The Role of Business in Social

and Economic Development

Business Ethics
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and Critical Responsibility
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At the end of the lesson the learners:
1. Differentiate the forms of business
organizations in terms of their purpose and role in
socio-economic development.

Business Ethics
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The Nature and Forms of Business
Organizations
- Business organizations play an integral role
in modern society.
- They help economies grow by developing,
producing, and supplying products and
services to consumers.
- They also create job opportunities for the
local community.
Business Ethics
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- All these have to be done in such a way that the
business will make a profit.
- While it is true that business organizations
need to be profitable to survive, business
activities or operations should not be done
unethically.
- Business organizations must set and follow
ethical standards to build and maintain not only
their business, but also more importantly their
reputation (Fernandez, 2020).
Business Ethics
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- Imagine a world without businesses.
- If clothing factories did not exist, you
would have to make your own clothes.
- If there were no car manufacturers, you
would have to build your own vehicle to get
from one place to another.

Business Ethics
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- If farmers did not sell their crops, you
would have to cultivate the land, plant your
crops, and then harvest them so you would
have food to eat.
- Imagine making your own soap, toothpaste,
and shampoo, cutting your own hair,
diagnosing your own illness, and producing
your own medicine.

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- These are just some of the things that business
organizations do to make your life easier.
- Business organizations exist to serve consumers’
needs, and in return, they make profits when people
patronize their products and services. They are
important components of modern society as they
contribute to the economy’s growth, provide products
for consumption, and offer employment to people
(Fernandez, 2020).

Business Ethics
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The Nature of Business Organization
- A business organization is an entity that aims to earn a
profit by providing products to satisfy the needs of the
market.
- Products can be tangible or physical objects – those
that can be perceived by touch (i.e., goods or
commodities) such as food, clothes, cars, etc.
- They can also be intangible or nonphysical items (i.e.,
services) such as haircut, medical consultation, and legal
advice.

Business Ethics
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- Business organizations are created
fundamentally to make a profit, which is
needed to sustain the business.
- Profit refers to the amount of money
remaining after all costs relating to a product
or service have been deducted from the total
sales or revenue.

Business Ethics
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Classification of Business Organization
- Meaning of for-profit organization and
nonprofit organization (Fernandez, 2020).

For-profit Organizations…
- Aim to make profits to sustain the business.
- Built to serve the business owner(s) by
directly or indirectly selling goods or services.
Business Ethics
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- Range from a sole proprietor running a
bakery, to a team of accountants who formed
a partnership offering accountancy services,
to corporations manufacturing goods being
sold in supermarkets and even to
conglomerates (a business with interests in
smaller business entities that operate
separately).
Business Ethics
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Nonprofit Organizations...
- Aim to advocate and implement activities for
which it normally raises funds, to further its
objectives such as providing social assistance for
the betterment of the society.
- Are formed to serve the public interest.
- Are sometimes referred to as part of civil society
organizations as the third sector of society, with
government and business being the other two
sectors.
Business Ethics
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- Are headed by a governing board of
trustees which must serve as a group, not
as individuals.
- Are oftentimes referred to as
nongovernment organizations (NGOs),
complement the government in the
delivery of social services to the people
and communities.
Business Ethics
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and Critical Responsibility
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Reflect Upon

If you were to start a nonprofit

organization, what public service
would it offer? Please provide a
brief explanation.
Business Ethics
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and Critical Responsibility
Thinking in the 21st Century
Forms of Business Organization
- Business organizations have different forms,
depending on the nature of the business, scale of
operation, degree of control desired by the
owner(s), amount of capital required, division of
profit, and government control, among others.
- The common forms of business organizations
are sole proprietorship, partnership, corporation,
and cooperative.
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Sole or Single Proprietorship
- A type of business organization that is
owned and operated by one individual who
makes all the decisions related to the
business.
- The sole proprietor (the owner) owns all the
assets of the business and the profits
generated by it, but at the same time, he or
she has total liability for any losses or debts.
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- This type of business organization does not need a
big capital and is often limited to the owner’s savings
or loan from the bank. It is also relatively easy to set
up and maintain. In this type of business
organization, if the business is operating at a loss, it
is easy to dissolve.
- Sole proprietorship examples include small
businesses such as sari-sari stores, beauty salons,
computer shops, laundry shops, and bakeries.
- If you are thinking of starting a sole proprietor
business, the possibilities are endless.
Business Ethics
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A Partnership
A type of business organization
that is composed of two or more
individuals who pool their resources
(e.g., money, property, skills) to
manage and operate a business.
.
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 Most common partnerships are in
professional services (e.g., law,
accounting, medicine) although delivery
or courier services and merchandising
businesses also have partnerships.
In a partnership, partners get to enjoy
the profits and losses of the business
together.
Business Ethics
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 A general partner has unlimited liability
for the debts and obligations of the business
while if one is only a limited partner, he or she
only has liability up to the extent of his or her
capital contributions along with other general
partners.
Partnership has a limited life and in the
event of the death or withdrawal of a partner,
the partnership can be dissolved.
Business Ethics
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A Corporation
A type of organization that is
formed legally through its
articles of incorporation filed
with the Securities of Exchange
Commission (SEC).
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Two Types of Corporation (The Corporation
Code of the Philippines)

1. Stock Corporation – a for-profit

organization that has capital stock that is
divided into shares and is authorized to
distribute to the shareholders’ dividends or
allotments of the surplus profits on the basis
of the shares held.
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2. Nonstock Corporation – is one where
no part of its income is distributable as
dividends to its members, trustees, or
officers. Any profit that a nonstock
corporations may be formed for charity,
religious, educational, professional, or
other similar purposes.

Business Ethics
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Other Classification of Corporation
1. Close Corporation – one whose
shares of stock are not available on
stock exchange or any public market;
that is, cannot make any public
offerings of its stocks.

Business Ethics
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Open Corporation – is listed in the
Philippine Stock Exchange (PSE) and
has gone public in raising its capital.
An open corporation makes an initial
public offering to get listed in the
PSE where its stocks are traded.

Business Ethics
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Advantages of a corporation as a
business organization are as
follows:
1. Unlimited life
2. Credibility
3. Ease of transferring ownership
4. Protecting Personal Assets
Business Ethics
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A Cooperative
The Philippine Cooperative Code defines a
cooperative as “an autonomous and duly registered
association of persons, with a common bond of
interest, who have voluntarily joined together to
achieve their social, economic, and cultural needs and
aspirations by making equitable contributions to the
capital required, patronizing their products and services
and accepting a fair share of the risks and benefits of
the undertaking in accordance with universally
accepted cooperative principles”
Business Ethics
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The Purpose of Establishing Business
Enterprise
- The primary objective of business
organizations is to develop, produce, and
distribute goods and services to the market in
order to generate profits. However, the purpose
of business organizations goes beyond earning
profits. They perform important rules in the
society particularly in socioeconomic
development.
Business Ethics
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The Roles of Business Organizations in the
Society
1. Provide goods and services - Business
organizations play a crucial role in society by
providing goods and services that meet the needs
and wants of consumers (Hitt, Ireland, &
Hoskisson, 2020). This function not only enhances
the overall quality of life for individuals but also
drives economic activity and consumer
satisfaction.
Business Ethics
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2. Create employment opportunities - They
also contribute significantly to society by
creating employment opportunities, thereby
reducing unemployment rates and improving
the livelihoods of individuals and
communities (Carroll & Buchholtz, 2019). Job
creation is a fundamental aspect of corporate
social responsibility, enhancing social well-
being.
Business Ethics
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3. Contribute to the economic growth of
the country - Business organizations
contribute to the economic growth of a
country by generating revenue, paying taxes,
and fostering economic stability (Porter &
Kramer, 2011). This growth positively impacts
various aspects of society, including
infrastructure development and public
services.
Business Ethics
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4. Promote sustainability - Promoting
sustainability is another critical role of
business organizations, as they can adopt
environmentally friendly practices and
reduce their ecological footprint
(Elkington, 1997). By doing so, they help
preserve the environment and support a
sustainable future for society.
Business Ethics
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5. Offer a quality of life - Businesses
can enhance the quality of life for
individuals through the products and
services they offer, improving
convenience, comfort, and overall well-
being (Hitt et al., 2020). This aspect
contributes to societal welfare and
happiness.
Business Ethics
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6. Invest in innovation and excellence -
Finally, business organizations invest in
innovation and excellence to stay
competitive and create value for society
(Porter & Kramer, 2011). This innovation can
lead to technological advancements and
improved products and services, benefiting
both businesses and consumers.
Business Ethics
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REFLECTION TIME!

If you are going to put up a business, what

will be your overarching goal for your
existence as a business entity? Explain
your answer.

Business Ethics
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and Critical Responsibility
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