Chapter 1: Nature and Forms of Business Organization

Business

• An organization or economic system where goods and services are exchanged for one another
or for money.
• Every business requires some form of investment and enough customers to whom its output
can be sold on a consistent basis in order to make a profit.
• Can be privately owned or not for profit or state-owned.
• Also known as an enterprise agency on a firm involved in the provision of goods or services to
customers.

Business Organization

• An entity formed for the purpose of carrying on commercial enterprise.

• Such an organization is predicated on systems of law governing contract and exchange,
property rights, and incorporations.

Basic Forms of Business Organizations

1. Sole Proprietorship

• Also known as a sole trader owned by a person and operates for their benefits.
• Has unlimited liability for all obligations incurred by the business, whether from operating costs
or judgments against the business.
• Not ideal for high-risk business because they put your personal assets at risk.

2. Partnership

• A business owned by two or more people.

• In most forms of partnership, each partner has unlimited liability for the debts incurred by the
• Like proprietorship, the law does not distinguish between the business and its owners.
• The partners should have a legal agreement that sets forth how decisions will be made, profits
will be shared, disputes will be resolved, how future partners will be admitted to the partnership,
how partners can be bought out, or what steps will be taken to dissolve the partnership when
needed.

Types of Partnerships that should be considered:

§ General Partnership- Partners divide responsibility for management and liability, as well as the
shares of profit or loss according to their internal agreement. Equal shares are assumed unless
there is a written agreement.

§ Limited Partnership and Partnership with Limited Liability – limited means that most of the
partners have limited liability (to the extent of their investment) as well as limited input regarding
management decisions, which generally encourages investors for short-term projects, or for
investing capital assets. This form of ownership is not often used for operating retail or service
 businesses. Forming a limited partnership is more complex and formal than that of a general
partnership.

§ Joint Venture – Acts like a general partnership but is clearly for a limited period of time or a single
project. If the partners in a joint venture repeat the activity, they will be recognized as an ongoing
partnership and will have to file as such, and distribute accumulated partnership assets upon
dissolution of the entity.

3. Corporation

• The owners of corporations have limited liability and the business has a separate legal
personality from its owners.
• Can organize either for profit or not for profit organizations.
• Has a life of its own and does not dissolve when ownership changes?

A privately-Owned for-Profit Corporation is owned by its shareholders, who elect a board of directors to
direct the corporation and hire its own managerial staff.

Advantages and Disadvantages

2 Types of Corporations

1. C Corps
2. S Corps

C Corporations - are considered separate tax-paying entities. They file their own income tax returns &
the income earned remains in the corporation until it is paid as a salary or wages to the corporation’s
officers and employees. Corporate income is often taxed at lower rates than personal income, so you
can save money on the taxes by leaving money in the corporation.

S Corporations - are pass-through entities, meaning that their income, losses deductions and credits
pass through the company and become the direct responsibility of the company’s shareholders. The
shareholders report these items on their personal income tax returns; thus, S Corps avoid the income
double taxation that is associated with C Corp.

4. Limited Liability Companies (LLC)

• Hybrid forms of business that have characteristics of both corporation & a partnership.
• It is not incorporated; hence, it is not considered a corporation.
• The owners enjoy limited liability like a corporation
• May choose to be taxed as a sole proprietorship, a partnership, or a corporation.
• Is a limited liability.
• This business structure protects the owner’s personal assets from financial liability and provides
some protection against personal liability.
• There are situations where an LLC owner can still be held personally responsible, such as if he
intentionally does something fraudulent, reckless, or illegal, or if she fails to adequately
separate the activities of the LLC from her personal affairs.
5. Cooperative Organizations

• Are those organizations which are different from the rest, as they are formed not for the
purpose of making a profit but to provide its member's goods and service at a reasonable rate.
• Primarily protects and safeguards the economic interests of its members.
• Are voluntary associations, formed with a service motive, the primary source of income being
the member’s shares, they get dividend on trading surplus, if any.
• Functions as a separate legal entity in a democratic way and are governed by state regulations.

Examples of Cooperatives

1. Water & Electricity (Utility) Cooperatives

2. Cooperative Banking
3. Credit Unions
4. Housing Cooperatives

The structure of a cooperative organization ensures:

1. All members have an equal say (one vote per member, regardless of the number of shares
held).
2. Open and voluntary membership.
3. Limited interest on share capital.
4. The surplus is returned to the members according to the amount of percentage.

Basic Classifications of Business

A. Services Businesses - a service type of business that provides intangible products (products with
no physical form). Service types that offer professional skills, expertise, advice, and other similar
products. Examples of service businesses are schools, repair shops, hair salons, banks, consulting
firms, accounting firms, and law firms, interior decorators, and entertainers.

1. Financial Business - includes banks and other companies that generate profits through
investments and management of capital.
2. Transportation Business - deliver goods and individuals to their destinations.
3. Utilities - produce public services such as electricity or sewerage treatment, usually under a
government.

B. Merchandising Businesses - buys products at wholesale price and sells the same at retail price.
They are known as “buy and sale” businesses. They make a profit by selling the products at prices
higher than their purchase costs. Sells a product without changing its forms. Examples are grocery
stores, convenience stores, distributors, and other resellers.

1. Retailers and Distributors - acts as a middleman and get goods produced by the
manufacturers to the intended consumers; they make their profits by marking up their prices.
Most stores and catalog companies are distributors or retailers.

C. Manufacturing Businesses - buys products with the intention of using them as a material in making
a new product. Thus, there is a transformation of the products purchased. This business combines raw
materials, labor, and factory overhead in its production process. The manufactured goods will then be
sold to the customers.

1. Agriculture and mining businesses - produce raw materials, such as plants or minerals.
2. Manufacturers – produce products, either from raw materials or from component parts, then
sell their products at a profit, for example, cars, clothing, or pipes.
3. Real-estate businesses – sell, rent, and develop properties – including land, residential
homes, and other buildings.
4. Information businesses – generates profits primarily from the sale of intellectual property-
they include movie studios, publishers, and internet and software companies.

D. Hybrid Businesses - are companies that may be classified in more than one type of business. A
restaurant, for example, combines ingredients in making a fine meal (manufacturing), sells a cold bottle
of wine (merchandising), and fills customers' orders (service).

Chapter 2: Purpose of Establishing Business Enterprise

What is the purpose of establishing a business enterprise?

There must be a purpose why you wish to establish an enterprise. The purpose is the reason you want
to pursue your destiny for yourself and for the organization you will create.

According to Ralf Waldo Emerson, said that starting a business of your own is a “divine activity.” Aim
high to get your business soar high. Keep the right values in business while adjusting strategies along
the way.

The purpose is the preparation of doing what is right and what is worthwhile. As such, it creates a sense
of obligation. Also, the purpose provides certainty and it also provides confidence. All of these come
together to contribute to the enterprise’s competitive advantage – “do the right thing and do it well”- a
new way of saying – “Do well by doing good.”

Here are some common reasons:

1. To Make Money and Have Financial Independence

2. To be your own Boss
3. To Self-Actualize /To Fulfill Own Interest and Enjoyment
4. To make Dreams come True
5. To Use Your Skills and Knowledge for Yourself
6. To Have Second Career
7. To Have Variety at Work
8. To Create Opportunities
9. To Employ Relatives, Friends, and Community Members
10. To Take up a Challenge
11. To Come up with Better Ways, To Create, To Innovate
12. To be Efficient at Work
 13. To Set and Meet Own Deadlines
14. To Avoid Commuting
15. To Create a Customer
16. To Offer Value
17. To Have More Life, More Freedom
18. To Solve Problems
19. To Move Society, To Change the World, To Make the World Better
20. To Build our Future

Chapter 3: Core Principles in Business Operations

1. Fairness - refers to the level of even-handedness in dispensing justice whereby claims are
recognized in the order of their legal and contractual priority.

Justice - means giving each person what he or she deserves or in, more traditional terms, giving each
person his or her due.

Justice and Fairness are closely related terms that are often today used interchangeably. There have,
however, also been more distinct understandings of the two terms. While justice usually has been used
with reference to a standard of rightness, fairness often has been used with regard to an ability to judge
without reference to one’s feelings or interest; fairness has also been used to refer to the ability to make
judgments that are not overly general but that are concrete and specific to a particular case.

A. Principles of Justice

The most fundamental principle of justice - one that has been widely accepted since it was first defined
by Aristotle more than two thousand years ago – is the principle that “equals should be treated equally
and unequals unequally.” In its contemporary form, this principle is sometimes expressed as follows:
“Individuals should be treated the same unless they differ in ways that are relevant to the situation in
which they are involved.”

B. Different Kinds of Justice

1. Distributive Justice refers to the extent to which society’s institutions ensure that benefits and
burdens are distributed among society’s members in ways that are fair and just.
2. Retributive or Corrective Justice refers to the extent to which punishments are fair and just.
3. Compensatory Justice refers to the extent to which people are fairly compensated for their
injuries by those who have injured them, just compensation is proportional to the loss inflicted
on a person.

2. Accountability is the obligation of an individual or organization to account for its activities, accept
responsibility for them, and disclose the results in a transparent manner. It also includes the
responsibility for money or other entrusted property.
In an organization, accountability is a management control process in which responses are given for a
person’s actions. These responses can be positive or negative. Depending on the response, the person
might need to correct his or her error. In other words, accountability refers to individual responsibility
for the work performed and answering to peers and superiors for performance.

Accountability:

• Encompasses the obligation to report, explain, and answer for resulting consequences.
• Has a strong connection to explanations. Employees who do not meet the expectations of their
supervisors are held accountable for their actions and must answer for their inability to do so
• Crucial to ensuring high performance within an organization.

In leadership roles, accountability is acknowledgment and assumption of responsibility for actions,

products, decisions, and policies including the administration, governance, and implementation within
the scope of the role or employee position.

Corporate Accountability refers to the act of being accountable to the stakeholders of an organization,
which may include shareholders, employees, suppliers, customers, the local community, and even the
particular country (s) that the firm operates in.

3. Transparency - refers to the lack of hidden agendas and conditions, accompanied by the availability
of full information required for collaboration, and collective decision making. It means unimpeded
visibility as all transactions are subject to scrutiny. It also refers to the minimum degree of disclosure to
which agreements, dealings, practices, and transactions are open to all for
verification. Transparency is the essential condition for a free and open exchange whereby the rules
and reasons behind regulatory measures are fair and clear to all participants.

Transparency, in a business or governance context, is honesty and openness.

Transparency and Accountability are generally considered the two pillars of good governance.

Corporate Transparency describes the extent to which a corporation’s actions are observable by
outsiders. This is a consequence of regulations, local norms, and the set of information, privacy, and
business policies concerning corporate decision-making and operations openness to employees,
stakeholders, shareholders, and the general public.

4. Stewardship was originally made up of tasks of a domestic steward, from stig (house, hall) and
weard (ward, guard, guardian, keeper). Stewardship, in the beginning, referred to the household
servant’s duties for bringing food and drink to the castle’s dining hall.

Stewardship is an ethic that embodies the responsible planning and management of resources. The
concept of stewardship can be applied to the environment and nature, economics, health, property,
information, theology, etc.

Stewardship responsibilities were eventually expanded to include everything the domestic, service, and
management needs of the entire household. Stewardship is generally recognized as the acceptance or
assignment t of responsibility to shepherd and safeguard the valuables of others.
Commercial Stewardship tends to the domestic and service requirements of passengers on ships,
trains, airplanes, or guests in restaurants.

In business, it has been used by CEOs to denote the concept that “as a steward, you try to leave the
company in better shape for your successor than it was handed over to you by your predecessor.

Product Stewardship refers to the understanding, controlling, and communicating a product’s

environmental, health, and safety-related effects throughout its life cycle, from production (or extraction)
to final disposal or reuse.

Businesses around the world is designing and implementing business ethics programs to address the
legal, ethical, social responsibility, and environmental issues they face. By addressing these issues in a
systematic way, the enterprise can improve its own business performance, expand opportunities for
growth, and contribute to the development of social capital in the markets.

Chapter 4: Common Practices in Business

Business Practices

• is a method, procedure, process, or rule employed or followed by a company in the pursuit of its
objectives. May also refer to those collectively.

Decorum

• When working in the Philippines, there are a few guidelines one ought to follow in order to avoid
alienating one’s colleagues and business partners. In general, it takes time to establish strong
business relationships. Be patient and stick to these tips in business etiquette.
• Business etiquette dictates that an individual must be prepared to conduct the business at
hand.
• An individual who exhibits politeness and decorum is often rewarded with success in his chosen
field.
• There are, however, additional formalities he must learn to assure that he is viewed by
supervisors, peers, and customers alike as a pleasant and cultivated professional.

1. On-Time and Promptness

2. On Preparations
3. On Agenda
4. On Attire and Appearance
5. On Decorum
6. On Basic Courtesy and Respect
7. On Greetings
8. On Handshake
9. On Body Language
10. On Formal and Informal Address
11. On Speaking in Meetings
12. On Listening
 13. On cellphones and laptops
14. On Business or Visiting Cards
15. On Breaks
16. On Appropriate Communication
17. On Bargaining
18. On Bringing in Guest
19. On Building Relationships
20. Business Meals and Recreation
21. On Gift-giving

Protocol

• The written rules or guidelines are peculiar to every culture or organization and are supposed to
be observed by all parties in the conduct of business, entertaining, negotiating, policies, etc.
• A general term that may define several aspects of a business. Everything from behavior and
dress to task execution is defined under the business’s protocol.

1. The Basics of Protocol

2. Training in Protocol
3. Benefits of Protocol
4. International Business Protocol
5. Examples of Protocol in the Philippine Business

a. Filipino Family-Modeled Business

b. Business is Personal
c. Status-Consciousness
d. Politeness and Ambiguity

Policies

• This is a set of general guidelines that outline the organization's plan for tackling an issue or a
deliberate system of principles to guide decisions and achieve rational outcomes.
• Policies communicate the connection between the organization's vision and values and its day-
to-day operations.

Features of Business Policy

a. Specific
b. Clear
c. Reliable/Uniform
d. Appropriate
e. Simple
f. Inclusive/Comprehensive
g. Flexible
h. Stable

Difference between policy and strategy

Policy
 • A blueprint of the organizational activities which are repetitive/routine in nature.
• Policy formation is the responsibility of top-level management.
• Deals with routine/daily activities essential for the effective and efficient running of the
organization.
• Concerned with both thought and action.
• Is what is or what is not done.

Strategy

• Concerned with those organizational decisions which have not been dealt with before in the
same form.
• Strategy formulation is basically done by middle-level management.
• Deals with strategic decision
• Concerned mostly with action.
• A methodology used to achieve a target prescribed by a policy.

Advertising

• How a company encourages people to buy their products, services, or ideas.

The following list is an introduction to advertising tactics that can be used:

1. Newspapers
2. Magazines
3. Radios
4. Television
5. Directories
6. Outdoor and Transit
7. Direct Mails, catalogs, and Leaflets
8. Online

Marketing

• Refers to the process of product development as well as sales, promotion, and distribution.
• The whole concept of marketing revolves around the customer.
• The needs of the customer come first. During product development, the prospective customers
(target market) are determined and analyzed. The company then comes up with a product line
that would best answer those needs.

Bookkeeping

• The process of recording all financial transactions to keep track of the cash flow.
• The most basic activity in accounting. Some financial reports even help generate
recommendations for a better tax strategy, or an employee healthcare and benefits package,
they can also be used as a basis for decisions during mergers and acquisitions.

1. Single-entry bookkeeping

• An accounting system under which every transaction is recorded in a single line only. This is a
very simple method that is commonly used in checkbook records.
 2. Double-entry bookkeeping

• A kind of accounting system governed by certain rules which ensure that each transaction that
takes place is reflected in two separate accounts. In more concrete terms, this makes use of a
system of debits and credits.

3. Auditing

• Entails the careful examination of an individual or firm’s financial records for the purpose of
determining its validity and reliability.

Reportorial Reporting

• Business reporting or enterprise reporting is “the public reporting of operating and financial data
by a business enterprise”.
• Reporting is a fundamental part of the larger movement towards improved business intelligence
and knowledge management

2 Kinds of Reports

1. Annual Report

• A comprehensive report on a company’s activities throughout the preceding year.

• Are intended to give shareholders and other interested people information about the company’s
activities and financial performance.

2. Financial Statement

• A formal record of the financial activities and position of a business, person, or other entity.

Documentation

• Refers to the processes and items which serve as evidence for the validity or truth of a certain
claim or statement.
• Necessary for the conduct of any business, transaction, or project.
• It serves as a record of every official action taken and may come in very handy in the future,
should a chronological account of events be necessary for legal or business purposes.
• No matter which area of the business is involved, one of the main requirements of great
documentation is that it contains accurate and truthful information.
• Since documents may take a legal function, tampering or distortion of facts contained in them
may carry serious legal implications for either the company or the individual involved, if proven.

Ethics

• The term is derived from the Greek word ethos which can mean custom, habit, character, or
disposition.
• This is the branch of knowledge that deals with moral principles.
Business Ethics

• Is a form of applied ethics or professional ethics, that examines ethical principles and moral or
ethical problems that can arise in a business environment.

Code of Ethics

• A code of ethics is a guide of principles designed to help professionals conduct business

honestly and with integrity.

Must There be a Formal Code of Ethics?

• Businesses that do not have a code of ethics should develop one where employees can live by
and make decisions while at work.
• Without such a code, how can the managers know what the company considers ethical or
unethical?
• Company ethics should reflect the company’s mission and must communicate with those who
are carrying out the mission.
• The service industry, in particular, is a “people business” ethics deals with relationships with
other people. For this reason, a code of ethics is mandatory for this kind of people enterprise
whose managers want to achieve a unified direction and a satisfactory level of control over the
conduct of business.
• There is ample evidence to suggest that, without a code of ethics, some managers will
unethical decision-according to a survey done by Personnel Journal Magazine.
• Middle managers especially those 40-45 years of age are the most likely executives to do
something ethical. Some of these managers have a desire to make it “before it is too late”.
• In addition, they may have developed the attitude that “the company owes me” and therefore
may be prone to cheating on expenses or making purchasing deals that benefit them.
• Other managers don’t cheat on purpose; they just make decisions without thinking out of all the
ethical implications or potential pitfalls.

Chapter 5: The Classical Philosophies and The Implications on Business Principles

and Practices

Business Ethics is as old as trade itself. It is a part of the philosophy of economics, the branch of
philosophy that deals with the philosophical, political, and ethical underpinning of business and
economics. Business ethics operates on the premise that the ethical operation of a private business is
possible.

Philosophy of Business

• Considers the fundamental principles that underlie the formation and operation of a business
enterprise; the nature and purpose of a business and the moral obligations to pertain to it.
• The subject is important to business and management and is closely related to business ethics
and political economy. It is influenced significantly by philosophy, ethics, and economic theory.
Business Philosophy

• Denotes a way of doing business or a business outlook, instead of the more academic
philosophy meaning of Philosophy in business.

A. Socrates: The Gad-Fly at the Marketplace

“The unexamined life is not worth living” – Socrates

• He is one of the few individuals whom one could say has so shaped the cultural and intellectual
development of the world that, without him, history would be profoundly different.
• Is best known for the Socratic Method of question and answer.
• His claim that he was ignorant, and his claim that the unexamined life is not worth living, for
human beings.

1. What Entrepreneurs can learn from Socrates

Before we can appreciate the values that entrepreneurs can gain from the Socratic Method, we need to
first define the Socratic Method and its role in entrepreneurial learning.

• The Socratic Method is a systematic process of examining the ideas, questions, and answers
that form the basis of human belief.

Sophism - was another method of teaching of Ancient Greece in which a handful of intellectuals taught
general wisdom about human affairs, such as rhetoric and philosophy, to children of the wealthy.

• While early Sophism was well-respected, later Sophists came to be known as deceptive (due to
their use of rhetoric) especially the use of the figure of speech and other compositional
techniques and elitist (since they reserved their teaching to only those who could afford it).
• Critics accused Sophists of doling out opinions on the specific subject matter as opposed to
encouraging independent thinking.

2. The Socratic Method and Entrepreneurial Learning

Definition of Socratic Method

• A systematic process of examining the ideas, questions, and answers that form the basis of
human belief.
• It involves recognizing that all new understanding is linked to prior understanding, that thought
itself is continuous questions and answers.
• A way of thinking that allows individuals to define their own purpose for learning and explore
this purpose through open-minded questioning of what they hold to be true.
• Entrepreneurs can find value in the Socratic Method because they too are bombarded by
assumptions based on what others and they themselves believe to be the best plan of action for
pursuing a business idea.

Two takeaways on what entrepreneurs can learn from Socrates

1.
1. The Socratic Method provides focus through clarity of purpose.
2. Use the Socratic Method to develop and reinforce an entrepreneurial mindset.
3. Dare to Disagree

• Socrates insisted on our right to think for ourselves. Too often, he warned humans to sleepwalk
through life, simply going along with the crowd.

B. Plato: The Philosopher King

“Good people do not need laws to tell them to act responsibly, while bad people will find a
way around the laws” – Plato

• One of the known and most widely read and studied philosophers.
• He was the student of Socrates and the teacher of Aristotle.

1. Combating the Relativism of the Sophists

• Plato considers the Sophists to be one of the primary enemies of virtue and he is merciless in
his attacks on them.

2. Theory of Forms

• Attempts to cultivate our capacity for abstract thought.

• Plato also argued that abstract thought is superior to the world of senses.
• By investigating the world of forms, Plato hopes to attain greater knowledge.

3. The Theory of the Tripartite Soul

In the Republic and the Phaedrus, Plato describes the soul as divided into 3 parts, labeled:

1. Appetitive (desire)
2. Spirited (emotion)
3. Rational (logic)

4. Education for Health of the State

• In both the Republic and the Laws, Plato identifies education as one of the most important
aspects of a healthy state.
• One can achieve only so much by arguing with a corrupt soul that a virtuous life is
better. Instead, Plato recognizes the need to teach children from a young age to live virtuous
lives and seek wisdom.
• Plato thinks that a child’s education is the last thing that should be left to chance or parental
whim since the young mind is so easily molded.

C. Aristotle: All or Nothing

“Happiness is the meaning and the purpose of life, the whole aim, and end of human
existence.” – Aristotle

• A towering figure in ancient Greek philosophy, making contributions to logic, metaphysics,

mathematics, physics, biology, botany, ethics, politics, agriculture, medicine, dance, and
theater.
• Was a student of Plato, who in turn studied under Socrates.
 • The first to classify areas of human knowledge into distinct disciplines such as mathematics,
biology, and ethics. Some of these classifications are still used today.

1. Virtue and Happiness

• His goal is not to tell us that we ought to live happy, successful lives, but to tell us what this life
consists of. Most people think of happiness as physical pleasure or honor, but this is because
they have an imperfect view of the good life.
• Virtue is a disposition to behave in the right manner, which is inculcated from a young age. A
person with the virtue of courage, for instance, will not only show confidence in the face of fear
but will think this courage is a good thing.

2. Moral Education

• A question of high importance in any investigation of Ethics is how we can teach people to be
good.
• According to Aristotle, virtue is something learned through constant practice that begins at a
young age.

3. The Doctrine of the Mean

• One of the most famous aspects of Ethics is Aristotle's doctrine that virtue exists as a mean
state between the vicious extremes of excess and deficiency.
• Aristotle repeatedly reminds us in the Ethics that there are no general laws or exact
formulations in the practical sciences. Rather we need to approach matters case by case,
informed by inculcated virtue and a fair dose of practical wisdom.

4. The Unity of the Virtue

• For Aristotle, virtue is an all-or-nothing affair. We cannot pick or choose our virtues. We cannot
decide that we will be courageous and temperate but choose not to be magnificent.

5. The Life of Contemplation

• Aristotle ultimately concludes that contemplation is the highest human activity.

6. Implications to Business

• Aristotle is viewed as the intellectual godfather of the virtue theory of Ethics. This facet of
business ethics is a person rather than action-based, meaning, it asks more about a person’s
character in making ethical business decisions.

D. Immanuel Kant: Duty-based Ethics

“Act only according to that maxim by which you can at the same time will that it should become
a universal law” –

Immanuel Kant

• One of the most influential philosophers in the history of Western philosophy.

• His contributions to metaphysics, epistemology, ethics, and aesthetics have had a profound
impact on almost every philosophical movement that followed him.
 • He was a German philosopher who advanced the theory of deontology or deontological ethics -
the theory of duty and obligation.

Deontology

• Proposes that ethical behavior is simply doing God’s will.

• Since most of us believe that is good, then goodwill and loving other human beings as God
loves us is the universal principle on which all moral behavior must be based.
• Then we can understand the main idea behind his ethical theory.

Type of Duty:

1. The Categorical Imperatives

• Along with the concept of goodwill goes a concept of duty to keep one’s promises which are
known as Kant’s categorical imperative – an absolute and universally binding moral law.
o Involves an individual performing a certain action as compulsory regardless of the end
results or away from any personal influence.
o Kant believes that the categorical imperative is the basis to determine whether one’s
action is deemed to be ethically correct.

2. Hypothetical imperatives

• When an individual will perform a certain action in order to achieve the desired end result.

Three Maxims:

1st Maxim - An action can only be considered ethically correct if it can be accepted or made into a
universal law.

2nd Maxim - That a person should be treated as an end and not the means to achieve an end.

3rd Maxim - Each individual should act as a member of an ideal kingdom where he or she is both the
ruler and subject at the same time.

E. Jeremy Bentham and John Stuart Mill: Utilitarianism

“The said truth is that it is the greatest happiness of the greatest number that is the measure of
right and wrong” –

Jeremy Bentham

“A person may cause evil to others not only by his actions but by his inaction, and in either case,
he is justly accountable to them for the injury” – John Stuart Mill

Jeremy Bentham (1748-1832)

• He was an English philosopher and a political radical.

• Primarily known today for his moral philosophy especially his principle of utilitarianism, which
evaluates actions based upon their consequences.
• The relevant consequences in particular are the overall happiness created for everyone
affected by the action.
• According to Bentham, Happiness, is thus a matter of experiencing pleasure and lack of pain.
John Stuart Mill (1806-1873)

• Morality has it that people will justify or not the end and the means. Not only that it directs
individuals to do what is right and wrong, moreover, it makes them do what is in the best of their
conscience.

Utilitarianism

• Revolves around the concept of “the end justifies the means.”

• For the utilitarian, a rule is morally correct when it provides more social good than any
alternative rule.

Types of Utilitarianism

There are types of Utilitarian ethics practiced on the job:

1. Rule Utilitarianism

• Put in place to benefit the most people by using the fairest method possible.
• Differentiates between the material pleasures of the consumers and shareholders and the
higher pleasures of taking care of employees. This implies that there should exist a code of
conduct on how to treat employees.

2. Act Utilitarianism

• Makes the most ethical actions possible for the benefit of the people
• Any action is permissible given that it increases pleasure for the greatest number of people and
a successful bus does exactly this. Therefore, there is no correct way to treat employees. It is
completely fine to exploit workers.

Preference Utilitarian

• Look at all the preferences and keeping workers happy is one of the company’s preferences
because it determines how motivated people are and hence the productivity of the firm. For this
reason, it is important to treat employees properly.
• Suggest that a mid-point should be found between “trade-off of consumers” material preference
and employee’s welfare preferences.

Chapter 6: The Impact of Belief Systems in the Business Setting

How World Religions View Business Ethics

Religious ethics provides a set of consistent and reasonable statements regarding business. It’s a
different approach that provides new horizons for thinking. Also, in our global world, business means
dealing with people of different religions, and ignoring or misinterpreting religious ethical approaches can
cause serious problems.
Understanding how the world’s religions approach business ethics encourages tolerance and
understanding, “A deeper knowledge of religious business ethics might bring about a better
understanding of people worldwide. It can also facilitate a more intense dialogue between different
religions and between religious-philosophical approaches.”

World’s Eight Major Religion which each has its own organized system of beliefs, ceremonies, and
worship, and each offers a prescription for the positive endeavor in both life and in business:

1. Judaism
2. Christianity
3. Islam
4. Hinduism
5. Buddhism
6. Confucianism
7. Taoism
8. Shintoism

A. Judaism: Jewish Business Ethics

A form of applied Jewish ethics that examines ethical issues that arise in a business environment. It is
noted in the Torah. Torah requires that one earns one’s living through productive labor, while also
warning against materialism.

• Requirements of accurate weights and measures

• Prohibition of Monetary Deception
• Prohibition of Verbal Deception
• Stealing a Person’s Mind
• Putting a Stumbling Block Before the Blind
• Treatment of Workers
• Not Wasting Time at Work
• Whistleblowing

B. Christianity: Crucial Principles

Christianity offers the Golden Rule command. " Therefore all things whatsoever ye would that men
should do to you, do ye even so to them: for this is the law and the prophets".

• The Golden Rule

• Stewardships
• Trust
• Justice
• Diligence
• Generosity

C. Islam: Ethics from Qur’an

As Muslims, we have to adhere to ethical standards not only in business but also in all aspects of life.
Both business and ethics are interrelated. There is a reference to this point in the Qur'an: For you in the
Messenger of Allah is a fine example to follow.

• Business Ethics for Islam

• Honesty
• Truthfulness
• Proficiency

D. Hinduism: Non-Violence

Is the 3rd religion in the world by number of believers, behind Islam and Christianity.

Hinduism provides a rich framework within which the dimensions of business and business ethics find
their own footing.

Ethical Principles of Hinduism

• Ahimsa (Non-Violence)
• Detachment
• Truthfulness
• Not to Steal
• Self-Control
• Discipline
• Appropriate words and thoughts
• Motivation to achieve the goal

5 Core Tata Values that underpin the way they describe their business procedure:

Integrity: Conduct business fairly, with honesty and transparency such that everything done stands the
test of public scrutiny.

Understanding: To be caring, show respect, compassion, and humanity for colleagues and customers
around the world, and always work for the benefit of India.

Excellence: To constantly strive to achieve the highest possible standards in their day-to-day work and
in the quality of goods and services they provide.

Unity: To work cohesively with colleagues across the group and with customers and partners around
the world, building strong relationships based on tolerance, understanding, and mutual cooperation.

Responsibility: To continue to be responsible, sensitive to the countries, communities, and

environments in which they work, always ensuring that what comes from the people goes back to the
people many times over.

E. Buddhism: Maxims for Business

An Ancient philosophical system that follows the teachings of Buddha.

The system-a meditative, esoteric practice that often functions as a religious system.

Emphasizes the cultivation and mindfulness and values a spiritually minimalistic worldview, eschewing
dependence and worldly attachment.
With the popularization of incorporating many multi-cultural and cross-philosophical practices in the
business world, it’s no surprise that some elements of Buddhism can be relevant to corporate managers,
entrepreneurs, and indeed most people who share some portion of their lives with the marketplace.

Buddhist business practices and maxims can be beneficial to the decision-making process in the
workplace, but you don’t have to be a guru in order to take away something meaningful from Buddha’s
teachings.

• Work Hard, No Excuse (Too cold, too hot, too late)

• Work Hard but Rest Well
• Be Mindful
• Follow the Eightfold Path
• Discover your world
• Serve Others
• Engage
• Be at Present
• Embrace Change
• Take one step at a time

F. Confucianism: The Golden Rule

" Do not impose on others what you do not wish for yourself " - Confucius

Confucius was the fifth-century Chinese thinker whose influence upon East Asian intellectual and social
history is immeasurable.

• Humaneness
• Rite and Right
• Integrity
• Loyalty
• Filial Piety
• Respect
• Small Profit is not a Loss

G. Taoism: Action without Action

Taoism or Daoism is a spiritual, philosophical, and religious tradition of Chinese origin that emphasizes
living in harmony with the Tao.

Tao means way, path, or principle. Denotes something that is both the source of and the force behind
everything that exists.

Taoist texts suggest that that the ideal way for a leader to run their country is by example and with
minimal intervention. So a good leader is one that the people respect and whose instructions are
willingly followed. The good leader achieves this by living virtuously in private and living publicly so as to
influence his people for the good.

• The “Way”
• Non-Action
• Naturalness
 • Compassion, Moderation, & Humility
• Good Behavior
• Non-Discriminatory, Gender –Neutral
• Leadership by Example

H. Shintoism: The Way of the Gods

Shinto (way of the gods) also called Kami-no-Michi.

It is an ethnic religion of the people of Japan, practiced by nearly 80% of the population, yet only a small
percentage of these identify themselves as “Shintoists” in surveys.

It focuses on ritual practices to be carried out diligently, to establish a connection between present-day
Japan and its ancient past.

• The Natural Order

• Impurity
• Purification
• Everything has a Soul
• Superiority of Groups
• Four Circles of Business Relationships
• Balancing Debt and Benefits
• Highly Contextual Culture
• Face-Saving
• Perception of Work
• Concept of Authority
• Non-Verbal Behavior
• a. Handshake b. Bowing c. Eye Contact