Applying Ethics in Business PDF

APPLYING ETHICS IN BUSINESS CHAPTER 3  ETHICS Derived from the Greek word “ethos”. Belief systems and actions that guide people on how to live their lives as they relate to other people around them. It deals with truthfulness, justice, moral duties, and obligations. Includes what is...

APPLYING ETHICS IN BUSINESS CHAPTER 3  ETHICS Derived from the Greek word “ethos”. Belief systems and actions that guide people on how to live their lives as they relate to other people around them. It deals with truthfulness, justice, moral duties, and obligations. Includes what is good to other and avoiding what is not good.  ETHICS Understanding what is “right” and “wrong” can come from different sources, such as: 1. Religion or Spiritual beliefs; 2. Influence of family and friends; 3. Ethnic background; 4. Social upbringing; 5. Media (e.g., internet, TV, radio); and 6. Personal role models  CORPORATE SOCIAL RESPONSIBILITY / CSR It is concerned with the responsibilities and obligations of businesses to people, communities, and the society around them. It is no longer a mere avenue for enhancing corporate image, but for attaining competitive edge in today’s highly competitive business environment. BUSINESS ETHICS The application of ethical principles and standards in a business environment. It is a broad discipline that attempts to address improper attitudes and actions that could be detrimental to the company. However, business ethics is not confined to the prevention of fraud or other irregularities. BUSINESS ETHICS It seeks to achieve a corporate culture that drives people in the company to do things legally and ethically. Without business ethics, the stakeholders will be negatively affected because their interests and concerns will not be met. Shareholders Community Government Decline in revenue, Lack of corporate support Insufficient tax collections profits, and cash flows to the community Increase in violations of Decline in stock price Lack of job opportunities laws and regulations Corporate bankruptcy Destruction of the local environment Employees Vendors Loss of employment Delayed payments for Job dissatisfaction and NEGATIVE IMPACT OF UNETHICAL goods received demoralized workforce ACTS TO STAKEHOLDERS Kickback and bribery Insufficient personal income Creditors Customers Inability to collect loan Substandard and unsafe principal and interest from products the company Exorbitant prices of Poor credit rating of the products borrower-company Customer dissatisfaction  ILLEGAL ACTS Are actions of the corporation, as well as its corporate officers and employees that are contrary to prevailing laws and government. It necessarily carry monetary fines and penalties to the company and guilty individuals. Examples: Tax Evasion Money Cybercrimes Patent laundering infringement Violation of labor Violation of Insider trading and social environmental security laws laws COMMUNICATION OF THE CODE OF ETHICAL CONDUCT Before implementing the company’s code of conduct, it must be communicated first to all interested stakeholders. The manner of communicating the ethical code is ordinarily done through the following modes: Employee orientation programs; Posting in the company website; Newsletters and publications; Bulletins; Official memoranda; and Employee manual EXAMPLES OF UNETHICAL ACTS IN VARIOUS COMPANY DEPARTMENTS MARKETING - Making a false INTERNAL AUDIT - Not reporting of representation or improper claim audit findings to the audit committee. about the features of a product PRODUCTION - Temporary patching PROCUREMENT - Procurement of a defective product and hiding the manager buys materials needed from product defect. his/her own trading firm at a high cost. RESEARCH AND DEVELOPMENT - ACCOUNTING - Understating the Divulging confidential information on bad debts expense to show high net the ingredients of a product. income. HUMAN RESOURCE - Falsifying BOD / SENIOR MANAGEMENT - employee competence and Approving a major project on which qualifications. they have a commission.  CODE OF ETHICAL CONDUCT It must be tailor-fitted to the company’s nature of business, industry, size, products, services, and other factors. The following are the major contents of the code of ethical conduct: 1. Company profile 2. Objectives of the code of ethical conduct 3. Ethical principles adapted by the company 4. List of instances of unethical acts 5. Process for identifying the threats or risks of unethical acts 6. Process for determining whether the threats are significant. 7. Resolving ethical conflicts. 8. Reporting of ethical issues and concerns. 9. Sanctions for violations of the code of ethical conduct. 10. Approval of the code of ethical conduct.  CODE OF ETHICAL CONDUCT The following specific unethical behaviors and unethical actions are also reflected and prohibited in the code of ethical conduct: 1. Divulging of confidential information and trade secrets 2. Personal use of company vehicles and equipment 3. Unauthorized commissions and consulting fees 4. Conflicts of interests and outside business of officers and employees 5. Reimbursement of personal expenses 6. Prohibition on bribery  RESOLUTION OF ETHICAL ISSUES IN THE FIELD OF ACCOUNTING A behavior or an act that is expressly prohibited in the company’s code of ethical conduct is outright unethical. However, if not expressly prohibited, the following steps may serve as guides in the resolution of ethical issues: 1. Identify the facts 2. Identify the ethical issue 3. Analyze the alternative course of action 4. Make a decision