Colegio de San Juan de Letran

College of Business Administration and Accountancy

Human Resource Development Management

Ethical Principles and Business

Management in the Philippines

Rogie Nichole Aquino

Marielena Manabat

Jov Aedrian Olgado

Mary Rose Rosalejos

Liselle Nicole Vidal

Corporate Governance term paper

HRDM3A
 TABLE OF CONTENTS

INTRODUCTION........................................................................................................... 1
DEFINING BUSINESS MANAGEMENT........................................................................... 2
Advancement of Management in the Philippine Setting..........................................3
Understanding of Filipino Management...................................................................4
The Filipino Manager............................................................................................... 4
A Personal Perspective of Current Filipino Management..........................................6
MANAGER AND LEADER............................................................................................. 8
Performance Management: The Success Indicator of an Organization....................9
ETHICS AND MANAGEMENT...................................................................................... 12
LEARNING ETHICS and MANAGEMENT................................................................12
ETHICS AND THE MANAGERS............................................................................. 14
ETHICS AND EMPLOYEES.................................................................................... 14
Ethical influence in Human Resource Management...........................................15
ETHICAL PRINCIPLES................................................................................................. 16
UNDERSTANDING THE IMPORTANCE OF ETHICAL PRINCIPLES...............................16
Principle of Autonomy........................................................................................... 17
Principle of Beneficence and Non-maleficence......................................................17
Principle of Fidelity................................................................................................ 17
Principle of Paternalism......................................................................................... 18
Principle of Justice................................................................................................. 18
THE RELATIONSHIP OF ETHICS AND LAW..............................................................19
FRAUD...................................................................................................................... 19
Fraud within the Company.................................................................................... 20
CONCEALMENT...................................................................................................... 20
Concealment within the Company........................................................................21
ETHICS AND SOCIO-CULTURE................................................................................... 23
Understanding Work Ethics in the Philippine Setting.............................................23
Ethical issues gave rise to Sarbanes-Oxley Act (SOX) of 2002..............................24
Section 406Code of Ethics for Executive and Financial officers..........................25
Conflict of Interest................................................................................................. 25
Full and Fair Disclosures........................................................................................ 26
Legal Compliance.................................................................................................. 26
Internal Reporting of Code of Violations................................................................26
Accountability........................................................................................................ 27
Strengthening Board Governance and Internal Controls in the Philippines...........27
Ensuring the Integrity of Financial Reports............................................................28
Establishing good governance through compliance..............................................28
 INTRODUCTION

The Philippines is a country with a diverse culture and tradition. It comprises of various
norms and customs that are being followed by its people. This is the very reason why
the Philippines today is one of the fastest growing countries in Asia. Furthermore, the
competitiveness imbedded in the minds of the Filipinos provides them the potential to
standout and to make a global impact.

In this manuscript, the management setting in the Philippines will be presented. It

includes the variation of standards being observed by its people and a further
understanding on Filipino values and management will be provided.

Ethical standards will also be shown in order to identify numerous strategies in

sustaining the effectiveness and efficiency of a business organization. Furthermore, the
leadership styles of the Filipino managers will also be tackled paving way to a deeper
understanding on how they handle the day-to-day operations of an organization.

Filipino management is indeed an innovative method of expressing corporate

leadership. It provides a different view of cultural and societal principles which
originated way back during the Spanish era.

Through this paper, the Filipino brand of managing an organization will be showcased.
A benchmark of quality and excellence. Leading and managing organizations, the
Filipino way.

1
 I.

DEFINING BUSINESS MANAGEMENT

Management is, above all, a practice

where art, science and craft meet.

Today, managers across the globe regardless of their level have their own definition of
management. Each country has its own unique culture, belief and customs that make their

perspective of management become different from others. In fact, management can be defined

in numerous ways, depending on a managers viewpoint or interpretation of management.

Some managers define management as getting work done through people; others see it as

planning and implementing. All of these definitions have their own merits (Iigo, 2014). 1 Most

managers of a business organization possess a general understanding of what their work entails,

most of which they acquired through experience, books or training. However, as businesses

evolve in emerging economies like the Philippines, managers need to adapt to the changes, in

order for them to keep going and to perform effectively and efficiently.

1. Conrado E. Iigo Jr., Management for Filipinos: Principles and Applications, Rev. Ed.
(Gemeni Phils. Graphics Art Corp. Sampaloc, Manila 2014), 43

2
 UNDERSTANDING BUSINESS MANAGEMENT

Business Management covers the entirety of all management that is recognized in a business

organization. It is a complex process that deals with the marketing, finance and human resource

management aspect of the business.

Advancement of Management in the Philippine Setting

It wasnt until the Spanish colonization where the Filipinos experienced a form of advanced

management. During the period of our ancestors however, organizations and managers already

existed. This came in the form of a structure called a barangay or balangay with the Datu

acting as the manager (Iigo, 2014). But shortly after the Second World War, an organization

focusing on professional management was established in September 1953. It was called the

Association of Management and Industrial Engineering of the Philippines (AMIEP) and was led

by one Dr. Lilian Gilbreth, a well-known figure on scientific management.2

In August 1950, a convention called the Advanced Management Program (AMP) in the Far East

was convened in the Philippines to improve the field of management in country. The program

was made possible by Filipinos who attended the AMP in Harvard. Upon seeing the programs

potential, the Filipino executives brought a proposal to the dean of Harvard which led to the

creation of the Asian Institute for Advanced Management (AIAM) at the Pines Hotel in Baguio

City on the 25th of June 1956. These actions made by the Filipino intellectuals brought a positive

significant change to management here in the Philippines. Soon after, management programs

across different universities arose in the Philippines, increasing the overall effort given to the

field of management.

2. Conrado E. Iigo Jr., Management for Filipinos: Principles and Applications, Rev. Ed.
(Gemeni Phils. Graphics Art Corp. Sampaloc, Manila 2014)

3
Understanding of Filipino Management

As we know, the Philippines were conquered by three different nations namely Spain, America

and Japan before achieving its true independence. It is because of these circumstances that our

country became a multi-cultured nation, thereby resulting in us Filipinos being exposed and

using different archetypes of management. Although majority of the management practices here

in the Philippines are influenced by American style management, there are those who still

follow traditional forms of management. For instance, Filipinos with Chinese ancestry usually

keep their businesses led by only the members of the family, compared to others who will

appoint any person to handle their businesses provided he or she is capable of doing so.

Whatever their style of management may be, successful Filipino managers incorporate the

advantages of these different influences to their daily agenda and it has proven to be a boon to

their work

With this in mind, we can say that Filipino Management is a duplication of a variety

of management styles that is integrated in to one package. It is a style of management

born out of a mixture of different foreign cultures and influences.

Good management consists in showing average

people how to do the work of superior people.

- John D.
Rockerfeller

4
The Filipino Manager

Now that we have established a brief history of Filipino Management, its evolution, and how it

came to be, we can now delve deeper on to the different personas that each individual Filipino

manager possess. According to the editor of Management in the Philippine Setting, Mr.

Ernesto A. Franco, Filipino managers can be divided into five distinct types, each of them

having different characteristics and ways of achieving their objectives. These are the managers

by Kayod, Lusot, Libro, Oido and Ugnayan.

We shall now proceed with a quick break down of the aforementioned types of Filipino

managers.

Manager by Kayod

Committed, formal and serious, this manager is described as someone who achieves objectives
through hard work and discipline and is less likely to give in to devious dealings

Manager by Lusot

Lazy, immoral and negligent, this manager is the opposite of the manager listed above. This

manager prefers to achieve objectives with the easiest method, even when the said method is

illegal, unethical or unconventional.

Manager by Libro

Scientific, analytical and thorough, this manager had undergone formal training, education or

both in management and can be easily described as someone who goes by the book.

Manager by Oido

5
Practical, observant and attentive, this manager uses experience to compensate for the lack of

formal management training or education. Can be described as someone who plays it by the ear

and is considers as the opposite of the Manager by Libro

Manager by Ugnayan

Adaptive, comprehensive and flexible, this manager is a hybrid of all the manager types

mentioned above. This manager is open-minded and able to change to any style of management

depending on the organizations position and is also considered as an exceedingly gifted

manager.3

In his book Management for Filipinos, Conrado E. Iigo Jr. summarized these managers into

three groups. He stated that the Oido and Libro managers are job oriented, and that they

mostly become the planners and thinkers in an organization. The Kayod and Lusot managers

are considered as process oriented, and are primarily involved in dealing with technical jobs.

Finally, the Ugnayan managers are considered as the best of all of the above mentioned

managers and are usually the most successful of the five. 4

Tell me and I forget. Teach me and I remember.

Involve me and I Learn.

- Benjamin
Franklin

3. Ernesto A. Franco, ed., Management in the Philippine Setting (Manila, 1988)

4. Conrado E. Iigo Jr., Management for Filipinos: Principles and Applications, Rev. Ed. (Gemeni
Phils. Graphics Art Corp. Sampaloc, Manila 2014), 202

6
A Personal Perspective of Current Filipino Management

As a group of tertiary education students enrolled in the College of Business Administration

and Accountancy of Colegio de San Juan de Letran, we are exposed to different courses and

seminars, most of which involves the discussion of management and its application. From

planning what homework to do first or working hard to catch a deadline, we students are

already learning and experiencing a juvenile form of management. Although this experience

that we acquire doesnt come easy, as we are faced with other fellow students who have different

attitudes and beliefs that we are not familiar with. It is especially difficult when there is a group

project that requires a substantial amount of work to be completed. It is at this moment where

undesirable Filipino attitude or thinking show themselves, like for instance, the Bahala na

attitude or the Crab Mentality. Nevertheless, whether we triumphed against these obstacles or

fail to overcome it, we still gain knowledge and experience from it. And with these different

experiences comes wisdom, which will help us to become a little bit better at management,

although all of us agreed that we still have a long way to go, even with most of us being in a

position of leadership.

7
 II.

MANAGER AND

LEADER

B
eing a leader constitutes to numerous opportunities and risks. It provides an avenue for

an individual to grow and to expand his horizon giving him the chance to grow and be a better

version of himself. As defined by a professor in University of Calicut, T.H. Jahfarali, a leader is

someone who has the capacity to create a compelling vision that takes people to a new place,

and to translate that vision into action. Leaders draw other people to them by enrolling them in

their vision. What a leader does is inspire people and empower them. 5 Thus, a leader is a person

5. Jahfarali, T.H., "Manager and Leader

8
who has a vision, a drive and a commitment to achieve that vision, and the skills to make it

happen.

In business, a manager serves as the leader of the organization. According to T.H. Jahfarali, a

manager can be defined as the person responsible for planning and directing the work of a

group of individuals, monitoring their work, and taking corrective action when necessary. 6 For

many people, this is their first step into a management career. Managers may direct workers

directly or they may direct several supervisors who direct the workers. The manager must be

familiar with the work of all the groups he or she supervises, but does not need to be the best in

any or all of the areas. It is more important for the manager to know how to manage the workers

than to know how to do their work well. A manager may have the power to hire or fire

employees or to promote them. In larger companies however, a manager may only recommend

such actions to the higher level of management.

A leader establishes the path towards an organizations vision. He provides the key to

unlock new doors and to explore innovative solutions.

It is indeed hard to differentiate a manager and leader. However, it is imperative to believe that

management and leadership should go together. They need each other to promote a harmonious

business environment. Being an employee and a team leader at the same time, I have

understood the importance of ethical standards in promulgating various goals and regulations

in an organization.

6. Jahfarali, T.H., Management Concepts and Business Ethics (2011)

9
Ethical standards define the manner of leadership and management an organization has. It

serves as the foundation to attain an effective and efficient working environment. Throughout

the years of being a leader, I was able to apply these experiences when I served as the head

teacher for a learning centre for kids. With this, I have realized that in order for one to become

an effective manager, one should learn how to become a transformative and ethical leader. A

vision must be present and the ethical values and standards which will be used to achieve the

said goals should always be intact.

In managing a business, the passion to lead and the commitment to succeed must exist. These

principles are important to sustain a healthy and vibrant employer-employee relationship,

therefore leading everyone to success

Performance Management: The Success Indicator of an Organization

Any person can lead and manage an organization. He can provide various ways on how

he wants to achieve his goals. However, the question is, how will he be able to measure the

success of his company?

As defined by the Edinburgh Business School, Performance management is a continuous

process of identifying, measuring and developing performance in organizations by linking

everyones performance and objectives to the organizations overall mission and goals. One

must remember that continuous evaluation and monitoring of the organizations goals is an

effective way to achieve the teams objectives. It involves a never-ending process of setting goals

and objectives, observing the members performance, and communicating proper feedback.

10
From there, an individual will be able to share and link the mission and goals to the employees

or the members of the organization.7

In a managers perspective, he must also ensure that the activities and outputs of the employees

are aligned with the goals of the organization and therefore support it in gaining a competitive

advantage in the business. Through performance management, effective business ethical

standards are also being implemented resulting to an organized and well-oriented work

environment. It establishes a strong link connecting employee performance and organizational

accomplishment.

Performance management paves way to various means of communicating and monitoring the

over-all success of an organization. It empowers the drive of the employees or the members

of the organization to achieve its goals.

As an individual who has been proactively participating in youth organizations, I can testify to

the fact that continuous monitoring of the organizations mission and vision will provide a

sustainable impact to the team in general. It emancipates a strong will to strive hard and execute

better performance for the welfare of the organization.

7. Herman Aguinis, Performance Management, (Prentice Hall, Tollesbury, Maldon UK, 2005),
(https://www.ebsglobal.net/EBS/media/EBS/PDFs/Performance-Management-Course-
Taster.pdf), (Accessed March 2017)

11
Performance management is an essential factor and can be very useful to student organizations

as well. Through this process, students will be able to nurture its organization and fellow

members. With this, their self-confidence and sense of camaraderie increases due to the

continuous feedback system about ones performance. The student leaders will be able to

acquire more insights as well about their members because of the constant appraisals.

Through this, I, myself, was able to gain new insights and a better understanding on how my

members can contribute to the organization. I was able to determine their strengths and

weaknesses, and to further comprehend their behaviour on their respective responsibilities.

With this, I was able to classify the proper roles for each of them.

The performance of an individual signifies the nature of the performance of the organization as

a whole. It is symmetrical to each other thus making their effort no matter how small it may be,

essential for the organizations success.

An organization is a system. The leaders and members are the organs and tissues. Their

actions and motivation to achieve their goals serves as the cell.

12
The life of the organization is its members. Therefore as members, we should synergistically

work hand in hand to achieve our goals.

13
 III.

ETHICS AND

MANAGEMENT

EEthical consideration in business and management setting are essential in achieving

success. The present situation of the Philippines is a test for the principle of ethics. The rapid

growth and liberalization of the economy, coupled with the inequitable distribution of wealth,

the destruction of the environment and corruption are the main ethical concerns.(Sison et al,

1997).8 In business context, the employees ethical assumption builds and strengthens integrity

that enables the organization to become competitive and effective.

LEARNING ETHICS and MANAGEMENT

Ethics in management deals with the internal character and moral that is a part of the

organizations culture and patterns it to the decision making concerning the social responsibility

of each employee with consideration to the external situation. It is believed that decision that is

ethically accepted is legally and morally respectable to a larger community. Knowing the ethical

standards inside the workplace will help an employee to understand the business environment

ideals, unethical conditions, behaviours and norms of the employees and the significance of the

companys doctrine. The Philippines is a diverse nation in which there are various languages,

8. Sison & Angeles, Journal of Business Ethics, (1997), ( https://philpapers.org/rec/SISBEI-2),

(Accessed March 2017)

14
ethnicity, religion and beliefs. Due to the influence of other nationalities, Filipinos adapted and

adopted their ethical standards and establish it to the countrys way of managing an

organization. According to Michael Josephson, a moralist and ethicist One problem with

talking about business ethics is theres often a wide gap between rhetoric and reality. The reality

is that business isnt nearly as bad as some critics make it out to be or nearly as good as its

apologists contend. By the same token, ethics may not be as crucial to success as moralists make

it. An acceptable and favourable ethics is good when it comes to managing a business yet

sometimes it is not. It is concluded that it depends on how the management and employees

manage the companys goal. A good code of ethics is an irreplaceable business asset. Great

things happen when a company does ethically right things persistently and bad things tend to

happen if they didnt follow the right.9

No, being a person of character is not easy. Thats

why its such a lofty goal and an admirable
achievement.

- Michael
Josephson

ETHICS AND THE MANAGERS

9. Josephson, M., Ethical Responsibilities in the Employer-Employee Relationship Applying Ethical

Principles, (2016), (http://josephsononbusinessethics.com/2010/12/responsibilities-employer-
employee-relationship/), (Accessed March 2017)

15
 "Moral authority comes from following universal
and timeless principles like honesty, integrity,
treating people with respect."

- Stephen
Covey

Every person in an organization fills different roles. Adding ethical and moral principles to

ones role and obligation may affect their relationship inside the workplace. The role of morality

is to be specific and relevant to any situation or careers. It requires responsibility and monitor

integrity at work. A managers role is to serve with authority among their subordinates and to

make major decisions about the approach of the management. As leaders of an organization,

managers need to ensure that they are delivering good quality of work for a competitive

advantage. Also, they are entrusted to meet all the expectations and possibilities of the

stakeholders. Filipino managers have many attributes and power in attending their obligations.

In the Philippine business setting, managers perform their duties in accordance with the laws

and regulation standards of the organization itself and the government. Managers are keen in

treating their employees with respect at the same time maintaining their authority. Loyalty

plays a vital role in Filipino culture of managing an organization.

ETHICS AND EMPLOYEES

16
Employees are essential assets of an organization. The welfare of the employees is the

responsibility of the organization. Every employee has moral obligations and duties. In order

the employees to be productive and effective, the management must ensure their working

conditions to their workers.

Everyone talks about building a relationship with

your customer. I think you build one with your
employees first.

- Angela
Ahrendts

Ethical influence in Human Resource Management

Human Resource Management takes focus on the welfare of the employees and the

management guides in making ethical policies and regulations and performing ethical

operations within the organization. Before the hiring of an employee, the company will undergo

first the employment screenings wherein it will determine if the employee is right for the

position and has a positive attitude and outlook to work in the organization. HRM aims to

objectively evaluate all the behavioural and ethical values and beliefs of a person. Here in the

Philippines, the people take everything personally that is why the management cannot prevent

conflicts inside the workplace. The HR management always encounter unethical behaviour and

actions. Understanding, integrity and credibility are the factors an employee and managers

must consider. The managers and the human resource department play a big role in building

trust within the employees and connecting them through good ethical leadership. 10

10.Reyes, R.G., Ethical Leadership in Human Resource Management, (2013),

(http://careersystems.com.ph/images/01.17.14%20ETHICAL%20LEADERSHIP%20IN

17
%20HRM.pdf) (Accessed March 2017)

18
 IV.

ETHICAL PRINCIPLES

T 19
 Theres nothing wrong with having varying opinions and beliefs with other people, it is

nothing more than being human. However, such differences within the workplace may lead to

legal, professional or personal conflicts. Thus, companies formulate standards to be followed by

its employees to prevent discord within the organization, most especially when it comes down

to making decisions. Beneficence and non-maleficence, autonomy, justice, fidelity, and

paternalism, this sums up the ethical principles that maintain the harmonious interaction

within the organization regardless of the differences between individuals.

UNDERSTANDING THE IMPORTANCE OF ETHICAL PRINCIPLES

While ethics pertains to the behavior of a person based on the perception that what hes doing is

morally right or wrong. Ethical principles on the other hand is the code of conduct that serves

as a guideline in making choices guiding ones behavior in situations that involves the concepts

of right and wrong, responsibility, duty and obligations. With knowledge of such principles, an

individual will be able to govern his activities and decisions, creating a positive and healthy

relationship with others.

It is important to make money in business, but not

at the cost of ethics and values

- Sam Pitrod

Principle of Autonomy

This principle may be formulated in the following way: A person should be free to perform

whatever action he/she wishes, regardless of risks or foolishness as perceived by others,

provided it does not impinge on the autonomy of others. (Ulrich) It is a personal rule of ones

20
self that is free from both controlling interferences by others and from personal limitations that

prevent meaningful choices. Acknowledging a persons right to make choices based on their

own beliefs is needed within an organization, all voices must be heard from the employees

going up to the top management. It is a process wherein all levels of management plays an

important role by giving out informations that cannot be provided by other management level.

This ethical principle stress out how one takes full responsibility with his/her actions by giving

the full control to an individual who is making a decision whether or not to perform a specific

action.

Principle of Beneficence and Non-maleficence

The principle of beneficence and non-maleficence is a principle of long standing in the traditions

of democratic societies. The principle of beneficence can be stated in the following way: One

should render positive assistance to others (and abstain from harm) by helping them to further

their important and legitimate interests. (Ulrich) While autonomy focuses on one self,

beneficence points out to an action made by one person for the benefit of another, this act leads

to non-maleficence, the obligation to not inflict any harm on others despite of ones belief. In the

corporate world, personal satisfaction causes mishap that often leads to corruption within the

company, neglecting the principle of beneficence and non-maleficence therein. This principle

focuses on being considerate with others, in order to prevent egocentric decisions.

Principle of Fidelity

In business, individuals become vulnerable when they start to put yields above all else; with

this principle, individuals will be reminded that trust and loyalty plays an important role in

maintaining relationships. This principle captures in a special way the element of trust that

must exist between persons who are mutually bound to each other by circumstances or choice. It

has been called the principle of fidelity that can be formulated in the following manner: One

21
should keep his/her promises to others and maintain the trust necessary to retain the

relationships that bind them together. (Ulrich)

Principle of Paternalism

The principle can be stated in the following way: One should restrict an individual's action

against his/her consent in order to prevent that individual from self-harm or to secure for that

individual a good which he/she might not otherwise achieve. (Ulrich) This principle seeks to

give assistance to those who lack enough knowledge on how business works. As fraud may

arise due to the insufficient understanding of an individual, this principle implies that the

management must perform their duties with integrity, and that the well-being of their

subordinates must matter to them in order to sustain the give and take relationship between

employees and the management.

Principle of Justice

Last, but definitely not the least, the Principle of Justice. When we speak of justice, many things

come to mind, mostly: legal matters and equality. One should give to persons what they are

owed, what they deserve, or what they can legitimately claim according to a proper allocation of

benefits and burdens where equals are treated equally unless there is a morally relevant

difference, which constitutes a reason for treating persons unequally. (Ulrich) 11

Basically, in business, the ultimate goal is to obtain profit. However, proceeds dont come easy; it

requires hard work and effort. In reality, hard work does not come from the top of the company;

hence, it comes from below, the employees work for the utmost benefit of those who are in the

top. The principle of justice ensures that the subordinates receive what they rightfully earned. It

prevents discrimination within the organization in the best way it can by treating everyone

11. Lawrence P. Ulrich, ETHICAL PRINCIPLES IN BUSINESS ETHICS,

(http://academic.udayton.edu/lawrenceulrich/313principles2.html), (Accessed March 2017)

22
equally; in a way, it also gives a person the freedom to be themselves and be respected on how

they act within the company. Thereby, the rule of law applies.

THE RELATIONSHIP OF ETHICS AND LAW

Ethics is a set of standard based on human reasoning and experience that in a way serves as a

criterion whether ones action is ethical, otherwise unethical. Law on the other hand is a basis

that somehow forcedly dictates or limits an action of an individual because of the possibility of

huge repercussions. Still, ethics and law are closely intertwined as they both have a focus on

right and wrong, preventing immoral acts and on creating rules for trade groups.

(Missouri.edu)

Its nice to be ethical, but our conduct has to be

legal

- John R. Boatright

FRAUD
According to Article 1170 and Article 1338 of the Civil Code of the Philippines:

Fraud (deceit or dolo) is the deliberate or intentional evasion of the normal fulfillment of an obligation.

(Art. 1170) There is fraud when, through insidious words or machinations of one of the contracting

parties, the other is induced to enter into a contract which, without them, he would not have agreed to.

(Art. 1338) 12

12. Hector S. De Leon and Hector M. De Leon Jr., The Law on Obligations and Contracts, Rev. Ed.
(Rex Bookstore, Manila 2015), 359

23
Fraud within the Company

Intentional deceptions and false representations of a material fact is the starting point of the

downfall of a business. When there is fraud within the company, the five ethical principles is

disregarded, thus, the relationship between the management and its employees is broken. There

are only two divisions of fraud within the company: employee fraud and management fraud.

Employees tend to engage on fraudulent acts because they may not be receiving what they are

truly earning. There is employee fraud when assets of the company are converted into cash for

the employees personal benefit. In real life, one good example is that some employees tend to

steal then resale the goods of the company for their own benefit keeping the proceeds that

theyve earned for themselves with the product of the company. However, fraudulent acts of the

employees do not create a huge impact as much as fraud in the management itself does.

Management fraud is more insidious than employee fraud because it often escapes detection

until the organization has suffered irreparable damage or loss. (Hall) When the management is

the one who deceives, the entire company will fall. Fraud in the top management is often caused

by the desperate need to drive up the companys market stock to impress or meet investors

expectations. On the other hand, lower management engages in fraudulent activities in order to

gain additional compensation, promotions, or to escape penalties.

CONCEALMENT

According to Article 1339 of the Civil Code of the Philippines:

24
 Failure to disclose facts, when there is duty to reveal them, as when the parties are bound by the

confidential relations, constitutes fraud.13

Concealment within the Company

Concealment within the company, no matter how big or small it may be will create mishap

within the organization; it materializes just like how fraud does. Technically, a small

concealment may lead to fraud. Concealment is done when a material fact is not disclosed by a

party for his/her own benefit. By concealing material things, the ethical principles are once

again disregarded. In the corporate world, concealment takes place due to the selfishness of

ones self, when a person start to think the concealing things is the way to make things better,

most of all, when profit becomes the only thing that matters whether it is done by the employee

or the management.

Good people dont need law to tell them to act

responsibly and bad people find a way around the
laws

- Plato

There are other factors that may be considered in relating law with ethics; however, this chapter

will focus on fraud and concealment in view of the fact that these two issues are mostly the core

of corruption within an organization.

According to one study, people engage in fraudulent activity as a result of an interaction of

forces both within an individuals personality and the external environment. These forces are

13. Hector S. De Leon and Hector M. De Leon Jr., The Law on Obligations and Contracts, Rev. Ed.
(Rex Bookstore, Manila 2015), 361

25
classified into three major categories: (1) situational pressures, (2) opportunities, and (3)

personal characteristics (ethics). (W.S Albrecht and M. B. Romney, 1980) These suggest that a

person with a high level of personal ethics and limited pressure and opportunity to commit

fraud is most likely to behave honestly. (Hall) Thus, a person being the opposite of what has

been said will most likely to create fraud. Therewith, the relationship between ethics and law is

justified.

Having a code of ethics reduces the possibility to violate the law, preventing problems that may

cause the downhill of a business. The principles stated above denote the importance of ethics in

the company, while the relationship between ethics and law depicts the importance of a legal

basis to be followed in order to sustain the organization. Thus, the harmonious interaction

between the employees and the management is preserved by the balancing figure that sustains

it as well, which is ethics and law.

A business that makes nothing but money is a

poor kind of business

- Henry Ford

26
 V.

ETHICS AND SOCIO-

CULTURE

Understanding Work Ethics in the Philippine Setting

We all know for a fact that in every workplace, there are competitions may it be healthy
or not. And with every success comes different reactions, different interpretations. We all want a

decent and a good paying job. And what if mostly, one of the better paying jobs in our country

cannot be easily gotten without any connections? And what if there is always a hindrance that

will pull you down before your promotion?

There are a lot of bad work ethics that are commonly seen in a Filipino workplace. When it

comes to work or job referral, Padrino System also known as Palakasan is one of the most

common, unfair way of getting a job in the government and/or other private industry without

the hassle. It is where a person gains favour, promotion, or political appointment through family

affiliation or friendship, as opposed to one's merit. Some have been able to enter a company or

the government even though they are not qualified, but because they have their padrino to back

them up while other deserving individuals are sidestepped. This system in the Philippines has

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been the source of many controversies and corruption. This kind of system is an open secret and

theres little that we can do about it because it has crawled its way up to the top.

Crab mentality is one of the most infamous work ethic in a workplace. It is a chronic problem

that has Filipinos have had to deal with for ages. Instead of getting out individually, people will

grab and pull each other down. Just like in a workplace setup, if you are highly recommended to

get promoted for your good performance, some of your workmate might not be in favour of it

and will try to expose something bad about you or create gossips just to prevent you from

getting that position. It happens in reality, especially in a big company, but also in small time

industry.

But of course, behind all those negative traits, there are some good behavior and character that

overweighs the bad. Naturally, Filipinos have the friendly, hospitable and accommodating

characteristic that will surely lighten up your daya desirable Filipino characteristic. Despite

the competitions and unpleasant behaviors in the workplace, Filipinos will never let the storm

and sadness overcome their livesthey will always get on their feet and stand all throughout

the darkest hour. We make it as a strong hold to reach for our goals in life.

Obstacles are necessary for success because in

selling, as in all careers of importance, victory
comes only after many struggles and countless
defeats.

- Og Mandino

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Ethical issues gave rise to Sarbanes-Oxley Act (SOX) of 2002

In response to a number of major corporate and accounting scandals by executives of Enron,

Global Crossing, Tyco, Adelphia, WorldCom, and others prompted the congress into passing the

American Competitiveness and Corporate Accountability Act of 2002. This wide-sweeping

legislation, more commonly known as the Sarbanes-Oxley Act (SOX), is the most significant

securities law since the Securities and Exchange Commission (SEC) Acts of 1933 and 1934. SOX

has many provisions designed to deal with specific problems relating to capital markets,

corporate governance, and the auditing profession. (Hall, 7e)14

Sarbanes-Oxley Act (SOX), passed in 2002, intended to increase transparency in accounting

practices. It was created in response to accounting malpractice in the early 2000s. The SOX Act

requires strict reforms to improve financial disclosures from corporations and prevent

accounting fraud. Section 406 of this act, which pertains to ethical issues, is the main concern of

the discussion.

Section 406Code of Ethics for Executive and Financial officers

According to Section 406 of the Sarbanes-Oxley Act of 2002, each company registered with the

Securities and Exchange Commission is required to disclose its adopted code of ethics for senior

financial officers. The Companys chief executive officer, chief financial officer and chief

accounting officer are bound by this Code, which sets forth the Companys requirements with

respect to ethical conduct, conflicts of interest and compliance with applicable laws. Many

companies expect honest and ethical conduct in all aspects of business from all of its employees.

A public company may disclose its code of ethics in several ways: (1) included as an exhibit to its

annual report, (2) as a posting to its Web site, or (3) by agreeing to provide copies of the code

upon request. Whereas Section 406 applies specifically to executive and financial officers of a

company, a companys code of ethics should apply equally to all employees. Top managements

14. James A. Hall, Accounting Information System, 7th Ed.

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attitude toward ethics sets the tone for business practice, but it is also the responsibility of

lower-level managers and non-managers to uphold a firms ethical standards. (Hall, 7e) 15

The SEC has ruled that compliance with Section 406 necessitates a written code of ethics that

addresses the following ethical issues:

Conflict of Interest

It means honest and ethical conduct, which includes ethical control of actual or apparent

conflicts of interest between personal and professional relationships. People tend to introduce

biases or preferences into the professional's clinical judgments or research interests which leads

to miscommunications and conflicts among employees, officers and staffs. Situations of conflict

of interest must be avoided whenever possible, and where they cannot be avoided, they must be

managed in an open and cooperative way to ensure good relations within the company.

Full and Fair Disclosures

The objective of this rule is to ensure that future disclosures are candid, open, truthful, and void

of such deceptions. (Hall, 7e)16 This means that public communications about material events or

developments concerning the company are required to be complete, fair, accurate and broadly

disseminated to the public in accordance with all applicable legal and regulatory requirements.

By practicing full and fair disclosure, the company ensures the investors and the public to have

access to the companys financial and other investment related information. Every company has

a responsibility to its shareholders to make sure that no one has an advantage by receiving

company financial and other investment related information that is not yet publicly

15. James A. Hall, Accounting Information System, 7th Ed.

16. James A. Hall, Accounting Information System, 7th Ed.

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communicated. Selective disclosure is unfair and exposes the company to serious legal and

financial consequences.

Legal Compliance

All employees and agents are required to comply and strictly adhere to all applicable laws, rules

and regulations. To ensure such compliance, it requires sensitivity to laws, rules, regulations,

and societal expectations. To accomplish this, organizations must provide employees with

training and guidance. Educate members of each division(s) about any law, regulation or

administrative procedure that affects the operation of the company generally. Monitor the

compliance of the organization to maintain the companys continued commitment to ethical

business practices and legal compliance.

Internal Reporting of Code of Violations

In line with this requirement, Senior Officers are required to identify, promptly report and

correct, any violation of this Code, the companys Code of Business Conduct and Ethics relating

to all employees, directors and officers, or any law, rule or regulation applicable to the company

or the operation of its business. Senior Officers must report any such violations to the companys

Audit Committee. This requirement in the code of ethics is confidential as required by SOX

therefore many companies are outsourcing their employee service to independent vendors.

Accountability

An effective ethics program must take appropriate action when code violations occur. The

company must take appropriate disciplinary actions for such violations. Such disciplinary

actions include, but are not limited to, penalties and demotions and even dismissals to promote

accountability of this Code.

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Strengthening Board Governance and Internal Controls in the Philippines

Sarbanes-Oxley Act of 2002 was enacted mainly to promote greater responsibility, accountability

and transparency of external auditors and corporate governing bodies with respect to financial

statements and reports of publicly traded companies. (Tomboc, 2004-05)

In the Philippines, our corporate sector had not been subjected to such opposing public reaction

relating to major corporate and accounting scandals involving companies like what happened in

the United States of America. In 1997, we had the Asian financial crisis in 1997 but our country

was not as seriously affected and the crisis served as a wakeup call that led to reforms in

corporate governance. What we have been implementing or practicing several years back are

being affirmed by this piece of US legislation, the Sarbanes-Oxley Act.

The Philippines has responded through the Securities and Exchange Commission through the

issuance of a Code of Corporate Governance and Rules 68 and 68.1 implementing the Securities

Regulation Code summarized in a Financial Disclosures checklist. On the other hand,

professional accountants in the Philippines have adopted a Code of Ethics and moved towards

the adoption of international accounting standards. (Tomboc, 2004-05) 17

The Code of Corporate Governance serves as a model for corporations in promulgating their

own governance rules and principles. The Code institutes several reforms which are intended to

strengthen the role of the Board of Directors, improve management accountability, and

safeguard the rights of minority stockholders. In the said Code, the accountabilities of the board

are being specified and it set higher qualification and ethical standards for board directors and

committees. Particular emphasis has been given to the formation of an audit committee within

the Board of Directors.

17. Juris Bernadette M. Tomboc, (A Study of the U.S. Sarbanes-Oxley Act in Relation to Philippine
Law on Corporate Governance), (SERIES 2004-05)

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Ensuring the Integrity of Financial Reports

Since conflicts of interests involving corporate insiders and external auditors were largely

blamed for the corporate scandals in the US, the Sarbanes-Oxley Act focused on strengthening

insider accountability for financial reports and ensuring the independence and integrity of

external audits. Based on similar provisions of Sarbanes-Oxley, we have strengthened Rule 68.1,

the special accounting rules of the Securities Regulation Code (SRC) applicable to listed and

public companies. We now impose appropriate monetary and criminal sanctions on any officer

or director of a company covered by SRC Rule 68.1 who causes untrue or misleading

information in the financial statements or materially incomplete financial reports.

Establishing good governance through compliance

New laws, rules and regulations from Philippine authorities or from foreign agencies that have

to be complied with due to the dictates of globalization should not be viewed as obstacles.

Instead, compliance with SEC rules, the Sarbanes-Oxley law, or any other provisions should be

embraced as part of good corporate governance that leads to transparent financial reporting,

better management of corporate risks, and increased shareholder value. The prevention of

unethical corporate behavior is one of the act's implicit purposes.

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References:

Iigo, Conrado E. Jr., Management for Filipinos: Principles and Applications, Rev. Ed. (Gemeni
Phils. Graphics Art Corp. Sampaloc, Manila 2014), 43, 202

Franco, Ernesto A., ed., Management in the Philippine Setting (Manila, 1988)

Jahfarali, T.H., "Manager and Leader

Jahfarali, T.H., Management Concepts and Business Ethics (2011)

Herman Aguinis, Performance Management, (Prentice Hall, Tollesbury, Maldon UK, 2005),
(https://www.ebsglobal.net/EBS/media/EBS/PDFs/Performance-Management-Course-
Taster.pdf), (Accessed March 2017)

Sison & Angeles, Journal of Business Ethics, (1997), ( https://philpapers.org/rec/SISBEI-2),

(Accessed March 2017)

Josephson, M., Ethical Responsibilities in the Employer-Employee Relationship Applying

Ethical Principles, (2016), (http://josephsononbusinessethics.com/2010/12/responsibilities-
employer-employee-relationship/), (Accessed March 2017)

Reyes, R.G., Ethical Leadership in Human Resource Management, (2013),

(http://careersystems.com.ph/images/01.17.14%20ETHICAL%20LEADERSHIP%20IN
%20HRM.pdf) (Accessed March 2017)

Lawrence P. Ulrich, ETHICAL PRINCIPLES IN BUSINESS ETHICS,

(http://academic.udayton.edu/lawrenceulrich/313principles2.html), (Accessed March 2017)

De Leon, Hector S. and De Leon, Hector M. Jr., the Law on Obligations and Contracts, Rev. Ed.
(Rex Bookstore, Manila 2015), 359, 361

James A. Hall, Accounting Information System, 7th Ed.

Tomboc, Juris Bernadette M., (A Study of the U.S. Sarbanes-Oxley Act in Relation to Philippine
Law on Corporate Governance), (SERIES 2004-05)