CITY COLLEGE OF Governance, Business Ethics, Risk Management & Internal Control

CALAMBA Cluster A- Prelims

Chapter 5: INTRODUCTION TO ETHICS letter of an agreement; do not interpret agreements

in an unreasonably technical or legalistic manner in
What is Ethics?
order to rationalize noncompliance or create
Ethics is defined broadly as a set of moral principles or excuses and justification for breaking commitments.
values that govern the actions and decisions of an
individual or group. Loyalty (Fidelity) and Confidentiality
• Be faithful and loyal to family, friends, employers,
Personal ethics vary from individual to individual at any client and country; do not use or disclose
point in time, most people within are able to agree about information learned in confidence; in a professional
what is considered ethical and unethical behavior. context, safeguard the influences and conflicts of
interest.
A society passes laws that define what its citizens
Fairness and Openness
consider to be the more extreme forms of unethical
• Be fair and open-minded, be willing to admit error
behavior.
and, where appropriate, change positions and
Examples beliefs, demonstrate a commitment to justice, the
Prescribed Sets of Moral Principles or Values equal treatment of individuals, and tolerance for
 Laws and regulation acceptance of diversity; do not overreach or take
 Church doctrine advantage of another's mistakes or diversities.
 Code of business ethics for professional groups
such as CPA’s Caring for Others
 Codes of conduct within individual organizations. • Be caring, kind, and compassionate; share, be
giving, be of service to others; help those in need
So how do we know whether we are acting ethically? and avoid harming others.

Who decides what standards of conduct are Respect for Others

appropriate? • Demonstrate respect for human dignity, privacy,
and the right to self- determination of all people; be
Is any type of behavior “ethical” as long as it does not courteous, prompt, and decent; provide others with
violate a law or a rule of one’s profession? the information they need to make informed
decisions about their own lives; do not patronize,
Characteristics and Values Associated with Ethical embarrass, or demean.
Behavior (List of Ethical Principles)
Responsible Citizenship
List of ethical principles incorporates the characteristics • Obey just laws; if all law unjust, openly protest it;
and values that most people associate with ethical exercise all democratic rights and privileged
behavior. responsibly by participation (voting and expressing
informed views), social consciousness, and public
Integrity service; when in a position of leadership or
• Be principled, honorable, upright, courageous, and authority, openly respect and honor democratic
act on convictions; do not be two-faced or processes of decision making, avoid unnecessary
unscrupulous, or adopt an end-justifies-the-means secrecy or concealment of information, and assure
philosophy that ignores principle. that others have all the information they need to
make intelligent choices and exercise their rights.
Honesty Pursuit of Excellence
• Be truthful, sincere, forthright, straightforward, • Pursue excellence in all matters; in meeting your
frank, and candid; do not cheat, steal, lie, deceive, personal and professional responsibilities, be
or act deviously. diligent, reliable, industrious and committed;
perform all tasks to the best of your ability, develop
Trustworthiness and Promise-Keeping and maintain a high degree of competence, be well
• Be worthy of trust, keep promises, and full informed and well prepared; do not be content with
commitments, abide by the spirit as well as the mediocrity; do not "win at any cost".
 CITY COLLEGE OF Governance, Business Ethics, Risk Management & Internal Control

CALAMBA Cluster A- Prelims

• Concern for the well-being on welfare of

Accountability others
• Be accountable, accept responsibility for decisions,
• Benevolence, trustworthiness, honesty
for the foreseeable consequences of actions and
inactions, and for setting an example of others. • Compliance with the law
Parents, teachers, employers, many professionals
and public officials have a special obligation to lead Professional Ethics include among others
by example, to safeguard and advance the integrity
• Integrity, impartiality, objectivity
and reputation of their families, companies,
professions and the government itself; an ethically • Professional competence
sensitive individual avoids even the appearance of
impropriety, and takes whatever actions are • Confidentiality
necessary to correct or prevent inappropriate • Professional behavior
conduct of others.
• Avoidance of potential or apparent conflict of
Why is ethical behavior necessary? interest

Business Ethics include among others

Ethical behavior is necessary for a society to function
in an orderly manner. It can be argued that ethics is the • Fair competition
glue that holds a society together. What would happen if,
for example, we could not depend on the people we deal • Global as well as domestic justice
with, to be honest? If parents, teachers, employees, • Social responsibility
siblings, co-workers, and friends all consistently lied, it
would be almost impossible for effective communication • Concern for the environment
to occur.

Why do people act unethically?

The Need for Professional Ethics
Most people define unethical behavior as conduct that To understand the importance of a Code of Ethics to
differs from the way they believe would have been professionals, one must understand the nature of a
appropriate given the circumstances. Each of us decides profession as opposed to other vacations.
for ourselves what we consider unethical behavior, both
for ourselves and others. It is important to understand All the recognized professions have several common
what causes people to act in a manner that we decide is characteristics. The several common characteristics are:
unethical.
• a responsibility to serve the public
There are two primary reasons why people act
• a complex body of knowledge
unethically:
• standards of admission to the profession
1. The person's ethical standards are different from
those of society as a whole, or • a need for public confidence

Code of Good Governance for the Profession in the

2. the person chooses to act selfishly.
Philippines
Categories of Ethical Principles This Code is adopted by the Professional Regulation
Commission (PRC) and the 42 Professional Regulatory
Principles of Personal Ethics include among others
Boards to cover an environment governance in which of
• Basic justice, fairness good all Filipino professionals shall perform their tasks.
While each profession may adopt and enforce its code of
• Respect for the rights of others good governance and code of ethics, it is generally
• Concern for the rights of others recognized that there is a general commonality among
the various codes. This Code which covers the common
 CITY COLLEGE OF Governance, Business Ethics, Risk Management & Internal Control

CALAMBA Cluster A- Prelims

principles underlying the codes of various professions

could be used by all professionals who face critical
ethical questions in their work.

General Principle of Professional Conduct

Professionals are required not only to have an ethical

commitment, and a personal resolve to act ethically but
also to have both ethical awareness and ethical
competency. Ethical awareness refers to the ability to
discern between right and wrong, while ethical
competency pertains to the ability to engage in sound
moral reasoning and consider carefully the implications
of alternative actions.

Specific Principle of Professional Conduct

• Service to others

• Integrity and objectivity

• Professional competence

• Solidarity and teamwork

• Social and civil responsibility

• Global competitiveness

• Equality of all professions

 CITY COLLEGE OF Governance, Business Ethics, Risk Management & Internal Control

CALAMBA Cluster A- Prelims

Chapter 6: BUSINESS ETHICS • Recognize the rights of subordinates on information

affecting them
What is Business Ethics?
• Fully evaluate effects of future business plans to
Business Ethics refers to a standard of moral conduct, the employees and to the community
behavior, and judgment in business.

Main Purpose.
To help businesses to determine what business
practices are right and wrong

Special Purpose
• To make the businessman realize that he cannot
employ double standards

• To show to the businessman that common

practices thought at first to be right are actually
wrong

• To serve as a standard or ideal or basis in the

conduct of business

Scope and Impact of Business Ethics

Economic Impact
Business has positive economic impact by the timely
and fair wages it pays to its employees, the materials it
buys and pays on time to suppliers, and the good value
of goods it sells and fair prices that it charges to its
customers

Social Impact
Contributes to ethical climate of society, if bribes and
frauds were committed to secure benefits, it is likely that
consumers will be affected due to increase in prices and
deteriorating quality of goods

Environmental Impact
Implementing good environmental policies will lead to
efficient use of energy, reduce wastes, and promote
positive image of the company.

Impact on Business Managers

The ethical conduct of business are assigned to the
business manager who is expected to act in the best
interest of the business. In relation to this role, the
business manager should:
• Acknowledge his role in the business and in the
community
• Avoid abuse of executive power for personal gain
• Reveal conflict of interest to his superior
• Concerned with the problems of subordinates,
leading them by example
 CITY COLLEGE OF Governance, Business Ethics, Risk Management & Internal Control

CALAMBA Cluster A- Prelims

Chapter 7: COMMON UNETHICAL PRACTICES OF customer urging him to buy an item. It is unethical
BUSINESS ESTABLISHMENTS when persuasion is used in selling a product without
considering the interest of the buyer.
Direct Misrepresentation

1. Deceptive packaging – exaggerating the size of Some examples of over-persuasion are:

the package and misleading sizes to give a false - Urging a customer to satisfy a low priority need for
impression of the actual content. merchandise

2. Misbranding or Mislabeling – making a false - Playing upon intense emotional agitation to convince a
statement about a product or making the container person to buy
similar to a well-known product
- Convincing a person to buy what he does not need just
3. False or misleading advertisement – because he has the money to spend
exaggerating the virtues of a product-making Unethical practices of Corporate Management
advertisement as an agent of misrepresentation. (Corporate Ethics)

4. Adulteration - the unethical practice of degrading a Board Of Directors

pure or genuine commodity by counterfeiting or Plain graft – huge per diems, bonuses not
imitating it, by adding something to increase commensurate to their services
volume, by substituting an inferior product to a
superior one for the purpose of profits/gains Interlocking Directorship – holds directorial positions
in two or more companies doing business with each
5. Weight understatement of short weighing – the other
weighing scale is tampered with or something is
attached to it so that the scale registers more than Insider Trading – person with access to confidential
the actual weight. information uses that information to trade in shares and
securities of that corporation gaining advantage over the
6. Measurement understatement or short other players in the market
measurement – the measuring stick is shorter than
the standard or real length or smaller in volume Negligence of Duty – failure to attend meeting
than the standard. regularly

7. Quantity understatement or short numbering – Executive Officers

the product being sold is packed in a shape or - Claiming vacation trip to be a business trip
manner that makes counting difficult. - Having employees do work unrelated to the
company
- Loose or Ineffective Controls
Indirect Misrepresentation
- Unfair labor practices
1. Caveat emptor – let the buyer beware, the defects - Making false claims of losses to avoid paying
of the product is not revealed, let the customer compensation and benefits provided by law
determine for himself. - Making employees sign documents that they are
receiving full benefits but are receiving just a
2. Deliberate withholding of information – similar to fraction of their salary
caveat emptor where one party does not exactly
know what he is giving away or receiving in return. Sexual harassment - is committed by anybody who has
3. Passive Deception – inability of the businessman to authority, influence, or moral ascendency over the others
give the customer with the complete information that in a work environment demands, and requires sexual
he needs to make a fair decision favor whether accepted or not.

4. Over-persuasion – persuasion is the process of

appealing to the emotion of the prospective
 CITY COLLEGE OF Governance, Business Ethics, Risk Management & Internal Control

CALAMBA Cluster A- Prelims

Employees
Conflicts of interest – transactions with outside parties,
where employer-employee relationship may be
compromised.

Common examples are:

- Holding significant shares of a competitor
- Accepting lavish gifts or loan from a supplier,
contractor or competitor
- Disclosing confidential company information for
personal gain
- Engaging in a business similar to the employer
- Using a business opportunity where employer might
have an interest

Dishonesty
- Taking office supplies for personal use
- Padding an expense account using fake receipts
- Taking credit for another employees ideas
 CITY COLLEGE OF Governance, Business Ethics, Risk Management & Internal Control

CALAMBA Cluster A- Prelims

Chapter 8: ETHICAL DILEMMA

Ethical Dilemma

Ethical dilemma is a situation where a person needs to

make a decision about appropriate behavior

To elaborate further, ethical dilemmas are situations in

which there is a difficult choice to be made between two
or more options, neither of which resolves the situation
in a manner that is consistent with accepted ethical
guidelines. When faced with an ethical dilemma, a
person is faced with having to select an option that
doesn’t align with an established code of ethics or
societal norms, such as codes of law and religious
teachings, or with their internal moral perceptions of right
and wrong.

Resolving Ethical Dilemma

Formal frameworks have been developed over the years

to help people resolve ethical dilemmas. The six step
approach is intended to be a simple approach to
resolving ethical dilemmas:

1. Obtain the relevant facts

2. Identify the ethical issues from the facts
3. Determine who is affected by the outcome of the
dilemma and how each person or group is affected
4. Identify the alternatives available to the person who
must resolve the dilemma
5. Identify the likely consequences of each alternative
6. Decide the appropriate action.

Illustrative Case: Resolving Ethical Dilemma