CHAPTER 7: COMMON

UNETHICAL
PRACTICES OF
BUSINESS
ESTABLISHMENTS

Prepared by:
Rozen G. Alfonso, MBA and Dennis T. Fajarito , MBA
TYPES :

1. TO FAMILIARIZE
YOURSELFOF THE COMMON UNETHICALPRACTICESOF
BUSINESSESTABLISHMENTS
SUCHAS
• MISREPRESENTATION
AND
• OVER-PERSUASION
2. DESCRIBE HOW DIRECTMISREPRESENTATION
IS COMMITTED
BY BUSINESS
FIRMSSUCHAS
a. DECEPTIVE
PACKAGING
b. MISBRANDINGOR MISLABELING
c. FALSEANDMISLEADINGADVERTISING
d. ADULTERATION
e. WEIGHTUNDERSTATEMENT
f. MEASUREMENTUNDERSTATEMENT
g. QUANTITYUNDERSTATEMENT
TYPES :

3. DESCRIBEHOW INDIRECTMISREPRESENTATION IS DONE BY BUSINESS

FIRMSSUCHAS
a. CAVEATEMPTOR
b. DELIBERATWITHHOLDING OF INFORMATION
c. E
PASSIVEDECEPTION
4. DESCRIBEHOW OVER-PERSUASION BECOMESUNETHICAL
5. DESCRIBESOMEUNETHICAL CORPORATEPRACTICES OF THE
a. BOARDOF DIRECTORS
b. EXECUTIVEOFFICERSANDLOWERLEVEMANAGER
c. EMPLOYEES L
TYPES :

➢MISREPRESENTATION – TO GIVE A FALSE OR

MISLEADING REPRESENTATION OF USUALLY
WITH AN INTENT TO DECEIVE OR TO BE UNFAIR
➢MISREPRESENTATION - MAY BE CLASSIFIED
INTO TWO TYPES: DIRECT MISREPRESENTATION
AND INDIRECT MISREPRESENTATION
➢DIRECT MISREPRESENTATION IS
CHARACTERIZED BY ACTIVELY
MISREPRESENTING ABOUT THE PRODUCT OR
CUSTOMERS.
THIS INCLUDES:
❑ DECEPTIVE PACKAGING .
❑ MISBRANDING OR MISLABELING
❑FALSE OR MISLEADING ADVERTISING
❑ ADULTERATION
❑ WEIGHT UNDERSTATEMENT OR SHORT
WEIGHING
❑ MEASUREMENT UNDERSTATEMENT OR
SHORT MEASUREMENT
❑ QUALITY UNDERSTATEMENT OR SHORT
NUMBERING .
 Product Misrepresentation and “Caveat Emptor”

Business Practices involving Misrepresentation and

Lying
A.Direct Misrepresentation:
Is characterized by actively misrepresenting something about
the product or service.
 Product Misrepresentation and “Caveat Emptor”

1. Deceptive Packaging - The practice of placing the product

in containers of exaggerated sizes and misleading shapes
to give a false impression of its actual contents.
 Product Misrepresentation and “Caveat Emptor”

Examples of Deceptive Packaging

 Product Misrepresentation and “Caveat Emptor”

Business Practices involving Misrepresentation and

2 MisbrandingMislabeling
or - Is the practice of making false
. statements on the label of a product or making its container
similar to
a well
-known product for the purpose of deceiving
the customer as to the quality and/or quantity of a product
being sold.
 Product Misrepresentation and “Caveat Emptor”

Lying
 Product Misrepresentation and “Caveat Emptor”

Example of Misbranding or Mislabeling

FDA-Advisory-No. -2016-073 - Cem's Honey

 Product Misrepresentation and “Caveat Emptor”

Business Practices involving Misrepresentation and

3 False or Misleading Advertising

- Advertising
does not
. always tell the “whole truth and nothing but the truth” if it
greatly exaggerates the virtues of a product and tells only
half of the truth or else sings praises to-existent
its non
virtues.
 Product Misrepresentation and “Caveat Emptor”

Lying
 Product Misrepresentation and “Caveat Emptor”

Example of False or Misleading Advertising

 Product Misrepresentation and “Caveat Emptor”

Business Practices involving Misrepresentation and

4 Adulteration
- Is the unethical practice of debasing a pure
. or genuine commodity by imitating or counterfeiting it, by
adding something to increase its bulk or volume, or by
substituting an inferior product for a superior one for the
purpose of profit or gain.
 Product Misrepresentation and “Caveat Emptor”

Lying
 Product Misrepresentation and “Caveat Emptor”

Example of Adulteration
 Product Misrepresentation and “Caveat Emptor”

Business Practices involving Misrepresentation and

5 Weight Understatement or Short Weighing

- the
. mechanism of the weighing scale is tampered
withor
something is unobtrusively attached to it so that the scale
registers more than the actual weight.
 Product Misrepresentation and “Caveat Emptor”

Lying
 Product Misrepresentation and “Caveat Emptor”

Business Practices involving Misrepresentation and

6 Measurement understatement or short measurement.

In
. short measurement, the measuring stick or standard is
shorter than the real length or smaller in volume than the
standard.
 Product Misrepresentation and “Caveat Emptor”

Lying
 Product Misrepresentation and “Caveat Emptor”

Business Practices involving Misrepresentation and

7 Quality understatement or short numbering.

In this
. unethical practice, the seller gives the customer less than
the number asked for or paid for.
 Product Misrepresentation and “Caveat Emptor”

Lying
 Product Misrepresentation and “Caveat Emptor”
Business Practices involving Misrepresentation and Lying
B. Indirect Misrepresentation: It is characterized by
omitting adverse information about the product or
service. It is a passive deception and not as
obvious compared to direct misrepresentation.

• Caveat Emptor means, “let the buyer beware” and

is a practice very common among salesmen. It is the
responsibility of the consumer to determine for himself
the defects or negative features of the product.
• Deliberately withholding information in any
business transaction.
• Business ignorance : Inability of the businessman
to provide the customer with the complete information.
Example stock investments.
 COMMON UNETHICAL PRACTICES OF BUSINESS
ESTABLISHMENTS

• INDIRECT - OMITTING ADVERSE OR

MISREPRESENTATION
INFORMATION ABOUT THEUNFAVORABLE
PRODUCT OR SERVICE.
• CAVEAT EMPTOR
- MEANS “LET THE BUYER
• THE SELLERBEWARE”
IS NOT OBLIGATED TO REVEAL ANY DEFECT IN
THE
PRODUCT OR SERVICE HE IS SELLING. IT IS THE RESPONSIBILITY
OF
THE CUSTOMER TO DETERMINE FOR HIMSELF THE DEFECTS OF
THE
PRODUCT
.
• DELIBERATE WITHHOLDING OF - NOT DISCLOSING
INFORMATION
CERTAIN INFORMATION ABOUT THE
TRANSACTION
• PASSIVE DECEPTION
- CONTRIBUTES TO THE IMPRESSION
BUSINESSMEN ARETHAT
LIARS AND ARE OUT TO MAKE A FAST
BUCK.
 COMMON UNETHICAL PRACTICES OF BUSINESS
ESTABLISHMENTS

• OVE-PERSUASIO - APPEALING TO THE EMOTIONS OF A

R N
CUSTOMER ANDPROSPECTIVE
URGING HIM TO BUY AN ITEM OF MERCHANDISE
HE
NEEDS
. 1. URGING A CUSTOMER TO SATISFY A LOW PRIORITY NEED
FOR
MERCHANDIS
2. E.
PLAYING UPON INTENSE EMOTIONAL AGITATION TO CONVINCE A
PERSON
TO
3. BUY.
CONVINCING A PERSON TO BUY WHAT HE DOES NOT NEED JUST
BECAUSE
HE HAS THE CAPACITY OR MONEY TO DO
SO.
 CORPORATE
ETHICS OF CORPORATE
UNETHICAL PRACTICES
MANAGEMENT
SAMPLE BOARD OF DIRECTORS ETHICS
CODE
BOARD OF
DIRECTORS
• PLAIN
GRAFT
✓SOME OF THE BOARD OF DIRECTORS HELP
THEMSELVES
TO THE EARNINGS THAT OTHERWISE WOULD GO
TO
OTHER STOCKHOLDERS. THIS VOTING
IS DONE FOR
BY
THEMSELVES DURING THE STOCKHOLDER’S MEETING
AND
THE EXECUTIVE OFFICERS HUGE PER DIEMS,
LARGE
SALARIES, BIG BONUSES THAT DO NOT
COMMENSURATE
TO THE VALUE OF THEIR
SERVICES.
 CORPORATE
ETHICS
• INTERLOCKING
DIRECTORSHIP
✓HOLDS DIRECTORIAL POSITIONS IN TWO OR MORE
CORPORATIONS THAT DO BUSINESS WITH EACH
✓OTHER
INVOLVE CONFLICT OF INTEREST AND CAN RESULT
TO
DISLOYAL
SELLING.
• INSIDER
TRADING
✓BROKER OR ANOTHER PERSON WITH ACCESS TO
CONFIDENTIAL INFORMATION USES THAT
INFORMATION
TO TRADE IN SHARES AND SECURITIES OF
A
CORPORATION
 CORPORATE ETHICS
• NEGLIGENCE OF DUTY
✓FAILURE TO ATTEND BOARD MEETINGS
 CORPORATE
CODE OF ETHICS ETHICS
IS A GUIDING SET OF PRINCIPLES INTENDED TO INSTRUCT
PROFESSIONALS TO ACT IN A MANNER THAT ALIGNS WITH THE
ORGANIZATION'S VALUES AND IS BENEFICIAL TO ALL
STAKEHOLDERS INVOLVED
 CORPORATE ETHICS
SOME UNETHICAL PRACTICES OF EXECUTIVE
OFFICERS AND LOWER LEVEL MANAGERS
1. CLAIMING A VACATION TRIP TO BE A BUSINESS TRIP.
2. HAVING EMPLOYEES DO WORK UNRELATED TO THE
BUSINESS.
3. LOOSE OR INEFFECTIVE CONTROLS.
 CORPORATE ETHICS
SOMEUNETHICAL PRACTICES OF EXECUTIVE OFFICERS
AND LOWER LEVEL MANAGERS
4. UNFAIR LABOR PRACTICES.
➢TO INTERFERE WITH, RESTRAIN OR COERCE
EMPLOYEES IN THE EXERCISE OF THEIR RIGHT TO
SELF-ORGANIZATION;
➢TO REQUIRE AS A CONDITION OF EMPLOYMENT
THAT A PERSON OR AN EMPLOYEE SHALL NOT JOIN
A LABOR ORGANIZATION OR SHALL WITHDRAW
FROM ONE TO WHICH HE BELONGS;
 CORPORATE ETHICS
SOMEUNETHICAL PRACTICES OF EXECUTIVE OFFICERS
AND LOWER LEVEL MANAGERS
4. UNFAIR LABOR PRACTICES.
➢TO CONTRACT OUT SERVICES OR FUNCTIONS
BEING PERFORMED BY UNION MEMBERS WHEN
SUCH WILL INTERFERE WITH, RESTRAIN OR
COERCE EMPLOYEES IN THE EXERCISE OF THEIR
RIGHTS TO SELF-ORGANIZATION;
➢TO INITIATE, DOMINATE, ASSIST OR OTHERWISE
WITH THE FORMULATION OR ADMINISTRATION OF
ANY LABOR ORGANIZATION, INCLUDING THE GIVING
OF FINANCIAL OR OTHER SUPPORT TO IT;
 CORPORATE
ETHICS
SOME UNETHICAL PRACTICES OF EXECUTIVE
OFFICERSANDLOWERLEVELMANAGERS
4. UNFAIRLABORPRACTICES
.
➢TO DISCRIMINATE WITH REGARDS TO WAGES,
HOURS OF WORK, AND OTHER TERMS OR
CONDITIONS OF EMPLOYMENT
IN ORDER TO
ENCOURAGE OR DISCOURAGE MEMBERSHIP IN
ANY LABOR ORGANIZATION.
 CORPORATE ETHICS

SOME UNETHICAL PRACTICES OF EXECUTIVE

OFFICERS AND LOWER LEVEL MANAGERS

➢TO DISMISS, DISCHARGE, OR OTHERWISE

PREJUDICE OR DISCRIMINATE, AGAINST AN
EMPLOYEE FOR HAVING GIVEN OR BEING
ABOUT TO GIVE TESTIMONY UNDER THE
LABOR CODE;
➢TO VIOLATE THE DUTY TO BARGAIN
COLLECTIVELY AS PRESCRIBED BY THE
LABOR CODE.
 CORPORATE
ETHICS
SOME UNETHICALPRACTICESOF EXECUTIVE
OFFICERSANDLOWERLEVELMANAGERS

➢TO PAY NEGOTIATION OR ATTORNEY’S FEES

TO THE UNION OR ITS OFFICERS OR AGENTS
AS PART OF THE SETTLEMENT OF ANY ISSUE
IN COLLECTIVE BARGAINING OR ANY OTHER
DISPUTE;
 CORPORATE
ETHICS
SOME UNETHICAL PRACTICES OF EXECUTIVE
OFFICERSANDLOWERLEVELMANAGERS

➢TO VIOLATE OR REFUSE TO COMPLY WITH

VOLUNTARY ARBITRATION AWARDS OR
DECISIONS RELATING TO THE
IMPLEMENTATION OR INTERPRETATION OF A
COLLECTIVE BARGAINING AGREEMENT;
➢TO VIOLATE A COLLECTIVE BARGAINING
AGREEMENT.
 CORPORATE ETHICS

SOME UNETHICAL PRACTICES OF EXECUTIVE

OFFICERS AND
LOWER LEVELMANAGERS

5. MAKING FALSE CLAIMS ABOUT LOSSES TO

FREE THEMSELVES FROM PAYING THE
COMPENSATION AND BENEFITS PROVIDED
BY LAW.
 CORPORATE ETHICS

SOME UNETHICAL PRACTICES OF EXECUTIVE

OFFICERS AND
LOWER LEVELMANAGERS

6. MAKING EMPLOYEES SIGN DOCUMENTS

SHOWING THEY ARE RECEIVING FULLY WHAT
THEY ARE ENTITLED TO UNDER THE LAW
WHEN IN FACT THEY ARE ONLY RECEIVING A
FRACTION OF WHAT THEY ARE SUPPOSED
TO GET.
7. SEXUAL HARASSMENT.
 CORPORATE ETHICS
SOME UNETHICAL PRACTICES BY EMPLOYEES

1. CONFLICTS OF INTEREST - ARISES WHEN AN

EMPLOYEE WHO IS DUTY BOUND TO PROTECT
AND PROMOTE THE INTERESTS OF HIS
EMPLOYER VIOLATES THIS OBLIGATION BY
GETTING HIMSELF INTO A SITUATION WHERE HIS
DECISION OR ACTUATION IS INFLUENCED BY
WHAT HE CAN GAIN PERSONALLY FROM IT RATHER
THAN WHAT HIS EMPLOYER CAN GAIN FROM IT.
 CORPORATE ETHICS
SOME UNETHICAL PRACTICES BY EMPLOYEES

EXAMPLES:
• HOLDS A SIGNIFICANT INTEREST OR SHARES
OF STOCK OF A COMPETITOR, SUPPLIER,
CUSTOMER OR DEALER FAVORS THIS PARTY TO
THE PREJUDICE OF HIS EMPLOYER.
• ACCEPTS CASH, A GIFT OR A LAVISH
ENTERTAINMENT OR A LOAN FROM A SUPPLIER,
CUSTOMER, COMPETITOR, OR CONTRACTOR.
 CORPORATE ETHICS
SOME UNETHICAL PRACTICES BY EMPLOYEES

EXAMPLES:
• USES OR DISCLOSES CONFIDENTIAL COMPANY
INFORMATION FOR HIS OR SOMEONE ELSE’S
PERSONAL GAIN.
• ENGAGES IN THE SAME TYPE OF BUSINESS AS
HIS EMPLOYER.
• USES FOR HIS OWN BENEFIT A BUSINESS
OPPORTUNITY IN WHICH HIS EMPLOYER HAS OR
MIGHT BE EXPECTED TO HAVE AN INTEREST.
 CORPORATE
ETHICS
SOME UNETHICAL PRACTICES BY EMPLOYEES
2. DISHONESTY- BUSINESS ETHICS IS NOT JUST
LIMITED TO BUSINESS TRANSACTIONS WITH
OUTSIDE PARTIES. IT ALSO COVERS EMPLOYEE
-
EMPLOYER RELATIONSHIP, ESPECIALLY WITH
RESPECT TO AN EMPLOYEE’S HONESTY AS HE
CARRIES OUT HIS ASSIGNED DUTIES IN THE
OFFICE.
 CORPORATE
ETHICS
SOME UNETHICAL PRACTICES BY EMPLOYEES
EXAMPLES:
• TAKING OFFICE SUPPLIES HOME FOR
PERSONAL USE.
• PADDING AN EXPENSE ACCOUNT THROUGH THE
USE OF FAKE RECEIPTS WHEN CLAIMING
REIMBURSEMENTS.
• TAKING CREDIT FOR ANOTHER EMPLOYEE’S
IDEA.
 CREATING AN ETHICAL WORKPLACE
ENVIRONMENT
THE FOLLOWING ELEMENTS ARE CRITICAL COMPONENTS
INCREATING AN ETHICAL WORKPLACE
ENVIRONMENT:
• FAIRNESS EMPLOYEES AT EVERY LEVEL SHOULD BE
:THE SAMEHELD TO
STANDARDS OF
CONDUCT.
• COMMUNICATION MOST COMPANIES ARE PRETTY GOOD AT
:SHARING INFORMATION FROM THE TOP DOWN. BUT
THE
COMPANIES WITH THE BEST WORKPLACE
ENVIRONMENT
ALSO ALLOW COMMUNICATION TO FLOW FROM THE
BOTTOM
UP.
 CREATING AN ETHICAL WORKPLACE
ENVIRONMENT
THE FOLLOWING ELEMENTS ARE CRITICAL
COMPONENTS IN CREATING AN ETHICAL WORKPLACE
ENVIRONMENT:

• RESPECT: EMPLOYEES DESERVE CONSIDERATION AS

INDIVIDUALS RATHER THAN SIMPLY AS COGS IN THE
COMPANY MACHINE. RECOGNIZING INDIVIDUAL
TALENTS,
SKILLS, AND GOALS HELPS DEVELOP EMPLOYEES
INTO EVEN MORE VALUABLE MEMBERS OF THE
 ORGANIZATION, WHICH, IN TURN, HELPS A COMPANY
THRIVE.

• TRUST: MANY MANAGERS CLING TO THE NOTION

THAT PEOPLE DON’T LIKE TO WORK AND WILL GOOF
OFF AT ANY OPPORTUNITY.
OTHER CORPORATE ETHICAL ISSUES
1. DISCRIMINATION - THE UNJUST OR PREJUDICIAL
TREATMENT OF DIFFERENT CATEGORIES OF
PEOPLE, ESPECIALLY ON THE GROUNDS OF
ETHNICITY, AGE, SEX, OR DISABILITY.
2. AGEISM - AGEISM IS DEFINED AS DISCRIMINATION
AGAINST OLDER PEOPLE BECAUSE OF NEGATIVE
AND INACCURATE STEREOTYPES—AND IT'S
SO INGRAINED IN OUR CULTURE THAT WE
OFTEN DON'T EVEN NOTICE.
OTHER CORPORATE ETHICAL ISSUES
3. DISABILITY - A DISABILITY IS ANY CONDITION OF
THE BODY OR MIND (IMPAIRMENT) THAT MAKES IT
MORE DIFFICULT FOR THE PERSON WITH THE
CONDITION TO DO CERTAIN ACTIVITIES (ACTIVITY
LIMITATION) AND INTERACT WITH THE WORLD
AROUND THEM (PARTICIPATION RESTRICTIONS).
4. GENDER - REFERS TO THE CHARACTERISTICS OF
WOMEN, MEN, GIRLS AND BOYS THAT ARE
SOCIALLY CONSTRUCTED. THIS INCLUDES
NORMS, BEHAVIORS AND ROLES ASSOCIATED WITH
BEING A WOMAN, MAN, GIRL OR BOY, AS WELL AS
RELATIONSHIPS WITH EACH OTHER.
OTHER CORPORATE ETHICAL ISSUES
5. RACIAL AND ETHNIC –
ANY DISCRIMINATION AGAINST ANY INDIVIDUAL ON
THE BASIS OF THEIR RACE, ANCESTRY, ETHNICITY,
AND/OR SKIN COLOR.
6. RELIGION - IT IS TREATING INDIVIDUALS
DIFFERENTLY BECAUSE OF THEIR RELIGIOUS
BELIEFS AND PRACTICES, AND/OR THEIR
REQUEST FOR ACCOMMODATIONS OF THEIR
RELIGIOUS BELIEFS AND PRACTICES. IT ALSO
INCLUDES TREATING INDIVIDUALS DIFFERENTLY
BECAUSE OF THEIR LACK OF RELIGIOUS BELIEFS
OR PRACTICES.
 OTHER CORPORATE ETHICAL
ISSUES
7. SEXUAL ORIENTATION
- IT REFERS TO
SEXUAL
PREJUDICE, A NEGATIVE ATTITUDE TOWARDS
SOMEONE THAT IS BASED ON THEIR SEXUAL
ORIENTATION
. AN EXAMPLE OF THIS BIAS IS
HOMOPHOBIA, WHICH REFERS TO
DISCRIMINATION TOWARDS SOMEONE WHO IS
HOMOSEXUAL.
QUOTE FOR THE DAY