Module 3 – Lesson 1

ETHICS IN BUSINESS
Your knowledge of the core principles underlying fairness, accountability, and transparency will be very
helpful in this next lesson.

Activity 1

Directions: Analyze each situation below and identify what core principle is applied. Write the letter of
your answer on a separate sheet of paper.

Your choices:

A. fairness

B. accountability

C. transparency

1. The treasurer of a cooperative withdrew P20,000 cash from a bank. On her way

to the office, she passed by the public market and since it was market day, there were a lot of people in
the area. A man suddenly snatched her bag where the money was placed. Although shocked and sad,
she promised to pay the P20,000 through salary deduction.

2. The manager of the company ordered materials for their office extension. He/she declared
the actual amount and attached the official receipt for future reference.

3. The boss noticed that his/her two clerks were not talking to each other. He/she ordered the
two to come to his/her office one at a time to listen to both sides before he/she decides.

Directions: Read and understand

the situation. Write your answers
on a separate
sheet of paper.
Chona opened an online food
service for an additional income.
She hired
one female helper in the kitchen
and two delivery boys. The
business was doing
very good for a month. But one
day, she got a call from an online
client
complaining that the food
delivered to her was already
spoiled and could not be
eaten. He/she was demanding for a
refund.
If you were Chona, how would you
handle the situation?
___________________________
___________________________
________________________
___________________________
___________________________
________________________
Activity 2

Directions: Read and understand the situation. Write your answers on a separate sheet of paper.

Chona opened an online food service for an additional income. She hired one female helper in
the kitchen and two delivery boys. The business was doing very good for a month. But one day, she got a
call from an online client complaining that the food delivered to her was already spoiled and could not
be eaten. He/she was demanding for a refund.

If you were Chona, how would you handle the situation?

_____________________________________________________________________________________

_____________________________________________________________________________________

Definition of Ethics
The term Ethics is derived from the Greek word ethos which means “characteristic way of thinking”.
Ethics, as a science, does not only evaluate the morality of our human conduct but also provides us with
a common understanding of the universal, objective, and irreversible moral principles that should
govern our human behavior and guide our moral decisions (Roa, 2011).

Ethics are moral principles that guide the conduct of the individual (Racelis, 2017). These are rules of
behavior based on ideas about what is morally good and bad (Merriam-Webster Dictionary).

Why is ethics important in business?

Ethical conduct, whether at the corporate, professional, or personal level, is a direct reflection of the
principles and values which regulate the person and the institution he/she represents. Organizations
establish their own culture that is socially expressed as their ideals. Such principles or ideals have an
impact on the relationships within the company, efficiency, prestige, performance and retention of
employees, legalities, and the wider community they work in.

As a result, most organizations generate a list of organizational values and codes of conduct to be
recognized and adhered by all workers. Motivating and enhancing constructive actions, and at the
same time building an atmosphere that prevents unethical behavior are vital obligations on the part of
both administrators and workers.

How to Apply Ethics

At the individual level, organizations ought to concentrate on improving and encouraging every
employee to respect and adhere to ethical principles. Certain aspects of individual ethics have their
roots in the individual. Achieving a strong sense of professionalism and recognizing certain professional
decisions' ethical implications are the key components of education, individual reflection, and
experience.

Examples of Ethical Issues in Business

1. Ethical Issues in Finance

Under the umbrella of finance and accounting, fairness in trading practices, trading conditions, financial
contracting, sales practices, consultancy services, tax payments, internal audits, external audits, and
executive compensation are included, whereas specific corporate ethical/legal abuse includes insider
trading, bribery/kickbacks, misleading financial analysis, and fraud on securities.

2. Ethical Issues in Human Resource (HR) Management

Human Resource Management 's tasks include hiring and orientation, performance evaluation, training
and development, labor relations, and health and safety concerns. Among the ethical issues are
discrimination by age (the young ones are preferred over the older ones), gender preference, sexual
orientation, race, ethnicity, disability, and physical appearance are all ethical issues that the HR
oversees.

3. Ethical Issues in Sales and Marketing

Marketing ethics deals with the beliefs, standards and/or morals that advertisers and marketing
organizations will operate upon. Ethical marketing issues include promotion of obsolete or harmful
products/services; openness about environmental threats; food ingredients (Genetically Modified
Organisms); possible health hazards or financial risks; protection for the privacy and autonomy of
consumers; truthfulness in advertising; and honesty in price and delivery. Some claim that
advertisements can affect the views of individuals and their relationships with others, suggesting an
ethical obligation to avoid distorting those expectations and relationships.

Ethics in marketing includes practices in pricing, which involves unlawful acts such as price manipulation
and price skimming. According to Hayes (2020), price skimming is a product pricing strategy by which a
firm charges the highest initial price that customers will pay and then lowers it over time. On the other
hand, advertising has raised concerns over offensive advertisements, objectification, and school
marketing.

4. Ethical Issues in Production

Business ethics typically deals with company's duties to ensure its goods and industrial procedures do
not inflict unnecessary harm. Many products and services can be generated and used at zero risk and it
can be difficult to assess the ethical path. However, there are consumers who patronize products that
damage them, for example, tobacco products. Output can have adverse effects on the environment like
air pollution, destruction of habitats, and urban sprawl.

Activity 3

A. Directions: Classify each phrase below to the corresponding column of ethical issues where it belongs.
Write your answers on a separate sheet of paper.

1. destruction of habitats 6. truthfulness in advertising

2. encountered misleading financial reports 7. fraud on securities

3. overweight applicants are not allowed 8. harm to environment

4. hiring limited to religious affiliations 9. manipulation in prices

5. honesty in prices 10. exaggerated advertisements

Ethical Issues:

in Finance in Human Resource in Sales and in Production

Management Marketing

Activity 4

Directions: Complete the given phrases below for at least three to five sentences.

Write your answers on a separate sheet of paper.

1. Ethics means ________________________________________________________________

______________________________________________________________________________

______________________________________________________________________________
2. Ethics is important in business because ______________________________________

______________________________________________________________________________

______________________________________________________________________________

Activity 5

Directions: What would you do under the following situations below. Write your answers on a separate
sheet of paper.

1. Being an advertising artist, you were instructed by the manager to make two layouts, but you will
only receive the price for one.

2. Your company would have to donate P 1,000,000 to charity, but you witnessed that the accountant
only gave P 700,000 instead of P 1,000,000.

3. Being one of the food processors in a manufacturing company, you know that the ingredients listed
on the label of your product are not completely true.

What I Have Learned

Directions: Complete the given phrases below for at least three to five sentences.

Write your answers on a separate sheet of paper.

1. Ethics means ________________________________________________________________

______________________________________________________________________________

______________________________________________________________________________

2. Ethics is important in business because ______________________________________

______________________________________________________________________________

______________________________________________________________________________

Directions: What would you do under the following situations below. Write your answers on a separate
sheet of paper.

1. Being an advertising artist, you were instructed by the manager to make two layouts, but you will
only receive the price for one.

2. Your company would have to donate P 1,000,000 to charity, but you witnessed that the accountant
only gave P 700,000 instead of P 1,000,000.

3. Being one of the food processors in a manufacturing company, you know that the ingredients listed
on the label of your product are not completely true.
 Assessment

Directions: Read each sentence below and classify each according to the ethical issue where it belongs.
Write the letter of your answers on a separate sheet of paper.

A. Ethical Issues in Finance

B. Ethical Issues in Human Resource Management

C. Ethical Issues in Marketing

D. Ethical Issues in Production

1. XYZ Company does not accept members of LGBTQIA+ community.

2. Diggie’s hotdogs are made under strict processing standards.

3. The company accountant orders office supplies from her husband’s store.

4. Strawberry, a new brand of computer, launched its new laptops at an overpriced amount.

5. Lobo Enterprise rejects all differently abled persons.

6. Super Milk does not put on the can’s label the ingredients they used.

7. The food products of XYZ Corporation are well-sealed.

8. The manager joins the contract bidding of their proposed new building.

9. Lotlot, the accountant, bribed the personnel to reduce their company’s tax payable.

10. Robot Beverages hired a famous commercial model for its product promotion.

11. Chocolatey Much Manufacturing Corporation delivers its products on time.

12. RB Corporation’s employable age limit is 55 years old.

Directions: Fill in the blanks with the appropriate word/s to make each sentence correct. Write your
answers on a separate sheet of paper.

13-14 The term ethics is derived from the Greek word _______ which means characteristic way of
__________.

15. Ethics are rules of _______ based on ideas about what is morally good and bad.

Additional Activities

Directions: Give a situation where ethics could be applied. Choose only one from the following places.
Write your answers in three to five sentences on a separate sheet of paper.

1. At the airport

2. In the marketplace

3. In a public office
Lesson 2
CODE OF ETHICS IN BUSINESS
You have learned that ethics is the interpretation of what is proper or not, what is right or wrong, what
is just or unjust, and what is good or bad in human behavior. It allows you to establish the standards
(norms) on which rational decision-making is guided and measured.

In this next lesson, you will get to know about the Code of Ethics, and you are expected to:

1. explain what code of ethics is;

2. identify which of the common practices in the business organizations are acceptable or not;

3. suggest ways on how some common practices could be improved;

4. write a good script that reflects good decision; and

5. formulate a “code of ethics” that reflects core principles derived from analyses.

Activity 6

Directions: Choose which action below is more acceptable. Write the letter of your choice on a separate
piece of paper.

1. As an office employee, you need to _____.

a. wear the prescribed office uniform

b. wear something you are comfortable with

2. With the “No Smoking” policy of the company, Elvis, being a smoker, _____.

a. will not follow because it makes him uncomfortable

b. will follow because it could irritate the people around him

3. In observing the office hour, I _____.

a. will report to my workplace before the time

b. will report any time I want, anyway there is salary deduction

4. In advertising our business, we _____.

a. will do anything, even to the point of inventing story, just to convince the consumers

b. will only tell the truth, so as not to affect our company’s credibility

5. In bookkeeping, Elsa _____.

a. will maintain two books of sales: one with the actual amount of sales, and one which has the
adjusted amount for income tax purposes
 b. will maintain only one book of sales with actual amount

Directions: Write True if the statement is correct and False if it is not.

6. The executives of the company should show perseverance.

7. Whether your decision is fair to all or not, it doesn’t matter.

8. Big businesses should conduct social surveys.

9. The Human Resource Department may not fully review the offenses reported.

10. Each employee should be fully aware of the company’s principles.

11. The proprietor’s decision should be based on truth.

12. Never mind immoral activities in the company.

13. The management should protect the whistleblowers because they show concern to the company.

14. Every decision should build goodwill of the organization.

15. Ethics are social principles that guide the conduct of the individuals.

The new Chief Operating Officer (COO) of Lee Ching Chemical Company, Max Ching, has found that the
firm has been dumping its toxic waste into the local river for the last four years and falsifying
information to officials about the amounts of alleged cancer-causing materials in the waste. The plant
overseer claims there is no evidence that the waste will cause cancer. Besides, within a hundred
kilometers downriver, there are only a few fishing villages. If the company had to treat the substance to
neutralize its potentially harmful effects and transport it to a legal dumpsite, the operating costs of the
company would rise to a level that could render the company uncompetitive. When the organization
loses its competitive advantage, five thousand local workers can become unemployed and the economy
of that town could collapse.

Question: If you were the COO, what would you do? Why?

__________________________________________________________________________________

__________________________________________________________________________________

__________________________________________________________________________________

A secret to success lies in recognizing the value of ethics in industry. The customers, management, and
staff value honest and ethical practices. Hence, business ethics is vital because it helps maintain a great
reputation, helps to avoid significant financial and legal issues, and ultimately benefits all involved.
Therefore, it is highly suggested that each company formulates its own Code of Ethics to be used as a
guide in its business operation.

What is Code of Ethics?

Code of Ethics is a set of rules about good and bad behavior. It is a guide of principles designed to help
professionals conduct business honestly and with integrity. A code of ethics document may outline the
mission and values of the business or organization, how professionals are supposed to approach
problems, the ethical principles based on the organization's core values, and the standards to which the
professional is held.

Saucer and Sims (2013) offer recommendations for developing Code of Ethics in business organizations:

1. Adopt code of ethics (use the Code of Ethics of other companies as a reference and modify according
to the needs of the company).

2. Offer training on ethics (for management and employees).

3. Hire and foster individuals with ethical value.

4. Deal with immoral activities. Employees must know the implications and effects of making unethical
actions, and should be ready to accept consequences.

5. Take constructive measures. For example, give rewards to employees who admit their mistakes. If the
company is conscientious and smart, it can encourage warehouse workers to take responsibility for their
mistakes and even praise them for coming forward, apologizing and ensuring that a faulty product is not
purchased by the customer. At first it seems counter-intuitive to reward an employee for a mistake, but
in the end, it provides everyone with the best result.

6. Carry out a social audit. Conduct survey to employees once in a while.

7. Cover all whistleblowers. These people detect illegal activities within

organizations and disclose the actions to the authority or managers. A whistleblower who works
sincerely, correctly reporting an issue, should be praised for his/her courage and integrity, as opposed to
being disciplined and ostracized. If an individual blasts the whistle, it is possible that the company itself
has failed internally to motivate and improve fair and ethical conversations.

8. Empower the defenders of integrity. Support those who work with honesty and integrity.

9. Ensure executive commitment. The anonymity of those who report the problems should be practiced.

10. Communicate the principles of conduct within the company and across the industry.

11. Assign an officer who is clearly responsible for the enforcement of ethical standards. He/she can be
consulted for advice.

12. Establish a procedure for violations of ethical standards, and fully review any offenses reported.

13. Ensure high perseverance by the company's board of trustees.

14. Lead by example, above everything else.

It should be remembered that when faced with an ethical situation, the outcome of the decision-making
process should be considered. One way to tackle ethical situations is by using the four-way test to
evaluate decisions.

This four-way test consists of asking four questions:

1. Is my decision truthful?
 2. Is my decision fair to all who are affected by it?

3. Will this build the organization's goodwill?

4. Will the decision benefit all parties with vested interest in the outcome?

Code of Ethics contains the following:

1. Vision means something that you imagine; a picture that you see in your mind (Merriam-Webster
Dictionary). The vision statement helps to ensure the alignment of the decisions to the company goals.

Example: To make innovations that everyone could access and adapt depending on their needs

2. Values (value means something thought of as important or useful) Values in business help to ensure
that all of the employees work towards the company goals.

Example: We commit ourselves to serve our customers with quality service and utmost respect.

3. Mission- a specific task with which a person or a group is charged (Merriam-Webster Dictionary).
The mission statement clearly and effectively guides the business or the organization in its decision-
making.

Example: To inspire all the young athletes of the country… tell them to dream and go for it!

4. Principles- moral rules or beliefs that help you know what is right and wrong and that influence your
actions (Merriam-Webster Dictionary).

Examples:

Customers have to be respected.

Make sure to deliver quality product.

Simplified Sample of Code of Ethics: XYZ Company

Our Core Values

Our Vision: To lead the car industry by giving our customers quality cars worthy of their money and
unmatched customer services

Our Values:

We act with the highest standards of integrity.

We respect individuals and treat them fairly.

Our Mission:
To work efficiently and enthusiastically to make XYZ Company the country’s top car dealer while serving
our customers punctually and courteously

Our Principles:

1st: XYZ Company shall adopt a zero-tolerance policy towards bribery and corruption in whatever form;

2nd: All company officers and employees shall conduct business in accordance with Philippine laws and
regulations; and

3rd: We shall act in good faith and observe sense of professionalism at all times.

For actual/specific example of Code of Ethics, please visit:

http://www.ayala.com.ph/governance/page/business-conduct-and-ethics

Code of Ethics aims to lessen conflicting issues as it explains to what degree such conflicts can be
avoided and what parties can do if these conflicts happened.

Professionals therefore cannot say that they were ignorant of the immoral nature of their improper
behavior. Often relevant is the possibility of disciplinary action (e.g. disbarment of a lawyer) which helps
minimize unnecessary disagreements or offensive behavior where a confrontation is imminent or is
likely to happen.

Activity 7

Directions: Answer the following questions and write your answers in two to three sentences on a
separate sheet of paper.

How do you understand Code of Ethics?

__________________________________________________________________________________

__________________________________________________________________________________

__________________________________________________________________________________

Why is Code of Ethics important in business?

__________________________________________________________________________________

__________________________________________________________________________________

Activity 8

Directions: Read the situation and formulate a Code of Ethics for the business. Write your answers on a
separate sheet of paper.

Situation:

You just started an online business selling bags and shoes made in Laguna.

You employed one bookkeeper, one clerk, two utilitymen, and four (4) delivery personnel. Follow the
format given below:

Our Core Values

Our Vision

Our Values

Our Mission

Our Principles:

1st:

2nd:

3rd:

Rubrics:

Relevance to the business 6 pts.

(one point for each - vision, values, mission, and three principles)

Mechanics 4 pts.

(one point for each – vision, values, mission, and principles) ________

Total 10 points

Assessment

Directions: Read each sentence below and write the words thumbs up if it is true or thumbs down if it is
not. Write your answers on a separate sheet of paper.

1. The company’s Board of Trustees should show perseverance.

2. It does not matter whether the decision is fair to all or not.

3. Social surveys should be carried out by the company.

4. The company may not fully review the offenses reported.

5. Each member of the organization should be fully aware of the company’s principles.

6. The owner’s decision should be based on truth.

7. Do not mind immoral activities in the company.

8. The management should protect the whistleblowers.

9. The decision should build goodwill of the organization.

10. Ethics are social principles that guide the conduct of the individuals.

Directions: Complete each statement by filling the appropriate word in the blank.

Write your answers on a separate sheet of paper.

11-12 Code of Ethics is a set of rules about _____ and _____ behavior.

13. The possibility of giving _____ action often minimize doing offensive behavior.

14. The people who detect illegal activities and report the same to proper authorities are called _____.

15. It is highly suggested that administrators should lead by _____.

Additional Activities

Directions: Write a short script that shows how a General Manager should respond to an employee-
whistleblower who had witnessed a bribing incident of a big client to the new Sales Manager. Write
your answers on a separate sheet of paper.

Rubrics:
Content 4 pts.
Mechanics 3 pts.
Ethical implication of decision 3 pts.
10 pts.