Business Structures & Ethics PDF

LESSON 1: NATURE AND FORMS OF BUSINESS ​ Business ethics or Corporate ethics is a form of applied ethics or professional ethics that examines ethical principles and moral or ethical problems that arise in a business environment. ​ Social Responsibility, like ethics, means distinguishin...

LESSON 1: NATURE AND FORMS OF BUSINESS ​ Business ethics or Corporate ethics is a form of applied ethics or professional ethics that examines ethical principles and moral or ethical problems that arise in a business environment. ​ Social Responsibility, like ethics, means distinguishing right from wrong and going right. ​ Leadership creates a sense of mission, often referred to as Corporate Social Responsibility (CSR), that attracts people to an enterprise. ​ A business is an organization or economic system where goods and services are exchanged for one another or for money. Basic Forms of Business Organization 1. SOLE PROPRIETORSHIP - also known as a sole trader, is owned by one person and operates for their benefit. 2. PARTNERSHIP - is a business owned by two people. Types of Partnership that should be considered: 1. General Partnership - Partners divide responsibility for management and liability, as well as the shares of profit or loss, according to their internal agreement. 2. Limited Partnership and Partnership with Limited Liability - “Limited” means that most of the partners have limited liability (to the extent of their investment) as well as limited input regarding management decisions. 3. Joint Venture - Acts like general partnership, but is clearly for a limited period of time or a single project. 3. CORPORATION - The owners of a corporation have limited liability, and the business has a separate legal personality from its owner. 1.​ C corporations are considered separate tax-paying entities. 2.​ S corporations are pass-through entities, meaning that their income, losses, deductions, and credit passes through the corporation’s earnings to themselves. 4. LIMITED LIABILITY CORPORATION (LLC) - in the USA, are hybrid forms of business that have characteristics of both a corporation and a partnership 5. COOPERATIVE - Often referred to as a “co-op”, a cooperative is a limited liability business that can organize for-profit or not-for-profit. Basic Classification of Business 1. SERVICE BUSINESSES a. Service businesses offer intangible goods or services and typically charge for labor or other services provided to the government, to consumers, or to other businesses. b. Financial businesses include banks and other companies that generate profits through investment and management of capital. c. Transportation businesses deliver goods and individuals to their destinations for a fee. d. Utilities produce public services such as electricity or sewage treatment, usually under a government. 2. MERCHANDISING BUSINESSES a. Retailers and distributors act as middleman and get goods produced by manufacturers to the intended consumers; they make their profits by marking up their prices. 3. MANUFACTURING BUSINESS - buys products with the intention of using them as materials in making a new product. a. Agriculture and mining businesses produce raw materials, such as plants or minerals. b. Manufacturers produce products, either from raw materials or from component parts, then sell their products at a profit, for example cars, clothing or pipes. c. Real-estate businesses sell, rent, and develop properties – including land, residential homes, and other buildings. d. Information businesses generate profits primarily from the sale of intellectual property – they include movie studios, publishers, and Internet and software companies. 4. HYBRID BUSINESSES Hybrid businesses are companies that may be classified into more than one type of business. PURPOSES OF ESTABLISHING A BUSINESS ENTERPRISE The purpose is the reason you want to pursue your destiny for yourself and for the organization you will create. Ralph Waldo Emerson said that starting a business of your own is a “divine activity.” Here are some common reasons: 1. To Make Money and Have Financial Independence 2. To be your Own Boss 3. To Self-Actualize/ To fulfill Own Interest and Enjoyment 4. To Make Dreams Come True LESSON 2: CORE PRINCIPLES IN BUSINESS OPERATIONS Core Principles in Business Operation 1. Fairness - refers to the level of even-handedness in dispensing justice whereby claims are recognized in the order of their legal and contractual priority. Justice means giving each person what he or she deserves or, in more traditional terms, giving each person his or her due. a. Principles of Justice - The most fundamental principle of justice— one that has been widely accepted since it was first defined by Aristotle more than two thousand years ago – is the principle that “equals should be treated equally and unequal unequally.” b. Different Kinds of Justice i Distributive Justice – refers to the extent to which society’s institutions ensure that benefits and burdens are distributed among society’s members in ways that are fair and just. ii Retributive or Corrective Justice – refers to the extent to which punishments are fair and just. iii Compensatory Justice – refers to the extent to which people are fairly compensated for their injuries by those who have injured them; 2. Accountability -is the obligation of an individual or organization to account for its activities, accept responsibility for them, and disclose the results in a transparent manner. -​ Corporate Accountability refers to the act of being accountable to the stakeholders of an organization, 3. Transparency - Refers to the lack of hidden agendas and conditions, Corporate Transparency describes the extent to which a corporation’s actions are observable by outsiders. 4. Stewardship - an ethic that embodies responsible planning and management of resources. (giving back) COMMON PRACTICES IN BUSINESS ORGANIZATION A. DECORUM 1. On-Time and Promptness - The easiest way to exhibit professionalism is to consistently be punctual. 2. On Preparation - In addition to arriving on time, business etiquette dictates that an individual must be prepared to conduct the business at hand. 3. On Agenda - The chairperson of the meeting should circulate a meeting agenda to each participant at least one week in advance. 4. On Attire and Appearance - Good business etiquette includes dressing appropriately. 5. On Decorum - An individual's attitude and deportment exhibit just as must about his seriousness as his wardrobe does. 6. On Basic Courtesy and Respect -Good etiquette involves showing respect not only to your superiors but also to your peers and subordinates; in other words, to everyone. 7. On Greetings - Standard greetings are an exchange of handshakes and a smile. 8. On Handshakes - The rules on handshakes are about the same in the West, although Filipinos may use a little more contact (a pat on the side of the arm as a gesture of hospitality or friendship). 9. On Body Language - Filipinos have fascinating nonverbal language, much of it involving facial expressions. 10. On Formal and Informal Address - Start out by addressing a new business acquaintance by his or her family name. 11. On Speaking in Meetings - Keep the meeting organized by only speaking when you have the floor. 12. On Listening - You may find that many of the questions you have about a topic are answered by the content of the meeting. 13. On Cell Phones and Laptops - Turn off your cell phone prior to the start of the meeting 14. On Business or Visiting Cards - It is advisable to present your business or visiting card with both hands, and to take that of your contacts with both hands also, to show a certain consideration for the person. 15. On Breaks - Meetings should have a break every 2 hours. the break should be 20 minutes long, and meal breaks should be 30 minutes long. 16. On Appropriate Communication Business etiquette involves communicating effectively. go a long way in ingratiating herself into the receiver’s good grace. 17. On Bargaining - Bargaining is part of the Filipino way of life, and it has become natural for the region’s businessmen to negotiate and bargain in order to obtain better commercial conditions. 18. On Bringing in Guests - Do not bring unannounced guests to meetings. If you have someone you would like to bring to a meeting, then contact the chairperson for permission to bring your guest. 19. On Building Relationships - Show others that you value their work by taking the time to visit and talk with them. 20. On Business Meals and Recreation - Entertainment in the business world takes place in restaurants, bars, hotels, lounge bars, at home, and sometimes in nightclubs. 21. On Gift Giving - Imported brandy and whiskey are prized gifts, even if the recipient does not drink alcohol. If you are given a small gift, accept it amiably, but do not open it in front of other guests or only do so after you have left. B. PROTOCOL 1) The Basics of Protocol - The purpose of business protocol is to encourage all employees in a company to act in a uniform manner. 2) Training in Protocol - Etiquette Expert notes that an increasingly diverse workforce requires such training to help people from all walks of life communicate with each other and work together. 3) Benefits of Protocol - helps present a uniform, professional face to the public, partners, and donors. 4) International Protocol 5. Examples of Protocol a. Filipino Family-Modeled Business b. Business is Personal c. Status-Consciousness d. Politeness and Ambiguity C. POLICIES Business policy defines the scope or spheres within which decisions can be taken by subordinates in an organization. 1. Features of Business Policy a. Specific e. Simple b. Clear f. Inclusive/Comprehensive c. Reliable/Uniform g. Flexible d. Appropriate h. Stable 2. Difference between Policy and Strategy Policy is a blueprint of the organizational activities which are repetitive/routine in nature. While strategy is concerned with those organizational decisions which have not been dealt with/faced before in the same form. Policy formulation is the responsibility of top-level management. While strategy formulation is basically done by middle-level management. Policy deals with routine/daily activities essential for the effective and efficient running of an organization. While strategy deals with strategic decisions. Policy is concerned with bought thoughts and actions. While strategy is concerned mostly with action. A policy is what is, or what is not done. While strategy is a methodology used to achieve a target as prescribed by a policy. D. ADVERTISING is how a company encourages people to buy its products, services, or ideas. 1. Newspaper 2. Magazine E. MARKETING. The term “marketing” refers to the process of product development as well as sales, promotion, and distribution optimization F. BOOKKEEPING is the process of recording all financial transactions to keep track of cash flow. Single-entry bookkeeping is an accounting system under which every transaction is recorded on a single line. Double-entry bookkeeping is a kind of accounting system governed by certain rules that ensures that each transaction that takes place is reflected in two separate accounts. Another more specific asset of accounting is auditing, which entails the careful examination of an individual's or firm’s financial records for the purpose of determining their validity and reliability. G. REPORTORIAL REQUIREMENTS Business or enterprise reporting is “the public reporting of operating and financial data by a business enterprise. 1. Annual Report is a comprehensive report on a company’s activities throughout the preceding year. Annual reports usually include a. General Corporate Information g. Notes to the Financial Statements b. Accounting Policies h. Chairperson’s Statement 2. Financial Statement ​ A financial statement or financial report is a formal record of the financial activities and position of a business, person, or entity. ​ A balance sheet also referred to as a statement of financial position, reports on a company’s assets, liabilities, and owner’s equity at a given point in time. ​ An income statement, also known as the statement of comprehensive income, profit or loss report, reports on a company’s income, expenses, and profits over a period of time.  ​ A Statement of changes in equity, also known as an equity statement or statement of retained earnings, reports on the changes in equity of the company during a stated period. ​ A cash flow statement reports on a company’s cash flow activities, particularly its operating, investing, and financing activities. H. DOCUMENTATION refers to the processes and items that serve as evidence for the validity or truth of a certain claim or statement. I. WHY IS A CODE OF ETHICS IMPORTANT? Businesses that do not have a code of ethics should develop one that employees can live by and make decisions with while at work. J. SAMPLE CODE OF ETHICS A code of ethics, also called a code of conduct or ethical code, sets out the company’s values, ethics, objectives, and responsibilities LESSON 4: THE CLASSICAL PHILOSOPHIES AND THEIR IMPLICATION ON BUSINESS A. Socrates: The Gad-fly at the Marketplace (469-399 B.C.E.) is one of the few individuals who could say has so shaped the cultural and intellectual development of the world that, without him, history would be profoundly different. He is best known for the Socratic method of question and answer, his claim that he was ignorant, and his claim that the unexamined life is not worth living, for human beings. 1. What Entrepreneurs Can Learn from Socrates Defined as a systematic process for examining human belief. Recognizes that all new understanding is linked to prior understanding. Entrepreneurs can benefit from Socratic Method as they face assumptions based on others' beliefs. Entrepreneurial learning involves constant questioning and testing of assumptions for validity. Assumptions can range from market beliefs to product features' effectiveness. "THE UNEXAMINED LIFE IS NOT WORTH LIVING" 2. The Socratic Method and Entrepreneurial Learning a. The Socratic Method provides a focus through clarity of purpose. b. Use the Socratic Method to develop and reinforce an entrepreneurial mindset. Reich states that the “Socratic method is better used to demonstrate complexity, difficulty, and uncertainty than at eliciting facts about the world.” 3. Dare to disagree Socrates insisted on our right to think for ourselves. Too often, he warned, humans sleepwalk through life, simply going along with the crowd. B. Plato: The Philosopher-King (427-347 B.C.E.) is one of the world’s best-known and most widely read and studied philosophers. 1. Combating the Relativism of the Sophists Plato could see the danger this moral relativism posed for the state and for the people who lived in it, and his attacks on the sophists showed up their hollow bravado that so many took for wisdom. 2. The Theory of Forms differentiates the abstract world of thought from the world of the senses, where art and mythology operate. Plato also argued that abstract thought is superior to the world of senses. (dapat raw may standard, ex. cats) 3. The Theory of the Tripartite Soul In the Republic and the Phaedrus, Plato describes the soul as divided into three parts, labeled appetitive, spirited, and rational. 4. Education for the Health of the State Plato emphasizes the importance of education in a healthy state, urging children to live virtuous lives and seek wisdom from a young age, ensuring it is not left to chance. “Good people do not need laws to tell them to act responsibly, while bad people will find a way around the laws.” – Plato C. Aristotle: All or nothing (384-322 B.C.E.) is a towering figure in ancient Greek philosophy, making contributions to logic, metaphysics, mathematics, physics, biology, botany, ethics, politics, agriculture, medicine, dance, and theater. 1. Virtue and Happiness Happiness in Ethics is a translation of Greek eudaimonia, meaning success and fulfillment. Aristotle views happiness as our highest goal, but people often view it as physical pleasure or honor. True happiness is derived from virtue, a disposition to behave correctly from a young age. 2. Moral Education Aristotle's Ethics focuses on understanding what is good and why it is good, rather than teaching it through classrooms or arguments. It aims to build societies and institutions that instill goodness. 3. The Doctrine of the Mean Aristotle's famous ethics doctrine suggests virtue is a mean state between extremes of excess and deficiency, learned through constant practice, implying no set rules, but rather learning from experience. 4. The Unity of the Virtues Ethics, derived from Greek ethos, focuses on a good character, ensuring all virtues are a unified unit, as no good person can exhibit some without exhibiting all. 5. The Life of Contemplation The activity of wisdom is contemplation, so contemplation must be the highest activity of human life. 6. Implications to Business Aristotle, the intellectual godfather of the virtue theory of ethics, emphasized character in ethical business decisions, addressing ethical questions relevant to corporate leaders. “Happiness is the meaning and the purpose of life, the whole aim, and end of human existence.” – Aristotle D. Immanuel Kant: Duty-Based Ethics Immanuel Kant, a significant Western philosopher, significantly influenced metaphysics, epistemology, ethics, and aesthetics, and advanced the deontological ethics theory of duty and obligation. Deontology is a moral theory that is dependent on the Scriptures – which may refer to rules, moral laws, and intuition. It is based on the Greek words “deon” and “logos,” meaning the “study of duty.” 1. The Categorical Imperative Kant's categorical imperative is a universal moral law emphasizing the duty to keep promises, as it ensures trust and honesty in relationships and agreements. According to Kant, everyone has the obligation to perform moral duties to oneself as well as to other people. There are two types of duties: ​ The hypothetical imperative is when an individual will perform a certain action to achieve the desired result. ​ The categorical imperative involves an individual performing a certain action as compulsory regardless of the result or away from any personal influence. Kant believes that the categorical imperative is the basis for determining whether one’s action is deemed to be ethically correct. There are three maxims: 1.​ The first maxim: an action can only be considered ethically correct if it can be accepted or made into universal law. 2.​ The second maxim: is that a person should be treated as an end and not the means to achieve an end. 3.​ The third maxim: everyone should act as a member of an ideal kingdom where he or she is both the ruler and subject at the same time. “Act only according to that maxim by which you can at the same time will that it should become a universal law.” – Immanuel Kant E. Jeremy Bentham and John Stuart Mill: Utilitarianism Jeremy Bentham (1748-1832) was an English philosopher and political radical. He is primarily known today for his moral philosophy, especially his principle of utilitarianism, which evaluates actions based on their consequences. John Stuart Mill (1806-1873) profoundly influenced the shape of nineteenth-century British thought and political discourse. His substantial corpus of works includes texts in logic, epistemology, economics, social and political philosophy, ethics, metaphysics, religion, and current affairs 1. Utilitarianism  Concept of "the end justifies the means" by John Stuart Mill and Jeremy Bentham. Outcomes result from actions with greater value. Advocates for maximizing happiness for societal good. Depends on consequentiality, stating the morally right course of action is the one that balances benefits over harms. Doesn't consider benefits from lies, manipulation, or coercion. 2. Two Types of Utilitarianism 1.​ Rule utilitarianism differentiates between the material pleasures of the consumer and shareholders and the higher pleasures of taking care of employees. This implies that there should be a code of conduct for how to treat employees. FAIREST 2.​ Act utilitarianism makes the most ethical actions possible for the benefit of the people. a.​ Therefore, there is no correct way to treat employees. “The sad truth is that it is the greatest happiness of the greatest number that is the measure of right and wrong.” – Jeremy Bentham “A person may cause evil to others not only by his actions but by his inaction, and in either case, he is justly accountable to them for the injury.” – John Stuart Mill LESSON 5: THE IMPACT OF BELIEF SYSTEM IN THE BUSINESS SETTING How World Religions View Business Ethics Major religions include Judaism, Christianity, Islam, Hinduism, Buddhism, Confucianism, Taoism, and Shintoism. Each religion has its own system of beliefs, ceremonies, and worship. Religious ethics offer consistent and reasonable business statements. Misinterpretation of religious ethical approaches can lead to serious problems in global business. Understanding religions' approaches to business ethics promotes tolerance and understanding. Deeper knowledge of religious business ethics can facilitate dialogue between different religions and philosophical religions. Judaism: Jewish Business Ethics Jewish tradition doesn't dictate economic life organization. Biblical and rabbinic sources of Jewish law and ethics insist on regulation of buyer-seller, employer-employee, and borrowers-lender relations. Torah teachings prohibit falsifying measures, paying wages before sunset, and deducting interest from loans. Themes and Theology Work and commerce are not inherently evil or profane in classical Judaism. Actions should reflect no impure motives and demonstrate concern for others' welfare. Rabbinic sage advises respecting others' property as one's own. Competition and acquisitiveness are not disgraceful, but should not unfairly advantage economically less powerful or savvy individuals. Work has inherent value, including dignity attached to earning one's living. Business Ethics in Practice Commerce should be conducted with honesty and full disclosure of information. Unreasonably high or low prices can be canceled by the party causing damages. Deceptive practices are prohibited, including inaccurate weights and measures. In disputes, adherence to local customs is enforceable unless otherwise specified. Arbitrators must balance worker rights against management interests. Ethical principles include maintaining above suspicion and going beyond the law. 1. Requirement of accurate weights and measures (Leviticus 19:35-36) 2. Prohibition of Monetary Deception (Leviticus 25:14) 3. Prohibition of Verbal Deception (Leviticus 25:17) 4. Stealing a person’s mind (Genesis 31:26; II Samuel 15:6) 5. Putting a Stumbling Block Before the Blind (Leviticus 19:14) 6. Treatment of Workers 7. Not Wasting Time at Work 8. Whistleblowing Christianity: Crucial Principles 1. The Golden Rule The concept often invocated in business ethics is the “Golden Rule.” Jesus enunciated it in these terms: “Do to others as you would have them to do to you” (Bible, Luke 6:27; Matthew 7:12). Prophet Muhammad: An Ideal Human Being Best teacher, preacher, guide, statesman, lawgiver, judge, diplomat, negotiator, military commander. Best family man, husband, father, neighbor, and friend. Highly honest and successful businessman. Chosen by God at 40, he was involved in commerce from an early age. Emphasized honesty and kind dealings as key to business success. Provided numerous teachings on business and economic issues. Listed major principles of fair business dealings according to Islam. "The truthful and honest merchant is associated with the Prophets, the upright, and the martyrs." Here are only a few major principles of fair business dealings according to Islam. 1.​ The Prophet advises against fraud and deceit in sales. 2.​ Sellers should avoid excessive oaths in sales to reduce abundance. 3.​ Mutual consent is necessary for a sale to be complete. 4.​ Strictness is required in weights and measures. 5.​ Monopoly is a sin and should be avoided. 6.​ Price fixing in free enterprise should only occur in crisis or extreme necessity. 7.​ Hoarding merchandise to increase prices is forbidden. 8.​ Transaction of haram items, like intoxicants, is forbidden. 9.​ The Prophet's advice is to guard against doubtful things to maintain religion and honor. Business people and their enterprises need to be reminded about their roles and responsibilities. The following issues need special attention in the present scenario. Globalization should promote respect, equality, and fairness for all, preventing exploitation based on race, color, nationality, gender, or faith. Earth's resources should be used with care and responsibility to leave the world in a better condition for future generations. Understanding and respecting diversity is crucial, despite differences. The universal golden rule should be followed, aiming to empower others and eradicate poverty, hunger, illiteracy, disease, and unsanitary conditions. Businesses should promote ethical standards, honesty, truthfulness, and commitment fulfillment. Political freedom, open debates, and participatory democracies should be promoted. An educational system should promote openness, dialogue, and guard against fanaticism. Islamic ethics in financial transactions include honesty, truthfulness, and proficiency. Hinduism: Non-Violence Hinduism is the third religion in the World by a number of believers, behind Islam and Christianity. Ethical principles of Hinduism: Yamas (restraints or abstentions) 1. Non-Violence (Ahimsa) - is the principle of non-harming, encompassing physical, verbal, and mental violence. 2. Truthfulness (satya) - refers to truthfulness, honesty, and integrity in all aspects of life. 3. Not to steal (asteya) 4. Sexual Moderation (brahmacharya) 5. Non-possession (aparigraha) - principle of non-attachment to material possessions and external things. Niyamas (Observance or Rules) 1. Purity (shauca) 2. Satisfaction (santosa) 3. Austerity / Self-discipline (tapas) 4. Self-knowledge (svadhyaya) 5. Surrendering to God (Ishvarapranidhana) Tata Group: A Reflection of Indian Ethics Tata Group, a respected Indian business house, operates 80 companies across various sectors. The group has established excellence institutes in both industry and social world. Tata's core values: Integrity, Understanding, Excellence, Unity, and Responsibility. These values align with Hinduism's work philosophy, providing a foundation for business ethics and business ethics. Buddhism: Maxims for Business Emphasizes mindfulness cultivation and minimalistic worldview. Avoids dependence and worldly attachment.  Relevant to corporate managers, entrepreneurs, and those in the marketplace. Key teachings: Work Hard, No Excuses, Confucianism's Influence on Chinese Business Culture Emphasizes humaneness, right, integrity, loyalty, and respect. Emphasizes the importance of filial piety and respect. Believes in the concept of small profit as a loss. the most profound and dynamic system in traditional Chinese culture Taoism: Action without Action Taoism, a Chinese spiritual, philosophical, and religious tradition, emphasizes harmony with the Tao. Tao, meaning "way," "path," or "principle," is central to Taoism. Tao is both the source and force behind all existence. Shintoism: The Way of the Gods also called kami-no-michi an ethnic religion in Japan, focusing on ritual practices. Emphasizes connection between present-day Japan and its ancient past. Key teachings include: - Natural Order - Impurity - Purification LESSON 6: THE FILIPINO VALUE SYSTEM AND ITS EFFECTS ON BUSINESS A. Utang na Loob - or debt of gratitude means that one does not forget the good deeds that others may have done to him or her, especially in times of great need. B. Filial Piety - It is a virtue to have respect for one’s parents, elders, and ancestors. C. Padrino System or patronage in the Filipino culture, business, and politics is the value system where one gains favor, promotion, or political appointment through family affiliation or friendship, as opposed to one’s merit. D. Suki - means “loyal customer.” E. Bahala na has been loosely translated as “come what may.” Hence, it is referred to as the Filipino version of fatalism, that is, leaving everything in the hands of fate. F. “Mañana Habit” comes from the Spanish word “Mañana” which means “tomorrow” or “an unspecified future time.” Hence, Mañana habit, refers to procrastination or putting off for tomorrow what can be done today. G. Filipino Family Values 1. Hospitality - refers to the friendly and generous reception and entertainment of guests, visitors, and strangers. 2. Humor, Adaptability, and Creativity - Filipinos' sense of joy and humor is evidenced in their optimistic approach to life and its travails. 3. Resilience, Resourcefulness, and Ability to Survive - Filipinos have the extraordinary ability to make something out of basically nothing for the sake of survival. 4. Faith and Religiosity - This reflects the Filipinos' strong faith in God, as seen in their various practices. 5. Hard Work and Industry - Filipinos are universally regarded as excellent workers who perform well, whether the job involves physical labor and tasks or highly sophisticated technical functions. H. Negative Filipino Traits 1. Bribery and Corruption - concerns the practice of offering something, usually money, to gain an illicit advantage. 2. Double Standards - can be described as a biased or morally unfair application of the principle that all are equal in their freedoms. 3. General Disregard for Rules - Filipinos exhibit a general disregard for rules, extending beyond lack of discipline to nonchalant behavior, possibly due to oppression by colonizers over 350 years. 4. Pagtakpan - This attitude refers to the covering-up of the shortcomings or wrongdoings of another person. 5. Gossiping - Many Filipinos are fond of talking about others’ business.