Business Ethics and Social Responsibility

1
The Role of Business in Social and Economic Development

Module 001 - The Role of Business in Social and

Economic Development
It is important for businesses to establish its role in the advancement of
socio-economic development of societies. Creating economic value should be
one of the core values of a company’s goal.

At the end of this module, you will be able to:

1. determine the forms of business organization;

2. identify businesses and their organizational purpose;
3.determine the importance of business in the socio economic development
of society.

Nature of Forms of Business Organization

A business is an organization of economic system where goods and services are being
exchanged for one another good or for currency. Every business requires some form of
investment or assets and enough customers and clients to whom its output can be sold on
to, as a basis in order to make a profit or income.

Businesses can be privately owned, not-for-profit or state-owned. An example of a

corporate business is 7-eleven, Adidas, Avon, Belo Corporation, Dell and Fisher-Price ,
while a Eat All You Can catering business may be categorized as a private enterprise.

Forms of Business Organization

A business can be organized in one of several ways, and the form its owners
choose will affect the company's and owners' legal liability and even its
income tax treatment.

Here are the different forms of business organizations:

I. SOLE PROPRIETORSHIP

A sole proprietorship or sometimes called a "single proprietorship" is a

business owned by only one person. It is easy to set-up and is the least costly
among all forms of ownership. It is the most easiest to register in the
Philippines, through the Bureau of Trade Regulation and Consumer
Protection (BTRCP) of the Department of Trade and Industry (DTI).

Course Module
A sole Proprietor business is owned by an individual who has full control or
authority of its own and owns all the assets, as well as personally answers all
liabilities or losses. The fact that it is run by the individual means that it is
highly flexible in which the owner has absolute control over the business.
The only downside of this form of organization is that the owner faces
unlimited liability; meaning, the creditors of the business may go after the
personal assets of the owner if the business cannot pay them. In other words,
the law basically treats the business and the owner as one and the same.

The sole proprietorship form is usually adopted by small business entities

and may work as an independent contractor. Many home-based businesses
are operated by sole proprietors. Understanding common businesses
operated by sole proprietors can help you decide if it is the right structure for
you.

Examples of Businesses that may be functional as sole-proprietor

Home-based Healthcare Services

The healthcare industry usually flourishes in both good and bad economic
conditions. Many sole proprietors look for to profit from this stability by
engaging in home healthcare businesses. Some of these services caters to
senior citizens. An example of these services may include cooking meals,
cleaning homes, and assisting with hygiene needs.

Landscaper/Landscaping Sevices

A landscaper may work single-handedly or hire a small group of workers.

Landscapers maintain lawns, plants and trees of homeowners and
businesses. Most landscaping services working with commercial and
industrial customers hire people to work on a larger scale of projects.

Bookkeeper / Bookkeeping

A bookkeeping business provides financial services of other businesses. A

bookkeeper posts a company’s income, expenses and other financial
statistics to an accounting system. This gives business owners precise
financial information concerning their business. The financial information
maintained by a bookkeeper is used to prepare a company’s tax returns
submitted to the Bureau of Internal Revenue.

Financial Planners

Sole proprietors work may also venture into a business as financial planners,
offering their services to individuals and small businesses. They help families
plan for different financial concerns such as retirement, preparing for college
expenses and invest in securities.
 Business Ethics and Social Responsibility
3
The Role of Business in Social and Economic Development

Computer Repair Services

Computer repair shops are often operated as sole proprietorship. Some

business owners operate commercial shops, while others work from home.
Small computer repair businesses typically cater to individuals. It may be
done in a shop or home services.

Tutoring Services

Tutoring provide learning assistance to students in varied of subjects. Tutors

may work with students in person or because of technology now a days, it
can be done through online video chatting. Many tutors have teaching
experience or extensive knowledge in the subject they are teaching, mostly,
these are people from the academe venturing into a business similar to their
profession.

Catering Services

Catering services offer their services for group engagements such as parties,
weddings, company functions and different business events. In most cases, a
sole proprietor operating a catering company needs to hire people to do
different tasks.

House Cleaning Service

The start-up costs for a housecleaning business are usually very low as it
only needs basic cleaning materials for household. Business owners can offer
a variety of additional services, such as doing the laundry, window washing,
ceiling and floor cleaning and carpet cleaning.

Freelance Writer

Most of freelance writers operate as independently, while others start

ventures into small publishing companies. A freelance writer provides
content to businesses owners or writes content to sell to consumers. Press
releases, sales copy, website content, text book content, work books, journals
and blog posts are commonly provided by freelance writers.

Course Module
Virtual Assistant

Virtual assistants assist entrepreneurs with clerical tasks through the use of
Internet. The assignments done by virtual assistants would depend on the
needs of clients. Common tasks may include scrutinizing and answering
important e-mails, creating excel spreadsheets and reports and typing
documents and summarizing information.

II. PARTNERSHIP

A general partnership is a legal entity binding two or more business partners

in responsibility and liability for their business. There are two types of
general partnerships: unlimited and limited.

In an unlimited general partnership; all partners in the business are equally

responsible for the debts and other liabilities incurred by the business, and
they all participate in operations.

In limited partnerships; individuals invest in the company and share in its

profits, but are not responsible for daily business activities and do not share
in the business’s liabilities.

General partnerships can occur when two or more people develop a business
with the intent to earn profit.

Examples of Businesses that may be functional as Partnership

Medical Services

One example of a partnership may occur between doctors or physician. You

may witness this in hospitals where out-patient-departments are full of
different rooms with different physicians. For example, a visit to your
doctor’s office might reveal another, or several, doctors maintaining separate
practices in the same building. These doctors may have combined their
efforts to form a general partnership. One advantage of doing so might be
that it can be easier to secure a business loan when more than one individual
is applying with collateral. Surgeons may also form a general partnership
when they work together to offer surgical specialties, such as through a
surgical group. A disadvantage to a medical general partnership may be in
cases of malpractice; all practitioners in the general partnership are equally
responsible for the costs incurred through malpractice litigation.

Legal Services

General partnerships are the foundation for a lot of legal firms. An example of
a general partnership between attorneys might be, “The Law Offices of Smith,
Jones and Daniels.” A law office might have many partners within a business
 Business Ethics and Social Responsibility
5
The Role of Business in Social and Economic Development

structure similarly to doctors, possessing several associated professionals

with different specialties working in the same building. Attorneys may have
extra direct lawful knowledge enabling them to organize their partnerships
in ways that will limit accountability for each partner.

Real Estate

A real estate agency may be owned by a number of of the people, each of

whom may be managing their own sales and producing profits for the
business. For example, a real estate office having 20 agents may be owned by
a general partnership consisting of five of those agents. The remaining 15
brokers may be agents, carrying on their own work and contributing a
commission to the overall business income of the general partnership. On the
other hand, the owners of the agency may be limited partners, contributing
investment funds to the business and not engaging in sales or other
functioning activities.

Creative Concepts

General partnerships can be found in creative events such as advertising,

marketing and sales and graphic designing. The various duties in the
partnership might be defined with one or more partners selling and
developing clientele accounts while the others are assigned to create
advertising and marketing strategies. An example of a limited general
partnership in a creative field is a voice studio where one individual is the
working partner in-charge of the operation of the business and voice
instructor, and another “silent” partner is contributing to the business
through investing in the physical facilities of the studio.

Example of famous businesses that started as a Partnership

Hewlett Packard originally was a partnership between

these two founders, Bill Hewlett and Dave Packard. It was
founded in a garage in California. Now a days, this
company is the leading PC manufacturer, producing a wide
range of computer hardware while also providing
software, IT services and consultation to customers.

Originally, Mc Donald's was founded by Richard and

Maurice McDonald and was set up in 1940's as a barbeque
restaurant and was later on developed into a hamburger
stand in 1948.

Course Module
 Microsoft was initially established between two partners,
Bill Gates and Paul Allen and is not the leading software
maker and one of the most valuable companies in the
world today.

III. CORPORATION

A corporation is a business organization that has a separate legal personality

from its owners. Ownership in a stock corporation is represented only by its
shares of stock. The owners or stockholders enjoy limited liability but have
limited involvement in the company's operations. The board of directors, an
elected group from the stockholders, are the one's that controls the activities
of the corporation.

Some examples of cooperatives are: utility cooperatives such as for water

and electricity, cooperative banks , credit unions, and cooperative for
housing projects.

Examples of Top Corporations in the Philippines

United Laboratories started as a small drugstore in

post-war Philippine in 1945 and it slowly became the
leading pharmaceutical company in the country,
creating quality but very affordable remedy to every
Filipino people nationwide. The company’s products
has also infiltrated some of the Philippines
neighbouring Asian countries like Indonesia, Thailand,
Malaysia, Singapore, Hong Kong, Vietnam, and
Myanmar.

Jollibee Foods Corporation is the mother company of

popular filipino fast-food chains. Tony Tan, the owner
of Jollibee and his family established the first Jollibee
store in Cubao in the year 1975. Amazingly in 2007, the
company opened its 600th Philippine store in Aparri,
Cagayan and also surprisingly, venturing even around
the globe, it opened its branch in Las Vegas, Nevada,
USA. In 2009, Jollibee celebrated its 31st year as the
fast-food chain most loved by Filipinos locally and
abroad.

The SM Group of Companies is being regarded as the

Philippines’ largest retail company, and it was founded
by Filipino-Chinese business tycoon, Mr. Henry Sy. It is
 Business Ethics and Social Responsibility
7
The Role of Business in Social and Economic Development

composed of retail outlets nationwide, even shopping

malls, banking and finance institutions, and property
developments. The company as it is today started
humbly as a small shoe store in Carriedo back in the
1950s.

San Miguel Corporation is largest food, beverage, and

packaging company in the Philippines. It was founded
in 1890 as a brewery and presently has 100 facilities
and laboratories in the Philippines, Southeast Asia,
China, and even in Australia. Its divisions and
subsidiaries comprise of San Miguel Beer, Ginebra San
Miguel, Incorporated, Coca-Cola Bottlers Philippines
Inc., Purefoods-Hormer Company, San Miguel
Packaging Products, and many other businesses.

The Philippine Long Distance Telephone Company is

the largest telecommunications provider in the
Philippines. It was incorporated in 1928 following the
merger of 4 telephone companies under US ownership.
As of present, the company has grown to include fixed
lines subsidiaries, wireless companies such as Smart
Communications, Inc., one mobile communications
provider in the our country, and companies affianced
in information and communications technology.

In addition to those basic forms of business ownership, below are some other
types of organizations that are common today:

Limited Liability Company

Limited liability companies (LLCs) in the USA, are hybrid forms of business
that have characteristics of both a corporation and a partnership. An LLC is
not incorporated; hence, it is not considered a corporation.

Nonetheless, the owners enjoy limited liability like in a corporation. An LLC

may elect to be taxed as a sole proprietorship, a partnership, or a
corporation.

Course Module
 Cooperative

A cooperative is a business organization owned by a group of individuals and

is operated for their mutual benefit. The persons making up the group are
called members. Cooperatives may be incorporated or unincorporated.

Purpose of business in the socio economic development

The primary role of business industry has remained reasonably constant: To provide goods
and services that people may need and will want. What has changed dramatically over time
are the expectations on these businesses. Boards of directors, management and investors of
large corporations are now expected to address an array of social, economic and ecological
challenges.

Business derives its social legitimacy and right to operate from the economic value it
creates for society at large, from its performance for both investors and a wider network of
constituencies, its partnership with governments and other agents in solving social
problems, and the trust its leadership inspires in employees and society as a whole.

Businesses hold a major responsibility not just to consumers in need but more so, it must
respond to the socio economic development of its country or society.

According to Peter Drucker's The Daily Drucker, each one ending with an
action item to put that day's concept to use, he writes:

Image courtesy of Google Books

 Business Ethics and Social Responsibility
9
The Role of Business in Social and Economic Development

Importance of Business to our society

Businesses despite public dispute on its notion of

egocentric in behaviour, businesses still plays an
important role in the social economic development.

Business produces and distributes goods and services

to satisfy certain public needs. To accomplish, business
has to be very flexible and constantly researching what
the consumer demands. Businesses, although it is profit
and revenue oriented, must always take in
consideration what the consumers demands are and
responds to that needs by creating the goods or
services.

But the role of businesses is far more than just the making revenue but it is
also a venue providing opportunity to expand job opportunities to
others and creates opportunities to pay salaries and wages. This is but a way
the whole business go around: everyone employed spends money they earn
in buying all kinds of goods and favor further into developing more business
ventures.

A business responding to all these contributes more to national well-

being. It does in several ways by; 1. collecting taxes that helps the
government maintain all kinds of public and social institutions and services;
2. by investing money in developing science and technology and constructing
more business enterprises.

A business also helps enlighten and educate people and encourages their
further personal growth. High level of competition makes it vital for both
businessmen and their employees to be involved in the constant process of
learning and developing their personal qualities such as creativity and
resourcefulness, determination, practicing and learning communication skills
and expands their vision in deriving new business opportunities.

In fact, it is much more unselfish than a lot of public institutions. It does not
exist to satisfy just its own needs – for that is a way to business a failure. On
the hand, its function is to satisfy in the long run the consumer or clients
demands – all of our demands, and to make our life seemingly comfortable.
So, when you make this crucial decision to embark on a business enterprise,
bear it in mind that it is a way to serve your society.

Course Module
Glossary

Socio-economic development: It is the process of social and economic development in a

society. Socio-economic development is measured with indicators, such as GDP, life
expectancy, literacy and levels of employment.

Unlimited liability: the partners are equally responsible for the entire debts of the
business.

References

Books and Journals

Hector S. De Leon ; 2005; The Law on Partnership and Private Corporation ; Philippines;
Rex Bookstore
Urich, Tara Fitzgerald; Business Organizations in the 21st Century: A Look at New Legal
Forms for Business That Enhance Social Enterprise; Southern Academy of Legal Studies
in Business. Provided by ProQuest LLC; 2013

Online Instructional Videos

Forms of an Organization; https://www.youtube.com/watch?v=-k1nkB-ZWMQ; May 15,
2017
Forms of Business Organization 1.0; https://www.youtube.com/watch?v=nzRi-I1MYHw;
; May 15, 2017

Online Supplementary Reading Materials

WIKIPILIPINAS.ORG;http://en.wikipilipinas.org/index.php/Top_10_Best_Corporations_i
n_the_Philippines; Modified on 9 February 2011; May 15, 2017

Forms Of Business Organization; http://www.investopedia.com/walkthrough/corporate

finance/1/forms-business-organizations.aspx#ixzz4hCKqTnwE; May 16, 2017

Sole Proprietorship Business Organization in the Philippines; http://

philippinesbusinessregistration.com/sole-proprietorship/ ; May 17, 2017

http://visual.ly/8-famous-business-partnerships-really-worked; May 17, 2017

The Secret of Entrepreneurship; http://www.entrepreneurshipsecret.com/the-role-of-

business-entrepreneurship-in-society/; May 15, 2017

Business Ethics Blog with Chuck Gallagher; http://www.chuckgallagher.com/business-

ethics-101-egocentric-behavior-a-foundation-for-ethical-decisions/; May 17, 2017
 Business Ethics and Social Responsibility
11
The Role of Business in Social and Economic Development

CHRON.COM; http://smallbusiness.chron.com/10-examples-sole-proprietors-
32858.html; Copyright 2017 Hearst Newspapers, LLC; May 17, 2017

Course Module