Business Ethics & Social Responsibility Module 3 (PDF)

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GladArcticTundra3910

Uploaded by GladArcticTundra3910

City National High School

2007

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business ethics corporate culture ethical issues in business business management

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This document contains a module on business ethics and social responsibility. It covers topics such as defining ethics, the importance of ethics in business, various ethical issues, and how to apply ethics in business scenarios, with an activity and a sample code of ethics in it.

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ACCOUNTANCY, BUSINESS AND Business MANAGEMENT Ethics & Social Responsibility 12 MODULE NO. 3 – Code of Ethics Most Essential Learning Competency formulate a “code of ethics that reflect core principles derives from analyses ABM_ESR12-IIIa-d-1.6...

ACCOUNTANCY, BUSINESS AND Business MANAGEMENT Ethics & Social Responsibility 12 MODULE NO. 3 – Code of Ethics Most Essential Learning Competency formulate a “code of ethics that reflect core principles derives from analyses ABM_ESR12-IIIa-d-1.6 If ethics are poor at the top, that behavior is copied down through the organization -Robert Noyce Objectives: After going through the module, you are expected to: 1. define ethics; 2. explain why ethics is important in business; 3. classify the given ethical issues; and 4. create a simple code of ethics of your business Activity Read Directions: # 1 and understand the situation. Write your answers on a separate sheet of paper. Chona opened an online food service for an additional income. She hired one female helper in the kitchen and two delivery boys. The business was doing very good for a month. But one day, she got a call from an online client complaining that the food delivered to her was already spoiled and could not be eaten. He/she was demanding for a refund. If you were Chona, how would you handle the situation? Definition of Ethics The term Ethics is derived from the Greek word ethos which means “characteristic way of thinking”. Ethics, as a science, does not only evaluate the morality of our human conduct but also provides us with a common understanding of the universal, objective, and irreversible moral principles that should govern our hu man behavior and guide our moral decisions (Roa, 2011). Definition of Ethics Ethics are moral principles that guide the conduct of the individual (Racelis, 2017). These are rules of behavior based on ideas about what is morally good and bad (Merriam-Webster Dictionary). Why is ethics important in business? Ethical conduct, whether at the corporate, professional, or personal level, is a direct reflection of the principles and values which regulate the person and the institution he/she represents. Organizations establish their own culture that is socially expressed as their ideals. Such principles or ideals have an impact on the relationships within the company, efficiency, prestige, performance and retention of employees, legalities, and the wider community they work in. Why is ethics important in business? As a result, most organizations generate a list of organizational values and codes of conduct to be recognized and adhered by all workers. Motivating and enhancing constructive actions, and at the same time building an atmosphere that prevents unethical behavior are vital obligations on the part of both administrators and workers. How to Apply Ethics At the individual level, organizations ought to concentrate on improving and encouraging every employee to respect and adhere to ethical principles. Certain aspects of individual ethics have their roots in the individual. Achieving a strong sense of professionalism and recognizing certain professional decisions' ethical implications are the key components of education, individual reflection, and experience. Examples of Ethical Issues in Business 1. Ethical Issues in Finance Under the umbrella of finance and accounting, fairness in trading practices, trading conditions, financial contracting, sales practices, consultancy services, tax payments, internal audits, external audits, and executive compensation are included, whereas specific corporate ethical/legal abuse includes insider trading, bribery/kickbacks, misleading financial analysis, and fraud on securities. Examples of Ethical Issues in Business 2. Ethical Issues in Human Resource (HR) Management Human Resource Management 's tasks include hiring and orientation, performance evaluation, training and development, labor relations, and health and safety concerns. Among the ethical issues are discrimination by age (the young ones are preferred over the older ones), gender preference, sexual orientation, race, ethnicity, disability, and physical appearance are all ethical issues that the HR oversees. Examples of Ethical Issues in Business 3. Ethical Issues in Sales and Marketing Marketing ethics deals with the beliefs, standards and/or morals that advertisers and marketing organizations will operate upon. Ethical marketing issues include promotion of obsolete or harmful products/services; openness about environmental threats; food ingredients (Genetically Modified Organisms); possible health hazards or financial risks; protection for the privacy and autonomy of consumers; truthfulness in advertising; and honesty in price and delivery. Some claim that advertisements can affect the views of individuals and their relationships with others, suggesting an ethical obligation to avoid distorting those expectations and relationships. Examples of Ethical Issues in Business 3. Ethical Issues in Sales and Marketing Ethics in marketing includes practices in pricing, which involves unlawful acts such as price manipulation and price skimming. According to Hayes (2020), price skimming is a product pricing strategy by which a firm charges the highest initial price that customers will pay and then lowers it over time. On the other hand, advertising has raised concerns over offensive advertisements, objectification, and school marketing. Examples of Ethical Issues in Business 4. Ethical Issues in Production Business ethics typically deals with company's duties to ensure its goods and industrial procedures do not inflict unnecessary harm. Many products and services can be generated and used at zero risk, and it can be difficult to assess the ethical path. However, there are consumers who patronize products that damage them, for example, tobacco products. Output can have adverse effects on the environment like air pollution, destruction of habitats, and urban sprawl. Activity 2 A. Directions: Classify each phrase below to the corresponding column of ethical issues where it belongs. Write your answers on a separate sheet of paper. 1. destruction of habitats 2. encountered misleading financial reports 3. overweight applicants are not allowed 4. hiring limited to religious affiliations 5. honesty in prices 6. truthfulness in advertising 7. fraud on securities 8. harm to environment 9. manipulation in prices 10. exaggerated advertisements. D B irections: What would you do under the following situations below. Write your answers on a separate sheet of paper. 1. Being an advertising artist, you were instructed by the manager to make two layouts, but you will only receive the price for one. 2. Your company would have to donate P 1,000,000 to charity, but you witnessed that the accountant only gave P 700,000 instead of P 1,000,000. 3. Being one of the food processors in a manufacturing company, you know that the ingredients listed on the label of your product are not Lesson 2: Code of Ethics in Business A secret to success lies in recognizing the value of ethics in industry. The customers, management, and staff value honest and ethical practices. Hence, business ethics is vital because it helps maintain a great reputation, helps to avoid significant financial and legal issues, and ultimately benefits all involved. Therefore, it is highly suggested that each company formulates its own Code of Ethics to be used as a guide in its business operation. What is Code of Ethics? Code of Ethics is a set of rules about good and bad behavior. It is a guide of principles designed to help professionals conduct business honestly and with integrity. A code of ethics document may outline the mission and values of the business or organization, how professionals are supposed to approach problems, the ethical principles based on the organization's core values, and the standards to which the professional is held. Saucer and Sims (2013) offer recommendations for developing Code of Ethics in business organizations: 1. Adopt code of ethics (use the Code of Ethics of other companies as a reference and modify according to the needs of the company). 2. Offer training on ethics (for management and employees). Saucer and Sims (2013) offer recommendations for developing Code of Ethics in 3. Hire and foster individuals with business organizations: ethical value. 4. Deal with immoral activities. Employees must know the implications and effects of making unethical actions and should be ready to accept consequences. Saucer and Sims (2013) offer recommendations for developing Code of 5. Take Ethics in constructive measures. business organizations: For example, give rewards to employees who admit their mistakes. If the company is conscientious and smart, it can encourage warehouse workers to take responsibility for their mistakes and even praise them for coming forward, apologizing and ensuring that a faulty product is not purchased by the customer. At first it seems counter-intuitive to reward an employee for a mistake, but in the end, it provides everyone with the best result. Saucer and Sims (2013) offer recommendations for developing Code of Ethics in business organizations: 6. Carry out a social audit. Conduct survey to employees once in a while. Saucer and Sims (2013) offer recommendations for developing Code of Ethics in 7. Cover all whistleblowers. business organizations: These people detect illegal activities within organizations and disclose the actions to the authority or managers. A whistleblower who works sincerely, correctly reporting an issue, should be praised for his/her courage and integrity, as opposed to being disciplined and ostracized. If an individual blasts the whistle, it is possible that the company itself has failed internally to motivate and improve fair and ethical conversations. Saucer and Sims (2013) offer recommendations for developing Code of Ethics in business organizations: 8. Empower the defenders of integrity. Support those who work with honesty and integrity. Saucer and Sims (2013) offer recommendations for developing Code of Ethics in business 9. Ensure organizations: executive commitment. The anonymity of those who report the problems should be practiced. 10. Communicate the principles of conduct within the company and across the industry. 11. Assign an officer who is clearly responsible for the enforcement of ethical standards. He/she can be consulted for advice. 12. Establish a procedure for violations of ethical standards, and fully review any offenses reported. 13. Ensure high perseverance by the company's board of trustees. 14. Lead by example, above everything else. It should be remembered that when faced with an ethical situation, the outcome of the decision-making process should be considered. One way to tackle ethical situations is by using the four-way test to evaluate decisions. This four-way test consists of asking four questions: 1. Is my decision truthful? 2. Is my decision fair to all who are affected by it? 3. Will this build the organization's goodwill? 4. Will the decision benefit all parties with vested interest in the outcome? Code of Ethics contains the following: 1. Vision means something that you imagine; a picture that you see in your mind (Merriam- Webster Dictionary). The vision statement helps to ensure the alignment of the decisions to the company goals. Example: To make innovations that everyone could access and adapt depending on their needs Code of Ethics contains the following: 2. Values (value means something thought of as important or useful) Values in business help to ensure that all of the employees Example: We commit ourselves to serve our customers with quality service and utmost respect. Code of Ethics contains the following: 3. Mission- a specific task with which a person or a group is charged (Merriam-Webster Dictionary). The mission statement clearly and effectively guides the business or the organization in its decision-making. Example: To inspire all the young athletes of the country… tell them to dream and go for it! Code of Ethics contains the following: 4. Principles- moral rules or beliefs that help you know what is right and wrong and that influence your actions (Merriam-Webster Dictionary). Examples: Customers have to be respected. Make sure to deliver quality product. Code of Ethics contains the following: 4. Principles- moral rules or beliefs that help you know what is right and wrong and that influence your actions (Merriam-Webster Dictionary). Examples: Customers have to be respected. Make sure to deliver quality product. Simplified Sample of Code of Ethics: XYZ Company Our Core Values Our Vision: To lead the car industry by giving our customers quality cars worthy of their money and unmatched customer services Our Values: We act with the highest standards of integrity. We respect individuals and treat them fairly. Our Mission: To work efficiently and enthusiastically to make XYZ Company the country’s top car dealer while serving our customers punctually and courteously Simplified Sample of Code of Ethics: XYZ Company Our Principles: 1st: XYZ Company shall adopt a zero-tolerance policy towards bribery and corruption in whatever form; 2nd: All company officers and employees shall conduct business in accordance with Philippine laws and regulations; and 3rd: We shall act in good faith and observe sense of professionalism at all times. Simplified Sample of Code of Ethics: XYZ Company For actual/specific example of Code of Ethics, please visit: http://www.ayala.com.ph/governance/page/ business-conduct-and-ethics Code of Ethics aims to lessen conflicting issues as it explains to what degree such conflicts can be avoided and what parties could do if these conflicts happened. Professionals therefore cannot say that they were ignorant of the immoral nature of their improper behavior. Often relevant is the possibility of disciplinary action (e.g., disbarment of a lawyer) which helps minimize unnecessary disagreements or offensive behavior where a confrontation is imminent or is likely to happen. Directions: Read each sentence below and write the words thumbs up if it is true or thumbs down if it is not. Write your answers on a separate sheet of paper. 1. The company’s Board of Trustees should show perseverance. 2. It does not matter whether the decision is fair to all or not. 3. Social surveys should be carried out by the company. 4. The company may not fully review the offenses reported. 5. Each member of the organization should be fully Directions: Read each sentence below and write the words thumbs up if it is true or thumbs down if it is not. Write your answers on a separate sheet of paper. 6. The owner’s decision should be based on truth. 7. Do not mind immoral activities in the company. 8. The management should protect the whistleblowers. 9. The decision should build goodwill of the organization. 10. Ethics are social principles that guide the conduct of the individuals. B. Directions: Complete each statement by filling the appropriate word in the blank. Write your answers on a separate sheet of paper. 11-12 Code of Ethics is a set of rules about _____ and _____ behavior. 13. The possibility of giving _____ action often minimize doing offensive behavior. 14. The people who detect illegal activities and report the same to proper authorities are called _____. 15. It is highly suggested that administrators should B. Directions: Write a short script that shows how a General Manager should respond to an employee- whistleblower who had witnessed a bribing incident of a big client to the new Sales Manager. Write your answers on a separate sheet of paper. Rubrics: Content 4 pts. Mechanics 3 pts. Ethical implication of decision 3 pts. 10 pts. ACCOUNTANCY, BUSINESS AND Business MANAGEMENT Ethics & Social Responsibility 12 CORPORATE CULTURE The Ethical Corporate Culture Organizational or corporate culture  Is the system of shared the actions, values, and beliefs that develops within an organization and guides The Ethical Corporate Culture There are business organizations that expect employees to work for long hours and even on weekends if needed. There are companies that value work- life balance, so they encourage employees to clock out at a certain time so they can spend more time with their families or personal interests. The Ethical Corporate Culture There are companies that have a vibrant culture, where everyone’s creativity is honed and generating new and innovative ideas is greatly encouraged. There are also companies with very traditional style of management where employees are required to be in the office at a certain time are given disciplinary action if they are tardy for several times. This only shows that different business organizations have their own The Ethical Corporate Culture Corporate culture is built and molded over time; it may still change depending on the leaders that move the company forward. For example, if a company suddenly decides to disallow casual attire on Fridays and require corporate attire as a dress code all week, it may harbor ill feelings among employees who may be looking forward to dressing up casually once a week. On the other hands, if the management decides to change the dress code from strictly corporate to Functions of Corporate Culture A company’s culture guides the thinking, behavior, and decisions of its members according to the company’s belief and values. According to Edgar H. Schein, author of Organizational Culture and Leadership (2010), the two main reasons why culture develops in organizations is because of external adaptation and internal integration. Functions of Corporate Culture External adaptation  Requires the organizational culture to determine how the company will reach its goals, accomplish its tasks, identify methods to achieve its goals, and place measures to cope with success or failure.  Methods of the organization may develop common views and goals through their shared experiences. Functions of Corporate Culture For example, reaching sales targets in order to become competitive and profitable in the market uses a goal shared by all the members of the organizations. External challenges, such as economic downturn, bad weather, political issues, and government regulations that may affect how the company achieves its goals, will have to be dealt with the accordance with the Functions of Corporate Culture For example, if there is a delay in releasing the company’s imported raw materials from customs, should the company bribe customs officials in order to expedite the process? The corporate culture will determine the answer to this question. Functions of Corporate Culture Internal integration Starts with the establishment of an identity that is unique to the business organization. Members acquire this identity through their interaction with each other. This enables the members to work in harmony with each other and to work toward advancing the Functions of Corporate Culture There are three important aspects of working together: First, the members decide who is a member of the group and who is not; Second, the members develop an informal understanding of acceptable and unacceptable behavior; Functions of Corporate Culture third, the members separate “friends” from “enemies”. Managers should be equipped in ensuring harmony within the team or organization. It is important for the members to understand what their roles are in achieving the company’s goals and the penalties or incentives that they will get if they perform Functions of Corporate Culture This is very similar to situations when you need to work on a school project with a group. You most likely prefer to work with classmates whom you can work well, but in cases when the teacher chooses who your group mates will be, members within the groups must establish rules (attending meetings, going online at a certain time, submitting assigned parts on agreed upon deadlines) in order to achieve the groups' goal, which is to submit the school project on time. Understanding Corporate Culture A person who recently joined a business organization may not easily figure out the corporate culture. Understanding organizational culture Understanding Corporate Culture Observable culture  refers to the way things are done in an organization. This can be observed in daily activities or in specific instances which include unique stories according to the company’s history, ceremonies, and corporate rituals. Understanding Corporate Culture Organizations are rich with their own stories of achieving success and conquering failures. The story on how company was founded may contain the owner’s ideals, vision, and the reason with the company was established. It may be to serve a previously unmet need, to offer solutions to common or not-so-common issues, or to give better options to the consumers. Understanding Corporate Culture Example: Bingo, a search engine company, is known to consumers as a company that provides its employees with an environment that feels like home. The office houses a TV, video games, free food, free internet, etc. the company’s rationale for this is that happy Understanding Corporate Culture Shared Values  refers to the common values that are meant to put together and motivate the members of the organization. These include a deeper understanding of what the company stands for. For example, a company may be known for its innovation, green practices, or providing solutions to social issues. Understanding Corporate Culture Example: Happy Filipino is a social business enterprise that aims to train mothers in the community to be financially independent and entrepreneurial. All the people in the company are oozing with passion and are fully to serve this segment as they know exactly the plight Understanding Corporate Culture Common cultural assumptions Include the taken-for-granted truths that the members share as result of a collective experience with the organization. These assumptions are at the core of corporate culture and are thus difficult to discern or understand because they exist at a largely unconscious level, yet they provide the key to understanding why things happen the Understanding Corporate Culture As employees become ingrained in the culture, their actions that are based on the company beliefs and values become everyday routines. These include quality of output, morality of employees, and innovativeness and excellence in Understanding Corporate Culture Example: Orange company, a telecommunications company, has ingrained to their employees the value of innovation. Every time employees meet in elevator, talk over lunch, or are anywhere else in the building, they unknowingly talk about the latest trends in technology, specifically smartphones, tablets, and the current trends in the Ethical Leadership and Management There is no doubt that the leaders of a business organization serve as the role models of the beliefs, values, and behavior that are expected from someone who represents the company. The top management sets the tone of the corporate culture, and this must be consistently adopted throughout the firm. Ethical Leadership and Management There are two recognized types of corporate culture: Compliance – based culture (traditional approach) Values-based culture (integrity- based) Ethical Leadership and Management Compliance – based culture  focuses on following rules, laws, policies, and regulations as the primary responsibility of ethics. It empowers legal counsel and Ethical Leadership and Management Example: GHI Bank in Muntinlupa City was cited by internal audit because it was not able to follow the company’s policy of dual control, that is, there should always be two persons entering the vault. The CCTV showed that there were two instances in May 2017 that the branch Ethical Leadership and Management Values-based culture  Reinforces a particular set of values rather than a particular set of rules. It is presumed that a company with a values- based culture adopts its code of conduct with more regard Ethical Leadership and Management Values-based culture also recognizes that despite the rules set by the company’s code of conduct, there are situations where rules can be applied so the organization will have to rely on the personal integrity of its Ethical Leadership and Management Example: Tina Garcia, a known actress of ABGM Network, always goes to her teleserye tapings on time, all the time. She got these values from the TV Network because all the employees of the ABGM Network give a very high regard to punctuality. Although there is no formal log-in process, all employee's stull come on time, all the time. Ethical Leadership and Management Ethical leaders are expected to practice ethical decision-making. Their goal is not simply to perform the job, but to perform consistently with a set of ethical values and principles chosen by the business organization. The ethical leaders are expected to not just care about company profits but also demonstrate caring for Ethical Leadership and Management Example: Eugenio Lapid, a supervisor of a big factory manufacturing electronic products, always ensures to talk to his subordinates during their breaks even about their personal lives or personal problems. He treats them as family instead of a simply subordinates. He also gives them constructive feedback every Ethical Leadership and Management A good ethical leaders must be visibly practicing the company’s traits and behaviors in order to influence perceptions and actions among the employees. This is important in creating, inspiring, and transforming an ethical corporate culture within the company. An effective ethical leader is able to successfully and efficiently guide, direct, and escort others toward the goals of the company, in consideration of the ethical Ethical Leadership and Management Example: Mrs. Pam Palma has been with JKL Corporation for the past 10 years as executive vice president. Ever since, she embodies punctuality, is careful with her words, and is very meticulous with her craft. She is also a role model as she was able to raise her four children well and can balance her career and family life. She never had Ethical Leadership and Management Not all effective leaders are effective ethical leaders. Some effective leaders may be able to deliver the expected output of the company with the use of coercion, harassment, or intimidation in directing the employees. However, an effective ethical leader may use more ideal interpersonal means of motivating employees by modeling ethical behavior, gentle persuasion, or positive reinforcement by offering incentives. Ethical Leadership and Management Example: MNO Corporation has produced two exemplary leaders in the Information Technology Department and in the Human Resources Department. The IT head is known as someone who can deliver IT projects even on a very short notice. He ensures that his teams members work overtime even on weekends and holidays just to finish the task. He always threatens them that they will get a low performance rating if they do not work overtime. The HR head, on the other hand, is known as someone who is very pleasant and nice to his team. With no coercion at all, his team members voluntarily go on overtime whenever there are major key result areas to be finished on a tight deadline. Regardless of the techniques, both leaders were able to deliver results. Ethical Issues At any given time, an organization may be confronted with ethical issues. An ethical issue is an identifiable problem, situation, or opportunity that requires a person to make an action or decision based on several options-whether right or wrong, ethical or unethical. It usually concerns financial matters in a business Table 3.1 some examples of Common Ethical Issues in Business Organizations Misreprese Overstating a product’s nting the benefits in order to make a benefits of sale is often committed by a product sales personnel or even by marketing officers. Misrepresenting a product- for example, saying that it can make your skin fairer without any substantial Table 3.1 some examples of Common Ethical Issues in Business Misuse Organizations of Some employees may engage in Company activities that are not related to Time and the job-for example, browsing Resources and posting on social media during office hours. The employee is clearly misusing the time that he or she is supposed to spend working for the company and the company resources by using the Table 3.1 some examples of Common Ethical Issues in Business Abusive Organizations Harassing a colleague by Behavior using physical threats, harassment, false accusations, profanity, yelling, and unreasonableness may result in conflicts within the department or organization. This disruptive behavior may Table 3.1 some examples of Common Ethical Issues in Business Conflict Organizations of Conflict of interest happens Interest when a employee is presented with a dilemma of whether to advance personal gain or interest or that of the companies. For example, an employee may choose to deal with a supplier that provides substandard products or services but gives him or her a Ethical Issues Leaders and employees must know how to deal with ideal ethical issues like these. The code of conduct and the company culture must be strong enough for the leaders and employees to Activity 4: Refer to the textbooks

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