SRGG Module (Finals)

INNOVATIVE COLLEGE OF SCIENCE AND TECHNOLOGY
MALITBOG BONGABONG ORIENTAL MINDORO

Business Administration Department
SOCIAL RESPONSIBILITY AND GOOD GOVERNANCE

ZAMORA, FRANCIS ADEL R.
I. OBJECTIVES
At the end this chapter, the students are expected to:
1. examine the different issues and problems in business and the business enterprise from the moral
perspective
2. develop a framework for analysis and resolution of ethical dilemmas and problems affecting business
3. acquire basic information about questionable business practices and their impact to its stakeholders
4. develop problem solving skills using the philosophical qualitative approach to resolve ethical problems
in the business and corporate world
II. TIME FRAME

• WEEK 9 and 10 ( FINALS )
6 HOURS
III. TOPICS
ETHICAL ISSUES AND PROBLEMS IN BUSINESS AND THE CORPORATE WORLD
"Life is really simple, but we insist on making it complicated." -

Confucius
INTRODUCTION
Business is a productive human activity that brings beneficial contribution to both people and society.
Business produces employment, fair deals, creativity, advancement of technology, customers' satisfaction,
among others. Ironically, however, business is also an activity that provides an opportunity for some
unscrupulous people to take advantage of others, e.g., the abuse fiduciary relationship between employers and
employees and between buyers and sellers. This chapter examines the broad array of ethical issues and
problems that affect the flow of business as a dynamic yet complex human activity
1. Sexual Harassment
WHAT IS SEXUAL HARASSMENT?
Sexual harassment is an issue in the corporate world that must be looked into because it can create a
hostile and unhealthy workplace for the employees. For this reason, the Congress of the Philippines enacted
the Anti-Sexual Act of 1995 or R.A. 7877 declaring sexual harassment unlawful in the employment,
education or training environment, and other purposes
"The State shall value the dignity of every individual enhance the development of its human resources,
guarantee full respect for human rights, and uphold the dignity of workers employees, applicants for
employment, students or those undergoing training, instruction or education.
Towards this end, all forms of sexual harassment in the employment, education or training environment are
hereby declared unlawful."
The Civil Rights Act of 1964 (Title VII) of the United States of America, from which our law was patterned,
defines sexual harassment as "Unwelcome sexual advances, requests for sexual favors, and other verbal or
physical conduct of a sexual nature constitute sexual harassment when submission to or rejection of this
conduct explicitly or implicitly affects an individual's employment, unreasonably interferes with an individual's
work performance or creates an intimidating. hostile or offensive work environment."
Republic Act No. 7877 defines sexual harassment as "Employer, employee, manager, supervisor, agent of
the sexual favors from an employee, e.g., "Go to bed with me and you will get that promotion you want."
In the hostile environment type of harassment, abuses include verbal, physical and visual conducts that create
an intimidating, offensive, or hostile environment in the workplace that interferes with work performance. This
type of harassment may be based on race, religion, national origin, sex, age marital status, veteran status,
sexual orientation, or disability Some examples of a hostile environment are as follows:
SOCIAL RESPONSIBILITY AND GOOD GOVERNANCE – FRANCIS ADEL R. ZAMORA Page 1

 Unwanted touching, patting, pinching or brushing up against a person:

 Comments about your body, leering, wolf-whistling, catcalls, insults of a sexual nature, persistently
pestering for a date,
 Displaying or circulation of pornographic pictures with the intention of harassing someone/posting of
explicitly sexual materials:
 Workplace blackmails, e.g., suggestions that sexual favors may further your career (or refusal may
hinder it);
 Green jokes,
 Obscene letters;
 Sexual proposition; and
 Suggestive looks.
The Profiles of the Victim and the Harasser
1. The victim as well as the harasser may be a woman or a man. The victim does not have to be of the
opposite sex
2. The harasser can be the victim's supervisor, an agent of the employer, a supervisor in another area. a
coworker, or a non-employee.
3. The victim does not have to be the person harassed but could be anyone affected by the offensive
conduct The harasser's conduct must be unwelcome.
It is helpful for the victim to directly inform the harasser that the conduct is unwelcome and must stop. The
victim should use any employer complaint mechanism or grievance system available. Although the victim of
sexual harassment and the person accused of sexual harassment may be peers. more frequently, the victims
are in a position of lesser position than the accused. The most common example is the boss subordinate
relationship. Harassment also occurs between customer client and providers.
How Does Sexual Harassment Affect the Workplace?
In the study made by Redbook Magazine in 1981 140,000 men and women were interviewed pertaining to
sexual harassment. The result revealed that 80 percent of the persons interviewed believed they have been
sexually harassed. The study also showed that use of words, jokes and gestures were the type of harassment
which created a hostile environment or offensive work environment. It affected the individuals harassed and
the persons accused, who may be innocent Such cases can generate costly lawsuits, unfavorable publicity or
the invasion of privacy. It can also affect the bottom line of the employer, managers and co-workers, and affect
the entire life of an organization and its members.
How to Prevent Sexual Harassment in the Workplace
A significant step an organization can take in preventing sexual harassment in the workplace is through
creating a safe. secure, and positive work environment by putting into practice a strong sexual harassment
policy. Some examples for policy development are the following:
 A broad anti-harassment positive environment policy that includes a statement that specifically
addresses sexual harassment;
 A separate sexual harassment policy that covers all organizational members, and
 Separate sexual harassment policy, one that addresses non-management employees and one that
addresses management
Sexual harassment is very costly and causes low morale among employees and a decrease in productivity.
Annoyed scared, disgraced people are incapable of performing well not dealt with, sexual harassment may
result in costly lawsuit dreadful publicity and ruin of an organization image that took years to establish.
Riddance of sexual harassment will come through the commitment of the organization and employees Most
persons male and female, want a secure office, free from threats are apprehension
Communicating the Sexual Harassment Policy
The best policy is ineffective if it is not communicated well. Even if the company already has a well-written
policy, it is important to expose it regularly through permanent posting on bulletin boards, memos, articles in
the organization's newsletters, meetings and trainings. Training programs may come up with various topics to
support the anti-harassment programs and to assure each employee of a safe and harassment-free workplace
environment.
Legal Penalties of R.A. 7877
 Imprisonment of not less than one (1) month but not more than six (6) months.
 Fine of not less than Ten Thousand Pesos (P10,000) but not more than Twenty Thousand Pesos
(P20,000)
2. The Problem of Just Wage
WORK AND COMPENSATION
Work is said to be for the purpose of obtaining economic gain for the laborer. Most agree that work is directed
to the promotion of life. The duty to preserve one's life implies the duty to work and that each has a personal
duty to take care of himself and not to be a burden to others
Being compensated for a work done or for services rendered is part of the essence of 'work'. One is willing to
work in exchange for remuneration or rewards he will receive from working. Such remuneration may include
both financial sand non-financial compensation. It can be in the form of wages, shares on profit, harvest or
commercial goods, in-kind payments, and other remunerative fringe benefits.
The main objective of compensation is to create a system of reward that is equitable to the employer and
employee. Thus, the general concern is that justice should be a substance of compensation
TYPES OF WAGES
 FAMILY WAGE - the amount of money that the worker needs to provide for the needs of the family
 JUST WAGE - remuneration which is enough to support the wage-earner in reasonable and frugal
comfort
 NOMINAL WAGES - measured in terms of money paid, not in purchasing power
 REAL WAGES - measured in terms of actual purchasing power (inflation)
 LIVING WAGES - minimum hourly wage necessary for a person to achieve some specified standard of
living
 MINIMUM WAGE minimum worker Can legally be paid as set by the state or government
The Question of Just Wage
The question of "What is a just wage?" or "How do you define a fair wage?" has a long history. A number of
people all over the world commented on its definition and have argued on the appropriate criteria to consider in
setting the so-called just wage. A just wage is defined as that remuneration which is enough to support the
wage-earner in reasonable and frugal comfort. The Catholic Church teaches us that "a just wage is the
legitimate fruit of labor."
The Teachings of the Catholic Church on Wages
The question of just wages has played a dominant role in the teachings of five popes, including the late Pope
John Paul II, who returned to the theme repeatedly. Guidelines for just compensation, according to their
beliefs, were poetically expressed in their apostolic writings
 Rerum Novarum
At the turn of the century, Pope Leo XIII forced the question onto the world stage in 1891 with his ground-
breaking encyclical Rerum Novarum (also known as the Capital and Labor, May 15, 1891). In it, Pope Leo XIII
addressed what he termed the "misery and wretchedness pressing so unjustly upon the majority of the working
class." The pope wrote, "Members of the working classes are citizens by nature and has the same rights as the
rich." Pope Leo did not attempt to calculate a just wage. He simply decried the philosophy widespread then
and today that the marketplace alone should set wage structures. He said:
"Let workers and employers... make any bargains they like and in particular agree freely about wages;
nevertheless, there underlies a requirement of natural justice higher and older than any bargain
voluntarily struck; the wage ought not to be in any way insufficient... If a worker is forced to accept
harder conditions imposed by an employer or contractor, he is a victim of violence against which justice
cries out.

Rerum Novarum is one of the most impassioned treatises ever written by a pope on the sacredness of work
and the dignity of the working person. Pope John XXIII rightly called it the "Magna Carta for Social
Reconstruction."
 Quadragesimo Anno
Forty years after Pope Leo XIII wrote Rerum Novarum, Pope Pius XI came up with another document-
Quadragesimo Anno (On the Reconstruction of the Social Order), an encyclical that advocated the minimum
wage. Pope Pius XI introduced profit-sharing and giving workers a say in a company's management. Echoing
Pope Leo XI Hrs previous encyclical, he insisted that heads of families should receive a wage sufficient
enough to meet the ordinary family needs From this, he developed the concept of Family wage as one
sufficient wage for a single wage came to support his family.
Indeed, Pius XI's assertion became the American norm throughout the 1950s and 1960s, until the vast and
large voluntary influx of women into the workforce in the latter part of the 1960s and early 1970s.
 Mater et Magistra
Popes John XXIII and Paul VI advanced the church's teach ings on economic justice. Writing Mater et Magistra
("Mother and Teacher") in 1961, Pope John XXIII called on governments to reign in business abuses and to
press for full employment policies. This encylical adopted and affirmed the teachings of the previous social
documents. It also focused the world's attention to the worldwide problem of the widening gap between the rich
and the poor, the arms race and the plight of the farmers.
 Laborem Exercens
In 1981, Pope John Paul II issued Laborem Exercens (On Human Work), an encyclical letter that discussed
the modern perspectives and problems of human work and the duties of the members of the church towards it.
He also extended and adapted the previous encyclical Rerum Novarum of Pope Leo Xill to the present
situation of labor and asked for commitment to justice through the fostering of just wages, joint ownership and
sharing in management and profits of labor.
Pope John Paul II offered a detailed assessment of what constitutes just compensation, declaring that workers
have "fundamental rights" to health care insurance, suitable working conditions, and rest periods. The
disabled, he says. "should receive job training, and migrant workers should have special protections."
In addition, the pope also argued that wages should be sufficient so that women with children aren't forced to
work so that it should be possible for a mother to devote herself entirely to her children.
 Centesimus Annus
On the 100th anniversary of Rerum Novarum on May 1 1991. Pope John Paul II stated that "Society and State
must ensure wage levels adequate for the maintenance of the worker and his family, including a certain
amount for savings.
The right to a “just wage,” which cannot be left to the free consent of the parties, so that the employer, having
paid what was agreed upon has done his part and seemingly is not called upon to do anything beyond." It was
said at the time that the state does not have the power to intervene in the terms of these contracts, except to
ensure the fulfillment of what had been explicitly agreed upon.
Catholic Bishops' Conference of the Philippines (CBCP): On Social Justice
The Catholic Bishops of the Philippines, in a pastoral letter on Social Justice," issued in May 1949, referred to
a just wage as "family wage that is commensurate to the needs of a modest average Filipino Family. It stated
that remuneration for work should guarantee man the opportunity to provide a dignified livelihood for himself
and his family on the material, social, cultural, and spiritual level, taking into account the role and productivity of
each, the state of the business, and the common good The Bishops concluded their exhortation by reminding
employers that workers deserve a "family wage not in charity merely, but as duty to social justice."
The encyclicals of the popes and the teachings of the Catholic Church reflect the importance of just wage and
the welfare of the workers. The teachings of the popes on wages and labor are basically grounded on the
principles of commutative justice and charity. At the same time it also encouraged the formation of labor unions
and rejected individualism. "For no person can stand completely alone, we need each other. The role of unions
in negotiating minimum wages and working conditions is decisive in this area.
The Issue of Just Wage Has Also Been Discussed by Other Agencies
 Universal Declaration of Human Rights

The 1948 Universal Declaration of Human Rights protects the basic rights of the workers, more
specifically on
"The right to work, to free choice of employment, to just and favorable conditions of work, and to
protection against unemployment (Art. 23 (1) and the right to equal pay for equal work (Art. 23 [2])."
 International Convention on Economic, Social and Cultural Rights
The 1966 International Convention on Economic, Social and Cultural Rights states in Article 7:
"The right to fair wages and equal remuneration for work of equal value."
The International Labor Office Conventions has adopted ILO Convention No. 100:
"Equal pay for men and women workers."
Philippine Constitution and Republic Act 6727
Spread in various parts of the 1987 Philippine Constitution are specific pronouncements and mandates on the
protection and promotion of the rights of workers in the public and private sectors, as indicated in letter "g" of
Sec. 3 of Art XIII.
"That the workers are entitled to a living wage."
Republic Act No. 6727
The Wage Rationalization Act declared the policy of the State to rationalize the fixing of minimum wages and to
promote productivity-improvement and gain-sharing scheme to ensure a decent standard of living for the
workers and their families. The minimum wage rates shall be adjusted in a fair and equitable manner,
considering existing regional disparities in the cost of living and other socioeconomic factors.
Government Agencies Involved
In our country, determination of wages must also be equitable and just. The National Wage and Productivity
Commission (NWPC) and the Regional Tripartite Wages and Productivity Boards (RTWPB) determine the
minimum wage for Filipino workers. They handle the minimum wage rates of the workers of each and every
region of the country. It is their duty that wage shall be as nearly adequate as is economically feasible to
maintain the minimum standards of living necessary for the health, efficiency and general well being of the
workers.
Factors to Consider in the Formulation of Fair Wages
Every employer faces the problem of setting wage rates and salaries. It is easy to say that companies should
pay a fair and just wage. However, there are so many variables that no one can say how much a person
should be paid for a job. Factors such as workers' contribution to the firm, the market for labor, the competitive
position of the organization, the bargaining power of both firms and unions, and individual needs all conspire to
make a simple answer impossible. Further that simple answer may become more complicated by the fact that
remuneration also includes health care, retirement plans, bonuses, commissions, and other incentives. The
following more specific factors should be taken into consideration to provide a clearer picture of what a just and
fair wage should be:
1. External Market Factors. Refers to the supply and demand for labor and the so-called economic conditions
and underemployment. The principle behind this is that wages are relatively high if there is scarce supply of
labor. and the same is low if there are more opportunities for labor.
2. Laws and Regulation. Workers should be paid in accordance with laws and regulations issued by the
government. It requires that employers pay at least the minimum wage. The government usually determines
the minimum wage for its country. In our country, the National Wage and Productivity Commission (NWPC)
and the Regional Tripartite Wages and Productivity Boards (RTWPB) determine the minimum wage. But still,
the minimum wage is not always acceptable as fair and just.
3. Cost of Living. The cost of living relates to basic maintenance needs and it must be seriously considered in
the formulation of wages. A fair wage should be sufficient to meet the increase in cost of living. Thus, if the cost
of living goes up by 10 percent, the wage should also go up by 10 percent. Unfortunately, it is a fact that
majority of the employers cannot automatically adjust wages with the increase of cost of living. However, it is
certainly clear that ignoring the cost of living means jeopardizing the welfare of workers.

4. Prevailing Industry Rate. Some claim that paying workers the average of what other companies are paying
for the same job results in a fair wage. However, such claim is not universally valid because not all companies
have a minimum wage high enough to maintain a decent standard of living.
5. Organizational Factors. Assessment on what type of industry the organization operates, the size of the
company and the organization's profitability to justify its ability to provide fair wages to its workers should be
considered. Likewise, determining if the organization is unionized or not and if the company is capital or labor-
intensive could contribute to the establishment of fair wage.
6. Job Factors. The nature of the job itself entails the formulation of a just wage. Duties, responsibilities and
the skill requirements of the job are probably the most considerable determinants of fair wage. An employee
should be paid based on the complexity and difficulty of his job. This concept, however, is not perfectly similar
and true to all employers due to difference in interpretation of skills and tasks
7. Individual Performances. The trend suggests that individual performances or productivity ratings affed the
determination of wage/salary increases. One who performs well in his job deserves to receive a proportionate
increase in pay. However, this doesn't justify providing unfair wages to workers with low performance ratings
Some Issues on Just Wage
 The minimum wage mandated by the government is not a guarantee of a just and fair wage.
 Organizations and businesses usually conclude that they are legally and morally right when they fulfill
their 'mutual agreement with the employees. It is objected that the mutually agreed upon wages may
not be advantageous to the workers.
 Geographic differences hinder the formulation of a perfectly common definition of fair wage. Some com
munities have a higher cost of living than others.
 Wage indexation to cost of living, where wage is automatically adjusted with the increases of cost of
living, is not usually met by majority of the employers. One valid reason is the organizations' insufficient
financial resources for the obvious fact that they too are unfavorably affected by such economic
fluctuations.
 Companies have different interpretations of the justifiable pay for certain job positions, skills and tasks.
Thus, the prevailing rate in industry alone could not perfectly establish a just wage.
 The Law of Supply and Demand on labor, e.g., the more the supply of labor the less the compensation
being given to workers.
 Inflation Rate. As one of the major economic indicators, the inflation rate also dictates the formulation of
just wages as it affects the prices of commodities.
3. Gift Giving and Bribery GIFT-GIVING
Gift-giving is merely an act of extending goodwill to an individual in an effort to share something with them.
Giving gifts to customers, clients, and business partners is a common practice in the business community. It is
normally observed during special occasions like Christmas, New Year, and sometimes even during birthdays.
Businesses usually engage in gift-giving for the following reasons:
 To show appreciation for a favor received;

 To effectively establish goodwill with business partners;
 To advertise; and
 To compete effectively against competitors.
 The following are the common forms of gift-giving:
 Samples
 Raffle coupons/certificates
 Rebates/cash refunds
 Padding
 Premiums
 Prizes
 Patronage awards (rewards)
 Tie-up promotions
 Allowance
 Free goods
 Tips
Is Gift-Giving Ethical or Unethical?

Business gifts of clients and business associates can raise conflict-of-interest problems, and knowing where to
draw the line, between what is right and wrong, is not always easy, The clear point is that those who cross that
line, intentionally or not, end up in big trouble.
Examples
Supposing you are a lawyer by profession and,
 Linda, a former client, has steered a half dozen prospective clients your way this year, and several of
them have become valued clients of your firm Would it be an appropriate gesture, to thank her by
inviting her and her husband out for a dinner?
 Jose, your former classmate in law school (now an established lawyer practitioner), has referred a case
that just resulted in a significant settlement. Would there be anything wrong with sending him a pair of
concert tickets as a "thank you" gesture?
It is indeed difficult to determine the morality of giving gifts. Most agree that accepting and receiving bribe is
a violation of professional ethics, but we may not always find it easy to determine what is and is not a bribe.
Certainly not all examples of giving and accepting gifts and amenities qualify as bribery, just as not all cases of
taking another's property should be considered theft.
For professionals and people in the business world, the rules are not so clear and identified, but a number
of considerations can help one determine the morality of giving and receiving gifts in a business situation.
Factors in Determining the Morality of Gift-Giving
1. Value of the Gift. Is the gift of nominal value, or is it substantial enough to influence a business decision?
The term "nominal" or "substantial" in this point of view is relative. It varies on beliefs and culture of a particular
group of people and society. However, from the majority point of view, a valuable gift is definitely unethical It is
for this main reason that the” goodwill” motives of the giver are open to doubt.
2. Purpose of the Gift. As long as the gift is not intended or received as a bribe and remains nominal, there
doesn't appear to be any serious problem What is important to this question of purpose is the consideration of
whether the gift is directly tied lo an accepted business practice or not. For example, gifts like appointment
books, calendars, or pens and pencils with the donor's name clearly imprinted on them may be perceived as a
form of advertisement.
3. Circumstances under Which the Gift Was Given or Received. A gift given during holiday season, for a
store opening, or one attached to a special event is circumstantially different from one unattached to any
special event or occasion. Another question is whether the gift was given openly or secretly. Openly given gifts
raise fewer questions than those gifts known only to the donors and recipients.
4. Position between or Relationship of the Giver and Receiver. Could the recipient's opinion, influence, on
decision result in preferential treatment in favor of the donor? In a superior and subordinate relationship. for
instance, the donors or the recipients have to make it clear that they don't intend to allow the gift to influence
their actions and decisions.
5. Acceptable Business Practice in the Industry. Could the act be considered acceptable in this kind of
business? Monetary gifts and tips are usually practiced in numerous service industries. When gratuities are an
integral part of customary business practice, they are far less prone to pose moral questions.
6. Company Policy. If firms explicitly forbid the practice of giving and receiving gifts to its customers, vendors
or suppliers, associates, or corporate directors, then gift-giving would normally be wrong.
7. Laws and Regulations. Certain federal, state or local government institutions may impose laws that forbid
accepting gifts from firms with which they do business. When these gift transactions violate the law, they are
clearly unacceptable.
Still the ultimate moral judgment hinges on whether an objective partly could reasonably suspect that the gift
might lead the recipient to sacrifice the interest of the firm for his/her own personal gain.
BRIBERY
Bribery is defined as a practice of giving renumeration for performance of an act that is inconsistent with the
work contract or the nature of the work one has been hired to perform, it is intended to induce people inside the
business or other organization to make decisions that would not be justifiable according to normal business or
other criteria. It was then identified to be a form of corruption and is generally immoral and for most is illegal.
Renumerations, termed as bribes, can be in the form of money, gifts, entertainment, or preferential treatment.

Examples of bribery:
 a motorist offers a certain amount of money to a police officer in order not to be issued a ticket for
overspeeding;
 a citizen seeking paperwork or utility line connections gives an expensive gift to a functionary in
exchange for a faster service;
 a construction company sharing percentage of its income to a civil servant in order to win a contract
and
 a narcotics smuggler bribes a judge to lessen criminal penalties
In some cases, the briber holds a powerful role a controls the transaction; in other cases, a bribe may
effectively extracted from the person paying it.
Bribery is obviously unethical because of the following reasons:
 It is generally used as an instrument to gain personal or corporate advantage,

 It corrupts the concept of justice and equality Bribery produces cynicism and a general distrust of
institutions;
 It destroys people's trust in the integrity of profes sional services, of government and the courts of law
enforcement, religion, and anything it touches, and
 It treats people as commodities whose honor can be bought and sold. It thus tends to degrade the
respect we owe to other human beings.
4. The Morality of Advertising
Advertising plays a very significant role in marketing goods and services. Without advertising, the
consumers would not be aware of the presence of diverse products and services available in the market.
Sometimes, even the mere presence of advertising can sell a product due to consumer perception that a
heavily advertised product is a product of "good value."
The famous marketing guru, Philip Kotler, defines advertising as "any paid form of non-personal
presentation and promotion of ideas, goods, or services by an identified sponsor." Wells, Burnett and Moriarty,
likewise defined advertising as "paid non-personal communication from an identified sponsor using mass
media to persuade or influence an audience."
Advertising has far reaching effects, sociologically and economically, and it is important to note that it does
not only dominate our environment but it also becomes part of our culture. Recognizing the effectiveness of
advertising in generating sales, companies allocate an enormous amount of their budget for advertising.
Companies like Philip Morris spent $730 million on television advertising alone for the year 1994, while
General Motors spent $728 million, and PepsiCo, $611.5 million. Topping the list for big television advertisers
is Procter & Gamble which spent about $1.10 billion.
The primary purpose of advertising is to inform potential buyers of the availability of a certain product by
providing relevant information on its uses, benefits and how it might serve the needs and wants of individuals.
However, the use of advertising today has not been serving its intended puree since very little information is
conveyed to consumers and more often the information is not even useful. Advertising is part of the selling
process and its goal is to persuade consumers to buy the products being advertised. The economic system is
characterized by high degrees of business competition where every producer would want to have a piece of
the consumers demand, as a result, advertisements typically end making misrepresentations or false claims.
From the point of morality, advertising in itself is not bad or immoral since it helps achieve the goals of
both the seller and buyer. It only becomes immoral when, in the attempt to persuade consumers, the
advertisements become deceptive, misleading, and manipulative. Since the primary function of advertising is to
sell goods, its purpose should not be limited to supplying consumers with appropriate information but it should
also educate the public or mold the public's opinion in choosing products that they need and not become
manipulated in buying what they do not need.
There is only one criterion in evaluating the morality of advertising, and that is, "to tell truth." An
advertisement that conveys truthful information is morally permissible. If an advertisement contains false
statements and "lies," then it is said to be immoral.
However, there are also shortcomings to this approach since the truth in advertising can be contrasted
with either falsehood or lying. Lying is immoral while falsehood is not necessarily immoral. Some
advertisements contain sentences and express propositions which are appropriately evaluated in terms of truth
and falsity. The ad is said to be immoral when it makes a false claim, which the advertiser knows to be false for
purposes of misleading, misinforming, or deceiving potential customers. It is considered immoral because the

advertiser in the ad is lying, and lying is considered immoral Using the criterion of truth in advertising, let us
examine some of the issues related to the moral dimension of advertising
From the discussions above, it is clear that advertising is not totally immoral. It only becomes unethical
when the advertisement becomes 1) misleading, 2) deceptive, and 3) manipulative or coercive. [cf. Richard de
George Business Ethics. 3rd ed. University of Kansas (New York: Macmillan Publishing Company, 1990) pp.
225-241.)
 Misleading Advertisements - do not misrepresent, do not make false claims but it makes claims in
such a way that a normal person looking at it comes up with the wrong conclusion.
 Deceptive Advertisements - makes a false statement or misrepresents the product, e.g., the picture
presented in the advertisement is different from the actual product.
 Manipulative or Coercive Advertisements - manipulative advertisement uses trickery or by devious

or insidious means. Coercive advertisement involves the use of force or threat, either physical or
psychological
Some Issues in Advertising
Deceptive Advertising
Deceptive ads are those which either make a false statement and therefore, lie, or which represent the
product without making any statement. Deceptions may occur not only through sentences or propositions but
also through pictures, individual words, or through certain combinations of objects which can deceive the eye
and mind. A typical example of a deceptive advertising is one where pictures from the box of the product do
not look the same as the contents of the product. In this case, the picture is said to be deceptive.
Semantics in advertising is also allowed in some conditions to allow certain leeway in some products. In
the case of cosmetics, since it is considered as luxury items, consumer expect various cosmetics to be
packaged in attractive bottles, boxes, or containers for aesthetic purposes. It cannot be sold just as well if the
packaging is simple or unattractive. This is also true with shampoo, hair conditioners, and lotions Using these
products does not guarantee that an ordinary person will look like the models pictured in the ads. Most people
understand the semantics in advertising and do not take the implied claims of the products literally
Use of "Weasel Words"
Another deceptive technique in advertising is ambiguity When ads are ambiguous, they are considered
deceptive. The use of weasel words is often complementary to ambiguity in advertising. Weasel words are
used to avoid or recoil from a direct or straightforward statement. This is true with semantics which is often
used in advertisements in order to prevent accusations that advertisers are acting immorally. One example of a
commonly used weasel word is "help. Help means to "aid" or "assist." According to one author, the word help
has been generally used to say something that couldn't be said. We are usually accustomed to ads that
contain phrases like: helps fight, helps prevent, helps stop, helps you feel, helps overcome, helps you look.
Other commonly used weasel words are: like, virtual or virtually, can be, up to, as much as, and many other
words that are used to imply what can't be said.
It cannot be undermined that ads are open to various interpretations. However this does not exempt
advertisers from the obligation to provide viewers with clear information. Given this fact, advertisers have the
responsibility of avoiding the dangers of misleading through ambiguity as the ads are subject to interpretation.
Not only are the people's money health, loyalties, and expectations at stake but also, to a great extent their
treatment of truth. It is for these reasons that ambiguity becomes a serious moral concern in advertising.
Exaggeration
Consumers might also be misled through exaggeration Exaggeration occurs when advertisements tend to
make false claims of the benefits of the goods or services which is actually unsupported by valid evidence. For
example, claims that a pain reliever provides "extra pain relief or is "50 percent stronger than aspirin," that it
upsets the stomach less frequently or is "superior to any other nonprescription painkiller on the market"
contradict evidence that all analgesics are effective to the same degree (Washington Post health supplement).
Much of the exaggeration is usually done by manufacturers of vitamins and other dietary supplements, while
some drug companies do the same. Exaggeration often goes hand in hand with concealed information.
Advertisers conceal facts by suppressing information that is unflattering to their products. That is, they
deliberately neglect to mention or distract consumers' attention away from information, knowledge which would
probably make their products less desirable.

One example of exaggeration in advertising is Trident chewing gum which has long advertised that it helps
fight cavities, but its ads (which describe Trident as a "dental instrument") clearly exaggerate the benefits of
chewing Trident. Indeed, chewing a gum can help remove debris on dental enamel, but eating an apple or
rinsing one's mouth with water can also do the same. The sugar substitute used by Trident which is sorbitol
can indirectly promote tooth decay.
Psychological Appeals
Advertisers play on several different tactics to get people interested in their products. There are some
advertisements that are directed at arousing human emotional needs rather than reason. This is one area in
advertising that presents a serious moral concern. Richard E. Taflinger defines psychological appeal as a
visual or aural influence on the subconscious mind and emotions. It influences by implying that doing what is
suggested (in the case of advertising, buying the product or service) will satisfy a subconscious desire. It is not
subliminal, which includes elements in a visual or aural presentation that are not consciously perceived but
influence behavior. Taflinger further states that if a psychological appeal couldn't be perceived, it would have
no effect at all, In fact, it is blatantly obvious the moment one knows such appeals exist It doesn't aim at
intellect. In fact, intellect can often get in the way of the effect of an appeal. Further, psychological appeal
doesn't have to make sense, and often shouldn't have to be effective.
Some of the psychological appeals that advertisers use to motivate people to buy products are: Power,
prestige, personal enjoyment, masculinity, femininity, curiosity, imitation, acceptance, approval, self-esteem,
self-preservation, altruism, and the most pervasive of all are sexual pitches.
The use of sex in advertising is a two-edged sword. Although it is extremely powerful and effective when
aimed at one gender, it often does so at the social expense of the other. Since humans live in a social world,
consideration must be given to the feelings of the people in that world.
Ads Directed at Children
Most advertisers have recognized that advertising to children is effective and eventually became a big
business recently. Children are a special group of consumers who do not regard reason. In the U.S., the
advertising industry spends $12 billion per year on ads targeted at children, bombarding young audiences with
persuasive messages. Children between ages four and 12 receive as gifts about $20.3 billion and spend
approximately $17.4 billion of it on items such as snacks, candies, and toys. The figure provided doesn't even
account for billions of adult purchases for gifts, clothes, and groceries that are influenced by children.
Advertising at children has grown exponentially in the recent years. More than $1.5 billion a year is spent by
advertisers on ads for children, owing to the fact that more and more venues for advertising for children are
now available such as in magazines, websites and television channels exclusively for children. The average
child is exposed to more than 40,000 TV commercials a year, according to studies. And ads are reaching
children through new media technologies and even in schools with corporate sponsored educational materials
and product placements in students textbooks,
The aim of advertisers is for the children to pester their parents to buy things for them. Children generally
remember what they see. Young children are naive and gullible and are particularly vulnerable to enticements
made by advertisers. Consider for example an ad where children are shown that after drinking a certain
chocolate drink, a child gains enough power to lift large objects. Adults can clearly distinguish that this is purely
persuasion and would not be misled by the idea, however, children lack experience and independent judgment
to distinguish the real meaning of the advertisement.
One advertising expert said that kids are the most pure consumers in that they tend to interpret ads
literally. The problem with this thinking is that children are not able to draw a line between children's shows and
commercials; they see commercials as a form of entertainment. Moreover, movies and television shows are
being linked to the selling of toys and other items featured in commercials with characters stamped on various
products. Since children are highly susceptible to misleading advertising there is a need to protect them from
possible manipulation that leads to the kind of role advertising must play in a society dominated by the media.
Philippine Laws on Advertising
CONSUMER ACT OF THE PHILIPPINES (R.A. 7394)

Article 108 of the Act declares that "The State shall protect the consumer from misleading advertisements
and fraudulent sales promotion practices." The Department of Trade and Industry is responsible for enforcing
the provisions of the Act. With respect to food, drugs, cosmetics, devices and hazardous substances, the
Department of Health is the agency that oversees these products.
False, Deceptive and Misleading Advertisement
Article 110 states that "It shall be unlawful for any person to disseminate or to cause the dissemination of
any false, deceptive or misleading advertisement by Philippine mail or in commerce by print, radio, television,
outdoor advertisement or other medium for the purpose of inducing or which is likely to induce directly or
indirectly the purchase of consumer products or services."
An advertisement shall be considered false, deceptive or misleading if it is not in conformity with the
provisions of the Act or if it is misleading in a material respect. To determine whether an advertisement is false,
deceptive or misleading, we must consider not only representations made or any combination thereof, but also
the extent to which the advertisement fails to reveal material facts in the light of such representations, or
materials with respect to consequences which may result from the use or application of consumer products or
services to which the advertisement relates under the conditions prescribed in said advertisement, or under
normal or usual conditions.
Special Requirements for Food, Drug, Cosmetic, Device or Hazardous Substances
1. The following rules must be followed:
a) No claim in the advertisement should be made that is not contained in the label or approved
by the Department of Health (DOH).
b) it is unlawful to advertise any food, drug, cosmetic, device or hazardous substance that is
false, misleading or deceptive or is likely to create an erroneous impression regarding its
character, value, quantity, composition, merit, or safety.
c) Where a standard has been prescribed for a food, drug, cosmetic, or device, no person shall
advertise any article or substance in a manner that is likely to be mistaken for such product,
unless the product actually complies with the prescribed standard
d) Advertisements of any food, drug, cosmetic device, or hazardous substance may not make
use of any reference to any laboratory report of analysis required to be submitted to the
Department of Health, unless such laboratory repot is duly approved by he DOH
e) No advertisements for an food drug, cosmetic device, or hazardous balance may be allowed
unless such product is duly registered and approved by DOH
PHILIPPINE ASSOCIATION OF NATIONAL ADVERTISERS (FAHA)
in 1958, advertisers formed the Philippine Association of National Advertisers (PANA) Since then, the
PANA has been engaged in a continuing campaign to regulate abuses committed by untruthful advertisers The
PANA issued a Code of Ethics which includes the following statement of general principles
 Good advertising recognizes both its economic and social responsibility to help reduce distribution
costs and to save the public interest
 Good advertising depends for its success on public confidence Hence, it cannot permit those practices
that tend In impair this confidence
 Good advertising aims to inform the consumer and help him buy intelligently
 Good advertising tells the truth. It is accurate, honest, and trustworthy I avoids exaggerations,
misstatement of facts, as well as possible deceptions through implication or omission
 Good advertising conforms not only to the laws but also to the generally accepted standards of good
taste and decency and to moral and aesthetic sentiments of the country It avoids any practice or
statement which may be offensive to the public as a whole or to any particular group, class, or race
 Good advertising seeks public acceptance on the basis of positive and constructive statements, made
on the merits of the road or service advertised, rather than by the disparagement of competition
 Good advertising does not allow any activity that involves the exploitation of the goodwill, attached to
any other firm, product, or service. It does not imitate or simulate trademarks, firm names, packages,
labels and such advertising devices as illustration, copy, layouts, or slogans.
 Good advertising helps to dignify the individual and contribute to the building of a civilized society.
5. Workplace Romance

People at work see each other every day, work together as teams, sometimes partners, on specific
projects. Through this, they get a sense of fulfillment and find encouragement from one another. Sometimes,
people at work get attracted to each other. Survey says that somewhere from 25 to 33 percent of the
employees at a given company have had office romances once in their careers. About three-fourths of the
people in the survey believe that a romance at the office is acceptable. However, others believe that is it
uncalled for and unprofessional to mingle romance with business purposes.
Definition
Workplace romance is defined as a relationship between two people who are employed by the same
organization. It is characterized by mutual attraction between the parties and a desire for a personal, romantic
relationship. Workplace romance is very likely to happen as long as men and women work together. Though it
has probably been increasing in the last few decades due to the increasing number of women in the corporate
world, it seems that the workplace has become the perfect venue for dating people. Work offers numerous
reasons for attractive social benefits: To be with people with the same economic, social, interest and
educational levels; the chance and moment to get to know each other; continued intimacy with one another on
shared tasks; the opportunity to share emotional experiences and the accessibility of information for
background checks.
The Company's Stand
The company is trapped in the middle of office and work place romances present in the organization Top
management does not want to interfere unduly with their employees personal lives and their right for privacy
Conversely. they don't want a workplace where employees are uncomfortable to work. This is why a lot of
companies come up with policies that cover workplace romances and educate all employees on the guidelines
and effects through trainings and seminars.
Benefits of Workplace Romance
Workplace romance offers benefits for the employees in particular and also for the company in gener
These benefits include friendship, mutual support to each other at work and other personal experiences.
Employees involved in a love relationship overcome rough times at work because of mutual support and
inspiration Employees likewise tend to view work as fun even when pressures begin to pile up. Romance
becomes the reason to keep their jobs. To be in somebody's company is better than being lonely. Love and
companionship in the office give the employees the relief and reason to overcome problems that come along
their way. A lot of people also believe that the workplace is the right venue to find the person to marry and to
nurture long-term relationships. A survey conducted by AMA (American Management Association) says that 49
percent of office romances have resulted to long-term relationships or marriages.
Disadvantages of Workplace Romance
Like any other relationships, an office or workplace romance is risky. It is sensible to have a head start
about the possible outcomes of a workplace romance before engaging into one, It can lead to:
Damaged Professional Reputations
it is likely that having relationships whether in offices or in any other workplace can damage work
reputations. Although surveys say that two-thirds said their romance revelation by itself didn't affect their
corporate standing it is wise to be aware of the company policy relating to office relationships and your
organization's reaction towards it. If the involvement is between the boss and a subordinate, then the
circumstance becomes more complicated Transfer, reassignment, performance review, relocation, career
advancement and reprimands and other employees opinions and perceptions can be very difficult and
awkward. Integrity will be placed in a questionable situation within the corners of workstations.
Disturbed Coworkers
The biggest concern is the reaction of coworkers and if they will support the relationship or not. Even if the
relationship is discreet, coworkers will eventually find out what is happening time is the only question. The
employees' reactions are important for the organization. They may have an idea that favoritism, unfair
treatment, and bias may arise from the relationship.
Changes in Productivity
The productivity of the people involved in the romance and that of even the spectators of the relationship
are at stake. The change in productivity depends on whether their morale is greatly affected by the
relationship. The time spent on gossiping, attempts to ruin and sabotage the relationship, and complaints about

the relationship may affect employees' productivity. It also includes the aftermath of an office or workplace
romance that did not work out.
Dating the Boss
The most disturbing type of romance is one that involves the supervisor or manager and a subordinate. It
is more prone to create a hostile environment among other subordinates, especially if it goes out-of-hand
resulting to a sexual harassment case. Also, decisions and actions relating to employees' careers will be
placed in scrutiny and integrity will be questioned.
Extramarital Affairs
Extramarital affairs may also occur inside the office and in the workplace. These are obviously very risky
arid subject to moral issues. It is an unfortunate fact of liberal lifestyle that broken homes and divorces are
increasing and one reason points to office romances Survey says that more than half of married men and
almost more than one-third of married women attest to falling for adulterous affairs. This is a major watch out
for companies and also for employees
Ethical Issues of Workplace Romances
Interventions
Workplace romances have always been an issue for companies especially the question on when it is best
for organizations to control romance in the office. Some companies want to restrict their employees from
engaging in office or workplace romances. Others are in favor of the positive effects of office romances, but
may want to lessen the bad effects. For example, some companies may allow relationships between
coworkers with the same rank.
Legal/Ethical Considerations
There are several legal and ethical issues to consider If proximity and repeated disclosures are found,
should an organization separate the persons involved? This could raise some legal issues such as
discrimination. Also, when one or both involved parties are required to leave the company, this risks legal
encounters. Policies regarding office romance need to be decided with vigilant thought and prudence, in order
to respect the rights of all members of the organization
Sexual Harassment
Sexual harassment is a very delicate subject Pierce and Aguinis (1997) have posited that sexual
harassment may sometimes arise when a bad workplace romance is terminated. There are few reasons why
this issue may exist One of the persons involved in a failed romance may seek. vengeance, may try to revive,
or would want to remove the other person involved. Also, there may be misinterpretation on the part of each
party. One may consider flirting acceptable which may eventually lead to a romance, while another may
consider it offensive and therefore, a form of harassment These issues are very sensitive. But, is this a reason
to ban workplace romance from the office? Are there good effects that will be lost? Is there a way to control
this type of workplace romance? These are questions which need to be addressed by organizations.
6. The Problem of Fair Pricing
Our everyday life requires the exchange of goods and services between two or more parties. These everyday
exchanges are given the conditions of a barometer we usually call the price. The concept of price comes in
many forms depending on the notion on how it is used. But the more familiar question on the concept of price
is implementing a fair price. In business, the price a business corporation charges its customers for a product
or service is the total cost of investment plus target profit. On the other hand, the consumer thinks of it as the
amount of money charged for a product or service.
What Iş Price?
Price is a measure of value in exchange (strictly speaking, nothing really has a price until it is offered in
exchange). It may be expressed in monetary terms (a sale) or in non-monetary terms, barter.
On the side of the buyer, price is an equivalent given or asked in exchange of value or cost. On the side
of the seller, it is the amount that the business charges its customers for a product or service which is part of
the firm's total cost of investment in view of the firm's target profit.
Natural Price, according to economist Adam Smith, is the price that just covers the costs of producing
commodity, including the going rate of profit obtainable in other markets.

Price Theories
As consumers, or in the context of customers' rights, there are two principal price theories that should be of
concern to us-the cost theory and the market theory.
A. The Cost Theory of Prices
According to this theory, value in exchange, is a function of the cost of the efficient production or acquisition of
the object of the exchange and the required return (profit). In other words, the fair price of a good/service will
ultimately depend on how much it costs for the seller to make the product available to the buyer and on the
calculation of a reasonable profit for the seller.
For example, a retailer would receive an unfair price if buyers are unwilling to pay enough for her merchandise
to permit her to recover the cost of acquiring the merchandise and offering it for sale (inventory and overhead
costs) and make a reasonable profit. Similarly, farmers receive unfair prices for their crops, milk, or livestock if
the prices do not cover their costs (including seed, labor, capital, and so on) and make a reasonable profit for
the year. In consideration of cost-based estimates of fair prices, much hinges on the assumptions about what
constitutes a reasonable profit.
According to various studies, estimates considered reasonable can vary greatly from industry to industry. For
instance, margin in the retail grocery or gasoline industries are rarely more than five percent, while margins in
jewelry, clothing and other consumer goods may often exceed 100 percent.
B. Market Theory of Prices
According to the market theory, value is a function of utility and scarcity. This is to say, the fair price of
something may vary considerably with the general context in which the thing is offered for sale. If something is
offered for sale that is perceived by the buyer to have great usefulness (however they may define this) its value
in exchange will be higher. Further, if by the same token, this product being offered for sale is in limited
quantity, its price will also be higher. Both factors therefore influence the formulation of prices.
One critique of the market theory of pricing is that it makes prices dependent upon a variety of factors that
neither the seller nor buyer can readily control. A surplus of wheat in the agricultural marketplace, for example,
could easily drive prices down to a point where many farmers, who have worked very hard to bring their
produce to market, might not be able to obtain a price for their goods that will enable them to stay in business.
Similarly, the whims of buyers may, in this particular month, judge some products harshly, in terms of their
usefulness that was quite popular last month. Or a scarcity of a product-food or medicine-could drive prices
sharply higher and make it difficult for many people to obtain what they need. Can this be fair?
What Makes a Price Fair
First of all, what is fair? The word fair has two separate meanings-acceptable and just. Acceptable
implies that a fair price is satisfactory. Adjust price, on the other hand, is a judgment that the price has been
justified. The difference between an acceptable fair price and a just fair price is the difference between what is
called personal and social fairness.
However, when you relate fair prices to the price theories mentioned earlier, when all is said and done,
the market theory of prices must be the foundation of fairness. It is argued that both theories can result in
hardships in buyers and sellers, but this is more a reflection of the uncertainties and rough edges of real life
than it is an ethical issue. However, it becomes an ethical issue when we accept that it is always possible for
buyers or sellers to deceive, manipulate, or defraud one another-and these are serious ethical issues. A price
is fair, then, when its value is determined in an exchange in which three conditions are met:
The buyer and seller must negotiate the terms of the exchange voluntarily. If either buyer or seller has
no choice to make about some relevant term of the exchange, we cannot be sure the price is fair. Both buyer
and seller must agree to the exchange without unusual constraints. If either buyer or seller is under unusual
pressure to buy or sell, we cannot be sure the price is fair.
Both buyer and seller must have adequate information about the things to be exchanged. This means,
for example, that buyers must receive from sellers, or be able to get adequate information about the thing they
propose to buy. They do not have a right to know everything, but sellers who deceive or mislead buyers about
relevant details, or who conceal important information, violate their customers' rights. Prices obtained under
such circumstances may very well not be fair. This has far-reaching implications for advertising efforts.
Determining a Fair Price

Two theories explain why a price for a product or service has to be established. First is that man is
entitled to enjoy the fruits of his labor and as an effect sets a price he deems reasonable for his produce.
Second is that price depends on the law of supply and demand and fair is that one obtained by a fair
competition. Accordingly, prices are determined differently so that the price in a fixed price system is fair when
a seller gives the lowest price for his good that he is willing to accept. Bargaining or the movable price system
takes place in an open market where price is fair when it tends to reach the lowest point possible due to strict
competition. Fair price related to fair return and bidding are determined depending on the value on which the
return is based and the qualifications of the given bid.
In general, a fair price is one that man has not yet resolved, though some factors are considered such
as (a) the cost of materials, (b) operating and marketing expenses, (c) a reasonable profit margin. These
factors constitute to set price fairly though it is not enough to provide a precise answer on what a fair price is.
One should assess the factors on which the price is based and the processes that determine it.
Ethical Issues in Fair Price
In the limelight of the business arena, prices are normally set differently and consequently receive pressure to
line up to ethical standard. These are some of ethical issues brought about by pricing (Shaw, 1999):
 The true cost of the product is concealed. Some companies normally don't show the real cost of the
product with a closed book policy or under the clout of confidentiality, hence the price may not be fair
for the consumers.
 Suggested retail price. The impact on the consumers of a suggested retail price is one that is open to a
lot of interpretations, making price determination subject to doubt and suspicion.
 Use of electronic scanners. The use of electronic scanners in grocery or department stores is not a
foolproof method for pricing fairly. It is subject to manipulation and system failure.
 Promotional pricing. Promo prices such as on sale items manipulate consumers in buying products that
are thought to be cheaper. Odd Price Policy on the other hand, deals with both price and advertising
ethics that uses odd numbers such as 49.99 instead of 50.00. Odd price has a psychological impact on
consumers making them believe that they are paying a lesser price.
 Follow the leader pricing. Follow the leader pricing is done to purposely make the buyers believe that
what is being sold is the same as the well-known brands. This technique gives the impression that
products that are priced higher have better quality, while in fact they can be sold for less.
 Price gouging. Price gouging takes advantage of an economic situation. An example is pricing canned
goods higher during typhoons and other natural calamities.
 Price fixing. Price fixing uses the power of the retailer among the producers correspondingly in
controlling product price.
The question underlying unethical pricing is considered in terms of relationship between seller and buyer, and
the responsibilities and duties of both parties that affect price and non-price. Questions such as: Do we
consider product price, quality and benefits or does it involve different considerations? Is it ethical to charge
different customers with different prices for the same product or service? An example is the suki system of the
Filipino business, which compromises the fair price for a regular customer from the new ones.
Market Structures
The market presupposes the setting of a fair price depending on its structure. Historically, buyers and sellers
bargain with each other in setting prices. Sellers would normally ask for a higher price and buyers offer less
than they expect. Through bargaining, each would arrive at a fair market value reasonable to both parties.
However, it is widely acknowledged that two types of market structure show a different scenario in price
setting. In a market of a perfect competition structure, the supply side must have a large number of sellers
competing among themselves, without conspiracy in providing consumers with a product or service. There
must be no external legal, financial, or cost barriers to enter or exit the market; an important consideration
because the fewer the competitors, the easier it is for competing sellers to engage in collusion or price-fixing.
In the demand side, perfect competition occurs when buyers compete, without collusion, in full knowledge of
the products or services offered. Consequently, in a perfect competition market, the price a seller sets is
balanced on the willingness of the buyer to pay. Businesses under a strict, large and perfect competition
market that offers the best product at the lowest price, may be rewarded with higher profits among the other
competitors. However, in the long run, under perfect competition, most businesses can expect only normal
profits enough to simply remain in a given market resulting to zero economic profits which are anything beyond
normal profits.

Imperfect competition structure may appear on either the supply or demand side of the market. On the supply
side, imperfect competition occurs when a single seller (a monopoly), or a group of sellers (an oligopoly),
operates with an agreement, are capable of controlling both the supply and price of a product or service that
has no substitute. Imperfect competition on the demand side occurs when a single or a group of purchasers in
collusion, are able to influence the price it pays for the product or service. However, when both sides exhibit
monopolies, then the market structure resembles perfect competition.
Just or Unjust Price
St. Thomas Aquinas, a brilliant Italian Dominican friar, set a principle on what is considered a just price. It
states that "buying and selling were instituted for the common good of both parties since each needs the
products of the other. Therefore, the contract between them should rest upon an equality of things to things.
The measure of the value of a thing, which is exchanged, should be given by its money price. Hence, to sell a
thing dearer or to buy a thing cheaper than it is worth is unjust."
The question of setting a fair price however can only be checked from the viewpoint of the theory of justice.
The formal principal of the principle of justice which states the obligation to "treat equals equally and unequals
unequally." Hence, in the economic setting, an unfair price rises if either the buyer or the seller receives more
than what is deserved resulting to the other party receiving less. An unfair price or an unjust price then results
when a buyer or seller does not receive exactly what he deserves.
Conclusion
For a business venture to progress, it needs to have an ample amount of profit. Profit can be narrowly defined
as income less expenses; however, profit is more broadly categorized on building a reputation for excellent
products, services, and business practices. Moreover, profits provide owners with a return on their investment,
to increase pay for workers, to buy additional resources, to research new products or services and to support
their communities. The price it pays to customers must also be equal to its internal factors that run the whole
business enterprise. It is therefore the balance between the two that determines the fair price. Businesses
therefore set prices high enough to make a profit, but not too high that consumers may think the price is unfair.
On the whole, setting a fair price is a difficult ethical and legal issue. It does not draw a clear line between
sharp business proposition and a price gouging, or between reacting to the market and colluding with the
market thru a competitive strategy. Businesses will keep their prices as low as they can in order to sell more
than their competition. Consumers help decide which prices are fair when they decide which product to buy.
Just price, therefore, represents itself in the obligations of the buyer and the seller. The seller has the duty to
give the best product it has and consequently the buyer has the responsibility to pay what is right for the given
products. In any case, the duties and rights of both the consumer and the producer must give way to a fair
price.
7. Trade Secrets and Corporate Disclosure
TRADE SECRETS
Trade secret is the legal term for confidential business information. That piece of information allows the
company to compete effectively.
Examples of trade secrets include customer identities and preferences, vendors, product pricing,
marketing strategies, company finances, manufacturing processes and other competitively valuable
information. This includes essentially any confidential business information such as customer lists, financial
information, employee data, production cost or sales data, and documents memorializing important
negotiations.
Corporations normally justify the keeping of trade secrets by the following arguments:
 The information must not be "generally known or readily ascertainable" through proper means.
Information known to someone or known to non competitors is still capable of being a trade secret. In
fact, more than one competing company can claim trade secret rights of the same information
independent of one another. Information generally known to one's competitors is not a trade secret.
 The information must have "independent economic value due to its secrecy." It is more concerned on
the money that the company has spent in developing the information
 The trade secret holder must use "reasonable measures under the circumstances to protect the
secrecy of the information. Failure to adequately protect the company's proprietary information will
allow competitors and ex-employees to reduce profits. The trade secret laws will help prevent such
misfortune if the company acts in accordance with its requirements. Imagine if a top employee leaves
the company and that employee has learned every major area of the company. If he sets up a business

in direct competition with his previous company or even becomes an employee of the toughest
competitor, he can pose serious problems to his previous company. This individual can be stopped if
proper measures and protection are to be observed. Proper protection requires action today to be
ready for tomorrow.
How can these criteria be put to test? A classic example is a situation where an employee transfers from one
business firm to another. Employee "A" resigns from the current business firm to apply in another business firm
with "greener pastures." Assuming that this employee is part of the corporate think tank and has acquired
considerable technical skills and information from the previous job, are the skills and information possessed by
employee "A" considered part of the business's trade secrets? Is the employee morally or immorally engaged
in a situation of using the information and skills acquired? Using the first criterion, the skills employee "A"
honed to develop are not part of the trade secret. The skill that one develops and the experiences that one
attains on a job belong to the employee. If the employee can market the skills and experiences acquired from
the previous job, the employee is entitled to do so. However, the information that the employee possesses, if it
is a key determinant for competitive advantage and not generally known to the industry, is considered a trade
secret. It is immoral to use the information acquired from the previous business firm to gain advantage of the
competition. This is not the case and not the end effect of the situation. This scenario could encourage other
firms to hire expert employees to have lesser cost and instant ROI (return on investment). The act of sharing
the valuable information is an immoral one. Looking back at the second criterion, if the information possessed
by employee "A" has independent economic value due to its secrecy, it is considered a trade secret.
Information that takes millions of money to develop is part of the business's trade secrets. And lastly, if there
are reasonable measures under the circumstances to protect the secrecy of the information, it is also classified
as a trade secret. A part of the prevention of disclosing trade secrets is stipulated in the employment contract.
Normally, an employee will not be allowed to directly transfer from one business firm to another business firm
of the same business interest. The employee is not allowed to do so for a specified amount of time.
Generally speaking, a trade secret will be protected from exploitation by those who either obtain access
through improper means, those who obtain the information from one who they know or should have known
gained access through improper means, or those who breach a promise to keep the information confidential.
Virtually all states in the United States have adopted a portion of or modified version of the Uniform Trade
Secrets Act, which was drafted by the National Conference of Commissioners on Uniform State Laws in 1970
and amended in 1985. According to the text of the Uniform Trade Secrets Act, a "trade secret" is: information,
including a formula, pattern, compilation, program device, method, technique, or process, that: (i) derives
independent economic value, actual or potential, from no being generally known to and not being readily
ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use,
and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
The Trade Secret Act prevents wrongful taking of confidential or secret information. Independent development
and reverse engineering by another party are defenses to claims of trade secret theft. Trade secret protection
is a must for virtually any business. It is most often not addressed until an employee or competitor obtains and
uses against a company its valuable secret information, thereby stealing their sales, customers, technology
base or damaging financial information. Trade secret protection can be lost through publishing the secrets and
through disclosures in the absence of a confidentiality agreement. Information that is readily ascertainable is
not capable of trade secret protection. The method of manufacturing your product is not a trade secret if
someone can learn how to make the product by simply examining it, otherwise known as reverse engineering.
Reverse engineering is the determination of someone else's trade secret information via examination and
testing of publicly available information. While the amount of effort needed to reverse engineer a trade secret
can show the information is readily ascertainable, this defense applies even when the reverse engineering is
difficult and the information is not readily ascertainable. Reverse engineering is a complete defense, since it
shows the information, trade secret or otherwise, was properly acquired from public sources of information.
Trade secret law prevents misappropriation and wrongful taking of trade secret information. A wrongful taking
can occur in a variety of manners. For example, the taking of information would be wrongful when the taking is
a: breach of contract, breach of fiduciary obligation, theft, and other illegal matters.
Reasonable measures under the circumstances include all facts and circumstances surrounding the
information and its treatment. Happy and loyal employees are more likely to keep information confidential.
Certain types of information in a company may "obviously" be secret. Methods of communicating the
information may show secrecy (whisper versus speech). The employer needs to make its desires known
through oral and written communications, physical barriers, actions, and any other method of communicating.
Protection of trade secrets involves creating an environment of confidentiality. Protection is not simply a
checklist of protective measures. Employees are people who will generally act in a manner appropriate for their
environment.

The company may still protect the information even if the information is or might become generally known or
readily ascertainable. Patents (design and utility), copyright, and trademark laws will provide protection for
certain information even when the information is generally known or readily ascertainable. Contracts can also
provide rights that exceed the bounds of trade secret law. Such a decision, however, turns in part on likelihood
of succeeding on showing the information "is not generally known or readily ascertainable."
CORPORATE DISCLOSURE
The information that a corporation is morally obliged to disclose coincides with much that is legally required,
though pressures for increased disclosure are based, for the most part, on moral arguments. According to De
George, the moral basis for corporate disclosure rests primarily on the following arguments: (1) Each person
has the right to the information he needs to enter into a transaction fairly and (2) Each person has the right to
those action of others that will seriously and adversely affect him or her.
The first basis speaks of information required for a fair transaction. A transaction is considered fair if the person
has the appropriate information needed for the transaction. On the other hand, a transaction is also considered
fair even if the person does not have the information needed, provided that the information is available.
Whether the person is equipped or not equipped, is not a consideration of a fair transaction.
The second basis speaks of the moral responsibility of the person. As stated in the law, it is clear that a person
is not morally permitted to harm others. But a person is permitted to do some things that might cause others
harm. In this case the person doing the action must provide the necessary precautions to prevent harm.
Eventually, this discussion leads to the right of a person to be informed.
According to De George, there are three guide questions prepared to clearly explain the ideas of corporate
disclosure:
 To whom must disclosures be made available?
 What must be morally disclosed?
 In what form should disclosures have to take?
Taking the first question, the disclosures must be made available to the stakeholders, board of directors,
general public, workers, government, consumers and suppliers. These groups require different disclosures
since they have different interests. The information may be similar to one another but expressed in different
terms. For example, the stakeholders and the government may require the same financial data but of different
depth, the stakeholders usually deal with the more detailed presentation as compared to the government.
The second question asks of moral items to be disclosed to these people. Stockholders and potential
stockholders require information on the management of the corporation, financial position which is contained in
the annual report and general plans for the future, The information is necessary if the shareholder is to
evaluate if the investment is being managed well. Because the same information is required for all competing
businesses, the conditions of the competition are kept fair. The board of directors has the right to independent
access on the information they desire yet they do not need to give the public everything they learn. The
owner's right of access is exercised through the members of the board and this access cannot be appropriately
restricted by a management decision. The workers have the right to know the conditions of work, including
their rights, benefits and obligations. By all means, they also have the right to know the general policy of the
corporation and the decisions that could directly and adversely affect them. The government, on the other
hand, has the right to know that corporations are complying with the law and the information from corporations
concerning their activities as well. The suppliers and agents need information that will make the contracts
between them fair. The consumers, on the other hand, should be informed of the dangers posed by the use of
the product they purchase. They should also know the contents and ingredients of the food or drug they take.
The general public requires information concerning environmental impact, pollution and safety of the operation
to the surrounding population.
The third question asks what form the disclosures have to take. The disclosures may be in annual reports or
legally mandated reports, legal contracts or agreements, financial statements, onsite investigations and
inspections. Other requirements are disclosed regularly through reports or even direct requests if deemed
proven highly confidential. Disclosure is necessary. However, the corporation must continue examining the
interests and balancing these interests for disclosure with the costs to the corporation and the economy,
providing an efficient and open economy.
The question is: To what extent should disclosure be tolerated? When a corporation is engaged in an immoral
or illegal activity, should it be disclosed? It is clear that the employee is morally allowed and morally required to
inform the public of conditions that will seriously affect the people. How? There are still some in-depth
questions that need to be answered. Confidentiality is another problem. Not all wrongdoings of the corporation

need to be publicly disclosed. But such information needs to be reported to the board of directors or even the
shareholders to determine who are guilty of the wrongdoing so the people can judge on the morality of the firm.
8. Product Misrepresentation and Caveat Emptor
MISREPRESENTATION
Misrepresentation is observed when there is a transformation of information to misinformation. Alejandro R.

Gorospe, in his book Philippine Business Ethics (pp. 21-34), distinguishes the two types of misrepresentation
as either intentional or unintentional misrepresentation.
 Intentional misrepresentation - a scenario whereby the person is fully aware or deliberately

misrepresents things, commonly known as lying.
 Unintentional misrepresentation a scenario whereby the person is not aware and does not
deliberately act on misrepresenting things. It is a situation where the person involved believes that it is
the right and acceptable thing to do. It is also commonly called as a white lie.
Definition of Lying
Lying can be defined as the act of making others believe something that they, themselves, do not believe in. It
happens when somebody tries to convince others with untrue statements. St. Augustine defines lying as
Locutio contra mentem cum intentione fallendi, meaning, "a speech that is contrary to what the person is
thinking with the intention to deceive," A lie therefore, takes place when the person's actions are not in
congruence with his thoughts and with the intention to deceive others.
Types of Lying
 Use of ambiguous terms: Is the act of deliberately using vague terms or open-ended statements that
can have several meanings to mislead people that one is telling the truth. Statements like: "I was at the
office around 8:00 a.m." This statement means either before or after 8:00 a.m., or even worse it is valid
until 8:55 a.m. The point is that the employee is still late for office. People must be very careful in using
such kind of statements because it can also be used against them which could entail another lie.
 Use of false statements: Is the act of making a statement from which false conclusions may be drawn,
eventually misleading others. This type of lying is often observed in advertising a product to be the
"best-seller" brand. This makes the public conclude that the brand is also No. 1 in sales even if this is
not true. The use of the term "fast selling" brand is a statement from which consumers may draw false
inference.
 Lying through action: Is a type of lying where the person gets caught in the act of wrongdoing. A good
example of this is when someone is caught red handed of stealing and still denies the accusation.
 Suppression of correct information: Is intentional or unintentional act of hiding the correct
information which eventually misleads others. This act is sometimes observed in some crime scenes
wherein a witness conceals the truth from the investigating body for the sake of his own security or the
unwillingness to be involved in the crime.
According to Catholic moral theology, lying becomes sinful only when:
1. It leads the neighbor to error;

2. It breaches a promise; and
3. It violates the nature of speech.
In general, lying is not a grievous sin. It is considered grievous only when it becomes gravely detrimental to the
neighbor and if it causes great dishonor to God. However, lying can be morally justified when it is:
1. Used to protect innocent people;

2. Used to protect national security/important secrets;
3. Used in the name of self defense; and
4. Used in protection of bodily integrity.
Business Practices Involving Misrepresentation and Lying
Aside from intentional and unintentional misrepresentation, the act of misrepresentation may be further
classified into other types: direct misrepresentation and indirect misrepresentation.

(1) Direct misrepresentation is characterized by actively misrepresenting something about the product or
service. It gives the business a bad name because deception and lying are used in the process of
selling the product to the customers. Some examples of direct misrepresentation:
a. Deceptive packaging - The objective is to create an impression wherein the buyers or the end users
will see an improvement, either by size or by weight without any change in the price. It can also be
done the other way around, introducing a new packaging and lowering the price. The concept is to
create an illusion that will divert the attention of the buyer and convince him to believe that the product
has been made better. Knowing what the buyer really needs/wants creates an opportunity for the
businessmen to think deceitfully.
A good example of deceptive packaging is floppy-filled packaging where containers are filled up to
90 percent to 95 percent of its real capacity. Excess package cushioning is also one of the many
techniques that promote deceptive packaging. It becomes even more deceptive when the product being
wrapped does not really need protection. Other examples of deceptive packaging include the introduction
of a new packaging material of the same size and price but designed to lessen the contents of the goods.
The use of misleading designations such as the number of servings to indicate the volume contents of the
package. The exercise of regular change in packaging design to indicate larger quantity at an economical
price is also an effective way. The success of this kind of act is also accompanied by a well planned
propaganda.
b. Adulteration - Is 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 or gain. It is an unethical practice since it does not meet the industry standard.
It can be done through repacking.
c. Misbranding or Mislabeling - Is the act of copying a product's design to the closest possible way
giving an impression that it is the same with the leading brand. It is based on the sole purpose of
deceiving the customer as to the quality and/or quantity of a product being sold. Misrepresenting the
quality of goods also occurs by labeling an inferior product as if it is of superior quality. A good example
of this one is the placement of tags on certain products that do not really contain the advertisement on
the tag. Another example is the packaging of alcoholic beverages with almost similar design to blend in
the competition. Claiming inferior products as superior ones by placing them in containers of well-
known brands, supports the concept of repacking. Changing the quality or quantity of the product but
not changing the label to conform to the change made is another example. The quantity of the product
that appears on the label is different from the actual contents of the containers. This is often noticeable
in candy packs. A pack of 50 pieces may not actually contain 50 pieces.
d. Short Weighing - Is the most common type of direct misrepresentation. It can be easily spotted in wet
and dry markets. Weighing scales are easily tampered by intentionally offsetting the calibration of the
dials. It is practiced in selling products by different quantities. It can also be practiced by manufacturers
packing products in bulk. Since weights are randomly checked, there are possibilities that short
weighed goods escape an inspection.
e. Shortchanging - Is taken directly from a situation where the seller gives the customer less than the
change he should get. It covers all situations from quality to quantity of goods the buyer should get in
exchange for money. When the buyer receives less than what should be taken, the buyer is being
shortchanged. On the quality of a product, a buyer who pays for a brand new phone and receives a
reconditioned phone is also being shortchanged.
f. Short Measuring Is an unethical practice observed in products that depend on length and/or volume.
The meter stick or standard is shorter than the real length or smaller in volume than the standard. It is
sometimes observed in textile markets and electrical shops. The yardstick being used is shorter than
the real one, resulting to increased profit. This is illegal and unethical.
g. Short Numbering - The seller gives the consumer the quantity by piece of the product less than the
number he has paid for. It is often practiced when the product being sold comes or is packed in a
manner that would make counting difficult or inconvenient for the consumer. For example, the products
sold by box or package such as toothpicks, bond paper, toilet paper, paper clips, matchsticks and
paper towels.
h. Misleading Advertising term "false" means any representation or symbol that is inconsistent with
facts, and where the deviation would be unacceptable to a significant number of the general or relevant
public, and would lead to misunderstandings or incorrect decisions. The term "misleading" means any

representation or symbol that would cause a significant number of the general or relevant public to
misunderstand or make incorrect decisions, regardless of whether such representation or symbol is
consistent with facts.
(2) Indirect misrepresentation is characterized by omit ting adverse information about the product or
service. It is passive deception and not as obvious compared to direct misrepresentation. But it still
contributes to the impression that businessmen are liars and are out to make quick money. It includes
caveat emptor and business ignorance.
Indirect misrepresentation is purposely done so that the product or service maintains its good image by
deliberately omitting adverse information about the product or service to mislead customers into thinking that
the product is reliable and durable and practically problem-free. The following are the common practices
involved in indirect misrepresentation.
a. Caveat Emptor means, "let the buyer beware," and is a practice very common among
salesmen. Based on this concept, is the responsibility of the consumer to determine for himself
the defects or negative features of the product. Therefore, it is not the responsibility of the seller
to reveal any defect of the product he is selling, thus, the costumer cannot expect the seller to
voluntarily provide that kind of information
Sometimes the contract provides a remedy, but the remedy proves to be illusory. For example,
a few decades ago a car, might come with a warranty promising that any defect discovered
during a warranty period will be repaired, but the seller, despite repeated efforts, proves unable
to effect proper repairs. The warranty, written by a sophisticated large manufacturer, may
provide that the buyer's only remedy for defects is tender for repair. When the repair proves
ineffective, the buyer is, in effect, left with no remedy.
Sometimes a seller will know of defects in the goods sold but will deliberately mask these
defects. For example, a used car may look beautiful on the lot, but may have been in a major
accident or flood and been extensively repaired. Only after some experience driving the car
does a problem arise. If the defects are so substantial that masking them through the "repair"
process amounts to fraud, the buyer may have a claim. Otherwise, the buyer was, historically at
least, out of luck.
b. Deliberately withholding information in any business transaction is also an unethical practice.

All parties involved in all business transactions must know exactly what they are giving away or
receiving in return, in order to be fair. A classic example would be a man selling a 10-hectare
farm (at ten thousand pesos per hectare) for P110,000 because the buyer believes the farm to
be 11 hectares, is dishonest. Honesty must always be observed in any business transaction. It
is clear that an agreement for purchase and sale is fair only if both parties are aware of all facts
relating to what they are offering and/or receiving in return.
In any set of rules, there is always an exception. And one of these exceptions is the revelation
of the buyer's plan on the acquired goods or land. The buyer, in this case, need not disclose the
purpose of the acquisition.
c. Business Ignorance is a form of passive deception because the businessman is unable to

provide the customer with the complete information he needs to make a fair decision. It is the
duty of the businessman to know the nature of the product he is selling, the goods in the market
and what goods are really the best at what price. For example, the quality of a share of stock
depends upon the stability of the company, the yield and its marketability. It is the duty of the
stockbroker to know all about the stocks he is selling so he can properly advise his customers of
the risks and probable gains in buying them.
Ignorance of costs - the cost of manu facture, the cost to sell, and the attendant ad
ministrative costs, is another form of business ignorance which is just as harmful and inexcus able
as ignorance of the product one is selling. A company, which does not know its costs, may sell at a
price lower than the costs of manufac turing the product and bringing it to the mar ket. The
company may then become a menace to other similar companies in that it may force them to sell at
below cost, making the whole industry unprofitable. At the other extreme, a company that does not
know its real costs may charge such a high price and further burden the customer who is already
reeling from the continuing blows of inflation. It may even price itself out of the market and not sell
at all (Gorospe, 1995).

Checked by:
LILLAN E. BAYANI
OIC - BSBA DEPARTMENT
SOCIAL RESPONSIBILITY AND GOOD GOVERNANCE

ZAMORA, FRANCIS ADEL R.
I. OBJECTIVES
At the end this chapter, the students are expected to:
1. examine the different issues and problems in business and the business enterprise from the moral
perspective
2. develop a framework for analysis and resolution of ethical dilemmas and problems affecting business
3. acquire basic information about questionable business practices and their impact to its stakeholders
4. develop problem solving skills using the philosophical qualitative approach to resolve ethical problems
in the business and corporate world
II. TIME FRAME

• WEEK 11 and 12 ( FINALS )
6 HOURS
III. TOPICS
ETHICAL ISSUES AND PROBLEMS IN BUSINESS AND THE CORPORATE WORLD
9. The Morality of Labor Strikes
Strike action (or simply strike) describes collective action undertaken by groups of workers in the form of a
refusal to perform work. This is a tactic often employed by labor unions during collective bargaining with an
employer. In ordinary usage, the term 'strike' is often used to describe all work stoppages, regardless of the
origin of the dispute. In many stoppages, the precise origins of the dispute are unclear, or are contested by the
different sides involved. For this reason, the decision to describe a stoppage as a 'strike' or as a 'lockout' may
be influenced by one's perspective or political outlook.
Workers go on strike for different reasons:
 for higher compensation;

 to improve the workplace;

 for shorter working days; to stop their wages from going down;
 for more benefits; and
 because they think their company has been unfair.
Conditions of employment include wages, hours, sanitation, and safety, and several other circumstances
that affect the work of the workers. The union aims at safeguarding and increasing present benefits.
In any specific instance, a union is justified in seeking advantages, whether of wages, hours, or other
conditions, only when these are in accord with the law of right. If its members are already receiving all that they
are morally entitled to, they, of course do wrong when they use the power of their organization to extort more.
For, contrary to the prevailing conception and the too frequent practice of the last century, there is an element
of justice in the labor contract, and when either party deliberately ignores this factor, its aim is to that extent
immoral.
What Are the Basic Rights of Employees
An act to strengthen the constitutional right of workers to self-organization and free collective bargaining and to
penalize unfair labor practices, further amending for the purpose articles 244, 247, 248, 249, 250, and 289
(book v) of presidential decree number four hundred forty-two, as amended, otherwise known as the labor
code of the Philippines.
Sec. 1. Articles 244 and 247 of Presidential Decree Number Four Hundred Forty-Two, as amended,
otherwise known as the Labor Code of the Philippines, are hereby further amended to read as follows:
Art. 244. Coverage and employees' right to self organization. All persons employed in commercial, industrial
and agricultural enterprises and in religious, charitable, medical or educational institutions whether operating
for profit or not, shall have the right to self-organization and to form, join or assist labor organizations of their
own choosing for purposes of collective bargaining. Ambulant, intermittent and itinerant workers, self-employed
people, rural workers and those without any definite employers may form labor organizations for the purpose of
enhancing and defending their interests and for their mutual aid and protection.
Types of strikes:
 A sit-down strike (or sit-in) is a strike in which workers show up to work, but refuse to work. It may
include preventing transports from entering or leaving in an institution or a company.
 A general strike is a strike affecting all areas of a labor force across many industries, typically
throughout an entire country or a large section thereof.
 A sympathy strike (or secondary strike) is a strike initiated by workers in one industry and supported
by workers in a separate but related industry.
 Unfair labor practice strike is an action taken by an employer (including any agent or representative
of an employer), that is believed to be inimical to the interest of an employee organization.
 A jurisdictional strike refers to a concerted refusal to work undertaken by a union to assert its
members' right to particular job assignments and to protest the assignment of disputed work to
members of another union or to unorganized workers.
 An economic strike is based on a demand for better wages or benefits than the employer wants to
provide.
 A wildcat strike is against the will of the leadership of the union, or without a union. A slow-down is a
form of work stoppage in which employees deliberately reduce their individual production.
 A recognition strike is a kind of strike forcing employers to recognize and deal with them.
Who Can Join Labor Organizations or Workers
Association
 All employees employed in commercial, industrial and agricultural enterprises and in religious,
charitable, medical or educational institutions whether operating for profit or not;
 Government employees in the civil service; Supervisory personnel;
 Security personnel; and
 Aliens with valid working permits.
Who Are Prohibited from Joining Legitimate Labor Organizations
 Managerial employees;

 Members of cooperatives, and

 Members of the Armed Forces of the Philippines, Philippine National Police and Firemen.
Is there a Right to Strike?
The right to strike is integral to the process of wage bargaining in an industrial economy. Everyone believes
that a quality work rendered by an individual in an industry deserves improvements in salaries and benefits. A
worker has no other means of defending her/his real wage other than seeking an increased money wage. If a
capitalist does not grant such an increase, she/he can be forced to come to a negotiating table by striking
workers. Any employee has a right to withhold his labor services from an employer if he doesn't like the pay
and benefits the employer offers. If each individual has this right, then a group of like-minded individuals can
exercise this right together. In other words, all individuals may withhold their labor services at the same time.
Workers who are willing to work for a strike and the employer who wishes to hire them have a legitimate right
to do so. Moreover, they may agree to accept the very terms of employment that the strikers consider to be
unacceptable. Replacement workers have the same job-related natural rights as striking workers.
In the book of Ramon Agapay, Ethics and the Filipino (p.153), the following conditions must be present for a
strike to be moral:
1. There is a sufficient and just reason for it; it is usually based on the claim that the laborer has a
right to his job, or that he has at least the right to decent conditions of employment, and
consequently that he may use force to protect this right against the unjust aggression of the
man who has seized it.
2. The intended good results must be proportionate to the evil effects. As against the employer,
the strikers have no right to destroy his property, as against the men who take the places of the
strikers, no violence is lawful when the action of the strikers is justified by their own needs. Now,
it is certain that the good effects to be obtained through the use of violence are practically never
sufficient to outweigh the evil effects: for the benefits that labor would thus secure are
insignificant compared with the social disorder and anarchy through which they would be
obtained. The interests and rights of a class must yield before the interest and rights of the
community.
3. The means employed are lawful. At most, the right to a job is merely the right to continue
economic relations with a particular employer. It is, consequently similar to the right of a
merchant to the patronage of his customers, or the right of any man to pursue a lawful good by
lawful means.
10. Whistleblowing
Whistleblowing is the disclosure by an employee of confidential information which relates to some

danger, fraud, or other illegal or unethical conduct connected with the workplace, be it of the employer or of his
fellow employees.
A whistleblower is someone in an organization who witnesses behavior by members that is either

contrary to the mission of the organization, or threatening to the public interest, and who decides to speak out
publicly about it.
A person, employee or officer of any institution (profit or nonprofit, private or public) who believes that
he or she has been ordered to perform some act or she/he obtained knowledge that the institution is engaged
in activities which:
 Are believed to cause unnecessary harm to third parties;

 Are in violation of human rights;
 Or run counter to the defined purpose of the institution or organization; and
 Who informs the public of this fact.
If the employee just complains to someone inside the company, that is not whistleblowing, and the employee is
not protected by the whistleblower laws. However, the employee may be protected under other laws. For
example, it is illegal to fire someone for complaining of sexual harassment or discrimination.
Four Elements that Encompass Whistleblowing:
1. The disclosure of information, be it internal or external, must be made in good faith;

2. The disclosure must be made by a current, former or prospective employee;

3. The information must be linked with misconduct on the part of the employer; and
4. Evidence of the misconduct should exist as well as information regarding the identity of the wrongdoer.
TYPES OF WHISTLEBLOWING:
1. Internal whistleblowing occurs within the organi zation. It is going "over the head of immediate
supervisors to inform higher management of the wrongdoing."
2. External whistleblowing Occurs outside the organization. It is revealing to outside individuals or
groups such as media men, public interest groups, regulatory body or nongovernment organizations.
3. Current - those who blow the whistle on present employers.
4. Alumni - those who blow the whistle on former employers.
5. Open - the whistleblower discloses his identity.
6. Anonymous - the whistleblower does not disclose his identity.
Another important facet of whistleblowing involves the potential for retaliation by management. Lack of support
from management and supervisors, external whistleblowing has been shown to be consistently related to
retaliation. Studies also revealed that whistleblowers experience each of the following forms of retaliation:
- lost their job or were forced to retire;

- received negative job performance evaluations;
- had work more closely monitored by supervisors;
- were criticized or avoided by coworkers;
- were blacklisted from getting another job in their field; and they were considered traitors to their
organization.
On the contrary, internal whistleblowing produces less retaliation than external whistleblowing. Along with
management retaliation, the majority of the whistleblowers also experience severe emotional effects of their
whistleblowing activity:
- severe depression or anxiety;

- feelings of isolation or powerlessness;
- distrust of others;
- declining physical health;
- severe financial decline; and
- problems with family relations.
It is important to note the negative effects of whistleblowing. Every year, thousands of employees, managers,
corporate executive officers, and officials witness wrongdoing on the job. Some speak out. Their actions may
ultimately save ethics and millions of pesos. But rather than receive praise for their integrity, these
whistleblowers are often targeted for harassment, intimidation, demotion, and dismissal. In the context of
corruption and bribery, this situation has particular relevance. Unless people are enabled and encouraged to
blow the whistle when a bribe is solicited, the fight against corruption has little chance to succeed. The primary
aim of whistleblowing is that concerns about corruption and bribery can be properly raised and addressed in
the workplace or with the person responsible.
HOW TO BLOW THE WHISTLE
1. Before taking any irreversible steps, talk to your family or close friends about your decision to
blow the whistle.
2. Be alert and discreetly attempt to learn of any other witnesses who are upset about the
wrongdoing.
3. Before formally breaking ranks, consider whether there is any reasonable way to work within the
system by going to the first level of authority. If you do decide to break ranks, think carefully
about whether you want to "go public" with your concerns or remain an anonymous source.
Each strategy has implications: The decision depends on the quantity and quality of your
evidence, your ability to camouflage your knowledge of key facts, the risk you are willing to
assume, and your willingness to endure intense public scrutiny.
4. Develop a plan, such as strategically-timed release of information to government agencies so
that your employer is reacting to you, instead of vice versa.
5. Maintain good relations with the administration and support staff.
6. Before and after you blow the whistle, keep a careful record of events as they unfold. Try to
construct a straightforward, factual log of the relevant activities and events on the job, keeping
in mind that your employer will have access to your diary if there is a lawsuit.

7. Identify and copy all necessary supporting records before drawing any suspicion to your
concerns.
8. Break the cycle of isolation research and identify and seek a support network of potential allies,
such as elected officials, journalists and activists. The solidarity of key constituencies can be
more powerful than the bureaucracy you are challenging.
9. Invest on funds to obtain legal opinion from a competent lawyer
10. Always be on guard not to embellish your charges.
11. Engage in whistleblowing initiatives on your own time and with your own resources, not your
employer's.
12. Don't wear your cynicism on your sleeves when working with the authorities.
IS WHISTLEBLOWING MORALLY PERMISSIBLE
It is morally permissible if it meets the following conditions: [cf. Richard De George. (1995). Business Ethics.
Fourth Edition. New York: Prentice Hall, Inc.]
 The company must be engaged in illegal or immoral practice or about to release a product which will do
serious harm to individuals or to society in general. The more serious the harm, the more serious the
obligation
 The employee should report his concern or complaint to his immediate superior.
 If no appropriate action is taken, the employee should take the matter up the managerial line before he
or she is obliged to go public. The employee must have a good reason to believe that by going public,
he will be able to bring about the necessary changes.
 It is done from the appropriate moral motive-as provided in the definition of whistleblowing.
 The whistleblower, except in special circumstances, has exhausted all internal channels for dissent
before going public. The whistleblower has compelling evidence that the inappropriate actions have
been ordered or have occurred.
 The whistleblower has acted after careful analysis of the danger: How serious is the moral violation?
How immediate is the problem?
 Can the whistleblower point to a specific misconduct?
 The whistleblowing has some chance of success.
11. Multilevel Marketing (MLM) and Pyramiding
MULTILEVEL MARKETING
Multilevel marketing is a system of selling in which one signs up other people to assist him, and they, in turn,
recruit others to help them. It is a system of selling through many levels of distributors, thus the word
"multilevel marketing." Each gets ial percentage on the price of the product being sold. This is also known as
direct selling companies. Common companies of this type are Avon Cosmetics, Triumph International, Sara
Lee Direct Selling and Tupperware Philippines. Most of these business ventures became successful because
the main focus of their activities is the product sales.
However, there are many multilevel distributorship schemes that often call themselves a "network" but are
nothing more than sophisticated chain letters. They are thinly disguised pyramids which operate like a real
"pyramid" claiming participants can earn a lot of money by concentrating their efforts on recruiting distributors
rather than on selling a product. They promise to pay commissions up to two or more levels of down lines. The
companies of these types require people to pay a joining fee or they simply call it an "investment" which
amounts usually to several thousand pesos. But oftentimes, the joining fee is quite a big amount for the start
up kit.
PYRAMIDING
In the classic "pyramid" scheme, participants attempt to make money solely by recruiting new participants into
the program. The hallmark of these schemes is the promise of sky high returns in a short period of time for
doing nothing other than handing over your money and getting others to do the same.
Pyramid schemes focus on the exchange of money and recruitment. At the heart of each pyramid is typically a
representation that new participants can recoup their original investments by inducing others to make the same
investments. Each person you bring to your pyramid is promised future monetary rewards or bonuses based
on your advancement up the structure.

The fraudsters behind a pyramid scheme may go to great lengths to make the program look like a legitimate
multilevel marketing program. But despite their claims to have legitimate products or services to sell, these
fraudsters simply use money coming in from new recruits the pyramid will collapse. At some point the
schemes get too big, the promoter cannot raise enough money from new investors to pay earlier investors, and
many people except those at the very top of the pyramid, lose their money. Many losers pay for a few winners.
Pyramiding operates on recruitment. It starts with one person, encourages six participants to join. The six
recruits will again get six to join making the number of people involved 36. The 36 new members will get six
recruits each to have a total of 216. The 216 will again recruit six persons each to have 1,296 participants in
the Pyramid. At the 13th level, they need to have 13 billion new recruits to sustain the pyramid which is already
impossible. The pyramid collapses when no new participants can be recruited.
Difference Between an MLM and Pyramiding
MLM Pyramiding
Legal Illegal
Income generated only on product sales. Income is generated solely on the process of
recruiting others into the pyramid.
Provides a training program No training program.
Consumable, reasonably priced quality products. Few retail sales and high cost, slower moving
products.
Serves legitimate economic function such as a No legitimate economic function such as no economic
channel of distribution for relatively small or new benefits, but a mere transfer of money from one
companies with excellent products. person to another without legitimate business.
Sponsoring participants earn nothing by mere Recruiting participants get benefits from recruitment.
sponsoring. Recruitment is optional.
Earnings are ultimately tied 7. to product consumption Earnings are tied to the act of recruitment
of end-users.
Enormous efforts to sell are exerted. Little effort or no effort is being made to sell to the
public.
Largely, products are sold to 9. the consuming public. Products are consumed internally within the
organization.
Bonuses are based on sales to final users who are Bonus entitlements are based on goods absorbed by
not members of the scheme. members within the structure.
The Direct Selling Association of the Philippines or DSAP presented the final 8-point test to determine a
pyramiding company. According to them, if the answer to any of these statements is no, then beware! You
might just be a victim of a pyramiding scam.
1. Are there legitimate products?

2. Is there an intent to sell the products?
3. Do the products have fair market value?
4. Is there a compelling reason to buy the products being offered?
5. Is there a product return policy?
6. Will you receive commission on the joining fees of your prospects
7. Is there a correlation between recruiting, and distributors commission?
8. If the recruitment is to be stopped today, will participants still make money?
Market Saturation: An Inherent Problem in Pyramiding
Pyramid's design can saturate the market with no one noticing. It is designed to recruit so many salespeople,
who in turn will attempt to recruit more salespeople, and so on until the market is saturated. It is unstoppable, a
human "churning" machine with no "off button." Out of control by design, its gears will grind up the money, time
and entrepreneurial energy of the well-meaning who joined to supplement their income. When the inevitable
destiny occurs, the only money that may be made is not from the product or service but from the losses of
people down the organization.
Moral Issues in Pyramiding
1. Too Much Materialism and Greed

Testimonies of those at the top, contents of brochure or videotape of a disguised MLM will encourage people
to join with the promise of success, large new homes, luxury cars, money in the bank, a grand vacation all over
the world, or even a Lear jet.
2. They Con the Public, Making Them Believe that They Are a Legitimate MLM
Once they add a product for cover, and call it an MLM, people are willing to accept them. They look so
legitimate in public, so decent. So many decent people are involved. But they exploit the most vulnerable of
people: the desperate, the out of work, the ignorant. It is hard to tell whether an organization is pyramiding or a
legitimate MLM. MLMS have become so large that they are difficult to stop. Some multinational MLMS spend
million to protect, lobby and insulate themselves from the law. The question is where is the money coming
from? Selling the product? But then everyone knows that the real incentive in most MLMs is the pyramid
aspect that the more you recruit, the higher the commission.
3. The Intentions Are Bad
They work under false pretenses. By sponsoring your parents and sisters, you will profit at their expense. You
sell them products they do not need or products that they can barely afford. Further, these schemes work
against the universal law of honesty, justice and fairness.
Legal Issues in Pyramiding
The Department of Trade and Industry can take action under two existing laws:
 Art. 53 of RA 7394 (the Consumer Act of the Philippines) states that "chain distribution plans or
pyramid sales shall not be employed in the sale of consumer products."
 RA 3883 or Business Name Law empowers DTI to cancel license of any business which does not
conform to the registered business name or style.
Tips to Consider When You Make Your Decision Before Joining a Plan
 Consult the 8-point test presented in this chapter.

 Beware of plans that claim to sell miracle products or promise enormous earnings. Just because a
promoter of a plan makes a claim doesn't mean it's true! Ask the promoter of the plan to substantiate
claims with hard evidence especially when the claims about the product or your potential earnings
seem too good to be true.
 Don't pay or sign any contract in an opportunity meeting" or any other high-pressure situation. Insist on
taking your time to think over a decision to join.
 Remember that no amount of personal testimonial and affirmation that there is money to gain in
pyramiding will dispute the fact that pyramiding does not create new wealth. The only wealth gained by
any participant is a loss by another participant.
12. Unfair Competition
Is competition good or bad? Competition is healthy and can be a motivation for firms to produce better
products or offer better services. Without competition, firms can just relax and quality will suffer. Thus,
competition becomes bad only when it eliminates a competitor like in a cutthroat competition. Some practices
include under cost selling or selling their products below cost just to get rid of their competitors.
Different kinds of Competition
1. A monopoly is defined as a market situation where there is only one provider of a kind of product or
service. It is an extreme type of imperfect competition characterized by a lack of competition and a lack
of viable substitute goods
2. An oligopoly, on the other hand, denotes a situation where there are few sellers for a product or
service. It is a type of imperfect competition where they can't dictate price like a monopoly can but the
members of an oligopoly often turn into friendly competitors, since it is all in the members' interest to
maintain a stable market and profitable prices.
3. Perfect competition is a situation in which no firm or consumer is large enough to dictate prices. The
prices are dictated by the law of supply and demand which states that when the supply is scarce, the
prices go up and when the demand goes down, the prices will go the same way.

Difference Between War and Competition
In a war, two contenders fighting hurl directly at each other whereas in a business competition, two or more
parties are vying for the opportunity to provide the customer's needs whether it's a product or service. In short,
competition is a rivalry to serve the customer.
Difference Between Fair and Unfair Competition
Fair competition is doing business under ethical rules of conduct, behavior and judgment. It is attaining
success in business through the merits of its products or services while unfair competition is unethical business
practice. It is doing business with the goal of profit without regard to others. In general, unfair competition
consists of:
 Deceptive trade practices such as misrepresentation and false advertising:

 Business interference to prevent a competitor from continuing with its business process or business
contract;
 Anti-competitive market practices such as under cost selling to kill the competitor;
 Defamation of a competitor or badmouthing a competitor to a customer;
 Caveat emptor or indirect misrepresentation by withholding information from the buyer; and
 Violation of intellectual property right such as copyrights, patents, trademarks and service marks.
The Intellectual Property Code of the Philippines (R.A. 8293)
R.A. 8293 otherwise known as Intellectual Property Code of the Philippines aims to provide an intellectual
property and industrial property system which will enhance the development of domestic and creative activity,
facilitate transfer of technology, attract foreign investments, and ensure market access for our products.
Article 168 of RA 8293 is specifically about unfair competition on the use of trademarks, service marks and
trade names. This article states that a person who has identified in the mind of the public the good he
manufactures or deals in his business from those of others, whether or not a registered mark is employed, has
a property right in the goodwill of the said goods identified, and will be protected as any other property rights.
The following shall be deemed guilty of unfair competiion
a. Any person who is selling his goods and gives the general appearance of the goods of another,
either in the goods themselves or in the wrapping of the packages, which would likely influence
buyers to believe that the products being offered are those of a manufacturer or dealer other
than the actual manufacturer.
b. Any person who, by any artifice, or device, induces the false belief that such person is offering
the services of another who has identified such services in the mind of the public.
c. Any person who shall make false statements in the course of trade or shall commit any other act
in bad faith to discredit the goods, services or business of another.
13. Money Laundering
A Brief History
The term "money laundering" is said to originate from Mafia ownership of Laundromats in the United States.
Gangsters there were earning huge sums in cash from extortion, prostitution, gambling and bootleg liquor.
They needed to show a legitimate source for these monies.
One of the ways in which they were able to do this was by purchasing outwardly legitimate businesses and by
combining their illicit earnings with the legitimate earnings they received from these businesses. Laundromats
were chosen by these gangsters because they were cash businesses and this was an undoubted advantage to
people like Al Capone who purchased them.
Al Capone, however, was prosecuted and convicted in October 1931 for tax evasion. It was for this that he was
sent to prison and not for the predicate crimes which generated his illicit income. According to Robinson, that
money laundering originated from this time is a myth. He states that:
"Money laundering is called what it is because that perfectly describes what takes place-illegal, or dirty,
money is put through a cycle of transactions, or washed, so that it comes out the other end as legal, or
clean, money. In other words, the source of illegally obtained funds is obscured through a succession of

transfers and deals in order that those same funds can eventually be made to appear as legitimate
income."
It would seem, however, that the conviction of Al Capone for tax evasion may have been the trigger for getting
the money laundering business off the ground.
Meyer Lansky (affectionately called The Mob's Accountant") was particularly affected by the conviction of Al
Capone for something as obvious as tax evasion. Determined that the same fate would not befall him, he set
about searching for ways to hide money. Before the year was out he had discovered the benefits of numbered
Swiss Bank Accounts. This is where money laundering would seem to have started and according to Lacey,
Lansky was one of the most influential money launders ever. The use of the Swiss facilities gave Lansky the
means to incorporate one of the first real laundering techniques, the use of the 'loan-back' concept, which
meant that hitherto illegal money could now be disguised by 'loans' provided by compliant foreign banks, which
could be declared to the 'revenue' if necessary, and a tax-deduction obtained into the bargain.
"Money laundering' as an expression is one of fairly recent origin. The original sighting was in newspapers
reporting the Watergate scandal in the United States in 1973. Since then, the term has been widely accepted
and is in popular usage throughout the world.
Definition
Money laundering is the process of disguising illegally obtained money so that the funds appear to come from
legitimate sources or activities. Money laundering occurs in connection with a wide variety of crimes, including
illegal arms sales, drug trafficking, robbery, fraud, racketeering and terrorism.
The principal objective of money laundering is to convert cash to some other form of asset to conceal the
illegal sources or origin of cash income.
Money Laundering - How Big Is the Problem
The estimated size of the money laundering problem totals more than $500 billion annually worldwide. This is a
staggering amount and detrimental by any calculation to the financial systems involved.
Clearly the problem is enormous. It is also clear that money laundering extends far beyond hiding drug profits.
In the UK, this is evidenced in the legislation that has been enacted to counter this crime. For example,
confiscation and money laundering provisions are contained in the Drug Trafficking Offences Act 1986
(DTOA), in the Criminal Justice Act 1988 and the Criminal Justice (International Cooperation) Act 1990. These
provisions focus particularly on drug trafficking.
However, the Criminal Justice Act 1993 makes the laundering of the proceeds of non-drug trafficking crimes an
offence for the first time. It was not until the enactment of the Criminal Justice (Consolidation) (Scotland) Act
1995 and the Proceeds of Crime (Scotland) Act 1995 (both came into effect from 1-4-96) that Scotland came
into line with England regarding the extension of money laundering to cover all crime proceeds.
Money Laundering Process
Money laundering is a diverse and often complex process. It basically involves three independent steps that
often occur simultaneously
1. Placement - physically placing bulk cash proceeds. It is during the placement stage that physical
currency enters the financial system and illegal proceeds are most vulnerable to detection. When illicit
monies are deposited at a financial institution, placement has occurred. The purchase of money orders
using cash from a criminal enterprise is another example of placement
2. Layering - separating the proceeds from criminal activity from their origins through layers of complex
financial transaction. Layering describes an activity intended to obscure the trail which is left by "dirty"
money. During the layering stage, a launderer may conduct a series of financial transactions in order to
build layers between the funds and their illicit source. For example, a series of bank-to-bank fund
transfers would constitute layering. Activities of this nature, particularly when they involve fund transfers
between tax haven and bank secrecy jurisdictions, can make it very difficult for investigators to follow
the trail of money.
3. Integration providing an apparently legitimate explanation for the illicit proceeds. During the final stage
in the laundering process, illicit funds are integrated with monies from legitimate commercial activities

as they enter the mainstream economy. The illicit funds thus take on the appearance of legitimacy. The
integration of illicit monies into a legitimate economy is very difficult to detect unless an audit trail had
been established during the placement or layering stages.
Money Laundering Methods
Money laundering schemes may vary greatly in character and complexity. They may involve any number of
intermediaries and utilize both traditional and non-traditional payment systems. To a large extent, the scope
and nature of a money laundering operation is limited only by the creativity of those involved. International
narcotics traffickers may employ a variety of different money laundering techniques and schemes at any one
time, each specially created to fulfill specific goals and objectives. Advanced computing and communications
technologies are currently routinely used to enhance the efficiency and the security of narcotics related money
laundering operations. The examples which follows below are baseline schemes intended to familiarize the
reader with a few simple methods for moving illicit funds.
Example 1 (Figure 16): Move the U.S.-based funds to New Mexico for use in the local economy.
1. 1 Street level narcotics sales occur in the U.S. (cash is the preferred method of payment for these
transactions.)
2. The cash from one or multiple sales locations is collected at a safe or "stash" house for processing.
3. The cash is taken to a remittance business for transmission out of the country. To avoid scrutiny by law
enforcement or bank regulatory authorities, the cash may be divided into amounts less than $10,000
and "smurfed" (the employment of a large number of individuals to make small deposits and
withdrawals) or structured (transfer of amounts below federal reporting requirements) at the remittance
business.
4. The funds are sent by the U.S.-based remitter to a Mexican-based counterpart. (The remittance
company will normally utilize an offsetting book entry transfer or conduct a bank wire transfer in order to
move the money out of the United States.)
5. The remittance business in Mexico pays out in pesos.
Example 2 (Figure 17): Move Laundered Funds from the U.S. to New Mexico.
1. Money from the U.S. drug sales is converted into money orders.
2. Money orders are shipped to Colombia via express mail.
3. U.S. funds money orders are sold to a currency broker in exchange for pesos.
Impact of Money Laundering on Society
The possible social and political costs of money laundering, if left unchecked or dealt with ineffectively,
are serious. Organized crime can infiltrate financial institutions, acquire control of large sectors of the economy
through investment, or offer bribes to public officials and even governments.
The economic and political influence of criminal organizations can weaken the social fabric, collective
ethical standards, and ultimately the democratic institutions of society. In countries transitioning to democratic
systems, this criminal influence can undermine the transition. Most fundamentally, money laundering is
inextricably linked to the underlying criminal activity that generated it. Laundering enables criminal activity to
continue.
Organized money laundering has devastating social consequences. Laundered funds provide financial
support for drug dealers, terrorists, and arms dealers and other criminals to operate and expand their criminal
empires.
How Can We Prevent It
The primary purpose of organized crime is to make profits. Like any business, the purposes of profit are to
enjoy it and re invest it in future activity. For the organized criminal, however, profit close to the source of the
crime represents a particular vulnerability and unless the criminal can effectively distance himself or herself
from the crime which is the source of the profit, they remain susceptible to detection and prosecution. Hence,
the need to launder their illicit profits makes them appear legitimate.
The biggest source of illicit profits is the drugs trade and it was drug trafficking that provided the initial catalyst
for concerted international efforts against money laundering. The drugs industry is a highly cash intensive
business and "in the case of cocaine and heroin the physical volume of notes received is much larger than the

volume of drugs themselves." In order to rid themselves of this large burden, it is necessary to use the financial
services industry and in particular, deposit taking institutions.
The Financial Action Task Force (FATF) on Money Laundering has identified certain 'choke points in the
money laundering process that the launderer finds difficult to avoid and where he is vulnerable to detection.
The initial focus has to be on these areas if the war against the launderer is to proceed successfully.
The choke points identified are:
a. Entry of cash into the financial system,

b. Transfers to and from the financial system, and
c. Cross-border flows of cash.
The entry of cash into the financial system, known as the "placement' stage is where the launderer is most
vulnerable to detection. Because of the large amounts of cash involved, it is extremely hard to place it into a
bank account legitimately.
The UK's system of reporting suspicious transactions to the authorities along with the procedures adopted by
deposit takers are powerful weapons against money launderers In particular, the emphasis being placed on the
importance of deposit-taking institutions 'knowing their customer' has severely curtailed this activity to such an
extent that one of the favorite methods for money launderers to place their money is to smuggle the money out
of the country. There are penalties attached to the various money laundering offenses for the deposit-taking
institutions and these have provided for a powerful incentive for reporting suspicions to the National Criminal
Intelligence Service (NCIS).
However, cross-border flows of cash are one of the areas mentioned above where the launderer is vulnerable
to detection. In the U.K., legislation provides the police and customs service with the power to seize cash they
believe could be the proceeds of drug trafficking. Part III of the Criminal Justice (International Cooperation) Act
1990 (CJICA) introduced the powers for customs and police officers to seize cash being brought into or out of
the United Kingdom, where they have reason to believe that such money represents the proceeds of drug
trafficking or is intended to be used in drug trafficking The power operates in respect of consignments of cash
of £10,000 or more. Additionally, the courts are empowered to order the confiscation of such cash, where they
are satisfied. on the balance of probabilities, of the alleged link with drug trafficking
These measures overcome the difficulty of custom officers coming across large amounts of cash with no
reasonable explanation for their export/import but, at the same time, with no hard evidence of links to drug
trafficking and allows the detention of the cash pending on investigation. Due to this. couriers limit the amount
they carry out of the country at any one time and the risk is seen as being less than passing the money into a
financial institution.
The reporting of suspicious transactions is not limited to cash in the U.K. Transfers to and from the financial
system are also under the umbrella of 'reporting of suspicious transactions and this can provide useful
information on the "layering' stage of the money laundering process. The keeping of comprehensive
transaction records (part of the procedures) by financial organizations provides a useful audit trail and gives
useful information on people and organizations involved in laundering schemes once discovered.
It is important, therefore, to ensure that complacency does not creep into our financial institutions at this stage,
now that the measures are in place to deny money launderers open access to these same institutions.
How Does Fighting Money Laundering Help Fight Crime
Money laundering is a threat to the good functioning of a financial system; however, it can also be the
Achilles' heel of criminal activity
In law enforcement investigations into organized criminal activity, it is often the connections made through
financial transaction records that allow hidden assets to be located and that establish the identity of the
criminals and the criminal organization responsible.
When criminal funds are derived from robbery, extortion, embezzlement or fraud, a money laundering
investigation is frequently the only way to locate the stolen funds and restore them to the victims.
Most importantly, however, targeting the money laundering aspect of criminal activity and depriving the criminal
of his ill gotten gains means hitting him where he is vulnerable. Without a usable profit, the criminal activity will
not continue.

What Individual Governments Should Do about Money Laundering
A great deal can be done to fight money laundering, and, indeed, many governments have already
established comprehensive anti-money laundering regimes. These regimes aim to increase awareness of the
phenomenon-both within the government and the private business sector-and then to provide the necessary
legal or regulatory tools to the authorities charged with combating the problem.
Some of these tools include making the act of money laundering a crime, giving investigative agencies
the authority to trace, seize and ultimately confiscate criminally derived assets; and building the necessary
framework for permitting the agencies involved to exchange information among themselves and with
counterparts in other countries.
It is critically important that governments include all relevant voices in developing a national anti-money
laundering program. They should, for example, bring law enforcement and financial regulatory authorities
together with the private sector to enable financial institutions to play a role in dealing with the problem. This
means, among other things, involving the relevant authorities in establishing financial transaction reporting
systems, customer identification, record keeping standards and a means for verifying compliance.
What Role the Financial Action Task Force (FATF) Play
The FATF is a multidisciplinary body that brings together the policy-making power of legal, financial and law
enforcement experts from its members. The FATF monitors members' progress in implementing anti-money
laundering measures: reviews and reports on laundering trends, techniques and counter-measures, and
promotes the adoption and implementation of FATF anti-money laundering standards globally.
The 40 Recommendations
Drafted by the FATF in 1990, revised in 1996 and more recently in 2003, the 40 Recommendations are
a comprehensive blueprint for action against money laundering. They cover the criminal justice system and law
enforcement, the financial system and its regulation; and international co operation. Each FATF member has
made a firm political commitment to combat money laundering based on them.
The 40 Recommendations have come to be recognized as the international standard for anti-money
laundering programs. A number of non-FATF member countries have used them in developing their efforts to
address the issue.
Conclusion
- Money laundering is the crime of the '90s.

- Money laundering is a sleight of hand... A magic trick for wealth creation... The lifeblood of drug
dealers, fraudsters, smugglers, arms dealers, terrorists, extortionists and tax evaders. It is also the
world's third largest business. Though a relatively new and in vogue subject, it [money laundering] has
in fact been around for centuries. Criminals throughout history have had to hide the source of newly
acquired wealth in order to escape prosecution for the predicate crime. However, the scale of the
problem has escalated out of all proportion. Former U.S. Secretary of State George Shultz summed it
up when he stated:
"Today's criminals make the Capone crowd and the old Mafia look like small time crooks."
Money laundering is one of the ongoing problems facing the international economy, and from the evidence
studied while researching this work, it can be seen that while the fundamentals of this crime remain largely the
same, technology has offered, and will continue to offer a more sophisticated and circuitous to convert ill-
gotten proceeds into legal tender and assets. The largely unchecked growth of the Internet presents what has
been described as the "Armageddon scenario of banking on the Net-criminals could have money transferred
without any audit trail. There is a total absence of regulation on the Internet and it has been recognized that
authorities need to ensure that legislation keeps abreast with technology in order to understand and pick up on
any new techniques that professional money launderers may come up with
There is also a growing realization about the extent that money laundering and its relationship with organized
crime are interlinked. The huge profits that accrue to these criminals from such areas as drug trafficking,
international fraud, advance fee fraud, long firm fraud, arms dealing, trafficking human organs and tissue,
among others, will be used not only to facilitate ongoing operations, but to consolidate the wealth, prestige and
respectability of those in control of the criminal business. Drug trafficking remains the largest single generator

of illegal proceeds. Robinson (1994) stated that more money is spent worldwide on illicit drugs than on food.
However, non drug related crime is increasingly significant
The characteristics of organized crime are evident in money laundering:
- It is a group activity, in that it is carried out often by more than one person;
- It is a criminal activity which is long term and continuing;
- It is a criminal activity which is carried out irrespective of national boundaries,
- It is large scale; and
- It generates proceeds which are often made available for licit use.
These characteristics define a very particular kind of serious criminal activity which, at its most developed, is
highly sophisticated and complex. The degree of organization that is displayed in money laundering is
therefore of particular concern because of its scale, its capacity to exploit and influence the legitimate business
world and its capacity for internationalization. These concerns have led to concerted international action for a
solution to combat this growing menace called Money Laundering. This is particularly evident, not only in the
formation of the FATF but also in international agreements and legislation. In fact, a watershed in the fight
against money laundering was the publication of the FATF 40 Recommendations in 1990-recently updated in
1996.
Recommendations
We must continue to work with and strengthen our international partnerships, and maintain strong ties with our
counterparts in the financial centers of the world. We must urge all countries to ratify the UN Convention and to
pass more effective money laundering and forfeiture laws. Above all, we must continue to identify the points
where the money is most vulnerable and identify what we can do to separate criminals from their ill-gotten
gains.
Launderers have a list popularly called a "shopping list" which they use to size up specific opportunities when
searching for jurisdictions to use. Knowing what is on this list can give rise to specific measures for countries to
adopt to fight money laundering. These measures are a natural progression for countries who have the political
will to combat this insidious crime.
We need to strengthen international cooperation on information exchange and law enforcement:
 Proper mechanisms for handling suspicious reports;

 A compliance culture among financial institutions; and to ensure that they put proper systems and
procedures in place;
 Encouraging financial supervisors to apply bank licensing procedures strictly, exchange information,
and train practitioners;
 Increasing public awareness on the threat of money laundering;
 Increasing coordination among the multiple agencies (national and international) involved and
improving the limited intelligence sharing:
 Increasing the limited human resources involved in the labor intensive and time consuming work of
investigating suspected violations;
 Implementation on a world-wide basis of a consistent set of policies. (e.g., FATF 40
Recommendations); h. Focusing on new technologies and increasing Counter measures to combat
their use for money laundering;
 Sharing forfeited proceeds with law enforcement agencies (a particular police gripe); and
 Introducing measures that make the movement of money more visible.
By implementing the recommendations above, the authorities could further strengthen the fight against
money launderers.
Moreover, political impetus is significant to achieve strong coordinated international efforts, and to involve
other countries, including drug-producing countries, in the fight against money laundering
14. Conflict of Interest
Conflict of interest in the business context occurs when a person acts in a way that is to his/her
advantage at the expense of the employing organization. At the time of hiring, when an employee agrees to the
terms of a contract, there is also an implicit agreement that the employee will not sacrifice the interest of the
organization for his or her personal interest. Conflict of interest violates the principles of impartiality. The
"interest" may be financial or not.

The common factors that create conflict of interest are commercial bribes and gifts. A commercial bribe
can be in the form of money, tangible goods, or services. An employee receives something from a person
outside the firm with the understanding that when there is a transaction between that person of the firm he or
she represents and the employee's firm, the employee will intervene in favor of that person or firm. Commercial
extortion occurs when an employee demands consideration from a person outside the firm as a condition to
intervene in favor of that person or firm when a transaction occurs. Such a consideration affects the judgment
of the employee and prevents him/her from acting objectively in the transaction. In either case, the employee's
firm is the loser.
Accepting a gift is unethical if it acts as a bribe or extortion in that it influences the impartial judgment of
the employee. The value of the gift, its purpose, the circumstances surrounding the actual presentation of the
gift, the accepted business practice in the region, and the company policy regarding gifts should all be taken
into consideration when evaluating whether or not ethical issues are involved.
General Principles
The term "conflict of interest" means something more than individual bias. There must be an interest,
ordinarily financial, that could be directly affected by the work of the committee.
The term "conflict of interest" applies only to current interests. It does not apply to past interests that have
expired, no longer exist, and cannot reasonably affect current behavior. Nor does it apply to possible interests
that may arise in the future but not currently exist, because such future interests are inherently speculative and
uncertain. For example, a pending formal or informal application for a particular job is a current interest, but the
mere possibility that one might apply for such a job in the future is not a current interest
The term "conflict of interest" applies not only to the personal financial interest of the individual but also to the
interest of others with whom the individual has substantial common financial interest if these interests are
relevant to the functions to be performed
Types of Conflict of Interest
1. Self-dealing. For example, you work for the government and use your official position to secure a
contract for a private consulting company you own. Another instance is using your government position
to get a summer job for your daughter.
2. Accepting benefits. Bribery is one example: substantial (no-token) gifts are another. For example, you
are the purchasing agent of your department and you accept a case of liquor from a major supplier.
3. Influence peddling. Here, the professional solicits benefits in exchange for using her influence to
unfairly advance the interest of a particular party.
4. Using your employer's property for private advantage. This could be as obvious as stealing office
supplies for home use. Or it might be a bit more subtle, say, using software which is licensed to your
employer for private consulting work of your own. In the first case, the employer's permission eliminates
the conflict; while in the second, it doesn't.
5. Outside employment or moonlighting. An exam ple would be setting up a business on the side that
is in direct competition with your employer. Another case would be taking on so many outside clients
that you don't have the time and energy to devote to your regular employer. In combination with
influence ped dling, it might be that a professional employed in the public service sells private
consulting services to an individual with the assurance that they will secure benefits from government:
"If you use my company, I am sure that you will pass the environmental re view."
6. Post-employment. Here, a risky situation can be one in which a person who resigns from a public or
private employment same example, practice lobbying former in which was
Key Elements
There private personal interest. financial interest, could interest, example, provide special advantage
spouse child. Taken themselves, nothing wrong with pursuing private personal interests, instance, changing
jobs more pay.
Conflict interest interferes with professional responsibilities specific way, namely, interfering with
objective professional judgment. major reason why clients and employers professionalism that they expect
professionals objective and independent.

15. Insider Trading
WHAT IS INSIDER TRADING
Insider trading refers the significant facts that have not yet made public and are likely affect stock prices.
being prohibited the rules and regulation the Securities and Exchange Commission (SEC). SEC defines insider
 insider meaning, the issuer;

 a director officer (or any person performing similar functions), person controlling the gives gave
him access material information about the issuer the security that not generally available the
public;
 government employee, director, officer exchange, clearing agency and/or self-regulatory
organization who has access material information about issuer security that not generally
available the public;
 person who learns such information communication from any the forgoing insiders.
The U.S. Securities and Exchange Commission considers "insider" be anyone who has pertinent information
that not publicly available, and that gives the trader an advantage over the public. Thus secretaries, lawyers,
consultants, financial partners, and others who have access to inside information and who might ordinarily be
considered outsiders become insiders because of their knowledge as do all others who are given the pertinent
information (De George, 1990).
Moral Arguments
Since insider trading involves the use of insider information, a lot of moral problems are related to the
employee's (insider) use of such information while he or she is still a member of the firm. De George cites two
aspects of this particular problem:
1. One is that of someone within the firm using information for his or her own private gain, at the expense
of the firm (conflict of interest).
2. The other is the use of information by someone within the firm to secure personal advantage over those
not in the firm (breach of loyalty).
Obviously, in these two cases, the insider information has been used to take advantage over others which
make the act morally questionable.
Ethical Issues Related to Insider Trading
 It violates fiduciary relationships between insiders and outside clients.

 It promotes greed and personal gain at the expense of others.
 It renders the transaction between two contracting parties as unfair.
Professor Jennifer Moore argues that insider trading is wrong because it undermines the fiduciary relationship,
which is central to business management. In addition, she contends by saying that employees have a duty to
act in the interests of the firm and its shareholders, but many ways of profiting from insider information do not
benefit the company at all - indeed, they may seriously damage its interests. (cf. W. Shaw. Business Ethics, p.
287).
16. Tax Evasion and Tax Avoidance
The word "tax" has two meanings First, the financial duty or levy contributed to the entity-be it a government
or any other organization. The second definition of tax means "a heavy burden." Taxation is the system by
which the government raises funds with which to finance governance, and to promote the general welfare of its
citizen. According to the author Dr. Jose Mario B. Maximiano (2003), taxation is the lifeblood of the nation. It is
the most important source of revenues for modern government, representing 90 percent or more of the
income. The right of the government to collect taxes coincides with the duty of business to pay correct taxes.
Governments spend 90 percent portion of tax collection to fulfill each duty towards business in general:
 To protect the free enterprise system as in integral part of the economic order.
 To require business to comply with the commercial, industrial, labor laws and regulations.
 To require business to pay proper taxes promptly.
Individuals in the other hand, pay taxes inter vivos and mortis causa
 When they earn money, in form of income taxes.
 When they spend money, in form of consumption taxes
 When they own a house or land, in form of property taxes
 When they die, in form of estate taxes
TAX EVASION
Ideally, corporations should pay the exact amount of tax to the government as part of their obligation to the
society in general. However, some companies intentionally evade the payment of taxes to the government Tax
evasion is an "intentional negligence" of the obligation to pay correct taxes to the government. It is also known
as tax dodging and it is intentional because the pro-profit company eliminates or reduces payment of its correct
and proper tax by fraudulent means. It is considered negligence because it is a form of abandonment of
economic duties which is mandated of a corporate citizen. In the ethical sense, the three elements of tax
evasion are:
 The intention to cheat.

 Knowledge that tax evasion is wrong.
 By fraudulent means
Some examples of actions that constitutes tax evasion are: omitting to report one's corporate income,
intentional understatement of income, improper overstatement of deductions, claiming false personal
exemptions, misdeclaration or underdeclaration of the estate in the estate tax return, among others.
TAX AVOIDANCE
Tax avoidance is when taxpayers exploit legally permissible alternative methods of assessing taxable property
or income in order to avoid or reduce tax liability. Tax avoidance is also known as tax minimization or tax
planning and it's not punishable by law. Tax avoidance like tax evasion is a deliberate escape from taxation but
accomplished by legal procedures that may be contrary to the intent of the sponsors of the tax law but
nevertheless do not violate the letter of the law.
Some examples of actions that constitute tax avoidance are: arranging some corporate affairs that can legally
reduce tax liabilities, off-shoring of business activities, individuals may add dependents to increase personal
exemption, individuals may claim family health insurance as tax deduction, among others.
CLASSIC DISTINCTION BETWEEN TAX EVASION AND TAX AVOIDANCE
A man approaches a river which can be crossed by two bridges, one a toll bridge and the other a free bridge. If
he passes on the toll bridge and fails to pay the toll that is tax evasion. If, however, he crosses by way of the
free bridge, that is tax avoidance." (cited in Elliot W. Brownlee. Federal Taxation in America: A Short History.
Cambridge University Press, 1996). Either way, the gain of the tax evader or tax avoider is the government's
loss.
THE DUTY TO PAY TAXES
The duty to pay taxes is pronounced by Christ Himself in the scriptures. In Mark 12:13-17, when Jesus was
asked by the Pharisees and some of the Herodians whether it is lawful to pay taxes to Caesar or not, His
answer was: "Render to Caesar the things that are Caesar's, and to God the things that are God's," thus
acknowledging the emperor's right to levy taxes. St. Paul in his letter to the Romans (Rom. 13:7) also required
Christians to pay their taxes conscientiously-"Pay all of them their dues, taxes to whom taxes are due, revenue
to whom revenue is due, respect to whom respect is due, honor to whom honor is due. In his book Christian
Ethics (1978), Fr. K.H. Peschke, SVD says that the duty to pay taxes is derived from the citizens' obligations to
contribute their share to the necessities of the state, whose help they need, by which they profit, and which
also assumes certain obligations in the citizens' place and stead." The payment of taxes is therefore an
essential part of one's public responsibility. Only the taxpayer is a good citizen. Tax paying is the sign of
communal spirit and good citizenship.
For Peschke, tax evasion is an evil and proof of lack of public spirit. Payment of just taxes is considered an
obligation in conscience and violation of this duty is regarded as an offense against justice Maximiano (2003)
argues that the main justification of taxation rests on the principle of justice, particularly, distributive justice.
According to this principle, there should be a fair distribution of the society's benefits and burdens. The
distribution of burdens requires proportionate equality, and proportionate equality is not necessarily an equal
share but a fair share of carrying the burden of taxes. Established on the principle of the ability to pay, a fair

share means those earners of the lower income bracket shouldn't be taxed as much as those of the high
income bracket
Checked by:
LILLAN E. BAYANI
OIC - BSBA DEPARTMENT

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INNOVATIVE COLLEGE OF SCIENCE AND TECHNOLOGY

MALITBOG BONGABONG ORIENTAL MINDORO

SOCIAL RESPONSIBILITY AND GOOD GOVERNANCE

II. TIME FRAME

ETHICAL ISSUES AND PROBLEMS IN BUSINESS AND THE CORPORATE WORLD

"Life is really simple, but we insist on making it complicated." -

WHAT IS SEXUAL HARASSMENT?

SOCIAL RESPONSIBILITY AND GOOD GOVERNANCE – FRANCIS ADEL R. ZAMORA Page 1

 Unwanted touching, patting, pinching or brushing up against a person:

The Profiles of the Victim and the Harasser

How Does Sexual Harassment Affect the Workplace?

How to Prevent Sexual Harassment in the Workplace

Communicating the Sexual Harassment Policy

Legal Penalties of R.A. 7877

2. The Problem of Just Wage

WORK AND COMPENSATION

 NOMINAL WAGES - measured in terms of money paid, not in purchasing power

 REAL WAGES - measured in terms of actual purchasing power (inflation)

The Question of Just Wage

The Teachings of the Catholic Church on Wages

SOCIAL RESPONSIBILITY AND GOOD GOVERNANCE – FRANCIS ADEL R. ZAMORA Page 3

Catholic Bishops' Conference of the Philippines (CBCP): On Social Justice

 Universal Declaration of Human Rights

 International Convention on Economic, Social and Cultural Rights

"Equal pay for men and women workers."

Philippine Constitution and Republic Act 6727

"That the workers are entitled to a living wage."

Republic Act No. 6727

Government Agencies Involved

Factors to Consider in the Formulation of Fair Wages

SOCIAL RESPONSIBILITY AND GOOD GOVERNANCE – FRANCIS ADEL R. ZAMORA Page 5

Some Issues on Just Wage

3. Gift Giving and Bribery GIFT-GIVING

Businesses usually engage in gift-giving for the following reasons:

 To show appreciation for a favor received;

Is Gift-Giving Ethical or Unethical?

SOCIAL RESPONSIBILITY AND GOOD GOVERNANCE – FRANCIS ADEL R. ZAMORA Page 6

Supposing you are a lawyer by profession and,

Factors in Determining the Morality of Gift-Giving

SOCIAL RESPONSIBILITY AND GOOD GOVERNANCE – FRANCIS ADEL R. ZAMORA Page 7

Bribery is obviously unethical because of the following reasons:

 It is generally used as an instrument to gain personal or corporate advantage,

4. The Morality of Advertising

SOCIAL RESPONSIBILITY AND GOOD GOVERNANCE – FRANCIS ADEL R. ZAMORA Page 8

 Manipulative or Coercive Advertisements - manipulative advertisement uses trickery or by devious

Some Issues in Advertising

Use of "Weasel Words"

SOCIAL RESPONSIBILITY AND GOOD GOVERNANCE – FRANCIS ADEL R. ZAMORA Page 9

Ads Directed at Children

Philippine Laws on Advertising

CONSUMER ACT OF THE PHILIPPINES (R.A. 7394)

SOCIAL RESPONSIBILITY AND GOOD GOVERNANCE – FRANCIS ADEL R. ZAMORA Page 10

False, Deceptive and Misleading Advertisement

Special Requirements for Food, Drug, Cosmetic, Device or Hazardous Substances

1. The following rules must be followed:

PHILIPPINE ASSOCIATION OF NATIONAL ADVERTISERS (FAHA)

SOCIAL RESPONSIBILITY AND GOOD GOVERNANCE – FRANCIS ADEL R. ZAMORA Page 11

The Company's Stand

Benefits of Workplace Romance

Disadvantages of Workplace Romance

Damaged Professional Reputations

SOCIAL RESPONSIBILITY AND GOOD GOVERNANCE – FRANCIS ADEL R. ZAMORA Page 12