BUSINESS ETHICS
Types and Forms of business organizations
Business- An active process which is an integral part of human
society.
- It is an organization where economic resources or inputs, such
as materials and services, are brought together and distributed
to deliver or to give consumers goods, products, or outputs.
- Aims to earn profit.
Profit- refers to the difference between the amount received
and the amount spent on something purchased, produced, or
manufactured.
Types of Business Organizations
Service Business
- Provide services to customers rather than products.
Merchandising Business
- Sell to customers products they buy from other business.
Manufacturing Business
- Turn basic inputs into products which are sold to consumers.
Forms of Business Organizations
1. Sole/Single Proprietorship - A form of business is owned by
one person; the simplest, and the most common form of
business organization.
ADVANTAGES OF SOLE PROPRIETORSHIP
- The owner keeps all the profits.
- The owner makes all the decisions.
- It is easy to form and operate
DISADVANTAGES OF SOLE PROPRIETORSHIP
- The life of the business is limited to the life of the owner.
Once the owner dies, the business will cease to operate under
the name of the proprietor.
- The amount of capital is limited only by the wealth of the
proprietor.
2. PARTNERSHIP
- A form of business owned by two or more persons. The
details of the arrangement between the partners are outlined
in a written document called articles of partnership.
- Profits are divided among partners based on their agreed
sharing.
- The owner is called a partner.
ADVANTAGES OF PARTNERSHIP
- Higher capital because two or more persons will contribute to
the common fund.
- It is easy to operate like a sole/single proprietorship
DISADVANTAGES OF PARTNERSHIP
-The profits are divided among the partners.
-A partner can be held liable for the acts of the other partners.
-In a lawsuit, the personal properties of the partners can be
held beyond their contributions and may be used to answer for
any liability of the partnership
3. CORPORATION
-A corporation is a business organized as a separate legal entity
(artificial person) under the corporation law with ownership
divided into transferable shares of stocks
-Emphasize that it is the law (Corporation Code of the
Philippines) that creates a corporation.
-the corporation begins its existence from the date the Articles
of Incorporation is approved by the Securities and Exchange
Commission (SEC).
- The SEC (Securities and Exchange Commission) is the
government agency primarily tasked to regulate private
corporations in the Philippines.
- The owners are called stockholders or shareholders.
- The word ‘Corporation/Incorporation/Corp./Inc.’ appears in
the name of the entity.
- The voting rights of a shareholder is generally based on the
percentage of ownership
- The management of the business is delegated by the
shareholders to the Board of Directors
- The ownership is divided into shares and the value of one
share may be denominated at a smaller amount, for example at
PHP10 per share.
- The proof of ownership is evidenced by a stock certificate.
Stock Certificate
- is the physical piece of paper representing ownership in a
company.
- It includes information such as the number of shares owned,
the date, an identification number, usually a corporate seal and
signatures. They are a bit bigger than a normal piece of paper,
and most of them have intricate designs to discourage
fraudulent replication
ARTICLES OF INCORPORATION
- is a set of formal documents filed with a government body to
legally document the creation of a corporation.
- it must contain pertinent information such as the firm's name,
street address, agent for service of process and the amount and
type of stock to be issued.
ADVANTAGES OF CORPORATION
- Can easily raise additional funds by selling shares of stocks to
the public.
- Shareholders are not personally liable for the debts of the
corporation. The extent of their liability is limited to their
equity (ownership) in the corporation.
DISADVANTAGES OF CORPORATION
- It is relatively complicated to set up.
- Subject to several legal restrictions as listed in the Corporation
Code of the Philippines
4. COOPERATIVES
- is a duly registered association of persons with a common
bond of interest, voluntarily joining together to achieve their
social, economic and cultural needs.
• The owners are called members who contribute equitably to
the capital of the cooperative.
-The members are expected to patronize their products and
services
. • The word ‘cooperative’ appears in the name of the entity.
- This form of business organization is regulated by the
Cooperative Development Authority (CDA).
Role of Each Form of Business Organization in the Economy
Microbusinesses (firms that employ fewer than ten people)
form a dynamic, integral part of the market economy, providing
goods and services and a gateway by which a million enter the
economic and social mainstream of society.
Industrial Revolution brought with it new forms of machine
production that enabled businesses to make massive quantities
of goods to ship and sell in national markets.
The result was the large corporation that came to dominate our
economies; offer better jobs than small businesses, in terms of
both compensation and stability.
Purpose of business in the socio-economic development
1. To provide goods and services that people may need and will
want.
2. Businesses hold a major responsibility not just to consumers
in need but more so, it must respond to the socio economic
development of its country or society.
Importance of Business to Our Society
1. Business produces and distributes goods and services to
satisfy certain public needs.
2. Businesses, although it is profit and revenue oriented, must
always take in consideration what the consumers demands are
and responds to that needs by creating the goods or services.
 BUSINESS ETHICS
3. A business responding to all these contributes more to
national well-being. It does in several ways by;
I. collecting taxes that helps the government maintain all kinds
of public and social institutions and services;
ii. by investing money in developing science and technology
and constructing more business enterprises.
4. A business also helps enlighten and educate people and
encourages their further personal growth.
5. It is also a venue providing opportunity to expand job
opportunities to others and creates opportunities to pay
salaries and wages.
Notions of Accountability, Fairness and Transparency
There is a need to convince the managements that they should
develop their “integrity capacity” which is the individual and/or
collective capability for repeated process alignment of moral
awareness, deliberation, character, and conduct that
demonstrates balance judgment, enhances sustained moral
development, and promotes supportive system for moral
decision-making.
Business leadership affects the moral capability and
performance of organizations. To help the business
organization get on the right track, there are three core
principles that should be implemented in its operation -
fairness, accountability, and transparency
fairness
Fairness is giving to a person what is due to him/her.
In business context, fairness means balancing the interests
involved in all decision-making including those related to hiring,
firing, and the compensation and reward system.
- It has something to do with justice because the employer
checks whether the members have the benefits and burdens
distributed evenly to them
Equity Theory
Focused on distributive justice, the employee’s perceived
fairness of the amount of rewards and who received them.
However, fairness and equity can be subjective; what one
person sees as unfair my be perfectly appropriate for another.
accountability
is the explication and justification process.
It is about testing, forming a judgment, and taking an action if
necessary. It also comes with responsibilities. Holding people to
account for those actions which they are responsible for is fair.
- an obligation to demonstrate that work has been carried out
in accordance with agreed rules and standards, or to report on
performance results fairly and accurately in relation to
mandated roles and/or plans.
- The most important aspect of preventing and detecting
corruption is the sound accountability structures. A civil society
organization without proper systems of accountability is fragile
and open to rumors of mismanagement and abuse of authority.
Worst of all, lacking it will prevent the organization from
enjoying full respect and legitimacy in the eyes of its
stakeholders, including those bearers of duties that it intends
to advocate with.
transparency
at the individual level, considers intrinsic or ethical salience as
an important feature of the relational dimension of a person.
(Caritas in Veritate) It is described as a personal quality which is
necessary to develop unity between and among individuals.
A transparent approach makes a person more honest and
sincere in his/her relationships, in communicating his/her
points of view, and in working actively to find shared meanings
and goals.
examples of fairness
1. A boss listening to both sides of the story before judging who
is right and who is wrong.
2. An employer giving 13th month pay to all his/her employees.
3. A person paying the right price for a product purchased or
for a service received
examples of accountability
1. A cashier admits he/she lost the company’s collection and it
is his/her mistake.
2. An engineer who is assigned on a project is the one to be
blamed if the project did not meet the deadlines.
4. Employee A recommended his cousin to be their company
janitor, but the latter stole the cellular phone of their secretary.
Therefore, Employee A may be blamed for recommending
his/her cousin and should pay or replace the lost cellphone.
code of ethics
ethics
Derived from the Greek word ethos – characteristic way of
thinking These are moral principles that guide the conduct of
individual and the rules of behavior based on ideas about what
is morally good and bad.
- Written documents which attempt to state the major
philosophical principles and articulate the values embraced by
the organization (Stevens, 1996). Codes articulate ethical
parameters of the organization --- WHAT IS ACCEPTABLE AND
WHAT IS NOT?
-American ethical codes were first called creeds or credos and
those in the 1980s were considered “legalistic” and “more likely
to talk about ethics or the reputation of the company” (Benson,
1989, p. 308)
Policy documents defining responsibilities of the organization
to stakeholders and articulating the conduct expected of
employees (Kaptein and Wempe, 2002)
Example: AYALA CORPORATION
The company and its employees are guided by four core values:
INTEGRITY, LONG-TERM VISION, EMPOWERING LEADERSHIP,
AND COMMITMENT TO NATIONAL DEVELOPMENT.
The Code is in accord with the company’s human resource
policies which include the Code of Conduct that prescribes the
standards by which employees are expected to conduct
themselves.
Employees are required to disclose annually any business and
family related transactions to ensure that potential conflict of
interest are brought to management attention.