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NORTHEASTERN CEBU COLLEGES, INC.

Senior High School Department
P.G. Almendras St., Danao City, Cebu
Tel #: 233 – 9660/ 233 – 9637

QUARTER 3

Module 1 2
BUSINESS ETHICS AND SOCIAL RESPONSIBILITY

UNIT I

THE ROLE OF BUSINESS IN SOCIAL AND ECONOMIC

DEVELOPMENT

LESSON 3: Core Principles of Fairness,

Accountability, and Transparency

NAME: ______________________________________________________________
GRADE & SECTION: ___________________________________________________
DATE: ______________________________________________________________

PREPARED BY: RESHEAL MEDIO

Subject Teacher

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UNIT I
_____________________________________________________________________________________
The Role of Business in Social and Economic Development

Profit Sharing System at San Jose Kitchen Cabinets Manufacturing

From the start of business in 1982, San Jose Kitchen Cabinets was already
sharing profits with employees. Although this price is not common, Mr. Chan,
founder and manager, had always been of the belief that profit sharing can aid
economic stability and decrease unemployment. The profit share percentage of
employees was arbitrary, until in 1987, Mr. Chan realized that in any economic
activity or business enterprise, there are always two partners: labors and capital,
and one cannot exist without the other. Thus, it followed that a 50/50 percent share
would be logical. This profit share is over and above the salaries and social
security paid to the employees. In addition, there was a cap on executive
compensation: there us a policy that the compensation, both salary and profit share,
of the highest ranking employee should not exceed ten times that of the lowest
ranking employee. All in all, a lot of efficiencies have been gained: the average
return on equity from 1987 to the present has been 30%, and high levels of job
satisfaction have been felt throughout the organization.

INTRODUCTION
………………………………………………………………………………………………………

The unit’s opening story makes us realize that there are Filipino
businessmen who practice social responsibility in business through fairness and
generosity to employees. Profit sharing has the positive effect of minimizing
productivity-reducing conflict and generating productivity-enhancing cooperation
and innovation. If only more entrepreneurs and businessmen were doing this, job
satisfaction across the labor force might be likely and the results would be
immeasurable.
Business have a multiplicative effect, since they are part of the complex
web of interaction among institutions and people. As such, business activities must
be viewed and examined from the perspective of ethics and social responsibility.
Thus, continued business success would be a function of whether you, the reader,
and we will commit ourselves to learning more about business organizations, our
role in them, the importance of virtuousness on the part of individuals and
institutions, and the ways in which we all can help social development. In the
lesson, we begin by first learning about business organizations.

Lesson 3: Core Principles of Fairness, Accountability, and

Transparency

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Lesson Objectives:
At the end of this lesson, the students should be able to:
1. Explain the meaning of fairness, justice, accountability,
stewardship, and transparency;
2. Explain the notion of competence, professionalism, and
responsibility;
3. Explain the relationship of accountability, stewardship, and
responsibility with ethical businesses; and
4. Explain the notion of organizational diversity and the role of
women in business organizations.

I. Pre – Test
Directions: Answer the following with all your mighty knowledge. You
can use your phone by searching the answer in the internet or by using a
reference book. Write your answers on the space provided.

1. Define the terms fairness, justice, accountability, and transparency.

2. Define the terms competence, professionalism, and responsibility.

Why do you need to be competent in your job? Explain the basic
skills needed in the work place.

3. What is stewardship? How can you be a good steward of your home,

Your school, your workplace, and the environment?

II. Discussion

Notions of Accountability, Fairness, and Transparency

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 Business leadership affects the moral capability and performance or
organizations. Business leaders influence the scope and character of formal ethics
programs and the integration of ethics into everyday organizational life. However,
most practicing business leaders in most countries most of the time are not held
accountable for dysfunctional moral, social, and environmental performance. Many
are seldom held accountable for adverse impacts of their decision – making, for
example, deepening poverty, social disintegration, and environmental degradation.
There is a need to convince managements that they should develop their “integrity
capacity” which is the individual and/or collective capability for repeated process
alignment of moral awareness, deliberation, character, and conduct that
demonstrates balanced judgment, enhances sustained moral development, and
promotes supportive systems for moral decision – making. These four key
dimensions of integrity capacity – process, judgment, development, and system –
should present challenges for business leaders so that they become more aware of
moral concerns and thus respond more effectively to the problems that arise
(Petrick and Quinn, 2001). The concept of “accountability” is discussed further
below.

Accountability
Why is accountability important? Sound accountability structures are the
most important aspect of prevention and detection of corruption. A civil society
organization without proper accountability systems is fragile and open to rumors
about mismanagement and abuse power. Worst of all, it will prevent from enjoying
respect and full legitimacy in the eyes of its stakeholders including those duty
bearers whom it intends to engage with advocacy.

Accountability – what it is:

 To be accountable is to be liable to explain or justify one’s actions decisions.
 Accountability is the process of explanation and justification.
 Holding to account is the process of requiring explanation and justification,
but it is also about testing, forming a judgment, and if necessary, taking
action.
 Accountability implies responsibility: it is reasonable only to hold people to
account for those things for which they are responsible.

Accountability – what it is not:

 It is not synonymous with responsibility.
 It does not imply a management relationship.
 It is not a “one off” annual event.
 It is not the same as appraisal.
 It is not about confrontation, “putting someone in his place” or “giving him a
hard time.”
Accountability Structures
Accountability is the ability to account for your actions and performance to
your stakeholders. Accountability includes the fact that persons (your stakeholders)
are willing and able to hold you accountable. With the willing and able aspects of
the definition, we have an operational understanding of accountability which can
guide us in asking questions to accountability structures in the organizations.
Accountability, then, is the obligations to demonstrate that work has been

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conducted in compliance with agreed rules and standards or to report fairly and
accurately on performance results vis – a- vis mandated roles and/or plans.

Fairness
Fairness – in the context of business organization involves balancing the
interests involved in all decision – making including any decisions related to
hiring, firing (including the investigatory process), and the compensation and
rewards system. Recent research has expanded the meaning of equity of fairness.
Historically, equity theory focused on distributive justice, the employee’s
perceived fairness of the amount of rewards and who received them. However,
organizational justice draws a bigger picture. Employees perceived their
organizations as just when they believe rewards and the way they are distributed
are fair. In other words, fairness or equity can be subjective; what one person sees
as unfair maybe perfectly appropriate for another. In general, people see
allocations or procedures favoring themselves as fair.

Overall fairness has to do with justices, which is to give to another that

which is due him on her. More concretely, justice: (1) looks at the balance of
benefits and burdens distributed among members of a group; and/or (2) can result
from the application of rules, policies or laws that apply to a society or a group. In
general, the results of actions override utilitarian results.

Transparency
Transparency has become an increasingly popular word in recent times; it is
used and sometimes misused by both scholars and practitioners. In this context, the
associated academic literature has recently analyzed several issues associated with
corporate transparency such as ethical justifications for information disclosure, the
ethical nature of corporate information transparency, or the use of transparency in
management – employee relationships.

Notion of Competence, Professionalism, and Responsibility

Study show that the 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, interests and needs, the more important it
becomes for employees to be able to connect with colleagues, to understand
different perspectives, to balance sometimes conflicting claims and to act
competently both interpersonally and ethically. In order to do that, a responsible
worker needs a minimum set of skills, as well as moral and relational qualities
(Whetstone, 2003). The following are the minimum competencies expected of
professionals:
 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.
Of course, professionals do not have monopoly on technical skills,
and not all technical skills have to be learned in schools or other
formal training programs. All jobs require some specialized expertise,
and many people develop their technical skills on the job.
 Human skills is the ability to understand, communicate with,
motivate, and support other people, both individually and in groups,
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 which defines human skills. Many people are technically proficient
but poor listeners, unable to understand the needs of others, or weak
of managing conflicts. Because managers get things done through
other people, they must have good human skills
 Conceptual skills are the skills and the mental ability that managers
must have to analyze and diagnose complex situations. Decision-
making, for instance, requires managers to identify problems, develop
alternative solutions to correct those problems, evaluate those
alternative solutions, and select the best one. After they have selected
a course of action, managers must be able to organize a plan of action
and then execute it.
The first and most basic necessary skill for a working professional is solid
competence in the human sphere, in the sphere of work. Such competence
requires the following characteristics:
a) Human maturity – a person works not only hard and solidly but also
efficiently, that is with professionalism;
b) Work is done in a spirit of service and love for those around us – the
worker has to take in and develop the social dimension that the work
involves. He realizes that work is something that helps improve social
conditions generally it is a source of progress and well – being.

III. Discussion Questions

Directions: Put a check mark under “Yes” or “No” depending on whether
the statement is true of your behavior or not.

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 Ye No
s
I treat other people the way I want to be treated.
I treat people with impartiality as equals.
I am open – minded and reasonable.
I play by the rules.
I do not take advantage of people.
I consider the feelings of all people who will be affected by my actions
or decisions

IV. Application
After reading this lesson, let us check if you are an accountable person
by doing this following task. Do this in a Long Bond paper.
 Set a micro – goals (A micro – goal is a single action that, when
accomplished, serves as building block to a much larger goal.)
 Make a 1 week to do list.
 Reward yourself at least a simple thing when you do a job well done.
Attach a picture of you and your reward then explain how you
achieved that goal.

Lesson 4: Code of Ethics and Business Conduct

Lesson Objectives:

At the end of this lesson, the students should be able to:

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 1. Explain what codes of ethics and codes of corporate conduct are;
2. Give examples of corporate codes of ethics in some Philippines
firms;
3. Explain the meaning of corporate ethical culture; and
4. Explain how ethical cultures can be created in business
organizations.

I. Pre – Test

1. Who is responsible for an ethical culture in a business organization?

2. How can a corporate code of ethics help a company to be ethical?

II. Discussion

Code of Ethics

When huge corporate sandals began to proliferate, companies began creating

communications propaganda for building a corporate reputation. Feeling a need to
improve their images and facing increasing accusations of corruption, businesses
turned to ethical codes to publicize their virtues and create a more positive

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impression with stakeholders. The debate over ethical code effectiveness continues
up until today.

American ethical codes were first called creeds or credos and those in the
1980s were considered “legalistic” and “more likely to talk about ethics and
reputation of the company” (Benson, 1989, p. 308); they showed concern over
issues like affirmative action. More recently they were defined as written
documents which attempt to state the major philosophical principles and articulate
the values embraced by the organization – what is acceptable and what is not. They
have been defined multiple times in Journal of Business Ethics, sometimes
redundantly without building on earlier works and other times adding new
dimensions to the understanding of a code. Kaptein and Wempe (2002) describe
them as policy documents defining responsibilities of the organization to
stakeholders and articulating the conduct expected of employees. Hijhof et al.
(2003) note codes contain open guidelines describing desirable behaviors and
closed guidelines prohibiting certain behaviors. As instruments to enhance social
responsibility, codes clarify the norms and values the organization seeks to uphold.

Specific Philippines Examples

Ayala Corporation
Code of Business Conduct and Ethics

Ayala adopts as part of its basic operating principles, the; primacy of

the person, shared values, and the empowerment of people. The company and its
employees are guided by four core values; integrity, long - term vision,
empowering leadership, and commitment to national development. These values
are expressed in the company’s Code of Ethical Behavior, which sets and outlines
the general expectations and standards for employee behavior and ethical conduct.
The Code is in accord with the company’s human resources policies, which include
the Code of Conduct that prescribes standards by which employees are expected to
conduct themselves. Employees are required to disclose annually any business and
family related transactions to ensure that potential conflicts of interest are brought
to management attention.

Ayala maintains fair dealings with its shareholders, customers, employees,

and business partners. As such, all Ayala citizens, including senior executives and
members of the executive and management committees, strive to maintain an
exceptional standard of conduct guided by the company’s policies and procedures.
What is Corporate Culture?

Culture has a profound influence on all aspects human behavior. Its impact
may be subtle or pronounced, direct or oblique, or enduring or ephermal. It is so
entwined with all facets of human existence that is often difficult to determine how
and in what ways its impact manifested. Adding to the complexity of
understanding the impact of culture and its inherently dynamic nature. Cultural
influences change and culture evolves as political, social, economic, and
technological forces reshape the cultural landscape (Usunier and Lee, 2005; Craig
and Douglas, 2006). Certainly the economic and physical environments
(populations, climate, geography, etc.) are important issues for business

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organizations; however, the cultural environment (communication, religions,
values and ideologies, education, social structure) has special importance and
relevance.

Culture, thus, is a human reality and resides in human communities. Having

such that, it is necessary to deal with the idea of culture from an anthropological
perspective. Philosophical anthropology has taught us that the human person is an
open system and as such, is capable of learning, but a learning that is positive (if he
is to be truly human) and is made most perfectly positive through the cultivation of
the virtues (Polo, 1997; Polo, 1991). Aristotle spoke so eloquently of the essential
transcendence of the human beings and the end for him to be cultured. What one
finds in the Protrepticus, so reconstructed, is an impassioned defense of the
primacy of intellectual activity and the importance of devoting oneself to a life of
study and culture. The Protrepticus unabashedly defends a Dominant End view of
the human good (Pakaluk, 2005).

Creating Corporate Code of Ethics?

Creating an Ethical Corporate Culture

As mentioned in Codes of Ethics above, Sauser and Sims (2013) suggest

that an organizational culture grounded in moral character is the ideal corporate
culture. A culture of character is the type of organizational culture in which
positive values are ingrained throughout the organization. Pastin (1986) describes
organization exhibiting what we call a culture of character as those that possess the
following four stylistic markers:
 They are at ease interacting with diverse internal and external stakeholder
groups. The ground rules of these firms make the good of these stakeholder
groups part of the organization’s own good.
 They are obsessed with fairness. Their ground rules emphasize that the
other person’s interests count as much as their own.
 Responsibility is individual rather than collective, with individuals
assuming personal responsibility for actions of the organization. These
organizations’ ground rules mandate that individuals are responsible to
themselves.
 They see their activities in terms of purpose. This purpose is a way of
operating that members of the organization highly value. Purpose ties the
organization to the environment.

To Pastin’s (1986) list, Sims (2005) has added:

 There exists a clear vision and picture of integrity throughout the
organization.
 The vision is owned and embodied by top management, over time.
 The reward system is aligned with the vision of integrity.
 Policies and practices of the organization are aligned with the vision; there
are no mixed messages.
 It is understood that every significant leadership decision has ethical value
dimensions.

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  Everyone is expected to work through conflicting stakeholder value
perspectives.

Creating Corporate Codes of Ethics

Saucer and Sims (2013) give the following suggestions for creating Codes of
Ethics in business organizations:
1. Adopt a code of ethics
2. Provide ethics training
3. Hire and promote ethical people
4. Correct unethical behavior
5. Take a proactive strategy
6. Conduct a social audit
7. Protect whistle – blowers
8. Empower the guardians of integrity
9. Assure commitment form the top
10.Communicate the standards of conduct widely throughout the organization
and the industry
11.Designate an ethics officer with clear responsibility for enforcing ethical
standards
12. Establish a process for reporting violation of ethical standards and actively
investigate all reported violations
13. Assure due diligence by the organization’s board of directors
14. Above all, lead by example

III. Discussion Questions

“When business and market economies function properly on serving the
common good, they contribute greatly to the material and even the spiritual well –
being of society. Recent experience, however, has also demonstrated the harm
caused by the failings of businesses and markets. Alongside their benefits, the
transformative developments of our era – globalization, communications
technologies, and financialization – produce problems: inequality, economic,
dislocation, information overload, financial instability, and many other pressures
that interfere with serving the common good.

Nonetheless, business leaders who are guided by ethical social principles,

live through virtues and illuminated for Christians by the Gospel, can succeed and
contribute to the common good. Obstacles to serving the common good come in
many forms – corruption, absence of rule of law, tendencies toward greed, and
poor stewardship of resources – but the most significant for a business leader on a
personal level is leading a divided life. This split between faith and daily business

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practice can lead to imbalances and misplaced devotion to worldly success. The
alternative path of faith – based “servant leadership” provides business leaders
with a larger perspective and helps them to balance the demands of the business
world with those of ethical social principles, illuminated for Christians by the
Gospel. This is explored through three stages: seeing, judging, and acting, even
though it is clear that these three aspects are deeply interconnected

Instructions: Imagine that you have just set up your own small business, and
you have become its General Manager. Based on the ideas contained in the two
paragraphs above, write out a simple Company Code of Ethics that you and your
company shall live by from now onward. The following is a suggested format.
Print it out in a long bondpaper.

Statement of Our Core Values

Company Vision____________________________________
Principles_________________________________________
Values ___________________________________________
Mission __________________________________________

Format

Statement of Our Core

Values

Company Vision

Principles

Values

Mission
IV. Application
Matching Type

A. B.
_____1. Partnership a. The quality of making
Judgments that are free
from discrimination or free
from bias.
_____2. Ethics b. A lack of honesty or
integrity; using a position of
trust or authority to receive
favors, often financial bribes
_____3. Business Ethics c. Any person, company or
other institution that owns
at least one share of a
corporation’s stock

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_____4. Code of Ethics d. The obligation of a business
to contribute to the well –
being of a company
_____5. Social Responsibility e. It occurs when a person
takes advantage of a
situation or piece of
information for his or her
own gain rather than for the
employer’s interests.
______6. Shareholder f. A statement of rules for
guiding the behavior of
employees or members of an
organization
______7. Corruption g. Rules about how businesses
and the organizational
members should behave
______8. Trust h. Principles of morality of
rules of conduct
______9. Conflict of Interest i. A business organization in
which two or more
individuals manage and
operate the business. Both
owners are equally and
personally liable for the debts
form the business.
______10. Fairness j. The willingness of one person
or group to have faith or
confidence in the goodwill of
another person, even though
this puts them at risk.

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