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Law Ethics
Not legal but maybe ethical
Example
1. Illegal possession of fire arms (R.A. 10591) is
unlawful but not unethical
2. Possession of marijuana (R.A.9165) for medical
purpose.
3. Violation of maximum speed limit. (R.A. 4136)
4. (Act 3085) When a child is hungry and stole a loaf
of bread from a shop to feed.
Example of Unethical Business Practice
1. Exploiting workers.
2. Over-billing customers.
3. Exploiting tax loopholes.
4. Dumping toxins into the air or water.
5. Prescribing unnecessary medical procedures.
6. Covering up car defects. (Philippine Lemon law R.A.
10642)
7. Designing phones so that users accidentally accept data
charges.
8. Creating fake identities.
“Everyone is doing it”
• “Everyone is doing it” is frequently
offered as a reason for engaging in
behavior that is widespread but less than
ideal.
• Ex: Installing software in multiple computer
with one license
• Exceeding speed limit by 1 km per hour
• It is frequently appealed to as reason
why people feel morally justified in
acting in less than ideal ways.
• It is not always a justification for moral
compromise.
• Ex: Sexual harassment – no justification for
others doing so.
Law and ethics
1. Not all legally sound decisions are ethical
2. Not all ethical decisions are necessary legal
Ethics
• Ethics
• Set of moral principles by which people conduct themselves
personally, socially, or professionally.
• Business ethics
• Set of laws about how a business should conduct itself.
• Legal Responsibility
• Social Responsibility
• Responsibility to Customers
• Responsibility to Employees
• Examples:
• Providing safe products
• Creating jobs
• Treating employees fairly
• Protecting the environment
• Being truthful about financial situations
• Business ethics may vary across cultures, companies, and industries.
The Basic Concepts in Business
Ethics (2 of 4)
• Moral dilemma: Two or more morals in conflict
with one another.
• a situation in which a difficult choice has to be
made between two courses of action, either of
which entails transgressing a moral principle.
• Classic “lifeboat dilemma”, where there are only 10
spaces in the lifeboat, but there are 11 passengers
on the sinking ship
The Basic Concepts in Business Ethics (3 of 4)
Learning Objectives
• Identify stakeholders’ roles in business ethics
• Explore the role of corporate governance in
structuring ethics in business
Relationships and Business (1 of 2)
• Primary stakeholders
• Those whose continued association and
resources are absolutely necessary for a
firm’s survival (customers, shareholders,
employees, suppliers).
• Secondary stakeholders
• Those who are not typically engaged directly
in transactions with a company and are
therefore not essential to its survival
(government agencies and communities).
Stakeholders Define Ethical Issues in
Business (3 of 3)
• Other stakeholders
• Others who have a “stake” or claim in some
aspect of a company’s products, operations,
markets, industry, and outcomes are known
as stakeholders.
Corporate Governance Provides Formalized
Responsibility to Stakeholders
• The stakeholder model places the
board of directors in the position of
balancing the interests and
conflicts of a company’s various
constituencies.
• External control of the corporation
resides not only with government
regulators but also with key
stakeholders which exert pressure
for responsible conduct.
• Social responsibility activities have
a positive impact on consumer
identification.
Views of Corporate Governance
• Classic agency problem: Ownership (investors)
and control (managers) are separate.
• Managers act as agents for investors, whose
primary goal is increasing the value of the
stock.
• Investors and managers are distinct parties
with unique insights, goals, and values.
• Corporate governance mechanisms are
needed to align investor and management
interests.
Part 2
Business Ethics
Emerging Business Ethics Issues
Learning Objectives
• Define ethical issues in the context of
organizational ethics
• Examine ethical issues as they relate to the basic
values of honesty, fairness, and integrity
• Delineate misuse of company resources, abusive
and intimidating behavior, lying, conflicts of
interest, bribery, corporate intelligence,
discrimination, sexual harassment, fraud, financial
misconduct, insider trading, intellectual property
rights, and privacy as business ethics issues
Ethical Awareness
• People make ethical decisions when they find an
ethical component in a particular issue or
situation.
• Failure to acknowledge or be aware of ethical
issues is hazardous to an organization.
• Ethical issues involve a group, a problem, or
an opportunity that requires introspection and
investigation before a decision can be made.
Foundational Values for Identifying Ethical
Issues (1 of 2)
• Integrity: Integrity is the practice of being honest and
showing a consistent and uncompromising adherence to
strong moral and ethical principles and values.
• Element of virtue, an unimpaired condition. Integrity
relates to product quality, open communication,
transparency, and relationships.
• Honesty: Truthfulness or trustworthiness. To tell the truth to
the best of your knowledge without hiding anything.
• Confucius defined an honest person as junzi, or one who
has the virtue ren.
Foundational Values for Identifying Ethical
Issues (2 of 2)
• Fairness: Just, equitable, and impartial.
• Lack of favoritism toward one side or another.
Three fundamental elements that motivate people
to be fair:
1. Equality: The distribution of benefits and
resources.
2. Reciprocity: An interchange of giving and
receiving in social relationships.
3. Optimization: Trade-off between equity
(equality) and efficiency (maximum
productivity).
Ethical Issues in Business
• Misuse of Company Time and Resources
• Abusive or Intimidating Behavior
• Lying to employees
• Conflicts of Interest
• Bribery
• Corporate Intelligence
• Theft and unlawful conduct
• Discrimination
• Sexual Harassment (R.A. 8799)
• Price manipulation (Sec 26, R.A. 8799
• Fraud (Sec 24, R.A. 8799)
• Insider Trading (Sec 27, R.A. 8799)
• Intellectual Property Rights (R.A. 8293)
Misuse of Company Time and
Resources
Whether it is covering for someone who shows up
late or altering a time sheet, misusing company time
tops the list. This category includes knowing that one
of your co-workers is conducting personal business
on company time. By "personal business" the survey
recognizes the difference between making cold calls
to advance your freelance business and calling your
spouse to find out how your sick child is doing.
Abusive or Intimidating
Behavior
• Too many workplaces are filled with managers and
supervisors who use their position and power to
mistreat or disrespect others. Unfortunately, unless
the situation you're in involves race, gender or
ethnic origin, there is often no legal protection
against abusive behavior in the workplace.
Lying to employees
• The fastest way to lose the trust of your employees
is to lie to them, yet employers do it all the time.
Conflicts of Interest
• Conflicts of interest involve a person who has two
relationships that might compete with each other
for the person's loyalties.
• A conflict of interest in the workplace is when an
individual can personally benefit from their
professional position. Rather than making decisions
for the betterment of your business, the employee
might make decisions based on their own personal
gain.
Conflicts of Interest - Interlocking director
SEC. 32. Contracts Between Corporations with Interlocking Directors. - Except in cases of fraud,
and provided the contract is fair and reasonable under the circumstances, a contract between
two (2) or more corporations having interlocking directors shall not be invalidated on that
ground alone: Provided, That if the interest of the interlocking director in one (1) corporation is
substantial and the interest in the other corporation or corporations is "merely nominal, the
contract shall be subject to the provisions of the preceding section insofar as the latter
corporation or corporations are concerned.
Stockholdings exceeding twenty percent (20%) of the outstanding capital stock shall be
considered substantial for purposes of interlocking directors.
Corporation A Corporation B
Substantial Nominal
Director X
Bribery
Punishable under the Revised Penal Code
Art. 210. Direct bribery
Art. 211. Indirect bribery.
Art. 212. Corruption of public officials.
https://business.inquirer.net/300483/wirecard-
ceo-quits-after-auditors-cant-find-2-1-billion
Discrimination
• REPUBLIC ACT NO. 10911
• Anti-Age Discrimination in Employment Act
• REPUBLIC ACT NO. 8972
• Solo Parents Welfare Act of 2000.
• Section 7. Work Discrimination. - No employer shall
discriminate against any solo parent employee with respect to
terms and conditions of employment on account of his/her
status..
Anti-Age Discrimination in Employment Act"
Sec. 5. Prohibition of Discrimination in Employment on Account of Age. –
a) It shall be unlawful for an employer to:
(1) Print or publish, or cause to be printed or published, in any form of media, including the internet,
any notice of advertisement relating to employment suggesting preferences, limitations,
specifications, and discrimination based on age;
(2) Require the declaration of age or birth date during the application process;
(3) Decline any employment application because of the individual's age;
(4) Discriminate against an individual in terms of compensation, terms and conditions or privileges of
employment on account of such individual's age;
(5) Deny any employee's or worker's promotion or opportunity for training because of age;
(6) Forcibly lay off an employee or worker because of old age; or
(7) Impose early retirement on the basis of such employee's or worker's age.
b) It shall be unlawful for a labor contractor or subcontractor, if any, to refuse to refer for
employment or otherwise discriminate against any individual because of such person's
age.
c) It shall be unlawful for a labor organization to:
1. Deny membership to any individual because of such individual's age;
2. Exclude from its membership any individual because of such individual's age; or
3. Cause or attempt to cause an employer to discriminate against an individual in violation of this Act.
d) It shall be unlawful for a publisher to print or publish any notice of advertisement
relating to employment suggesting preferences, limitations, specifications, and
discrimination based on age.
Exception:
Sec. 6. Exceptions. – It shall not be unlawful for an employer to
set age limitations in employment if:
(a) Age is a bona fide occupational qualification reasonably
necessary in the normal operation of a particular business or
where the differentiation is based on reasonable factors
other than age;
(b) The intent is to observe the terms of a bona fide seniority
system that is not intended to evade the purpose of this Act
(c) The intent is to observe the terms of a bona fide employee
retirement or a voluntary early retirement plan consistent
with the purpose of this Act: Provided, That such retirement
or voluntary retirement plan is in accordance with the Labor
Code, as amended, and other related laws; or
(d) The action is duly certified by the Secretary of Labor and
Employment in accordance with the purpose of this Act.
Cooking the books
Enron-style accounting fraud – "cooking the books" –
involves a coordinated, deliberate and illegal effort to
misstate company earnings and mislead investors as
a way of manipulating the company's stock price.
This is the type of unethical behavior that sends
company executives to jail.
Watch the movie – Prepare a
reaction paper
Enron:
The Smartest Guys in the Room
Sexual Harassment
Sec. 3. Work, Education or Training-related Sexual
Harassment Defined. – Work, education or training-
related sexual harassment is committed by an
employee, manager, supervisor, agent of the
employer, teacher, instructor, professor, coach,
trainor, or any other person who, having authority,
influence or moral ascendancy over another in a
work or training or education environment,
demands, requests or otherwise requires any sexual
favor from the other, regardless of whether the
demand, request or requirement for submission is
accepted by the object of said Act.
Sexual Harassment
(a) In a work-related or employment environment, sexual harassment is committed when:
1. The sexual favor is made as a condition in the hiring or in the employment, reemployment or
continued employment of said individual, or in granting said individual favorable
compensation, terms, conditions, promotions, or privileges; or the refusal to grant the sexual
favor results in limiting, segregating or classifying the employee which in a way would
discriminate, deprive or diminish employment opportunities or otherwise adversely affect
said employee;
2. The above acts would impair the employee’s rights or privileges under existing labor laws; or
3. The above acts would result in an intimidating, hostile, or offensive environment for the
employee.
(b) In an education or training environment, sexual harassment is committed:
4. Against one who is under the care, custody or supervision of the offender;
5. Against one whose education, training, apprenticeship or tutorship is entrusted to the
offender;
6. When the sexual favor is made a condition to the giving of a passing grade, or the granting of
honors and scholarships, or the payment of a stipend, allowance or other benefits,
privileges, or considerations; or
7. When the sexual advances result in an intimidating, hostile or offensive environment for the
student, trainee or apprentice. Any person who directs or induces another to commit any act
of sexual harassment as herein defined, or who cooperates in the commission thereof by
another without which it would not have been committed, shall also be held liable under
this Act. (R.A. 7877)
Philippine case – Sexual
Harassment
1. ATTY. JACINTO C. GONZALES vs. MAILA
CLEMEN F. SERRANO, G.R. No. 175433 March
11, 2015
2. DIOSCORO F. BACSIN vs. EDUARDO O.
WAHIMAN G.R. No. 146053, April 30, 2008
3. TERESITA G. NARVASA, vs. BENJAMIN A.
SANCHEZ, JR, G.R. No. 169449, March 26,
2010
4. ATTY. SUSAN M. AQUINO, vs. HON. ERNESTO
D. ACOSTA, A.M. No. CTA-01-1. April 2, 2002)
Prepare a case digest
Philippine case – Sexual Harassment
Format of the case digest
Facts:
Issue:
Ruling:
Price manipulation
Section 24. Manipulation of Security Prices; Devices and Practices. – 24.1 It shall be unlawful for any
person acting for himself or through a dealer or broker, directly or indirectly: (a) To create a false or
misleading appearance of active trading in any listed security traded in an Exchange of any other trading
market (hereafter referred to purposes of this Chapter as "Exchange"): (i) By effecting any transaction in
such security which involves no change in the beneficial ownership thereof; (ii) By entering an order or
orders for the purchase or sale of such security with the knowledge that a simultaneous order or orders of
substantially the same size, time and price, for the sale or purchase of any such security, has or will be
entered by or for the same or different parties; or (iii) By performing similar act where there is no change
in beneficial ownership. (b) To affect, alone or with others, a securities or transactions in securities that: (I)
Raises their price to induce the purchase of a security, whether of the same or a different class of the
same issuer or of controlling, controlled, or commonly controlled company by others; or (iii) Creates active
trading to induce such a purchase or sale through manipulative devices such as marking the close, painting
the tape, squeezing the float, hype and dump, boiler room operations and such other similar devices. (c)
To circulate or disseminate information that the price of any security listed in an Exchange will or is likely
to rise or fall because of manipulative market operations of any one or more persons conducted for the
purpose of raising or depressing the price of the security for the purpose of inducing the purpose of sale
of such security. (d) To make false or misleading statement with respect to any material fact, which he
knew or had reasonable ground to believe was so false or misleading, for the purpose of inducing the
purchase or sale of any security listed or traded in an Exchange. (e) To effect, either alone or others, any
series of transactions for the purchase and/or sale of any security traded in an Exchange for the purpose of
pegging, fixing or stabilizing the price of such security; unless otherwise allowed by this Code or by rules of
the Commission. 24.2. No person shall use or employ, in connection with the purchase or sale of any
security any manipulative or deceptive device or contrivance. Neither shall any short sale be effected nor
any stop-loss order be executed in connection with the purchase or sale of any security except in
accordance with such rules and regulations as the Commission may prescribe as necessary or appropriate
in the public interest for the protection of investors. 24.3. The foregoing provisions notwithstanding, the
Commission, having due regard to the public interest and the protection of investors, may, by rules and
regulations, allow certain acts or transactions that may otherwise be prohibited under this Section. (Sec
24, R.A. 8799)
Price manipulation
Click the link for news.
BW shares
https://www.pinoymoneytalk.co
m/bw-resources-stock-price-mani
pulation/
Calata
https://www.rappler.com/busines
s/9710-trading-in-calata-probed-f
or-possible-price-manipulation
https://www.philstar.com/business/2019/01/21/1886718/special-report-insider-tra
ding-still-prevalent-philippines
Fraud
Section 26. Fraudulent Transactions. – It shall be
unlawful for any person, directly or indirectly, in
connection with the purchase or sale of any
securities to: 26.1. Employ any device, scheme, or
artifice to defraud; 26.2. Obtain money or property
by means of any untrue statement of a material fact
of any omission to state a material fact necessary in
order to make the statements made, in the light of
the circumstances under which they were made, not
misleading; or 26.3. Engage in any act, transaction,
practice or course of business which operates or
would operate as a fraud or deceit upon any person.
Insider Trading
Insider’s Duty to Disclose When Trading.
27.1. It shall be unlawful for an insider to sell or buy a security of the issuer, while in
possession of material information with respect to the issuer or the security that is
not generally available to the public, unless:
(a) The insider proves that the information was not gained from such relationship; or
(b) If the other party selling to or buying from the insider (or his agent) is identified,
the insider proves:
I. that he disclosed the information to the other party, or
II. that he had reason to believe that the other party otherwise is also in possession of the
information.
A purchase or sale of a security of the issuer made by an insider defined in
Subsection 3.8, or such insider’s spouse or relatives by affinity or consanguinity
within the second degree, legitimate or common-law, shall be presumed to have
been effected while in possession of material nonpublic information if transacted
after such information came into existence but prior to dissemination of such
information to the public and the lapse of a reasonable time for market to absorb
such information: Provided, however, That this presumption shall be rebutted upon a
showing by the purchaser or seller that he was aware of the material nonpublic
information at the time of the purchase or sale. (Sec 27, R.A. 8799)
Definition: Insider
means
(a) the issuer;
(b) a director or officer (or any person performing similar
functions) of, or a person controlling the issuer;
(c) a person whose relationship to the issuer gives or gave
him access to material information about the issuer or the
security that is not generally available to the public;
(d) A government employee, director, or officer of an
exchange, clearing agency and/or self-regulatory
organization who has access to material information about
an issuer or a security that is not generally available to the
public; or
(e) a person who learns such information by a communication
from any forgoing insiders. (Sec 3, R.A. 8799)
Movie to watch
Wall Street (1987)