Lesson 1

Nature Of Business And Forms Of Business Organization

Do you agree that business is everywhere?

- The fruit of business are everywhere. We have entered a maze called business. And it is
a maze that is probably inescapable . This is because business has become a
necessary facet of modern living.

What is business?

The word business has come to associated with a number of meaning and usage.
1. A business is an organization or economic system where goods and services are
exchanged for one another or for 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. Businesses can be privately owned, not-for-profit or state
owned (www.businessdictionary.com)
2. According to Merriam-Webster Dictionary the word business defined as:
(a) The activity of making, buying, or selling goods or providing services in exchange of
money.
(b) Work that is part of a Job
(c) The amount of activity that is done by a store, company, factory etc.

Businessperson and Entrepreneur: A distinction

Businessperson
- Usually concerned simply with business aspect of the enterprise, that is how can
activities be arranged and organized in such way that guaranties profits.
- Imitators
- Waits for the innovations made by the entrepreneurs
- More likely to play it safe
- Mostly motivated by the financial reward of the business activity.

Entrepreneur
- Are more concerned with the insight aspect of an enterprise, or how new and private
ideas can be applied so that it may have more social utility.
- Innovator
- Very observant, pays attention to the changes of society and to the movements of the
wants and needs of the market.
- Risk-taker, not afraid to take the road less traveled.
- Propelled and driven by his or her creative juices.
Therefore,

● The businessperson best to become an entrepreneur. The challenge that business

people face is to never let go of the entrepreneurial mind, that is to regain the
characteristics of innovativeness, creativity, and daring risk-taking to create valuable
contribution to the society.
● The entrepreneur must guard himself lest he may end up as a plain businessperson who
has forgotten to take risks just because of the singular pursuit of financial gain.

Forms of Business Organization

● The term “BUSINESS ORGANIZATION” refers to how business is structured.

● It refers to a commercial or industrial enterprise and the people who constitute it.

FOUR FORMS OF BUSINESS ORGANIZATION

⮚Single or Sole Proprietorship
⮚Partnership
⮚Corporation
⮚Cooperative

1. Single/Sole Proprietorship
- Defined by the Philippine Statistics Authority as “a business establishment
organized, owned, and managed by one person, who alone assumes the risk of
the business enterprise.
- simplest form of business organization in the Philippines. It is not encumbered by
the strict regulatory laws and rules imposed upon corporations and partnerships.

Characteristics:

1. Single Ownership
● Alone assume the risk of the business enterprise. Single proprietorship is the
easiest to set up that you may already be engaged in one without you knowing
that is called single or proprietorship.
● Example. Small Sari-sari store, turo-turo, canteen, local grocery, laundry shop.

2. No Sharing of Profit and Loss

● All profit and business decisions are under the discretion of the business owner.

3. Unlimited Liability
➢ The single proprietor has unlimited liability in the sense that creditors of his business
may proceed not only against the assets and property of his business but after his own
personal assets and property.
➢ Creditors with whom he had incurred personal debts may also run after the assets
and property of his single proprietorship business.
 ➢ Simply put, the law does not make any distinction between his personal affairs and
his business transactions. Before the eyes of the law, they are one and the same, his
business being a mere extension of his person.

4. One man’s Capital

5. Less Legal Formalities
6. One man Control

ADVANTAGES OF SOLE DISADVANTAGES OF SOLE

PROPRIETORSHIP PROPRIETORSHIP

Easy formation Owner has unlimited liability

Better Control (Prompt decision making Difficult to raise capital

and Flexibility in Operations)

Subject to fewer regulations Business has a limited life

Not subject to corporate income tax Difficult to do business beyond a certain

size

Ownership of all profits

2. Partnership
● ARTICLE 1767. By the contract of partnership 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. Two or more persons may also form a partnership for the
exercise of a profession
● Partnership resemble sole proprietorship, except that there are two or more owners of
the business. Each owner called partner.
● Partnership are often formed to bring together various talents and knowledge.
● Partnerships provides a means of obtaining more equity capital than a single individual
can obtain and allow the sharing of risks for rapidly growing business.
● A profession is a calling in the preparation for or practice of which academic learning is
required and which has for its prime purpose the rendering of public service. Thus, it has
been defined as “ a group of men pursuing a learned art as a common calling in the spirit
of public service”.
● The exercise of profession, is not a business or an enterprise for profit but the law allows
two or more persons to act as partners in the practice of their profession. Example:
practice of law , public accounting, medicine and other professions (General professional
partnerships).

Characteristics of Partnership
 1. Mutual Contribution
- There cannot be a partnership without contribution of money, property or industry
(i.e. work or services which may either be personal manual efforts or intellectual)
to a common fund.
2. Division of profits or Losses
- The essence of partnership is that each partner must share in the profits or
losses of the venture.
3. Co-Ownership of contributed Assets
- All assets contributed into the partnership are owned by the partnership by virtue
of its separate and distinct juridical personality. If one partner contributes an
asset to the business, all partners jointly own it in a special sense.
4. Mutual agency
- Any partner can bind the other partners to a contract if he is acting within his
express or implied authority.
5. Limited life
- A partnership has a limited life. It may be dissolved by the admission, death,
insolvency, incapacity, withdrawal of a partner or expiration of the term specified
in the partnership agreement.
6. Unlimited liability
- All partners (except limited partner), including industrial partners, are personally
liable for all debt incurred by the partnership.
- If the partnership can not settle its obligations, creditors 'claims will be satisfied
from the personal assets of the partners without prejudice to the rights of the
separate creditors of the partners.

ADVANTAGES OF PARTNERSHIP DISADVANTAGES OF PARTNERSHIP

Easy Formation Unlimited Liability

Larger Resources Limited Life

Sharing of Risk Difficult to raise capital

Better Management and Flexibility of Chances of dispute

Operation

No Corporate Income Tax

Subject to fewer regulation as compared to

companies
3. Corporation

⮚ Is an artificial being created by operation of a law, having the right of succession and the
powers, attributes and properties expressly authorized by law or incident to its existence (The
Corporation Code of the Philippines's 2).
⮚ It has a distinct personality separate from its owners. It enjoys certain right and privileges just
like an ordinary individual. It can enter into contracts, loans and borrow money, sue and be
sued, hire employees, and pay taxes.
⮚ A corporation has a minimum of five members called shareholders.
⮚ The shareholders elect a board of directors who oversee the major policies and decisions of
the corporation. It has a life of its own and does not dissolve upon the death or withdrawal of a
shareholder.

Characteristics of Corporation

1. Artificial being
- A corporation is an artificial being with a personality separate and apart from its
individual shareholders or members.
2. Created by operation of law
- It cannot come into existence by mere agreement of the parties as in the case of
business partnership. Corporations require special authority or grant from the
State, either by a special incorporation law that directly creates the corporation or
by means of a general corporation law (i.e., The Corporation Code of the
Philippines).
3. Enjoys the right of succession
- A corporation has the capacity of continued existence subject to the period stated
in the Articles of incorporation. The death, withdrawal, insolvency or incapacity of
the individual shareholders or members will not dissolve the corporation.The
transfer of ownership of shares of stock does not dissolve the corporation.
4. Powers, Attributes and Properties
- It has the powers ,attributes and properties expressly authorized by law or
incidents to its existence.

ADVANTAGES OF CORPORATION DISADVANTAGES OF CORPORATION

The corporation has the legal capacity to act A corporation is relatively complicated in
as a legal entity. formation and management.

Shareholders have limited liability. There is a greater degree of government

control and supervision.

It has continuity of existence. It requires a relativel;y high cost of formation

and operation.
 Shares of stock can be transferred without It is subject to heavier taxation than other
the consent of the shareholders. forms of business organization.

Its management is centralized in the board of Minority shareholders are subservient to the
directors. wishes of the majority.

Shareholders are not general agents of the In large corporations, management and
business. control have been separated from ownership.

Greater liability to acquire funds. Transferability of shares permits the uniting of

incompatible and conflicting elements in one
venture.

4. Cooperative
➢ "ART. 3. General Concepts. - A cooperative is 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.
Example: Credit Cooperative, Consumer Cooperative, producers cooperative and electric
cooperative
➢ "Cooperative organizations are those organizations, which are different from the rest, as they
are formed not for the purpose of making profit but to provide its members goods and services
at reasonable rates. This form of organization primarily protect and safeguards the economic
interests of it members.

Characteristics of Cooperative

⮚ They consist of groups of people who join together to do something they cannot very well to
do as individuals.
⮚ They aim to provide some services that is necessary or very desirable in their lives.
⮚ They operate on the basis of self-help, that is, the people involved look to one another as a
group for the solution of their problems.
⮚ They do business motivate by service and not by profit.
⮚ Democratic member participation

ADVANTAGES OF COOPERATIVE DISADVANTAGES OF COOPERATIVE

Generally inexpensive to register. A cooperative entails a longer

decision-making process.

A cooperative organization is owned and It requires members to participate for

 controlled by members. success.

Members have an equal vote at general It has less incentive, and there’s also a
meetings regardless of their level of possibility of development of conflict between
investment or involvement. members.

All members must be active in the As cooperatives are formed to provide a

co-operative. service to members rather than a return or
investment, it may be difficult to attract
potential members seeking a financial return.

This type of organization has a limited liability. Members providing greater involvement or
investment than others will still only get one
vote.

Profit distribution (surplus earnings) to

members is carried on in proportion to the
use of service, and may be allocated in share
or cash.

Therefore,

➢ When an individual owns and operates a business, it’s often a sole proprietorship.
➢ When two or more people own a business, it’s often a partnership.
➢ corporation is the most complex and it has also a separate legal entity.
➢ When a company is owned and operated by the people who use its products and services
and who benefit from what the company has to offer, it’s known as a cooperative.

Lesson 2
The Purpose Of Business & Their Role On Social Economic Development

Reasons for putting up a Business

1. Subjective reason
- refer to a reasons that motivate the individual to put up a business.
- They are “subjective” because these reasons vary from one businessperson to
another.
- These reasons are usually given as the answer to the question: Why do you put
up a business? Or Why are you into business?

Subjective Reasons For Putting Up Business

 1. Desire to make more income for oneself and his or her family.

➢If you consider this as a reason for you to put up a business, perhaps you have
observed that the business enterprise is usually more financially rewarding than other
careers or profession.

2. You may intend to engage in business because you want more independence.

➢When you own your business, you are the boss. An employee may lack mobility,
choices, and decision- making capabilities among others.

3. You may own a business because you are probably continuing the legacy of your
family.

➢You are comfortable with being an employee and may not be motivated much by the
flow and overflow of profit. However, because of your respect and love for the family, you
also decide to take part in your family business.

4. You may decide to start a business because you want to try unique and novel
idea.

➢You have an entrepreneurial mind that needs an outlet. The profit aspect of the
enterprise does not excite you so much. Rather, it is the novelty of the idea that
motivates you and your creativity in finding an outlet that leads you to an enterprise
called business.

5. Your desire for competition

➢You realize that other occupations do not thrill you at all. You may view employment as
monotonous and lacking in substance.

6. 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.

Why Is There An Institution Called Business?

What Are The Objective Purpose And The Reason Behind The Existence Of Business In
Our Society?

The Objective Purpose of Business

THREE SCHOLARS CLARIFY THE OBJECTIVE PURPOSE OF BUSINESS.

 1. Milton Freidman
2. Paul F. Camenisch
3. Ronald F. Duska

MILTON FRIEDMAN: PROFIT AS THE PRIMARY RESPONSIBILITY OF BUSINESS

➢an American economist who taught for many years University of Chicago. (Profit as the
primary responsibility of the business).
➢Friedman claimed that if you are an executive or manager of a firm, you must remember that
you are not the owner and that you are hired for a purpose.
➢To make the firm more profitable since it is supposed to be the main intention of the firm’s
owners and shareholders.
➢He believes that you do not have moral responsibility to take care of the needs of people
outside the firm.
➢The company is not a government unit, and the company executive is neither a government
official nor a politician.
➢Freidman stressed, you have only one social responsibility and the corporation has a sole
purpose- to increase the profits of the firm so that you also increase the wealth of its owners.

PAUL F. CAMENISCH : The Primacy of Business ‘Social Function

➢A professor of Religious Studies at De Paul University in Chicago (The Primacy of Business

”Social Function”)
➢In 1981, Camenisch publish an essay title “Business Ethics: On Getting to the Heart of the
Matter” In the said article, admitted that his insights may not be in agreement with Freidman’s.
➢For him , Friedman has put too much emphasis on the profit-motive as the social
responsibility of business. By doing this, Friedman has forgotten the other essential element of
business—that it exists to respond to the societal needs for life-sustenance and
life-enhancement.
➢There are two (2) essential elements for any proper definition of business “the provision of
goods and services, and the fact that this is done with the intention of making a profit. If one
element is removed, then it is no longer considered a business.
➢He claimed that the intention to provide goods and services for human flourishing is more
fundamental and primary than the profit-making intention.

Ronald F. Duska: The Motive is Not the Purpose

➢American professor and a leasing scholar in the field of business ethics.(The motives is not
the purpose)
➢One of the main of the contributions of Duska in the Debate regarding the purpose of
business is his argument on the distinction between purpose and motive.
➢According to him, the purpose is not necessarily the motive and vise versa. He said: “My
motive for doing an action is not necessarily the same as the purpose of action” Duska (2007)
➢To illustrate, the purpose of medical profession is to attend the to the health concerns of
people, but the motive of an individual doctor may not even include taking care of
people.
➢Just like Camenisch, he believed that the primary purpose of business is neither personal
benefit nor the accumulation of profit.

1987 Philippines Constitution

“The goals of the national economy are a more equitable distribution of opportunities, income,
and wealth, a sustained increase in the amount of goods and services produced by the nation
for the benefit of the people; and an expanding productivity as the key to raising the quality of
life for all, especially the underprivileged.”

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”

Business And Socioeconomic Development

➢It is undeniable that the business institution is a mighty force for every development.
➢In the World Summit on Sustainable Development, Wheeler and McKague said that “the role
of business and trade was understood to be central if eminent , In meeting economic, social,
and environmental aspirant governments and people worldwide”

● Business institution is a significant factor in the improvement of our standard living. The
electricity, appliances, modern gadgets and information, transportation and
communication facility we use daily are all products of business activities and operations.
● The different forms of organizations are also the major players in creating employment.
Every year, thousands of young Filipino graduate's dream of entering the workforce.
● The business institution is the main enhancer of the entrepreneurial mind.
● The business institution helps the government and other social agencies in responding
to the basic needs of many Filipinos. Through charitable donations and corporate social
responsibility activities of many businesses, more basic goods and services are
extended to the less fortunate members of the Philippine Society.
● Indeed, business occupies a key role in our nation’ socioeconomic development. It is a
necessary component of social and economic development. On the other hand, it is also
the source of many of our serious social, economic, and environmental problems.

Lesson 3
Core Principles Underlying Fairness, Accountability, And Transparency In Business &
Common Practices

What Is Ethics?
 - Ethics, from the Greek word ethos, encompasses the study of moral problems, practical
reasoning, right and wrong, good and bad, virtues and vices, character, moral duty and
related issues involving the nature , origins, and scope of moral values.

➢ Ethics talks about how we behave and how we should behave as human beings
different from animals , plants, and other known creatures.
➢ It makes us realize again that man is a free creature endowed with intellect and
rationality. Talks about our life with all its complications, difficulties , problems and
brokenness. Similarly, it also talks about our capacity to resolve these complications,
overcome these difficulties, face these problems, and come to grips with life’s
brokenness.

FOR EXAMPLE:
➢ When a person is sick , he or she goes to the doctor. The patient tells the doctor what he
feels. After knowing the facts, The Doctor describes the illness; but he does not stop there. After
describing, the doctor prescribes what the patient should do for him to get well.
➢ The aims of ETHICS is not only describing, but also prescribing the ethically correct course
of action that the human agent should take.

CONCEPT OF ETHICS
1. Etiquette
2. Law
3. Professional Code of Ethics

Ethics and Etiquette

➢We must not confuse ethics with etiquette.
➢ One may violate etiquette without necessarily violating an ethical standard.

EXAMPLE:
1. You may not use the words “po” and “opo” when talking with elder people, but it does not
make you immoral.
2. You may not shake the hand of a person you are introduced to by a business colleague,
but it would not be immoral.
➢ However, society might judge you as disrespectful, rude and even uncivilized
because of your disregard of etiquette ; it does not follow that this outright disregard
renders you unethical.
3. When your acts involves dumping of toxic materials in the river, people will not only call
you rude or uncivilized; they see that your act involves the concept of being “unethical”
and “immoral”
➢ The dumping of toxic materials in the river is not a simple case of violation of courtesy
(etiquette), rather, it is a more complex issue that involves ethical and moral evaluation,
➢ Duska (2007) said that “the actions examined in ethics are those that affect other
people and ourselves positively or negatively in some serious way”
Ethics and Law
➢Some Businessmen may say that if you follow the law, then you have got no problem. While
abiding the law is an important components of any business activity , it does not guarantee the
fulfillment of the requirements of ethics by the businessperson.
➢ As a general rule , we must follow the law because it is the embodiment of man’s cherished
ethical principles and moral convictions. But on the other hand, we have to recognize that laws
are made by human minds and human hands. Nathan Roscoe Pound, a legal scholar, once said
that “Law must be stable and yet, it cannot stand still.”

EXAMPLE:

➢The diagram above shows that there are ethical but are judge by the society illegal. other
words, there are situations when you think your actions are ethically correct, but you might be
apprehended because the said actions are judged by the current legal system as unacceptable.

Ethics And Professional Code Of Ethics

➢Ethics are moral principles that guide the conduct of individual. It affect how people make
decision and lead their lives. Ethics is concerned with what is good for the individuals and
society, and its also described as “moral philosophy”.
➢A code of ethics clarifies an organization’s mission, values and principles, linking them with
standards professional conduct. Outline the ethical principle that govern decisions and behavior
at a company or organization.
➢ An organization’s code of ethics is a formal document that states an organization’s primary
values and the ethical rules it expects employees to follow. It is good to be reminded that
an enterprise also has its responsibility to its.
1. Investors and owner. For fair returns on their investments;
2. customers, for safe products;
3. Suppliers ,for fair deals; and
4. employees, for decent wages.

THEREFORE,
➢ Sample code of ethics of professional, service, and manufacturing sectors often show
common statements that address the needs of their investors, customers, suppliers and
employees.
➢ Each individual needs ethics to live in a disciplined manner.
• Some individuals act incorrectly because their ethical standards differ from society, or because
they choose to be self-seeking. Professionals, especially those dealing with businesses and
businessmen, often face the tough task pursuing ethical practices.

Why is a Code of Ethics Important?

➢ Businesses that do not have code of ethics should develop one where employees can live by
and make decisions with while at work. Without such code, how can the manager know what
the company considers ethical or unethical? If every manager decides based on his or her
ethical code, then the company may have no ethics at all or a lot of different ethical codes,
depending who is calling the shots.
➢ A company ethics should reflect the company’s mission and must be communicated to those
who are carrying out the mission.

Sample Code of Ethics

➢ A code of ethics, also called a code of conduct or ethical code, sets out the company’s
values , ethics, objective and responsibilities. A well-written code of ethics should also give
guidance to employees on how to deal with certain ethical situations.
➢ Every code of ethics is different and should reflect the company’s ethos, values and business
style.
➢ Some codes are short, setting out only general guidelines, and others are large manuals,
encompassing a huge variety of situations (Magloff, 2016).

Verizon
➢The Verizon code of ethics is a lengthy document that contains four short core values,
followed by 16 pages of specific rules and guidelines to follow in certain situations. The core
values are integrity ,respect, performance excellence ,and accountability.
➢The specific guidelines cover situations, such as how to deal with workplace violence, alcohol
use, and harassment.
➢They also cover areas of integrity and fairness, such as how to avoid conflicts of interest and
how to safeguard company information.
➢There is also a section on protecting Verizon’s company assets, including what to do in cases
of sabotage and how to create accurate records (Magloff, 2016).

3. Kraft Heinz
➢The Kraft Heinz code of ethics contains short rules on ethical behavior that all employees
must follow. The introduction to the Kraft Heinz code of ethics suggests that employees should
let values guide their actions in all cases.
➢The code includes a speaking-up policy that requires employees to speak up if they are
aware of any violations of the code, even those they have committed themselves
(Magloff,2016).

WHAT IS BUSINESS ETHICS?

➢ It is a discipline used to explore the rightness or wrongness of business activities and the
conduct of the businesspersons and professionals.
➢ In its simplest form , business ethics can be defined as a systematic study of ethics as
applied to the issues arising in business (Mc donald , 2007).
➢ Business ethics is the study of good and evil,right and wrong, and just and unjust actions in
business (steiner and steiner, 2003).

● It is a discipline used to explore the rightness or wrongness of business activities and the
conduct of the businesspersons and professionals.
● In its simplest form , business ethics can be defined as a systematic study of ethics as
applied to the issues arising in business (Mc donald , 2007).
● Business ethics is the study of good and evil,right and wrong, and just and unjust actions
in business (steiner and steiner 2003).

WHAT IS BUSINESS ETHICS?

➢ Business ethics are moral principles that guide the way a business behaves.
➢ Acting in an ethical way involves distinguishing between “right” and “wrong” and then making
the “right” choice.
➢ Ethics is a branch of philosophy which seeks to find answers about the moral concepts like
bad, good, evil, right, wrong, etc.
➢ Business ethics is the study of business situations, activities, and decisions where issues of
right and wrong are addressed.

IMPORTANCE OF ETHICS IN ORGANIZATION

✓ Business ethics help the organization to protect their reputations .
✓ Business ethics is needed to make business activities fair and reasonable for consumers.
✓ Attract customers to the firm's products, thereby boosting sales and profits.
✓ Make employees want to stay with the business, reduce labor turnover and therefore
increase Productivity.

Legal Responsibilities
• All business enterprises need to comply with a country’s laws and regulations. Obedience to
local, national, and relevant international laws constitutes legal responsibilities.

A selection of Laws that explain Legal Responsibilities of Philippine Enterprises includes

the following:
1. Corporation Code (Batas Pambansa Bilang 68)
➢ Dictates the most important legal responsibilities toward investors and owners, as it
guarantees that the enterprise is managed in the interest of its stockholders.
2. Consumer Act of the Philippines (R.A 7894)
➢ Details the legal responsibilities of enterprises toward their buyers , suppliers, tradesmen,
and distributers. R.A. 7894 mandates that the conduct of business and industry must implement
measures for protection against hazards of health and safety; protection against deceptive,
unfair, and unconscionable sales acts and practices; provision of information and education to
facilitate sound choice and the proper exercise of rights by the consumer; and involvement of
customer representative in the formulation of social and economic policies.
3. Minimum Wage Law
➢ Entails the compliance of organizations with the minimum wages that their employees
are entitled to. The law is administered by the Department of Labor and Employment
(DOLE).
4. Migrant Workers and Overseas Filipino Act 1996 (R.A 8042)
5. Environmental legislation, the most challenging legal responsibilities of business and
industry toward community-stakeholders is the growing concern for the environment.

e.g.,of Environmental legislation

● R.A. 8749: Clean Air Act of 1999 oversees the formulation of holistic national program
against air pollution that shall be implemented by the government, through proper
delegation, and effective coordination of function and activities.
● (P.D.)1586 established an environmental impact statement system.
● R.A. 6969 Toxic substances and Hazardous and Nuclear
➢ Waste Control Act 1990 covers the importation, manufacture, processing, handling, storage,
transportation, sale, distribution ,use, and disposal of all unregulated chemical substance and
mixture in the Philippines.

Notions of Accountability, Fairness, and Transparency in Business Enterprise

Accountability
➢ The term Accountability means that employees will perform a job, take corrective action
when necessary, and report upward on the status and quality of their performance.
➢ Accountability implies responsibility: it is reasonable only to hold people to account for those
things for which they are responsible.

Example: Manual of Cebu Pacific Corporate Governance

• Reiterates accountability in the Governance Monitoring and Self-assessment stipulation.
• The self-rating performance system makes the board members accountable for their
performance.
• When top-level management is answerable for their actions, it is a powerful message sent
down and through the management hierarchy that accountability is a valued enterprise
standard.
Why is accountability important?
➢ Sound accountability structure are the most important aspect of prevention and detection of
corruption. A civil society organization without a proper accountability system is fragile and open
to rumors about mismanagement and abuse of power.
➢ Accountability is the ability to account for your action and performance to your stakeholder.
Accountability includes the fact that persons are willing and able to hold you accountable. With
the willing and able aspect of definition
➢ Accountability also has a strong connection to expectations. Employees who do not meet the
expectations of their supervisor are held accountable for their actions and must answer for their
inability to do so.

Fairness
● Fairness in the context of business organization involves balancing the interest in all
decision making including any decision related to hiring, firing(including the investigatory
process), and the compensation and reward system. Fairness has to do with justice,
which is to give to another that which is due to him/her.
● May be measured by the equity theory. The equity theory states that people assess how
fairly they have been treated according to two key factors- outcomes and inputs (i.e.,
their own outcomes or inputs versus other outcomes or inputs).
Transparency
● defines as a lack of hidden agendas or conditions, accompanied by the availability of full
information required for collaboration, cooperation and collective decision.
● Lack of transparency is one of the main reasons that employees become unhappy and
find it difficult to place trust in their company.
● Business organizations should ensure that timely and accurate disclosure is made on all
material matters regarding the association, including financial situation, performance,
and membership.

Notions of Competence, Professionalism, and Responsibility

● Moral character and technical competence are viewed as being equally important for
worker excellence. The greater the need to engage with co- workers who have different
values, interest and needs, the more important it becomes for employees to be able to
connect with colleagues, to understand different perspective, to balance sometimes
conflicting claims and to act competently both interpersonally and ethically.

➢ Technical skills encompass the ability to apply specialized knowledge or expertise. When
you think of the skills of professionals such as civil engineers or oral surgeons, you typically
focus on the technical skills they have learned through extensive formal education.
➢ Human skills is the ability to understand, communicate with, motivate, and support other
people, both individually and in group. Many people are technically proficient but poor listener,
unable to understand the needs of others, or weak at managing conflict.
➢ Conceptual skills are the skills and the mental ability that managers must have to analyze
and diagnose complex situation. Decision making, for instance requires managers to identify
problems, develop alternative solutions to correct those problem, evaluate those alternative
solution, and select the best one.

CONSIDERATIONS IN ETHICAL DECISION MAKING

● Know all the facts and circumstances.
● Identify other needed information and find ways to attain them.
● Identify the ethical problems and issues involved
● Identify those who will be affected by any decision you will make. Picture the possible
reactions, feelings, and insights of those who will be affected.
● Consult the various ethical principles that you studied in your ethics subject.

Lesson 4
Foundations Of The Principles Of Business Ethics Philosophical/Ethical Foundation Of
Business Ethics
PHILOSOPHICAL/ETHICAL FOUNDATIONS OF BUSINESS ETHICS
● Consequentialism
● Deontological Ethics
● Moral Rights
● Ethics of Care
● Virtue Ethics

CONSEQUENTIALISM
➢ Refers to an approach in moral decision-making wherein the prime consideration is the effect
or consequence of an action or a decision.
➢ For the consequentialist, an action is morally acceptable if it leads to some desirable
Consequence.
➢Hold that an action’s rightness or wrongness depends on the consequence it causes (e.g
happiness, pain, etc.)
➢There are two consequentialist approaches that ethics scholar would discuss. In the Business
world, utilitarianism has found many advocates. Ethical egoism is usually considered as
unacceptable.

Utilitarianism
- From Latin word utilis means “useful”.
- A consequential approach to ethical decision-making “because it tell us that an act’s
rightness or wrongness is determined solely by the act’s consequences and not by any
feature of the act itself.”
- Look for the one that has good consequences or benefits, overall, for the greatest
number of people affected.
- “The greatest amount of utility for the greatest number of people” (Quoted in Jonas et al.
2005)
- These are the questions that a utilitarian would ask in order to produce the right course
of action:
a. Who will be affected by the decision?
b. How many would stand to benefit from it?
c. How many would be harmed?
d. Will most of the Filipinos stand to gain if wages are increased if income is
reduced?

2. Ethical Egoism
- It describes human nature as basically selfish, self-interested, and self-centered.
- It assumes that people never act except with a personal benefit in sight.
- If the business world is dominated by egoists, you can expect exploitation of workers,
deception of consumers, violation of basic human rights, grave abuse of the environment
and so on.

Deontological Ethics
- From the Greek word “deon” means “duty”.
 - A category of normative ethical theories that encompasses any theory which is primarily
concerned with adherence to certain rules or duties.
- The Right is said to have priority over the Good.
- If an act is not in accord with the Right, it may not be undertaken, no matter the good
that it might produce.
- Deontological Theories hold that actions that are morally right are those in accordance
with certain rules, duties, rights, or maxims.
- Example: Accounts Payable Clerk

Conclusions:
Consequentialism Theories
- Hold that an action’s rightness or wrongness depended on the consequences it causes
(e.g happiness, pain, etc.)
Deontological Theories
- Hold that an action’s rightness or wrongness depends on its conformity to a certain
moral norm regardless of the consequence. (e.g right vs good)

Moral Rights
- Rights are entitlements (not) to perform certain actions, or (not) to be in certain states; or
entitlements that others (not) perform certain actions or (not) be in certain states.
- According to Velasquez (2006) “a person has a right when that person is entitled to act
in a certain way or is entitled to have others act in a certain way toward him or her.”

Rights can be classified into two:

1. Legal Rights
- Is acquired due to specific laws of a locality, legal rights are limited to the
particular jurisdiction within which the legal system is in force.
2. Moral Rights
- Also known as human right
- Is significantly different from a legal right. It is inherent in each and every human
person by virtue of his or her very personhood.

Important of Moral Rights in Business Ethics

➢ It is important to study moral rights in business ethics because many business
decisions and activities, in one way or the other, are connected to the enhancement or
violation of human rights.
➢ The right to information may be invoked by stockholders.
➢ The right to healthy and safe working conditions and the right to privacy are concerns
of all workers.
➢ The right to hire and fire is an employer’s affair.
➢ The right to intellectual property is a matter of contention for business competitors.
➢ Right to correct information is invoked by consumers who are exposed to various
marketing and advertisement techniques then business transactions are laden with
human rights issues and problems.
Ethics of Care
- Is an approach to ethical dilemmas that is significantly different from the various
perspectives such as utilitarianism, deontology and right theories.
- The main premise of ethics of care is “that we have an obligation to exercise special care
toward those particular persons while we have valuable close relationships, particularly
relations of dependency.
- An ethical attitude that many feminist ethicists have currently promoted, obliges a person
to maintain and cherish his or her basic relationship with people he or she cares for such
as family, relationships, friends, and close associates. If one is caught in an ethical
dilemma, interpersonal relationships should be a main consideration.
- An ethics of care can help illuminate the people at the top to also care about the needs
and concerns of the people at the bottom.

Virtue Ethics
- Is rooted in the moral philosophy of the Greek Philosopher Aristotle.
- Is more concerned with assessing the moral integrity and character of the person. It
focuses not on the act but on the character of the agent.
- Instead of focusing too much on the question, “What is the right thing to do?” virtue
ethics is more concerned with the question “Will a particular course of action make the
agent a better person?”. Rather than action-based, it is agent-based.

What is Virtue?
- From Latin words virtues means “strength/power”.
- Virtus is the Latin translation of the Greek word “arete” means “excellence of any kind” or
“moral virtue”
- A businesspersons is excellent or “virtuous” if he or she lives up to his or her purpose as
a businessperson, not just for money but “to serve society’s demands and the public
good and be rewarded by doing so”

Aristotle: Virtue
Jeremy Bentham: Consequentialism
Immanuel Kant: Deontological

Therefore,

➢The various ethical philosophy that we have discussed above are ways to evaluate and deal
with concrete ethical dilemmas.
➢These theories are not perfect, that is, they have their own limitations when applied in
concrete settings.
➢Our task as thinking and rational beings, when faced with moral dilemmas, is to diligently
gather all the known information and then, cautiously apply the fitting approaches to ethical
decision making.
Belief Systems and Conduct of Business

Why do we have to talk about belief systems or religions in relation to ethics and the
conduct of business?

➢ In 1901,the famous German philosopher and sociologist Max Weber published an article
entitled “The Protestant Ethic and the Spirit of Capitalism’
➢ In this article, he satisfactorily showed how Protestant ethics has a direct implication to the
growth of capitalism in the United States
➢ Weber also saw the direct effect of Confucianism in Chinese economic life
➢ Weber’s message is that a better understanding of the behavior and attitude of people can
only happen if we will also attempt to understand the people’s worldview which necessarily
includes their religious beliefs and convictions.
➢ It is with this insight that we attempt to explore the major religions of the world and how their
main ethical teachings are reflected into the business world.

HINDUISM
● Hinduism is the oldest among the major religions of the world. The word Hindu is derived
from the name Sindhu, meaning ‘the people of the Indus River region of northern India”
● Hinduism is a unique religion because it has neither a single and specific human founder
nor a definite historical beginning.
● It is not a religion with a unified body of belief systems , ethical codes, absolute
doctrines, religious rituals, and practices.

Hindu Assumptions:
1.The universe has no beginning and will never end. It eternally undergoes cycles of creation
and destruction.
2.All living things undergo cycles of birth, death, and rebirth until they are totally liberated from
this cosmic journey.
3.The practice of asceticism is helpful in the goal of liberation from the cycle of rebirth.

HINDU BUSINESSPERSON IN THE CONDUCT OF BUSINESS

➢ Hindus have a positive outlook towards the business institution. Hinduism has never
expressed shame about the desire for wealth.
➢ Hindu businessperson must treat the business stakeholders with honesty and fairness.

REASON:
1. First, if you hurt others, then you are ultimately hurting yourself.
2. Second, you cannot escape the law of karma. Your soul cannot attain liberation until you
use your free will to choose rightly and perform good acts.
BUDDHISM
➢ Similar with Hinduism, Buddhism originated from India.
➢ Buddhist believe in the law of karma, in reincarnation, and in the ultimate goal of attaining
liberation and nirvana.
➢ Siddharta Gautama (566- 486 BCE), a rich and young prince who renounce his royal
inheritance in order to search for the true meaning of life.

The Most Important Principles of Buddhism are the Four Noble Truths
1. No one can deny that suffering is the condition of all existence.
2. Suffering and general dissatisfaction come to human beings because they are possessive,
greedy, and above all, self- centered.
3. Egocentrism, possessiveness, and greed can, however, be understood, overcome, rooted
out.
4. This rooting out, this vanquishing, can be brought about by following an Eightfold path of
behavior in thought, word, and deed. Change of viewpoint will manifest itself in a new outlook
and new patterns of behavior.

Eight-Fold Path
❖ Right View- means that one should understand that the main cause of suffering is ignorance.
❖ Right intention- means that when one understands the causes of suffering, he or she must
intend to transform those causes.
❖ Right Speech- means that one must be truthful and constructive when communicating with
another.
❖ Right Action- means that one must avoid violent and destructive actions.
❖ Right Livelihood- means that one’s means of subsistence must not be destructive to other
people, other living things, and the environment.
❖ Right Effort- means that one must accept that the path to liberation is difficult and requires
effort and perseverance.
❖ Right Mindfulness-means that one must aspire for self- awareness to fight aggression and
other negative tendencies.
❖ Right Concentration-means that one should realize the importance of meditation in order to
gain deeper insights.

Buddhist Businessperson in the Conduct of Business

➢ One of the most relevant aspect of Buddhism’s Eightfold Path in relation to the conduct of
business is Right Livelihood.
➢ From the Buddhist perspective consideration of right livelihood, one may ask these
questions:
➢ “As a person involved in trade, what do you produce?” How do you produce it? For
Buddhism, products that are proven to be harmful human beings raise moral questions.
➢ Buddhism believes in the interconnectedness and interdependence of all things in the
universe. Business policies and decisions will surely affect various stakeholders of the business
organization. Thus, “because businesses are integral part of the community, decision making
cannot be reduced to profits without considering the impact on people and the environment”.
➢ “The goal in Buddhism is to eliminate suffering, so allowing businesses to profit while
exploiting people and polluting the environment increases the amount of suffering and is
counterproductive to the overall goal”.

CONFUCIANISM
• Confucianism is not a religion. It is more a body of philosophical teachings. Confucius is the
founder of Confucianism. he is considered the most influential thinker in the history.
• At the center of Confucianism, the ideal virtue of Ren, usually translated as “humaneness” or
“benevolence”
• Another central virtue of Confucianism is Li, usually translated as “propriety”. Every member of
the society belongs to a particular gender, social position and social role. Thus, there are proper
and correct ways of living for each person according to his or her social position. Li is the code
of conduct that assures harmony and respect toward each person’s role in the society.

Confucian Businessperson in the Conduct of Business

● The Confucian ideal of Ren leads its followers to give higher priority to character and
virtues over and above the pursuit of profit.
● In one’s conduct of business, what is more important is that the businessperson
develops his or her moral character as he or she works for the success of his or her
business enterprise.

JUDAISM
- Is the oldest among the major monotheistic religion (belief that there is only one God)
- In an article, Moses Pava (2008) explored five prominent themes in Jewish Ethics that
are particularly useful in the conduct of business especially in the modern times; these
are:
1. Right action - show his Goodness through concrete acts. Good or Right act is certainly
more valuable than the grandest intention. (CSR is compatible with the principle of right
action).
2. Free choice - Inherent capability to choose his or her course of action freely.
➢ It implies that each person is free to engage in business if he or she deems it
beneficial for his or her well being.
➢ Furthermore, it means that he or she is free to own private property as the expected
result of a moral business practice.
3. Balance - In Jewish thought, neither selfless love nor selfish love is seen as ideal.”
➢ Applying this to the conduct of business ,the businessperson must strike a balance
between the gaining of profit as a manifestation of love toward the self and his or her
family ,and the sharing of profit as a manifestation of love toward the self and his or her
family, and the sharing of profit as a manifestation of love toward the other members of
the society.
➢ between individual freedom and his or social obligation. Thus, there is a dynamic
interaction.
 4. Covenant - defined formally as a voluntary agreement among independent but equal
agents to create a shared create a shared community.
- The notion of the covenant may be used as one of the central themes in the
attempt of various nations to make agreements for the sake of ecological
sustainability.
5. Dialogue - as a central theme of Jewish Ethics, contending that the contemporary
discussion on corporate transparency and accountability will benefit from the Jewish
notion of dialogue.
➢ To legitimately justify an organization’s decisions and actions , corporate
accountability is now viewed and described by many as a dialogue between the
corporation and its stakeholders and not as a monologue on the part of management.
This means that corporate accountability requires listening to a company’s diverse
stakeholders as well as responding to them.

What are some of the most common Biblical themes that are of relevance to one’s
conduct of Business?
● The Commandment to love one’s neighbor is relevant for the Christian businesspersons.
● Means that ruthless, excessive, and greedy pursuit of economic benefits cannot be a
characteristic of a Christian Businessperson who is faithful to biblical exhortation to love
one’s neighbor.
● The biblical concept that is relevant to the conduct of business is the notion of private
property. Under fair and just social relationships, the person who labors must enjoy the
fruits of his or her labor.

ISLAM
➢ Islam literally means ”Submission” and it pertains to “Submission to God”
➢ Islam followers are called Muslims. Muslims means “one who submits or surrenders.”
➢ Islam is the world’s second largest religion next to Christianity.
➢ Islamic ethics is mainly on shariah, the Sacred Law or the Islamic legal/social system whose
main purpose is the advancement of goodness for humankind and the protection from evil.

Islam Businessperson in the conduct of business

- It does not just uphold the value of business and trade.It even encourage the Muslims to
participate in business activities that are not againts islamic laws.
- “There is no inherent conflict between fair business and Islam. Islam declares that the
search for one’s livelihood through fair business is like the pursuit of blessing of Allah
(Mohammed 2013).
- The concept of halal(lawful) and haram (unlawful) are very important consideration for
the businessperson.

The Four Common Principles of Christians, Muslims and Jews relevant to the conduct of
Business
➢ JUSTICE (FAIRNESS)
➢ MUTUAL RESPECT (LOVE AND CONSIDERATION)
➢ STEWARDSHIP (TRUSTEESHIP)
• Businesspeople are reminded that human beings are not the absolute owner of things in the
world.
➢ HONESTY (TRUTHFULNESS)

THEREFORE,
⮚Hinduism, Buddhism, Confucianism, Judaism, Christianity, and Islam are among the major
religions of the world.
⮚Despite the many differences regarding belief, rituals, and practices among the major
religions, we can still find commonalities among their ethical values in relation to conduct of
business.
⮚Our search for commonalities regarding ethics is not an attempt to unify all religions. Rather, it
is an attempt for interreligious harmony and respect.
⮚In the Interfaith Declaration which is a Code of Ethics for International Business among
Christians, Muslims and Jews, four ethical commonalities among three monotheistic religions
were agreed upon; justice and fairness, mutual respect (love and consideration), stewardship or
trusteeship, and honest or truthfulness.
⮚These four ethical commonalities can also be observed as significant values in the other major
religions: Hinduism, Confucianism, and Buddhism. For example, the Golden Rule can be
observed in all the major religions of the world.