COLEGIO DE SAN ANTONIO DE PADUA

Supervised by the Lasallian Schools Supervision Office

Ramon M. Durano Foundation Compound,
Guinsay, Danao City, Cebu
Tel. No. (032) 344-4709

COLLEGE OF ACCOUNTING AND INFORMATION SYSTEMS

(BSAIS)

MODULE 2
IN
REGULATORY FRAMEWORK AND
LEGAL ISSUES IN BUSINESS

WELCOME TO CSAP! THE GATEWAY TO BETTER LIVES!

Prepared by:
ATTY. CHERRY C. ROBLE

Name: __________________________________________________________

Course & Section: _________________________________________________

SECOND SEMESTER
S.Y. 2025-2026

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II. Business Ethics and Corporate Social Responsibility
Business Ethics
➢ Ethics is derived from the Greek word “ethos” – meaning “character.”
Ethics is concerned with understanding right and wrong and how conduct
should be judged to be good or bad.
➢ The following theories are helpful in understanding its framework,
namely:
1. Metaethics,
2. Normative ethics, and
3. Descriptive ethics.

• Metaethics is the study of the nature of ethics. It considers where

one’s ethical principles “come from, and what they mean.” Metaethical
focuses on issues of universal truths, the will of God, the role of reason
in ethical judgments, and the meaning of ethical terms themselves.
• Normative ethics is the study of ethical action. It deals with the
practical side of ethics. It tells the people what to do and what not to
do.
• Descriptive ethics is the study of people’s views about moral beliefs.
It also relates to presenting and describing but not interpreting or
evaluating facts, events, and ethical actions in specific situations and
places.

➢ When the ethical principles and methods of analysis are applied to

business, it is called business ethics.

➢ Based on the definition from Laura Nash, “Business Ethics is the study of
how personal moral norms apply to the activities and goals of commercial
enterprise. It is not a separate moral standard, but the study of how the
business context poses its unique problems for the moral person who acts
as an agent of this system.”

➢ Practically, Business ethics is an organization’s policies and standards

established to ensure certain kinds of behavior by its members. It must
be a fundamental aspect of mission, since everything the organization
does flows from that.

➢ Managers are responsible for strategic decision-making and, therefore

should apply ethical rules to all their decisions to filter out potentially
unwarranted occurrences in the business.

• Adoption of a Code of Business Conduct and Ethics

➢ The company should adopt a Code of Business Conduct and Ethics and
ensure its proper and efficient implementation and monitoring of
compliance.

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 ➢ The Code will provide standards for professional and ethical behavior, as
well as articulate acceptable and unacceptable conduct and practices in
both internal and external business affairs.

➢ This will serve as a mandate of behavior expected of all employees and

contains the standards of regarding company operations and how the
employees should deal with customers, competitors, vendors, and their
co-employees.

➢ The Code of Business Conduct and Ethics shall cover and apply equally to
all employees.

➢ Failure to comply with the standards contained in the Code will result in
disciplinary action, including termination of employment. In some cases,
and as may be provided for by the existing laws, civil and criminal actions
can even be resorted to.

• Ethical Principles adopted by business entities

➢ Most large companies adhere to the following ethical principles and values
described as follows:
a. Accountability. Taking full responsibility for business decisions,
actions/inactions, and conduct.
b. Integrity. Acting righteously, morally and legally and under the
highest standards of ethics.
c. Fairness. Uphold the value of justice and fair play amongst everyone
we deal with, both internally and externally.
d. Transparency. Uphold the value of truthfulness in everything we do
coupled with the quality of being open to scrutiny as we provide and
disclose accurate material information in a timely manner.

➢ Some of the commitments of the Company, its directors, officers and

employees in their behavior and various business dealings are relate to
the following:
i. Honesty and Fair Dealing.
ii. Compliance with laws
iii. Conflicts of Interest and Corporate Opportunities.
iv. Corporate Entertainment/Gifts
v. Creditor Rights
vi. Creditor Rights
vii. Confidential Information
viii. Accounting of Funds
ix. Proper Use of Property

➢ Ethical reasoning is required in business for at least three reasons:

1. laws do not cover all aspects or “gray areas” of a problem.

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 2. free- market and regulated- market mechanisms do not effectively
inform owners and managers how to respond to complex issues
that have far reaching ethical consequences.
3. ethical reasoning is necessary because complex moral problems
require “an intuitive or learned understanding and concern for
fairness, justice, [and] due process to people, groups, and
communities.

Corporate Social Responsibility (CSR)

➢ As defined by the World Bank, Corporate Social Responsibility “CSR”
is the commitment of business to behave ethically and to contribute to
sustainable economic development by working with all relevant stakeholders
to improve their lives in ways that are good for businesses, the sustainable
developments agenda, and society at large.

➢ CSR is a broad concept of corporate citizenship, which provides that as a

citizen, a corporation has social, cultural, and environmental responsibilities
to the community where is operates, as well as economic and financial ones
to its shareholders and immediate stakeholders.

➢ CSR may relate to activities such as:

i. Charitable programs and projects,
ii. Scientific research,
iii. Youth and sports development,
iv. Cultural or educational promotion,
v. Services to veterans and senior citizens,
vi. Social welfare,
vii. Environmental sustainability,
viii. Health development,
ix. Disaster relief and assistance,
x. Employees and worker welfare-related activities.

➢ CSR activities become strategic and effective when they are concerned with
the long-term success of the business and should therefore be beneficial to
the business as well as to society.

Businesses and the Philippine Constitution

➢ In as much as progress and development of our country especially in the
sector of the economy, is sought, however, business regulations have also
been developed to ensure the protection and promotion of public interest.

➢ These regulations imposed are based on the provisions of the 1987

Philippine Constitution and the policy declarations embodied in the statutes
which mainly aim to uphold the interest of the public. These regulations are

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 essential and serve as an intervention by the government in the dealings of
private businesses because if left unchecked, opportunities and privileges
might be abused which will render our economy devastated.

➢ Although in general, business organizations such as partnerships and

corporations, being juridical entities, are subject to regulation, however,
there are certain industries that are specially governed by a more isolated
and specific set of rules, which include: public utilities, mining, power,
telecommunications, and banking.

A. Banking.
➢ The regulations on the banking sector are due to the vital role of banks in
the economy and the need to maintain high standards of integrity and
performance due to the fiduciary nature of the enterprise (Sec 2, The
General Banking Law of 2000).
➢ As regards the organization of banks, the law gives the Monetary Board
the power to authorize the organization of a bank subject to the following
conditions: (1) that the entity is a stock corporation; (2) that its funds are
obtained from 20 or more persons; and (3) that the minimum capital
requirements prescribed by the Monetary Board (MB) for each category of
banks are satisfied. (Sec 8)
➢ The bank’s ownership structure, management, operations, projected
financial condition and capital base are assessed during the licensing
process.

B. Public Utilities.
➢ Sec 13(b) of the Public Service Act (Commonwealth Act 146), provides that,
the gas, electric, and power industry; petroleum; telecommunications
industry; wire or wireless broadcasting stations; water and sewerage
systems; and transportation industry are considered as public utilities.

➢ Thus, they are mandated under Section 11, Article XII of the 1987
Philippine Constitution to be subjected to state regulation.

➢ These industries require a government franchise or authorization for their

operation. Entering into these fields of industries is restricted to Filipino
citizens or to domestic corporations or associations with at least 60%
Filipino ownership of capital. Furthermore, the franchise can only be
for a maximum of 50 years, and shall be subject to amendment or repeal
by Congress. (Section 11, Article XII of the 1987 Philippine Constitution).

➢ The constitutional mandate and restrictions on ownership of and market

entry to these industries are attributable to the policy of the Constitution
to develop a self-reliant and independent economy effectively controlled by
Filipinos (Section 19, Article II of the 1987 Philippine Constitution).

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 ➢ This is also in line with the stated goal of the national economy to provide
a sustained increase in the amount of goods and services produced by the
nation. It is likewise a means of promoting the highest development of
these industries and protecting them from unfair foreign competition and
trade practices (Section 1, Article XII of the 1987 Philippine Constitution).

C. Mining and Logging.

➢ Mining and logging are regulated by the Government according to the
Regalian Doctrine embodied in Section 2, Article XII of the 1987
Constitution which states that:
“… All lands of the public domain, waters, minerals, coal,
petroleum, and other mineral oils, all forces of potential energy,
fisheries, forests or timber, wildlife, flora and fauna, and other
natural resources are owned by the State …”.
➢ Therefore, the exploration, development, and utilization of these resources
are under the full control and supervision of the State.

➢ The Constitution likewise imposes the 60% Filipino ownership requirement

when it comes to these industries and with a shorter franchise period of 25
years (maximum). Dealings of the President with foreign-owned
corporations in these industries are limited to technical or financial
assistance for large-scale exploration, development and utilization of
minerals, petroleum and other mineral oils (Section 2, Article XII of the
1987 Philippine Constitution).

D. Insurance.
➢ This field is subjected to regulation because of the fiduciary nature of the
transaction that requires the highest degree of good faith between the
parties involved. The regulations imposed, which include restrictions on the
operations of these industries as well as supervision by the Insurance
Commission, are intended to ensure the parties’ ability to meet their
obligations and mitigate the risks taken.

➢ The Insurance Code provides that before a domestic insurance company

may transact any insurance business in the Philippines, it must possess the
required amount of capital and assets, it shall have obtained a certificate
of authority for that purpose from the Insurance Commissioner upon
application therefor and payment of the fees prescribed, and it shall have
filed all the required documents with the Commissioner. Additional
requirements are needed for foreign insurance companies.