BUSINESS ETHICS AND SOCIAL

RESPONSIBILITY
MODULE 1 –THE ROLE OF BUSINESS IN SOCIAL AND ECONOMIC
DEVELOPMENT
1A. THE BUSINESS ORGANIZATION
The learners shall be able to
1.Identify forms of business organizations and their characteristics
2.Explain the purpose of business organizations and their role in
socioeconomic development
3.Explain the core principles of fairness, accountability and transparency in
the socioeconomic development of a country
4.Craft simple “Codes of Ethics” or “Codes of Right Conduct”
SOLE PROPRIETORSHIP- 72% OF BUSINESSES
Advantages of sole proprietorships Economic Weakness of sole
proprietorship:

Ease of start up Unlimited Liability: you have total

Ease of Management responsibility for all debts and liabilities of the

You keep all profits company

Difficulty in raising financial capital

You do not have to pay any business taxes

Limited size and efficiency

Psychological advantages

Limited managerial experience

Ease of exit

Limited Life
 STOP AND THINK

 If you started your own business what would it be?

 What are some of the 4 Factors of production you would need.
 2 examples for each

Land Labor

Entrepreneur
Capital
9% OF BUSINESSES
 PARTNERSHIPS

Two major types of partnerships:

General Partnership: (most common type) all partners are responsible for
management and the financial responsibilities of the partnership.
Limited Partnership: at least one partner is not active in the day to day
running of the business. They have limited liability.

Articles of Partnership: contract between partners spelling out the rules of

partnership.
Dividing profit
Dividing responsibility
Admitting new partners
Buying out partners
 PARTNERSHIPS

Advantages of Partnerships: Disadvantages of Partnerships

Ease of establishment Unlimited liability

 Ease of Management: each partner has Limited partner is only responsible for
different things to offer his initial investment. He has limited
No special business taxes liability.

Easier to raise financial capital Limited Life

Larger than sole proprietorship Conflict between partners

Easier to attract qualified workers

WHAT FITS BEST WITH EACH BUSINESS???
TELL ME WHY!!!
CORPORATIONS- 20% OF BUSINESS 74%-
PROFITS
 CORPORATION- SET UP

 Incorporate: to form a corporation.

 Charter: a document granted by the state giving a corporation the right
to do business
 Stock: shares of ownership in the corporation
 Stockholders (shareholders): owners of stock.

Reasons to own stock:

Dividends: share of corporate profits paid to stockholders
Speculation: buy in hope that price of stock will increase.
 CORPORATION- OWNERSHIP

 Common Stock is a basic share of ownership in a corporation

 Have voting rights in the management of the company
 In reality they turn over voting rights to someone else with a proxy: giving someone
else the right to vote your share of stock.

 Preferred Stock:
Non voting shares of ownership
Guaranteed dividend
Liquidation benefit: If corporation goes out of business they are ahead of common
stockholders in getting back money.
 Board of Directors: duty to direct the corporations business by setting board policies
and goals

Elected by common stockholders

 Hires a professional management team to run day to day activities. (CEO, CFO….)
 CORPORATIONS

Advantages of a corporation:  Disadvantages of a corporation:

Ease of raising financial capital

(main advantage)  Start up expenses are high.
 Selling stock to investors
 Stockholders (owners) have a
 Selling bonds: a written promise to
repay a loan on a specific date limited
 Principal: the amount borrowed
 Interest: the price paid for the use  Profits are taxed
of another’s money
 Borrowing money from banks.  Corporations are subject to more
Ability to hire
government regulations than sole
Limited liability
Unlimited life proprietors or partners
Ease of transferring ownership:.
Buying and selling stock is easy and is
done millions of times a day
 DARE TO COMPARE

 Using the interwoven circles list the similarities and differences between
Sole Proprietorships, Partnerships, and Corporations
LIMITED LIABILITY COMPANIES
LIMITED LIABILITY COMPANIES
LIMITED LIABILITY COMPANIES
LIMITED LIABILITY COMPANIES
ADVANTAGES AND DISADVANTAGES OF LLCS

 Advantages of LLCs
 Fewer corporate formalities. Corporations must hold regular meetings of
the board of directors and shareholders, keep written corporate minutes
and file annual reports with the state. On the other hand, the members
and managers of an LLC need not hold regular meetings, which reduces
complications and paperwork.
  No ownership restrictions. S-corporations cannot have more than 100
stockholders, and each stockholder must be a natural person who is a
resident or citizen of the United States. There are no such restrictions
placed on an LLC.
ADVANTAGES AND DISADVANTAGES OF LLCS

 Ability to use the cash method of accounting. Unlike a C-corporation, which

often must use the accrual method of accounting, most limited liability
companies can use the cash method of accounting. This means that income
is not earned until it is received.
 Ability to place membership interests in a living trust. Members of an LLC are
free to place their membership interests in a living trust. It is difficult to
place shares of an S-corporation into a living trust.
 Ability to deduct losses. Members who are active participants in the business
of an LLC are able to deduct its operating losses against the member's
regular income to the extent permitted by law. Shareholders of an S-
corporation are also able to deduct operating losses, but shareholders of a C-
corporation are not.
ADVANTAGES AND DISADVANTAGES OF LLCS

 Tax flexibility. By default, LLCs are treated as a "pass-through" entity for

tax purposes, much like a sole proprietorship or partnership. This means
that LLCs avoid double taxation. Furthermore, an owner of an LLC is not
required to pay unemployment insurance taxes on his or her own salary.
However, an LLC can also elect to be treated like a corporation for tax
purposes, whether as a C-corporation or an S-corporation
ADVANTAGES AND DISADVANTAGES OF LLCS

 Disadvantages
 Profits subject to social security and medicare taxes. In some
circumstances, owners of an LLC may end up paying more taxes than
owners of a corporation. Salaries and profits of an LLC are subject to
self-employment taxes, currently equal to a combined 15.3%. With a
corporation, only salaries (and not profits) are subject to such taxes. This
disadvantage is most significant for owners who take a salary of less
than $97,500 for tax year 2007.
ADVANTAGES AND DISADVANTAGES OF LLCS

 Owners must immediately recognize profits. A C-corporation does not

have to immediately distribute its profits to its shareholders as a
dividend. This means that shareholders in a C-corporation are not always
taxed on the corporation's profits. Because an LLC is not subject to
double-taxation, the profits of the LLC are automatically included in a
member's income.
 Fewer fringe benefits. Employees of an LLC who receive fringe benefits,
such as group insurance, medical reimbursement plans, medical
insurance and parking, must treat these benefits as taxable income. The
same is true for employees who own more than 2% of an S-corporation.
However, employees of a C-corporation who receive fringe benefits do
not have to report these benefits as taxable income.
 COOPERATIVE

 A cooperative is an autonomous association of persons united voluntarily

to meet their common economic, social and cultural needs and
aspirations through a jointly owned and democratically controlled
enterprise.
 COOPERATIVE PRINCIPLES

 Every cooperative shall conduct its affairs in accordance with Filipino

culture, good values and experience and the universally accepted
principles of cooperation
 PRINCIPLE 1

Concern for Community

Cooperatives work for the sustainable development
of their communities through policies
approved by their members. 
 PRINCIPLE 2

Open and voluntary Membership

Cooperatives are voluntary organizations, open to all persons able to use
their services and willing to accept the responsibilities of membership,
without gender, social, racial, cultural, political or religious discrimination
 PRINCIPLE 3

Democratic Member Control

Cooperatives are democratic organizations that are controlled by
their members who actively participate in setting their policies and
making decisions. Men and women serving as elected representatives,
directors or officers are accountable to the membership. In primary
cooperatives, members have equal voting rights of one-member, one-
vote. Cooperatives at other levels are organized in the same democratic
manner
 PRINCIPLE 4

Economic Participation of the members

Members contribute equitably to, and democratically control, the
capital of their cooperatives. At least part of that capital is the common
property of the cooperative. They shall receive limited compensation or
limited interest, if any, on capital subscribed and paid as a
condition of membership. Members allocate surpluses for any or all of the
 PRINCIPLE 5

Autonomy and Independence

Cooperatives are autonomous, self-help organizations controlled
by their members. If they enter into agreements with other organizations,
including government, or raise capital from external sources, they shall do
so on terms that ensure democratic control of their members and maintain
their cooperative autonomy.
 PRINCIPLE 6

Cooperation Among Cooperatives

Cooperatives serve their members most effectively and strengthen the
cooperative movement by working together through local, national,
regional and international structures
 PRINCIPLE 7

Education, Training and Information –

Cooperatives shall provide education and training for their members,
elected and appointed representatives, managers, and employees, so that
they can contribute effectively and efficiently to the development of
their cooperatives.
 MERGERS AND ACQUISITIONS

 5 Reasons to merge- Make money faster, Increase efficiency, Acquire

new product lines, Catch up or eliminate rivals, Lose a company identity.
 
 Horizontal Merger- when two or more companies that product the same
kind of product join forces.

 Vertical merger- when two or more firms that are at different steps of
manufacturing process join together.

 Conglomerates- is a firm that has at least four businesses, each making

unrelated products.
 BE A THINKER NOT A STINKER

 With a neighbor develop 2 examples of each type of merger

 Vertical

 Horizontal

 Conglomerate

 Why would companies ever want to merge????

1 2 3 4 5
 SUMMARY

 With a partner:
 Use two real organizations and design the following:
 A vertical merger
 A horizontal merger
 Conglomerate
 APPLY IN REAL LIFE
(PERFORMANCE OUTPUT)
 You are the business development officer of Coffee Grandeur, a
company that produces instant coffee sold and distributed in the
Philippines. You have been tasked by the president of the company to
initiate setting up a nonprofit organization (NPO) for the company. The
president wants you to purpose and NPO that will focus on a specific
goal to provide a solution for an unmet need in your community. The
mission of the NPO must be related to the nature of your company’s
business. You are to provide the following:
 Description of the proposed NPO (provide reasons why your company
should choose to support this advocacy.)
 Mission and vision
 Beneficiaries (description of beneficiaries, benefits that they need,
location)
 CONTINUED

 Your output must be a PowerPoint presentation to be presented to the

president of the company. Ensure that your presentation only includes as
list in bullet points and key words. Use photos, illustrations, and/or
graphs to make your presentation more engaging and interesting.
 RUBRICS 1. PAPER
- Content (25%) the paper contains
all the needed information, data, and
research materials. It is well-written
-Organization (15%) the paper followed the
prescribed outline, and thoughts are well
organized.
 RUBRICS CONTINUED

 PRESENTATION
 Visual presentation (20%) the presentation materials contain all the needed
information to present the paper in an interesting manner (i.e. use of photos, graphs,
videos)
 Presentation skills (25%) the presenters have mastery of the presentation.
 Ability to answer questions (15%) the presenters were able to answer the questions
satisfactorily.
 1B-CORE PRINCIPLES IN BUSINESS
OPERATIONS
 OBJECTIVES
 explain the core principles of fairness, accountability, and transparency
in the socioeconomic development of a country;
 Give examples of how fairness, accountability, and transparency are
practice in business and non-profit organizations
FAIRNESS PRINCIPLE
 FAIRNESS AND JUSTICE

 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.
TYPES OF JUSTICE
 CASE STUDY

People’s Recovery, Empowerment, and Development Assistance (PREDA)

People’s Recovery, Empowerment, and Development Assistance (PREDA)
Fair Trade was a not-for-profit organization working at the national and
international levels for the protection of human rights, especially women’s
and children’s rights. It was founded in 1974 and a year later it started to
engage in fair trade. “Fair Trade,” in general, refers to objectives such as:
creating opportunities for economically disadvantage producers; increasing
farming market access both domestic and export, for these businesses;
and ensuring transparency and accountability, among others.
Organizations in the Philippines started to engage heavily in fair trade in
the 1980’s, especially
 CASE STUDY CONT’D

due to sugar and coffee crises when prices fell sharply, causing
unemployment among thousands of Filipinos. In response to the situation,
organizations started to implement structures that alleviated poverty and
lessened dependency on sugar and coffee exports. PREDA works hand in
hand with the Philippine
Chapter of the World Fair Trade Organization (WFTO) which works for the
development of progressive and responsible fair trade stakeholders in the
country, as well as ensures that all member organizations are engaged in
their commitment to the principles and standards of fair trade, such as:
providing income and food security to disadvantage communities;
empowering community-based producers; and promoting quality and
market-driven image of fair trade products.
 CASE STUDY CONT’D

Guide Questions:
What is meant by fairness?
How can trade and commerce be fair?
To what extent is the lesson about fairness related to PREDA’S
promoting fairness?
ACCOUNTABILITY
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 CASE ANALYSIS

 PQR Corporation is into the school supplies business and has been
looking for large-scale customers as the company is now in the brink of
bankruptcy. One of its owners, Mr. Jun Haraya, gleaned that he can tap
a relatively large school where his brother Mr. Jay Haraya currently works
as school administrator. He requested his brother to convince the other
school administrators to choose their company as their official school
supplier. To make this happen, he promised his brother a sum of
P200,000 upon signing of the contract. With this in mind, Mr. Jay
Haraya convinced the other school administrators to choose PQR
Corporation and did not disclose that he is related to one of the owners
of the said corporation. The school chose PQR Corporation as its official
school supplier.
 CASE CONTINUED

Guide Questions
What ethical issue was tackled in this case? Explain
What would you do if you were Mr. Jun Haraya, one of the owners of PQR
Corporation?
What would you do it you were Mr. Jay Haraya, the school administrator?
 STEWARDSHIPS

 Stewardship: leaders are accountable to others and to the organization,

without controlling others, defining meaning and purpose for others or
taking care of others.

 Four principles of stewardship:

 Reorient toward a partnership assumption
 Localize decisions and power to those closest to the work and the customer
 Recognize and reward the value of labor
 Expect core work teams to build the organization
 RESEARCH ACTIVITY

 Choose your partner. Research on the core beliefs of the company and
its logo.
 Suppose you are to create your company, write down your company’s
core beliefs, and design your company’s logo. Describe briefly how you
foresee your company in the future.
 1D-COMMON PRACTICES IN BUSINESS
ORGANIZATIONS
 Objectives:
 Share observations on business polices and practices
 Distinguish between good policies/practices and morally unacceptable
policies/practices
 Craft simple”Code of ethics” or Codes of Right Conduct”
CORE PRINCIPLES IN BUSINESS OPERATIONS

 Business practice is a method procedure, process, or rule employed or

followed by a company in the pursuit of its objectives.
 Decorum
 Decorum is proper and polite behavior. If you let out a big belch at a fancy
dinner party, you're not showing much decorum. This noun is from Latin
decōrus "proper, becoming, handsome," from décor "beauty, grace," which is
also the source of English décor.
 Protocol
The unwritten rules or guidelines that are peculiar to every culture or
organization, and are supposed to be observed by all parties in the conduct
of business, entertaining, negotiating, politics, etc.
 Policies
The guidelines developed by an organization to govern its actions.
 CONTINUED
 Advertising
Advertising is how a company encourages people to buy their products,
services or ideas.
 Marketing
The process of product development as well as sales, promotion, and
distribution.
 Bookkeeping
Keeping track of money
 Reportorial Requirements
Business reporting or enterprise reporting is “the public
reporting of operating, and financial data by a business enterprise.”
(Lymer, 2013)
Reporting is a fundamental part of the larger movement towards
improved business intelligence and knowledge management. There so
may kinds of reports, but what usually required by governments and
regulating agencies are the
 Documentation
The processes and items which serve as evidence for the validity or truth of a certain claim or
statement.
CORPORATE ETIQUETTE
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ETIQUETTE
BUSINES ETIQUETTE
INTRODUCTIONS
INTRODUCTIONS
INTRODUCTIONS
HANDSHAKE
HANDSHAKE
SHAKING
BUSINESS ETIQUETTES
ETIQUETTE
ETIQUETTE RULES
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TIPS
TIPS
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DINING
DINING
DINING
TELEPHONE
TELEPHONE
TELEPHONE
OFFICE
OFFICE
OFFICE
OFFICE
MEETING
CARD
CUBICLE
CUBICLE
APPEARANCE
APPEARANCE
ATTIRE
APPEARANCE
CONTINUED
NETWORKING
POSTURES
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