UNIVERSITY OF MAKATI

J. P. Rizal Ext., West Rembo, Makati City

HIGHER SCHOOL NG UMAK
ABM AND LANGUAGES DEPARTMENT
Course Title Title
Module No. 5 The Core Principles and Common Practices in
Business Ethics and Social
Business Operation
Responsibility
Prepared by Prof. Carmela M. Malabed
Learning Objectives; 1. Explain the core principles of fairness, accountability, and transparency
At the end of the lesson, the students in the socioeconomic development of country; and
should be able to: 2. cite examples of how these core principles are practiced in businesses.

Good corporate governance is a key factor in underpinning the integrity and efficiency of a company. Poor
corporate governance can weaken a company’s potential, can lead to financial difficulties and in some cases, can
cause long-term damage to a company’s reputation.
A company which applies the core principles of good corporate governance will usually outperform other
companies and will be able to attract investors, whose support can help to finance further growth.
This module will explain the core principles of fairness, accountability, and transparency in the
socioeconomic development of the country and also the common practices in business organizations, how these
INTRODUCTION

core principles were being practiced.

 Whichever form of business organization one chooses, one has to deliberate on how the enterprise will run.
How will the enterprise reflect the owner’s values and mission?
In December 1992, after a string of corporate failures in the United Kingdom, a committee was formed and
chaired by Sir Adrian Cadbury to investigate the British corporate governance system and suggest improvements
to restore confidence of investors.
The Cadbury report entitled Financial Aspects of Corporate Governance outlined corporate governance as
the system of rules, practices, and processes by which businesses are directed and controlled.
Rules or policies are the guiding principles on specific issues. These should help the members make better
decisions and provide guidance on how the corporation wants its members to behave.
Good corporate governance is the main factor that determines the integrity of the company. It is the system
by which businesses are directed and controlled.
A company which applies the core principles of good governance will usually outperform other companies
and will be able to attract investors, whose support can help to finance further growth.
Companies with good corporate governance operate more efficiently; have better ability to attract
customers, lower costs of capital and interest rates on loan, better access to external finance, higher firm valuation
and share performance; mitigate risks and safeguard against mismanagement. All these help sustain company
growth. It makes companies more accountable and transparent to investors and gives them tools to respond to
stakeholders concerns (e.g. environmental or social development). Poor corporate governance can weaken the
potential of the company, which may lead to financial problems and cause long-term damage to company’s
reputation.
Core Principles of Good Corporate Governance
1. Fairness
Each decision made requires balancing the interest of different stakeholders. Fairness expresses the just
and reasonable treatment of the stakeholders, free from discrimination and according to the rules and principles
of the corporation. Fair practices are able to establish longer term relationships which are critical to sustain the
development of the corporation.
2. Accountability

Each decision-maker in the corporation should assume complete responsibility to take initiative and be
CONTENT

answerable for his/her decisions, actions, and behaviors. Everyone must be able to reason and explain for his/her
actions and conduct.
If the company owner should therefore accept full responsibility for the powers that it is given and the
authority that it exercises. The owner is responsible for overseeing the management of the business and affairs
of the company. In doing so, it is required to act in the best interest of the company. Accountability goes hand in
hand with responsibility.
3. Transparency
A principle of good governance is that stakeholders should be informed about the company’s activities, what
it plans to do in the future and any risks involved in its business strategies.
Transparency means openness, a willingness by the company to provide clear, factual and timely
information that accurately reflects the financial situation, performance, ownership and corporate governance of
the company. Trust from the stakeholders can be gained only through transparency. All these will help
stakeholders have confidence in the corporation and ensures that they can have confidence in the decision-making
and management processes of a business.
Common Practices in Business Organizations
Policies and procedures establish the rules of conduct within an organization. They are enforced to protect
stockholders of the corporation. The depth and number of procedures depend highly on the needs of the
company.
1. Employee Conduct (Accountability)
Employee conduct policy sets the duties and responsibilities each employee must follow as condition of
employment. Examples are proper dress code, workplace safety procedures, harassment policies, etc. The policies
also outline procedures the company may utilize to discipline inappropriate behavior, such as warnings or
termination of employment.
2. Equal Opportunity (Fairness)
Equal opportunity laws are policies that promote fair treatment in the workplace. Companies are expected
to advocate anti-discriminatory policies and encourage unprejudiced behavior within the workplace. The Human
Resource (HR) department of a company normally organizes and establishes policies in order to avoid
discrimination against people in regard to race, gender, sexual orientation, religion, or cultural beliefs.
3. Attendance and Time Off (Accountability, Fairness)
Attendance policies not only outline the employees’ responsibility to adhere to work schedules but also
define how employees may schedule leaves or notification of an absence or late arrival. It also discusses the
disciplinary action employees face noncompliance.
4. Computer Use (Transparency, Accountability)
 Companies may implement policies governing the use of computers and internet in the workplace to limit
unnecessary and time-wasting internet surfing and social media usage. Security-conscious companies may require
employees to sign a waiver that allows employers to monitor e-mail or internet activities to ensure confidential
information are secured.
5. Non-competition (Fairness)
Some companies require employees to sign a non-compete agreement that limits employees’ activity to
look for the company’s direct competition and prevent disclosure of confidential information. The agreement may
include exclusion to approach the company’s clients for specific period of time.
6. Finance and Accounting (Transparency)
Accounting policies deal with how money is handled in the company and how acquisitions and liabilities are
recorded. A well-managed finance department should have clear guidelines on purchases, petty cash
disbursements, and recordings. To gain the trust of investors, companies should also have their records audited
by an external auditor to assure compliance with government bodies and accepted practices. Many corporations
in the past have used the financial side of the business to hide problems and wrongdoings.
The above examples illustrate good policies an organization can adopt.

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 I. Which principles correspond to the policies on the left? Fill out the table.
Policies Principles
1. Employee Conduct
2. Equal Opportunity
3. Attendance and Time Off
4. Computer Use
ASSESSMENT

5. Non-competition
6. Finance and Accounting
II. Fill in the blanks:
7. Business _______________ is the process of being open, honest, and straightforward about various company
operations.
8. In business, a _______________ arises when a person chooses personal gain over duties to their employer, or
to an organization in which they are a stakeholder, or exploits their position for personal gain in some way.
9. _______________ ensures everyone in an organization follows appropriate and transparent decision-making
processes and that the interests of all stakeholders (shareholders, managers, employees, suppliers, customers,
among others) are protected.
10. _______________ is the freedom from discrimination (as in employment) on the basis of race, color,
religion, national origin, sex, disability, age, or sometimes sexual orientation .
ASSIGNMENT

1. Why are core principles important in running a business?

2. What are the benefits of good corporate governance?
3. If you are the business owner, do you think it is best to set policies and rules for all aspects of the business?
Why?
4. If you are the employee, do you think it is best to set policies and rules for all aspect of the business?
5. Are there negative effects of imposing too many policies?

Choa, Valerie N. Essentials in Business Ethics

REFERENCES

Siguete, Cherille. Business Ethics and Social Responsibility

[Link]
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