BMSH2004

SOCIAL RESPONSIBILITY OF ENTREPRENEURS

Basic fairness
Ethical Issues
Ethical decision-making processes should center on protecting employee and customer rights, making sure all business
operations are fair and just, protecting the common good, and making sure individual values and beliefs of workers are
protected.
Partners
Suppose you are a partner in a business and see a great deal of profitability on the horizon. You don't believe that your
partner deserves to profit from the business's future success because you don't like his personality. You may wonder if
you could simply take his name off the bank accounts, change the locks, and continue without him. If you proceed with
this course of action, you would likely be in violation of your ethical and legal obligation to act in good faith concerning
your partner. The better course of action may be to simply buy out his interest in the business (Jerusalem, Palencia, &
Palencia, 2017).
Gross Negligence
Suppose you are on the board of directors for a publicly traded corporation. You and your fellow board members, in hopes
of heading off early for the holidays, rush through the investigatory process involved in a much- anticipated merger. As a
board member, you have a duty to exercise the utmost care respecting decisions that affect the corporation and its
shareholders. Failing to properly investigate a matter that affects their interests could be viewed as gross negligence
supporting a breach of your ethical and legal duty of care (Jerusalem, Palencia, & Palencia, 2017).
Just Wages
Wages are the price that workers receive for their labor in the form of salaries, bonuses, royalties, commissions, and
fringe benefits, like paid vacations, health insurance, and pensions. Wages differ among nations, regions, occupations,
and individuals.
The policy in setting minimum wage rates considers the needs of workers, employers’ capacity to pay, and requirements
for socio-economic development. The following factors should be taken into consideration in determining the wage and
salary structure of workers (Camilar-Serrano, 2016):
1. External market factors: This refers to the supply and demand for labor and so-called economic conditions
and underemployment.
2. Laws and regulations: Workers must be paid with reference to the laws and regulations of the government. It
obliges that employers pay no less than the minimum wage.
3. Cost of living: The cost of living relates to essential maintenance needs, and it must be fatally considered in the
preparation of wages.
4. Existing industry rate: Some alleged that paying workers the average of what other companies are paying for
identical jobs results in a fair wage.
5. Organizational factors: Evaluation of what nature of the industry the organization operates, the size of the
company, and the organization’s profitability to justify its ability to grant fair wages to its workers should be
considered.
6. Job factors: The kind of job itself entails the formulation of a just wage. Duties, responsibilities, and the skill
requirements of the job are the most substantial determinants of a fair wage.
7. Individual performances: The trend implies that individual performance or productivity ratings influence the
determination of wage/salary increases.
The issue of minimum wage versus the living wage
A minimum wage is a national floor level set by the government. Various countries have laid down lawful national
minimum wage for workers. It is usually decided in the course of negotiations between government industry and
sometimes trades unions. On the other hand, this method does not constantly work as proposed. There is at times no
genuine representation of workers, or the method is used only once in a whole or overlooked in the actuality of the
workplace (Camilar-Serrano, 2016).

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The sad reality is that the minimum wage doesn’t make it easy to face the necessities of life. In fact, earning minimum
wage is not sufficient to put a family above the poverty line. Only a single person is above the government measure of
poverty when earning minimum wage. The thought is that paying a living wage will help lift people out of poverty.
A living wage is what workers need to give their families decent standards of living. The national minimum wage in
many countries is often not adequate to allow a worker to supply his family with a decent living standard. A living wage is
sufficient to meet primary needs and to provide some discretionary income. The primary needs comprise a standard level
of nutrition, housing, transportation, energy, healthcare, childcare, education, and savings within regulated working hours
without overtime hours. Some living wage supporters wanted to make the minimum wage equivalent to the living wage,
which they describe as a “living minimum wage.” (Camilar- Serrano, 2016)
Personnel and customer relations
Sexual harassment includes unwanted sexual advances, requests for sexual favors, direct or indirect threats or bribes for
sexual activity, sexual innuendos and comments, sexually suggestive jokes, unwelcome touching or brushing against a
person, pervasive displays of materials with sexually illicit or graphic content, and attempted or completed sexual assault.
It varies depending on the situation and the people involved. Sexual harassment is not restricted by gender. Anybody,
male or female, can be a victim of sexual harassment (Camilar-Serrano, 2016).
There are two (2) forms of sexual harassment (Camilar-Serrano, 2016):
1. Quid pro quo (an employment decision): Like in a promotion, an assignment, or even keeping one’s job is
based on submission to sexual harassment. Unwanted sexual advances, requests for sexual favors, or other
verbal or physical behavior of a sexual nature comprise quid pro quo sexual harassment when:
a. Giving in to such conduct is made whether openly or implicitly a term or condition of employment; or
b. Giving in to or refusal of such conduct is used as the source for employment decisions.
2. Hostile work environment: Sexual harassment makes the workplace environment frightening, intimidating, or
offensive. All verbal or physical conduct of a sexual nature constitutes a hostile environment. Sexual harassment
in this form has the intention of unfairly meddling with an employee’s work performance. The law considers
some factors to establish whether an environment is hostile, including:
a. Whether the behavior was verbal, physical, or both;
b. How often it was done again;
c. Whether the behavior was hostile or obviously unpleasant;
d. Whether the supposed victim was a co-worker or supervisor;
e. Whether others connived in committing the harassment; and
f. Whether the harassment was aimed at more than one (1) individual.
Employee Promotion
A promotion is a move up the organizational ladder. There are two (2) major promotion tracks: one based on
accomplishment, the other on the competition.
Accomplishment promotions are those scheduled for workers attaining specific, predetermined goals. For example, in an
office of stockbrokers, that money under their direction may automatically be elevated. An account executive could
become a vice president of accounts after he’s gathered more than 99 clients or has garnered accounts valued at more
than a million pesos. Along with the new title, there will be pay raise and additional benefits.
Competitive promotions, on the other hand, are those situations where workers within a group are not only teammates
working to attain the organization’s goals but also competitors contending for that one slot that comes open on the
hierarchy’s next level up. In this situation, the ethics of trying to get the promotion comes into play (Camilar-Serrano,
2016).

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Employee Termination
Terminating employees is one of the most feared tasks for human resources managers. Unless there is a definite cause to
terminate the employee from the company, the decision to stop the employment relationship is a hard one. In an ordinary
situation, when a human resources manager removes an employee, the lives of not just the employee but the employee’s
family as well are affected. Employee terminations also have an effect on existing employees. It is for these reasons that
a human resources manager charged with terminating an employee will struggle with the ethical dilemmas about
termination.
Ethics factor comes in whether an employee should rightfully be terminated for grounds connected to employee
performance. When an employee’s performance is mediocre, the instruction given to human resources may be to
terminate the employee. In contrast, a human resources manager may consider mediocre performance could be enhanced
through a structured improvement program. The choice to spend on an employee’s performance or just terminate an
employee is a foremost ethical dilemma for numerous human resources professionals (Camilar-Serrano, 2016).
Distribution Dilemmas
Ethics is a prime concern in marketing, and the areas of price, placement, and promotion are no exception. Pricing refers
to the way in which prices are set for consumers considering the cost of inputs, distribution, and overhead. Placement
involves the strategic positioning of products within retail stores. Promotions involve short- term price discounts or
giveaways. Each of these areas presents its own set of ethical dilemmas, challenges, and legal guidelines to navigate
(Jerusalem, Palencia, & Palencia, 2017).
Pricing Strategy Ethics
A fair and reasonable price is the price point for a good or service that is fair to both parties involved in the transaction.
This amount is based upon the agreed-upon conditions, promised quality, and timeliness of contract performance.
There is a common consensus that marketing strategies must not violate values like honesty, transparency, and autonomy.
As such, the main root of pricing ethics concerns the establishment of a balance of power between the producer and the
consumer. In a completely free market, producers frequently have the upper hand because they are in power over their
products and processes. This potentially led to unethical practices, which could be in the form of using cheap or harmful
materials or lying about benefits, which are believed to be harmful to society as a whole (Camilar-Serrano, 2016).
Price collisions can be a major source of ethical pressure in many industries, and artificial price-fixing is illegal in a wide
range of countries. Price collusion exists when a number of competitors agree to set prices at a certain level, bypassing
the natural market forces of supply and demand and creating an unfair advantage over consumers (Jerusalem, Palencia, &
Palencia, 2017).
Product Placement Ethics (Media)
It has been a continuous debate whether product placement found in different types of media (television, commercials,
movies, etc.) is ethical or not. There are thousands of films that would have never made it to the screen without the help
of product placement. Not only is product placement great because it helps films actually be produced, but it also brings a
sense of “believability for us as audience members.”
On the other hand, the audience is not aware they are being advertised with product placement. This can create many
problems, especially with kids. The issue arises when people can’t tell if a brand is being used for an artistic purpose or a
financial agreement. According to a critic, “The imperative of corporate branding threatens to dominate even our artistic
endeavors–especially when audiences can’t tell the difference between art and ads (Dodds, 2015).”
Ethics and Promotions
Promotions are designed to boost short-term sales by providing irresistible value propositions to consumers. Coupons,
holiday sales events, mail-in rebates, and giveaways all fall under the promotions category. The “bail and switch” tactic,
which refers to a situation wherein customers are lured in with specific claims about the quality or low prices on items
that turn out to be unavailable in order to upsell them on a similar, pricier item

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(Investopedia, 2021). This is widely considered unethical, yet many companies still practice this promotion technique
(Jerusalem, Palencia, & Palencia, 2017).
Fraud
Product Misrepresentation (Camilar-Serrano, 2016)
Misrepresentation means a transformation of information into misinformation. It could be direct or indirect in nature.
1. Direct: This is done through actively misrepresenting a product or service, which creates a bad name due to
deception or lying
a. Deceptive packaging: The objective is to create an impression wherein buyers or the end-users will see
the improvement, either by weight without any change in the price.
b. Adulteration: The unethical practice of corrupting a genuine commodity by imitating or by adding
something to increase its bulk or volume, or even by substituting an inferior product for a superior one for
the purpose of profit/gain.
c. Misbranding/mislabeling: The act of copying a product’s design in the closest possible way giving an
impression that it is the same with a leading brand.
d. Short weighing: Tampering weighing scales by intentionally offsetting the calibration of the dials.
e. Shortchanging: Taken directly from a situation where the seller gives the customer less than the change he
should get.
f. Short measuring: An unethical act observed in products that depend on the length and/or volume where
the meter stick used is shorter than the real length.
g. Short numbering: The seller gives the customer the quantity by a piece of the product less than the number
he has paid for.
h. Misleading advertising: The use of false or misleading statements in advertisements and
misrepresentation of the product at hand, which may negatively affect many stakeholders, especially
consumers.
2. Indirect: This is done by omitting unfavorable information about the product or service.
a. Caveat emptor: Similar to the phrase “sold as is”, this term means that the buyer assumes the risk that a
product may fail to meet expectations or have defects. In other words, the principle of caveat emptor serves
as a warning that the buyers have no recourse with the seller if the product does not meet their expectations.
b. Business ignorance: Unable to give the customer the complete information he needs to make a fair
decision in buying the product or service.
Tax evasion (Jerusalem, Palencia, & Palencia, 2017)
Tax evasion refers to the elimination or reduction of one’s correct and proper tax by fraudulent means, which is
criminally punishable. Tax avoidance, on the other hand, is an attempt to minimize the payment or altogether eliminate
tax liability by lawful means, which is not criminally punishable while the latter.
Unfair Competition
A situation in which competitors compete on unequal terms because favorable or disadvantageous conditions are applied
to some competitors but not to others.
The concept can also refer to situations in which the actions of some competitors actively harm the positions of others
with respect to their ability to compete on equal and fair terms (Jerusalem, Palencia, & Palencia, 2017).
a. Antitrust Law or Competition Law: When one competitor attempts to force others out of the market or prevent
others from entering the market through tactics such as predatory pricing or obtaining exclusive purchase rights
to raw materials needed to make a competing product.
b. Trademark Infringement: When the maker of a product uses a name, logo, or other identifying characteristics
to deceive consumers into thinking that they are buying the product of a competitor.
c. Misappropriation of Trade Secrets: When one competitor uses espionage, bribery, or outright theft to obtain
economically advantageous information in possession of another.
d. Trade Libel: The spreading of false information about the quality or characteristics of a competitor’s products.

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e. Tortious Interference: When one competitor convinces a party having a relationship with another competitor
to breach a contract with or duty to the other competitor.
f. Anti-competitive practices: It is to prevent or reduce competition in a market.
g. Dumping: Foreign countries often use dumping as a competitive threat, selling products at prices lower than
their normal value. This can lead to problems in domestic markets. It becomes difficult for these markets to
compete with the pricing set by foreign markets, leading to local producers and the local economy suffering a
result.
h. Exclusive dealing: A retailer or wholesaler is obliged by contract to only purchase from the contracted
supplier.
i. Price fixing: Companies collude to set prices, effectively dismantling the free market.
j. Refusal to deal: Two companies agree not to use a certain vendor.
k. Dividing territories: An agreement by two (2) companies to stay out of each other’s way and reduce
competition in the agreed-upon territories.
l. Limit pricing: It is set by a monopolist at a level intended to discourage entry into a market.
m. Tying: Products that aren’t naturally related must be purchased together.
n. Resale price maintenance: Resellers are not allowed to set prices independently.
o. Religious/minority group doctrine – Business must apply tribute to a significant normally religious part of
the community in order to engage in trade with that community.
Unfair communication
Conflict of interest
Conflict of interest in the organizational context happens when someone acts in a way that is advantageous to himself at
the expense of his employer. When hired by the employing company, an employee has implicitly agreed that the interest
of the company is above his personal interest. Conflict of interest could be non-financial or financial in nature.
Incentives are everywhere in all aspects of society to motivate effort, performance, and social welfare. People are
rewarded for taking certain actions like workers for their effort and productivity, salespeople for their sales, and small
business owners for successful ventures. Incentives work reasonably well, especially when they are well-understood by
everyone. Except occasionally, individuals have incentives that violate their responsibilities and hurt their clients and
employers, frequently in manners that are not visible to the public or in their own minds. These conflicts of interest create
grave economic and social troubles (Camilar-Serrano, 2016).
Non-respect of agreements
A breach of contract is a legal cause of action in which a binding agreement is not honored by one or more of the parties
to the contract by non-performance or interference with the other party’s performance (Jerusalem, Palencia, & Palencia,
2017).
Environmental degradation
It is the deterioration of the environment through the depletion of resources such as air, water, and soil, the destruction of
ecosystems, and the extinction of wildlife (Jerusalem, Palencia, & Palencia, 2017).
The Stakeholder
Framework ModelResponsibility
of Social of the Corporation
(Cortez, 2016)
Friedman’s view of the responsibility of business is usually called the shareholder or stockholder model of the
corporation for the obvious reason that his main concern is the profit of the shareholders or owners of the corporation.
Some scholars believe that one of the main reactions against Friedman is expressed in what is now known as the
Stakeholder Model of the Corporation.
The term ‘stakeholder’ refers literally to somebody who “holds the bet or the wager on the outcome of an enterprise – as
well as, perhaps also originally, the result of a game of a horse race.” Originally, therefore, a stakeholder is a neutral
person who is entrusted to hold the bet for two (2) people engaging in an enterprise (especially a gambling enterprise). A
stakeholder essentially has no stake in the enterprise; he just holds the stake for the people who own the said stake.

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Over the years, the meaning of the word ‘stakeholder’ evolved throughout the years. A stakeholder in an organization is
any group or individual who can affect or is affected by the achievement of the organization’s objectives.” From this
definition, the following are considered as the stakeholders of the business organization: shareholders (stockholders,
owners), employees, customers, suppliers, competitors, government, non- government organizations, community, and the
natural environment.

Figure 1. A Business Organization's Stakeholders

Source: Business Ethics and Social Responsibility, 2016, p. 179

The stakeholder model shows that business managers cannot afford to have a narrow understanding of their
responsibilities. Their duty is not limited to economic welfare in terms of profit for the owners of the business
organization. The managers of the firm must also consider the claims of other primary and secondary stakeholders. It is
mainly because the business organization does not only relate with and affect its owners. The business organization has
operational consequences to the natural environment, the community where it operates, the employees, the customers,
and many other interest groups.
The viability of a business organization depends on how it manages the various stakeholders effectively and efficiently.
A narrow concern for the financial gains of the firm’s owners is an unsound management strategy, inviting the risk of
extinction. Moreover, due to the uncertainty and complexity of the business world today and the interconnectedness of its
various stakeholders, a company cannot sustain its performance if it manages its shareholders at the expense of other
stakeholders.
Corporate Social Responsibility (CSR)
CSR refers to a person’s obligation to consider the effects of his decisions and actions on the whole social system.
Businessmen apply social responsibility when they consider the needs and interests of others who may be affected by
business actions. In so doing, they look beyond their firm’s narrow economic and technical interests.
There are five (5) dimensions of CSR:
a. Environmental: Pertains to many CSR definitions’ direct assertion of concern for the natural environment.
b. Social: Points to the aspect of CSR wherein the business is conscious of its impact on the communities.
c. Economic: Pertains to the emphasis on preserving the economic viability or profitability of the business
organization.

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d. Stakeholder: Emphasizes the importance of how other stakeholders such as employees, suppliers, and
customers are fairly and justly treated.
e. Voluntariness: Speaks of the CSR programs as going beyond the requirements of the law and as being
motivated by ethics and values.
One of the most important achievements of CSR is that many businesses are no longer focused solely on profit
maximization. They have become more aware that exploiting the workers, polluting the environment, and deceiving the
consumers just to collect the largest profits possible is unacceptable. Furthermore, many businesses recognize that their
responsibility dies not only to consist in not doing the wrong thing but also in doing something right for the community
and the environment.
From the CSR perspective, doing something right must not only be born out of benevolence but out of a deep sense of
responsibility toward the other stakeholders of the business institution. Supporters of CSR believe that doing well
(financial performance) is compatible with doing good (ethical and social performance) and that there is a virtuous circle
connecting good corporate social performance with good financial performance.
References
Camilar-Serrano, A. O. (2016). Business Ethics and Social Responsibility. Unlimited Books Library Services &
Publishing Inc.
Cortez, F. G. (2016). Business Ethics and Social Responsibility. Vibal Group, Inc.
Dodds, A. (2015, March 05). Product Placement: Is it Ethical? Retrieved April 7, 2021, from
https://mediaethicsmorning.wordpress.com/2015/03/04/product-placement-is-it-ethical/
Hayes, A. (2021, April 01). Bait and Switch Sales Tactic. Retrieved April 7, 2021, from
https://www.investopedia.com/terms/b/bait-switch.asp#:~:text=Bait and switch, is a, takes place in other contexts.
Jerusalem, V., Palencia M, & Palencia J. (2017). Business ethics and social responsibility: concepts, principles, &
practices of ethical standards. FASTBOOKS Educational Supply, Inc.

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