MODULE NO.

1 – THE BUSINESS ORGANIZATION

Lesson 1: The Nature of Business Organization
A business is an active process which is an integral part of human society. It is an organization where economic
resources or inputs, such as materials and services, are brought together and distributed to deliver or to give consumers
goods, products, or outputs. It involves significant operations such as buying, assembling, distributing, advertising,
selling, and accounting.

A business organization is an entity that aims to earn a profit* by providing products to satisfy the needs of the market.

*Profit refers to the difference between the amount received and the amount spent on something purchased,
produced, or manufactured.

The fundamental reason for examining business activities from a moral point of view is that business organizations
should, in principle, help promote the common good and protect the rights and interests of individuals.

Three types of business organizations:

Service businesses - provide services to customers rather than products.

Merchandising businesses - sell to customers products they buy from other businesses.
Manufacturing businesses - turn basic inputs into products which are sold to consumers.

Two kinds of business organizations:

For – profit organization have the right to keep and use their profits as they choose – within legal limits –
because profit is the reward for the risks, they take in making and selling their products.

Nonprofit organization (NPOs) are formed for a specific purpose (to assist victims of domestic violence, to
promote animal welfare, or to care for the elderly) to serve the common good of the public. According to the
World Bank, NPOs are entirely or largely independent of the government; are not operated for profit; and exist
to serve humanitarian, social, or cultural interest, either of their members or of society as a whole.

Lesson 2: Forms of Business Organization

1. Sole Proprietorship - It is a one-person business. The owner has full control over the finances and operations and
decides alone. Sole Proprietorship is the simplest form of business organization and is the easiest to register through the
Bureau of Trade Regulation and Consumer Protection (BTRCP) of the Department of Trade and Industry (DTI).

Sole Proprietorship Advantages:

a. Tax preparation is faster. Simply file an individual income tax return including losses and profits to your
business. Your personal and business income is considered the same and the tax implications for self-employed
individuals would apply.
b. Sole proprietorship has lower start-up costs.
c. Handling money for the business is easier.
d. Sole proprietorships have the least government rules and regulations that affect them.
e. The sole proprietor can own the business for as long as he/she wants, and when he/she wants to move out,
he/she can cash in and sell the business.
f. Even in common practice, the sole proprietor can pass the business down to his/her heir.

Sole Proprietorship Disadvantages:

a. The sole proprietor is personally liable for all debts and actions of the enterprise.
b. There is lack of financial control because of looser structure of sole proprietorship.
c. There could be difficulty in raising capital.

2. Partnership - It is a business relationship between two or more people. It refers to an arrangement where individuals
share a business venture's profits and liabilities. The partners give feedback on how to use the capital and other critical
strategic decisions that may provide different perspectives.

Partnership Advantages:

a. Partnership business lacks formality as compared with managing a limited company or corporation.
b. It is easy to start. The partnership may be created either verbally or in writing.
c. You share the burden. You have companion and support.
 d. Every partner would add his/her own expertise, skills, experience, and connections to the business, thus
giving it a greater chance of success.
e. There is better decision-making. Two heads are better than one.
f. There is privacy. The business deals may be kept confidential by the partners.
g. The partners own and control the business.
h. The more partners there are, the more funds are available in the company, which can be used for possible
expansion. Its borrowing capacity is also likely to be higher.
i. There is an easy access to profits in a business partnership. The partners just have to divide the profits.

Partnership Disadvantages:

a. The business does not have any independent legal status.

b. The business has no separate legal personality, so the partners are personally liable for the debts and losses
incurred.
c. The partnership business often seems to lack the sense of prestige more closely associated with a corporation.
d. A partnership will often find it more difficult to raise money than a corporation.
e. There is a potential of differences and conflicts.
f. Decision-making can be slower because there is a need for consultation among partners.
g. The profit must be shared among the partners.
h. It may require a lot of time and energy thus may affect life-work balance.
i. The profits earned by the partnership will be translated to income on the individual partners. Thus, they are
subject to income tax in the financial year in which they are made.
j. There are limits on business development like unlimited liability, lack of funding opportunities, and a lack of
commercial status, etc.

3. Corporation - It is an entity created by law that is independent and distinct from its owners and relies on the
corporate laws of the state in which it is incorporated to continue its existence. Corporations have an advantage in
generating money for the company. It can raise funds by selling shares of stocks. It files taxes separately from its owners.

Corporation Advantages:

a. The liability of the shareholders of a corporation is limited up to the amount of their investments.
b. A publicly held corporation may sell shares or issue bonds to raise substantial amounts.
c. It is easy for a shareholder to sell shares in a corporation.
d. A corporation’s life has no limit, ownership can pass through many generations.

Corporation Disadvantages:

a. The corporation pays taxes on its income depending on its type and the shareholders pay dividend taxes, so
income gets taxed twice.
b. The management team of a corporation can operate the business without any real oversight from the owners.

Major Contributions of Forms of Business Organization in Socio Economic Development

Business are considered the engine of the economy because they contributed to the economy of our country through
paying corporate taxes so that the government can promote social welfare of its citizens. Business also provides job
opportunities which compensates the people in the society.

Sole Proprietorship Partnership Corporation

Easiest to establish It could be easily to establish like sole Hard to establish
proprietorship
Limited life Limited life Life is 50 years and can be extended
Small amount of capital is needed to Large amount of capital Large amount of capital
start a business
Ownership of all profit/losses Share of profit/losses Proportion to each stockholder’s
percentage of ownership interest
Unlimited liability Unlimited liability of the partner Stockholders have limited liability
Minimum legal requirements Subject to minimum government Subject to numerous government
regulations regulations
Business secrecy Business secrecy Lack of Secrecy
Lesson 3: Business Organization and the Economy

Economics is the study of how resources* used in the production of goods and services are distributed for consumption
within a social system.

*Resources which include natural, human, and financial resources are sometimes called factors of production.

An economic system describes how a society distributes its resources to produce goods and services.

Different Economic Systems:

1. Capitalism

In capitalism, individuals own and operate the majority of businesses that provide goods and services. Also known as a
FREE ENTERPRISE, capitalism can be pure or modified.

In a pure capitalism, or a free-market system, all economic decisions are made without government
intervention.
In modified capitalism, the government intervenes and regulates businesses to some extent (laws, regulations,
and policies).

2. Communism

According to Karl Marx, communism is a society in which the people, without regard to class, own all the nations'
resources. In his ideal society, everyone contributes according to each person’s ability, and people receive goods and
services based on their needs. The government determines the good and services needed by the citizens, as well as the
production and distribution of goods and services.

3. Socialism

In socialism, the government owns and operates basic industries, but individuals own most businesses. Socialism’s core
benefit is supposed to be social equality. Central planning determines production and distribution of goods and services,
while individual businesses provide other goods and services based on consumer demand and availability of resources.

Capitalism Communism Socialism

Ownership Business are owned and Businesses are owned and Major industries are owned
operated by individuals and operated by the and operated by the
corporations. government. government; small
businesses are owned by
individuals.
Competition Competition is encouraged There is no competition as Competition is restricted in
by market forces and the government owns and major industries owned
government regulations. operates businesses. and operated by the
government but is
encouraged in small
businesses.
Profits Individuals keep profits and Profits go to the Profits from government-
decide on how to use government. owned enterprises go to
them. the government; small
business owners reinvest
profits.
Price of Products Prices of products are Prices of products are high Prices of products are
determined by supply and with limited choices of determined by supply and
demand, and consumers goods and services. demand, while consumers
enjoy a wide selection of have some choices of
products. products.
Career There are unlimited choices Most people work in the Many people work in the
of career for everyone. government, with a little government, with some
option in choosing a career. options in choosing a
career.
 Lesson 3: Free Enterprise System
In a free-enterprise system, individuals and businesses are given rights in order to motivate them to succeed.

Free enterprise gives an opportunity for business organizations to succeed or fail based on the demand of the market.

Consumers can freely choose to pay for goods and services that they want. Businesses that can efficiently produce,
distribute, and market their products will most likely succeed, while those that do not offer what consumers seek may
fail.

Rights in a Free Enterprise System:

1. Right to own a property

Individuals must have the right to own property and be able to pass it on to their heirs. This right motivates
people to work hard so they can afford to buy properties.

2. Right to own a business and keep all profits

Individuals and business organizations must have the right to earn profits and be able to use the profits as they
wish, within the limits of the society’s laws, principles, and values.

3. Right to freedom of competition

Individuals and business organizations must have the right to make decisions on how to operate businesses and
compete with other businesses within the limits of the laws, principles, and values.

4. Right to freedom of choice

Individuals must have the right to choose the career to pursue, the place to live in, the goods and service to
purchase or take advantage of, and other benefits that are necessary for their business. Business organizations
must have the right to choose the location of their business, the goods and service to offer, and the resources to
use in the production process, among others.

Lesson 4: The Roles of Business Organizations in the Society

The primary objective of business organizations is to develop, produce, and distribute goods and services to the market
in order to generate profits.

Business organization are not only meant to generate profits for themselves. They perform important roles in the
society, particularly in socioeconomic development.

➢ Providing goods and services

➢ Creating employment opportunities
➢ Advancing the economy
➢ Promoting sustainability
➢ Investing in innovation and excellence

It is important for companies to create shared value* by playing a role in advancing socioeconomic development in
societies, according to Arancha Gonzalez, Executive Director of International Trade Center. She emphasized the creating
economic value should be at the heart of company’s activities.

*Shared Value is a business concept that focuses on measurable business value by identifying and addressing
social problems that cross paths with the business.

*Corporate Social Responsibility (CSR) ensure that companies not only care about profits but also care about
how they can give back to society.
 MODULE NO. 2 – TRANSPARENCY, ACCOUNTABILITY, AND FAIRNESS
Lesson 1: The Core Principles
Fairness
This is the standard of judging which is exempted from bias or prejudice. When someone displays fairness in making
decision, he/she pleases all involved parties and offers a solution that is beneficial to everyone. In business context,
fairness means balancing the interests involved in all decision-making including those related to hiring, firing, and the
compensation and reward system. Employees think of their organizations as just when the rewards and the way they are
distributed are fair.
Fairness is giving to a person what is due to him/her. It has something to do with justice because the employer checks
whether the members have the benefits and burdens distributed evenly to them.
Examples of fairness:
1. A boss listening to both sides of the story before judging who is right and who is wrong.
2. An employer giving 13th month pay to all his/her employees.
3. A person paying the right price for a product purchased or for a service received.
Accountability
The most important aspect of preventing and detecting corruption is the sound accountability structures. A civil society
organization without proper systems of accountability is fragile and open to rumors of mismanagement and abuse of
authority. Worst of all, lacking it will prevent the organization from enjoying full respect and legitimacy in the eyes of its
stakeholders, including those bearers of duties that it intends to advocate with.
Accountability is the explication and justification process. It is about testing, forming a judgment, and taking an action if
necessary. It also comes with responsibilities. Holding people to account for those actions which they are responsible for
is fair. Accountability is therefore an obligation to demonstrate that work has been carried out in accordance with
agreed rules and standards, or to report on performance results fairly and accurately in relation to mandated roles
and/or plans.
Examples of accountability:
1. A cashier admits he/she lost the company’s collection and it is his/her mistake.
2. An engineer who is assigned on a project is the one to be blamed if the project did not meet the deadlines.
3. Employee A recommended his cousin to be their company janitor, but the latter stole the cellular phone of
their secretary. Therefore, Employee A may be blamed for recommending his/her cousin and should pay or
replace the lost cellphone.
Transparency
Transparency, at the individual level, considers intrinsic or ethical salience as an important feature of the relational
dimension of a person. It is described as a personal quality which is necessary to develop unity between and among
individuals. A transparent approach makes a person more honest and sincere in his/her relationships, in communicating
his/her points of view, and in working actively to find shared meanings and goals.
Organizationally speaking, the instrumental salience of transparency is identified as an important mechanism for
ensuring social responsibility. For example, adequate disclosure is required to inform donors of how an organization
uses its money. Transparency helps people to consider how the actions of social organizations such as multinational
agencies and non-governmental groups offer meaningful support to civil society and whether funding is being properly
spent.
Examples of transparency:
1. Reporting accurately the company’s financial situation and risks to investors
2. Holding and selecting bids according to an open pre-defined process
3. Having an open process of decision-making such as in hiring additional employees
Stewardship
In Biblical terms, stewardship is defined as utilizing and managing all resources God provides for the glory of God and the
betterment of His creation. That definition plays a critical role in today’s business landscape. In the context of business
organization, stewardship refers to taking responsibility for the business and the effects it has on the world around it.
This involves considering more than just the bottom line and looking at elements such as values, ethics, and morals.
 MODULE NO. 3 – CODE OF ETHICS
Lesson 1: 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 hu man 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.

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.
 Lesson 2: Code of Ethics in Business
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.

Recommendations for Developing Code of Ethics:

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 - 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 - something thought of as important or useful. Values in business help to ensure that all of the
employees
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.

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

Lesson 3: The Ethical Corporate Culture

Organizational or corporate culture is the system of shared the actions, values, and beliefs that develops within an
organization and guides the behavior of its members.

There are business organizations that expect employees to work for long hours and even on weekends if needed. There
are companies that value work-life balance, so they encourage employees to clock out at a certain time so they can
spend more time with their families or personal interests.

There are companies that have a vibrant culture, where everyone’s creativity is honed and generating new and
innovative ideas is greatly encouraged. There are also companies with very traditional style of management where
employees are required to be in the office at a certain time are given disciplinary action if they are tardy for several
times. This only shows that different business organizations have their own unique culture.

Corporate culture is built and molded over time; it may still change depending on the leaders that move the company
forward. For example, if a company suddenly decides to disallow casual attire on Fridays and require corporate attire as
a dress code all week, it may harbor ill feelings among employees who may be looking forward to dressing up casually
once a week. On the other hands, if the management decides to change the dress code from strictly corporate to casual,
it may appear that the culture leaders are becoming younger and bolder in their actions.

Functions of Corporate Culture

A company’s culture guides the thinking, behavior, and decisions of its members according to the company’s belief and
values.

According to Edgar H. Schein, author of Organizational Culture and Leadership (2010), the two main reasons why culture
develops in organizations is because of external adaptation and internal integration.

1. External adaptation

Requires the organizational culture to determine how the company will reach its goals, accomplish its tasks,
identify methods to achieve its goals, and place measures to cope with success or failure. Methods of the
organization may develop common views and goals through their shared experiences.

Examples:

Reaching sales targets in order to become competitive and profitable in the market uses a goal shared by all the
members of the organizations.

(External challenges, such as economic downturn, bad weather, political issues, and government regulations that
may affect how the company achieves its goals, will have to be dealt with the accordance with the company’s
culture.)
 If there is a delay in releasing the company’s imported raw materials from customs, should the company bribe
customs officials in order to expedite the process? The corporate culture will determine the answer to this
question.

2. Internal Integration

Starts with the establishment of an identity that is unique to the business organization. Members acquire this
identity through their interaction with each other. This enables the members to work in harmony with each
other and to work toward advancing the company’s goals.

Three important aspects of working together:

➢First, the members decide who is a member of the group and who is not;

➢Second, the members develop an informal understanding of acceptable and unacceptable behavior;

➢Third, the members separate “friends” from “enemies”.

Managers should be equipped in ensuring harmony within the team or organization. It is important for the
members to understand what their roles are in achieving the company’s goals and the penalties or incentives
that they will get if they perform their roles in achieving the goals.

This is very similar to situations when you need to work on a school project with a group. You most likely prefer
to work with classmates whom you can work well, but in cases when the teacher chooses who your group mates
will be, members within the groups must establish rules (attending meetings, going online at a certain time,
submitting assigned parts on agreed upon deadlines) in order to achieve the groups' goal, which is to submit the
school project on time.

Understanding Corporate Culture

A person who recently joined a business organization may not easily figure out the corporate culture. Understanding
organizational culture involves layers of cultural analysis.

Observable culture - refers to the way things are done in an organization. This can be observed in daily
activities or in specific instances which include unique stories according to the company’s history, ceremonies,
and corporate rituals.

Organizations are rich with their own stories of achieving success and conquering failures. The story on how
company was founded may contain the owner’s ideals, vision, and the reason with the company was
established. It may be to serve a previously unmet need, to offer solutions to common or not-so-common issues,
or to give better options to the consumers.

Example: Bingo, a search engine company, is known to consumers as a company that provides its
employees with an environment that feels like home. The office houses a TV, video games, free food, free
internet, etc. the company’s rationale for this is that happy employees are productive employees.

Shared Values - refers to the common values that are meant to put together and motivate the members of the
organization. These include a deeper understanding of what the company stands for. For example, a company
may be known for its innovation, green practices, or providing solutions to social issues.

Example: Happy Filipino is a social business enterprise that aims to train mothers in the community to be
financially independent and entrepreneurial. All the people in the company are oozing with passion and
are fully to serve this segment as they know exactly the plight of these mothers.
 Common cultural assumptions - include the taken-for-granted truths that the members share as result of a
collective experience with the organization. These assumptions are at the core of corporate culture and are
thus difficult to discern or understand because they exist at a largely unconscious level, yet they provide the key
to understanding why things happen the way they do.

As employees become ingrained in the culture, their actions that are based on the company beliefs and values
become everyday routines. These include quality of output, morality of employees, and innovativeness and
excellence in carrying out tasks, among others.

Example: Orange Company, a telecommunications company, has ingrained to their employees the value
of innovation. Every time employees meet in elevator, talk over lunch, or are anywhere else in the
building, they unknowingly talk about the latest trends in technology, specifically smartphones, tablets,
and the current trends in the telecommunications industry.

Lesson 4: Ethical Leadership and Management

There is no doubt that the leaders of a business organization serve as the role models of the beliefs, values, and
behavior that are expected from someone who represents the company. The top management sets the tone of the
corporate culture, and this must be consistently adopted throughout the firm.

There are two recognized types of corporate culture:

1. Compliance – based culture (traditional approach)

Focuses on following rules, laws, policies, and regulations as the primary responsibility of ethics. It empowers
legal counsel and auditing/accounting firms.

Example: GHI Bank in Muntinlupa City was cited by internal audit because it was not able to follow the
company’s policy of dual control, that is, there should always be two persons entering the vault. The CCTV
showed that there were two instances in May 2017 that the branch manager entered the vault alone.

2. Values-based culture (integrity-based)

Reinforces a particular set of values rather than a particular set of rules. It is presumed that a company with a
values-based culture adopts its code of conduct with more regard for ethical values.

Values-based culture also recognizes that despite the rules set by the company’s code of conduct, there are
situations where rules can be applied so the organization will have to rely on the personal integrity of its
workforce when decisions are to be made.

Example: Tina Garcia, a known actress of ABGM Network, always goes to her teleserye tapings on time, all the
time. She got these values from the TV Network because all the employees of the ABGM Network give a very
high regard to punctuality. Although there is no formal log-in process, all employee's stull come on time, all the
time.

Ethical leaders are expected to practice ethical decision- making. Their goal is not simply to perform the job, but to
perform consistently with a set of ethical values and principles chosen by the business organization. The ethical leaders
are expected to not just care about company profits but also demonstrate caring for people (internal and external
stakeholders) in the process.

Example: Eugenio Lapid, a supervisor of a big factory manufacturing electronic products, always ensures to talk
to his subordinates during their breaks even about their personal lives or personal problems. He treats them as
family instead of a simply subordinates. He also gives them constructive feedback every time they commit
mistakes.

A good ethical leaders must be visibly practicing the company’s traits and behaviors in order to influence perceptions
and actions among the employees. This is important in creating, inspiring, and transforming an ethical corporate culture
within the company. An effective ethical leader is able to successfully and efficiently guide, direct, and escort others
toward the goals of the company, in consideration of the ethical standards set by the organization.

Example: Mrs. Pam Palma has been with JKL Corporation for the past 10 years as executive vice president. Ever
since, she embodies punctuality, is careful with her words, and is very meticulous with her craft. She is also a role
model as she was able to raise her four children well and can balance her career and family life. She never had
any case of fraud, employee complaint, or even one employee resignation.

Not all effective leaders are effective ethical leaders. Some effective leaders may be able to deliver the expected output
of the company with the use of coercion, harassment, or intimidation in directing the employees. However, an effective
ethical leader may use more ideal interpersonal means of motivating employees by modeling ethical behavior, gentle
persuasion, or positive reinforcement by offering incentives.

Example: MNO Corporation has produced two exemplary leaders in the Information Technology Department and
in the Human Resources Department. The IT head is known as someone who can deliver IT projects even on a
very short notice. He ensures that his teams members work overtime even on weekends and holidays just to
finish the task. He always threatens them that they will get a low performance rating if they do not work
overtime. The HR head, on the other hand, is known as someone who is very pleasant and nice to his team. With
no coercion at all, his team members voluntarily go on overtime whenever there are major key result areas to be
finished on a tight deadline. Regardless of the techniques, both leaders were able to deliver results.

Lesson 5: Ethical Issues

At any given time, an organization may be confronted with ethical issues. An ethical issue is an identifiable problem,
situation, or opportunity that requires a person to make an action or decision based on several options-whether right or
wrong, ethical or unethical. It usually concerns financial matters in a business setting.

Misrepresenting the Benefits of a Product

Overstating a product’s benefits in order to make a sale is often committed by sales personnel or even by
marketing officers. Misrepresenting a product-for example, saying that it can make your skin fairer without any
substantial research to back it up-is an ethical issue.

Misuse of Company Time and Resources

Some employees may engage in activities that are not related to the job-for example, browsing and posting on
social media during office hours. The employee is clearly misusing the time that he or she is supposed to spend
working for the company and the company resources by using the computer and internet connection on social
media browsing.

Abusive Behavior

Harassing a colleague by using physical threats, harassment, false accusations, profanity, yelling, and
unreasonableness may result in conflicts within the department or organization. This disruptive behavior may
demotivate employees involved and may result in less productivity.

Conflict of Interest

Conflict of interest happens when an employee is presented with a dilemma of whether to advance personal
gain or interest or that of the companies. For example, an employee may choose to deal with a supplier that
provides substandard products or services but gives him or her a bribe instead of an ethical supplier that
provides better products or services.

Leaders and employees must know how to deal with ideal ethical issues like these. The code of conduct and the
company culture must be strong enough for the leaders and employees to choose to do the right things.
 MODULE NO. 4 – PHILOSOPHIES INFLUENCING OUR BUSINESS PRACTICES
Lesson 1: The Classical Philosophers and Philosophies and Their Implications on Business
1. Socrates (469-399 BCE) “The Gad-fly at the Marketplace”

He is one of the few individuals whom one could say have shaped the cultural and intellectual development of the world
for without him, history would be profoundly different.

This is Socrates’s philosophical idea:

“The unexamined life is not worth living.” Socrates pointed out that human choice was motivated by the desire for
happiness.

Socrates thought of the Entrepreneurs. The Socratic Method is a way of thinking that allows individuals to define their
own purpose of learning and exploring its purpose through open-minded questioning of what they hold to be true.
Socrates insisted on a right to think of ourselves by introducing the philosophical concept, “Dare to Disagree”.

2. Plato – “The Philosopher-King”

One of the world’s best known and most widely read and studied philosophers. He was the student of Socrates and the
teacher of Aristotle. He wrote in the middle of the 4th Century BCE in ancient Greece.

This is Plato’s philosophical idea:

“Good people do not need laws to tell them to act responsibly, while bad people will find a way around the laws.”

Plato maintains a virtue-based eudemonistic conception of ethics. That is to say, happiness or well-being (eudaimonia) is
the highest aim of moral thought and conduct, and the virtues (aretê: excellence) are the requisite skills and dispositions
needed to attain it.

3. Aristotle – “All or Nothing” (384-322 BCE)

Towering figure in ancient Greek philosophy, contributing to logic, metaphysics, mathematics, physics, biology, ethics,
politics, agriculture, medicine, dance, and theater.

These are some of Aristotle’s philosophical ideas:

“Happiness is the meaning and the purpose of life, the whole aim, and end of human existence.”

“Let people seek fulfillment.”

The word happiness in ethics is a translation of the Greek term “eudaimonia” which connotes success and fulfillment.
For Aristotle, this happiness is our highest goal. In relation to business, Aristotle concludes that the role of the leader is
to create an environment in which all members of an organization can realize their potential.

4. Immanuel Kant (1724–1804). – “Duty based Ethics”

He is one of the most influential philosophers in the history of Western Philosophy. He was not concerned with the
consequences of one’s actions or the harm caused to one’s individual interests. Instead, he is focused on motives and
the willingness of individuals to act for the good of others, even if the action might result to personal loss. Doing
something for the right reason was more important to Kant than any particular outcome.

For example, business ethics is littered with cases of companies that have suffered damaging crises due to their leaders’
lack of commitment to act based on goodwill and about what benefits others.

5. Jeremy Bentham and John Stuart Mill

“Utilitarianism” revolves around the concept of “the end justifies the means”. It believes that outcomes, as a result of
an action have a greater value compared to the latter.

Utilitarianism is a philosophy or belief suggesting that an action is morally right when the majority of people benefit
from it. Also, the doctrine that an action is right as it promotes happiness, and that the greatest happiness of the
greatest number should be the guiding principle of conduct. Utilitarianism is a moral theory that advocates actions that
promote overall happiness or pleasure and reject actions that cause unhappiness or harm. A utilitarian philosophy, when
directed to making social, economic, or political decisions, aims for the betterment of society.
6. Rufus, on keeping track of one’s ethical progress

Musonius Rufus was known as the Socrates of Rome. He was another Stoic, who taught that philosophy cannot just be
theoretical. If you want to be an ethical individual or an ethical company, you can't just study ethics, you must practice
it, every day, to get into good habits. The ancient Greek word for ethics is the same word for habit. (The Guardian, 2020)

You also need to keep track of your progress, to see how you are performing. You cannot just rely on your intuitions,
because they are often wrong. So, the ancient Greeks learned to keep accounts of themselves. They would track their
daily behavior in journals, keeping account of how many times they lost their temper, for example, or got too drunk.
Then they could see if they were really improving their behavior, or just going around in circles. (The Guardian, 2020)

In organizational terms, keeping track of ourselves means trying to take an evidence-based assessment of our
performance. We might say we are a green company, but how do we know if we are making progress? We might say we
are a happy organization, but how do we know? We can keep track of this, for example by asking our employees
(anonymously) how worthwhile they feel their job is. Then see if, in a year, we have managed to enhance their sense of
purpose. (The Guardian, 2020) Today, we use balanced score card, where we keep track on our performance from
begging one cycle to the end.

7. Plutarch, on being a good role model

Plutarch, the ancient Greek historian and educator, understood that humans are incredibly social creatures, who
constantly observe the people around them and imitate them. (The Guardian, 2020)

Unfortunately, people often grow up surrounded by bad role models. However, we can steer people, by providing them
with better patterns to imitate. That's what Plutarch tried to do with his famous work, Parallel Lives, which offered
biographical sketches of some of the great Greek and Roman heroes – Cicero, Caesar, Alexander the Great, Pericles – to
give young people something to emulate. (The Guardian, 2020)

In organizational terms, that means what you say to your employees is less important than what you do. They will watch
how you behave, how you treat others, how you cope with pressure and whether you follow through on your promises.
And they will imitate you. If you talk about ethics and then cut corners at the first opportunity, they will follow your lead.
Set a good example and they will follow it. Plutarch would also warn that your best young employees will use you as a
bar to aim for and exceed. That's natural. Let them compete with you and encourage them to go further. (The Guardian,
2020)

8. Epicurus, on the art of happiness

Epicurus was a fourth century Greek philosopher who taught, rather scandalously, that the aim of life was simply to be
as happy as possible here on Earth, before we die and dissolve back into the atomic universe. He warned that humans
are very bad at being happy, and very good at inventing reasons to be miserable. Philosophy should teach us how to be
happy, he suggested. For example, it could teach us how to bring our attention to the resent moment, to savor it. It
could also teach us to limit our desires to what is easy to get, not inflating our needs with endless artificially stimulated
desires. (The Guardian, 2020)

Today, some companies are embracing Epicurus' philosophy, and trying to teach their employees the art of happiness.
Tony Hsieh, the CEO of American shoe company Zappos, is so committed to the company's courses in happiness that he
sold the company to Amazon on the agreement it would be able to continue with its unique happy culture. (The
Guardian, 2020)

The Guardian Author Says that companies should be careful about forcing all their employees to follow one philosophy
of the good life. As we have seen, there are many different approaches to achieving happiness or welfare. Perhaps
companies could create an ethical culture that embraces all these different ways of living. (The Guardian, 2020)