UNIVERSITY OF NEGROS OCCIDENTAL-RECOLETOS

Bacolod City
INTEGRATED SCOOL | GRADES 11 and 12

LEARNING MODULE

MODULE NO. 2

Fairness, Accountability and

Transparency

BUSCOR380
Business Ethics and Social
Responsibility

Prepared by:
Dave Mark P. Sumagaysay
 BUSINESS ETHICS AND CORPORATE SOCIAL RESPONSIBILITY

Module 2: Fairness, Accountability and

Transparency
]

INTRODUCTION:

A business is an organization that uses economic resources or inputs to provide

goods or services to customers in exchange for money or other goods and services. One
of the initial decisions a business owner has to make is how the business should be
structured. All businesses must assume some legal design that describes the rights and
liabilities of participants in the business's ownership, control, personal liability, life span,
and financial configuration. Any decision made about how business shall be structured
will have long-term consequences to the business. Business organizations come in
different forms. All these forms of business organizations contribute to the
socioeconomic growth and development of a country.

OBJECTIVES:

To do well in this module, you need to remember and do the following:

1. To give examples of how fairness, accountability and transparency practiced in
business and non-profit organizations.
2. Share observations on business policies and practices.

DISCUSSION

A company that applies the principles of fairness, accountability and transparency,

will usually outperform other companies. Strong application of these principles maintains
investors' confidence, whose support can help to finance further growth. Companies who
implement these principles into working environment life will ensure corporate success
and economic growth. They are the basis on which companies can grow.
FAIRNESS
Fairness is perhaps one of the hardest, yet most important, to practice on a
consistent basis. Fairness refers to equal treatment. For instance, all shareholders should
receive equivalent consideration for whatever shareholdings they hold. In addition to
shareholders, there should also be fairness in the treatment of all stakeholders including

MODULE NO. 2 BUSCOR380 2

 BUSINESS ETHICS AND CORPORATE SOCIAL RESPONSIBILITY

employees, communities and public officials. The fairer the entity appears to
stakeholders, the more likely it is that it can survive the pressure of interested parties.

Fairness in business refers to the value of treating people with a standard of

performance that is consistent and equal based on commitments. It means giving
customers a reasonable value for their money. It also means providing an unbiased work
environment where employees have identical opportunities to good benefits and working
conditions. Caring for community members and business partners with similar level of
fairness expected from them is also vital.
Most people spend most of their waking hours in the workplace yet the feeling of
unfairness normally happens here. The issues of money, competition, and pride are
usually the causes of unfairness both petty and serious. Common examples of unfairness
include taking credit for another's work, shifting blame, inequitable allocation of work
load, promotions of the less competent for political reasons. Unfairness could also be felt
when there are double standards. Some do less work, and what they do isn't good.
Others come in late, miss deadlines, and make mistakes. Yet they get the same raise as
anyone.
When unfairness happens, what is or is not fair is much more complicated and
ambiguous than it seems from the viewpoint of the person who feels victimized.
Although the underlying concept of fairness is simple, almost instinctive, its application
in real life proves extremely complex. In recent years differentiating real injustice from
self-serving justifications has become harder. It appears that whenever someone is
starved of something, he wants such as a job, a promotion or a contract, fairness is
deprived.
Fairness is concerned with actions, processes, and consequences that are morally
right, honorable, and equitable. In essence, the virtue of fairness establishes moral
standards for decisions that affect others. Fair decisions are made in an appropriate
manner based on appropriate criteria.
ACCOUNTABILITY
Accountability refers to the obligation and responsibility to give an explanation or
reason for the company's actions and conduct. Accountability also has a strong
connection to expectations. Employees who do not meet the expectations of their
supervisor are held accountable for their actions and must answer for their inability to do
so.
Accountability is crucial in ensuring high performance within an organization.
However, managers must clearly communicate their expectations to the person who is
responsible for the specified action or task. Clear communication of expectations and

MODULE NO. 2 BUSCOR380 3

 BUSINESS ETHICS AND CORPORATE SOCIAL RESPONSIBILITY

well-defined goals is a very effective tool in enhancing performance at every level of

organization.
Without defined goals, employees lack a frame of reference for how they are
performing in the workplace. They are unable to rely on guidelines or a structure that
helps them achieve their performance goals. In many organizations, the management
team and board of directors create goals for themselves and the general manager, while
the general manager creates goals for department managers. This process is replicated
throughout the organization, down to the department managers who create goals for
entry level employees
Both subordinates and supervisors should have a clear idea of how their projects
should be handled and delivered. A clear expectation level and the understanding that all
employees are accountable for their performance boost employee morale and
productivity in the workplace. However, because different individuals in large
organizations contribute in various ways to a company's decisions and policies, it is often
difficult to identify who should be accountable for the results.
Cultivating accountability across the organization requires managers to take
specific actions. Employees need to clearly understand their role in the company and
what they are responsible for accomplishing. Managers need to define expectations
upfront and reinforce them periodically within the context of the business and ensure
their employees are empowered to do what is expected. Arming employees with that
understanding, combined with monitoring their progress and fostering transparency
across the organization, will reinforce the culture of accountability and enable it to
thrive.
Accountability is applicable not just for profit-oriented company, but also to non-
profit organizations. All non-profits have the obligation to provide some community
benefit. Accountability for a non-profit organization include ensuring that they are
effectively providing this benefit service such as feeding the homeless, protecting the
environment, preventing domestic violence, offering a cultural endeavor, and so on.
These organizations have to evaluate their services objectively and execute a needs
assessment of their client or constituency population, making changes if needed. This is
the critical part of being an accountable organization.
In the past, companies were primarily accountable to just two entities which are
their customers, whom they owed a quality product at a fair price, and their
shareholders, whom they owed regular profits. Customers and shareholders still demand
businesses' accountability, but scores of other entities are also demanding information
about organizations' operations.

MODULE NO. 2 BUSCOR380 4

 BUSINESS ETHICS AND CORPORATE SOCIAL RESPONSIBILITY

Today, companies' constituencies include:

1. Institutional Investors – Institutional investors are becoming much more vocal
and more active. Investors want more information about board performance,
morally acceptable policies and practices, compensation policies and the
behavior of senior management, as well as fully transparent financial data and
information on the company's prospects for growth. People want to make sure
that companies and the boards that manage them are held accountable.
Transparency and accountability are the watchwords, with return on
investment and protection of shareholder interests as the criteria.

2. Customers - Although customer power always been a force to contend with

consumers have never used their influence in the ways they are using it today.
Customers are starting to voice out their concerns and demand information in
all sorts of areas, including product quality, community involvement and child-
labor practices. Customers are also starting to demand information about
allowances on pricing, customer service and performance issues.

3. Employees - Everyone knows the demands that full employment has brought
to accept on companies. Finding and keeping good employees is tough, so
companies must be quick to respond to employee needs. Nowadays,
employees need information. Prior to making employment decisions, they are
asking for information about compensation practices, the amount of money
devoted to training and development, the company's growth potential, the
working environment and culture of the organization, and whether or not the
company provides work-family and domestic partner benefits. Then, once they
accept new positions, employees want information related to company
finances and operations, and guidelines on how they can improve processes,
performance and profitability. In order to satisfy these employee demands,
companies not only have to gather this information, but they have to be
prepared to share it in a timely manner

4. Communities - Companies face enormous pressure from community groups to

be good corporate citizens Corporations determine far more than any other
institution the air to breathe, the quality of water to drink and even where to
live. As a result, an increasing number of environmental and public-interest
groups are demanding companies to be accountable for any and all actions
that may affect the communities in which they operate. These groups work to
disclose businesses' human rights, ethical and environmental exploitation and
to promote companies to improve local communities through investments in
housing and education Corporate watchdog groups have been pressuring
companies for years. Today, corporate watchdogs sponsor boycotts, generate

MODULE NO. 2 BUSCOR380 5

 BUSINESS ETHICS AND CORPORATE SOCIAL RESPONSIBILITY

negative press coverage and raise a public commotion for their causes. They
are also starting to sit at the table with business people to bargain for greater
accountability.

TRANSPARENCY
Transparency means openness, a willingness by the company to provide clear
information to shareholders and other stakeholders. Transparency ensures that
stakeholders can have confidence in the decision-making and management processes of
a company. For instance, a company to be called transparent has to open and willing to
disclose financial performance figures which are truthful and accurate.
Disclosure of material topics about the organization's performance and activities
should be timely and precise to make certain that all investors have access to
understandable, realistic information which exactly mirrors the financial, social and
environmental situation of the organization. Organizations ought to give details and
make publicly known the roles and responsibilities of the board and management to
present shareholders with a level of accountability
This anticipation for transparency has extended further than personal interactions
and is now a reality in business. Across all industries, transparency has never been more
important to a successful business model. Withholding or shrewdly restructuring
information is no longer a practical option for this new generation of consumers.
Consumers today are more knowledgeable than any generation before them and for
whom doubt seems to be a default setting. In order to create brand loyalty among
customers, companies need to first build trust.
There is a widespread fallacy regarding transparency. Far too often, companies
perceive it merely as a tool to be used when claiming for a mistake or correcting
something wrong. This approach is insensitive and can even be considered an ineffective
means to build trust. Customers will be more tolerant of mistakes if a company has a
history of being upfront with all interactions not just the pessimistic ones.
Businesses should embrace it as way to get better service and increase customer
loyalty instead of being worried by transparency. A good example of the concept of
transparency is a restaurant setting where the cooks and customers could literally see
each other during the food preparation and eating experience. In this case customers
will be more satisfied because they feel that they have been made part of the process.
This shows the power of transparency
Transparency is not just about consumers. Employees too place a high value on
transparency in their relations with different levels of management. Transparency is
even one of the top factors in shaping their happiness and satisfaction in the workplace.

MODULE NO. 2 BUSCOR380 6

 BUSINESS ETHICS AND CORPORATE SOCIAL RESPONSIBILITY

No employee wishes to work for a company with blurry stands and no distinct long-term
plans. Employees should know about every aspect that affects their lives.
Some businesses keep information secret. This approach can nurture gossip and
rumors, both from staffers and customers. Openness and honesty concerning all aspects
of the business operation has various advantages for a company. It also places the
company to be responsive in a quick and efficient manner when confronted with
problems and controversies.
1. Respect - A transparent business demonstrates respect for both employees
and customers. Even outsiders, who have the chance to observe and know
how a business operates behind the scenes and the processes that are
involved in all the business operations, will likely have respect for the
organization. Respect is particularly useful for non-profit organizations, which
are trusted to handle and manage donated funds.

2. Positive Public Perception - Scandal often triggers some companies to become

transparent. They have to openly protect themselves or otherwise enlighten
the public of their actions and behaviors. A transparent approach to business
proves the public that the company has nothing to hide. It is an effective
approach particularly when transparent business operations include open and
straightforward communication through publicity department. Frankness
rather than getting around or spiraling corporate information demonstrates
integrity even when information is unfavorable.

3. Staff involvement - Staff members with no idea about the business may
assume, contribute in spreading gossip, or if not be unconvinced and fearful
regarding the condition of the company and the security of their jobs Open
and honest communication must be maintained with the staff. Letting them
participate on the company's strategic plan and changing circumstances can
facilitate building staff loyalty. The feel of involvement by employees is likely
to give them a higher degree of morale and job satisfaction. They will then
consider themselves as trusted members of the inner circle rather than just
workers.

4. Customer Service-Customer service can get better through transparent

business operations. Take the case of a leading car manufacturer that makes
an effort to hide itself from a product defect that had recently bombarded
newspapers and television today. Consumers may perceive the company as
being deceitful, unreasonable and voracious. A manufacturer that openly
confesses a defect, promises action to repair it, and expresses regret for its

MODULE NO. 2 BUSCOR380 7

 BUSINESS ETHICS AND CORPORATE SOCIAL RESPONSIBILITY

mistake is more likely to keep or still draw customers who are glad about the
level of sincere and truthful behavior shown.

5. Image Management - It is easy to manage the public perception of a company

by being open and transparent. Established media connections can help
disseminate information during a crisis. The release of timely information that
is advantageous to the company will make handling even of the toughest
situations manageable.

On another note, transparency of a non-profit organization involves how much it

tells publicly about its agency, and how truthfully and promptly it discloses this
information. One common way to be transparent is to make public the organization's
financial records, principal programmatic activities and officer's compensation package.
Another more comprehensive approach to be transparent is to generate an
annual or biannual report. The non-profit organization can lay out in a more convincing
document the highlights of achievements, services and financial records with photos and
graphics. The organization should make these readily available to the public by posting it
on its website. The more the organization can guarantee itself as accountable and
transparent the more trustworthy it will be viewed by the public, donors, constituents
and regulators

FAIRNESS, ACCOUNTABILITY AND TRANSPARENCY FOR SOCIOECONOMIC

DEVELOPMENT
On a broader perspective, a nation is larger and more difficult to manage and to
lead than an organization. One of the requirements for a sustainable socio-economic
development is fairness. So that the best will be acknowledged fairness has to be
practiced for a healthy competition. Corruption and cronyism in business must be
removed to move forward towards development
According to Aristotle "Equals should be treated equally and unequals unequally."
Favoritism, cronyism, and nepotism all interfere with fairness since they furnish
unjustified benefit to somebody who is not worth of this treatment.
On the part of the government, favoritism, cronyism, and nepotism also weaken
the common good. When somebody is awarded a high position owing to connections not
because of the best credentials and experience he possess, the service this person
would render to the public may perhaps be inferior. Just like in the Philippines where
favoritism, cronyism, and nepotism proliferate that hampers the nation towards more
development in the social and economic aspects.

MODULE NO. 2 BUSCOR380 8

 BUSINESS ETHICS AND CORPORATE SOCIAL RESPONSIBILITY

Transparency and accountability are important pillars also for socioeconomic

development of a country especially for developing ones like the Philippines.
Transparency and accountability are very vital for the resourceful and effective
functioning of a modern economy and for nurturing social well-being. Hence, satisfactory
transparency and accountability are significant for making certain that resource wealth is
administered for the advantage of the entire population. In most cases in many
societies, a lot of powers are entrusted to public officials. The society at large being the
delegator must be provided with some assurance that this transfer of power is not only
helpful, but also must not be abused. Transparency guarantees that information is
accessible to assess the authorities' performance and to protect against any potential
abuse of powers. In that logic, transparency serves as a way to realize accountability,
which means that authorities can be held answerable for their actions. The absence of
transparency and accountability will create mistrust between a government and those
whom it rules. The outcome would be an unsteady society and an environment that is
less than contributing to economic growth.

PRACTICES OF FAIRNESS, ACCOUNTABILITY AND TRANSPARENCY IN

PHILIPPINE BUSINESSES
Last year, the Philippines had ranked second best among countries belonging to
the Association of Southeast Asian Nations (ASEAN) when it comes to the practice of
fairness, accountability and transparency or simply corporate governance.
There are eleven (11) Philippine corporations that made it to the top 50 list. Four
(4) are owned by the Ayala group which are Ayala Corp., Ayala Land Inc., Globe
Telecom Inc., and Manila Water Co. The Manuel Pangilinan led group had three, namely
Manila Electric Co., Philex Mining Corp., and Philippine Long Distance Telephone Co. The
other firms that were part of the list were Aboitiz Equity Ventures of the Aboitiz clan,
George Ty's GT Capital Holdings, Inc. and the Sy family's SM Prime Holdings and BDO
Unibank Inc.
The practice of sustainability reporting was implemented in Globe Telecom Inc. as
a means to provide fair, accurate and meaningful assessment of its overall performance
on triple bottom line responsibility to its stakeholders including investors.
Globe practices regular disclosure of financial results. Quarterly financial results
are immediately released following the approval by the Board to appropriate regulatory
bodies like the Philippine Stock Exchange (PSE) and the Securities and Exchange
Commission (SEC). Quarterly and year-end financial statements and detailed
management's discussion and analysis are filed within 45 and 105 calendar days
respectively from the end of financial period, if not in advance. The company's financial

MODULE NO. 2 BUSCOR380 9

 BUSINESS ETHICS AND CORPORATE SOCIAL RESPONSIBILITY

reporting disclosures are in compliance with the PSE and SEC requisites. These reports
are made available to the analysts once disclosed and posted on the company's website.
Philippine Long Distance Telephone Co. (PLDT) on the other hand has a policy
that provides safeguards so that the tradition of giving gifts is handled based on the
values of fairness, accountability and transparency. It aims to prevent the occurrence of
situations or actions that could extensively influence objective, independent or effective
performance of an employee's duties. Purposely, this prohibits the solicitation of gifts,
sponsored travel, and entertainment from third parties, Receipt and acceptance of gifts
voluntarily given by such third parties are handled based on this policy as well
In the Institute of Corporate Directors (ICD) working session at the Mandarin
Oriental in Makati City on November 15, 2015 Atty. William S. Pamintuan shared with an
audience Meralco's road map in establishing a corporate governance culture from simple
corporate governance compliance Policies on conflict of interest, gifts and management
control have been implemented, to facilitate transparency and clarify accountability, and
are already being practiced by the company's directors, officers and employees in all
their dealings and performance of duties.
The policies and practices of fairness, accountability and transparency is not the
only common denominator of these companies. All of them are successful companies
because they are valued by their customers. A Philippine Stock Exchange (PSE) study
showed that Filipino stock investors are particularly conscious of disclosure practices,
which form part of firms’ corporate governance structure. The study also revealed that
Filipino investors are most concerned about fairness, accountability and transparency
issues related to equitable treatment of shareholders, disclosure, and board
responsibilities.
According to Jonathan Juan Moreno, head of the PSE's Corporate Governance
Office, there is an empirical proof about the relationship between corporate governance
and company value. This finding will help PSE push the governance reform agenda more
actively by arguing on the legal and moral case.
Corporate governance is the framework of rules and practices by which a
company's board ensures accountability, fairness and transparency in its relationship
with stakeholders such as financiers, customers, management employees, the
government and community. Corporate disclosure is a big part of corporate governance.
It is generally believed to be a good thing since a clear and well-timed announcement
aids stakeholder of the company and other market participants make knowledgeable
decisions about their investments.
Detractors have often reminded that listed companies prefer not to reveal
corporate developments if they can get away with it. While they are supposed to make

MODULE NO. 2 BUSCOR380 10

 BUSINESS ETHICS AND CORPORATE SOCIAL RESPONSIBILITY

companies more transparent, disclosure rules have provided too much flexibility for
companies to conceal behind jargon.

MODULE NO. 2 BUSCOR380 11

 BUSINESS ETHICS AND CORPORATE SOCIAL RESPONSIBILITY

CASE STUDY 2
How the Tylenol Murders of 1982 Changed the Way We Consume Medication

By Dr. Howard Markel

Early on the morning of Sept. 29, 1982, a tragic, medical mystery began with a sore
throat and a runny nose. It was then that Mary Kellerman, a 12-year-old girl from Elk Grove
Village, a suburb of Chicago, told her mother and father about her symptoms. They gave her
one extra-strength Tylenol capsule that, unbeknownst to them, was laced with the highly
poisonous potassium cyanide. Mary was dead by 7 a.m. Within a week, her death would panic
the entire nation. And only months later, it changed the way we purchase and consume over-
the-counter medications.

That same day, a 27-year-old postal worker named Adam Janus of Arlington Heights,
Illinois, died of what was initially thought to be a massive heart attack but turned out to be
cyanide poisoning as well. His brother and sister-in-law, Stanley, 25, and Theresa, 19, of Lisle,
Illinois, rushed to his home to console their loved ones. Both experienced throbbing headaches,
a not uncommon response to a death in the family and each took a Tylenol extra-strength
capsule or two from the same bottle Adam had used earlier in the day. Stanley died that very
day and Theresa died two days later.

Over the next few days, three more strange deaths occurred: 35-year-old Mary
McFarland of Elmhurst, Illinois, 35-year-old Paula Prince of Chicago, and 27-year-old Mary
Weiner of Winfield, Illinois. All of them, it turned out, took Tylenol shortly before they died.

It was at this point, early October of 1982, that investigators made the connection
between the poisoning deaths and Tylenol, the best-selling, non-prescription pain reliever sold in
the United States at that time. The gelatin-based capsules were especially popular because they
were slick and easy to swallow. Unfortunately, each victim swallowed a Tylenol capsule laced
with A lethal dose of cyanide.

MODULE NO. 2 BUSCOR380 12

 BUSINESS ETHICS AND CORPORATE SOCIAL RESPONSIBILITY

McNeil Consumer Products, a subsidiary of the health care giant, Johnson & Johnson,
manufactured Tylenol. To its credit, the company took an active role with the media in issuing
mass warning communications and immediately called for a massive recall of the more than 31
million bottles of Tylenol in circulation. Tainted capsules were discovered in early October in a
few other grocery stores and drug stores in the Chicago area, but, fortunately, they had not yet
been sold or consumed. McNeill and Johnson & Johnson offered replacement capsules to those
who turned in pills already purchased and a reward for anyone with information leading to the
apprehension of the individual or people involved in these random murders.

The case continued to be confusing to the police, the drug maker and the public at large.
For example, Johnson & Johnson quickly established that the cyanide lacing occurred after cases
of Tylenol left the factory. Someone, police hypothesized, must have taken bottles off the
shelves of local grocers and drug stores in the Chicago area, laced the capsules with poison, and
then returned the restored packages to the shelves to be purchased by the unknowing victims.

To this day, however, the perpetrators of these murders have never been found.

One man, James Lewis, claiming to be the Tylenol killer wrote a "ransom" letter to
Johnson & Johnson demanding $1 million in exchange for stopping the poisonings. After a
lengthy cat and mouse game, police and federal investigators determined that Lewis lived in
New York and had no demonstrable links to the Chicago events. That said, he was charged with
extortion and sentenced to 20 years in prison. He was released in 1995 after serving only 13
years.

Other “copy-cat” poisonings, involving Tylenol and other over-the punter medications,
cropped up again in the 1980s and early 1990s but these vents were never as dramatic or as
deadly as the 1982 Chicago-area deaths. Conspiracy theories about motives and suspects for all
these heinous acts continue to be bandied about on the internet to this day.

Before the 1982 crisis, Tylenol controlled more than 35 percent of the over-the-counter
pain reliever market; only a few weeks after the murders, hat number plummeted to less than 8
percent. The dire situation, both in terms of human life and business, made it imperative that
the Johnson & Johnson executives respond swiftly and authoritatively.

For example, Johnson & Johnson developed new product protection methods and
ironclad pledges to do better in protecting their consumers in the future. Working with FDA
officials, they introduced a new tamper-proof packaging, which included foil seals and other
features that made it obvious to a consumer if foul play had transpired. These packaging
protections soon became the industry standard for all over-the-counter medications. The
company also introduced price reductions and a new version of their pills called the "caplet" a
tablet coated with slick, easy-to-swallow gelatin but far harder to tamper with than the older
capsules which could be easily opened, laced with a contaminant, and then placed back in the
older non-tamper-proof bottle.

Within a year, and after an investment of more than $100 million, Tylenol's sales
rebounded to its healthy past and it became, once again, the nation's favorite over-the-counter
pain reliever. Critics who had prematurely announced the death of the brand Tylenol were now

MODULE NO. 2 BUSCOR380 13

 BUSINESS ETHICS AND CORPORATE SOCIAL RESPONSIBILITY

praising the company's handling of the matter. Indeed, the Johnson & Johnson recall became a
classic case study in business schools across the nation.

In 1983, the U.S. Congress passed what was called "the Tylenol bill," making it a federal
offense to tamper with consumer products. In 1989, the FDA established federal guidelines for
manufacturers to make all such products tamper-proof.

Sadly, the tragedies that resulted from the Tylenol poisonings can never be undone. But
their deaths did inspire a series of important moves to make over-the-counter medications safer
(albeit never 100 percent safe) for the hundreds of millions of people who buy them every year.

Case Questions:

1. As a business, what is the accountability of Johnson & Johnson to its

customers?
2. When the tragedy happened, what is the responsibility of Johnson & Johnson
to the victims?
3. After the tragedy, what changes were done by Johnson & Johnson to its
Tylenol brand to prevent the same incident to happen? Do you think Johnson
& Johnson actions are correct?

MODULE NO. 2 BUSCOR380 14

 BUSINESS ETHICS AND CORPORATE SOCIAL RESPONSIBILITY

MODULE NO. 2 BUSCOR380 15