STUDY GUIDE

Unit II: Business Ethics

Chapters 5-10

Introduction to Ethics | Business Ethics | Unethical Practices

Ethical Dilemma | Advocacy Against Corruption | Initiatives to Improve Business Ethics

Table of Contents

Chapter 5: Introduction to Ethics

Defining Ethics
Ten Ethical Values
Why Ethical Behavior is Necessary
Categories of Ethical Principles
Professional Code of Governance

Chapter 6: Business Ethics

Definition and Purpose
Scope of Business Ethics
Impact on Stakeholders

Chapter 7: Common Unethical Practices of Business Establishments

Direct and Indirect Misrepresentation
Over-Persuasion
Corporate Ethics

Chapter 8: Ethical Dilemma

Defining Ethical Dilemma
Six-Step Resolution Framework

Chapter 9: Advocacy Against Corruption

Defining Corruption
Forms of Corruption
Causes and Factors
Corruption in the Philippines
Prevention Measures
Chapter 10: Initiatives to Improve Business Ethics and Reduce Corruption
Introduction
The Integrity Initiative Campaign
Corporate Values
Need for a Code of Conduct
Chapter 5: Introduction to Ethics

Chapter 5: Introduction to Ethics

Defining Ethics

Ethics
Ethics is the system of moral principles that examines the concept of right and wrong.
It is a values-based framework for human conduct that determines what is good or
bad, fair or unfair, and just or unjust in human behavior.

Ethics guides individuals in making decisions about how to act in various situations. It
provides a foundation for determining moral obligations and responsibilities in personal,
professional, and social contexts. Ethics is not merely about following laws but about
understanding the underlying principles that govern responsible behavior.
The study of ethics is essential because it helps individuals and organizations navigate
complex moral landscapes, make principled decisions, and maintain integrity in their
actions. Ethics serves as the backbone of professional conduct and societal trust.

Ten Ethical Values

Ethical behavior is grounded in core values that guide moral decision-making. The
following ten values form the foundation of ethical conduct:
Table 1: The Ten Ethical Values

Value Definition

Integrity Adherence to moral and ethical principles; consistency between words and
actions; honesty and strong moral character.

Honesty Truthfulness in all dealings; refusal to deceive, mislead, or manipulate others

through false statements.

Trustworthiness Being reliable and deserving of confidence; fulfilling commitments and

maintaining dependability.

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Chapter 5: Introduction to Ethics

Loyalty Faithfulness to obligations and duties; standing by commitments to people,

organizations, and principles.

Fairness Treating all people equitably and justly; making decisions without
favoritism, discrimination, or prejudice.

Caring Demonstrating concern for the well-being of others; showing compassion,

kindness, and empathy.

Respect Showing regard for the worth and dignity of all persons; honoring the
rights, privacy, and autonomy of others.

Responsible Fulfilling duties to society; obeying laws, contributing to community

Citizenship welfare, and participating in civic life.

Pursuit of Striving for the highest standards of quality and performance; continuous
Excellence improvement and professional development.

Accountability Willingness to accept responsibility for one's actions and decisions; being
answerable for outcomes and consequences.

Study Tip: Memorize all ten ethical values using the acronym "IHTLFC-RRPA" (Integrity,
Honesty, Trustworthiness, Loyalty, Fairness, Caring, Respect, Responsible Citizenship, Pursuit of
Excellence, Accountability). Understanding each definition is crucial for exam questions.

Why Ethical Behavior is Necessary

Ethical behavior is necessary for several fundamental reasons that affect individuals,
organizations, and society:
1. Maintaining Public Trust: Ethical conduct builds and sustains trust between
businesses and the public. Without trust, institutions lose credibility and legitimacy.
2. Promoting Fair Competition: Ethics ensures that competition occurs on a level playing
field, where success is determined by merit rather than deception or exploitation.
3. Protecting Stakeholder Interests: Ethical behavior safeguards the rights and interests
of all stakeholders, including employees, customers, investors, and the community.
4. Ensuring Long-Term Success: Organizations that operate ethically tend to achieve
sustainable success, while unethical practices often lead to legal penalties, reputational
damage, and eventual failure.
5. Legal Compliance: Ethical standards often align with legal requirements, helping
organizations avoid violations that could result in fines, sanctions, or criminal

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Chapter 5: Introduction to Ethics

prosecution.
6. Social Responsibility: Businesses have an obligation to contribute positively to society,
and ethical behavior ensures that their operations do not harm the community or
environment.

Categories of Ethical Principles

Ethical principles can be organized into twelve distinct categories that guide moral
reasoning and decision-making:
Table 2: Categories of Ethical Principles

Category Description

Honesty Being truthful and transparent in all communications and

transactions.

Integrity Maintaining consistency between values, words, and actions.

Promise-Keeping Fulfilling commitments and honoring agreements made to others.

Loyalty Remaining faithful to relationships, organizations, and duties.

Fairness Treating all parties justly and without discrimination or favoritism.

Caring Showing compassion and concern for the welfare of others.

Respect for Others Acknowledging the inherent dignity and rights of all individuals.

Law-Abidingness Obeying laws and regulations that govern conduct.

Commitment to Pursuing the highest quality and continuous improvement.

Excellence

Leadership Setting positive examples and guiding others toward ethical behavior.

Reputation and Morale Building and maintaining a positive standing and spirit within the
organization.

Accountability Accepting responsibility for decisions and their consequences.

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Chapter 5: Introduction to Ethics

Professional Code of Governance in the Philippines

The professional code of governance in the Philippines establishes standards for ethical
conduct among professionals. It encompasses several key principles:
Transparency: Professionals must conduct their affairs with openness, ensuring that
decisions and actions are visible and understandable to stakeholders.
Accountability: Every professional is responsible for their actions and decisions and
must be prepared to justify them to appropriate authorities.
Integrity: Professionals must maintain the highest standards of honesty and ethical
behavior, avoiding conflicts of interest and corrupt practices.
Fairness: Decisions must be made impartially, without bias or prejudice, ensuring
equitable treatment for all parties.
Responsibility: Professionals have a duty to act in the best interests of their clients,
employers, and the public while upholding the law.

KEY POINTS - CHAPTER 5

Ethics is the system of moral principles governing right and wrong conduct.
The ten ethical values are: Integrity, Honesty, Trustworthiness, Loyalty, Fairness,
Caring, Respect, Responsible Citizenship, Pursuit of Excellence, and Accountability.
Ethical behavior is necessary for public trust, fair competition, stakeholder
protection, long-term success, legal compliance, and social responsibility.
There are twelve categories of ethical principles including honesty, integrity,
promise-keeping, loyalty, fairness, caring, respect, law-abidingness, commitment to
excellence, leadership, reputation and morale, and accountability.
The professional code of governance in the Philippines emphasizes transparency,
accountability, integrity, fairness, and responsibility.

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Chapter 6: Business Ethics

Chapter 6: Business Ethics

Definition and Purpose

Business Ethics
Business ethics is the application of ethical principles and standards to business
behavior. It is the study of what is right and wrong in the workplace, encompassing the
moral principles, values, and norms that guide conduct in commercial activities and
organizational settings.

Purpose of Business Ethics: Business ethics serves to guide the conduct of organizations
and their members in a manner that is morally responsible and socially acceptable. Its
primary purposes include:
Guiding Decision-Making: Providing a moral framework for making business decisions
that affect stakeholders.
Building Trust: Establishing credibility with customers, employees, investors, and the
public.
Promoting Fair Practices: Ensuring that business operations are conducted honestly
and justly.
Legal Compliance: Helping organizations understand and adhere to laws and
regulations governing business conduct.
Long-Term Sustainability: Contributing to the enduring success of the organization by
fostering positive relationships with all stakeholders.

Scope of Business Ethics

The scope of business ethics is broad, covering various dimensions of organizational

activity:
1. Corporate Governance: The system by which companies are directed and controlled,
including relationships among management, boards, shareholders, and stakeholders.

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Chapter 6: Business Ethics

2. Employee Relations: Ethical treatment of workers, including fair wages, safe working
conditions, equal opportunity, and respect for employee rights.
3. Customer Relations: Honest marketing, fair pricing, product safety, and protection of
consumer privacy.
4. Supplier and Partner Relations: Fair dealing with vendors, honoring contracts, and
avoiding exploitative practices.
5. Environmental Responsibility: Sustainable practices that minimize harm to the
environment and promote conservation.
6. Community Involvement: Contributing to the social and economic well-being of
communities where businesses operate.
7. Financial Integrity: Accurate reporting, honest accounting, and transparent financial
practices.
8. Competitive Conduct: Engaging in fair competition without resorting to deceptive or
harmful practices.

Impact on Stakeholders

Business ethics significantly affects various stakeholders in the following ways:

Table 3: Impact of Business Ethics on Stakeholders

Stakeholder Impact

Economy Ethical business practices promote market stability, investor confidence,

sustainable economic growth, and fair competition. Unethical practices can lead
to market manipulation, financial crises, and economic inequality.

Society Businesses operating ethically contribute to social welfare, environmental

protection, and community development. Unethical practices can harm public
health, exploit communities, and erode social trust.

Environment Ethical businesses adopt sustainable practices, reduce pollution, and conserve
natural resources. Unethical practices may cause environmental degradation,
pollution, and resource depletion.

Managers Ethics guides managerial decision-making, leadership style, and organizational

culture. Ethical managers build trust, motivate employees, and create positive
work environments.

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Chapter 6: Business Ethics

Employees Ethical workplaces provide fair treatment, safe conditions, equal opportunities,
and respect for human dignity. Employees in ethical organizations experience
higher job satisfaction and loyalty.

Shareholders Ethical conduct protects shareholder value by reducing legal risks, maintaining
reputation, and ensuring sustainable profitability. Unethical behavior can lead to
financial losses and stock depreciation.

Study Tip: When studying the impact of business ethics, remember the acronym "ESSEMBS"
(Economy, Society, Environment, Managers, Employees, Shareholders) to ensure you cover all
stakeholder groups in your answers.

KEY POINTS - CHAPTER 6

Business ethics applies moral principles to business behavior and workplace

conduct.
The purposes include guiding decision-making, building trust, promoting fair
practices, legal compliance, and long-term sustainability.
The scope covers corporate governance, employee relations, customer relations,
supplier relations, environmental responsibility, community involvement, financial
integrity, and competitive conduct.
Business ethics impacts the economy, society, environment, managers, employees,
and shareholders.

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Chapter 7: Common Unethical Practices of Business Establishments

Chapter 7: Common Unethical Practices of

Business Establishments

Direct and Indirect Misrepresentation

Misrepresentation involves providing false, misleading, or deceptive information about

products or services. It can be classified into two types:

Direct Misrepresentation
Direct misrepresentation occurs when a seller knowingly makes false statements or
representations about a product or service to induce a customer to make a purchase.
This includes outright lies about product features, quality, or origin.

Indirect Misrepresentation
Indirect misrepresentation involves deception through omission, ambiguity, or failure
to disclose material facts that would influence a consumer's purchasing decision. This
includes withholding important information or creating misleading impressions.

Forms of Misrepresentation

Table 4: Forms of Misrepresentation in Business

Form Description Example

Deceptive Designing product containers to mislead Using oversized packaging to

Packaging consumers about the quantity or quality make the product appear larger
of contents. than it actually is.

Misbranding Labeling products with false or Labeling a product as "made in

misleading information about their USA" when it was manufactured
nature, origin, or characteristics. elsewhere.

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Chapter 7: Common Unethical Practices of Business Establishments

False Making untrue or exaggerated claims Claiming a product can cure

Advertising about a product's benefits, performance, diseases when it has no proven
or features in promotional materials. medical benefit.

Adulteration Reducing the quality of a product by Adding water to milk or mixing

adding inferior or harmful substances. inferior chemicals with food
products.

Short Weighing Giving customers less than the stated A scale calibrated to show more
quantity of a product. weight than actual, or underfilling
pre-packaged goods.

Short Providing less than the advertised Selling fabric at less than the
Measurement length, area, or volume of a product. stated meterage or construction
materials at reduced dimensions.

Short Delivering fewer items than specified in Sending 95 units when 100 were
Numbering an order. ordered and paid for.

Caveat Emptor The principle of "let the buyer beware" Selling goods "as is" without
where sellers shift responsibility to disclosing known defects.
buyers to inspect goods.

Withholding Deliberately failing to disclose material Not disclosing that a vehicle was
Information facts that would affect a purchase previously involved in a major
decision. accident.

Passive Creating conditions where consumers Placing premium-priced items

Deception are likely to be misled without active near similar-looking discount
false statements. products to confuse buyers.

Over-Persuasion

Over-Persuasion
Over-persuasion occurs when salespeople use excessive pressure, aggressive tactics,
or manipulative techniques to convince customers to make purchases they do not need
or cannot afford. This practice crosses the line from legitimate persuasion into
unethical manipulation.

Characteristics of over-persuasion include:

Using high-pressure sales tactics that create a sense of urgency or scarcity

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Chapter 7: Common Unethical Practices of Business Establishments

Exploiting customers' emotions, fears, or insecurities

Making it difficult for customers to refuse or exit the sales process
Providing misleading information about product necessity or value
Targeting vulnerable populations such as the elderly or financially distressed
Using persistent contact or harassment to wear down customer resistance

Corporate Ethics

Corporate ethics involves the ethical responsibilities of different levels within an

organization:

Board of Directors

The Board of Directors holds ultimate responsibility for setting the ethical tone of the
organization. Their ethical duties include:
Establishing a code of ethics and conduct for the organization
Ensuring compliance with laws, regulations, and ethical standards
Overseeing corporate governance practices
Acting in the best interests of shareholders and stakeholders
Avoiding conflicts of interest and self-dealing
Ensuring transparent and accurate financial reporting

Executive Officers

Executive officers are responsible for implementing ethical policies and leading by
example:
Communicating ethical expectations throughout the organization
Creating and maintaining an ethical organizational culture
Making decisions that balance profit with ethical considerations
Ensuring adequate resources for ethics training and compliance programs
Responding appropriately to ethical violations and misconduct

Employees

All employees have ethical responsibilities in the workplace:

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Chapter 7: Common Unethical Practices of Business Establishments

Following the organization's code of conduct and ethical policies

Reporting unethical behavior through appropriate channels
Treating colleagues, customers, and stakeholders with respect
Avoiding conflicts of interest and maintaining confidentiality
Performing duties with honesty, integrity, and professionalism

KEY POINTS - CHAPTER 7

Misrepresentation can be direct (knowingly false statements) or indirect (deception

through omission or ambiguity).
Forms of misrepresentation include deceptive packaging, misbranding, false
advertising, adulteration, short weighing/measurement/numbering, caveat emptor,
withholding information, and passive deception.
Over-persuasion involves excessive pressure and manipulative tactics to force
unwanted purchases.
Corporate ethics applies at three levels: Board of Directors, Executive Officers, and
Employees.

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Chapter 8: Ethical Dilemma

Chapter 8: Ethical Dilemma

Defining Ethical Dilemma

Ethical Dilemma
An ethical dilemma is a situation a person faces in which a decision must be made
about the appropriate behavior. It involves choosing between two or more alternatives,
each of which may have ethical merits and drawbacks. A simple example is finding a
diamond ring and deciding whether to attempt to find the owner or to keep it.

Ethical dilemmas are common in professional life because situations often involve
competing values, obligations, or interests. The difficulty arises because:
There may be no clear right or wrong answer
Different stakeholders may have conflicting interests
Organizational pressures may conflict with personal values
Laws or rules may be ambiguous or silent on the specific situation
Consequences of different choices may be uncertain

Six-Step Resolution Framework

In recent years, formal frameworks have been developed to help people resolve ethical
dilemmas. The following six-step approach provides a systematic method for ethical
decision-making:
Table 5: Six-Step Approach to Resolving Ethical Dilemmas

Step Action Description

Step Obtain the Gather all pertinent information about the situation, including who is
1 relevant facts involved, what actions occurred, and what rules or policies apply.

Step Identify the Determine which ethical principles, values, or obligations are at stake
2 ethical issues in the situation.

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Chapter 8: Ethical Dilemma

Step Determine who is Identify all stakeholders who will be impacted by the outcome
3 affected and how each person or group is affected.

Step Identify the Brainstorm all possible courses of action available to resolve the
4 alternatives dilemma.

Step Identify the likely Evaluate the short-term and long-term outcomes of each
5 consequences alternative for all stakeholders.

Step Decide the Select the course of action that best aligns with ethical principles,
6 appropriate action produces the most positive outcomes, and minimizes harm.

Study Tip: Memorize the six steps in order: (1) Facts, (2) Issues, (3) Affected parties, (4)
Alternatives, (5) Consequences, (6) Decision. A helpful mnemonic is "Find Issues And Always
Consider Decisions."

KEY POINTS - CHAPTER 8

An ethical dilemma is a situation requiring a choice between competing ethical

alternatives.
The six-step resolution framework involves: obtaining facts, identifying issues,
determining affected parties, identifying alternatives, evaluating consequences, and
deciding appropriate action.
When evaluating consequences, consider both short-term and long-term effects on
all stakeholders.
The final decision should align with ethical principles and minimize harm while
maximizing positive outcomes.

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Chapter 9: Advocacy Against Corruption

Chapter 9: Advocacy Against Corruption

Defining Corruption

Corruption
Corruption is the abuse of entrusted power for private gain. It involves the misuse of
authority, position, or resources for personal benefit at the expense of the public good.
Corruption undermines trust in institutions, distorts markets, and perpetuates
inequality and poverty.

Forms of Corruption

Corruption manifests in various forms:

Table 6: Forms of Corruption

Form Description

Bribery Offering, giving, receiving, or soliciting something of value to influence the

actions of an official or other person in a position of trust.

Extortion Obtaining money, property, or services from a person through coercion,

threats, or force.

Embezzlement Theft or misappropriation of funds placed in one's trust or belonging to one's

employer.

Fraud Wrongful or criminal deception intended to result in financial or personal

gain.

Nepotism Favoring relatives or friends, especially by giving them jobs or appointments.

Cronyism Appointment of friends and associates to positions of authority without

proper regard to qualifications.

Conflict of Situations where a person's personal interests could improperly influence

Interest their professional decisions.

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Chapter 9: Advocacy Against Corruption

Kickbacks Illegal payments made to someone who has facilitated a transaction or

appointment.

Trading in Using one's position or connections to influence decisions in exchange for

Influence benefits.

Money Laundering Processing criminal proceeds to disguise their illegal origin.

Causes and Factors

Several factors contribute to the commission of corruption:

Greed and Self-Interest: The desire for wealth, power, or material possessions beyond
what is legitimately earned.
Weak Institutions: Lack of effective checks and balances, inadequate enforcement
mechanisms, and poor governance structures.
Lack of Transparency: Secretive decision-making processes that enable corrupt
activities to go undetected.
Poor Pay and Incentives: Inadequate compensation for public officials that may tempt
them to seek illicit income.
Cultural Tolerance: Societal acceptance or normalization of corrupt practices, making
them seem less objectionable.
Absence of Accountability: Failure to punish corrupt actors, creating a culture of
impunity.
Complex Regulations: Excessive bureaucratic procedures that create opportunities for
rent-seeking and bribery.
Political Patronage: Systems where loyalty to political patrons is rewarded over merit
or competence.

Ill Effects of Corruption

Corruption has severe negative consequences:

1. Economic Damage: Corruption discourages investment, increases business costs,
distorts competition, and hinders economic development.
2. Poverty Exacerbation: Resources meant for public services and poverty alleviation are
diverted to private pockets.

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Chapter 9: Advocacy Against Corruption

3. Undermined Trust: Citizens lose confidence in government institutions and the rule of
law.
4. Inequality: Benefits are distributed unfairly, favoring those with connections and
resources to engage in corrupt practices.
5. Poor Public Services: Infrastructure, healthcare, education, and other services suffer
from diverted funds and corrupt procurement.
6. Environmental Harm: Illegal activities such as logging and mining are enabled through
bribery of regulatory officials.

Characteristics of Corruption

Corruption typically exhibits these characteristics:

Universality: It occurs in all countries and societies, though to varying degrees.
Hidden Nature: Corrupt transactions are often concealed and difficult to detect.
Complexity: It involves sophisticated networks and methods to avoid detection.
Pervasiveness: Once established, it tends to spread throughout institutions and systems.
Contagion Effect: Exposure to corruption normalizes it, making it more likely to
continue and expand.

Corruption in the Philippines

The Philippines faces significant corruption challenges across multiple sectors:

Judicial System: Corruption in the judiciary affects the fair administration of justice,
with reports of bribery and case-fixing.
Police: Law enforcement agencies have faced allegations of corruption, including
extortion and protection of criminal activities.
Public Services: Citizens frequently encounter demands for unofficial payments to
obtain permits, licenses, or basic government services.
Land Administration: Disputes over land titles and property rights are often influenced
by corrupt practices.
Tax Administration: Tax evasion and collusion between taxpayers and officials reduce
government revenue.
Customs: Smuggling and fraudulent declarations are facilitated through bribery of
customs officials.

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Chapter 9: Advocacy Against Corruption

Public Procurement: Government contracts are sometimes awarded through rigged

bidding processes favoring connected contractors.
Natural Resources: Mining and logging companies have been known to evade
regulations through bribery, causing environmental damage.

Prevention Measures

Businesses and organizations can adopt several measures to prevent corruption:

Clear Business Processes

Having defined workflows, clear directives on financial approving authorities, and

standard procurement instructions helps flag irregularities. Processes should be reviewed
regularly to ensure they are updated to the shifting business environment. Diligent record-
keeping and regular audits deter corrupt activities.

Policy on Gifts and Entertainment

Gifts and entertainment are often offered in the legitimate course of business to promote
good relations. However, if too frequent or lavish, or done with the deliberate intention to
gain an unfair advantage, they can be tantamount to corruption. Organizations should set
policies on when gifts may be given and accepted, what records need to be kept, and ensure
business partners are aware of these policies.

Declaration of Conflict of Interest

Conflicts of interest occur when personal interests or relationships are placed before
business interests, leading to corrupt activities such as bribery. A declaration system
applicable to all employees should be instituted, with forms for employees to disclose
potential conflicts, enabling appropriate action such as recusal or reassignment.

Convenient Corruption Reporting System

A corruption reporting system comprising whistle-blowing policies and feedback channels

allows staff to conveniently raise concerns and feel protected from retaliation. Reports
should be able to be filed anonymously through publicized email addresses or phone
numbers.

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Chapter 9: Advocacy Against Corruption

Legislative Efforts

Several Philippine laws address corruption:

Table 7: Anti-Corruption Laws in the Philippines

Law Key Provisions

Anti-Graft and Corrupt Criminalizes active and passive bribery, embezzlement, extortion,
Practices Act (RA 3019) abuse of office, and conflict of interest in the public sector.

Anti-Red Tape Act (RA Forbids office-holders from accepting gifts or material benefits in
9485) exchange for government permits or licenses.

Revised Penal Code Classifies gifts as indirect bribery; requires public officials to file
statements of assets and liabilities; discrepancies subject officials to
immediate dismissal.

Anti-Money Laundering Criminalizes money laundering and organized crime.

Act (RA 9160)

Code of Conduct for Public Formulates standards for personal integrity and accountability of
Officials (RA 6713) civil servants.

Government Procurement Requires competitive and transparent bidding for government

Reform Act (RA 9184) contracts.

Vigilance of Civil Society

Philippine civil society plays an active role in combating corruption:

Civil society organizations (CSOs) enjoy high social capital and play a large role in
initiating legislation and steering debate in Congress.
Watchdog organizations monitor implementation of policy and expose corrupt practices.
The constitution guarantees freedoms of speech and expression, though these are not
always consistently upheld.
The media reports on high-level corruption cases, though independent observers note
that bribes are sometimes used to influence coverage.
Internet access enables citizens to share information about corruption, though concerns
about censorship exist.

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Chapter 9: Advocacy Against Corruption

KEY POINTS - CHAPTER 9

Corruption is the abuse of entrusted power for private gain.

Forms include bribery, extortion, embezzlement, fraud, nepotism, cronyism, conflict
of interest, kickbacks, trading in influence, and money laundering.
Causes include greed, weak institutions, lack of transparency, poor pay, cultural
tolerance, and absence of accountability.
Ill effects include economic damage, poverty, undermined trust, inequality, poor
public services, and environmental harm.
Prevention measures include clear business processes, gift policies, conflict of
interest declarations, and reporting systems.
Key Philippine anti-corruption laws include RA 3019, RA 9485, RA 9160, RA 6713,
and RA 9184.

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Chapter 10: Initiatives to Improve Business Ethics and Reduce Corruption

Chapter 10: Initiatives to Improve Business

Ethics and Reduce Corruption

Introduction

Improvement of business ethics is a common concern of everybody. It is imperative that all

parties involved -- manufacturers, sellers, consumers, government, and relevant
organizations -- must participate in improving business ethics. Unless there is a concerted
effort on the part of everybody, we cannot effectively remind businessmen and
professionals of their ethical responsibility to each other and to their customers and clients.
Unethical practices are ever present. Even people who have not yet been victims of these
practices are vaguely aware that they exist and agree that something must be done to rid
the world of them. Accordingly, various approaches to improving business ethics have been
brought forward not only in the Philippines but also in other countries.

The Integrity Initiative Campaign

In 2010, a private sector-led campaign aiming to strengthen ethical standards in business,

the Integrity Initiative, was organized after the Philippines received a grant from Siemens.
The Makati Business Club (MBC) and the European Chamber of Commerce of the
Philippines (ECCP) serve as the Integrity Initiative Secretariat.

Integrity Initiative
The Integrity Initiative is a multisectoral campaign that seeks to institutionalize
integrity standards among various sectors of society -- business, government, judiciary,
academe, youth, civil society, church, and media. Led by the private sector, the
initiative aims to help in diminishing, if not fully eradicating, the vicious cycle of
corruption in the Philippines, which has not only exacerbated poverty but also
obstructed the development of a competitive business environment that operates on a
level playing field.

The goals of the Integrity Initiative include:

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Chapter 10: Initiatives to Improve Business Ethics and Reduce Corruption

Building trust in government

Creating a more equitable society
Establishing fair market conditions
Improving competitiveness and increasing business confidence
Attracting domestic and foreign investments
Generating more employment for Filipinos
Alleviating poverty through a vibrant Philippine economy
Making the Philippines a benchmark in transforming a highly corrupt country into one
that fosters an ethical and progressive business environment
To achieve these goals, the Initiative conducts consultations, roundtable discussions, and
public forums involving business leaders, compliance officers, corporate governance
experts, academics, and practitioners from small and medium enterprises to Fortune 500
companies. An "Integrity Compliance Handbook" containing key documents and toolkits
was published for organizations to promote ethical business practices.
Since 2010, MBC and ECCP have been joined by various organizations and industry
associations in taking an active role in promoting honesty and transparency in Philippine
business.

Corporate Values

The increasing scrutiny by regulators, lobbyists, non-government organizations, consumer

groups, and the media have the potential to affect a business firm's market perception and
hence value. It is therefore important that the organization's values and its code of conduct
address the legal and other obligations owed to important stakeholders.
Organizations must consider obligations related to:
Trade practices laws
Privacy laws
Employment laws
Occupational health and safety regulations
Equal opportunity in the workplace
Superannuation (retirement benefits)
Environmental regulations

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Chapter 10: Initiatives to Improve Business Ethics and Reduce Corruption

Managing, protecting, and enhancing reputation has become one of the greatest challenges
facing today's board. The reputation of a business is a critical factor in the determination of
its value. The values and ethics of the organization need to be explicitly managed.

Need for a Code of Conduct

Code of Conduct
A code of conduct is a formal expression of the organization's values and ethics. It
serves as a practical guide for behavior, establishing standards and expectations for
how members of the organization should conduct themselves in their professional
activities.

A code of conduct should:

Guide directors and senior executives: At a minimum, provide guidance on practices
necessary to maintain confidence in the organization's integrity. Other members of staff
should also have a code of conduct relevant to them, which may be the same as that for
directors and senior executives or may be a complementary version.
Promote responsibility and accountability: Encourage individuals to take
responsibility for reporting and investigating reports of unethical practices, creating a
culture where ethical concerns are addressed promptly and seriously.
Ensure compliance with legal obligations: Address all legal and other obligations
owed to legitimate stakeholders, ensuring that the organization operates within the
bounds of the law and meets its commitments to all parties with legitimate interests.
An organization's code of conduct recognizes the important role that business ethics play in
the success of today's business, encouraging the board to actively develop an organizational
culture that is established on transparency, accountability, and integrity.

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Chapter 10: Initiatives to Improve Business Ethics and Reduce Corruption

Unified Code of Conduct for Business (Integrity Initiative)

The Integrity Initiative has developed a Unified Code of Conduct for Business that
serves as a comprehensive ethical framework for Philippine companies. This code
addresses:
Commitment to integrity in all business dealings
Fair competition and rejection of corrupt practices
Responsibility to stakeholders including employees, customers, and communities
Compliance with laws and regulations
Transparency in financial reporting and disclosures
Respect for human rights and labor standards
Environmental responsibility
Mechanisms for reporting violations without fear of retaliation

Code of Conduct for Business (Bishops-Businessmen's Conference)

The Bishops-Businessmen's Conference for Human Development (BBC) of the
Philippines has also endorsed a Code of Conduct for Business that emphasizes:
The dignity of the human person as the foundation of business ethics
The common good as the guiding principle for economic activity
Preferential option for the poor in business decisions
Solidarity between employers and employees
Stewardship of creation and environmental sustainability
Subsidiarity and participatory decision-making

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Chapter 10: Initiatives to Improve Business Ethics and Reduce Corruption

KEY POINTS - CHAPTER 10

Improving business ethics requires concerted effort from all stakeholders:

manufacturers, sellers, consumers, government, and organizations.
The Integrity Initiative, launched in 2010 by MBC and ECCP, is a multisectoral
campaign to institutionalize integrity standards across society.
Corporate values must address obligations to stakeholders under trade practices,
privacy, employment, health and safety, equal opportunity, and environmental laws.
A code of conduct formally expresses organizational values, guides directors and
executives, promotes accountability, and ensures legal compliance.
The Unified Code of Conduct for Business (Integrity Initiative) and the BBC Code of
Conduct provide frameworks for ethical business behavior in the Philippines.

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Quick Review Summary

Quick Review Summary

Chapter 5: Introduction to Ethics

Ethics: System of moral principles examining right and wrong.
Ten Values: Integrity, Honesty, Trustworthiness, Loyalty, Fairness, Caring, Respect,
Responsible Citizenship, Pursuit of Excellence, Accountability.
Why Necessary: Public trust, fair competition, stakeholder protection, long-term
success, legal compliance, social responsibility.
12 Categories: Honesty, Integrity, Promise-Keeping, Loyalty, Fairness, Caring,
Respect, Law-Abidingness, Excellence, Leadership, Reputation, Accountability.

Chapter 6: Business Ethics

Definition: Application of ethical principles to business behavior.
Purposes: Guide decisions, build trust, promote fairness, legal compliance,
sustainability.
Scope: Governance, employee relations, customer relations, suppliers, environment,
community, financial integrity, competition.
Stakeholders: Economy, Society, Environment, Managers, Employees, Shareholders.

Chapter 7: Common Unethical Practices

Misrepresentation: Direct (knowingly false) and Indirect (omission/deception).
Forms: Deceptive packaging, misbranding, false advertising, adulteration, short
weighing/measurement/numbering, caveat emptor, withholding information,
passive deception.
Over-persuasion: Excessive pressure and manipulative sales tactics.
Corporate Ethics: Applies to Board of Directors, Executive Officers, and Employees.

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Quick Review Summary

Chapter 8: Ethical Dilemma

Definition: Situation requiring choice between competing ethical alternatives.
Six Steps: (1) Obtain facts, (2) Identify issues, (3) Determine affected parties, (4)
Identify alternatives, (5) Evaluate consequences, (6) Decide action.

Chapter 9: Advocacy Against Corruption

Corruption: Abuse of entrusted power for private gain.
Forms: Bribery, extortion, embezzlement, fraud, nepotism, cronyism, conflict of
interest, kickbacks.
Causes: Greed, weak institutions, lack of transparency, poor pay, cultural tolerance,
impunity.
Key Laws: RA 3019, RA 9485, RA 9160, RA 6713, RA 9184.

Chapter 10: Initiatives to Improve Business Ethics

Integrity Initiative: Private sector-led campaign by MBC and ECCP since 2010.
Goals: Build trust, equity, fair markets, competitiveness, investment, employment.
Code of Conduct: Guides behavior, promotes accountability, ensures compliance.
Key Frameworks: Unified Code of Conduct (Integrity Initiative), BBC Code of
Conduct.

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