LESSON 1: ETHICS AND BUSINESS

Objectives

At the end of this chapter, the students are expected to;

1. Define Business Ethics

2. Identify the features of business ethics
3. Describe the principles of business ethics
4. Understand the nature of business from the moral perspective
5. Rationalize the importance of ethics in business
6. Apply the objective of moral reasoning as a framework for making ethical decisions in business
7. Examine the morality of profit-motive in business
8. Justify the need for ethical propriety in business and the corporate world

Introduction

Ethics is a topic of social science that is connected with moral values and social values.

'Business Ethics' can be called as a study of proper business policies and performs regarding possibly
controversial issues, such as corporate governance, insider trading, bribery, discrimination, corporate social
responsibility, and fiduciary responsibilities.

Businesses must stand by some simple principles. It should offer quality goods and services at sensible prices to
consumers. It must also evade adulteration, misleading advertisements, and other unfair malpractices.

A business must also implement other duties such as allocating fair wages, providing good working situations, not
abusing the workers, encouraging competition, etc.

Business Ethics – Definition

There are numerous meanings of business ethics, but the ones given by Andrew Crane and Raymond C.
Baumhart are considered the most appropriate ones.

 According to Crane, "Business ethics is the study of business situations, activities, and decisions where
issues of right and wrong are addressed." Business ethics ay ang pag aanalyze ng business and dapat
itama ang mga mali.
 Baumhart defines, "The ethics of business is the ethics of responsibility. The business man must promise
that he will not harm knowingly." Responsibility talaga, di pwedeng gumawa ng illegal.

Features of Business Ethics

There are eight major types of business ethics

Code of Conduct − Business ethics is really a form of codes of conduct. It lets us know what to do and what
not to do. Businesses must follow this code of conduct. States the rules, values, ethical procedure. Having a code
of conduct in the workplace provides staff with clear standards and expectations to do their jobs. That why
business men must follow it to become a guide in a company. This are follows based on the rules of company.

Based on Moral and Social Values − Business ethics is a topic that is based on moral and social values. It
proposals some moral and social principles (rules) for conducting a business. Moral – are the rules used to
decide what is good and bad. Social Values – this tell us what is important to guide us and make decicions what
is right and wrong.

Protection to Social Groups − Business ethics defend numerous social groups counting consumers,
employees, small businesspersons, government, shareholders, creditors, etc.
Social groups are divided into two types
1. Primary Groups – like family, friends, peers, neighbor, classmates and churches where the communication is
informal. Have strong emotional kinds.
2. Secondary Groups – are impersonal and goal oriented. Where there I less of interaction. Examples are
sociology class, political parties, labor union and business organization.

Offers a Basic Framework − Business ethics is the basic framework for doing business correctly. It constructs
the social, cultural, legal, economic, and other limits in which a business must operate. Sets of ideas or facts that
provide support for something like social, cultural and other limit in which the business must offering.
Voluntary − Business ethics is intended to be voluntary. It should be self-practiced and must not be enforced by
law. Naka base sa natural law, based on norms and standards hindi yung law na pinapatupad ng tao kung
susundin mo ba ito o hindi. It doesn’t force you. Dito pumapasok ang a good samaritan law which refers to
someone who renders an aids in an injured person in a voluntary basis.

Requires Education & Guidance − Businessmen should get good education and leadership about business ethics.
Trade Relations and Chambers of Commerce should be active enough in this matter. The business men should
gave proper education and guidance before introducing a business events. Also they must be motivated to use
business ethics and inform the advantages of using business ethics. Kasi walang kapupuntahan yung business
mo kung hindi mo magagawa yung mga proper procedures.

Relative Term − Business ethics is a qualified term. It alters from one business to another and from one
country to another. Should show good business ethics not just to one business transactions but as well as future
business transactions.

New Concept − Business ethics is a comparatively newer concept. Established countries have more experience
to business ethics, while poor and developing countries are moderately backward in applying the principles of
business ethics. Established countries have more experience to business ethics, because they cant afford
to train and study that poor and developing countries.

Principles of Business Ethics

The principles of business ethics are connected to social groups that include of consumers, employees, investors,
and the local community. The important rules or principles of business ethics are as follows −

Avoid Exploitation of Consumers − Do not fraud and abuse consumer with measures such as artificial price
rise and adulteration. Consumer awareness is important in avoidance of exploitation in the market place because
exploitation of consumers happens in a various ways in the market place. Meaning the customers are always
aware if tumataas ba ang ito o bumababa. And also the products and services kapag di yan na satisfied di nyan
uulit pa o babalik pa.

Avoid Profiteering − Dishonest business actions such as hoarding, black-marketing, selling banned or harmful
goods to earn exorbitant profits must be avoided. Avoid ang masyadong pagpatong ng mataas na price sa
products and pandaraya para maging maganda yung relationships sa mga customers. Wag na ibenta yung mga
expired na products.

Encourage Healthy Competition − A well reasonable atmosphere that offers certain profits to the consumers
must be encouraged. We have encourage good customers services, quality, and the products and fair pricing.

Accuracy − Correctness in weighing, packaging and quality of providing goods to the consumers has to be
followed. Sa isang business dapat accurate lahat ng ginagamit, and the quality of packaging. Ex. Yung sa mga
timbangan, and ang plastic na gamit dapat di nabubutas.

Pay Taxes Regularly − Taxes and other duties to the government must be fairly and frequently paid. Paid right
amount of tax is a social responsibility in a country. If you paid the right amount the government may collect the
right amount of money to supports its projects like highway, free tuition fee.

Get the Accounts Audited − Good business records, accounts must be achieved. All official persons and
authorities should have admission to these details.

Fair Treatment to Employees − Fair wages or salaries, facilities and incentives must be delivered to the
employees. Their practices and policies must be applied equally. Consistently and fairly among everyone
regardless of the race, gender, age and other physical or emotional phase. Must compensate to every work
received.

Keep the Investors Informed − The shareholders and investors must know about the financial and other
important choices of the company. The most important reasons that the investors continue informed is to capture
their hearth and minds. This helps to keep them connected to the company and retain their interest and
engagement to the company. The more engaged the investors are, the more likely write another check
the next time capital is needed.

Avoid Injustice and Discrimination − Evade all types of unfairness and prejudice to employees. Judgment
based on gender, race, religion, language, nationality, etc. should be avoided. Discrimanation – is the unfair or
prejudicial treatment of people based in the characteristics such as age, sex and personal orientation. Kahit sino
pa yan walang karapatan na maliitin ang isang tao.

No Bribe and Corruption − Do not give expensive gifts, commissions and payoffs to people having
influence. Bribery – is giving or receiving gifts or reward to someone being. In order to get want you need
money or things tinatawag na suhol. But depende sa kung paano mo gagawin. Pwedeng suhul for thanking
or thoughtful talaga or may masamang intensyon kana.

Discourage Secret Agreement − Making secret agreements with other business people to influence
production, distribution, pricing etc. are unethical. Any form of agreement regarding the company policies ay
 bawal ipagsabi, pero minsan may nakikipag transacts in the clients outside the company ng pasikreto kasi
pwede nilang ilabas yon para kumita.

Service before Profit − Accept the principle of "service first and profit next." Need muna magtrabaho bago
pasahurin, that’s the usual policy.

Practice Fair Business − Businesses should be fair, humane, efficient and dynamic to offer certain benefits
to consumers. Dapat ang quality ng product ay maganda and affordable.

Avoid Monopoly − No private monopolies and concentration of economic power should be practiced. Do not
control the supply or the raw material be sure to be competitive. Dapat hindi lang ikaw ang nakikinanabang o
kumikita, bigyan ng chance ang ibang company.

Fulfill Customers’ Expectations − Adjust your business activities as per the demands, needs and expectations
of the customers. To exceed the customers expectation the company must know first their expectations. When it
comes to certain performance and functionality from your products or services, you need to make sure that you
cater on the speed that you sold the customers. Dapat inaalam kung ano ang mga needs and wants ng mga
consumers para ma satisfied sila.

Respect Consumers Rights − Honor the basic rights of the consumers. From the word itself

Accept Social Responsibilities − Honor responsibilities towards the society.

Satisfy Consumers’ Wants − Satisfy the wants of the consumers as the main objective of the business is to
satisfy the consumer’s wants. All business operations must have this aim. Must satisfy the needs of the
customers needs by providing it
Ways of Satisfying Customers Need
1. Providing them the products by realistic
2. Pay attention to the competitors and customers needs.

Service Motive − Service and consumer's satisfaction should get more attention than profit-maximization. Here
dapat mag focus sa satisfaction ng consumer than sa pag earn ng profit.

Optimum Utilization of Resources − Ensure optimum utilization of resources to remove poverty and to
increase the standard of living of people. Dapat tiyakin ang pinaka mabuting kalagayan ng paggamit ng mga
mapag kukunan upang matanggal ang kahirapan at upang madagdagan ang pamantayan ng pamumuhay ng
mga tao.

Intentions of Business − Use permitted legal and sacred means to do business. Avoid Illegal, unscrupulous
and evil means. Kung may balak mag open ng business dapat lahat legal, huwag mag scam.
Nature of Business

 Business is as old as a human Civilization.

 Business is an activity that is part and parcel of human society.
 Business also is complex enterprises that involve major activities like purchasing, manufacturing,
marketing, advertising, selling and accounting.
 Business deal with suppliers, customers, workers, employees and even competitors.
 Business is a good human activity however, it is the selfish motive and personal interest of scrupulous
businessmen that make business bad and, in some instances, unproductive.

The Importance of Ethics in Business

a. The study of Business Ethics paves the way for a common ground in our understanding of the fundamental
idea of what is good and what is bad in our human conduct. So ang pag aaral ng business ethics ay
nagbibigay ng daan upang maunawaan natin ng wasto. The basis is the human conduct, this would help us
to distinguish what is right and wrong.
b. Ethics as a science does only evaluate the morality of human conduct but also provides us with a common
understanding of the universal, objective, and irreversible moral principles that should govern our human
behaviour and guide our moral decisions.

c. Business Ethics opens a novel way of resolving moral problems and ethical dilemmas affecting business
transactions and the interactions of people in the corporate world.
d. The study of Business Ethics will also enhance the human and interpersonal skills of managers so they can be
more effective in managing the human side of organization.

The Businessman’s Myth’s about Business Ethics

 Businessmen are not immoral, and it would be disastrous to judge and conclude that business people
commit unethical act in doing business. We should thinking that every business men doesn’t conform or
obey the standards of morality.

 Business certainly is a good and productive human activity. However, it is the businessman’s wrong
perception about the role that ethics plays in the world of business that affects the moral judgment and
decision making. The opinion of business men in ethical world will affect the judgement of the people and
in doing decisions.
 Here are some myths that businessmen have about Business Ethics;

1. Ethics is a personal affair and not a public debatable matter. Ethics ay mahahalintulad sa personal
judgement ng isang tao that cannot be make decision by the other people other than his self.
2. Ethics and business do not mix ethics at business ay hindi pwedeng ipagsama.
3. Good business means good ethics ang pagkakaroon ng malagung negosyo ay nangangahulugang ng
pagkakaroon ng magandang etika.
4. Business is a war hindi maalis sa negosyo ang pagkakaroon ng maraming kakompetensya.

The Relationship between Ethics and Business

Ethics play an important role in business. Without morality, business will be a chaotic human activity.
Ethics is not a study of positive laws intended to govern and regulate the actions of people doing business. The
concern of ethics as a philosophical science is to discover that there are unwritten laws, written in the
hearts of man that should govern our human conduct where positive law may be absent, and in some cases are
not clear. Mahalaga ang ginagampanan ng Ethics sa business dahil ito ang nagiging prinsipyo ng isang
businessmen upang maging maayos ang kanyang pamamalakad sa isang business. Magkaiba nag batas sa ethics.
Ang batas ay nagsisilbing gabay nararapat sundin ng mga businessman sa kanilang pamamalakad. The ethics on
the other hand is a philosophical term that will guide the human conduct but there is a time that we do not give
importance that’s why people tend to do mistakes or wrong doing.

The following arguments justify the significant role that ethics plays in the world of business;

1. Business is an integral part of human society. Therefore, the actions of individuals and institutions in
business must be subjected to moral rules and moral evaluation. Part of the society, di na maalis kaya
nararapat na ang ginagawa ng isang tao or the institution will in line to the morality.
2. In business, as in any other human endeavour, “what is legal may not necessarily be moral.”
People tend to be confused legality and morality. An action may be legal but not necessarily moral.
“what is legal may not necessarily be moral” tinutukoy nito that not all the legal things even stated
in the laws are can be consider as moral. This where the ethics or own morality of human enters.
3. Law is insufficient. Hindi sapat ang law na alam natin dahil may sariling law or rules ang isang business.

Moral Reasoning in Business

The essence of studying Business Ethics is to provide the manager as a decision maker with a framework
for the resolution of moral issues and problems affecting business activates and the organization itself . Moral
reasoning is a process in which ethical issues and problems are benchmarked against a moral standard so that a
moral judgment is made possible. Ang importansya ng ethics is to guide the managers because their role in
business is to make a decisions and that decision must be made under moral reasoning. Moral reasoning – this
is where moral standards takes against moral, ethical issues to achieve the moral judgement.

Characteristics of a Good Moral Standard;

1. A good moral standard is one that looks as the issue as something that is very serious. States that the person
take that problem seriously.
2. A good standard must be grounded on good moral argument. A good argument is an argument that always
tells the truth. A solid moral argument leaves the room for loopholes and counter arguments. It can be
consider as good moral standard if the means the truth is always the basis.
3. A good moral standard should be objective not subjective. It should be universally accepted and should apply
to all. It must be Universally accepted which means that people can easily accept or agree with it.
4. A good standard, when violated, brings about feelings of guilt, shame and remorse of conscience. If the
person violated its morality it can feel remorse on what he did and where the conscience enter.

Requirements for a Good Moral Judgment

1. A good moral judgment must be logical. Has a logic in judgment or in other words it has sense and reliable
ang judgment . Has sound reasoning.
2. A good moral judgment must be based on facts and solid evidence. Must be supported by facts or evidence.
3. A good moral judgment must be based on sound and defensible moral principle. A weak ethical principle is
open to a lot of criticisms.

The Morality of Profit Motive

 People go into business for a number of reasons:

 Some go to business for personal satisfaction. They been sure in the business because they are
interested. Personal interest lang ang gusto nila
 In business to earn a livelihood. To sustain their needs as a human being
 Others are in business because they want to serve the society through the goods and services
they offer to the customers. Pinaka maganda. The main purpose is to serve people by entering
the business world.
 To make a profit. (most common reason) money is their priority. The difference in number is that
here the focus is to earn just for profit but in to be able to support their necessities.
 Businessmen consider profit as a form of anticipated reward or a compensation for the efforts they
spend, skills they apply and returns for the capital they invested in putting up and organizing the business.

The issue of profit motive is a subject matter that needs to be carefully considered in the study of
Business Ethics. Is profit motive in business good or bad? Is it moral or immoral?

The Good and the Bad Sides of Profit Motive

A. The Good Side of Profit Motive;

 Profit motive motivates people to do something meaningful. Dito na e encourage to do something that is
relevant to the needs of human.
 Profit motive promotes ingenuity and cleverness in running business. It improve the intellectual ability of
a person in running a business.
 Profit motive makes people productive. Mas namomotivate ang tao para magsikap at magsipag
 Profit motive generates potential capital for the business. There is a possibility that the capital will grow
which would be the business will also grow.

B. The Bad Side of Profit Motive;

 Motive promotes rivalry among competitors. Ang mindset na lahat dapat nasa top sila. Hindi maiiwasang
mangyari ditto becaudse business is a war.
 Profit motive makes people focus only on making money, that is, to sell as many goods as possible
without considering whether or not these products satisfy the needs and wants of consumers and end
users. They are focus is the profit it do not consider the satisfaction of its customers.
 Profit motive turns the businessman from being a reflective and a questioning person because he focuses
his attention only on the practical activity of making money. The ability of the business will be affected
because it doesn’t apply the characteristics of the statement it has because it will only focus in generating
profit or money.
 Profit motive promotes self-interest rather than the common good.

C. Ethical Considerations of Profit Motive Business

1. Earning profit is a good and valid activity in business.

2. Making excessive profits is totally wrong. It leads to greed, avarice, and manipulation of the customers.
3. Profit is not the “be-all and the end-all” of doing business. Certainly there are factors to be considered in
business such as, customer’s satisfaction, respect for the environment, enhancement of the quality of life
and the preservation of the society.
4. The teachings of the Catholic Church do not totally condemn profit as part of business activity. Pope Pius
XI, does not prohibit the producer from himself provided “one respects the law of God, does not
prejudice the right of others, and work according to faith and right reason.”

The Concept of Moral Responsibility

1. Moral Responsibility refers to holding to people morally accountable for some past action or actions. This
simply means assigning to people blame or praise for particular actions that they have performed.
2. Moral Responsibility also means care, welfare, or treatment of others as derived from the specific social
role that one plays in the society.
3. Moral Responsibility likewise refers to one’s capacity for making moral or rational decisions of his own.

References:

Business Ethics and Social Responsibility 2nd Edition by Fr. Froliano Roa,
https://www.tutorialspoint.com/business_ethics/business_ethics_introduction.htm