Good Governance and Code of Ethics Lesson 3 PDF

LESSON 3- (GOOD GOVERNANCE) **GOOD GOVERNANCE AND CODE OF ETHICS** **GOVERNANCE** -Governance is the management framework that enables senior executives to direct and control an organization. It ensures that the information provided to them is complete, accurate, and timely for effective decision...

LESSON 3- (GOOD GOVERNANCE) **GOOD GOVERNANCE AND CODE OF ETHICS** **GOVERNANCE** -Governance is the management framework that enables senior executives to direct and control an organization. It ensures that the information provided to them is complete, accurate, and timely for effective decision-making. Additionally, governance includes control mechanisms to ensure that management strategies and directives are executed systematically and effectively. **GOOD GOVERNANCE** **-**This means making decisions in a fair and effective way. It's hard to achieve perfectly because it involves many people with different ideas and experiences. Achieving good governance requires ongoing discussions to ensure that the interests of all stakeholders are considered and reflected in policy initiatives. **CONCEPT OF GOOD GOVERNACE** **-**become buzzword (trend) an synonymous to sound development management. In the mid-1980s, governance focused on strict adherence to the rule of law. After the fall of the Soviet Union and the Cold War, it evolved to signify the transformation of public administration, particularly in developing countries adapting to globalization. -The concept of \"governance\" has ancient roots, deriving from the French word \"gouvernance,\" which means the act or manner of governing. By the mid-16th century, \"government\" referred to a system of governance, evolving by the 18th century to signify a \"governing authority.\" However, by the 19th century, \"governance\" fell out of favor as a political term and became less commonly used. -In the 1980s, governance regained popularity, particularly due to economic reforms and globalization. The emphasis shifted to the processes and styles of governing, with a focus on sustainable development.  **Efficient**: Resources are used wisely to achieve optimal results with minimal waste.  **Transparent**: Operations and decision-making are open and clear, allowing public access to information.  **Equitable**: Fairness in distributing services and resources, ensuring all individuals have equal opportunities. **BASIC ELEMENTS OF GOOD GOVERNANCE** **-**The **rule of law** is crucial for good governance, ensuring that laws protect human rights and civil liberties, especially for minorities. Key components include an independent judiciary, a strong legal framework, equal access to justice, an incorruptible police force, and effective dispute resolution mechanisms. Without the rule of law, countries may face political instability and corruption, making them less attractive for investment. Overall, it fosters stability, accountability, and trust in governance. **TRANSPARENCY -**is vital for good governance, especially in the business sector. It involves making decision-making processes open and accessible, ensuring that information is clear, accurate, and complies with established rules. This fosters trust among shareholders, employees, and the public, enhancing credibility and relationships. Additionally, transparency in the workplace leads to faster problem-solving, stronger teamwork, and increased productivity. Overall, it promotes a culture of openness and accountability, crucial for effective governance and organizational success. **RESPONSIVENESS-** is important for good governance, meaning organizations need to act quickly and effectively to meet the needs of all stakeholders, like customers and employees. Good communication is key, especially during crises, as it helps build trust and guides the organization. Overall, being responsive improves decision-making and strengthens relationships with stakeholders. It involves two main parts: 1. **Value**: This is about providing useful information---like insights and data---that helps stakeholders make better decisions. 2. **Speed**: This refers to how quickly organizations can deliver that information when it\'s needed. **CONSENSUS ORIENTED** **-**consensus-oriented governance encourages teamwork and ensures that everyone's voice is heard when making decisions. **EQUITY AND INCLUSIVENESS** -Equity and inclusiveness are based on the idea that all members of an organization or society must feel the sense of belongingness and must not havethe impression of being excluded from the typical group.( but it doesn't mean treating everyone exactly the same. Some people may need more help or different kinds of support to succeed.) -**Inclusivity** means individuals are expected to be treated with respect, dignity,collegiality, and kindness. **EFFECTIVENESS AND EFFICIENCY-** effectiveness and efficiency mean the government does what it promises and does it in a smart, cost-effective way. Example : the government said that they will build houses and actually did and build it using a little money as possible. **ACCOUNTABILITY-** means that government officials and leaders are responsible for their actions and decisions. They must explain and justify what they do, and if they make mistakes or misuse resources, they can be held accountable or face consequences. **PARTICIPATION -**means involving citizens in decision-making to ensure their voices are heard and considered in policies and projects. **ETHICS, VALUES AND MORAL IN GOOD GOVERNANCE** **-**refer to the principles and standards that guide the behavior of leaders and officials. These ensure honesty, integrity, fairness, and respect for laws and people in all government actions and decisions.**Morals** **MORALS-** are a person's sense of right and wrong. They are the personal standards that guide someone's behavior. **VALUES -** are the beliefs or ideas a person or group holds as important. They guide decisions and actions. **INDIVIIDUALS INFLUENCES ON ETHICAL BEHAVIOR** **-**refer to the personal factors that shape how a person decides what is right or wrong. These factors guide people in making ethical decisions in their actions and interactions **Individual Factors Affecting Ethics:** **Stages of moral development -** moral development is the process wherein children are able to develop their right attitudes and behaviors on how totreat other people in the society founded on social and culture norms, rulesand laws. **Personal values and morals** -shape a person's behavior and decision-making. Values are the guiding principles that define what is important to you, while morals are your sense of right and wrong based on those values. **Locus of control** is a concept in psychology that concerns how intensely people consider they have controlover the situation and experiences that influence their lives. a person with an internal locus of control might take responsibility for their actions and work hard to improve outcomes, while someone with an external locus might blame circumstances or others for failures. **Family influences** - family influences are crucial in shaping the foundation of a person\'s ethics, behavior, and worldview. **Peer influences -** peer are those coworkers who are always around during the conduct of operations in the workplace. Sometimes and individual's decisions in life are influenced by the behaviors and attitudes peers. **Life experiences -** life experiences of people help them evaluate whether their behaviors and attitudes are ethically correct, incorrect, or acceptable.These experiences help individuals discover possible bases of moral obligations that consist of God, human reason, or the goal to be happy. **Social Norms** - ethical behavior could also be defined through local customs and traditions in a certain culture. What is normally acceptable in one culturecould be absolutely forbidden in another culture. **Religious beliefs -** most faith believes in life beyond death. The theme of judgement in the afterlife is a shared belief among most religions. Thus, the existence of Ten Commandments as guide to good deeds. Obeying the commandments seriously is an important factor for a person to define his overall ethical behavior. **Upbringing**- upbringing significantly impacts a child\'s future behavior, values, and how they relate to the world around them. **Laws**- are established rules and regulations created by governing authorities to maintain order, protect individual rights, and promote the general welfare of society. **SITUATIONAL INFLUENCES ON ETHICAL BEHAVIOR** -refer to external factors and circumstances that can affect how individuals make ethical decisions. **Two Main Situational Factors:** **Issue-Related -** is the importance of the decision to the decision maker. **Moral intensity-** refers to the degree to which an individual perceives a situation as ethically significant or morally charged. It influences how people respond to ethical dilemmas and can impact their decision-making processes. **Influences on moral intensity includes the following:** **THE MAGNITUDE OF CONSEQUENCE** - every decision made by leaders or public officials has consequences. These consequences can affect people in different ways, depending on how important the decision is. When we talk about the magnitude of consequence, we\'re asking how big or serious these effects will be. **THE SOCIAL CONSECNSUS** - is when most people in a group or society agree on something. It helps guide decisions and keeps things peaceful. **TEMPORAL IMMEDIACY**- means how soon something will happen after a decision is made or an action is taken. **PROXIMITY -** is about how close the government is to the people. Being close in location and understanding leads to better help, trust, and communication. (EMOTION) **CONCENTRATION OF EFFECT** - refers to how **strongly** the results of a decision or action affect a specific group of people or a particular area, rather than affecting everyone equally. **MORAL FRAMING** - is about how the words we use and our perspective can change how we feel about right and wrong. How we describe things can lead to different opinions, even about the same facts. **MORAL MUTENESS** - is when businesses avoid talking about ethics, which can result in poorer decision-making. Open discussions about morals help create a culture of ethical decision-making. **Moral muteness usually takes place due to some concerns on perceived threats to:** 1.**HARMONY -** gests that people avoid talking about moral issues because they fear it could lead to conflict and negative reactions among colleagues, which might disrupt the overall team dynamic. **EFFICIENCY** - suggests that some people avoid discussing moral issues because they think it makes decision-making more complicated and time-consuming. They prefer to focus on practical aspects to reach decisions more quickly. **IMAGE OF POWER AND EFFECTIVENESS** - managers consider that their image will be hurt if they would be seen as someone idealistic or making decisions for ethical reasons. **CONTEXT RELATED** \- means judging actions based on the situation and circumstances instead of strict rules. It looks at cultural differences, intentions, outcomes, and social norms to determine what is right or wrong. **REWARD -** Rewarding ethical behavior encourages a positive culture within an organization. However, focusing only on results can lead to unethical actions if employees think they can get away with it. If unethical behavior is ignored, it can become more common. **AUTHORITY** - subordinates are likely just to follow instructions from their superiors. On the other hand, middle managers obey orders from their seniors. Hence, when senior managers create unethical decisions, their juniors are just expected to conform. **BEREAUCRACY -**Bureaucracy is a way to organize people in large groups, with clear rules and levels of authority. It can help things run smoothly but can also slow things down and limit creativity**.** **WORK ROLES -** define the responsibilities, tasks, and expectations for individuals in an organization. They help create clarity, efficiency, and teamwork within the workplace. **ORGANIZATIONAL CULTURES -** the norms of the group often define the standard or satisfactory behavior in an organization. This could mean that even an unethical behavior may be considered ethical if the group is amenable to it. **NATIONAL CONTEXT** - affects ethics by reflecting the unique culture and shared values of each country. What is considered right or wrong can vary widely based on these cultural influences, impacting decision-making and behavior. **CODE OF ETHICS -** A code of ethics is a formal document that outlines the values, principles, and expected behaviors for individuals within an organization or profession. It serves as a guide for ethical decision-making and helps create a culture of integrity. **EMPLOYEE CODE OF CONDUCT** - is a set of rules that tells employees how they should behave at work. **CONFIDENTIALITY AND PRIVACY POLICIES** - are rules that companies create to protect sensitive information, such as customer details and business data. These policies ensure that personal information is kept safe and not shared without permission. **PROFFESIONAL APPEARANCE POLICIE**S - re rules about how employees should dress for work. **PROMOTING GREEN BUSSINESS PRACTICES -** means making choices that are good for the environment, like using less paper, recycling, and following safety rules. These practices help protect the planet and can also be good for business. **OBEYING THE LAW** - means that employees must follow all the rules and laws that apply to their job. **CARING AND CONSIDERATION POLICIES** - businesses must not allow their consumers to feel that they are just after profit. Companies should create as part of their code of ethics that employees should reflect a caring, considerate manner atmosphere to customers. Employees must be trained to be helpful and sympathetic staff. **Key Components of Code of Ethics in Business** **LEGAL ISSUES -** in the workplace refer to problems that happen when employees don't follow the law. Companies should document these rules and explain the consequences of breaking them in their code of ethics, ensuring everyone knows what is expected. **COMPLIANCE AND REGULATION** - mean that businesses must follow specific laws for their industry. If they don't, they could face fines and legal action. Following the rules is important for avoiding problems and keeping the company's reputation strong. **VALUE-BASED COMPONENTS** - are six important values (trustworthy, respectful, responsible, fair, caring, and good citizens) that guide how employees should act at work. They help create a positive and ethical workplace. **VIOLATION OF CODE OF ETHICS** -means breaking the rules set by a company. **Categories of Code of Ethics:** **COMPLIANCE OF CODE OF ETHICS -**is a set of rules that tells employees exactly what they can and cannot do at work. If they break the rules, there are clear punishments. **VALUE-BASED CODE OF ETHICS** -is centered around guiding employees to act based on important values like honesty, fairness, and responsibility, rather than just following strict rules. It helps create a positive and ethical work environment. **A great code of conduct is:** **1. Written for the reader -** it is simple to understand and does not contain any technical or legal terminology. **2. Comprehensive -** it covers all significant details that may influence the daily lives of employees and answers common questions that arise **3. Supported by leadership -** it has been recognized and ratified by the company's senior management team. This is usually confirmed in the form of a foreword written by the CEO or President**.** **4. Accessible** - it is available to all employees, current investors and potential investors **5. Visually Appealing -** it follows a style that is clean and reflective of the organization**.** **LESSON 4 : GOOD GOVERNANCE** **GOOD GOVERNANCE AND CODE OF ETHICS** **CORPORATE GOVERNANCE** - is a system of rules and processes that ensures a company is run fairly and responsibly, benefiting everyone involved, from shareholders to employees and the community. It helps balance profits with sustainability and prevents unethical practices.  **Transparency:** Ensures that a company is open about its transactions by fully disclosing them in the accounts.  **Accountability:** Encourages management to be accountable to the company's directors, and directors to be accountable to shareholders.  **Equitable Treatment:** Ensures that all shareholders are treated fairly and equally.  **Risk Management:** Helps companies evaluate their behavior and reduce regulatory risks and fines.  **Shareholder Protection:** Focuses on protecting the long-term interests of shareholders, leading to higher value and trust in the company's shares. **Elements of Corporate Governance:** **DIRECTION -** means helping a company figure out what it wants to achieve and guiding everyone to work toward those goals. The mission and vision statements play a key role in showing the purpose of the company. **OVERSIGHT** -means keeping an eye on the company's leaders to ensure they make good decisions, follow rules, and act responsibly. This helps protect the company and its stakeholders. **STAKEHOLDER RELATION** - means the company must be responsible to everyone involved with it, especially investors, and keep them informed. Good communication helps build trust and leads to better decisions for everyone. **CORPORATE CITIZENSHIP** - companies being responsible members of society. They commit to acting in ways that are good for people and the environment, which they express through citizenship statements. **INDEPENDENCE OF DIRECTORS** - independent directors are important because they help ensure that the company makes fair and good decisions. They should not be too close to the owners or managers, so they can think clearly about what's best for everyone. **EFFECTIVE RISK MANAGEMENT** - Means being aware of potential problems that could hurt the company and having plans ready to deal with those problems. This helps the company stay strong and successful, no matter what challenges arise. **SOLID STRUCTURE AND ORGANIZATION**- having a solid structure in a company means that everyone knows their job and the company can run smoothly. This helps the company follow its rules and keep track of what it does. **TRANSPARENCY -**means sharing information openly with employees and the public. This helps build trust, keeps everyone informed, and creates a stronger, more united organization. **SELF EVALUATION** -is about regularly checking how well a company is doing, recognizing mistakes, and finding ways to fix any issues. This process helps the company improve and avoid bigger problems in the future. **Who is Responsible for Corporate Governance?** the **Board of Directors** is key to a company's governance. They set goals, lead the company, supervise management, and shape the company\'s values. **shareholders** play a crucial role in corporate governance by choosing directors, approving major company decisions, and having the ability to take legal action if the company is not being managed properly. From a legal perspective, corporate governance here in the Philippines is regulated by the Securities and Exchange Commission (SEC) based on the Securities Regulation Code and the Corporation Code. **POTENTIAL CHALLENGES IN CORPORATE GOVERNANCE** **CONFLICT OF INTEREST** - occurs when someone in a position of power in a company has personal financial interests that could affect their decision-making. **OVERSIGHT ISSUES** - means that the Board of Directors must monitor the company closely, including the actions of the executive staff and the daily operations. This oversight is essential to ensure that the company is effectively achieving its goals. **ACCOUNTABILITY ISSUES** -accountability in corporate governance means that everyone in the organization is responsible for their actions and must report to someone else. This system of checks and balances is essential for effective governance and helps ensure fair and ethical practices within the company. **TRANSPARENCY** - means that a company must accurately report its financial performance and share that information with investors. Being honest is crucial for maintaining trust with shareholders and avoiding legal issues. **ETHICS VIOLATIONS** -ethics violations occur when executives do not act in the best interests of shareholders or the community. Companies have a duty to make ethical decisions that protect both their stockholders and the greater social welfare. **GOVERNANCE STANDARDS** -are fair rules set by the board that everyone in the company should know and follow. There should be ways to ensure these rules are followed, especially when some managers might not comply. **SHORT TERMINISM -** when boards focus too much on immediate profits instead of long-term success. This can be a problem because directors have limited time in their roles, which can hinder their ability to make decisions that benefit the company in the longun. **DIVERSITY-** based on good judgement and practicality, boards should possess a good combination skills and personalities to ensure the success of any organization. **The Two Distinct Approaches to Corporate Governance** **RULE- BASED APPROACH-** Means companies must strictly follow specific laws and guidelines. They keep records to show they comply, and there are penalties for breaking the rules. While it ensures legal behavior, it can be less flexible. **PRINCIPLES-BASED APPROACH-** Allows companies to use general guidelines instead of strict rules. If they don't follow a guideline, they must explain why. This way, companies can be more flexible and adapt to their own needs.