Shared Inputs from

Atty. Rufino Tengco Lopez

JD, MBA, MDP, LE
Faculty – PLM GSB

Credits to :
Dr Denise Dollimore
University of Hertfordshire, UK
Following this session students should be able to:

❑Define business ethics and describe the factors that shape a

manager’s ethical decision making.

❑Describe the principles of good Corporate Governance

❑Define corporate social responsibility and explain how to

evaluate it along economic, legal, ethical, and discretionary
criteria.
❑ He who is lips to his rights, will be left by his own
lips… Atty RCasano

❑ Sic Utere Tuo Ut Alienum Non Laedas – use your

property in such a manner not to injure that of another

❑ Salus Populi Est Suprema Lex – the welfare of the people

is the supreme law (interest)

❑ If you build it… they will come… (movie: Fields of Dreams

*Kevin Costner
Ethical values: shared beliefs about right and wrong,
good and bad
❑ Govern the behaviour of a person or a group

Ethical issues: problems or dilemmas which present a

conflict of values
❑ Pay a ‘living wage’ or personal financial gain

Ethical choices: decisions about which option to take in

response to a dilemma
❑ Difficult decisions, because each option has its own
drawbacks
Some business practices always
considered unethical and often illegal

❑ Misleading advertising (IPO issue)

❑ Misleading labeling (IPO Issue)
❑ Poor product or service safety (PP
Regulation)
❑ Harming the environment (Environment
M.CM)
Some business practices always
considered unethical and often illegal

❑ Insidertrading (Commercial)
❑ Padding expense accounts (Taxation)
❑ Dumping flawed products on foreign
markets (Customs)

Remember: If in Doubt – Inquire from

Regulatory Offices, for good faith
presumption (if acts did was wrong)
 According to Global Sullivan Principle

❑ Misreporting the amount or number of hours

worked
❑ Taking credit for the work of another person

❑ Stealing resources (i.e. cash, inventory) or falsifying

financial statements
❑ Accepting gifts or other forms of payment that
might cloud one’s objectivity in decision-making
❑ Getting too personal with any colleague or superior
in a professional setup… Sexual harassment occurs
when such actions create a “hostile work
environment.”
 According to Global Sullivan Principle

❑ Violating one’s confidentiality obligation to

the organization by divulging sensitive
information
❑ Misrepresentation of data, knowingly or
unknowingly. It also involves failing to report
such misrepresentation by other employees of
the organization
 Failing to disclose all the information the
public has a right to know. This would include
product safety and financial information.
 Treating others unfairly including employees,
customers, and suppliers
 Free
Law Ethics
Choice

Legal Standard Social Standard Personal Standard

A personal responsibility?
Prepared by: Lariza Laming, RN
Different culture have different rules of conduct.
Some cultures view certain ethical practices with different
levels of condemnation (Pitta et al, 1999)

ISSUES: REFERENCES:

https://home.ubalt.edu/ntsbpitt/ethics.pdf
Asenet.org/topics/cuture.com
-Bribery https://www.alzheimer-europe.org/Ethics/Definitions-and-approaches/What-is-
meant-by-the-term-ethics?fbclid=IwAR2Frw8UI6mawXCRfT6QPAkd_wc5CwErKk-
7l3eRmbFb8Yfa2RGpUmNvgz8
-Corruption https://www.afar.com/magazine/beyond-the-handshake-how-people-greet-
each-other-around-the-world
-Sleaze (immoral, corrupt behavior) https://theculturetrip.com/north-america/usa/articles/12-surprising-customs-
from-around-the-world/

PRACTICE:

Tipping in the U.S./Boracay v Bali, Indo

Pointing with lips in Nicaragua
Slurping in Japan
Using the left hand for things
Stick out your tongue in Tibet
CROSS CULTURAL
ETHICAL ISSUES

Prepared by: Lariza Laming, RN

❑ You are a strategic analyst at a successful hotel enterprise that
has been generating substantial excess cash flow.
❑ Your CEO instructed you to analyse the competitive structure of
closely related industries to find one the company could enter,
using its cash reserve to build up a substantial position.
❑ Your analysis suggests that the highest profit opportunities are
to be found in the gambling industry. You realise that it might be
possible to add casinos to several of your existing hotels,
lowering entry costs into this industry.
❑ However, you personally have strong moral objections to
gambling

Should your own personal beliefs influence your

recommendations to the CEO?
❑ Utilitarian approach – moral behavior produces the
greatest good for the greatest number
❑ Individualism approach – acts are moral when they
promote the individual’s best long-term interests
❑ Moral rights approach – moral decisions are those
that best maintain the rights of those affected,
including free consent, life and safety
❑ Justice approach – decisions must be based on
standards of equity, fairness, and impartiality; (esp.
important in HR management)
❑ Companies experience ‘social blowback’ when
stakeholders perceive that they have breached their
deal with society

❑ Good business ethics is a prerequisite for good

strategic management
Social Blowback

– unforeseen and
unwanted effect, result
or set of repercussions.
6 PILLARS OF CORPORATE CHARACTER

 Honesty
 Do not lie or deceive stakeholders in
conducting business operations
 Fully disclose all the information that
stakeholders have a right to know

 Trustworthiness
 Act in a reliable manner by exercising
diligence in business decision making
 Be consistent and dependable in word and
deed
6 PILLARS OF CORPORATE CHARACTER

 Fairness
 Judge performance in the workplace in an
unbiased manner
 Act in accordance with established standards
of behavior (i.e. code of conduct)

 Integrity
 Keep promises and carry through decisions
with ethical action
 Act to prevent improper behavior or to stop it
once it has been detected
6 PILLARS OF CORPORATE CHARACTER

 Responsibility
 Meet obligations to stakeholders
 Accept the consequences of decisions and act
to improve corporate behavior

 Civic virtue
 Follow the laws and customs of society
 Act in a socially responsible manner
❑ Companies have responded to increasing
expectations by advocating what is now a common
term in business: Corporate Social Responsibility
(CSR)

❑ Most large companies now feature CSR reports,

managers, departments, and the subject is
increasingly promoted as a core area of
management - next to marketing & accounting
Crane, Matten & Spence (2008)
❑ Government: the law makers?
▪ Business ethics begins where the law ends
❑ The ‘strategists’: CEO, COO, CFO, managers
▪ Core values, beliefs ‘embedded’ in organization
▪ Business ‘code of ethics’ (Banking, Media, Food Industry)
❑ Board of Directors
▪ Corporate Governance
▪ Duties & Responsibilities

❑ Stakeholders
▪ Consumers/pressure groups/local community/Media
▪ Corporation / Partnership / Association / Organizations
Who is Responsible for Ethics / CSR?
Leadership & Management Issues
CEO / Strategists

Code of business ethics:

❑ Provides basis on which policies can be devised to
guide daily behavior and decisions in the workplace
❑ CEO & Management responsible for implementation
Who else is responsible for Ethics / CSR?
Governance Issues

Board of Directors Roles & Responsibilities

▪Control & oversight over management
▪Adherence to legal prescriptions
▪Consideration of stakeholder interests
▪Advancement of stockholder rights

Is ‘being ethical’ good for business?

Is it possible to be both profitable and responsible?
❑ The way in which organizations are directed and
controlled
Cadbury (1992)

❑ The process by which corporations are made

responsive to the rights and wishes of
stakeholders
Demb and Neubauer (1992)
The Growth of Modern Corporations
The ‘Agency Problem’

❑ The agency problem arises because of the

separation between ownership of an organization
and its control

❑ The agency problem is inherent in the

relationship between the providers of capital,
referred to as the ‘principal’, and those who
employ that capital, referred to as the ‘agent’.
The ‘Agency Problem’
❑ Agency problems occur because no contract, however precisely
drawn, can possibly take account of every conceivable action
that an agent may engage in

❑ How do you ensure that the agent will always act in the best
interest of the principal?

❑ ‘Agency costs’ occur where there is a divergence between these

interests
Hence original purpose of Board of Directors
How are such issues addressed?
▪ 2 or more but not more than 15 Incorporators
▪ Independent Directors if imbued with Public Interest (20%)
▪ Merger or Consolidation
▪ Joint Venture
▪ One Person Corporation vs Sole Proprietor
▪ General Professional Partnership
▪ Cooperative Development Autorities
▪ CEO, President, General Manager, Managing Partner
▪ Shareholders have considerable power and information to
choose & replace directors (with or without Reasons)
▪ Who are the Officers for Good Governance?

▪ Subject to Philippine Revised Corporation Code

The Purpose of Corporations?
To maximise shareholder value

‘In a free enterprise, private property system, a corporate

executive is an employee of the owners of the business. He
has direct responsibility to his employers. That
responsibility is to conduct the business in accordance
with their desires, which generally will be to make as much
money as possible…’
Milton Friedman (1970)
The Pyramid of CSR
Archie Carroll (1991)
Socially obstructive
Prioritising short-term shareholder interests
Avoids highly regulated business locations, lobby to change
laws
Socially obligative
Prioritising longer-term shareholder interests
Comply with laws
Socially responsive
Balancing multiple stakeholder obligations
Pay attention to pressure groups, use CSR to build competitive
advantage
Socially contributive
Seeking to shape society
Promoting sustainability and locally led economic development
The Purpose of Corporations?
To meet the needs of stakeholders

Stakeholders are individuals or groups that affect or are

affected by the achievement of an organization’s objectives

Edward Freeman (1984)

eg., shareholders, customers, suppliers, employees,

government, local community, media…
Key question…
Should a business prioritise shareholder value or
stakeholder needs?

❑ Shareholders own the business

▪ Primarily for financial gain

❑ Stakeholders are affected by the decisions and operational

activities of the business
▪ Financial, non-financial and personal benefits

The social contract between business and society

is constantly evolving... (Waddock 2010)
❑ The early message ‘doing well by doing good’
❑ CSR imposes political functions of govt on corporate executives
❑ CSR has failed to create the good society – expecting too much
from business
❑ Close adherence to CSR agenda leads to falling profits
❑ Difficulty in allocating rights responsibilities and enforcing
them – who decides?
❑ Stakeholder theory the way forward through building superior
relationships.
❑ Good CSR manages the paradox of profitability & responsibility

Jury is still out – you decide!

▪ Cadbury. 1992, Corporate Governance and Chairmanship. Oxford.
▪ Carroll, A.B. 1991 The Pyramid of corporate social responsibility: toward the
moral management of organizational stakeholders. Business Horizons, July-
Aug: 39-48.
▪ Demb and Neubauer. 1992, ‘The Corporate Board: Confronting the
Paradoxes’. Long Range Planning, Vol 25, Issue 3, June, pp. 9–20.
▪ David, F. 2008, Strategic Management Concepts and Cases Pearson
International Edition.
▪ Freeman, E. 1984, Strategic Management: A Stakeholder Approach. Boston:
Pitman.
▪ Friedman, M. 1970, ‘The Social Responsibility of Business is to increase its
Profits’. New York Times Magazine, 13 September.
▪ Jensen and Meckling, 1976, Theory of the Firm: Managerial Behaviour,
Agency Costs and Ownership Structure. Journal of Financial
Economics.3:305-60
▪ Waddock, S. (2010) ‘The Social Contract of Business in Society’ in Aras and
Crowther eds. A Handbook of Corporate Governance and Social
Responsibility 2010 pp. 69-82