TOPIC 22025 BUSINESS ETHICS services (in the form of a superior product and terms of

payment) than the competitor.

COMMON UNETHICAL PRACTICES OF BUSINESS
ESTABLISHMENTS e. Weight understatement or Short weighing – the
mechanism of the weighing scale is tampered with or
MISREPRESENTATION
something is unobtrusively attached to it so that the scale
1. Direct Misrepresentation registers more than the actual weight. An example is a
foot pedal with a concealed string tied to the weighing
a. Deceptive packaging –The practice of placing the product scale. The modus operandi is to have 2 scales, one which
in containers of exaggerated sizes and misleading shapes gives the correct weight and has been sealed by the
to give a false impression of its actual contents. Ex. authorities and another which looks identical but registers
Products with containers like cartons, tin cans and certain more weight than the product. Short weighing is practiced
plastics that are filled only up to 85% of their capacity. in selling products where prices depend on the weight such
b. Misbranding or mislabeling – the practice of making as sugar, meat, fish, vegetables, fruits, nails, etc.
false statements on the label of a product or making its f. Measurement understatement or short measurement –
container similar to a well-known product for the purpose in short measurement, the measuring stick or standard is
of deceiving the customer as to the quality and/or quantity shorter than the real length or smaller in volume than the
of a product being sold. standard. This unethical practice is found in selling
c. False or misleading advertising – Advertising that does situations where the price of the product depends on its
not tell the truth where it greatly exaggerates the virtues of length such as selling cloth or textiles, electric cords or
a product and tells only half of the truth or sings praises to wires or on its volume such as selling rice by the sack.
its non-existent virtues. g. Quantity understatement or short numbering – In this
1. Advertisements with pictures of statements that unethical practice, the seller gives the customer less than
convey exaggerated impression of the product’s the number asked for or paid for. Short numbering is often
availability of quality practiced in selling situations where the product being sold
is in such a shape or is packed in a manner that would
2. Advertisement that claims that the product is the make counting the product difficult or inconvenient. For
“fastest selling brand” or the “product of the year” example, a customer who is not vigilant may receive less
3. Advertisements using fictitious or obsolete quantity than what he is entitled to when buying toilet
testimonials paper, bond paper, carbon paper, paper clips, thumb tacks,
matches and toothpicks which are sold by the box or
d. Adulteration – is the unethical practice of debasing a pure package.
or genuine commodity by imitating or counterfeiting it by
adding something to increase its bulk or volume, or by 2. Indirect Misrepresentation – characterized by omitting adverse
substituting an inferior product for a superior one for the or unfavorable information about the product or service
purpose of profit or gain. This does not meet the standard a. Caveat emptor – is a practice very common among
for fair service, that is achieving success by offering better salesmen. Translated, caveat emptor means “let the buyer
 beware”. Under this concept, the seller is not obligated to UNETHICAL PRACTICES OF CORPORATE MANAGEMENT
reveal any defect in the product or service he/she is selling.
INTERLOCKING DIRECTORSHIP
It is the responsibility of the customer to determine for
himself the defects of the product. Interlocking directorship is often practiced by a person who holds
directorial positions in two or more corporation that do business with
This is indirect misrepresentation and unethical because a
each other. This practice may involve conflict of interest and can result
seller is a witness for the goods he is selling.
in disloyal selling. Disloyal selling happens when this person is
He testifies to its nature, features, uses and qualities. As
compelled to decide which of the two corporation’s interest should be
a witness, it is his obligation to “tell the truth and
protected of upheld. Thus, whatever decisions the person makes, he
nothing but the truth” about his product. What makes
betrays the trust reposed on him by the shareholders of either of the two
this practice unethical is the willingness of the seller
companies.
to generate profit by taking advantage of the
buyer’s lack of information. This is passive deception NEGLIGENCE OF DUTY
which is also lying.
A more common failure of the members of the Board of Directors than
Indirect Misrepresentation – characterized by omitting breach of trust is neglect of duties when they fail to attend board meetings
adverse or unfavorable information about the product or regularly. It is only in regular attendance that they can protect the rights
service. (cont’d) and interest of the shareholders and their non-attendance of board
meetings could result in betrayal of trust of the parties who elected them
b. Deliberate Withholding of Information – The deliberate
to their positions.
withholding of significant information in a business
transaction, is also unethical. No business transaction is INSIDER TRADING
fair where one of the parties does not exactly know what
he is giving away or receiving in return. This involves trading in a public company’s stock by someone who has
c. Passive deception – While passive deception is not as non-public material information about that stock for any reason. Insider
obvious as direct misrepresentation, it nonetheless trading can be either illegal or legal depending on when the insider makes
contributes to the impression that businessmen are liars the trade. It is illegal when the material information is still non-public,
and are out to make a fast buck. Business ignorance is and this sort of insider trading comes with harsh consequences.
passive deception because the businessman is unable to Material non-public information is any information that could
provide the customer with the complete information that substantially impact on investor’s decision to buy or sell the security that
the latter needs to make a fair decision. has not been made available to the public.
3 Over-Persuasion – persuasion is the process of appealing to the An individual who has access to insider information would have an unfair
emotions of a prospective customer and urging him to buy an item edge over other investors, who do not have the same access, and could
or merchandise he needs. Persuasion is legitimate and necessary potentially make larger, unfair profits than their fellow investors.
in the selling of goods if it is done in the interest of a buyer such
as persuading him to get hospitalization insurance policy. Illegal insider trading includes tipping others when you have any sort of
However, persuasion used for the sole benefit of selling a product material non-public information.
without considering the interest of the buyer is not ethical.
Legal insider trading happens when directors of the company purchase or To discriminate with regard to wages, hours of work, and other terms or
sell shares, but they disclose their transactions legally, The SEC has rules conditions of employment in order to encourage or discourage
to protect investments from the effects of insider trading. It does not membership in any labor organization
matter how the material non-public information as received or if the
To dismiss, discharge or otherwise prejudge or discriminate against an
person is employed by the company.
employee for having given or being about to give testimony under the
For example, suppose someone learns about non-public material Labor Code
information from a family member and shares it with a friend. If a friend
To violate the duty to bargain collectively as prescribed by the Labor
uses this insider information to profit in the stock market, then all three of
Code
the people involved could be prosecuted.
To pay negotiation or attorney’s fees to the union or its officers or agents
SOME UNETHICAL PRACTICES OF EXECUTIVE OFFICERS
as part of the settlement of any issue in collective bargaining or any other
AND LOWER LEVEL MANAGERS
dispute
CLAIMING A VACATION TRIP TO BE A BUSINESS TRIP
To violate or refuse to comply with voluntary arbitration awards or
The President or Vice-President reports his personal vacation in Europe decisions relating to implementation or interpretation of a collective
or in the United States as a business trip so he can get reimbursement for bargaining agreement
his expenses including those of his family’s.
To violate a collective bargaining agreement
HAVING EMPLOYEES DO WORK UNRELATED TO THE BUSINESS
MAKING FALSE CLAIMS ABOUT LOSSES TO FREE
Executive officers and lower managers ask company employees to do THEMSELVES FROM PAYING THE COMPENSATION AND
personal things for them on company time such as having the company BENEFITS PROVIDED BY LAW
janitors water and mow their lawns, having the maintenance men do
There are employers who claim non-existent losses so they can be
house or appliance repairs for them, and having subordinate employees
exempted from paying the minimum wage and emergency-cost-of living
secure a license or type letters pertaining to their other businesses.
allowances required by law.
UNFAIR LABOR PRACTICES
Making employees sign documents showing that they are receiving fully
To interfere with, restrain or coerce employees in the exercise of their what they are entitled to under the law when in fact they are only
right to self-organization receiving a fraction of what they are supposed to get.
To require as a condition of employment that a person or an employee SEXUAL HARRASSMENT
shall not join a labor organization or shall withdraw from one to which he
Work, education or training-related sexual harassment is committed by an
belongs
employer, employee, manager, supervisor, agent of the employer, teacher,
To contract out services or functions being performed by union members instructor, professor, coach, trainer or any person who, having authority,
when such will interfere with, restrain or coerce employees in the influence or moral ascendancy over another in a work or training or
exercise of their rights to self-organization education environment, demands, requests or otherwise requires sexual
favor from the other, regardless of whether the demand, request or
To initiate, dominate, or assist with the formation or administration of any
requirement for submission is accepted or not by the subject.
labor organization, including the giving of financial or other support to it
 • Padding an expense account through the use of false receipts
when claiming reimbursements
CONFLICT OF INTEREST
• Taking credit for another employee’s idea
This arises when an employee who is duty bound to protect and promote
the interest of his employer violates this obligation by getting himself into CODE OF CONDUCT
a situation where this decision or actuation is influenced by what he can
DEFINITION: A formal expression of the organization’s values and
gain personally from it rather than what his employer can gain from it.
ethics
Some common examples are:
NEED FOR A CODE OF CONDUCT
• An employee who holds a significant interest or shares of
• Guide directors and senior executives, as a minimum, as to
stock of a competitor, supplier, customer or dealer favors
the practices necessary to maintain confidence in the
this party to the prejudice of his employer
organization’s integrity
• The employee accepts cash, a gift or a lavish entertainment
• Promote responsibility and accountability of individuals
of a loan from a supplier, customer, competitor or
for reporting and investigating reports of unethical
contractor. The decision of the employee is influenced by
practices, and
his being indebted for a favor or loan from a party with
whom the company is doing business. He, therefore, • Ensure compliance with legal and other obligations to
cannot act impartially. legitimate stakeholders
• The employee uses or discloses confidential company
information for his or someone else’s personal gain. An
TOPIC 21725 BUSINESS ETHICS
example is revealing his employer’s formula or menu for a
well-liked food to a competitor SITUATION
• The employee engages in the same type of business as his A pharmaceutical company discovers that its new drug, while effective,
employer. He may attend to his business only after office has serious side effects that could affect a small percentage of patients.
hours because he has somebody to mind it for him, but it is
still unethical. An example is an auditor employed full- The company faces an ethical dilemma:
time in a public accounting firm and maintains his own Should they disclose this information to the public, potentially harming
auditing office where he works after officer hours sales and their reputation, or downplay the risks to maximize profit and
• The employee uses for his own benefit a business market share? This situation raises issues of patient safety, transparency,
opportunity in which his employer has or might be and corporate responsibility.
expected to have an interest.
DISHONESTY Options for the pharmaceutical company
Examples:
• Taking office supplies home for personal use
 1. Disclose the Side Effects: Provide full transparency about the Often, they guide our reactions to situations and ethical dilemmas,
risks to patients and healthcare providers, prioritizing patient impacting both personal and professional interactions.
safety.
Recognizing and reflecting on these values can enhance self-awareness
2. Downplay Risks: Minimize the severity of the side effects in and improve alignment with our actions and choices.
marketing and communications to protect sales and market
GROUP DEFINES IDEAL SET OF MORAL PRINCIPLES
position.
While personal ethics vary from individual to individual, most people
3. Conduct Further Research: Invest in studies to better
within a society are able to agree about what is considered ethical and
understand the side effects and potentially mitigate them before
unethical behavior.
making public statements.
Society passes laws that define what its citizens consider to be the more
4. Implement Risk Management Strategies: Develop risk
extreme forms of unethical behavior
management plans and patient monitoring programs to address
side effects while continuing to market the drug. Examples of prescribed sets of moral principles of values
5. Consult Regulatory Authorities: Engage with regulatory bodies • Laws and regulations
for guidance on how to proceed while ensuring compliance and
consider their recommendations on disclosures • Church doctrine
• Code of business ethics for professional groups such as CPAs,

Business Ethics Defined • Code of conduct within business organizations

A set of moral principles or values that govern the actions and decisions FACTORS THAT INFLUENCE PEOPLE’S SET OF VALUES
of an individual or group • Life experiences – life successes and failures and other
Refers to the standards and principles that guide behavior in the business experiences
environment. • Parents – family upbringing
Involves distinguishing right from wrong, making decisions that align • Culture –societal norms and customs
with moral values, and ensuring that actions consider the well-being of
stakeholders, including employees, customers, and the community. • Teachers – education, formal or informal learning experiences

builds trust, maintain reputations, and foster a positive workplace culture • Religion/spirituality – beliefs and practices
while striving for profitability and growth. • Friends and social circles – peer influence
INDIVIDUAL SET OF VALUES • Television – media and technology, information and narratives
Each individual possesses a unique set of values, shaped by personal consumed
experiences, culture, upbringing, and beliefs. • Economics – socioeconomic status and related opportunities
These values influence decision-making and behavior, even if we haven't How do these factors influence people’s set of values?
consciously identified or articulated them.
 • Family Upbringing: Parents and guardians instill core beliefs and
behavioral norms, shaping moral frameworks and priorities from
an early age.
CHARACTERISTICS AND VALUES ASSOCIATED WITH
• Culture: Cultural norms and traditions provide a collective
ETHICAL BEHAVIOR
identity and influence views on issues like respect, community,
and responsibility. INTEGRITY – Be principled, honorable, upright, courageous, and act on
convictions, do not be two-faced or unscrupulous, or adopt an end-
• Education: Exposure to diverse ideas and critical thinking helps
justifies-the-means philosophy that ignores principle.
individuals form their own beliefs, challenging or reinforcing
preexisting values. HONESTY - Be truthful, sincere, forthright, straightforward, frank,
candid, do not cheat, steal, lie, deceive or deviously.
• Religion/Spirituality: Religious teachings and practices offer
moral guidelines and purpose, often establishing rights and TRUSTWORTHINESS AND PROMISE KEEPING – be worthy of trust,
wrongs for believers. keep promises, full commitments, abide by the spirit as well as the letter
of an agreement, do not interpret agreements in an unreasonably technical
• Peer Influence: Friends and social groups can shift perspectives,
or legalistic manner in order to rationalize noncompliance or create
leading individuals to adopt values that align with their circle,
exercises and justification for breaking commitments.
especially during formative years.
LOYALTY (FIDELITY) AND CONFIDENTIALITY – Be faithful and loyal
• Life Experiences: Personal challenges, successes, and pivotal life
to family, friends, employers, client and country; do not use or disclose
events can drastically alter one’s values, fostering resilience,
information learned in confidence, in a professional context, safeguard
empathy, or pragmatism.
the influences and conflicts of interest.
• Media and Technology: Access to information and differing
FAIRNESS AND OPENNESS – Be fair and open-minded, be willing to
viewpoints shapes beliefs and values, exposing individuals to
admit error and, where appropriate, change positions and beliefs,
global perspectives and current issues.
demonstrate a commitment to justice, the equal treatment of individuals,
• Economics: Socioeconomic status can influence priorities, and tolerance for acceptance of diversity, do not overreach or take
shaping values around hard work, success, security, and social advantage of another’s mistakes or diversities.
responsibility based on lived experiences.
CARING FOR OTHERS – Be caring, kind, and compassionate, share, be
• These factors intertwine to create a unique set of values for each giving, be of service to others, help those in need and avoid harming
individual. others.
Ethical behavior RESPECT FOR OTHERS – Demonstrate respect for human dignity,
privacy, and the right to self-determination of all people, be courteous,
Ethical behavior refers to actions that are consistent with moral principles
prompt, and decent; provide others with the information they need to
and values, such as honesty, integrity, fairness, and respect for others.
make informed decisions about their own lives; do not patronize,
It involves making choices that align with what is considered right and embarrass, or demean.
just, both personally and socially.
RESPONSIBLE CITIZENSHIP – Obey just laws, if there are unjust laws, Some ethical values cannot be incorporated into law because of the
openly protest against it; exercise democratice rights and privileged judgmental nature of certain values. Ethical values, such as
responsibility by participation (voting and expressing informed views), compassion or honesty, are inherently subjective and can vary widely
social consciousness, and public service; when in a position of leadership among individuals and cultures.
and authority, openly respect and honor democratic processes of decision
These values often involve personal judgments that are difficult to
making, avoid unnecessary secrecy or concealment of information, and
standardize in legal frameworks.
assure that others have all the information they need to make intelligent
choices and exercise their rights. Laws strive for objectivity and universality to ensure fairness and
consistency, while ethical values can be deeply personal and context-
PURSUIT OF EXCELLENCE – Pursue excellence in all matters, in
dependent, making it challenging to incorporate them into legal systems
meeting your personal and professional responsibilities, be diligent,
without potential bias or discrimination.
reliable, industrious and committed, perform all tasks to the best of your
ability, develop and maintain a high degree of competence, be well Example: Integrity, loyalty, and pursuit of excellence
informed and well prepared, do not be content with mediocrity, do not
“win at any cost”. But this does not imply that these ethical values not incorporated into law
are less important for an orderly society.
ACCOUNTABILITY – Be accountable, accept responsibility for decisions,
for the foreseeable consequences of actions and inactions, and for setting Business decisions influence employees, customers, suppliers, and
an example for others. Parents, teachers, employers, many professionals competitors, while company operations affect communities,
and public officials have a special obligation to lead by example, to governments and the environment. Thus, it is important for these
safeguard and advance the integrity and reputation of these families, decisions to be guided by ethical values
companies, professions and the government itself; an ethically sensitive UNETHICAL BEHAVIOR DEFINED
individual avoids even the appearance of impropriety, and takes whatever
actions are necessary to correct or prevent inappropriate conduct of Most people define unethical behavior as conduct that differs from the
others. way they believe would have been appropriate given the circumstances.

IMPORTANCE OF ETHICAL BEHAVIOR Each individual decides what he/she considers unethical behavior based
on his/her own set of beliefs, values and experiences that shape their
• Necessary for a society to function in an orderly manner understanding of ethics. This means that what one person considers
• It is the glue that holds society together unethical behavior might be seen as acceptable by another.

Some commonly held values are incorporated into law such as laws Factors influencing these perceptions include cultural background,
dealing with: personal upbringing, religious beliefs, and individual life experiences.

• driving while intoxicated; As a result, ethical judgments can vary widely, making it a very
subjective matter rather than a universally agreed-upon code.
• Selling drugs;
REASONS WHY PEOPLE ACT UNETHICALLY
• Selling of defective products
• A person’s ethical standards are different from those of society as
a whole, or
 • The person chooses to act selfishly. • Professional Ethics
• In some instances, both reasons exist. • Business Ethics
When the person’s ethical standards are different from those of
society as a whole.
Our focus is on business ethics.
Extreme examples are drug dealers, bank robbers, and larcenists. These
• Basic justice, fairness
people do not feel any remorse when they are apprehended, because their
ethical standards differ from those of society as a whole. • Respect for the right of others
There are also many far less extreme examples who violate our ethical • Concern for the right of others
values. When people:
• Concern for the well-being on welfare of others
• cheat on their tax returns
• Benevolence, trustworthiness, honesty
• Treat other people with hostility
• Compliance with the law
• Lie on employment applications
• Integrity, impartiality, objectivity
• Perform below their competence level as employees
• Professional competence
The person chooses to act selfishly
• Confidentiality
A considerable portion of unethical behavior results from selfish
behavior. • Professional behavior

Examples: • Avoidance of potential or apparent conflict of interest

• political scandals resulted from the desire for more BUSINESS ETHICS INCLUDE AMONG OTHERS
political power and wealth • Fair competition
• cheating on tax returns and expense reports is motivated • Global as well as domestic justice
by financial greed
• Social responsibility
• performing below one’s competence and cheating on tests
are typically due to laziness • Concern for environment

In these examples, the persons know that the behavior is inappropriate, Fair Competition
but chooses to do it anyway because of the personal sacrifice neede to act Fair competition in business ethics refers to practices that promote a
ethically. level playing field among companies, ensuring that all participants can
CATEGORIES OF ETHICAL PRINCIPLES compete based on merit rather than unfair advantages.

• Personal Ethics It emphasizes honesty, transparency, and respect for laws and
regulations.
Fair competition discourages monopolistic practices, deceptive • engage in sustainable practices,
advertising, and exploitation of workers or resources.
• support community initiatives,
By fostering ethical behavior, it aims to enhance consumer trust,
• ensure fair labor conditions, and
innovation, and market efficiency, benefiting both businesses and
society as a whole. • promote ethical sourcing.
Global as well as domestic justice The goal is to balance profit-making with contributing to the well-
being of society, fostering trust and goodwill while enhancing their
• refers to the principles and practices that ensure fairness and
reputation and long-term success.
equity in international business operations.
Concern for environment
• It addresses issues such as labor rights, environmental
sustainability, and fair trade, promoting ethical conduct Concern for the environment in business ethics involves integrating
across borders. sustainable practices into operations and decision-making.
• Global justice emphasizes the responsibility of It emphasizes:
multinational corporations to consider the impact of
their actions on communities and economies worldwide. • reducing ecological footprints,

• Domestic justice focuses on fairness within a specific • minimizing waste,

country or locality. It pertains to how businesses treat • conserving resources, and
employees, consumers, and other stakeholders within that
jurisdiction. This includes adhering to local labor laws, • mitigating climate change impacts.
ensuring equitable treatment of all employees, and Companies are expected to:
engaging in ethical marketing practices. Domestic justice
seeks to create a fair business environment that • adhere to environmental regulations,
supports local communities and adheres to national • promote eco-friendly products, and
legal standards.
• engage in corporate social responsibility initiatives that
Both concepts aim to promote ethical behavior and social support ecological sustainability.
responsibility in business, albeit at different levels.
This commitment not only fosters public trust but also contributes to
Social responsibility long-term viability and profitability by aligning business goals with
Social responsibility in business ethics refers to the obligation of the health of the planet.
businesses to act in ways that benefit society at large. BUSINESS ETHICS
It involves considering the impact of their operations on stakeholders, • Refers to the standards of moral conduct, behavior and judgment
including employees, customers, communities, and the environment. in business
Companies practicing social responsibility often:
 • Involves making the moral and right decisions while engaging in • Covers acts that may be legal but which are wrong because
such business activities as manufacturing and selling a product they violate ethical principles
and providing a service to customers
• Is an area of corporate responsibility where businesses are legally
bound and obligated to conduct business in an ethical manner.
• Based on the personal values and standards of each person
engaged in business. Current state of business ethics
PURPOSES OF BUSINESS ETHICS • Business ethics is based on the personal values and standards of
each person engaged in business.
MAIN PURPOSE
• Since individual values differ, what is ethical or unethical in
To help business and would-be business to determine what business
making profit also varies from person to person. Here lies the
practices are right and what are wrong. Hopefully, they are going to use
problem.
this knowledge to guide them in making the right business decisions.
• There is still no uniform standards right or wrong from which
SPECIAL PURPOSES:
business may base their actions
• To make businessmen realize that they cannot employ double
Fair business competition
standards to the actions of other people and to their own actions
• The businessman who provides fair business competition is the
• To show businessmen that common practices which they have
most likely to observe the business ethical rules of conduct,
thought to be right because they see other businessmen doing it,
behavior and judgment.
are really wrong
• Fair business competition means achieving success solely by
• To serve as a standard or ideal upon which business conduct
offering better products, services and terms than the competitor.
should be based
• It is a form of business competition where success is gained by the
SCOPE AND IMPACT OF BUSINESS ETHICS
merits of one’s goods or services.
SCOPE
IMPACT OF BUSINESS ETHICS
• Covers all conduct, behavior, and judgment in business
ECONOMIC IMPACT
• This includes:
• Positive impact if employees are paid just wages and
• Slightest deviation from what is right to illegal and benefits
dishonest acts that are punishable by law
• Positive impact if suppliers are paid fairly and on time
• It involves making the right choices while engaging in for their supplies
such business activities as manufacturing, selling a product
• Positive impact if business gives them good value for the
or selling and rendering a service
price they pay for the products and services
SOCIAL IMPACT • Be actively concerned with the difficulties and problems
of subordinates, treat them fairly, and by example, lead
• Contributes adversely to the ethical climate of society
them effectively, assuring to all the right of reasonable
• If businesses offer bribes to secure work or other benefits, access and appeal to superiors
engage in accounting fraud or breach regulatory and legal
IMPACT ON BUSINESS MANAGERS
limitations on their operations, the ethics of society will
suffer • A manager should: (cont’d)
• Corruption may unfairly raise the price of goods for • Recognize that his subordinates have a right to information on
customers or the quality of the product compromised. matters affecting them, and make provision for his prompt
communication unless such communication is likely to
ENVIRONMENTAL IMPACT
undermine the security and efficiency of the business
• Environmental protection is a key area of business influence on
• Fully evaluate the likely effects on employees and the
society.
community of the business plans for the future before taking a
• Businesses that implement good environment policies to use final decision, and
energy more efficiently, reduce waste and in general, lighten their
• Cooperate with his colleagues and not attempt to secure
environmental footprint can reduce their internal costs and
personnel advantage at their expense
promote a positive image of their company
ETHICAL CHALLENGES IN TODAY’S WORLD
• The environmental initiatives of a business leader often force
competitors to take similar action for an increased beneficial Mercedes B. Suleik wrote in a newspaper article on February 13, 2018
effect on the environment. that there is an inherent conflict between ethics and the pursuit of profit is
more pronounced. She cited in her article Pope Francis’ message in the
IMPACT ON BUSINESS MANAGERS
Ecumenical Evangeli Gaudum:
• Business managers are expected to act in the best interest of the
“Humanity is experiencing a turning point in its history as can be seen
business, but he cannot be expected to act in a manner that is
from the advances occurring in the sciences and technology. We are in
contrary to the law or to his conscience.
the age of knowledge and information and that this has led to new and
• A manager should: often anonymous kinds of power. We have today an economy of
exclusion and inequality.”
• Acknowledge that his role is to serve the business
enterprise and the community She cited in her article Pope Francis’ message in the Ecumenical Evangeli
Gaudum: (cont’d)
• Avoid all abuse of executive power for personal gain,
advantage or prestige “ In a system that idolizes increased profit, everything that stands in its
way is pushed aside. Behind this attitude lurks a rejection of ethics.
• Reveal the fact to his superior whenever his personal Ethics has come to be viewed with derision as being counterproductive.
business of financial interest conflict with those of the Ethics is felt to be a threat because it condemns the manipulation and
company
debasement of the person and that ethics leads to a call for committed the Makati Business Club (MBC) and the European Chamber of
response, which is outside of the categories of the marketplace. ” Commerce of the Philippines (ECCP) in response to widespread
corruption, which has long hindered economic progress and fair
She also quoted Pope Benedict XVI’s Encyclical Carita Veritate
competition in the country.
“ Humanity has a mission and the means to transform the world in justice
The campaign encourages businesses to sign an Integrity Pledge,
and love in human relations, even in the social and economic field.
committing to uphold ethical business practices and compliance with
Market economics must be underpinned by commitments to particular
laws. This initiative aligns with global efforts to combat corruption,
moral goods and a certain version of the human person if it is to serve
improve corporate governance, and create a level playing field for
rather than undermine humanity’s common good. The economy needs
businesses.
ethics in order to function correctly – not an ethics which is people-
oriented INTEGRITY INITIATIVE CAMPAIGN
• The Integrity Initiative Campaign was established in the
Philippines in 2010. It was launched by the Makati Business Club
(MBC) and the European Chamber of Commerce of the
TOPIC 3325 Philippines (ECCP) as a private-sector-led effort to promote ethical
business practices, transparency, and good corporate governance.
INITIATIVES TO IMPROVE BUSINESS ETHICS AND REDUCE
CORRUPTION • The campaign was created in response to the persistent problem of
corruption in the country, which has negatively impacted business
Introduction to Business Ethics and Integrity Initiatives competitiveness and economic growth. Through the Integrity Pledge,
Business ethics is the foundation of a reputable and sustainable corporate companies and organizations commit to upholding ethical business
environment. Ethical practices help organizations build trust with standards, complying with anti-corruption laws, and fostering a
stakeholders, ensure compliance with legal standards, and create a culture culture of integrity in both private and public sectors.
of integrity within the company. ALIGNED WITH GLOBAL EFFORTS TO COMBAT
Significance: CORRUPTION

• Protects businesses from legal risks and reputational damage. While the Integrity Initiative is a Philippine-led campaign, its
objectives align with global efforts to combat corruption and promote
• Fosters an ethical corporate culture that enhances long-term good governance. Many international companies, embassies, and
success. business chambers operating in the Philippines have also endorsed or
• Aligns with global trends emphasizing corporate social participated in the initiative.
responsibility (CSR).
BACKGROUND OF THE INTEGRITY INITIATIVE REASONS FOR THE INTEGRITY INITIATIVE CAMPAIGN
The Integrity Initiative is a private-sector-led campaign in the 1. Corruption and Unethical Business Practices
Philippines that aims to promote ethical business practices,
transparency, and accountability among companies. It was launched by
The Philippines has faced persistent challenges related to corruption, • Bribery Allegations: High-ranking officials, including Mike
including: Arroyo and Benjamin Abalos, were accused of demanding
bribes from ZTE to approve the deal.
• Bribery and kickbacks in government contracts
• Outcome: The scandal led to public outrage, legal battles, and
• Unethical business dealings, including tax evasion and fraud
eventually contributed to President Arroyo facing corruption
• Nepotism and favoritism in procurement and hiring charges after her term.

These unethical practices undermine economic development and 3. The Fertilizer Fund Scam (Ghost Projects & Overpricing)
discourage foreign investments, creating an uneven business environment
• Key Figure: Agriculture Undersecretary Jocelyn "Joc-Joc"
where corrupt companies gain an unfair advantage.
Bolante
• Issue: Around ₱728 million in funds meant for fertilizers to help
SOME BIG CORRUPT CASES IN 2010 (PUBLIC SECTOR) poor farmers were allegedly diverted to campaign funds for the
Arroyo administration in the 2004 elections.
1. The AFP "Pabaon" Scandal (Military Corruption)
• Modus Operandi: Funds were allocated to non-existent or
• Key Figures: Former Armed Forces of the Philippines (AFP) overpriced fertilizers that never reached the farmers.
chiefs Angelo Reyes, Carlos Garcia, and Jacinto Ligot
• Impact: Despite multiple investigations, key figures were not
• Issue: High-ranking officials were accused of embezzling millions convicted, highlighting weaknesses in the judicial system.
of pesos from military funds, including conversion of funds meant
for soldiers and procurement contracts. 1. Globe Asiatique Housing Scam (Philippines)

• Notable Discovery: The practice of giving “pabaon” (retirement • Key Figures: Delfin Lee (President, Globe Asiatique)
send-off money) to top military officials, with allegations that
• Issue: Globe Asiatique, a private real estate developer, was
some generals received up to ₱50 million upon retirement.
accused of defrauding Pag-IBIG Fund (Home Development
• Impact: Exposed deep-seated corruption in the military, leading to Mutual Fund) by using ghost borrowers and falsified documents
congressional hearings and reforms in fund management. to obtain multi-billion peso housing loans.
2. The ZTE-NBN Deal (Bribery & Overpricing in Government • Modus Operandi: The company allegedly faked homebuyers’
Contracts) documents, allowing them to secure massive housing loans even
though the supposed borrowers did not exist or were ineligible.
• Key Figures: Former President Gloria Macapagal-Arroyo, First
Gentleman Mike Arroyo, COMELEC Chairman Benjamin • Impact: The scandal cost the government billions in unpaid loans
Abalos, and DOTC Secretary Leandro Mendoza and affected thousands of real homebuyers. Delfin Lee was
arrested and faced syndicated estafa charges.
• Issue: A government deal with China’s ZTE Corporation to
build a national broadband network was exposed as being 2. Legacy Group Rural Bank Fraud (Philippines)
overpriced by millions of dollars.
• Key Figures: Celso de los Angeles Jr. (Founder of the Legacy
Group)
 • Issue: The Legacy Group, a network of rural banks and Corruption distorts fair competition by favoring businesses that engage in
investment companies, engaged in a Ponzi scheme, promising unethical practices rather than those that operate with integrity. The
high returns to depositors while misusing their funds. Integrity Initiative promotes fair competition by:
• Fraud Amount: More than ₱30 billion was lost, affecting • Ensuring that contracts and government deals are awarded based
thousands of small investors and depositors. on merit rather than bribes.
• Impact: The Bangko Sentral ng Pilipinas (BSP) shut down • Encouraging businesses to comply with ethical procurement and
several rural banks under Legacy, and Celso de los Angeles was bidding processes.
charged with multiple fraud cases.
Preventing monopolistic behaviors and insider dealings that harm
3. The Banco Filipino Closure (Philippines) small and medium-sized enterprises (SMEs).
• Key Figures: Banco Filipino officials 3. Enhancing Investor Confidence and Economic Growth
• Issue: One of the oldest banks in the Philippines, Banco Filipino, Corruption and unethical practices can drive away potential investors
was forced to close due to financial mismanagement, fraudulent due to concerns over unstable business conditions. By advocating for
lending practices, and misuse of depositors’ funds. transparency and good governance, the Integrity Initiative:
• Allegations: Bank officials were accused of giving unsecured • Encourages local and foreign investors to trust the Philippine
and illegal loans, leading to a liquidity crisis. business environment.
• Impact: Thousands of depositors lost their savings, and the • Improves the country’s reputation in global anti-corruption
scandal revealed poor financial regulation in the banking rankings.
industry.
Strengthens long-term economic growth and sustainability.
IMPACT OF THESE CORRUPTION CASES
4. Strengthening Corporate Social Responsibility (CSR)
These scandals shook public trust in the government and business
The Integrity Initiative aligns with the growing global demand for ethical
sector, reinforcing the need for transparency, accountability, and
and responsible business conduct. Companies that adhere to integrity
corporate integrity.
principles are more likely to gain:
As a response, business leaders and advocacy groups pushed for
• Better customer trust and loyalty, as consumers prefer
stricter anti-corruption measures, leading to the creation of the
businesses that uphold ethical values.
Integrity Initiative Campaign in 2010.
• Stronger partnerships with international organizations that
prioritize sustainability and governance.
REASONS FOR INTEGRITY INITIATIVES CAMPAIGN
A more sustainable and long-term business model that is resilient to
2. Need for Fair Competition legal and reputational risks.
5. Compliance with International Anti-Corruption Standards
The Philippines, as a member of the global business community, is transparent business environment, free from corruption and unethical
expected to comply with international regulations such as: dealings.
• The United Nations Convention Against Corruption Objectives:
(UNCAC)
• Harmonization of Ethical Standards: Establishes a common
• OECD Guidelines for Multinational Enterprises ethical framework for businesses to follow.
• ISO 37001: Anti-Bribery Management Systems • Promotion of Fair Competition: Prevents monopolistic
practices and ensures a level playing field.
The Integrity Initiative helps Philippine companies align with these global
standards, making them more competitive in the international market. • Transparency in Business Transactions: Encourages honesty
in dealings with stakeholders, including employees, customers,
and government bodies.
NEED FOR A CODE OF CONDUCT
ROLE OF TOP MANAGEMENT IN BUSINESS INTEGRITY
A Code of Conduct is a formal document outlining the ethical standards,
Top management plays a critical role in embedding ethical values within
values, and expected behaviors within an organization. It serves as a
the company. Leaders must set the tone at the top by demonstrating a
framework for decision-making, ensuring that employees and
commitment to ethical business conduct.
management act in a manner that upholds business integrity.
• Key Responsibilities:
1. Anti-Corruption Measures:
 Clear stance against bribery, fraud, and unethical practices.
Key Elements:
 Implementation of policies to prevent fraudulent activities.
1. Guidance on Ethical Decision-Making: Provides employees
with clear instructions on handling ethical dilemmas. 2. Regulatory Compliance:
2. Accountability and Reporting: Establishes procedures for  Adherence to government regulations, including reporting
reporting unethical behavior without fear of retaliation. and disclosure requirements.
3. Legal and Regulatory Compliance: Ensures adherence to 3. Ethical Resource Allocation:
laws, policies, and industry standards.
 Investing in compliance programs, training, and internal
4. Commitment to Integrity: Reinforces the company's controls to ensure ethical behavior.
dedication to ethical practices across all operations.
UNIFIED CODE OF CONDUCT FOR BUSINESS (INTEGRITY
ETHICAL STANDARDS IN HUMAN RESOURCES
INITIATIVE)
Human resource (HR) policies should promote a culture of integrity,
The Integrity Initiative is a commitment by businesses to uphold ethical
transparency, and fairness among employees. Ethical HR practices
practices, particularly in the Philippines. It aims to create a fair and
ensure that employees feel safe, valued, and empowered to report Financial transparency ensures that a company’s financial statements
unethical behavior. accurately reflect its operations, reducing fraud risks and promoting
investor confidence.
Key Policies:
• Key Measures:
1. Open Communication:
1. Compliance with Accounting Standards:
 Employees should feel comfortable discussing ethical
concerns with management. Adherence to generally accepted accounting principles
(GAAP) or international financial reporting standards
2. Whistleblower Protection:
(IFRS).
 Employees reporting unethical conduct should be protected
2. Anti-Money Laundering (AML) Regulations:
from retaliation.
Preventing illegal financial activities through strict
3. Ethical Training Programs:
monitoring and reporting.
 Continuous education on workplace ethics, harassment
3. Tax Compliance:
policies, and conflict resolution.
Ensuring accurate reporting and timely payment of taxes.

SALES AND MARKETING ETHICS

ETHICAL PROCUREMENT PRACTICES
Marketing and sales teams must engage in ethical promotions, avoiding
deceptive advertising and misleading claims. Ethical guidelines also Procurement policies must be transparent and fair to ensure ethical
regulate corporate gifting, hospitality, and sponsorships sourcing and supplier relationships. Organizations should avoid
favoritism and corruption in awarding contracts.
• Key Principles:
• Key Practices:
1. Transparency in Advertising:
1. Fair Supplier Selection:
Avoid false claims and misleading promotions.
Procurement decisions should be based on quality, price,
2. Ethical Gift-Giving Policies:
and ethical considerations.
Guidelines on accepting and giving gifts to prevent
2. No Tolerance for Bribery:
conflicts of interest.
Strictly prohibiting payments or favors in exchange for
3. Fair Competition:
business advantages.
Prohibiting unfair competitive practices such as price-
3. Integrity Pacts with Suppliers:
fixing or insider trading.
Written agreements to uphold ethical standards in supplier
FINANCE AND ACCOUNTING INTEGRITY
contracts.
LOGISTICS AND SUPPLY CHAIN COMPLIANCE Sharing best practices with other companies to promote
ethical business processes.
A company's supply chain must align with ethical business principles,
including compliance with labor laws, environmental sustainability, and 3. Employee Training and Reinforcement:
anti-corruption measures.
Continuous education on ethics through workshops and
• Key Policies: digital learning tools.
1. Legal Compliance: The Code of Conduct for Business Ethics serves as a guidepost for
companies to operate with transparency, accountability, and integrity.
Following international and local laws in supply chain
Ethical business practices reduce risks, strengthen corporate
operations.
reputation, and ensure long-term sustainability. This aligns with
2. No Unethical Concessions: global trends where companies are increasingly held accountable for
their impact on society, emphasizing corporate social responsibility,
Avoiding unethical transactions, such as smuggling or sustainability, and ethical governance.
tax evasion.
By implementing these principles, businesses can create a culture that
3. Protection of Employees: prioritizes fairness, compliance, and corporate responsibility,
Employees should not be penalized for refusing to contributing to a more ethical and sustainable global economy.
engage in unethical supply chain practices.

STATUS OF THE INTEGRITY INITIATIVE CAMPAIGN

• The Integrity Initiative in the Philippines has set ambitious
targets to promote ethical standards across public and private
sectors. In 2015, the initiative aimed to enlist 3,000 signatories to
IMPLEMENTATION AND MONITORING OF ETHICAL its Integrity Pledge, with plans to increase this number to 5,000 in
PRACTICES 2016 and 10,000 by 2017.
For ethical policies to be effective, businesses must continuously evaluate • By 2016, the initiative reported over 3,000 signatories, including
their implementation and compliance. Ongoing monitoring ensures that 45 government agencies and 233 business and industry
ethical practices evolve with the business landscape. associations.
• Key Actions: • However, there is no publicly available information indicating that
1. Regular Compliance Audits: the subsequent targets of 5,000 and 10,000 signatories were met in
the following years.
Periodic reviews to identify ethical risks and improve
policies. • In addition to increasing the number of signatories, the Integrity
Initiative developed an online Integrity Self-Assessment Tool to
2. Collaboration with Business Networks: help organizations evaluate their compliance with ethical
standards. As of 2016, out of the 3,000-plus signatories, 256 had
 utilized this tool, and 33 companies underwent validation, with 16 facilitating large-scale fraud operations known as "pig butchering"
achieving the highest "advanced" rating. Integrity Initiative scams. These schemes, orchestrated by Chinese criminal
organizations, defrauded victims worldwide through fake
While these efforts indicate progress, the available data suggests that the
investment platforms. Guo allegedly leveraged her political
Integrity Initiative did not fully achieve its ambitious targets set for 2016
position and business interests to support these illicit activities,
and 2017. Continuous efforts are necessary to expand participation and
leading to her arrest and multiple charges, including human
reinforce a culture of integrity within the Philippines' public and private
trafficking and corruption.
sectors.
• Additionally, in December 2024, Philippine authorities arrested
over 400 individuals, including foreign nationals, during a raid on
STATUS OF CORRUPTION IN THE PHILIPPINES TODAY a suspected cybercrime hub in Manila. The suspects were believed
to be involved in illegal online gambling and various online
• As of February 2025, the Philippines continues to grapple with scams, further illustrating the private sector's entanglement in
significant corruption challenges. In the 2024 Corruption corrupt practices.
Perceptions Index (CPI) by Transparency International, the
country ranked 114th out of 180 nations, with a score of 33 out of • The persistence of bribery and corruption disproportionately
100. This position reflects a slight improvement from the previous affects micro, small, and medium enterprises (MSMEs), hindering
year, where the Philippines ranked 115th with a score of 34. their integration into the formal economy. The slow
implementation of digitalization initiatives has been identified as a
• Despite this marginal progress, the Philippines' score remains contributing factor, as it perpetuates bureaucratic inefficiencies
below both the global average of 43 and the Asia-Pacific regional and opportunities for corrupt practices.
average of 44, indicating persistent issues with public sector
corruption. • Addressing private-sector corruption in the Philippines
necessitates comprehensive reforms, including the acceleration of
• Public perception aligns with these findings. The Global digitalization efforts, strengthening of regulatory frameworks, and
Corruption Barometer-Asia reported that 86% of Filipinos fostering a culture of transparency and accountability within
surveyed consider corruption a significant problem in the country. business practices.
• Addressing these challenges requires sustained efforts from both
government and civil society to implement effective anti-
corruption measures and promote a culture of integrity. The underlying cultural, economic and institutional dynamics that
facilitate corruption should be transformed!
STATUS OF CORRUPTION IN THE PRIVATE SECTOR
Addressing the deep-seated cultural, economic, and institutional factors
• As of February 2025, corruption within the Philippines' private that facilitate corruption in the Philippines requires a comprehensive and
sector remains a significant concern, impacting both economic multifaceted approach. Several studies have explored strategies to
growth and business operations. transform these underlying dynamics:
• Recent incidents highlight the pervasive nature of private-sector 1. Promoting Holistic Governance: Buendia (2014) advocates for a
corruption. In March 2024, a major scandal emerged involving holistic governance framework that integrates various sectors and
Alice Guo, the mayor of Bamban, who was implicated in stakeholders to create a unified front against corruption. This
 approach emphasizes the importance of cohesive policies and
collaborative efforts across governmental and non-governmental
organizations to address corruption systematically.
2. Reforming Political Culture: The Office of the Ombudsman
(2012) highlights the need to transform the political culture that
perpetuates corrupt practices. This involves fostering a culture of
integrity and accountability through education, public awareness
campaigns, and the promotion of ethical behavior in both public
and private sectors.
3. Strengthening Institutions: The Center for Strategic and
International Studies (2012) points out that weak institutions are a
significant barrier to effective anti-corruption measures.
Strengthening these institutions through capacity building,
adequate resourcing, and ensuring independence can enhance their
ability to combat corruption effectively.
4. Addressing Political Dynasties and Nepotism: The persistence
of political dynasties and nepotism undermines democratic
processes and fosters environments conducive to corruption.
Studies suggest that implementing laws to limit dynastic politics
and promoting merit-based appointments can reduce these
practices.
Implementing these strategies necessitates a concerted effort from all
sectors of society, including government agencies, civil society
organizations, the private sector, and the general public. By addressing
the root causes of corruption through systemic reforms and cultural
change, the Philippines can make significant strides toward reducing
corruption and promoting good governance.