ETHICAL ISSUES AND PROBLEM IN BUSINESS AND THE

CORPORATE WORLD

SOME OF THE ETHICAL ISSUES AND PROBLEM IN BUSINESS AND THE CORPORATE
WORLD ARE THE FOLLOWING:

1. Sexual Harassment
2. The Problem of Just Wage and Unfair Compensation
3. Unjust Dismissal
4. Gift-giving and Bribery
5. Multi level marketing and pyramiding
6. Whistle Blowing
7. Conflict of Interest
8. Money Laundering
9. Insider Trading
10. Business bluffing
11. Mergers and acquisitions

1. 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.
Consequently, 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, the other purpose.

“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 American, from our
law, was patterned, defines sexual harassment as “Unwelcome sexual advances,
request 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 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, an agent of the employer, teacher, instructor, professor, coach,
trainer or any other person who, having authority, influence or moral ascendancy over
another in a work or training or education environment demands, request or otherwise
requires any sexual favor from the other, regardless of whether the demand, request or
requirements for submissions is accepted by the object of said act.”
Why Does Sexual Harassment Occur?

Sexual harassment occurs due to the power struggle between men and women
as a response to a real or imagined loss of power or as an expression of retaliation or
flexing of the new power. This also happens because some organizations and managers
allow it to happen. Historically, sexual harassment has always occurred but there used to
be no label for such behavior. The industrial revolution brought about changes in the
traditional function of men and women which greatly increased gender specialization and
formed a new kind of workplace in the western world. Men and women no longer work
together on the farm or in the family business. The responsibility of each is more
specialized.

The workforce has been continuously joined by more and more women as things
continued to change in the past decades. Some moved into jobs traditionally held by
men. Because of these changes, the balance is shifting. Sexual harassment is one effect
of this shift. When harassment is committed by a male against a female, it may be a
response to the real or imagined loss of power. When committed by a woman towards a
man, it may be an expression of retaliation or flexing of the new power.

Sexual harassment falls into two general categories:

1. The “Quid Pro Quo” Harassment - “Quid pro quo” means “this for that”
(something for something) and is defined as requiring a sexual favor or
interaction as a condition of employment or in exchange for an employment
benefit (such as promotion, transfer, pay raise, and the like). A manager uses
his authority to grant pay increases and promotions as a means to extort
sexual favors from an employee, e.g., “Go to bed with me and you will get that
promotion you want.”

2. A harassment that creates a hostile environment - 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 must
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.

 Unwanted touching, patting, pinching, or brushing up against the person;

 Comments about your body, leering, wolf-whistling, catcalls, insults of a sexual
nature, persistently pestering
 Displaying or circulation of pornographic pictures with the intention of harassing
someone or posting or 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, or 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.
4. 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 peer, more frequently, the victims are in a
position than the accused. The most common example is the boss subordinate
relationship. Harassment also occurs between customer/client and provides.

How Does Sexual Harassment Affect the Workplace?

In the study made by Redbook Magazine (1981), the data have shown that 80
percent of the persons interviewed believed they have been sexually harassed out of
140,000 respondents (men and women). The study also tackled different types of
harassment such as usage of words, jokes, and different gestures creating a hostile and
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 strong sexual harassment policy can serve as a significant step an organization

can take in preventing sexual harassment in the workplace and can be a tool to ensure a
safe, secure, and positive work environment. Some examples of 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 organization member; and
 Separate sexual harassment policy, one the 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. If not dealt with, sexual harassment may result in costly lawsuits,
dreadful publicity, and ruin of an organization's image that took years to establish.
 The possibility of sexual harassment being completely stopped will only come
through with the commitment of the organization and employees. Everyone, male or
female, wants a secure office to work in harmony, free of threats and apprehension.

Communicating the Sexual Harassment Policy

Communication is the key to make a policy an effective one. A well-written policy

is not enough, regular actions must also be made such as permanent posting on bulletin
boards, memos, articles in the organization’s newsletters, meetings, and training.
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 AND UNFAIR COMPENSATION 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.

Compensation for an accomplished work 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. It can be in the form of wages, shares of profit, harvest or
commercial goods, in-kind payments, and other remunerative fringe benefits. Such
remuneration or reward, including both financial and non-financial, will be received by a
person from working.

It is believed that by properly compensating, an equitable system for the

employer and employee will be created which is the main objective. Thus, the general
concern mainly revolves around justice being the substance of compensation.

The Question of Just Wage

The definition of wage and the fair wage has a long history as a lot of people
have already argued on the appropriate criteria to consider in setting the so-called just
wage. A just wage is defined as the 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 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:

“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

The1966 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

“Equally pay for men and women workers.”

The 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

Equitability and being just must always be considered in determining wages in

our country. The ones primarily responsible for determining the minimum wage for
Filipino workers are The National Wage and Productivity Commission (NWPC) and the
Regional Tripartite Wages and Productivity Boards (RTWPB). 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

Setting wage rates and salaries were some of the problems being faced by every
employer. Others may find it 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. These refer to the supply and demand for labor and
so-called economic conditions and underemployment. The principle behind this is
that wages are relatively high if there is a scarce supply of labor, and the same is
low if there are more opportunities for labor.

2. Laws and Regulation. It is stated that 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 the cost of living. Thus, if the cost of living goes
up by 10%, the wage should also go up by 10%. Unfortunately, it is a fact that the
majority of the employers cannot automatically adjust wages with the increase in
cost of living means jeopardizing the welfare workers.

4. Prevailing Industry Rate. Some claim that paying workers the average of what
other companies are paying for the same job results in affair wage. However,
such a 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. These factors are involved with the assessment of 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.
Likewise, determining if the organization is unionized or not and if the company is
capital or labor-intensive could contribute to the establishment of a 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 a fair wage. An employee should be paid
based on the complexity and difficulty of his job. The concept, however, is not
perfectly similar and true to all employers due to differences in interpretation of
skills and tasks.

7. Individual Performances. The trend suggests that individual performances or

productivity ratings affect 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
a fair wage. Some communities have a higher cost of living than others.
 Wage indexation to the cost of living, where the wage is automatically adjusted
with the increases in the cost of living, is not usually met by the majority of
employers. One valid reason is the organizations’ insufficient financial resources
for the obvious fact that they 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 the 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 price of commodities.

3. UNJUST DISMISSAL

Unjust dismissal is when an employee is dismissed from their job in a harsh,

unfair, or unreasonable manner.
Applying for unjust dismissal - Employees have to apply to the Commission within 21
days of the dismissal taking effect. If you think you have been unfairly dismissed you
need to contact the Commission as soon as possible.
Minimum employment period - Employees have to be employed for at least 6 months
before they can apply for unfair dismissal. Employees working for a small business have
to be employed for at least 12 months before they can apply. If there was a change of
business ownership, service with the first employer may count as service with the second
employer when calculating the minimum employment period.

4. GIFT GIVING AND BRIBERY

Gift-giving is merely an act of extending goodwill to an individual to share

something with them. Giving gifts to the customer, 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 receives:

 To effectively establish goodwill with business partners;
 To advertise: end
 To compete effectively against competitors.

The following are the common forms of gift-giving;

  Samples
 Raffle coupons/certificates
 Rebates/cash refunds
 Padding
 Premiums
 Prices
 Patronage awards (rewards)
 Tie-up promotions
 Allowance
 Free goods
 Tips

Is Gift-Giving Ethical or Unethical?

Gift-giving between 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,

Leila, 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 of dinner?

Mateo, your former classmate in law school (now an established lawyer

practitioner) has referred a case that 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 a bribe is a violation of professional ethics, but we may not
always find “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 should be considered theft.

For professionals and for people in the business world, the rules are not so dear
and identified, but a number of considerations can help one determine the morality of
giving and receiving gifts in business situations.

Factors in Determining the Morality of Gift-Giving

[Of William Show 1999 Business Ethics. (San Jose, Cal., USA Wadsworth Publishing)
pp. 292-294 and A. Gorospe. 1995. Philippine Business Ethics. (Manila: GIC Enterprises
Inc.) p.36]

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 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 is the consideration of whether the gift is directly tied to
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 the holiday season, for a store opening, or one attached to a special event
is circumstantially different from one unattached 0 any special event or occasion.
Another question is whether the gifts were 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, or 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
party 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 remuneration for the 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. Remuneration; termed as bribes, can be in the form of monetary 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 over speeding.
 A citizen seeking paperwork or utility line connections gives an expensive gift to a
functionary in exchange for faster service;
 A construction company sharing a 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 and controls the transaction; In
other cases, a bribe may be effectively extracted from the person paying it.

Bribery is unethical because of the following reasons:

 It is generally used as an instrument to gain a 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 professional 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.

5. MULTI LEVEL MARKETING AND PYRAMIDING

Multi-level Marketing (MLM) or network marketing, - is individuals selling products to

the public – often by word of mouth and direct sales. The main idea behind the MLM
strategy is to promote maximum number of distributors for the product and exponentially
increase the sales force. The promoters get commission on the sale of the product as
well as compensation for sales their recruits make thus, the compensation plan in multi-
level marketing is structured such that commission is paid to individuals at multiple levels
when a single sale is made and commission depends on the total volume of sales
generated.

Pyramid Schemes - fraudulent schemes, disguised as an MLM strategy. The difference

between a pyramid scheme and a lawful MLM program is that there is no real product
that is sold in a 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.
6. WHISTLE BLOWING

Whistleblowing is the disclosure by an employee or confidential information

related to some danger, fraud, or other illegal or unethical conduct connected with the
Workmate be it of the employer or of his fellow employees.

A whistleblower is someone in an organization who witnesses behavior by a

member that is either contrary is 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 institutions (profit or non-profit. 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 both parties;

 Are in violation of human rights;
 Or run counter 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:

 The disclosure of information, be it internal or external, must be made in good

faith;
 The disclosure must be made by a current, former, or prospective employee;
 The information must be linked with misconduct on the part of the employer; and
 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 organization 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 bodies, 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 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 co-workers;
 Were blacklisted from getting another job in their field;

 They were considered traitors to their organizations.

On the contrary, internal whistleblowing produces less retaliation than external

whistleblowing. Along with the 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.

7. 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 a 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 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
individual but also to the interest of others with whom the individual has a
substantial common financial interest if these interests are relevant to the
functions to be performed.

Type 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 that 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 example 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. combination with influence peddling, 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 the government. ”If you use my company, I am sure that you will
pass the environmental review."

6. Post-employment. Here, a risky situation can be one in which a person resigns

from public or private employment and goes into business in the same area. For
example, a former public servant sets up a practice lobbying the former
department in which she was employed.

8. MONEY LAUNDERING

Money laundering is the process used to disguise the source of money or assets
derived from criminal activity. Profit-motivated crimes span a variety of illegal activities
from drug trafficking and smuggling to fraud, extortion, and corruption.

Money laundering facilitates corruption and can destabilize the economies of

susceptible countries. It also compromises the integrity of legitimate financial systems
and institutions and gives organized crime the funds it needs to conduct further criminal
activities. It is a global problem, and the techniques used are numerous and can be very
sophisticated. Technological advances in e-commerce, the global diversification of
financial markets, and new financial product developments provide further opportunities
to launder illegal profit and obscure the money trail leading back to the underlying crime.

Money Laundering Process

Money laundering is a diverse and often complex process. It basically involves

three independent steps that often occur simultaneously:

1. Placement - puts the "dirty money" into the legitimate financial system
2. Layering - conceals the source of the money through a series of
transactions and bookkeeping tricks.
3. In the final step, integration, the now-laundered money is withdrawn from
the legitimate account to be used for whatever purposes the criminals
have in mind for it.

FINTRAC's financial intelligence plays a critical role in helping to combat money

laundering. This financial intelligence is used to assist money laundering and terrorist
financing investigations in the context of a wider variety of criminal investigations, where
the origins of the suspected criminal proceeds are linked to drug trafficking, fraud, tax
evasion. corruption, and other criminal offenses.

9. INSIDER TRADING

Insider trading refers to significant facts that have not yet made public and are
likely to affect stock prices. It is being prohibited by the rules and regulations of the
Securities and Exchange Commission (SEC). SEC defines insider as (a) insider
meaning, the issuer, (b) a director or officer (or any person performing similar functions),
 or a person controlling the issuer; gives or gave him access to material information about
the issuer or the security that is not generally available to the public; (c) a government
employee, director, or officer of an exchange, clearing agency and/or self-regulatory
organization who has access to material information about an issuer or a security that is
not generally available to the public; or (d) a person who learns such information by a
communication from any of the forgoing insiders.

The Securities and Exchange Commission considers an “insider” to be anyone

who has pertinent information that is 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 a
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 of others which makes 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

10. BUSINESS BLUFFING

Business bluffing is an act of puffing at best and misrepresentation or fraud at worst. In

either case, its legality and morality are already well defined and dis- cessions of the subject
should be directed along these established paths.

Is Business Bluffing Ethical?

In article written by Albert Z. Carr in 1968. It tackles the question of whether

regular ethics and morality are appropriate in the business world. At one point, Carr
compares business to a game of poker in which bluffing is a natural way to play as long
as all the players know the rules of the game. The article goes on to argue that regular
morals, which may make certain individuals recoil in the face of certain decisions, do not
apply to business decisions. Businesses aim to make profits in all situations and, as long
 as their actions do not break the law in any way, they are allowed to bend the rules
because they are playing "to win," and not merely to stay in the game. Moreover, bluffing
is not the same as lying. In some cases, the whole truth is not expected, and withholding
information to get a competitive edge is not the same as providing false information.
Ultimately, the article does not advocate against doing the right thing or telling the truth,
it merely advances that, in the game of business, these things lose the weight and
relevance they hold in real life.

11. MERGERS AND ACQUISITIONS

Mergers and acquisitions both refer to the joining of two or more business entities
that entails a restructuring of their corporate order. They are aimed at achieving better
synergies within the organization in order to increase their competence and efficiency.
However, there are key differences between a merger vs. acquisition in terms of
initiation, procedure, and outcome.

MERGER

When two or more individual businesses consolidate to form a new enterprise, it

is known as a merger. The merged entity usually takes on a new name, ownership, and
management that is composed of employees from both companies. The decision to
merge is always mutual since the merging companies combine their forces to seek
certain benefits, even at the cost of diluting their individual powers. There is usually no
exchange of cash.

The motive for mergers may be to expand market share, gain entry into new
markets, reduce operating costs, increase revenues, and widen profit margins. The
parties to the contract are generally similar in terms of size and scale of operations, and
they treat each other as equals. A merged company issues new shares, and the shares
are distributed proportionately among existing shareholders of both parent companies.

ACQUISITION

An acquisition entails one organization acquiring the business of another. The

acquirer must purchase at least 51% of the target company’s stock in order to gain
absolute control over it. It usually occurs between two companies that are not equal in
stature: a financially stronger entity generally acquires a smaller, relatively weaker one. It
is not necessary for the decision to be a mutual one; when a company takes over the
operations of another without the latter’s consent, it is termed as a hostile takeover.

The smaller company continues its operations under the name of the larger one.
The acquirer can choose to either retain or lay off the staff of the acquired company. In
fact, the acquired company ceases to exist in its previous name and operates under the
name of the acquiring company; only in some cases does the acquired company gets to
retain its original name. No new shares are issued.

The motives for acquisition are similar to those for mergers. The basic aim is to
gain a better competitive advantage by combining resources with another organization.
KEY DIFFERENCES BETWEEN MERGER VS ACQUISITION

MERGER ACQUISITION

Procedure Two or more individual One company completely takes over

companies join to form a the operations of another.
new business entity.

Mutual A merger is agreed upon by The decision of acquisition might not

Decision mutual consent of the be mutual; in case the acquiring
involved parties. company takes over another
enterprise without the latter’s consent,
it is termed as a hostile takeover.

Name of The merged entity operates The acquired company mostly

Company under a new name. operates under the name of the
parent company. In some cases,
however, the former can retain its
original name if the parent company
allows it.

Comparative The parties involved in a The acquiring company is larger and

Stature merger are of similar financially stronger than the target
stature, size, and scale of company.
operations.

Power There is dilution of power The acquiring company exerts

between the involved absolute power over the acquired
companies. one.

Shares The merged company New shares are not issued.

issues new shares.