Common Unethical Practices of Business Establishments

Unethical problems in business ethics occur in many forms and types. The most common of these are
misrepresentation and over-persuasion.

Misrepresentation may be classified into two types: direct misrepresentation and indirect
misrepresentation.

Direct Misrepresentation is characterized by actively misrepresenting about the product or customers.

This includes:

 Deceptive packaging. – it takes many forms and is of many types. One type is the practice of
placing the product in containers of exaggerated sizes and misleading shapes to give false
impression of its actual contents.
 Misbranding or Mislabeling. – is the practice of making false statements on the label of a
product or making it’s container similar to a well-known product for the purpose of deceiving
the customer as to the quality and/or quantity of a product being sold.
 False or misleading advertising. Advertising serves a useful purpose if it conveys the right
information. However, advertising does not always tell the “whole truth and nothing but the
truth” if it greatly exaggerates the virtues of a product and tells only half of the truth or else
sings praises to its non-existent virtues. If advertising does not provide a useful service anymore
to the customers, it can become the agent of misrepresentation.
 Adulteration. Is the unethical practice of debasing a pure or genuine commodity by imitation or
counterfeiting it, by adding something to increase its bulk or volume, or by substituting an
inferior product for a superior one for the purpose of profit or gain.
 Weight understatement or short weighing. In short weighing, the mechanism of the weighing
scale is tampered with or something is unobtrusively attached to it so that the scale registers
more than the actual weight.
 Measurement understatement or short measurement. In short measurement, the measuring
stick or standard is shorter than the real length or smaller in volume than the standard.
 Quality understatement or short numbering. In this unethical practice, the seller gives the
customer less than the number asked for or paid for.

Indirect Misrepresentation is characterized by omitting adverse or unfavorable information about the

product or service. Among the most common practices involving indirect misrepresentations are caveat
emptor, deliberate withholding of information and business ignorance.

Caveat emptor is a practice very common among salesman. Translated, caveat emptor means “let the
buyer beware.” Under this concept, the seller is not obligated to reveal any defect in the product or
service he is selling. It is the responsibility of the customer to determine for himself the defects of the
product.

Deliberate withholding of information. Following the argument that caveat emptor is unethical, the
deliberate withholding of significant information in a business transaction, is also unethical. No business
transaction is fair where one of the parties does not exactly know what he is giving away or receiving in
return.
Passive deception. Direct misrepresentation gives business a bad name while indirect misrepresentation
or passive deception is not as obvious, it nonetheless contributes to the impression that businessmen
are liars and are out to make a fast buck. Business ignorance is passive deception because the
businessman is unable to provide the customer with the complete information that the latter needs to
make a fair decision.

Over-persuasion. Persuasion is the process of appealing to the emotions of a prospective customer and
urging him to buy an item of merchandise he needs. Persuasion is legitimate and necessary in the
selling of goods if it is done in the interest of a buyer such as persuading him/her to get a hospitalization
insurance policy. The common instances of over-persuasion include the following:

1. Urging a customer to satisfy a low priority need for merchandise.

2. Playing upon intense emotional agitation to convince a person to buy.

3. Convincing a person to buy what he does not need just because he has the capacity or money to do
so.

Corporate Ethics

Unethical practices of Corporate Management

Practices of corporate management that involve ethical considerations may be classified into two:
practices of the Board of Directors and practices of executive officers. In many cases, the practices may
apply to both categories of corporate management and the only dividing line is in the financial
magnitude and implications of a particular corporate management practice.

Some Unethical Practices of the Board of Directors

1. Plain Graft – some of the Board of Directors help themselves to the earning that otherwise would go
to other stockholders. This is done by voting for themselves and the executive offices huge per diems,
large salaries, big bonuses that do not commensurate to the value of their services.

2. Interlocking Directorship – interlocking directorship is often practiced by a who holds directorial

positions in two or more corporations that do business with each other. This practice may involve
conflict of interest and can result to disloyal selling.

3. Insider trading - insider trading occurs when a broker or another person with access to confidential
information uses that information to trade in shares and securities of a corporation, thus giving him an
unfair advantage over the other purchasers of these securities.

4. Negligence of Duty – a more common failure of the members of the Board of Directors than breach
of trust is neglect of duties when they fail to attend board meetings regularly.

Some Unethical Practices of Executive Officers and Lower-Level Managers

Unethical practices that are more common to executive officers and lower level managers are:

1. Claiming a vacation trip to be a business trip.

2. Having employees do work unrelated to the business.

3. Loose or ineffective controls.

4. Unfair labor practices.

a. To interfere with, restrain or coerce employees in the exercise of their right to self-organization;

b. to require as a condition of employment that a person or an employee shall not join a labor
organization or shall withdraw from one to which he belongs;

c. To contract out services or functions being performed by union members when such will interfere
with, restrain or coerce employees in the exercise of their rights to self organization.

d. To initiate, dominate, assist or otherwise with the formulation or administration of any labor
organization, including the giving of financial or other support to it;

e. To discriminate with regards to wages, hours of work, and other terms or conditions of employment
in order to encourage or discourage membership in any labor organization.

f. To dismiss, discharge, or otherwise prejudice or discriminate, against an employee for having given or
being about the give testimony under the Labor Code;

g. To violate the duty to bargain collectively as prescribed by the Labor Code;

h. To pay negotiation or attorney’s fees to the union or its officers or agents as part of the settlement of
any issue in collective bargaining or any other dispute;

i. To violate or refuse to comply with voluntary arbitration awards or decisions relating to the
implementation or interpretation of a collective bargaining agreement;

j. To violate a collective bargaining agreement.

5. Making false claims about losses to free themselves from paying the compensation and benefits
provided by law.

6. Making employees sign documents showing they are receiving fully what they are entitled to under
the law when in fact they are only receiving a fraction of what they are supposed to get.

7. Sexual Harassment.

Some Unethical Practices by Employees

1. Conflict of Interest. A conflict of interest arises when an employee who is duty bound to protect and
promote the interests of his employer violates this obligation by getting himself into a situation where
his decision or actuation is influenced by what he can gain personally from it rather than what his
employer can gain from it.

a. An employee who holds a significant interest or shares of stock of a competitor, supplier, customer or
dealer favors this party to the prejudice of his employer.

b. The employee accepts cash, a gift or a lavish entertainment or loan from a supplier, customer,
competitor or contractor. As a result, he therefore cannot act impartially.
c. The employee uses or discloses confidential company information for his or someone else’s personal
gain.

d. The employee engages in the same type of business as his employer.

e. The employee uses for his own benefit a business opportunity in which his employer has or might be
expected to have an interest.

2. Dishonesty. Business ethics is not just limited to business transactions with outside parties. It also
covers employee-employer relationship, especially with respect to an employee’s honesty as he carries
out his assigned duties in the office.

a. Taking office supplies home for personal use.

b. Padding an expense account through the use of fake receipts when claiming reimbursements.

c. Taking credit for another employee’s idea.