CHAPTER 10 INITIATIVES TO IMPROVE BUSINESS ETHICS AND REDUCE CORRUPTION INTRODUCTION Improvement of business ethics imperative that all parties a common concern of everybody. It is wolved — manufacturers, sellers, consumers, government and relevant organizations must participate in improving business. ethics. Unless there is a concerted effort on the part of everybody, we cannot effectively remind businessmen and professional of their ethical responsibility to each other, to their customers and clients. Unethical practices are ever present. Even people who have not yet been victims of these practices are vaguely aware that they exist and agree that something must be done to rid the world of them. Accordingly, various approaches to improving business ethics have been brought forward not only in the Philippines but also in other countries. THE INTEGRITY INITIATIVE CAMPAIGN In 2010, a private sector-led campaign aiming to strengthen ethical standards in business, the Integrity Initiative was organized afier the Philippines received a grant from Siemens. The Makati Business Club (MBC) and the European Chamber of Commerce of the Philippines (ECCP) serve as the Integrity Init Secretariat. The Integrity Initiative is a multisectoral campaign that seeks to institutionalize integrity standards among various sectors of society — business, government, judiciary, academe, youth, civil society, church and media. Led by the private sector, the initiative aims to help in diminishing, if not fully eradicating, the vicious cycle of corruption in the Philippines, which has not only exacerbated poverty but also obstructed the development of a competitive business environment that operates on a level playing field, gpUltimately, the Integrity Initiative hopes to build trust in government, a more equitable society and fair market conditions. This will result in improved competitiveness and increased business confidence, which will evident with the increase in domestic and foreign investments, and more employment generated for Filipinos. Subsequently, with more Filipinos employed in a vibrant and dynamic Philippine economy, the alleviation of poverty should become inevitability. Through the initiative, the Philippines will become a benchmark in the transformation process of any country regarded as highly corrupt to one that fosters an ethical and progressive business environment. To achieve this goal, consultations, roundtable discussions and public forums involving business leader compliance officers, corporate governance experts, academics and practitioners from small and medium enterprises to Fortune 500 companies. "An Integrity Compliance Handbook" containing the key documents and toolkits in Integrity Initiative was published for the use of organizations to promote ethical business practices. Since 2010, MBC and ECCP have been joined by various organizations and industry associations in taking an active role in promoting honesty and transparency in Philippine business. As of 2018, a number of the organizations and industry associations have been taking active participation in this movement. With the active participation of these organizations, is hoped that the problem of massive graft and corruption in the Philippines will be minimized if not totally eliminated. Appendix G shows a partial list of organizations who are actively participating in the “Integrity Initiative” Campaign against Corruption. Corporate Values The increasing scrutiny by regulators, lobbyists, non-government organizations, consumer groups and the media have the potential to affect a business -firm market perception and hence value. It is therefore important that the organization's values, and its code of conduct, address the legal and other obligations owed to important stakeholders, including, for example, trade practices laws, privacy laws, employment laws, occupational health and safety, equal opportunity in the workplace, superannuation and environmental regulations. ’Initiatives to Improve Business Ethics and Reduce Corruption _149 Managing, protecting and enhancing reputation has become one of the greatest challenges facing today's board. The reputation of a business is a critical factor in the determination of its value. The values and ethics of the organization need to be explicitly managed. Need for a Code of Conduct A code of conduct is a formal expression of the organization's values and ethics. A code of conduct should: guide directors and senior executives, as a minimum, as to the practices necessary to maintain confidence in the organization's integrity. Other members of staff should also have a code of conduct relevant to them which may be the same as that for directors and senior executives or may be a complementary version; © promote responsibility and accountability of individuals for reporting and investigating reports of unethical practices; and ensure compliance with legal and other obligations to legitimate stakeholders. An organization's code of conduct recognizes the important role that business ethics play in the success of today’s business, encouraging the board to actively develop an organizational culture that is established on transparency, accountability and integrity. One of the most significant accomplishments of the Integrity Initiative is the preparation of the "Unified Code of Conduct for Business". The Code's purpose is two-fold. First, it harmonizes existing ethical standards among business operating in the Philippines. It ensures that different market players adhere to the same rules of the game in order to create fair market conditions and proinote transparency in doing business. Second, the Code formally communicates the signatories’ commitment to upholding high standards of ethics in all business transactions. It articulates the belief that securing profit at the expense of integrity is an unacceptable and unsustainable way of conducting business and that measures have been taken to enforce and cultivate integrity habits within the signatories’ respective organizations.4150 _ Chapter 10 _ THE UNIFIED CODE OF CONDUCT FOR BUSINESS (Integrity Initiative) Top Management * Our top management leads by example by consistently demonstrating the value of conducting business with integrity. * Our officers strongly communicate our organization's postion against bribery, corruption and unethical business practices within the company and the broader public; comply with all the requirements of government regulatory bodies; and prohibit cover-ups and falsified reports that conceal improper transactions. ‘+ Management strongly supports integrity practices and allocates sufficient resources for their implementation. Human Resources * We strive to instill culture of integrity among our employees. The management maintains open lines of communication with employees, particularly on matters relating to honesty, transparency and integrity in business transactions. ‘© In the spirit of fairness and due process, all employees have the right to file and respond to complaints against practices suspected to be illegal or unethical. ‘© We have appropriate tools to confidentially receive, monitor, and act on internal and external complaints. ‘Employees filing complaints will be protected from all types of retaliation, while those involved in unethical practices will be subject to commensurate disciplinary actions. © We have instituted training programs on business ethics covering all levels of the organization. Sales and Marketing © We clearly communicate rules and guidelines on giving gifts, entertainment, tokens of hospitality, and contributions to/from public and private organizations and their representatives,_ ies and Reduce Corruption 181 Employees and all third parties engaged by our company to act as our intermediaries, agents or representatives are not permitted to offer, promise, or give, as well as demand or accept concessions — directly or indirectly — in order to obtain, retain, or secure any undue advantage in the conduct of business. We abide by existing laws when transacting with government agencies (as stipulated under RA 6713 - Code of Conduct and Ethical Standards for Public Officials and Employees and RA 3019 -- Anti-Graft and Corrupt Practices Act). Finance and Accounting We require all our employees to ensure that all books and records they create or are responsible for are complete and accurate. Our financial records conform to standard accounting principles. comply with Securities and Exchange Commission requirements on disclosure and transparency, and abide by anti-money laundering laws (RA 9160) and international conventions. We pay taxes in compliance with all laws. Procurement A track record of integrity and compliance with existing laws is a prerequisite when we vet third party consultants, suppliers, intermediaries, and agents. Our company has transparent procurement procedures, provides equal opportunities for all suppliers, and prohibits, collusion between and among our employees and suppliers. Recognizing that the Integrity Initiative is sustained through widely shared ethical practices within the business community, we enter into integrity pacts with our suppliers and ensure that they comply with the provisions of our pact, Contracting a third party to bribe or commit corrupt practices on behalf of the company is strictly prohibited.452__ Chapter 10 Logistics * We comply with laws and regulations pertaining to supply chain management. We do not tolerate any breaches in existing laws in exchange for undue advantage and unethical concessions or favors. We pay correct duties and taxes based on transparent assessment of goods and services. Employees are not penalized for refusing to pay bribes or facilitation Payments even if it results in failure to meet deadlines or loss. of revenue, Amplementation and Monitoring ‘We will continually to align our operations to the principles contained in this Code periodically assess and monitor our compliance to it. We will continue to share best practices with the business community to strengthen ethical business processes in the Philippines.Initiatives to Improve Business Ethics and Reduce Corruption 15% BISHOPS-BUSINESSMEN'S CONFERENCE PHILIPPINES -CODE OF ETHICS FOR THE PHILIPPINE BUSINESS * The Code of Ethics for the Philippine Business issued by the Bishops- Businessmen’s Conference Philippines is reproduced in this chapter for reasons of continuing applicability, relevance and significance to entities doing business in the Philippines. Preamble This Code of Ethics has been formulated impelled by the belief that man has a dignity that must be respected, and that all the resource of the earth has been created for his growth and development. As here presented, this Code js considered a major step in the on-going and changing process of understanding the growing role of business activity in the development of man and, as much, is open to further improvement. The Code seeks to express systematically and coherently the principles of. business practices accepted and professed by Philippine business at its best, and seeks to apply these to current and changing needs. It is the hope that this Code will serve as a general stimulus to renew and develop or amend existing standards, and that individual entities will expand and adopt it to the specific needs of their own organizations. It is general Code intended to be influential rather than coercive. It is hoped that individual entities will consciously adopt and embrace it as a. statement of principles and, having done so, will be unwilling to incur the sanction of adverse public opinion through failure to live up to the Code. Finally, it is Code for all people, formulated on the premise that the modern manager must be a strategist for human development, and that the business of business is to build an enterprise oriented to the development of man.The Concepts Business which embraces commerce and industry is not an accidental human " . y ose is to meet activity but an integral element of the social order. Its primary Lai ‘bh society's human needs by providing goods and services as efficiently ee le. Those engaged in business should, therefore, recognize the following basic concepts: * All business is essentially an expression of human relationships; not only with those who work in the enterprise, but also with those who own and provide financial resources, with those who supply it with materials and services, with those who buy its products or services, with the government, and with the wider public whose lives are affected by the business activity. The interest of all those members of society must be taken into account in formulating business policy. These interests, in themselves legitimate, will at times conflict. While conflict and tension can be themselves being constructive, the aim of business must always be to reconcile opposing interests in a balance of justice and mutual concern, * The owners, management, the work force, the suppliers and subcontractors, the customers, and government contribute to the performance of the business enterprise, and are therefore entitled to receive the proper worth of their contributions. * The resources employed by a business enterprise are financial, technological and human. The human resources have a unique quality and should be employed in a manner consistent with personal dignity. The individual should be given opportunity to use and develop his faculties in his work. His contribution to the success of the enterprise should be properly recognized and rewarded. * Business enterprise has a public responsibility to use all its resources efficiently. Profit in a system of free enterprise is recognized as a fundamental incentive, and is necessary for the maintenance and growth of the enterprise, for raising the quality or life, and for helping meet the broader needs of society. © Competition and incentives are essential for the maintenance and continuing improvement of the quality of goods and services for growth and for technological progress. However, to guard against unfair forms of competition, a consistent standard of business behavior must be established and observed.Initiatives to Impro © In business, as in any other institution of society, any right or authority cnjoyed by or entrusted to business. presupposes, and is justified by. Corresponding duties, responsibilities and performance. Some Principles for the Conduct of Business Those responsible for business policy should consider not only the interest of the ‘owners of the business, but also the interest of those affected by the activities of the business, Towards the Empl Business shall recognize the unique position of employees as individuals with a Vital stake in their work and at the same time with inherent obligations to their ‘own families, and provide: * for recognition that, although rates of pay may often be determined by uunion., economic and legal pressures, wages and salary policy should be bbased on the right of the employees to a fair and improving standard of living, irrespective of race, sex, age and creed; for fair recruitment practice that affords equal opportunity to all qualified job-seekers; for job security, adequate compensation for employees in cases of separation and retirement, and opportunities for fringe benefit for a safe and healthy atmosphere in the work environment conducive to the physical and moral well-being and growth of the employees: © for con ions in which human potentials and relationships can be developed at all levels of the work force, with a view to providing therein a sense of purpose and achievement; and for participative elements so that the knowledge, experience and creativity of all who work. in the enterprise may contribute to the decision-making process.186 Chapter 10 Towards the Customers Business shall, in the production of goods and services: i urpose: © strive after a quality that will enable them to serve their purp efficiently and effectively; © avoid anything that would be detrimental to the health, safety & growth of the proper user or beneficiary of such goods and services; an\ * seek to apply or make use of the discoveries and inventions of science with adaptations that will improve their products or services, thereby benefitting customers / users and increasing their number. In this marketing arrangement, business shall: © driver the product or service in the quality, quantity, and time agreed upon, and at a reasonable price, and avoid the creation of artificial shortages, price manipulation, and like practices; * establish an after-sales and complaints service commensurate with the kind of product or service supplied and the price pai ® ensure that all mass media, promotional, and packaging communications be informative and true, and take into account the precepts of morality and the sound cultural values of the community, and manifest for human dignity. Towards the Suppliers Business shall ensure: * that the terms of all contracts be clearly stated and unambiguous, and honored in full unless terminated or modified by mutual consent; * that abuse of economic power in dealing with a smaller concern be avoided, and that, in all cases, terms of payment be strictly and fully observed. In general, payment should always be made promptly at the agreed time or, if no specific time is agreed upon, as quickly as may be reasonable, given the circumstances; andInit ives to Improve Business Ethics and Reduce Corruption 15 that no supplier be encouraged to commit his resources for apparently long-term purposes unless there are reasonable guarantees that the orders, he receives from the business enterprise will not be terminated arbitrarily. Towards the Owners and other Providers of Capital In the interest of the Owners and other Providers of Capital, business shall: ‘+ provide an adequate rate of return to those contributing capital to the enterprise and ensure the security of their investment, * use their financial resources to provide goods and services responsibly and efficiently; ‘© furnish the Owners and other Providers of Capital with such information as they may reasonably require, provided that it does not adversely affect the security or efficiency of the business: and * pursue the specific objectives of the Owners and other Providers of Capital provided these do not run contrary to any of the principles stated herein. Towards the Local and National Government Although it is the responsibility of government to enact legislation and formulate implementing policies and programs, itis the duty of business: © to participate in the discussion: of proposed legislation and / or its implementation affecting sectoral, regional, national and international interests; and ‘© to propose sound policies in the use of human and material resources.Chapter 10 Towards Society in General Businessmen shall recognize in their decision-making the interest of the general Public and, realizing that they are utilizing to an important degree the nation's + take regular stock of their response to the basic needs of society and thus ensure that these needs are taken into account in all policy-making decisions; * do their best to ensure that the way they deploy their resources benefits society in general and does not conflict with the needs and reasonable aspirations of the communities in the area where they operate; * pay proper regard to the environmental and social consequences of their business activity, with special attention to the duty of renewing resources where possible and minimizing waste and pollution, and not sacrifice safety or efficiency in the interest of short-term profitability; ‘* a5 corporation citizen make such contributions as their resources will allow, to research, development and application of indigenous technology, and to the financing of social development projects; * consider the human and social costs of mechanization and technology. ‘* establish 2 policy allowing employees, within reasonable limits, to contribute to the public and community services during the work time; * establish a policy regarding conflicts of interest based on the principle that decisions should be made in the best interest of the business enterprise, and deision makers should be on their guard against allowing personal consideration to distort their judgment; and * not tolerate any form of illegal data-gathering or nay form of inducement that tends to distort normal commercial judgment.Initiatives to Improve Business Ethics and Reduce Corruption _159 Survey of Laws Advocating Business Ethics RA 7394 “The Consumer Act of the Philippines” approved on April 13, 1992. RA 3720 “The Food, Drug and Cosmetics” approved on June 22, 1963. RA 8293 “The Intellectual Property Code of the Philippines” effective January 1, 1998. The Intellectual Property Rights Law covers Copyright and Related Rights Trademarks and Service Marks Geographic Indications Industrial Designs Patents Lay-out-Designs (Topo! Circuits 7, Protection of Under ayeepe graphic) of Integrated