BUSINESS ETHICS AND SOCIAL

RESPONSIBILITY

UNIT 1: THE ROLE OF BUSINESS IN SOCIAL

AND
ECONOMIC DEVELOPMENT
 THE ROLE OF BUSINESS IN SOCIAL
AND ECONOMIC DEVELOPMENT

The Nature and Forms of Business Organizaton

Business. Is an activity that is part and 3 types of Business Organizations:

parcel of human society: It is an entity in
1. Service Businesses. Provide services
which economic resources or inputs, such
rather than products to cutomers.
as materials and labor, are put together and
process to provide goods or outputs to 2. Merchandising Businesses. Sell
customers. products they purchase from the
other businesses to customers.
Profit. Is the difference between the
3. Manufacturing Businesses. Change
amount earned and the amount spent in
basic inputs into products that are
buying, operating or producing something.
sold to customers
 the role of business in social
and economic development
The Nature and Forms of Business Organizaton

 Business and Business Organization Disadvantages:

Various Forms of Business Organization: 1. Unlimited liability
 Sole Proprietorship – A business owned by 2. Limitation on size
one person.
3. Limited by management’s ability to be
Advantages: jack-of-all-trades.
1. Total undivided authority  Partnership – an association of two or
2. Low organizational cost and license fees more people as partners; it refers to an
arrangement in which the individuals
3. Tax savings
share the profits and liabilities of a
4. No restrictions on type of business (as long business venture.
as it is legal
 THE ROLE OF BUSINESS IN SOCIAL
AND ECONOMIC DEVELOPMENT

The Nature and Forms of Business Organizaton

Characteristics of Partnership
o Association of individuals – based on as simple an act as a handshake.

o Mutual agency – act of any partner is binding on all other partners.

o Limited life – Dissolution occurs when a partner withdraws or a new partner is admitted.

o Unlimited Liability – each partner is individually liable for all partnership liabilities.

o Co-ownership of property – partnership assets and personal resources of any partner

 THE ROLE OF BUSINESS IN SOCIAL
AND ECONOMIC DEVELOPMENT

The Nature and Forms of Business Organizaton

 Corporation Characteristics of Corporation

– an entity created by law that is
separate and distinct from its
owners and its continued
existence is dependent upon the
corporate statutes of the state in
which it is incorporated.
o Has separate legal existence from its owners
o The stockholders have limited liability
o Transferable ownership rights
o Ability to obtain capital
o Can have a continuous life

o Subject to numerous government regulations

o Double taxation of distributed earnings

o An artificial/juridical “person”. The management

structure is at the discretion of board of directors
 THE ROLE OF BUSINESS IN SOCIAL
AND ECONOMIC DEVELOPMENT

The Nature and Forms of Business Organizaton

 Business and Business Organization

• In the Philippines, application of incorporation for Corporation is to be filed
on Security on Exchange Commission or SEC
• Charter/Articles of incorporation. This will be granted upon approval of
SEC.
• Bylaws. Rules and procedures for conducting corporation’s affairs.
 WHAT IS BUSINESS ETHICS?

 Business Ethics can be described as a systematic study of moral (ethics) matter pertaining
to business, industry or related activities , institutions or practices and beliefs.
John Donaldson (1989)

 Business Ethics observed that the moral standards of business are not different to that of an
individuals.
- It is the study of how personal moral norms apply to the activities and goals of
commercial enterprise. It is not a separate moral standards, but the study of how the
business context poses its own unique problems for the moral person who acts an agent of
this system.
Ethics
The principle of right and wrong that guide an individual in making
decisions

Business Ethics
the use of personal ethics in making business decisions
Three – step checklist

 is the action illegal?

 Does the action violate company or professional standards?
 who is affected, and how, by the action ?
Is the action illegal?

 obeying the law is in your best interest and the best interest of your business.
Does the action violate company or professional standards?
 Public laws often set only minimum standards of behaviour.
 Many businesses and professions set even higher standards.
a. an action may be legal, yet violate
standards of the business or profession.
b. Violating these standards may affect job
security and professional certification
Who is affected by the action and how are they affected?
a. employees
b. business owners
c. customers
d. the local community
e. society
Who is affected by the action and how are they affected?
 determining how the action affects individuals and groups will help you decide
if an action is ethical
 Business Ethics applies ethical reasoning to business situations and activities. It is base on a
combination of distributive justice- that is , the issuing of rewards for judgement that is
placed on all activities.
Strenberg (1994)
 the study of moral standards and how they apply to the systems and organizations through
which modern societies produce and distribute goods and services, and to the people who
work in these organizations.
Buchholz & Rosenthal (1998)
 defines that moral principles that define right and wrong behaviour in the world of
business. What constitutes right and wrong behaviour in business determined by the public
interest groups, and business organizations as well as an individual’s personal morals and
values.
C.S.V Murty (2006)
 is a form of applied ethics or professional
ethics that examines ethical principles and
 morally right and wrong
behaviour
moral or ethical problems that arise in a
business environment. It applies to all aspects
 including questions of fairness,
of business conduct and is relevant to the
justice and equity,
conduct if individuals and entire organizations.
Standford Encyclopedia of  that which require application of
Philosophy (2008) moral standards by persons in
the organizations, and

 the moral standards that are not

separate, but derived from
society.
CORE PRINCIPLES OF FAIRNESS,
ACCOUNTABILITY AND TRANSPARENCY
ACCOUNTABILITY

• Accountability is the process of explanation and

justification.
• Holding to account is the process of requiring explanation
and justification, but it is also about testing, forming a
judgment, and if necessary, taking action.

Core Principles of Fairness, Accountability and Transparency

ACCOUNTABILITY: WHAT IT IS NOT

• It is not synonymous with responsibility.

• It does not imply a management relationship.
• It is not the same as appraisal.
• It is not about confrontation, “putting someone in
his/her place” or “giving him/her a hard time.”

Core Principles of Fairness, Accountability and Transparency

WHY IS ACCOUNTABILITY IMPORTANT?

 Sound accountability structures are the most

important aspect of prevention and detection of
corruption.

Core Principles of Fairness, Accountability and Transparency

ACCOUNTABILITY IN THE CONTEXT OF A BUSINESS ORGANIZATION

Accountability is the obligation to demonstrate that

work has been conducted in compliance with agreed
rules and standards or to report fairly and accurately
on performance results vis-à-vis mandated roles and/or
plans.

Core Principles of Fairness, Accountability and Transparency

FAIRNESS IN THE CONTEXT OF A BUSINESS ORGANIZATION

Fairness involves balancing the interests involved in

all decision-making including any decisions related to
hiring, firing (including the investigatory process), and
the compensation and rewards system.

Core Principles of Fairness, Accountability and Transparency

TRANSPARENCY IN THE CONTEXT OF A BUSINESS ORGANIZATION

 On the organizational level, the instrumental

salience of transparency is referred to in two
instances (Caritas in Veritate (CV) 47, 65). In the
first case (CV 47), transparency is identified as an
important mechanism for guaranteeing social
accountability. The discussion is focused on the
role that transparency plays in international and
nongovernment organizations (NGOs) working in
humanitarian projects.

Core Principles of Fairness, Accountability and Transparency

  This understanding of transparency as a means for
organizational accountability is consistent with previous
Catholic Social Thought (CST) documents. Appropriate
information disclosure, such as the percentage of funds
directly used to help people, the activities and the results
achieved, and how these organizations’ budgets are
distributed among different organizational functions, is
necessary to inform donors about how their money is used
by these organizations.

Core Principles of Fairness, Accountability and Transparency

  Transparency allows stakeholders to understand
whether the activities of social institutions, such as
international organizations and NGOs, provide a
genuine service to civil society and whether money
is used appropriately.

Core Principles of Fairness, Accountability and Transparency

MINIMUM COMPETENCIES EXPECTED OF
PROFESSIONALS

1. Technical Skills
They encompass the ability to apply specialized
knowledge or expertise, both that which is learned
through extensive formal education and that which is
developed on the job.

Core Principles of Fairness, Accountability and Transparency

MINIMUM COMPETENCIES EXPECTED OF
PROFESSIONALS

2. Human Skills
These pertain to the ability
to understand,
communicate with,
motivate, and support
other people, both
individually and in
groups, which defines
human skills.

Core Principles of Fairness, Accountability and Transparency

MINIMUM COMPETENCIES EXPECTED OF
PROFESSIONALS

3. Conceptual Skills
These are the skills and the mental ability that managers
must have to analyze and diagnose complex situations.

Core Principles of Fairness, Accountability and Transparency

 THE NOTION OF RESPONSIBILITY
 Commercial viability and long-term business
success depend on the ability of a firm and their
leadership to act responsibly with respect to all
stakeholders in business, society, and the
environment.

Core Principles of Fairness, Accountability and Transparency

  Part of the responsibility of the worker is to be
trustworthy.

 Businesses also support the well-being of members

of society through their other key functions.

Core Principles of Fairness, Accountability and Transparency

 WHO ARE SERVANT LEADERS?
• They go beyond their own self-interest and focus
on opportunities to help followers grow and
develop.
• They do not use power to achieve ends. Instead,
they emphasize persuasion.
• Their characteristic behaviors include listening,
empathizing, persuading, accepting stewardship,
and actively developing followers’ potential.

Core Principles of Fairness, Accountability and Transparency

WHAT ARE THE EFFECTS OF SERVANT LEADERSHIP?

• One study found it has resulted in higher levels of

commitment to the supervisor, self-efficacy, and
perceptions of justice, which all were related to
organizational citizenship behavior (OCB).
• It increases team potency (a belief that one’s team
has above-average skills and abilities), which in
turn leads to higher levels of group performance.

Core Principles of Fairness, Accountability and Transparency

 • Another study has found higher levels of
citizenship associated with a focus on growth and
advancement, which in turn was associated with
higher levels of creative performance.

Core Principles of Fairness, Accountability and Transparency

COMPONENTS OF AN EFFECTIVE, COMPREHENSIVE WORKFORCE
PROGRAMS THAT ENCOURAGE DIVERSITY

1. They teach managers about the legal framework

for equal employment opportunity and encourage
fair treatment of all people regardless of their
demographic characteristics.
2. They teach managers how a diverse workforce will
be better able to serve a diverse market of
customers and clients.

Core Principles of Fairness, Accountability and Transparency

 3. They foster personal development practices that
bring out the skills and abilities of all workers,
acknowledging how differences in perspective can
be a valuable way to improve performance for
everyone.

Core Principles of Fairness, Accountability and Transparency

Women in Organizations

Findings appear to show that:

1. Firms employing more women managers have

probably done a better job of recruiting capable
managers from the total available talent pool, and
consequently will be in a better position to link
with customers, employees, and other
constituencies.

Core Principles of Fairness, Accountability and Transparency

 2. Firms having a higher proportion of women
serving on their boards do engage in charitable
giving to a greater extent than firms having a lower
proportion of women serving on their boards.
3. Investors (in Singapore) value the diversity and
potential contribution of women on the board of
directors, that is, the appointment of female
directors may be viewed as a means of improving
corporate governance of firms whose boards may
be dominated by old-boys networks, besides
adding to the diversity of corporate boards.

Core Principles of Fairness, Accountability and Transparency

 4. Since women represent a significant proportion of
the customer base in many corporations, the
presence of female directors would bring the
female perspective to the boardroom and positively
impact the bottom-line of companies, as explained
by evidence that male CEOs find the viewpoints of
female directors beneficial in understanding
female clients.

Core Principles of Fairness, Accountability and Transparency

Discussion Questions

1. How do you define the terms fairness, justice, accountability,

and transparency?
2. How do you define the terms competence, professionalism, and
responsibility? Why do you need to be competent in your job?
Explain the basic skills needed in the workplace.
3. What is stewardship? How can you be a good steward of your
home, your school, your workplace, and the environment?
4. What is organizational diversity? What is the role of women in
business organizations?

Core Principles of Fairness, Accountability and Transparency

 Theory Guiding Questions
Eternal Law Is the decision based on
natural human duties and
rights of decision maker?
Hedonism/Egoism Does a given decision give
maximum benefit to self or
organization?
Utilitarian Theory Does a given decision
result in greater benefits
than damages for society
as a whole , not just for our
organization as part of that
society?
Nature of the Principles
Ethical beliefs
Moral standards are given Golden role
in an Eternal Law, which is
revealed in Scripture or
apparent in nature and then
interpreted by religious
leaders or humanist
philosophers
Moral standards are self- Hedonist principle, might
serving . Maximum benefit equal rights principle,
to self or organization organization interest’s in
Principle
Moral Standards are Means-end principle ,
applied to the outcome of Utilitarian Principle
an action or decision, the
principle is that everyone
should act to generate the
greatest benefits for the
largest number of people
 Theory Guiding Questions Nature of the Principles
Ethical beliefs
Universalist Theory Is the decision self- Moral standards are Professional
serving, or would we applied to the intent standards principles
be willing to have of an action or
everyone else takes decision; the
the same action principle is that
when faced with the everyone should act
same circumstances? to ensure that similar
reached by others,
given similar
circumstances
Distributed Justice Will the decision Moral standards are based Distributive Justice
upon the primacy of a
lead to social single value, which is
principle
cooperation? justice. Everyone should
act to ensure a more
equitable distribution of
benefits, for this promotes
individual self-respect
 Theory Guiding Questions Nature of the Principles
Ethical beliefs
Personal Liberty Will the decision Moral standards are Disclosure principle
increase or decrease based upon the Principle of
the liberty of others? primacy of a single individual rights
Is the decision value, which is
protecting the right liberty. Everyone
of others? should act to ensure
greater freedom of
choice, for this
promotes market
exchange, which is
essential for social
productivity
A Process of Ethical Decision Making

Identify action, decision or

behaviour you are about to take

Articulate all dimension of

proposed action, decision or
behaviour
Ethics Screen
Principles Approach Ethical Test Approach
Ethical Principles Ethical Test
Conventional Approach
 Justice  Common Sense
Standard/ Norms
 Rights  One’s best Self
 Personal
 Utilitarianism  Public Disclosure
 Organizational
 Golden Rule  Ventilation
 Societal
 Virtue  Purified idea
 International
 Caring  Gag Test

Course of action fails to

Course of action passes to
ethics screen
ethics screen
Do not engage in course
Engage in course of of action
action
Identify new course of
action