CORPORATE GOVERNANCE

BUSINESS ETHICS  Avoid all abuse of executive power for

personal gain
- Standards of moral conduct, behaviour and  Reveal to his superior whether his
judgment in business personal business of financial interests
- Area of corporate responsibility where conflict with those of the company
businesses are legally bound and socially  Be concerned with difficulties of
obligated to conduct business in an ethical subordinates
manner  Recognize that subordinates have a
- Based on personal values and standards of each right to information on matter affecting
person engaged in business them
Main Purpose  Fully evaluate likely effects on
employees and community before
- Help business to determine what practices are taking a final decision
right and wrong  Cooperate with his colleagues and not
attempt to secure personal advantage
Special Purpose
at their expense
 To make businessmen realize that they cannot
Ethical Challenges
employ double standards to the actions of
other and their own  Ethical Challenges in Today’s World written by
 To show businessmen that what they thought Ms. Mercedes B. Suleik published in Business
to be right because others are doing it, are Mirror on February 13, 2018
really wrong  Pope Francis: “We are in age of knowledge and
 To serve as a standard or ideal upon which information”
business conduct should be based  Pope benedict XVI: “Humanity has a mission
and the means to transform the world in justice
Specific Purpose
and love in human relations.”
- To assist the business world in formulating
codes of conduct which can be used as a guide
in formulating business plan, strategies in
making decisions

Scope and Impact

1. Economic Impact
- Through the wages it pays to its employees,
materials it buys and prices it charges
2. Social Impact
- Contributes to the ethical climate of society
3. Environmental Impact
- Key area of business influence on society. They
force competitors to take similar action.
4. Impact on Business Managers
- A manager should:
 Serve the business enterprise and
community
 CORPORATE GOVERNANCE

COMMON UNETHICAL PRACTICES  Passive Deception

- Business ignorance
1. Misrepresentation
 Direct Over-Persuasion
 Indirect
2. Over-persuasion  Persuasion is the process of appealing to the
emotions of a prospective customer to urge him
Misrepresentation to buy an item he needs.
 Examples of over-persuasion:
1. Direct Misrepresentation – active
 Urging a customer to satisfy a low
 Deceptive Packaging
priority need
- False impression of its actual
 Playing upon intense emotional
contents
agitation
 Misbranding
 Convincing a person to buy what he
- Making false statements
doesn’t need just because he the
 False/Misleading Advertising
money to do so.
- Advertising makes people informed
- Misleading advertising tells only Unethical Practices of Board of Directors
half of the truth
o Exaggerated impression of  Plain Graft
product quality - Voting themselves big bonuses/ salaries
o “Fastest selling brand” - Reduces earnings going to other
o Using fictitious or obsolete shareholders
testimonials  Interlocking Directorship
 Adulteration - Person who holds directorial
- Counterfeit by substituting an partnership in two or more corporation
inferior product for a superior one - May involve conflict of interest
 Weight Understatement - Disloyal selling happens
- Weighing scale is tampered  Negligence of Duty
 Measurement Understatement - Failure to attend meetings regularly
- Measuring stick is shorter  Insider Trading
 Quantity Understatement - Trading a public company’s stock by
- Giving customers less than the someone who has non-public material
number they paid for. Often information
practiced in products that are - Illegal when material information is still
difficult to count. non-public. It includes tipping others.
2. Indirect Misrepresentation (omission of - Legal when directors of company
unfavourable information) purchase or sell shares but they disclose
 Caveat Emptor their transactions legally.
- Very common among salesmen.
Unethical Practices of Executive Officers
The seller won’t reveal any defect.
 Deliberate Withholding of Information  Claiming a vacation trip to be a business trip
- One parties does not exactly know  Having employees do work unrelated to the
what he is giving away or receiving business
in return  Loose or ineffective controls
 Unfair labor practices
 CORPORATE GOVERNANCE

 Making false claims about losses to free Why a Person Becomes Corrupt
themselves from paying the compensation and
benefits  Career advancement
 Making employees sign documents showing  Earning of more income
that they are receiving fully what they are  Financial problems
entitled to although they only receive a fraction Characteristics
of what they are supposed to get
 Sexual harassment  Recipients and payers
 Extortion
Unethical Practices of Employee  Lubricant of society
 Conflict of interest  An ethical dilemma
 Dishonesty  Poverty alleviation
 Culture
 Kindness among friends

ETHICAL DILEMMA Philippines Corruption Report

- Situation a person faces which a decision must  Judicial System

be made using appropriate behaviour. - Underfunded by state and depends on
local sponsors
Resolving Ethical Dilemma
 Police
1. Obtain relevant facts - Most corrupt
2. Identify ethical issues  Public Services
3. Determine who is affected how each are  Land Administration
affected  Tax Administration
4. Identify alternatives available  Customs Administration
5. Identify likely consequences of each alternative  Public Procurement
6. Decide appropriate action  Natural Resources

Prevention

CORRUPTION 1. Clear business processes

2. Policy on gifts and entertainment
- Abuse of private and public office for personal 3. Declaration of Conflict of Interest
gain
4. Convenient Corruption Reporting System
- Acts of bribery, embezzlement, nepotism,
kickbacks and state capture Efforts to Curb Through Legislation
- Receiving or asking for any gratification to
induce a person to do a favour for private gain  Anti-graft and Corrupt Practices Act
- Misuse of entrusted power  Anti-Red Tape Act
- Results from patronage and associated with  Anti-Money Laundering Act
bribery  Government Procurement Reform Act
- A form of dishonesty or criminal activity  United Nations Convention Against Corruption
- Dr. Petrus Van Duyne: “Corruption is decay in
the decision-making process.”
 CORPORATE GOVERNANCE

INITIATIVES TO IMPROVE BUSINESS ETHICS AND Corporate Values

REDUCE CORRUPTION
- Reputation of a business is a critical factor in
Integrity Initiative the determination of its value. The values and
ethics of the organization need to be explicitly
- endeavors to institutionalize integrity standards
managed
across various sectors of Philippine society, - they serve as guiding principles that shape the
including business, government, judiciary, behavior and decision-making processes within
academe, youth, civil society, church, and
an organization
media
- a multi-sectoral campaign that seeks to Code of Conduct
institutionalize integrity standards among
various sectors of society-business, - serves as a cornerstone for organizations,
providing a formal framework to uphold values
government, judiciary, academe, youth, civil
society, church and media and ethics
- a beacon of hope in the fight against corruption  Guiding Principles for Integrity
in the Philippines o It sets clear expectations for
- multifaceted approach: behavior, ensuring that all
 Multisectoral Collaboration stakeholders understand and
o brings together stakeholders adhere to ethical standards.
 Promoting Responsibility and
from diverse sectors to
collectively address the issue of Accountability
corruption o An effective code of conduct
promotes a culture of
 Capacity Building
o conducts consultations, responsibility and
roundtable discussions, and accountability. It empowers
public forums involving individuals to report unethical
business leaders, compliance practices without fear of
officers, corporate governance reprisal and outlines
experts, academics, and procedures for investigating
practitioners such reports.
 Publication of Resources  Compliance with Legal and Ethical
o creating and disseminating Obligations
resources such as "An Integrity o It establishes a framework for
Compliance Handbook" to conducting business ethically, it
equip organizations with the protects the interests of
tools necessary to promote stakeholders, including
ethical business practice customers, employees,
 Active Participation investors, and the community
o encouraging active involvement at large.
from various organizations and One notable achievement of the Integrity Initiative is
industry associations in the development of the Unified Code of Conduct for
championing honesty and Business. This code serves a dual purpose:
transparency in Philippine
business operations  Harmonizing Ethical Standards
 CORPORATE GOVERNANCE

-By establishing uniform rules of - This law sets out the specific prohibited
engagement, it creates a level playing acts of public officers and provides
field and promotes transparency in corresponding penalties for commission
business dealings. thereof.
 Formalizing Commitment to Ethics - shall be interpreted to prejudice or
- It sends a clear message that integrity is prohibit the practice of any profession,
non-negotiable and that profitability lawful trade or occupation by any private
should never come at the expense of person or by any public officer who under
ethics. the law may legitimately practice his
profession, trade or occupation, during
The Unified Code of Conduct for Business (Integrity his incumbency, except where the
Initiative) practice of such profession, trade or
Top Management occupation involves conspiracy with any
other person or public official to commit
- leads by example by consistently demonstrating any of the violations penalized in R.A.
the value of conducting business with integrity 3019.

Human Resources Finance and Accounting

- strive to instill culture of integrity among our - Accurate Records

employees o employees are mandated to maintain
complete and accurate books and
Sales and Marketing
records.
- clearly communicate guidelines on giving gifts,
Procurement
entertainment, etc
- Abide by existing laws when transacting with - The act of sourcing suppliers and purchasing
government agencies goods or services from those suppliers
- A track record of integrity & compliance w/
 RA 6723 - Code of Conduct & Ethical Standards existing laws is a prerequisite
for public officials & providing a set of principles - Enter into integrity pacts
that affect employee mindset and decision- - Contracting a third party to bribe on behalf of
making. the company is STRICTLY prohibited
- A code of conduct offers principles
defining the ethics of a business, but it Logistics
also contains specific rules for employee - They comply with laws and regulations
actions and behavior. pertaining to supply chain management.
- Public officials and employees shall at - They pay correct duties and taxes based on
all times be accountable to the people transparent assessments of goods and services.
and shall discharge their duties with - Employees are not penalized for refusing to pay
utmost responsibility, integrity, bribes or facilitation payments, even if it leads
competence, and loyalty, act with to missed deadlines or revenue loss.
patriotism and justice, lead modest
lives, and uphold public interest over
personal interest.
 RA 3019 - Anti-Graft and Corrupt Practices Act
 CORPORATE GOVERNANCE

Implementation and Monitoring particular, possess unique value and

should be treated with dignity, provided
- Continue to share best practices w/ the opportunities for personal and
business community to strengthen ethical professional development, and duly
business processes in the Philippines. recognized for their role in the
- continually strive to align the operations to the enterprise's success.
principles contained in this Code and  Public Responsibility
periodically assess and monitor the compliance - Business enterprises bear a public
to it responsibility to utilize resources
Code of Ethics for the Philippine Business efficiently for the betterment of society.
While profit serves as a crucial incentive
- issued by the Bishops - Businessmen's for enterprise growth and societal
Conference Philippines advancement, it must be pursued
- reproduced in this chapter for reasons of ethically and in alignment with broader
continuing applicability, relevance and societal needs.
significance to entities doing business in the  Competition and Incentives
Philippines - Competition and incentives are vital
drivers for the improvement of goods,
Concepts of Business Ethics
services, and technological progress.
 Human Relationships However, ethical business conduct
- Business activities are fundamentally necessitates the establishment and
grounded in human relationships, adherence to consistent standards to
encompassing interactions with prevent unfair competitive practices.
employees, investors, suppliers,  Rights and Responsibilities
customers, government entities, and the - Any authority or privilege enjoyed by a
broader public. Recognizing and business entity is contingent upon
addressing the interests of these corresponding duties, responsibilities,
stakeholders is paramount in crafting and performance. Upholding ethical
ethical business policies. standards entails recognizing and fulfilling
 Reconciliation of Interests these obligations to all stakeholders.
- Inherent to business operations are -
conflicting interests among stakeholders.
While such conflicts can spur constructive
dialogue, the overarching goal of business
remains the reconciliation of these
opposing interests in a manner that
upholds justice and mutual concern
 Recognition of Contributions
- All contributors to a business enterprise,
including owners, management,
employees, suppliers, customers, and
government, are entitled to fair
compensation and acknowledgment of
their contributions. Human resources, in