Republic of the Philippines

Laguna State Polytechnic University

Province of Laguna

LSPU Self-Paced Learning Module (SLM)

Course Governance, Business Ethics, Risk Management, and Internal Control
Sem/AY First Semester/2023-2024
Module No. 5/6
Lesson Title Module 5: Introduction to Business Ethics

Week
2
Duration
Date
Description This lesson will discuss: introduction to Ethics; Characteristics and values associated with
of the ethical behavior; The need for Professional ethics; Basic concept and purposes of Business
Lesson Ethics; and Scope and impact of Business ethics.

Learning Outcomes
Intended Students should be able to meet the following intended learning outcomes:
Learning ● Define ethics
Outcomes ● Describe the basic characteristics and values associated with ethical behavior
● Explain the reasons why people act unethically.
● Describe the ethical principles related to: Personal ethics; Professional ethics;
and business ethics.
● Explain what business ethics is and its purpose
Targets/ At the end of the lesson, students should be able to:
Objectives ● Explain why ethical behavior in personal, professional, and business dealings is
necessary
● Explain why professional ethics is important and why a code of conduct should
be adopted
● Describe the scope and impact of business ethics on
a. The economy
b. Society
c. Environment
d. Business managers
● Explain ethical challenges in today’s world

Student Learning Strategies

LSPU SELF-PACED LEARNING MODULE: Governance, Business Ethics, Risk Management, and Internal Control
 Republic of the Philippines
Laguna State Polytechnic University
Province of Laguna

Online Activities A. Online Discussion via Google Meet/Classroom or Messenger (Meeting

(Synchronous/ Room or GC)
Asynchronous) Students will be directed to attend in a minimum of one-hour class
discussion on government accounting. To have access to the Online
Discussion, students will be directed to a google classroom/messenger
GC.
The online discussion will happen on the Third day of each week based
on the schedule provided by the College.

Further instructions, can be provided in the Group Chat or common

email created specifically for the group.
Lecture Guide
Offline Activities a. Modules, activity sheet, learning materials stored in a hard drive, sent to the
(e-Learning/Self-P common email created for the specifically for the group.
aced)
b. developing document, spreadsheet, presentation file outputs

Lecture Guide
CHAPTER 5: INTRODUCTION TO ETHICS

INTRODUCTION

Ethics can be defined broadly as a set of moral principles or values that govern the actions and
decisions of an individual or group. While personal ethics vary from individual to individual at any
point in time, most people within a society are able to agree about what is considered ethical and
unethical behavior. In fact, a society passes laws that define what its citizens consider to be the
more extreme forms of unethical behavior.

Each of us has such a set of values, although we may or may not have considered them explicitly.
Philosophers, religious organizations, and other groups have defined in various ways ideal sets of
moral principles or values. Examples of prescribed sets of moral principles or values at the
implementation level include laws and regulations, church doctrine, code of business ethics for
professional groups such as CPAs, and codes of conduct within individual organizations.

Ethics is a topic that is receiving a great deal of attention throughout our society today. This
attention is an indication of both the importance of ethical behavior to maintaining a civil society,
and a significant number of notable instances of unethical behavior. Much of what is considered
unethical in a particular society is not specifically prohibited. So how do we know whether we are
acting ethically? Who decides what standards of conduct are appropriate? Is any type of behavior
“ethical” as long as it does not violate a law or a rule of one's profession?

It is common for people to differ in their moral principles or values. Even if two people agree on
the ethical principles that determine ethical behavior, it is unlikely that they will agree on the
relative importance of each principle. These differences result from all of our life experiences.

LSPU SELF-PACED LEARNING MODULE: Governance, Business Ethics, Risk Management, and Internal Control
 Republic of the Philippines
Laguna State Polytechnic University
Province of Laguna

Parents, teachers, friends and employers are known to influence our values, but so do television,
team sports, life successes and failures, and thousands of other experiences.

CHARACTERISTICS AND VALUES ASSOCIATED WITH ETHICAL BEHAVIOR

The following list of ethical principles incorporates the characteristics and values
that most people associate with ethical behavior.

Integrity
Be principled, honorable, upright, courageous and act on convictions; do not be twofaced or
unscrupulous or adopt an end-justifies-the means philosophy that ignores principle.

Honesty
Be truthful, sincere, forthright, straightforward, frank, candid; do not cheat, steal, lie, deceive or act
deviously.

Trustworthiness and Promise Keeping

Be worthy of trust, keep promises, full commitments, abide by the spirit as well as the letter of an
agreement; do not interpret agreements in an unreasonably technical or legalistic manner in order
to rationalize noncompliance or create excuses and justification for breaking commitments.

Loyalty (Fidelity) and Confidentiality

Be faithful and loyal to family, friends, employers, client and country; do not use or disclose
information learned in confidence; in a professional context, safeguard the influences and conflicts
of interest.
Fairness and Openness
Be fair and open-minded, be willing to admit error and, where appropriates change positions and
beliefs, demonstrate a commitment to justice, the equal treatment of individuals, and tolerance for
acceptance of diversity; do not overreach or take advantage of another's mistakes or diversities.

Caring for Others

Be caring, kind, and compassionate; share, be giving, be of service to others; help those in need
and avoid harming others.

Respect for Others

Demonstrate respect for human dignity, privacy. and the right to self-determination of all people;
be courteous, prompt, and decent: provide others with the information they need to make informed
decisions about their own lives; do not patronize, embarrass, or demean.

Responsible Citizenship
Obey just laws; if all law unjust, openly protest it; exercise all democratic rights and privileged
responsibly by participation (voting and expressing informed views), social consciousness, and
public service; when in a position of leadership or authority, openly respect and honor democratic
processes of decision making, avoid unnecessary secrecy or concealment of information, and
assure that others have all the information they need to make intelligent choices and exercise their
rights.

Pursuit of Excellence
Pursue excellence in all matters; in meeting your personal and professional responsibilities, be
diligent, reliable, industrious and committed; perform all tasks to the best of your ability, develop
and maintain a high degree of competence, be well informed and well prepared; do not be content
with mediocrity; do not "win at any cost".

LSPU SELF-PACED LEARNING MODULE: Governance, Business Ethics, Risk Management, and Internal Control
 Republic of the Philippines
Laguna State Polytechnic University
Province of Laguna

Accountability
Be accountable, accept responsibility for decisions, for the foreseeable consequences of actions
and inactions, and for setting an example of others. Parents, teachers, employers, many
professionals and public officials have a special obligation to lead by example, to safeguard and
advance the integrity and reputation of their families, companies, professions and the government
itself; an ethically sensitive individual avoids even the appearance of impropriety, and takes
whatever actions are necessary to correct or prevent inappropriate conduct of others.

WHY IS ETHICAL BEHAVIOR NECESSARY?

Ethical behavior is necessary for a society to function in an orderly manner. It can be argued that
ethics is the glue that holds a society together. What would happen if for example we could not
depend on the people we deal with to be honest? If parents, teachers, employees, siblings,
co-workers and friends all consistently lied, it would he almost impossible for effective
communication to occur.

The need for ethics in society is sufficiently important that many commonly held ethical values are
incorporated into laws. For example, laws dealing with driving while intoxicated and selling drugs
concern responsible Citizenship and respect for other. Similarly, if a company sells a defective
product, it can be held accountable if harmed parties choose to sue throughout the legal system.

A considerable portion of the ethical values of a society cannot be incorporated into laws because
of the judgmental nature of certain values. Looking at the honesty principle, it is practical to have
laws that deal with cheating, stealing, lying, or deceiving others. It is far more difficult to establish
meaningful laws that deal with, many aspects of principles such as integrity, loyalty and pursuit of
excellence. That does not imply that these principles are less important for an orderly society.

Business decisions influence employees, customers, suppliers and competitors, while company
operations affect communities, governments and the environment.

WHY DO PEOPLE ACT UNETHICALLY?

Most people define unethical behavior as conduct that differs from the way they believe would
have been appropriate given the circumstances. Each of us decides for ourselves what we
consider unethical behavior, both for ourselves and other. It is important to understand what
causes people to act in a manner that we decide unethical.

There are two primary reasons why people act unethically:

1. the person's ethical standards are different from those of society as a whole, or
2. the person chooses to act selfishly.

In many instances, both reasons exist.

1. Person's Ethical Standards differ from General Society

Extreme examples of people whose behavior violates almost everyone's ethical standards
are drug dealers, bank robbers, and larcenists. Most people who commit such acts feel no
remorse when they are apprehended, because their ethical standards differ from those of
society as a whole.

There are also many far less extreme examples when violate our ethical values. When
people cheat on their tax returns, treat other people with hostility, lie on employment

LSPU SELF-PACED LEARNING MODULE: Governance, Business Ethics, Risk Management, and Internal Control
 Republic of the Philippines
Laguna State Polytechnic University
Province of Laguna

applications, or perform below their competence level as employees, most of us regard

that as unethical behavior. If the other person has decided that this behavior is ethical and
acceptable, there is a conflict of ethical values that is unlikely to be resolved.

2. The Person Chooses to Act Selfishly

A considerable portion of unethical behavior results from selfish behavior. The Pork Barrel
Scam and the other political scandals resulted from the desire for political power and
wealth; cheating on tax returns and expense reports is motivated by financial greed;
performing below one's competence and cheating on tests are typically due to laziness. In
each case, the person knows that the behavior is inappropriate, but chooses to do it
anyway because of the personal sacrifice needed to act ethically.

CATEGORIES OF ETHICAL PRINCIPLES

Principles of Personal Ethics include among others

● Basic justice, fairness
● Respect for the right of others
● Concern for the right of others
● Concern for the well-being on welfare of others
● Benevolence, trustworthiness, honesty
● Compliance with the law

Professional Ethics include among others

● Integrity, impartiality, objectivity
● Professional competence
● Confidentiality
● Professional behavior
● Avoidance of potential or apparent conflict of interest

Business Ethics include among others

● Fair competition
● Global as well as domestic justice
● Social responsibility
● Concern for environment

The focus of this book is on Business Ethics.

The Need for Professional Ethics

To understand the importance of a Code of Ethics to professionals, one must understand the
nature of a profession as opposed to other vacation.

There is no universally accepted definition of what constitutes a profession; yet, for generations,
certain types of activities have been recognized as professions while others have not.

Medicine, law, engineering, architecture and theology are examples of disciplines long accorded
professional status. Public accounting is relatively new as far as the ranking of the professions is
concerned but it has achieved widespread recognition in recent decades.

All the recognized professions have several Common characteristics. The most important of these
characteristics are:
1. a responsibility to serve the public

LSPU SELF-PACED LEARNING MODULE: Governance, Business Ethics, Risk Management, and Internal Control
 Republic of the Philippines
Laguna State Polytechnic University
Province of Laguna

2. a complex body of knowledge

3. standards of admission to the profession
4. a need for public Confidence

Careless work or lack of integrity of a professional may lead the public to a negative view toward
the entire profession. All professionals must have public confidence of the public to be successful.
Consequently, the members of the different professions act in unison by deriving their respective
code of conduct.

Code of Good Governance for the Profession In the Philippines (E.O. No. 220, June 23,
2003)

This Code is adopted by the Professional Regulation Commission (PRC) and the 42 Professional
Regulatory Boards to cover an environment of good governance in which all Filipino professionals
shall
perform their tasks. While each profession may adopt and enforce its own code of governance
and code
of ethics, it is generally recognized that there is a general commonality among the various codes.
This Code which covers the common principles underlying the codes of various professions could
be used by all professionals who face critical ethical questions in their work.

General Principle of Professional Conduct

Professionals are required not only to have an ethical commitment, a personal resolve to act
ethically, but also have both ethical awareness and ethical competency. Ethical awareness refers
to the ability to discern between right and wrong, while ethical competency pertains to the ability to
engage in sound moral reasoning and consider carefully the implications of alternative actions.

Specific Principle of Professional Conduct

1. Service to Others
Professionals are committed to a life of service to others. They protect life, property, and
public welfare. To serve others, they shall be prepared for heroic sacrifice and genuine
selflessness in carrying out their professional duties even at the expense of personal gain.

2. Integrity and Objectivity

To maintain and broaden public confidence, professionals shall perform their
responsibilities _with the highest sense of integrity and imbued with nationalism and
spiritual values. In the performance of any professional service, they shall at all times,
main objectivity, be free of conflicts of interest, and refrain from engaging in any activity
that would prejudice their abilities to carry out their duties ethically. They shall avoid
making any representation that would likely cause a reasonable person to misunderstand
or to be deceived.

3. Professional Competence
In providing professional services, a certain level of competence is necessary, i.e.,
knowledge technical skills, and experience. Professionals shall, therefore, undertake only
those professional services that they can reasonably deliver with professional
competence. Corollary to this, it is their express obligation to keep up edge and techniques
in their field, continually improve their skills and upgrade their level of competence and
take part in a lifelong continuing education program.

4. Solidarity and Teamwork

LSPU SELF-PACED LEARNING MODULE: Governance, Business Ethics, Risk Management, and Internal Control
 Republic of the Philippines
Laguna State Polytechnic University
Province of Laguna

Each profession shall nurture and support one organization for all its members. Though a
deep spirit of solidarity, each member should put the broader interest of the profession
above one's personal ambition and preference. Through teamwork within a cohesive
professional organization, each member shall effectively observe ethical practices and
pursue continuing professional development as well as deepen one's social and civic
responsibility.

5. Social and Civic Responsibility

Professionals shall always carry out their professional duties with due consideration of the
broader interest of the public. They shall, therefore, serve their clients/employers and the
publics with professional concern and in a manner consistent with their responsibilities to
society. As responsible Filipino citizens, they shall actively the attainment of the country's
national objectives.

6. Global Competitiveness
Every professional shall remain open to challenges of a more dynamic interconnected
world. He or she shall rise up to global standards and maintain levels of professional
practices fully aligned with global practices.

7. Equality of All Professions

All professionals shall treat their colleagues with respect and shall strive to be fair in their
dealings with one another. No one group of professionals is superior or above others. All
professionals perform an equally important, yet distinct, service to society. In the eyes of
the PRC, all professions are equal and, therefore, every one shall treat one other
professionals with respect and fairness.

CHAPTER 6: BUSINESS ETHICS

BASIC CONCEPT OF BUSINESS ETHICS

Business ethics refers to standards of moral conduct, behavior and judgment in business. It
involves making the moral and right decisions while engaging in such busines activities as
manufacturing and selling a product and providing a service to customers. Business ethics is an
area of corporate responsibility where businesses are legally bound and socially obligated to
conduct business in an
ethical manner.

Business ethics is based on the personal values and standards of each person engaged in
business.

PURPOSES OF BUSINESS ETHICS

Main Purpose
The main purpose of business ethics is to help business and would-be business to determine
what business practices are right and what are wrong. Hopefully, they are going to use this
knowledge to guide them in making the right business decisions.
To gain profit
Special Purpose
There are other purposes which are corollary to the main purpose These purposes include the
following:

LSPU SELF-PACED LEARNING MODULE: Governance, Business Ethics, Risk Management, and Internal Control
 Republic of the Philippines
Laguna State Polytechnic University
Province of Laguna

1. To make businessmen realize that they cannot employ double standards to the actions of
other people and to their own actions
2. To show businessmen that common practices which they have thought to be right because
they see other businessmen doing it, are really wrong.
3. To serve as a standard or ideal upon which business conduct should be based.

Except for some country's organizations, professionals which have formulated and implemented
their Code of Ethics, the business world today does not have one universal standard code of
ethics. Each man has to evaluate a situation according to his own belief. Often, because there is
no code of ethics to guide them, businessmen take actions that may be wrong. Therefore, one of
the specific purposes of business ethics is to assist the business world in formulating codes of
conduct — personal, company and professional — which can be used as a guide in formulating
business plans and strategies and in making business decisions.

SCOPE AND IMPACT OF BUSINESS ETHICS

Business ethics covers all conduct, behavior and judgment in business. This includes the slightest
deviation from what is right to illegal and dishonest acts that are punishable by law. It involves
making the right choices while engaging in such business activities as manufacturing and selling a
product or selling and rendering a service.

Generally, actions that are not forbidden by law are ethical. In some cases, however, what is legal
(not forbidden by law) may be unethical. Business ethics therefore covers even acts that may be
legal but which are wrong because they violate ethical principles.

Business ethics is based on the personal values and standards of each person engaged in
business. Since individual values differ, what is ethical or unethical in making profit also varies
from person to person. And here lies the problem. There are still no uniform standards of right and
wrong from *Which all business may base their actions.

The businessman who provides fair business competition is the most likely to observe the
business ethical rules of conduct, behavior and judgment. Fair business competition means
achieving success solely by offering better products, services and terms than the competitor. It is
a form of business competition where success is gained by the merits of one's goods or services.

Economic impact

A business has an economic impact on society through the wages it pays to its employees, the
materials that it buys from their suppliers and the prices it charges its customers. It would have a
positive social impact on its employees if they are paid fair living wages and benefits. it Will have a
positive effect on its suppliers that they paid fairly and on time for their supplies. The effect on its
customers is
positive if the business products and services gives them good value for the price they pay for
products and services.

Social Impact

The social impact of corporate governance contributes to the ethical climate of society. If
businesses offer bribes to secure work or other benefits, engage in accounting fraud or breach
regulatory and legal limitations on their operations, the ethics of society suffer. In addition to a
deteriorating ethical environment, such as corruption may unfairly raise the price of goods for
consumers or the quality of the product or service compromised.

LSPU SELF-PACED LEARNING MODULE: Governance, Business Ethics, Risk Management, and Internal Control
 Republic of the Philippines
Laguna State Polytechnic University
Province of Laguna

Environmental Impact

Environmental protection is a key area of business influence on society. Businesses that

implement good environmental policies to use energy more efficiently, reduce waste and in
general lighten their environmental footprint can reduce their internal costs and promote a positive
image of their company. The environmental initiatives of a business leader often force competitors
to take similar action for an increased beneficial effect on the environment.

Impact on Business Managers

The concepts and principles for the ethical conduct in business are relegated to the managers of
the business enterprise. Thus, although the manager is expected to act in the best interest of the
business, he cannot be expected to act in a manner that is contrary to the law or to his
conscience.

In particular, a manager should:

● acknowledge that his role is to serve the business enterprise and the community
● avoid all abuse of executive power for personal advantage or prestige
● reveal the fact to his superior whenever his personal business of financial interests’
conflict with those of the company.
● be actively concerned with the difficulties and problems of subordinates, treat them fairly
and by example, lead them effectively, assuring to all the right of reasonable access and
appeal to superiors.
● recognize that his subordinates have a right to information on matter affecting them and
make provision for its prompt communication unless such communication is likely to
undermine the security and efficiency of the business.
● fully evaluate the likely effects on employees and the community of the business plans for
the future before taking a final decision and cooperate with his colleagues and not attempt
to secure personal advantage at their expense.

ETHICAL CHALLENGES IN TODAY'S WORLD

In an article, "Ethical Challenges in Today's World" written by Ms. Mercedes B. Suleik published in
the Business Mirror on February 13, 2018 the author expressed her insights on "Business Ethics"
where an inherent conflict between ethics and the pursuit of profit is more pronounced.

Cited in this article is the message of Pope Francis in his Ecumenical, Evangeli Gaudium

"Humanity is experiencing a turning point in its history as can be seen from the advances
occurring in the sciences and technology. We are in age of knowledge and information and that
this has led to new and often anonymous kinds of power. We have today an economy of exclusion
and inequality".

"In a system that idolizes increased profit, everything that stands in its way is pushed aside.
Behind this attitude lurks a rejection of ethics. Ethics has come to be viewed with derision as being
counterproductive. Ethics is felt to be a threat because it condemns the manipulation and

LSPU SELF-PACED LEARNING MODULE: Governance, Business Ethics, Risk Management, and Internal Control
 Republic of the Philippines
Laguna State Polytechnic University
Province of Laguna

debasement of the person and that ethics leads to a call for a committed response, which is
outside of the categories of the marketplace."

She also quoted Pope Benedi XVI’s Encyclical Caritas in Veritate

"Humanity has a mission and the means to transform the world in justice and love in human
relations,
even in the social and economic field. Market economics must be underpinned by commitments to
particular moral goods and a certain version of the human person if it is to serve rather than
undermine humanity's common good. The economy needs ethics in order to function correctly —
not an ethics which is people-oriented.”

Performance Tasks

Kindly explain the following:

a. What is the basic purpose of a code of ethics for a profession?
b. What are some of the reasons why people act unethically?
c. What does business ethics mean?
d. What is the main objective of observing ethical behavior in business?
e. What is the economic impact of observing business ethics?

Understanding Directed Assess

Kindly explain the following
a. Why ethical behavior is necessary
b. Why ethical behavior is necessary in the practice of one’s profession
c. How business managers could act ethically
d. The inherent conflict between ethics and pursuit of profit

Learning Resources

LSPU SELF-PACED LEARNING MODULE: Governance, Business Ethics, Risk Management, and Internal Control
 Republic of the Philippines
Laguna State Polytechnic University
Province of Laguna

● Corporate Governance, Business ethics, Risk Management, and Internal Control 2019 – 2020
edition, Cabrera, Ma. Elenita B., Cabrera, Gilbert Anthony B., GIC Enterprise and Co., Inc, Manila
● Good Governance and Social Responsibility 2017 1st edition, Biore, C., Gonzales, R., Caparas, JL.,
Burgos, N., Ballada, W., Made Easy Books., Sampaloc, Manila.
● http://picpa.com.ph/content.html?article=Code%20of%20Ethics&page=Home
● https://www.youtube.com/watch?v=HQcHR8-6IEA

LSPU SELF-PACED LEARNING MODULE: Governance, Business Ethics, Risk Management, and Internal Control