BA 50 – GOOD GOVERNANCE AND CORPORATE

SOCIAL RESPONSIBILITY

UNIT 1 – OVERVIEW OF BUSINESS OPERATION

BUSINESS ADMINISTRATION DEPARTMENT
MMSU-CBEA
Topics Covered:

I. Overview of Business Operation

A. Forms of Business Ownership and
Corporation
B. Business and its various Publics
C. Stakeholders and their expectations:
At the end of the unit, the student must have:

1. identified the differences between sole

proprietorship, partnership and corporation.
2. explained the different publics of the business;
and
3. discussed the expectations of the different
stakeholders. culinary
Classification of Business as to Ownership
1. Sole Proprietorship – it is a business entity owned
and operated by a single person

2. Partnership – is a legal association of two or more

persons as co-owners of an unincorporated
business
Types of Partnership
1. General Partnership – is an association of 2 or
more persons each with unlimited liability, who
are actively involved in the business
2. Limited Partnership – is an arrangement in
which the liability of one or more partners is
limited to the amount of assets they have
invested in the business.
3. Corporation
- Isa legally chartered enterprise with most of the
legal rights of a person, including the right to
conduct a business, to own and sell property, to
borrow money and to sue or be sued.
Five Main Characteristics of a Corporation
1. Limited Liability
• Stockholders, who are owners of the corporation, are
not liable for its debts or acts. The premise of
separate legal entity means that the no one represents
or acts on behalf of the company as it represents
itself. In instances where a corporation is being
wound up, the shareholders are only liable up to the
unpaid amounts of their shares.
2. Perpetual Life
• In accordance to the going concern principle of
accounting, corporations have an endless life. A
corporation exists indefinitely, up to the foreseeable
future. There is no connection between the life of a
corporation and that of its members. There is a
continuous succession of stakeholders (employees,
shareholders, managers and debtors).
3. Transferability of Ownership
• Shares of corporations, whether private or public, are
transferable from one person to the other. By
transferring shares, the ownership of the corporation
also changes hands. Transfer of ownership is
accomplished simply by selling and buying of shares
at the prevailing market prices. Transfer transactions
do not interfere with the corporation’s operations.
The share certificate represents a legal title to
ownership.
4. Capacity to Contract
• Corporations have full legal capacity to enter into
contractual agreements on their own behalf. Having
full contractual capacity means that legal proceedings
instituted against the firm are upon the corporation
and not the management or the employees. Legal
proceedings brought forward by the corporation are
also in the corporation’s name.
5. Centralized Management
• Regardless of the type of corporation, whether sole,
aggregate, statutory or chattered, there is a centralized
management system. Shareholders do not manage the day-
to-day operations of the corporation, instead appointed
mangers act as stewards over the corporation's business.
Unlike other business associations where owners manage the
affairs, it is impossible for shareholders to do so due to their
lack of skill and geographic dispersion.
Types of Corporation
1. Publicly Held Corporation:
The establishment most often referred by the
word corporation is a publicly held corporation. A
publicly held corporation is a publicly traded
corporation. The shares of such corporations are
traded on a public stock exchange (e.g., the New
York Stock Exchange or NASDAQ in the United
States).
Types of Corporation
1. Publicly Held Corporation:
Types of Corporation
1. Publicly Held Corporation:
2. Closely Held Corporation:
A closely held corporation is a corporation
that has only a small number of stockholders
with no public market for its stock.
3. Limited Liability Company:
Unlike a corporation, an LLC is a pass-through
type of business. Pass-through businesses are those
in which the profits and losses of the business pass
through to the owners. In other words, the business
income is considered as the owner’s income, and the
owner pays the tax on his or her personal tax return.
4. C Corporation:
A “C Corporation” is a business entity that can
have an unlimited number of shareholders, which
may include shareholders who are foreign
citizens. Shareholders are protected from the
corporation’s liabilities. The corporation is taxed on
its profits, and shareholders are also taxed on the
distributions they receive, such as profit sharing
payments or dividends.
5. S Corporation:
Unlike a “C Corporation”, an “S Corporation” must not
have more than 100 shareholders and must have only one
class of stock. Spouses are automatically treated as a single
shareholder. Shareholders must be U.S. citizens or
residents, and must be natural persons, so corporate
shareholders and partnerships are generally excluded.
However, certain trusts, estates, and tax-exempt
corporations, are permitted to be shareholders. Profits and
losses must be allocated to shareholders proportionately to
each one’s interest in the business.
6. Professional Corporation:
A professional corporation is a corporation consisting of
professionals who are licensed to practice a particular profession
such as accountants, lawyers and doctors. These professionals can
form a corporation and take advantage of the various benefits of
the corporate structure such as limited liability of shareholders,
continuity of life and centralized management. However, shares in
a professional corporation can only be transferred to other
individuals licensed to practice in the same profession.
7. Non Profit Corporation:
A nonprofit corporation is an organization formed for serving a
purpose of public other than for accumulation of profits. These
corporations enjoy tax-exempt status; however, specific
requirements and limitations are imposed on their activities. Non
Profit corporations are generally those that serve a scientific,
literary, education, artistic or charitable purpose that benefits the
public.
 FORCES SHAPING FUTURE
BUSINESS
1. Better-quality management
2. Better Production
3. Growing Use of Technology
4. Use of computers
5. Environmental Protection
6. Expansion beyond National Boundaries
1. BETTER QUALITY MGT.
• Fierce competition
• Kaizen (continuous improvement)
• Changing customers
• Service cycle, service failure, service recovery
• Goals of marketing (to attract and retain customers)
2. BETTER PRODUCTION
• Through the aid of computers/technology
• Ethical issues (humans are displaced)
3. GROWING USE OF TECHNOLOGY/use of
computers
• Application of technology in all areas of mgt.
• Privacy issues
E.g. marketing (on-line transactions)
4. ENVIRONMENTAL PROTECTION
• Environmental degradation
• Corporate social responsibility
• Programs to protect the environment (e.g. DENR
permit, emission test, air pollution)
• E.g. Bantay kalikasan
6. EXPANSION BEYOND national
BOUNDARIES
• Internationalization of business
• Ethical issues (Businesses should fully understand the culture
of the country where they expand)
 BUSINESS AND ITS VARIOUS
PUBLICS
Employees – employees and contractors who work for the organization
Customers - consumer and clients who purchase the organization’s goods
and /or use its services
Suppliers – providers of the organization’s human , information, material
and financial resources
Owners – stockholders, investors and creditors with claims on assets and
profits of the organization
Competitors – other organizations producing the same or similar goods
and services
Regulators – the local, state and national government agencies that
enforce laws and regulations
Interest Groups – community groups, activists, and others representing
interests of citizens and society
STAKEHOLDERS AND THEIR EXPECTATIONS
STAKEHOLDER EXPECTATIONS

Employees Pay Work satisfaction, training

Customers Supply of goods and services Quality

Suppliers Payment Long-term relationship

Owners Financial return Added value

Regulators Compliance Improved competitiveness

Interest Groups Safety and security Contribution to community

CORPORATION
Corporations whether stock or non-stock must be registered and incorporated at the
SECURITIES AND EXCHANGE COMMISSION

The Securities and Exchange Commission is the agency of the Government of the Philippines
responsible for regulating the securities industry in the Philippines. In addition to its regulatory
functions, the SEC also maintains the country's company register.
CORPORATION CODE OF THE PHILIPPINES
RA 11232 – Revised Corporation Code of The Philippines.
CONTENTS OF ARTICLES OF
INCORPORATION
Article I – NAME OF THE CORPORATION
Article II – PURPOSE/PURPOSES FOR WHICH THE CORPORATION IS
BEING FORMED
Article III – PLACE/PRINCIPAL OFFICE OF THE CORPORATION IS
LOCATED
Article IV – THE TERM FOR WHICH THE CORPORATION EXIST
Article V – NAMES, NATIONALITIES AND RESIDENCE ADDRESSES OF
THE INCORPORTORS.
CONTENTS OF ARTICLES OF
INCORPORATION
Article VI – NUMBER OF DIRECTORS
Article VII – NAMES, NATIONALITIES AND RESIDENCE ADDRESSES OF
PERSONS WHO SHALL ACT AS DIRECTORS / TRUSTEES
Article VIII – THE AMOUNT OF ITS AUTHORIZED CAPITAL STOCKS /
NUMBER OF SHARES. THE PAR VALUE OF EACH, NAMESM
NATIONALITIES, RESIDENCE ADDRESSES.
Article IX – IF NON-STOCK CORP., THE AMOUNT OF ITS CAPITAL, THE
NAMES, NATIONALITIES AND RESIDENCE OF CONTRIBUTORS
Article X – SUCH OTHER MATTERS CONSISTENT WITH LAW AND WHICH
THE INCORPORATORS MAY DEEM NECESSSARY AND CONVENIET.
POWERS OF CORPORATIONS
SEC. 35. Corporate Powers and Capacity.
Every corporation incorporated under this Code has the power and capacity:
(a) To sue and be sued in its corporate name;
(b) To have perpetual existence unless the certificate of incorporation provides otherwise;
(c) To adopt and use a corporate seal;
(d) To amend its articles of incorporation in accordance with the provisions of this Code;
(e) To adopt bylaws, not contrary to law, morals or public policy, and to amend or repeal the same in accordance with this Code;
(f) In case of stock corporations, to issue or sell stocks to subscribers and to sell treasury stocks in accordance with the provisions
of this Code; and to admit members to the corporation if it be a nonstock corporation;
(g) To purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage, and otherwise deal with such real and personal
property, including securities and bonds of other corporations, as the transaction of the lawful business of the corporation
may reasonably and necessarily require, subject to the limitations prescribed by law and the Constitution;
POWERS OF CORPORATIONS
(h) To enter into a partnership, joint venture, merger, consolidation, or any other commercial agreement with natural and
juridical persons;
(i) To make reasonable donations, including those for the public welfare or for hospital, charitable, cultural, scientific, civic,
or similar purposes: Provided, That no foreign corporation shall give donations in aid of any political party or candidate or
for purposes of partisan political activity;
(j) To establish pension, retirement, and other plans for the benefit of its directors, trustees, officers, and employees; and
(k) To exercise such other powers as may be essential or necessary to carry out its purpose or purposes as stated in the
articles of incorporation.
BUSINESS AND ITS VARIOUS PUBLICS

PUBLICS
- isthe group of people that influence the business
activities of a company or people who have real or
potential interest in the company. This public is
responsible for building your company’s image
amongst the customers or the industry.
TYPES OF PUBLIC
• FINANCIAL PUBLICS
• MEDIA PUBLICS
• GOVERNMENT PUBLICS
• CITIZEN-ACTION PUBLICS
• LOCAL PUBLICS
• GENERAL PUBLICS
• INTERNAL PUBLICS
FINANCIAL PUBLICS

• These are the people that affect a company’s

funding. Banks, investors, brokerage firms,
stock holders etc. This type of publics affect a
company’s ability to take loans, favorable
payment terms etc. They also determine how
the customers or other publics perceive a
business.
MEDIA PUBLICS

• This type of publics generally use newsletters, articles,

blogs, magazines, radio announcements etc. to make a
perception about a business in the minds of the
stakeholders. Having good media relations can always help
a company hide its faults and highlight its strengths. But if
the media relations are not good, it might lead to heavy
losses.
GOVERNMENT PUBLICS

• The Government rules and regulations need to be followed

while operating a business. Any change in the rules should
be noted and corresponding alterations should be done in
the business procedures.
• A business should always be updated about the
Government policies and may consult a Government official
or advocates etc. for doing so.
CITIZEN-ACTION PUBLICS

• These are the voluntarily or involuntarily formed public

groups for the benefit of the general consumer. These
include consumer groups, environmental groups and
minority groups etc.
• The general public that might affect the business should be
known and efforts should be taken to keep friendly
relationships with them.
LOCAL PUBLICS

• These include the neighborhood citizens,

general local bodies etc. A community relations
officer needs to be appointed to solve the
issues of the local public.
GENERAL PUBLICS

• General public includes the general customers. The

customers brand perception is very important for the
company’s success. Various advertising campaigns
might be undertaken to build a healthy image.
• General public’s perceptions can be judged through
their feedback on social media.
INTERNAL PUBLICS

• A company’s employees, managers, distributors, suppliers,

volunteers, stakeholders, Board of Directors etc. are very
important assets of a company. If the internal public is
happy and content, then only they will try to increase the
goodwill of the company, in the outside world. Newsletters,
memos, company meetings etc. can be used to educate
and motivate the employees.
Maxim, S. T. (2014). Ethics: Philosophy or science? Procedia—Social and Behavioral Sciences, 149, 553–55
Rimando, L. 2012. How CSR is evolving in the Philippines. Retrieved July 11, 2013 from
http://www.rappler.com/newsbreak/3421-how-csr-is evolving-in-the Philippines.

Winters, M.S. 2013. Pope Francis spotlights social teaching with blunt calls for ethical economy. National Catholic
Reporter, Julyn 5-18.

Books/Journals:

Maximiano, Jose Mario B., 2014, Business Ethics and Corporate Social Responsibility, Anvil Publishing Inc.

Neff, Blake J. et al. 2000, Business Ethics: Sunday Ethics, Monday World, Second Edition, Triangle Publishing, Indiana
Wesleyan University, 1900 West 50th St., Marion Indiana, 46953.

O. C. Ferrel, et.al. 2012. Social Responsibility and Business, 4th edition, Cencage Learning Asia Pte. Ltd.
REFERENCES
MBA Skool Team. (2021). Public Meaning and Types. Retrieved from
https://www.mbaskool.com/business-concepts/marketing-and-strategy-terms/13852-
publics.html

UCLG ASPAC. (2021). Good Governance: Definition and Characteristics. Retrieved

from https://uclg-aspac.org/en/good-governance-definition-and-characteristics/

Camilar-Serano, A. (2019). Corporate Social Responsibility and Good Governance in

the Millennial Age. Unlimited Books Library Services &Publishing, Inc.