Bus - Ethics Module
Bus - Ethics Module
Bus - Ethics Module
BUSINESS ETHICS
Module 1
WEEK 1
Objectives:
Let’s Discuss!
LESSON 1: THE NATURE OF BUSINESS
1.1 What is a Business?
Believe it or not, you are surrounded by various artifacts of an activity that we call business.
Upon waking up in the morning, you get up from your bed and fix your beddings. Then, you brush your
teeth, take a shower, eat breakfast, and go to school. Beds, beddings, toothpaste, soap, water, food, and
clothes are items or goods you acquire through business transactions.
What is business? The word business has come to be associated with a number of meanings
and usages. Merriam-Webster Dictionary easily gives the following definitions:
a. the activity of making, buying, or selling goods or providing services in exchange for money;
b. work that is a part of a job;
c. the amount of activity that is done by a store, company, factory, etc.
Duska and Ragatz, two business ethics scholars, said that the original and primary meaning
of business is “to engage in purposeful activity.” Meanwhile, a group of business ethics textbook authors
said it this way, “The correct response to the question, ‘what is your business here?’ would be a description
of a particular task, not an organization.”
From a quick survey and look at a number of textbooks and the internet will give the
following definitions and descriptions of business:
1. An organization or economic system where goods and services are exchange for one another or money.
Every business requires some form of investment and enough customers to whom its output can be sold
on a consistent basis in order to make a profit.
2. The activity of making, buying, or selling goods or providing services in exchange for money.
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3. Business is a broad term encompassing a range of actions and institutions from hamburger stand to
giant corporations. The term covers manufacturing, finance, trade, service, and other economic activities.
The fundamental purpose of business activity is to satisfy human needs by creating products and services.
4. …there is a secondary meaning of the word business, which denotes activities that involve the
production and exchange of goods for economic purposes, primary among which is the generation of
profit. Consequently, business is often defined as economic activity engaged in for the sake of profit.
2. Imitators and wait for the innovations made by 2. Innovators and observant.
the entrepreneur.
3. More likely to play safe. 3. More of a risk-taker but of course calculates it.
4. Motivated by the financial reward of the 4. Goes beyond the profit motive.
business activity.
5. Although some business persons are also 5. Founders of the companies and other forms of
owners of their business others are simply business organizations. They set the vision,
managers, employees, and agents of the business. mission, goals, and values of the companies; they
They are also called business professionals. set and envision the corporate culture.
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1.3 Capitalist and Entrepreneur: A Distinction
Have you heard somebody being called a capitalist? It seems that rarely do we call
somebody a capitalist. We may call one a business person or an entrepreneur but not a capitalist. The label
capitalist suggests an image of somebody who is greedy, unjust, manipulative and selfish.
It can truly be argued that there is further difference between a capitalist and an
entrepreneur. For this distinction, we will draw heavily from the ideas of David Schweickart, a professor
of philosophy and author of numerous books and articles on political, economic, and social philosophy.
He claimed that “a reasonable definition of ‘capitalist’ is someone who owns enough productive assets
that he can, if he so chooses, live comfortably on the income generated by these assets.” The capitalist
owns more than sufficient income-generating resources, and by virtue of this, he/she and his/her family
may not work and still live a comfortable and rich lifestyle.
The true-blooded entrepreneur does not receive economic reward by simply chipping in
capital. He or she contributes actively and positively for the benefit of the society. Entrepreneurial activity
is a necessary component of any form of society. On the other hand, the pure and plain capitalist has
become a passive recipient of the fruits of the toils of other stakeholders in the business activity – the
laborers and the entrepreneurs.
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A genuine desire to help people in your small community or the country in general, and find that
engaging in a business is a way to accomplish them.
You may decide to start a business simply because you like it and you are attracted to the prospect.
You are not primarily moved by the profit that you may earn. You simply enjoy dealing with
people, employees and customers alike.
1.6 Objective Purpose of Business
In order to clarify our understanding of the objective purpose of business, we will explore
the ideas of three scholars: Milton Friedman, Paul F. Camenisch, and Ronald Duska. These three thinkers
attempted to explore what we can call as the objective purpose of business.
Milton Friedman: Profit as the Primary Responsibility of Business
Milton Friedman, known for his contributions to consumption analysis and the monetary
history and theory. He received the Nobel Memorial Prize in Economic Research in 1976.
From Friedman’s insights, we can probably deduce that the objective purpose of business
is to increase profits. For Friedman, this is not a bad thing. However, that is totally unfair for Friedman if
we will interpret him to be saying that business must not be concerned with ethics. According to him,
business must be played within the rules of the game. He declared: “There is one and only one social
responsibility of business – to use its resources and engage in activities designed to increase its profits so
long as it stays within the rules of the game, which is to say, engages in open and free competition without
deception or fraud.” Existing laws and moral codes of the society must consciously be considered by the
business entity.
Paul F. Camenisch: The Primacy of Business’ Social Function
Paul F. Camenisch graduated Summa Cum Laude with a degree in English. In 1981, he
published an essay titled: “Business Ethics: On Getting to the Heart of the Matter.” For him, Friedman
has put too much emphasis on the profit-motive as the social responsibility of business. According to him,
Friedman has forgotten the other essential element of business – which it exists to respond to the societal
needs for life sustenance and life enhancement.
Ronald F. Duska: The Motive is not the Purpose
Ronald Duska is a member of the board and past president and executive director of the
Society for Business Ethics. One of the main contributions of Duska in the debate regarding the purpose
of business is his argument on the distinction between purpose and motive.
Just like Camenisch, Duska believed that the primary purpose of business is neither
personal benefit nor the accumulation of profit. The purpose of business is to respond to society’s needs
for goods and services.
Some Further Thoughts
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The Corporation Code of the Philippines
“To establish a new concept of business corporations so that they are not merely entities established
for private gain but effective partners of the National Government in spreading the benefits of
capitalism for the social and economic development of the nation.”
https://happytimestoday.wordpress.com/2012/11/18/why-sari-sari-stores-only-exists-in-the-philippines/
2. Partnership
The law on business partnership in the Philippines can be found in Republic Act No. 386, also
known as the Civil Code of 1949.
A business is classified as a partnership does not mean that there are only two owners; it may have
more than two.
Article1767 of the Civil Code says that the contract of partnership happens when “two or more
persons bind themselves to contribute money, property, or industry to a common fund, with the
intention of dividing the profits among themselves.”
Article 1770 clarifies further that “a partnership must have a lawful object or purpose, and must
be established for the common benefit or interest of the partners.”
It must be listed under the Securities and Exchange Commission (SEC).
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Partnership Business Examples
GoPro & Red Bull.
Pottery Barn & Sherwin-Williams.
Casper & West Elm.
Bonne Belle & Dr. Pepper.
BMW & Louis Vuitton.
Uber & Spotify.
Apple & MasterCard.
Airbnb & Flipboard
3. Corporation
The law on corporation can be found in Batas Pambansa Blg.68 otherwise known as The
Corporation Code of the Philippines.
In the said code, corporation is defined as “an artificial being created by operation of law, having
the right of succession and the powers, attributes, and properties expressly authorized by law or
incident to its existence.”
This type of business can either be a stock corporation or a non-stock corporation.
The owners of stock corporation are called stockholders or shareholders; while those of nonstock
are simply called members.
A corporation is required to be registered under the SEC where it will also file the articles of
incorporation.
https://aseanup.com/top-30-companies-philippines-psei/
4. Cooperative
The Philippine Cooperative Code defines a cooperative as “an autonomous and duly registered
association of persons, with a common bond of interest, who have voluntarily joined together to
achieve their social, economic, and cultural needs and aspirations by making equitable
contributions to the capital required, patronizing their products and services and accepting a fair
share of the risks and benefits of the undertaking in accordance with universally accepted
cooperative principles.”
Cooperatives are regulated by the Cooperative Development Authority.
Some types of cooperative include credit cooperative, consumer cooperative, and producers
cooperative.
The membership in a cooperative is voluntary and registered through its articles of cooperation.
Members of a cooperative join by contributing a membership fee and building up share capital
over time. Whenever they want to leave the cooperative, they can redeem their share capital
contribution which has earned interest over time.
Business owners need to make profits to sustain and grow their business. Sometimes they
have to make difficult decisions, especially when they reach a fork in the road: Shall I do the right thing
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but put my business in jeopardy? Shall I use bribery to facilitate or expedite routine procedures? Shall I
declare a lower income to pay less tax? Shall I start a smear campaign to destroy my competitor?
You probably have heard some controversies involving major or big companies that do
unethical business practices. Long work hours, unhealthy working conditions, low wages, unpaid
workers, inadequate benefits, and others are only some of the many issues that some companies face.
Although there are laws that protect the workforce, these are not always implemented; companies may
have codes of conduct, but these are not always observed.
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security, and health safety hazards) set by the government and other governing bodies. The law provides
important legal considerations to ethical decision-making. A company may pay entry-level workers with
salary based on what the law mandates as the minimum wage. However, the company may offer more
benefits (e.g., rice allowance, health insurance, etc.) to provide better compensation for minimum-wage
earners. Paying what the law mandates conforms to legal values, but offering more benefits to employees
who need them satisfies ethical values.
When you join an organization, whether it is a school club, a hobby group, a social media group,
a church organization, or even just a group of friends hanging out together, you will notice that in the
group, there are certain accepted behaviors and unwritten rules to be followed. If you fail to follow these,
you will either be frowned upon or be kicked out of the group.
A certain culture exist in every organization. If you want to fit in, you try to follow the norms of
the group – the way the members act, dress, behave, speak, and other actions that may affect your
decisions.
1. External Adaptation
Requires the organizational culture to determine ow the company will reach its goals, accomplish
its tasks, use methods to achieve its goals, and place measures to cope with success or failure.
The members of the organization may develop a common views and goals through their shared
experiences. For example, reaching sales targets is a goal shared by all the members of the
organization.
External challenges, such as economic downturn, extreme weather events, political issues, and
government regulations, will have to be dealt with in accordance with the company’s culture.
For example, if there is a delay in the release of imported raw material from customs, should the
company bribe customs officials to expedite the process? The company’s corporate culture will
determine the answer to this question.
2. Internal Integration
Starts with the establishment of an identity that is unique to the business organization. Members
acquire this identity through their interaction with each other.
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Enables the members to work harmoniously toward advancing the company’s goals.
There are three important aspects of working together:
The members decide who is a member of the group and who is not;
The members develop an informal understanding of acceptable and unacceptable
behaviour; and
The members separate “friends” from “enemies”.
https://drvidyahattangadi.com/edgar-scheins-three-levels-organizational-culture/
1. Observable Aspects of Culture (outer layer)
Refers to the way things are done in an organization.
This can be observed in daily activities or specific instances which include unique stories
according to the company’s history, ceremonies, and corporate rituals.
The story on how a company was founded may explain the owner’s ideals, vision, and the reason
why the company was established. Its reason may be to serve a previously unmet need, to offer
solutions to common or not-so-common issues, or to give better options to the consumers.
Example:
Bingo, a search engine company, is known for its conducive work environment where employees
feel like they are just in the comfort of their home. The office houses a game room, and large pantry
with free food and beverages. The company’s rationale for this is that happy employees are
productive employees.
2. Shared Values
Refer to the core values that are meant to be followed by the members of the organization when
acting on behalf of the organization.
These describe what the company stands for and guide all of a company’s action.
Example:
Happy Filipino is committed to creating social value by helping housewives become financially
independent and entrepreneurial. To achieve its goal, the company believes in treating everyone
with care, respect, and dignity; it fosters partnerships – more can be achieved if people work
together; and it believes in offering only the best and continuous improvement and growth.
3. Common Cultural Assumptions
Include the taken-for-granted truths that the members share as a result of a collective experience
with the organization.
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These assumptions are at the core of corporate culture, and thus are difficult to discern and
understand because they exist at a largely unconscious level, yet they provide the key to
understanding why things happen the way they do.
As employees become totally immersed in the company’s culture, their actions that are based on
the company’s beliefs and values become everyday routines.
These include quality of output, morality of employees, and innovativeness and excellence in
carrying out tasks.
Example:
Orange Company, a telecommunications company, has ingrained to their employees the value of
innovation. Every time employees meet in the elevator, talk over lunch, or are anywhere else in the
building, they are unknowingly talk about the latest trends in technology, specifically smartphones,
tablets and the current trends in the telecommunications.
Company Values
Customer-centered – We are committed to continuously listen to our customers and to respond
positively to their needs.
Excellence – We strive to provide the best service and products to our customers and maintain
the highest excellence in our products.
Safety – We assure that our products are safe from harmful chemicals.
Integrity – We practice integrity in all our actions, and we promise an honest and fair service
to all our employees, customers, and suppliers.
Code of Conduct
Employee Decorum
1. Employees must show respect toward one another in the workplace. The company does not tolerate
spreading of rumors or stories that may taint the reputation of its employees.
2. Employees must use a professional tone in communicating with colleagues, whether oral or written.
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2. Employees must use company property with care. Everyone must use or operate physical assets
(e.g., computers, printers, copiers, telephones) responsibly.
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- The end justifies the means
- Making decisions based on principle, and not just on
Ethics of Principles and Rights consequences
- The end does not justifies the means
Virtue Ethics - Grounded on character traits and emphasizes moral character in
contrast to moral rules or consequences of actions.
1. Utilitarianism: A Consequentialist (Results-based) Approach
Utilitarianism holds that an action is judged based on its overall consequences. It is also called the
consequentialist approach to ethics and social policy – that each person should act in ways that produce
better consequences or results regardless of the means taken to achieve those results. “Better
consequences” are results that promote human well-being such as happiness, dignity, health, integrity,
freedom, and respect of all the people. This approach also upholds the following principles:
A decision is morally right of it promotes the greatest good for the greatest number of people.
A decision is morally right if the net benefits over costs are greatest for all people affected,
compared with the net benefits over cost of all other possible choices.
A decision is morally right if its benefits are greatest for each individual and if these benefits
outweigh the costs and benefits of alternatives.
2. Ethics of Principles and Rights
Considering the greatest good in decision-making is definitely an ethical way of arriving at a
decision, but it is also important to consider principles and not just consequences. This explores the
relationship between the legislative and judicial branches of the government – the legislative branch
creates policies and regulations based on utilitarian principles, while the judicial branch enforces these
laws to achieve justice and fairness. The second framework in ethical philosophy provides that some
decisions need to be made based on principles rather than consequences.
3. Virtue Ethics
Virtues can be described as the character traits that would constitute a good and meaningful life.
Being happy, friendly, joyful, and calm; preserving integrity and dignity; having a good relationships; and
possessing modest things are a few of the characteristics of having a meaningful life.
Virtue ethics emphasizes moral character in contrast to moral rules (deontology) or consequences
of actions (consequentialist approach in utilitarianism). It has its roots in ancient Chinese and Greek
philosophy and is recognized to have been established by Plato and Aristotle. It focuses on the type of
person you want to be – grounded on good character, motives, and core values – and not on the actions
you should take.
4.2 Impacts of Different Belief Systems on Business Ethics
People from different cultures and backgrounds have different belief systems. This diversity in
belief systems or religious orientations can influence a person’s business ethics. And can have an impact
on business organizations as a whole.
Buddhism
Buddhism is a religion that originated in India. Centered in Buddhism belief are the five precepts
or training rules, which helps promote peaceful coexistence and harmony in the society. These principles
are the minimum moral obligations of Buddhists, which they fulfil by refraining from
1. harming or taking lives of beings;
2. taking what is not given;
3. engaging in sexual misconduct;
4. lying or spreading gossip; and
5. taking intoxicating substances such as alcohol and drugs.
These Buddhist principles can be applied in business. For example, in conducting its business, an
organization must ensure the sustainable use of natural resources so as not to endanger wildlife and the
environment.
Islam
Shariah, the Islamic law based on the religious precepts of Islam, is applied in all Muslim-
dominated countries. Islam favors trading or business, but the conduct of the business has to conform to
rules, and most importantly, must be guided by honesty. Cheating or deception in economic transactions
is strictly prohibited and condemned in Islam. Possible gains from the trade and business should not result
in materialism, which is considered as diverting the attention from more important spiritual concerns.
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Christianity
Christian beliefs are based on the Bible. Christian who considered that God called them to a
particular occupation or business were naturally concerned that their actions involving their work or
business must be conducted in an ethical manner and for the good of the community. Stewardship is
another Christian concept were Christians see themselves as stewards of God’s creation which means they
have responsibility to care for the environment. The environment is God’s gift to everyone, and in using
it, Christians have a responsibility toward future generations and toward humanity as a whole.
Padrino System
The padrino system or patronage happens when one gains favour, promotion, or political position
through family affiliation or friendship, as opposed to earning merit for one’s own efforts, skills, and
abilities. For example, a person may be given a promotion in the office not because he or she deserves it,
but because she is a friend or a relative of the business owner. Aside from denying the rightful person the
position he or she deserves, it may also foster ill feelings among other employees in the department.
Utang na Loob
Utang na loob or debt of gratitude is the concept of “repaying” a person for what he or she has
done in nonmonetary terms. The good deeds that has been received will be paid back with a good deed as
well. While this may seem as a harmless and even a thoughtful practice, in a business setting it may cause
ethical dilemmas such as giving a promotion or a special favour to an undeserving employee.
Pakikisama
Pakikisama is a Filipino trait that describes how Filipinos take care of their interpersonal
relationships, that is, by agreeing to what the majority wants or by getting along with others. While this is
a positive trait, it may have its drawbacks when it is used to force someone to do something not because
he or she wants to, but because he or she wants to fit in. In the business setting, a person may do a favour
for another out of pakikisama.
Bahala na and Mañana Habits
Bahala na is a phrase that can loosely translated as “whatever happens, happens.” In business, one
cannot leave big decisions up to fate. Business owners need to know and analyse the needs of the market
first before they come up with a product that the customers would want to buy.
The mañana (mamaya na) habit is delaying to do things instead of doing things now. This habit
has a negative impact on business because it leads to low productivity and poor performance or service.
Filipino Hospitality
Filipinos are known worldwide for their warm hospitality. This trait is best manifested in the
hospitality and tourism industries such as hotels, resorts, airlines, travel agencies and the like where these
entities stretch themselves to deliver services to their clients in ways distinctly Filipinos. They aim to give
their clients a unique experience of having availed of their services. Showing Filipino hospitality to foreign
visitors makes their stay in the country not only enjoyable but unforgettable as well.
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References:
Business Ethics and Social Responsibility, DIWA Senior High School Series, pp. 3-78
http://bit.ly/diwa-BUSETHICS2ED
https://www.entrepreneur.com/slideshow/289426#1
https://www.entrepreneur.com/article/289431
Module 2
WEEK 2
Objectives:
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the harm could be avoided by exercising due care or proper planning, then both the law and ethics would
deem that the company should be held liable for violating its responsibilities.
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1. It gives the company positive publicity while providing its stakeholders, such as employees and
customers, the chance to participate in philanthropic activities.
2. They earn tax holidays or deductions when they do such activities. The government grant tax relief,
which is deductible by expense to reduce taxable income, by claiming donations as charitable
contributions.
3. Some companies that contribute to a social cause without seeking any reputational benefit (e.g.,
companies that donate anonymously). These companies do not seek business pay off when they contribute
to social cause; they simply want to truly give back to the community.
Social Web Model of CSR
The social web model views business organizations as citizens of the society in which they operate.
As members of the society, business organization must conform to the normal ethical duties and
obligations that are expected from them.
Companies have social responsibility to uphold welfare of their employees, ensure a safe and
healthy workplace, and observe other human rights, whether or not these are specified or required by law.
They also have the responsibility to cause no harm to consumers and uphold consumers’ right by providing
safe products and not overstating or exaggerating the value or capabilities of their products.
Embedded within the social web model of CSR is the stakeholder theory, which states that every
business decision has an impact on a wide variety of people, that is, providing benefits to some and
imposing cost on others. Stakeholders are defined as any group of individuals that can affect or be affected
by the organization. They can be suppliers, employees, customers, investors, owners, competitors, the
government, or the general public.
Integrative Model of CSR
While non-profit organizations focus on fulfilling their mission to provide solutions to social
issues, there are also for-profit organizations that do the same. These organizations include social
entrepreneurship and sustainability at the core of their business model.
A social enterprise is a for-profit business organization that seeks solutions to pressing social
issues. This type of business organization brings social goals into the core of its business model and fully
integrates economic and social goals; thus the CSR model is referred to as the integrative model of CSR.
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One of the most controversial employment-related issues in the Philippines is the
contractualization of employees (colloquially known as “endo”- end of contract or 5-5-5). “Endo
employees receive the social and welfare benefits required by law, such as SSS, PAG-IBIG, and
PhilHealth. However, they are not entitled to other benefits, such as paid vacation/sick leave, maternity
leave, solo parent leave, retirement, and separation pay.
Employees hired under “endo” arrangements are hired 5 months and rehired for another 5 months,
sometimes under a different agency or with a gap period. Employers effectively avoid paying certain
benefits granted to permanent hires, and deprive “endo” employees of job security.
Reports noted that the greatest influence on employee work commitment is fairness at work,
followed by care and concern for employees, which are all key components of an ethical work
environment. The incentives (bonuses), recognition (awards), and benefits (health insurance, retirement
program) that the employees receive from the company also increase employee motivation and
engagement. Employees who are motivated, engaged, and responsive become more productive, produce
higher-quality products, and are likely to stay with the company.
6.2 Employment Relationship (Employer Responsibilities and Employee Rights)
Companies have a responsibility to take care of their employees and to provide for their needs in
the workplace. When an employer hires an employee, an employment relationship is formed. Employment
relationships may give rise to ethical issues of power, authority, obligation, responsibility, fair treatment,
and expectations.
Termination of Employment Due to Authorized and Just Causes
Under the Labor Code of the Philippines, an employer can only terminate its relationship with an
employee if there is a just cause or an authorized cause. In both cases, employers need to practice due
process prior to termination or separation.
Just Causes of Termination:
serious misconduct
willful disobedience
gross and habitual neglect of duty
fraud or breach of trust
commission of a crime of offense against the employer, his or her family or representative and
other similar cases.
Authorized Causes of Termination:
installation of labor-saving devices
redundancy
retrenchment to prevent losses
closure and cessation of business
disease/illness
(Source: Labor Code of the Philippines, Book VI)
Due Process Requirement for Termination of Employment
Termination of employment based on just causes also requires the observance of due process. In
labor law, it is important that an employer follows the due process procedures. If not, the employee can
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contest the termination as not being in accordance with the law. The termination process must meet the
substantial and procedural requirements – the reason or cause for the termination and the procedure of
how the termination decision has been reached and communicated.
In the dismissal of an employee, due process entails the twin-notice rule:
1. A notice apprising the employee of the act or omission for which his or her dismissal is sought.
2. A notice informing the employee of the employer’s decision to dismiss him or her, after being afforded
a fair and reasonable opportunity to be heard.
Termination of employment based on authorized causes requires the employer to serve a written
notice of termination to the employee at least 30 days before the effectivity of the termination. This will
allow the employee to find a new job or make other necessary arrangements. A separation pay is usually
given to the employee after separation from the service.
Health, Safety, and Security
Employers have a responsibility to protect the employees’ health, safety, and security while at
work. Health, safety, and security are intangible assets the employees have and are valued both as a means
for attaining other valuable ends and as ends in themselves. They have both instrumental and intrinsic
values.
Instrumental and intrinsic values may be viewed in business perspective this way. If, for example,
a construction worker dies in an accident while at work, the instrumental value of the employee can be
measured in part by the lost wages that would have been earned had that person lived. However, the
intrinsic value is much more abstract – what is a person’s worth, and how do you measure it.
The Department of Labor and Employment (DOLE) formulated the Occupational Safety and
Health Standards (OSHS) in compliance with the constitutional mandate to safeguard the workers’ social
and economic well-being as well as their physical safety and health.
6.3 Discrimination and Diversity
Discrimination
Discrimination is being in favor of or against a person based on group, age, social class, gender
orientation, race, religion, or any category to which that person belongs rather than on individual merit.
In recent years, the Philippines has been losing experienced workforce to other countries as it has
become difficult for those 30 years and older. In 2017, Republic Act No. 10911 or the Anti-Age
Discrimination in Employment Act was passed. Rather than age, potential employees should be evaluated
based on their abilities, knowledge, skills, and qualifications; thus promoting equal employment
opportunities for everyone.
Diversity
Diversity refers to the presence of differing culture, race, religion, language, ethnicity, gender,
ability, experience, age, social class, and other categories in the workplace. Workforce diversity is
important in organizations because it helps enhance competitiveness, expand organizational capabilities,
encourage sharing of expertise and skills from past experiences, and enhance access to markets. Although
workforce diversity greatly benefits a company, conflicts may also arise due to misunderstanding among
the culturally diverse employees.
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LESSON 7: BUSINESS AND ENVIRONMENTAL SUSTAINABILITY
“For it matters not how small the beginning may seem to be; what is once well done is done
forever.”
- Henry David Thoreau
Earth is facing a wealth of environmental issues today – pollution, global warming,
overpopulation, poor waste management, depletion of natural resources, and biodiversity. Many of these
environmental problems contribute to climate change. Every individual or corporation must make a
conscious effort to protect and save the environment. Most business organizations now integrate
environmental sustainability in their business decision.
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sustainability. This means that more natural resources need to be allocated to support the growing needs
of the people, and that more people will contribute to environmental degradation.
5. New and uncontrolled technologies. Some companies that prioritize profits, convenience, and
consumption over environmental protection disregard the impacts of the technologies they use and
develop. Although many business organizations that focus on technological advancements are now more
aware of their environmental and social responsibilities, it is still not a mainstream concern for most
companies. The use of GMOs in food, for example, has sparked a lot of controversy over recent years due
to its environmental implications.
6. Industrialization. Industrial activities deplete natural resources and cause environmental degradation.
Air, water, and soil pollution and global warming, which are caused by manufacturing processes, improper
waste management, use of toxic chemicals, and burning of fossil fuels, are some of the ill effects of
industrialization on the environment.
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the environment and natural resources” and for guaranteeing the “equitable sharing of the benefits from
all natural resources for all the welfare of the present and future generations of Filipinos”. It is tasked to
regulate the use of natural resources, issue permits to businesses that require the use of these resources,
and implement policies to prevent pollution and abuse of natural resources.
https://commons.wikimedia.org/wiki/File:Circular_flow_of_goods_income.png
According to economist Herman Daly, a major paradigm shift is needed in our understanding of
economic activity. The problem with the circular flow model is that it does not differentiate natural
resources from other factors of production, and it does not identify the origin of the resources. It just
assumes that resources are provided by households for the businesses. It also fails to note that resources
are finite and just assumes that natural resources are infinite resources that can be used by companies.
Another thing to note is that the circular flow models treats economic growth as limitless. To keep
up with the population growth, the economy must grow. To improve a country’s standard of living, the
economy must grow.
2. The Sustainable Model
https://bluetribe.co/business-model-innovation-the-secret-weapon-of-your-sustainability-strategy/
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The sustainable model recognizes that the economy exists within the biosphere with finite
resources. From the first law of thermodynamics (the conservation of matter/energy), you learn that neither
matter nor energy can truly be “created”. It can only be transformed from one form to another. The second
law of thermodynamics (entropy increases within a closed system) will explain that energy is loss at every
stage of an economic activity, and the amount of usable energy decreases over time, with “waste energy”
leaving the economic system continuously requiring low-entropy energy to constantly flow into the
system. The sustainable model recognizes the input of natural resources and the presence of wastes
produced at each stage of an economic activity that are dumped back into the biosphere.
7.4 Principles for Business Sustainability
The sustainable model provides a general picture of how business organizations should conduct
their businesses in consideration of their environmental responsibility.
1. Eco-efficiency Principle
Practically “doing more with less,” and has been an environmental guideline for decades. For
example, riding a bike is better than riding a bus; riding a bus or train is better than flying on a plane in
terms of carbon footprint, or the amount of greenhouse gases produced directly or indirectly support
human activities. Business organizations can improve energy efficiency in their offices through energy-
efficient lightning, better building designs, environmentally friendly product designs, and more efficient
distribution channels.
2. Biomimicry Principle
The waste materials of one company are turned into resources by another company. The ultimate
goal of this principle is to eliminate waste instead of just reducing it. For example, a closed-loop
production, a manufacturing or production system that seeks to integrate what is presently considered as
waste back into the production.
3. Serviced-based Economy Principle
Interprets consumer demand as a demand for services – transportation, laundry, and maintenance
of cars and appliances, among others. This principle produces incentives for product redesigns that create
more durable and more recyclable products. For example, consumers may choose to have their clothes
washed by a laundry service company instead of buying their own washing machines. To do the laundry,
the company will have to purchase industrial-grade washing machines, which are more durable and will
last longer than consumer-grade ones.
References:
Business Ethics and Social Responsibility, DIWA Senior High School Series, pp. 87 - 133
http://bit.ly/diwa-BUSETHICS2ED
hhtps://www.equalrights.org/legal-help/know-your-rights/sex-discrimination-at-work/
https://commons.wikimedia.org/wiki/File:Circular_flow_of_goods_income.png
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Module 3
WEEK 3
Objectives:
Let’s Discuss!
LESSON 8: ETHICS AND MARKETING
“Advertising doesn’t create a product advantage. It can only convey it.”
- William Bernbach
Imagine seeing a commercial of a new shampoo that promises shiny, silky hair in just one week
of using the product. Since you have always had problems with your dry hair, this seemed like it is worth
a try so you bought the product. After using it for weeks now, you are still waiting for the promise of a
shiny, silky hair. How would you feel about the product?
Marketing is defined as a business activity that aims to build the value for the customers and
manage customer relationships in order for a company to gain value in return. This exchange process
involves convincing the customers of a product’s value through various marketing activities like
advertising, events, sponsorships and many others. To make the customers believe the value of its product,
a company must be able to showcase the best features of the product in the most creative and convincing
way. This may lead to the company overstating the benefits of its product or worse, saying something that
may not be true about the product just to be able to gain consumers’ attention and establish brand
awareness.
8.1 Product Safety and Liability
Business organizations have an ethical responsibility to design, manufacture, and promote their
products in ways that do not cause harm to consumers.
In the Philippines, the Bureau of Product Standards (BPS) under the Department of Trade and
Industry (DTI) is responsible for developing, promulgating, implementing, and promoting standardization
activities as mandated by Republic Act No. 4109 (Charter of BPS) and Republic Act No. 7394 (Consumer
Act of the Philippines).
Business organizations have the responsibility to provide goods at an agreed-upon price. They
usually follow the caveat emptor approach, which assumes that consumers have the responsibility to look
out for their own interests and protect their own safety when buying a product. The problem with this
approach is that unless the company ensures that a product is safe, the buyers are liable for any harm they
suffer.
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A warranty gives the consumers assurance that the company will be held liable for product
damages or failure for a certain period of time. This is common in electric gadgets and appliances.
The Tort Standards, or the quasi-delict as it is called in the Philippines, covers the liabilities of
companies. Liability for quasi-delict under the Civil Code of the Philippines requires the following
conditions:
1. an unlawful act or omission amounting to a fault or negligence, imputable to the defendant
2. damage or injury to the plaintiff
3. such damage or injury being the natural and probable, or direct and immediate consequence of the
defendant’s wrongful act or omission
4. there being no pre-existing contractual relation between the plaintiff and the defendant
To simply put it, a company can be held liable for the actions of its employees. For instance, if a
bus driver accidentally hits a pedestrian, resulting in injury, the bus company could be liable for the actions
of the driver. The company would have to cover hospital, medical treatment, and rehabilitation expenses
caused by the accident.
8.2 Ethical Issues in Advertising
Advertising is an important tool in marketing that is used to introduce a product or inform
consumers about product updates, and to influence or persuade the consumers to buy the product.
Consumers benefit from this tool by receiving information so they can make better, informed choices
when they shop.
The most common issue in advertising is the truth or how much of the truth is declared in
advertising materials. For example, a company may claim that its product can do various things, but in
fact, the product can only do so much. Worse, the company may claim that the product has certain benefits
when it really does not or the company has no evidence that such benefits can be attained.
Tobacco advertising on mass media has been banned in the Philippines. Tobacco companies are
directed to use shock advertising, which requires them to put graphic or disturbing images related to the
consequences of cigarette smoking on cigarette packs to discourage people from smoking.
Infant formulas are also not allowed to be advertised on mass media unless the advertisement is
approved by an interagency committee. Executive Order No. 51, or the Milk Code, encourages mothers
to breastfeed their babies to ensure that they receive the best nourishment.
The portrayal of women in ads in a sexual tone is also a controversial issue in the country. For
example, many liquor ads show women in sexy outfits while posing seductively and holding a bottle of
liquor. Unfortunately, the phrase “sex sells” may be true in some occasions.
8.3 Sustainable Marketing
Sustainable or green marketing focuses on actions that promote sustainable ways of marketing a
business organization’s product or service. Remember that there are four P’s of the traditional marketing
mix: product, price, place, and promotion. Each element must contribute to the practice of green
marketing.
The Four Ps of Traditional Marketing and Green Marketing
Products go through changes throughout their availability in the market.
Through innovation, a company can implement more sustainable ways of
manufacturing them. For example, many companies now use biodegradable
Product and environment-friendly packaging. Other examples:
Most cellphone companies no longer include a user manual in their
product pack instead, consumers are directed to the company website
to download or read the user manual.
Some companies encourage recycling by offering discounts to
consumers who return empty containers.
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Some coffee shops offer discount to customers who bring their own
mug or tumbler.
Price Price is an important component of marketing simply because it is the only
element among the four Ps that affects revenues rather than costs. Customers
consider the price of the product before buying it, and companies consider
the price of the product to ensure profitability.
Place The channel of distribution can be turned green by using cost-efficient
delivery systems and energy-efficient vehicles. For example, a company can
reduce carbon footprint by having a well-planned delivery schedule.
Promotion Capitalizing on green marketing efforts is one way to create positive image
for the company. Using eco labels such as eco-friendly, natural, organic, and
energy-efficient to promote products may influence the purchase behavior
and decisions of consumers; that is, green products are often more appealing.
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Exhibiting heightened accountability to the constituencies served and for the outcomes created.
Social entrepreneurs take steps to ensure that they are creating social value. They seek to provide
real social improvements, and they work hard to be able to do what they set themselves to achieve.
Social entrepreneurs are regarded as change agents as they make a difference through changing,
reforming, or revolutionizing solutions in the social sector. They seek to create systematic changes
and sustainable improvements.
9.2 Modeling the Social Entrepreneurship Process
Social entrepreneurship is the process of recognizing and pursuing opportunities to create
social value, that is, to develop and implement solutions to social, cultural, and environmental issues.
It involves the interaction of the individual entrepreneur, the enterprise itself, and the context in which
the entrepreneur and social enterprise operate.
The Timmons Model of the Entrepreneurship Process
According to the Timmons Model of the Entrepreneurship Process, the three key components of a
successful business venture are opportunity, team, and resources.
https://venturefounders.com/timmons-model-of-new-venture-creation/
The figure above shows that entrepreneurship is opportunity driven, or that the market shapes the
opportunity. The entrepreneurs has to be able create value for the consumers at the right price in order for
the opportunity to become viable. Once the opportunity is deemed viable, the entrepreneur forms a team.
The size of the tem is based on the size and the nature of the opportunity. Timmons considers a good team
as a requirement for the venture to succeed. The entrepreneur also has to be able to choose the right
members of the team to contribute to the success of the business. Identifying the resources is also important
so the company can create a competitive advantage for its products. The resources must also match the
requirements of the opportunity.
The PCDO Framework
The PCDO framework presents four interrelated elements of social entrepreneurship; people,
context, deal, and opportunity. People represents the human resource needed to successfully run the
enterprise. The collective skills that the people are needed to fully operate the business. People also include
the investors in the enterprise.
Context includes elements in the environment where the entrepreneurship takes place. It includes
factors that are beyond the control of the management, such as political, demographic, cultural, and
economic factors.
Deal includes transactions involves in determining how and to whom the benefits of the
entrepreneurial activity are dispersed. It is the substance of the bargain that defines who gives what, who
gets what, and when those deliveries and receipts will take place.
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Lastly, opportunity creates an avenue for the enterprise to offer something of value to the market.
It is the essence of the framework.
https://www.researchgate.net/figure/People-context-deal-and-opportunity-PCDO-framework-Source-Austin-et-al-
2006_fig15_316739915
https://www.researchgate.net/figure/The-opportunity-creation-process-Guclu-Dees-and-Anderson-2002-
2_fig2_255574243
The Social Entrepreneurship Framework
This is a modification of the PCDO framework. This framework identifies three elements:
opportunity, people, and capital. Opportunity and people represent exactly the same variables discussed
in the PCDO framework, but finance providers are no longer part of people; instead, they fall under capital.
This framework captures the synergy of the three elements in order to fulfill the social value proposition
(SVP). The SVP is at the heart of the social entrepreneurship process where the three elements overlap in
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the Venn diagram and is the reason why target beneficiaries of a social enterprise choose a company’s
products over its competitors.
https://www.researchgate.net/figure/Social-Entrepreneurship-Framework-Note-SVP-social-value-
proposition_fig2_307773106
The Social Entrepreneurship Process Model
This model attempts to put together the best of both the CASE and the social entrepreneurship
framework. In this model, the social entrepreneurship process takes place in two stages and starts with
idea creation similar to the first step in the CASE model.
In stage 1 (idea creation), ideas are generated based on the entrepreneurs motivation, the identified
social need that has to be addressed, and the current capacity of the society to fulfill the need. The
entrepreneur’s motivation is influenced by his or her background – geography, history, politics, etc.
In stage 2 (mission achievement), the three elements, opportunity, people, and resources –
converge in the fulfillment of the mission or purpose of the social venture.
https://www.researchgate.net/figure/Social-entrepreneurship-Process-Model-adopted-from-Flament-
2012_fig1_332379829
LESSON 10: CREATION OF A SOCIAL ENTERPRISE
“Ideas are the root of creation”.
- Ernest Dimnet
Many big companies came from small beginnings. Some started as a dream which became a
reality. Some were realized because of one’s passion, while others were materialized out of necessity.
Indeed, ideas come in many forms and sizes, in different places, at different times.
10.1 Social Idea Generation
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A social enterprise starts with the recognition of a need in society, driven by a motivation to initiate
social change. Social entrepreneurs are often on the lookout for ideas that can be offered to the market to
address the needs of society.
10.2 Innovation
Creativity and innovation are often used synonymously, but these words have different meanings.
Creativity is the development of original ideas or inventions, while innovation is the implementation of
these inventions.
Seven Types of Innovation
This refers to making available products that have not been
Creation of New Products previously conceived of or offered to the market.
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Implementing New Ways of Microfinance institutions do not operate like commercial banks.
Engaging Customers or Target While their main function is to lend money to microenterprises,
Beneficiaries most of them do not require collateral.
The situation analysis gives you an overview of the environment in which the social enterprise
will be operating. You could include analysis of current trends that are related to the enterprise you are
proposing, the social issue that you want to address, and the social impact that the enterprise could have
on the society. You may consider the following when deciding on the social issue you want to help resolve:
Prevalence – Is the social problem rampant in the society?
Relevance – How can the social entrepreneur help solve the problem? Does he or she have the
necessary skills and knowledge to manage the social enterprise?
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Radicalness – What are the proposed solutions of the social enterprise? How innovative are they
to address the social problem?
Urgency – How quickly can the social enterprise respond to the social problem?
Accessibility – What are the challenges in providing logistical support, mechanisms, and/or
operations of the social enterprise? How can these be resolved?
The second section of the plan requires you to describe in detail the specific features of your social
enterprise. What product (or service) will you be offering to the market? You may also discuss here your
product’s competitive advantage. The mission and vision will serve as the guiding light for your social
venture. The target beneficiaries and customers will give a clearer picture of who will benefit from the
enterprise, what exactly they will need, and who will be patronizing the product. Identifying and analyzing
competitors will let you know how to make your product stand out and will give you insights as to what
your competitors are doing and what they are planning to do.
The third section of the plan should provide specific details about the operations of your social
enterprise. Some questions that must be answered in this section include the following:
Where will your enterprise operate?
How many people do you need to manage and run it?
Where will your raw materials come from?
How long will it take for you to produce and make it available to the market?
The last section will show the viability of your social enterprise plan.
References:
Business Ethics and Social Responsibility, DIWA Senior High School Series, pp. 134-160
http://bit.ly/diwa-BUSETHICS2ED
https://venturefounders.com/timmons-model-of-new-venture-creation/
https://www.researchgate.net/figure/People-context-deal-and-opportunity-PCDO-framework-Source-Austin-et-al-
2006_fig15_316739915
https://www.researchgate.net/figure/The-opportunity-creation-process-Guclu-Dees-and-Anderson-2002-
2_fig2_255574243
https://www.researchgate.net/figure/Social-Entrepreneurship-Framework-Note-SVP-social-value-
proposition_fig2_307773106
https://www.researchgate.net/figure/Social-entrepreneurship-Process-Model-adopted-from-Flament-
2012_fig1_332379829
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