycotts and public anger for abusive
labor practices in places like Indonesia throughout the 90s, but turned the tide around. In
2005, it became a pioneer in establishing transparency by publishing a complete list of
the factories it contracts with and a detailed 108-page report revealing conditions and
pay in its factories. It also acknowledged widespread issues, particularly in its south
Asian factories. By recognizing the impact of sustainability in a crisis these companies
have all developed more proactive sustainability strategies.

46
 4. Quantify, including the business case: All companies struggle with quantifying the return
on their sustainability investments. With regards to compliance this is a straight forward
issue. With regards to areas of competitive advantage, however, companies need to link
sustainability to a business case. But the ones that actually do form a relatively small
group.

5. Transparency is a pre-condition for assessing and improving sustainability practices.

You cannot judge without transparency, simple as that. Transparency builds on the idea
that an open environment in the company as well as with the community will improve
performance. The only way for companies to accomplish transparency is through open
communications with all key stakeholders built on high levels of information disclosure,
clarity, and accuracy – as well as openness to recognizing faults and improving
practices.

6. Engage the Board: A full 86% of respondents in a recent survey by MIT/BCG agree that
boards should play an active and strong role in sustainability. But, only 42% report that
their boards are substantially engaged. Boards are often critical in collaborations with
key stakeholders such as NGOs, governments and international Organizations.

7. Engage your ecosystem: We see that collaboration is critical for efficient sustainability
practices, in particular in solving crises and in shaping broader solutions. The MIT/BCG
data shows that 67% of executives see sustainability as an area where collaboration is
necessary to succeed.

8. Finally – and most importantly – engage the organization broadly: One example of
engagement is Salesforce.com which through their “1/1/1” philanthropy program
contributes to each employee’s personal ability to engage with environmental
organizations and initiatives that support local communities. Another good example is
Nespresso, responding to the debate over the sustainability of its capsules, the company
has embedded sustainability into the DNA of every part of its business. Nespresso’s very
purpose is linked to the so called “Positive Cup” campaign. Sustainability is considered
during every decision made at Nespresso. The company seems sincere about reducing
its impact and is even looking at its aluminum sourcing.
In sum, sustainability is a major challenge, one that matters beyond individual companies. But
reassuringly a number of large companies are developing forward-thinking sustainability
policies. It is really becoming clear that sustainability is a megatrend that simply isn’t going
away!

ACTIVITIES/ASSESSMENTS
1. Discuss the different global environmental issues
2. Explain the actions that companies may implement to adopt to the issue of sustainability

47
LESSON 8- CSR STANDARDS AND CORPORATE ETHICAL VIRTUES

OVERVIEW
With the growing concern of both corporations and their stakeholders towards social
responsibility reporting, CSR standards and guidelines have become a common point of
reference for practitioners, regulating bodies and scholars alike. However, research in the
business ethics field seems to have given less attention to the way ethical concepts and models
relate to such CSR standards. The lesson evaluates the principles of three most prominent CSR
standards and guidelines, through the lens of the Corporate Ethical Virtues Model. It inquires
how the principles and reporting criteria pertaining to these CSR standards help corporations
embed seven ethical virtues which represent organizational conditions for ethical conduct:
clarity, consistency, achievability, supportability, visibility, discussability and sanctionability.

LEARNING OUTCOMES
By the end of this lesson, you should be able to:

• Discuss the Corporate Ethical Virtues Model and how it is embedded into the CSR
Standards.

COURSE MATERIALS

TOPIC 1- THE CORPORATE ETHICAL VIRTUES MODEL

Research from the business ethics field highlights the important role that the corporate
context plays in generating (un)ethical behavior in the workplace, acknowledging that the main
driver for conduct lies in the corporate context (Davis and Frederick 1984). As a result, business
ethics research became less interested in the personal characteristics of individual
transgressors and more focused on the characteristics of the organizational context within which
unethical behavior occurs. With this transition from the ‘bad apples’ to the ‘bad barrels’
approach (Trevino and Youngblood 1990), the corporate context was perceived as an active
element in the decision-making process, for it may either stimulate or constrain employees to
act morally or immorally. The context is important in generating the responsibility that individuals
assume as related to their role within the corporate context, for it is the corporate structures that
define such roles and their responsibilities.

The corporate context is built-up by corporate practices which include the tasks,
responsibilities and procedures (the corporate structure or formal dimension), as well as the
expectations, norms and values (the corporate culture or informal dimension) that are actually
expressed in the actions of organizational members. Globalization is a dynamic set of social
processes that is transforming our present social condition of nationality into one of globality,
characterized by tight global economic, political, cultural, and environmental interconnections
that make most of the currently existing borders and boundaries irrelevant.

Based on those factors of the ethical context which influence substantively the way
stakeholder expectations are embedded, corporate moral characteristics may be delineated so
as to make possible an ethical evaluation of the corporate conten. Kaptein terms such corporate
moral characteristics as “virtues” or “qualities” and positions them as desirable: when a
corporation achieves these qualities completely, one can label it as an ethical corporation.

48
Therefore, the extent to which a corporation integrates these virtues represents the extent to
which we can consider a corporation to be ethical. Embedded in the corporate structure and
culture, the corporate ethical virtues (or qualities) support employees in responding to the dirty
hands dilemma. They do this by promoting those contextual formal and informal stimuli which
are necessary for an adequate balancing of stakeholder interests and demands.

The model of Corporate Ethical Virtues developed and tested by Kaptein (1998, 2011)
identifies seven virtues which are interpreted as corporate conditions for ethical conduct and
reflect the capacity of an organization to stimulate the ethical conduct of employees. These
virtues are: clarity, consistency, achievability, supportability, visibility, discussability and
sanctionability. They represent dimensions of the ethical culture that a corporation should strive
for and aim to achieve the greater the level of embeddedness of these dimensions, the higher
the ethical quality of the organizational culture and the less likely it is that unethical behavior
would occur .

While CSR standards are basically aimed at stimulating corporations to report on the
way stakeholder expectations are handled, scholars have yet neglected to research whether
business ethics developments have relevant implications for the way such standards are
designed. It is precisely this gap in the existing research that we aim to fill, by linking the CEV
model and its implications for the dirty hands corporate dilemma, with the CSR standards and
guidelines, and by further evaluating the degree to which the latter help corporations integrate
stakeholder concerns.

TOPIC 2- EMBEDDING CORPORATE VIRTUES INTO CSR STANDARDS

We now turn to exploring the way CSR principles help corporations embed the seven
virtues from the CEV Model and thus become able to respond to the dirty hands dilemma. We
do this by analyzing each of the seven virtues and see how they are endorsed by three CSR
standards and guidelines: UNGC, GRI and ISO26000. Our option for these specific standards is
based on the international recognition that they have received as frameworks for CSR reporting.
The CSR strategy issued by the European Commission in 2011 specifically encourages
corporations to adhere by 2014 to a core set of CSR guidelines and principles, among which
UNGC and ISO26000 are mentioned. With over 10,000 corporate participants and other
stakeholders from more than 130 countries, UNGC represents the largest voluntary corporate
responsibility initiative in the world. A survey conducted by ISO in 2012 shows that more than 60
countries worldwide have adopted ISO 26000 as a national standard, while over 20 countries
plan to adopt it. GRI is the leading standard in sustainability reporting (UNGC and GRI 2013),
with more than 4,000 organizations across the world – including 80 % of the world’s 250 largest
corporations – reporting their sustainability performance and impacts according to GRI
guidelines.

RESEARCH METHOD
The research method used for evaluating the way the three CSR standards and
guidelines embed the ethical virtues is content-based. In discussing the way the standards
embed the seven ethical virtues from the CEV Model, we evaluate the extent to which each
standard explicitly sets reporting guidelines that correspond to the description of the ethical
virtues. In this regard, our research takes into account CSR principles and reporting topics of
the standards, including topics concerning the implementation process that corporations might
follow in view of CSR reporting.

49
 First, in the case of UNGC, reference is made to the guidelines for Communication on
Progress (COP) at the advanced level of corporate reporting (UNGC 2012), which is a public
disclosure to stakeholders made by corporations concerning the progress achieved in
implementing the ten principles of the UN Global Compact. It also includes 24 Advanced Criteria
(AC) for reporting, with correlated input for best practice. These criteria correspond to areas
covering the ten principles and, additionally, areas such as Strategy, Government and
Engagement, UN Goals and Issues, Value Chain Implementation and Transparency and
Verification.
Second, in the case of GRI, reference is made to the latest revision concerning the
sustainability reporting guidelines, namely, GRI.4 (GRI 2013), which contains several changes
in comparison to the previous editions of GRI.3, such as a new standard disclosure on ethics
and integrity and new sub-sections within the standard disclosure on Governance. In discussing
the way GRI.4 embeds the seven virtues, we refer to principles concerning content and quality,
as well as to general and specific standard disclosures.

Finally, the research refers to the ISO26000 voluntary standard published by ISO in
2010. When discussing the way this standard reflects the seven ethical virtues, we take into
account both the CSR principles and the seven core subjects it contains.

TOPIC 3- FROM CORRPORATE VIRTUES MODEL TO CSR STANDARDS

We discuss below each of the seven virtues depicted by the CEV Model in relation to
UNGC, ISO26000, and GRI.4 guidelines. For each CSR standard we indicate the specific
sections that embed the virtue under discussion and state how this contributes to answering the
dirty hands corporate dilemma.

CLARITY
Clarity is the first virtue of the CEV Model and concerns the extent to which the
corporation’s moral expectations from its employees are expressed accurate, concrete,
comprehensive, and understandable. Vagueness and ambiguity of moral expectations
constitute a main source of unethical conduct within organizations. Applied to the dirty hands
dimension, the virtue of clarity refers to the way in which employees are aware about the
responsibilities that the corporation recognizes towards its stakeholders, by being able to
identify the stakeholder categories, together with their interests and expectations. Ideally, this
corporate quality involves that the expectations of corporate stakeholders are clear for the
employees. The corporate virtue of clarity is reflected in GRI.4 by both the principle of
stakeholder inclusiveness, which specifies that the corporation should identify its stakeholders
and explain how it responds to their reasonable expectations and interests, and the standard
disclosure on stakeholder engagement (G4-24 through G4-27), which asks corporations to
report on the stakeholder groups engaged, criteria for their selection, as well as the approach
adopted by the corporation towards concerns raised by stakeholders.

CONSISTENCY

Consistency refers to the way in which corporate moral expectations regarding

employee behavior are coherent, univocal and compatible. As managers and supervisors are
true role models within corporations and employees often imitate their ethical or unethical
behavior, ethical standards are undermined when superiors communicate contradictory or
inconsistent messages to followers. The value of consistency therefore suggests that managers
need to constantly and continually follow the ethical norms and display the desired behavior that
the organization sets out, or else employees receive inconsistent signals. As related to the dirty

50
hands dimension, the virtue of consistency ideally means that referents make the necessary
effort to satisfy stakeholder expectation. Consistency is covered by GRI.4 through the standard
disclosure on governance G4-42, highlighting that the governance body (committee or board)
and senior executives set the tone for the organization in terms of values, policies and strategy
and therefore their role in developing the latter must be monitored. The focus on the conduct of
top management is completed with disclosure G4-44 concerning the way corporations evaluate
the governance body’s performance and actions taken as a result of such evaluation. Moreover,
G4-DMA asks corporations to pay attention to mechanisms for evaluating the effectiveness of
the management approach and related adjustments.

ACHIEVABILITY

Achievability is the corporate virtue which acknowledges that moral expectations set out
by corporations must be in line with the capability of employees to live up to them. It concerns
the degree to which corporations enable employees to meet such expectations by providing
sufficient time, budgets, equipment, information, and authority to fulfill their ethical
responsibilities. Employees are less inclined to pay attention to ethical standards when under
great time pressure; therefore the corporation is responsible for creating the proper context in
which individual action takes place. In connection to the dirty hands dimension, the virtue of
achievability means that the corporation refrains from creating unrealistically high expectations
on the part of external stakeholders and leaving them to employees to fulfill. Ideally, this virtue
translates into the practice of creating stakeholder expectations that can be satisfied.

SUPPORTABILITY

Supportability concerns the extent to which employees are encouraged to recognize and
realize the legitimate expectations and interests of stakeholders. It refers to the commitment of
managers and employees to behave ethically, and the extent to which the corporation fosters or
hinders such commitment. Because a corporate culture characterized by demotivation, mistrust,
and dissatisfaction can generate unethical behavior, commitment is thought to be desirable.
Employees who feel that they do not receive a fair and proper treatment within the corporation
might try to balance their dissatisfaction by deliberately causing harm to the corporation. As
related to the dirty hands dimension, the virtue of supportability is ideally embedded when the
corporation fosters support for satisfying stakeholder interests.

VISIBILITY

Visibility is the corporate virtue pertaining to the degree to which employee unethical behavior
and its consequences are manifest to those who can take a stance. It may be read either in
terms of vertical visibility, when it relates to top-down or bottom-up awareness of unethical
behavior, or in terms of horizontal visibility, when it relates to awareness of unethical behavior
among colleagues of the same hierarchical position.

DISCUSSIBILITY

Discussibility concerns the openness to discuss ethical dilemmas, as it is perceived by

employees. When employees can openly talk about ethics, unethical behavior is less frequent.
On the contrary, when the corporate culture allows for little discussion and debate, unethical
behavior is more present. In relation to the dirty hands dimension, this virtue is ideally translated
into open discussions regarding the way dilemmas, problems and criticism over the way
stakeholder expectations are satisfied.

51
SANCTIONABILITY

Sanctionability concerns the extent to which employees are likely to be punished for
irresponsible conduct and rewarded for responsible behavior, either in a formal or informal way.
While sanctioning of unethical behavior reinforces the ethical standards within the corporation
and leads to avoidance, research also suggests that the more ethical behavior is rewarded, the
less people behave unethically. Related to the dirty hands dimension, this virtue is ideally
embedded when staff is sanctioned if stakeholder expectations are deliberately ignored.

ACTIVITIES/ASSESSMENTS
1. Discuss the Corporate Ethical Virtues Model and how it is embedded into the CSR
Standards
2. Discuss the Seven Virtues depicted by the Corporate Ethical Virtue (CEV) Model.

52
 GRADING SYSTEM
Class Standing 70%
(Portfolio, projects, case analysis, summative tests)

Midterm / Final Examinations 30%

100%

Midterm Grade + Final Term Grade = FINAL GRADE

2

REFERENCES
Corporate Social Responsibility by David Crowther & Guler Aras 1st edition 2008
https://www.investopedia.com/terms/c/corp-social-responsibility.asp
http://faculty.wwu.edu/dunnc3/rprnts.pyramidofcsr.pdf
Management by Robert Kreitner 3rd edition
https://www.tutorialspoint.com/management_principles/management_principles_tutorial.pdf
https://www.consultationmanager.com/7-tactics-to-maintain-positive-stakeholder-relationships/
https://www.investopedia.com/terms/c/corporategovernance.asp
https://s3.amazonaws.com/brt.org/archive/Principles-of-Corporate-Governance-
2016.pdf#:~:text=Principles%20of%20Corporate%20Governance%202016%203%20Guiding%2
0Principles,the%20CEO%20and%20senior%20management%20in%20operating%20the
https://smallbusiness.chron.com/effects-government-policies-businesses-65214.html
https://saylordotorg.github.io/text_the-sustainable-business-case-book/s07-02-business-and-
government-relati.html
https://theintactone.com/2019/09/19/be-u1-topic-1-business-ethics-an-overview-concept-nature/
https://www.wisegeek.com/what-is-strategic-philanthropy.htm
https://www.shrm.org/ResourcesAndTools/hr-topics/benefits/Pages/philanthropy-
volunteerism.aspx
http://www.pbsp.org.ph/
https://www.imd.org/research-knowledge/articles/why-all-businesses-should-embrace-
sustainability/
https://environmentalprofessionalsnetwork.com/environmental-global-sustainability-issues/
https://www.linkedin.com/pulse/globalisation-impact-csr-issues-alex-rius
https://reporter.rit.edu/features/csr-era-globalization

53
 GOOD GOVERNANCE AND CORPORATE SOCIAL RESPONSIBILITY
FINAL EXAM

Name____________________________________ Year & Sec.______________

Please write the correct answer for each question

1_______As social activists like to say, business is either part of the solution or part of the
problem. There is no denying that private business shares responsibility for societal problems
including unemployment, inflation, and pollution. Like everyone else, corporate citizens must
balance their rights and responsibilities. Which of the following supports the said statement?
A. A better society means a better environment for doing business.
B. Since managers are not elected, they are not directly accountable to the people.
C. Business is unavoidably involved in social issues.
D. Corporate social action will prevent government intervention

2._______It is a business concept whereby companies perform charitable deeds and receive
indirect financial benefits from these actions.
A. Sustainability
B. Governance
C. Strategic Philanthropy
D. Globalization

3._______It is a branch of social science. It deals with moral principles and social values.
A. Social Responsibility
B. Ethics
C. Philosophy
D. Sociology

4._______It is the combination of rules, processes or laws by which businesses are operated,
regulated or controlled.
A. Leadership
B. Control
C. Governance
D. Guidance

54
5._______Which of the following is considered as secondary stakeholder?
A. Suppliers
B. Owner
C. Creditor
D. Community

6._______More and more companies recognize the link between business ethics and financial
performance. Companies displaying a “clear commitment to ethical conduct” consistently
outperform companies that do not display ethical conduct. Which of the following is an
advantage of business ethics?
A. Retaining talent
B. Profit loss
C. Customer dissatisfaction
D. Bankruptcy
E. Mismanagement

7._______With its rich stock of technical, financial and managerial resources, the private
business sector can tip the scale in favor of solving society’s more troublesome problems. After
all, it is argued, without the support of society, business could not have built its resource base in
the first place. Which of the following support this statement?
A. Corporate social action will prevent government intervention
B. Profit maximization ensures the efficient use of society’s resources
C. Business has the resources to tackle today’s complex societal problems
D. Since managers are not elected, they are not directly accountable to the people

8._______This is concerned with the effect which action taken in the present has upon the
options available in the future. If resources are utilized in the present then they are no longer
available for use in the future, and this is of particular concern if the resources are finite in
quantity
A. Availability
B. Sustainability
C. Transparency
D. Forecasting

9._______Any individual or group that has an interest in a company and can either affect or be
affected by the business.
A. Organization
B. Individual
C. Owner
D. Stakeholder

55
10._______Business can enhance its long-run profitability by making an investment in society
today. In other words, today’s problems can turn into tomorrow’s profits. Which of the following
support this statement?
A. Business has the resources to tackle today’s complex societal problems
B. Corporate social action will prevent government intervention
C. A better society means a better environment for doing business
D. Business is unavoidably involved in social issues

11._______They are responsible for the development of the company’s long-term strategic
plans and the effective execution of the company’s business in accordance with those strategic
plans. As part of this responsibility, management is charged with the following duties.
A. Suppliers and Intermediaries
B. Board of directors and Management
C. Investors
D. Employees

12._______Management identifies the company’s major business and operational risks,

including those relating to natural disasters, leadership gaps, physical security, cyber security,
regulatory changes and other matters.
A. Risk Identification
B. Crisis Preparedness
C. Leadership Control
D. Security Alert

13._______They invest in a corporation by buying its stock and receive economic benefits in
return. They are not involved in the day to-day management of business operations, but they
have the right to elect representatives (directors) and to receive information material to
investment and voting decisions.
A. Employees
B. Customers
C. CEO
D. Shareholder

14._______It encompasses those corporate actions that are in response to society’s

expectation that businesses be good corporate citizens. This includes actively engaging in acts
or programs to promote human welfare or goodwill
A. Sustainability
B. Philanthropy
C. Accountability
D. Transparency

56
15._______It is a program that is focused on capability building of public schools as well as
influencing systems of change to contribute to the attainment of desired education outcomes
and impact. This program shall enable HS graduates to be ready for work or entrepreneurship,
fit for jobs or ready for college.
A. Negosyo Eskwela
B. Bayanihan Pampaaralan
C. Entre Eskwela
D. Trabaho Eskwela

16._______It is a simple framework that helps argue how and why organizations should meet
their social responsibilities.
A. Maslow’s Hierarchy of Needs
B. Theory X and Y
C. Herzberg Two Factor Theory
D. Archie Carroll’s Pyramid

17._______Society has not only sanctioned business to operate according to the profit motive;
at the same time business is expected to comply with the laws and regulations promulgated by
federal, state, and local governments as the ground rules under which business must operate.
Which of the following support this statement?
A. Economic Responsibility
B. Discretionary Responsibility
C. Legal Responsibility
D. Ethical Responsibility

18._______It means that the external impact of the actions of the organization can be
ascertained from the organization’s reporting and pertinent facts are not disguised within that
reporting. Thus all the effects of the actions of the organization, including external impacts,
should be apparent to all from using the information provided by the organization’s reporting
mechanism.
A. Accountability
B. Transparency
C. Sustainability
D. Check and Balance

19._______It is the largest business-led NGO at the forefront of strategic corporate citizenship
and business sector leadership, contributing to sustainable development and poverty reduction.
Established in 1970, it remains a consultant and partner of choice of companies and donors.
A. League of Corporate Foundation
B. Gawad Kalinga
C. Philippine Business for Social Progress
D. Metrobank Foundation

57
20._______Which of the following is not an ethical issue in the Human Resource Management
Department?
A. Discrimination issues
B. Sexual harassment
C. Occupational safety and health
D. Fake reimbursements

Illustrate and Explain

CSR pyramid (10pts)

Essay: (10pts each)

✓ Strategic Philanthropy
✓ CSR and Globalization
✓ Business Ethics

58