Social Responsibility and

Good Governance

CHAPTER 6
Ethical Issues and
Problems in Business
Ethics & Corporate World
Chapter 6.
 Objectives:
 Examine the different issues and problems
in business and the business enterprise from the
moral perspective
 Develop a framework for analysis for analysis
and resolution of ethical dilemmas and problems
affecting business
 Acquire basic information about questionable
business practices ad their impact to
stakeholders
 Develop problem solving skills using the
philosophical-qualitative approach to resolve
ethical problems in business & organization
Business is viewed as…
 Productive human activity
 Produces employment, fair deals,
creativity, advancement of
technology, customer satisfaction,
etc.
 However, it also subject for abuse
 Employee-employer relationship
 Buyer-sellers relationship
SEXUAL HARASSMENT
 Create hostile and unhealthy
workplace for the employees
 Anti-Sexual Act of 1995 (Philippines)
SECTION 2. Declaration of Policy. - The State shall value
the dignity of every individual, enhance the development
of its human resources, guarantee full respect for human
rights, and uphold the dignity of workers, employees,
applicants for employment, students or those
undergoing training, instruction or education. Towards
this end, all forms of sexual harassment in the
employment, education or training environment are
hereby declared unlawful.
 Civil Rights Act of 1964 (US)
“unwelcome sexual advances, requests for
sexual favors, and other verbal or physical
conduct of sexual nature constitutes sexual
harassment when submission to or rejection of
this conduct explicitly or implicit affects an
individual’s employment, unreasonably
interferes with an individual’s work
performance, or creates and intimidating,
hostile or offensive work environment.”
Why sexual harassment occurs
 Due to power struggle between men and women
 Some organizations and managers allow it to
happen
 Industrial revolution. Balanced shift.
 Men and women used to work separately
(women joined the workforce)
 Harassment committed by man to woman –
response to real or imagined loss of power
 Harassment committed by woman to man – it
may be an expression of retaliation or flexing of
the new power
Two types of sexual
harassment
 “Quid Pro Quo”
 “this for that” or “something for
something”
 Requiring a sexual favor or interaction as
a condition for employment or in
exchange for an employment benefit
conduct
 Harassment that creates a hostile
environment
 Includes abuse, verbal, physical & visual
conduct & intimidating, offensive, or
hostile environment in the workplace
that interferes with work performance
 Maybe based on religion, race, national
origin, sex, age, marital status, veteran
status, sexual orientation, disability
Examples of hostile
environment
 Unwanted touching, patting, pinching or brushing up
against a person
 Comments about your body, leering, wolf whistling, cat
calls, insults, of a sexual nature, persistently pestering
for a date
 Display or circulation of pornographic pictures with the
intention of harassing someone
 Workplace blackmail
 Green jokes
 Obscene letters
 Sexual propositions
 Suggestive looks
Profiles of the victim and the
harasser
 Harasser & victim maybe a woman or a man.
Victim does not have to be the opposite sex.
 The harasser can be the victim’s supervisor,
agent of the employer, supervisor in another
area, co-worker or non-employee.
 The victim does not have to be the person
harassed but could be anyone affected by the
offensive conduct.
 The harasser’s conduct must be unwelcome
How sexual harassment affects
the workplace
 Study made by Redbook Magazine
(1981)
 140,000 men and women were asked
 80% believed that they were sexually
harassed
 Jokes, gestures creates hostile
environment
 Lawsuits
 Unfavorable publicity or invasion of
privacy
 Affects manager, employers, co-workers
 Affect the entire life of the organization
 Low morale for the employees
 costly
How to prevent sexual
harassment
 Create a safe, secure, positive
working environment
 Examples of policy development
 Statement that specifically addresses sexual
harassment
 A separate sexual harassment policy that
covers all organizational members
 One that addresses non-management
employees & one that addresses
management
Communicating the sexual
harassment policy
 Communicate sexual harassment
policy to be effective
 Expose the policy regularly by
 posting it on bulletin boards
 Memos
 Articles
 Newsletters
 Meetings
 training
JUST WAGE
 Work
 is said to be for the purpose of obtaining
economic gain for the laborer.
 Promotion of life
 Essence of work to be compensated for a
work done or for services rendered.
 Main objective is to create a system of
reward that is equitable to the employer
& employees
 Just Wage –
 is the legitimate fruit of work according to the
Church.
 should not be below the level of subsistence of a
worker.
 is a compensation enough to support the
wage-earner in reasonable and frugal comfort.
 should assure that every man has the
opportunity to provide a dignified livelihood for
himself and his family.
The Teachings of the Catholic
Church on Wages
Pope Leo XXIII
 That members of the working class are
citizens by nature and has the same rights as
the rich.
 That workers and employers should bargain
on wages; wages bargained should not be in
any way insufficient.
 If a worker is forced to accept harder
conditions imposed by the employer, he is a
victim of violence of injustice
“Capital of Labor” by Pope
Leo XIII was called as the
“Magna Carta of Social
Reconstruction” by Pope
John XXIII.
Pope Pius XI

-Shares on Profit

-Giving workers a say in a

company’s management
Pope John XXIII

called on government to lead in

business abuses and push full
employment policies and attempted to
focus on the widening gap between
the rich and the poor.
Blessed Pope John Paul II
•Just wages
•Joint ownership
•Employee share in profit and management
•Employee benefits such as health care, suitable
working condition and rest periods
•Job trainings for disabled persons
•Special protections for overseas workers
•Wages should be sufficient so that women with
children will not be forced to work and will have
time to devote themselves to the care of their
children.
Catholic Bishops of the Philippines
-focuses on just wage and welfare
of workers
-formation of labor unions for
wage negotiations and working
conditions
-rejects individualism
Agencies concerned on just
wage
1. The International Labor Office
Conventions –
“Equal pay for men and women workers.”

2. The 1966 International Convention on

Economic, Social, and Cultural Rights –
“The right to fair wages and equal compensation
for work of equal value”.
3. The 1984 Universal Declaration of
Human Rights –
“The right to equal pay for equal work
(Art. 23)”
4. The 1987 Philippine Constitution –
“That the workers are entitled to a living
wage(Art. 13)”
5. The Wage Rationalization Act (RA
No. 6727) –

“The state shall rationalize the fixing of

minimum wages to ensure a decent
standard of living for the workers and
their families.”
Factors to consider in the
Formulation of Just Wages
1. External Market
2. Laws and Regulations
3. Cost of Living
4. Industry Rate and Locality
5. Organizational factors
6. Job Factors
7. Individual Performance
 External Market
 Supply and demand of labor in the
market
 Scarcity of labor or jobs
 Laws & Regulations
 Workers should be paid according to the
law
 Minimum wage
 National Wage and Productivity
Commission (NWPC)

 Regional Tripartite Wages and

Productivity Board (RTWPB)
 Cost of living
 A fair wage should be sufficient to meet the
increase of cost of living
 If COLA is up by 10% the wage should also
be up by 10%
 Unfortunately it does not always happen
 Prevailing rate
 Wage survey
 Not all companies have a minimum wage
high enough
 Organizational factors
 Type of industry
 Size of the company
 Unionized or not/labor intensive or
capital intensive
 Job Factors
 Nature of job
 The more difficult the job is the higher
the pay rate should be
Some issues on just wage
 The minimum wage mandated by the government
is not a guarantee of just and fair wage
 Mutually agreed wages of he different organizations
may not be advantageous to the workers
 Geographic differences hinder the formulation of
perfectly common definition of fair wage.
 Wage indexation to cost of living where wage is
automatically adjusted with the increase of COLA is
not usually met by majority of employers
 Companies have different interpretation of the
justifiable pay for certain job positions, skills, &
task
Gift giving & Bribery
 Gift-giving. An act of extending
goodwill to an individual in an effort
to share something with particular
others.
 Giving gifts to customers, clients &
business partners is a common
practice in business community
 Normally observed during special
occasions
Reasons for gift-giving
 To show appreciation for a favor
received
 To effectively establish goodwill with
business partners
 To advertise
 To compete effectively against
competitors
Common forms of gift-giving
 Samples
 Raffle coupons
 Rebates/cash refunds
 Padding expense accounts
 Premiums
 Prizes
 Patronage awards (rewards)
 Tie-up promotions
 Allowance
 Free goods/tips
Is gift-giving ethical or
unethical
 Difficult to determine the morality of
gift-giving
 Most agree that accepting & receiving
bribe is a violation of professional
ethics
 However, it’s hard to determine what
is and is not a bribe.
 Rules not clear
Factors in determining the
morality of gift-giving
 Value of gift
 Is the gift nominal or substantial enough to
influence a business decisions?
 Valuable gifts are unethical
 Purpose of gifts
 If the gift is not intended to be or received as
bribe & remains nominal there does not appear
any serious problem
 Gift with imprinted name of the giver maybe
considered as a form of advertisement.
 Circumstances under which the gift
was given or received
 Gift given during special occasions or events
 Unattached to special events
 Gifts given openly or secretly
 Position between or relationship of
the giver & receiver
 Donor-receiver. Could the recipients' opinion
influence decision result in favor of the donor
 Superior-subordinate relationship
 Acceptable business practice in the
industry
 Is the act considered acceptable in a particular
business?
 Tips & gifts
 Company policy
 if the firm prohibits gift-giving to customers,
vendors or suppliers, associates, et. Then it is
wrong
 Laws & regulations
Bribery
 Practice of giving remuneration for
performance of an act that is
inconsistent with the work contract or
the nature of the work one has hired to
perform.
 Induce to make people inside the
business or other organizations to make
decisions that would not be justifiable
according to normal business criteria
Examples of bribery
 Motorist offering money to police officer so
as not to be given ticket for a violation
 Giving an expensive gift for a faster paper
work
 A construction company shared percentage
of income to civil servant in order to win a
contract
 Bribing a judge to lessen criminal penalties
Bribery is unethical because…
 It used to gain personal or corporate
advantage
 It corrupts the concept of justice & equality
 It produces cynicism & a general distrust of
institution
 It destroys people’s trust in the integrity of
professional services of government,
courts, law enforcement, religion, etc.
 It treats people as commodities whose
honor can be bought & sold
 Advertising
 Any paid form of non-personal
presentation and promotion of ideas,
goods, or services by an identified
sponsor.
 Paid non-personal communication
from an identified sponsor using mass
media to persuade or influence an
audience.

RPS
Purpose of Advertising
 To inform potential buyers of the
availability of a certain product by
providing relevant information on its
uses, benefits and how it might serve
the needs and wants of individuals.
 THE BENEFITS OF
ADVERTISING

• Economic Benefits
– Informing people about the availability of
products (new and improvements of existing
ones)
– Helps consumer to make informed and
prudent decisions
– Contributes to efficiency and lowering the
prices
– Stimulating economic progress through the
expansion of business and trade
– New jobs, higher income and more decent
and humane way of life for all.

RPS
 THE BENEFITS OF
ADVERTISING

• Political Benefits
– Makes contribution to democracy analogous
to its contribution to economic well being in
a market system guided by moral norms.
– Helps counteract tendency toward the
monopolization of power on the part of
oligarchies and special interests
– Informs people about the ideas and policy
proposals of parties and candidates,
including new candidates not previously
known to the public.

RPS
 THE BENEFITS OF
ADVERTISING

 Cultural Benefits
 Have an opportunity to exert a positive
influence on decisions about media content
 Can contribute to the betterment of society
 Advertising can brighten lives
 Moral and Religious Benefits
 Helps generous social institutions to
communicate their message (faith,
patriotism, etc.)

RPS
The morality of advertising
(some issues in advertising)
 Deceptive advertising
 False statement
 Lying or representing the product without
any statement
 May occur through
 Sentences or propositions
 Pictures
 individual words
 Combination of objects which can deceive the
mind & the eye
 Example of deceptive advertising
 Box of the product do not look the same
as the contents of the product.
 Picture deceptive
 Semantics in advertising
 Allowed in certain way to create a leeway in some
products
 Products should be package in attractive way but
should not be taken literally
 Ex. Shampoo, cosmetics with pictures of beautiful
model
 Use of weasel words
 Ambiguity in advertising
 Used to avoid or recoil from
straightforward statement
 Ex. Help (aid or assist)
 Semantics
 Do not provide direct information
 unsure
 Exaggeration
 Occurs when advertisement tend to
make false claims of the benefits
unsupported by evidence
 Psychological appeals
 Arousing human emotional needs rather
than reason
 Contains elements that satisfy
subconscious desire
 Power, prestige, personal enjoyment,
masculinity (ex. Axe)
 Plays a serious moral concern
 Ads directed at children
 Children are special group of consumer
 Advertising to children is effective & eventually
became big business
 Average child is exposed to more than 40,000
tv commercials per year
 Kids are the most pure customers
 Not able to draw the line between children's
show & commercials
 Aim for children to pester their parents to buy
things for them
 Philippine law on advertising
 Consumer Act of the Philippines (RA 7394)
 ARTICLE 108. Declaration of Policy - The State shall protect
the consumer from misleading advertisement and fraudulent
sales and promotion practices.
 FALSE, DECEPTIVE AND MISLEADING ADVERTISEMENT
 ARTICLE 110. False, Deceptive And Misleading Advertisement
- it shall be unlawful for any false, deceptive or misleading
advertisement by Philippine mail or in commerce by print,
radio, television, outdoor advertisement or other medium for
the purpose of inducing of which is likely to induce directly or
indirectly the purchase of consumer products or services.
 An advertisement shall be considered
false, deceptive, or misleading if not
in conformity w/ the provisions of the
Act.
Special requirement for Food, Drug,
Cosmetic, Device or Hazardous
Substances
 No claim in the advertisement can be made if not
approved by DOH;
 It is unlawful to advertise any food, drug, cosmetic,
device or hazardous substance that is false,
misleading or deceptive or is likely to create
erroneous impression regarding its character,
value, quantity, composition, merit or safety;
 Where a standard has been prescribed for, FDCD or
H substance, no person shall advertise any article
or substance in a manner that is likely to be
mistaken for such product, unless the product
actually complies with the prescribed standard;
 Advertisement of any FDCD or H substance may not
make use of any reference to any laboratory report
of analysis required to be submitted to the DOH,
unless such laboratory report is duly approved by
the DOH;
 No advertisements for any FDCD or H substance
may be allowed unless such product is duly
registered and approved by DOH.
Philippine Association of National
Advertisers (PANA): Code of ethics
 Good advertising…
 recognizes both its economic & social
responsibility to help reduce distribution costs
& to serve the public interest;
 Depends for its success on public confidence.
Hence it cannot permit those practices that
tend to impair this confidence;
 Aims to inform the consumer & help him by
intelligently;
 Tells the truth. It is accurate, honest &
trustworthy. It does not exaggerate.
 Conforms not only to the laws but also to the
generally accepted standards of good taste &
decency, & to moral & aesthetic sentiments of
the country;
 Seeks public acceptance on the basis of
positive & constructive statements, made on
the merits of the product or service advertised;
 Does not allow activity that involves the
exploitation of goodwill, attached to any other
firm, product or services;
 Helps to dignify the individual and contribute to
the building of a civilized society.
Workplace Romance
Brief Background

 Romance in the workplace is not a novelty.

However, it is believed to have increased as a
result of the influx of women into the labor
force in the last 50 years. In 1950, less than 30
percent of the 64 million labor force
participants were women. Between 1950 and
2001, six out of ten additions to the labor force
were women. As of 2003, women composed
46.6 percent of the labor force (Kaufman &
Hotchkiss, 2003).
Brief Background cont’d

 The combination of a gender-mixed workforce

and time spent at the workplace has the effect
of conjuring up human emotions that often
give birth to romance between co-workers and
between subordinates and their supervisors.
What is Workplace Romance?
 Workplace romance is defined as a
mutually desired relationship that
includes physical attraction between
two members of the same
organization (Quinn, 1977, Foley and
Powell 1999).
 Workplace romance is consensual and
mutually welcomed (Clarke 2006).
What is Workplace Romance?
Cont’d
 Workplace romances are characterized
by desiring to be with the other person
and feelings of emotional and physical
attraction, which may lead to a sharing
of personal information, mutual caring
and respect, and quite likely sexual
behaviour such as touching, kissing and
hugging, and sexual intercourse (Pierce,
Byrne, and Aguinis 1996).
EMPLOYER’S INTERESTS

 Employers may be concerned about office

romances for a variety of reasons. Office
romance has the potential to negatively affect
behaviour in the workplace in ways that conflict
with both the business and legal interests of
the employer.
Business Interests
 A relationship between a supervisor and
subordinate may lower the morale and
productivity of other employees.
 Morale may suffer as a result of alleged
favouritism, the extent of which may or may
not arise to the level of a recognizable legal
claim.
 Employees may also lose motivation to work
harder or go the extra mile, because they
believe that the supervisor has “blinders” when
it comes to other employees’ accomplishments.
Legal Interests
 A relationship between a supervisor and
subordinate presents some legal issues. Is the
subordinate truly a consenting party? Will it
result in favoritism?
 If the elements support a legally recognizable
claim, not only are there costs associated with
defending the claim, but the employer may be
found liable by a trier of fact and be subjected
to an uncertain amount of damages.
Don’t be Confused!
Consent is not a synonym for welcome

 When we ask whether the

subordinate in a relationship with a
supervisor is a consenting party, what
we really mean and should ask is
whether the supervisor’s advances
were welcomed and whether the
subordinate’s continued consent was
voluntary.
A woman may consent to a sexual
relationship, but not welcome it.
EMPLOYEES’ INTERESTS
Employees expect to be left alone in
matters that are private and do not
concern their work. While at work,
they expect fairness and equity. It
sounds simple enough. Of course, it
is not.
THE WORKPLACE:
A BREEDING
GROUND FOR ROMANCE?

Why Do So Many Romances Originate

in the Workplace?
 Today’s worker spends more time with
business colleagues than with his or her
mate.
 It is not surprising that men and women
develop close friendships with each other,
and turn to one another for emotional
support. This is likely to happen both to
married as well as single individuals.
A BREEDING
GROUND FOR ROMANCE CONT’D
Interpersonal Attraction
 In the 1950s researchers believed that opposites
attract because they would complement each
other’s needs, but there is little support for this
proposition.
 Recent studies have consistently found that higher
perceptions of similarity are associated with
increased levels of relationship quality” (Hogg &
Cooper, 2003). Physical attractiveness and
reciprocity of liking are also factors of interpersonal
attraction.
 Another factor is the exposure effect.
Workplace Romance
Philippine Setting

In the Philippine setting, romances

have likewise blossomed in the
workplace resulting both as a
challenge and success in the
companies where they are
happening (Reclusado-Nario,
2006).
To Love or Not to LOVE?
To love or not to love while at work is indeed a great
poser. Here are some tips on dealing with office
romance:
 Decide in advance whether you will have a romantic
relationship in the office.
 Don’t have a relationship with someone in your
company unless you can stay far enough away from
each other so you won’t be influenced by the other
person
 Do not have a romance with a married colleague!
 The more flirtatious a guy gets, the more business-
like you should get.
 If you are in love, don’t get lightheaded because you
feel great.
To Love or Not to LOVE?
 If you marry a male colleague, consider
keeping your own name.
 Consider keeping your relationship secret until
you see how serious it is going to be.
 Make sure the corporation realizes you are
spending your time on business even if you
have a romance.
 Understand that there are two elements of
career success: Actual Performance and How
you are being perceived.
What do Employers Need to
Control?
 It is important to note the difference between
regulating professional behaviour (the ethical
do’s and don’ts and acceptable etiquette within
one’s profession) and regulating behaviour that
is searching to meet more instinctive human
needs. There may be a natural conflict.
 What is the employer trying to control that is
different from normal socializing at the
workplace?
Employers Need to Control Cont’d
 Attraction. The best chances of
controlling attraction would be to hire an
all male or all female heterosexual
workforce. A firm could also attempt to
physically separate its male employees
from its female employees.
 Behavior at work. The employer can
try to control the actual behaviour that
may lead to romantic feelings.
Employers Need to Control Cont’d
 Behavior/relationships out of work.
At will doctrine allows an employer to
fire for any or no reason as long as it is
not an unlawful reason (discrimination,
etc.).
 Consequences of “bad” breakups.
Employers need to prevent sexual
harassment claims arising from romantic
relationships that have gone “sour.”
Types of Control
(Concerning Workplace Romance)

 Rules/Policies. The employer can establish a policy

prohibiting it and list possible consequences for violating
the policy.
 Corporate Culture. The employer that may not want to
bind itself to a written rule, yet minimize its risk for
sexual harassment liability, may establish a corporate
culture in which their behaviour is frowned on, and
“prohibited.”
 Performance outcomes. If management frowns upon
office romance and is aware of the romance, the
employer may be encouraged to “punish” the employee
by means of performance reviews.
 CRITIQUE
 Businesses and its employees primary
interests must agree together. Both parties
should maintain productivity and morale,
and as much as possible avoid liability.
 Any company should know the importance
of fairness and equity and the right to
privacy of employees in their personal lives.
 Now whether or not workplace romance is
moral, as rational people we are expected
to know our limit and the consequences of
our actions by getting involved in such
situations.
FAIR PRICING
 Price. Measure of value in exchanged.
Maybe expressed in monetary terms
(a sale) or in non-monetary terms
(barter)
 Natural price. Covers the cost of
producing the commodity including
rate of profit obtainable in other
markets (Adam Smith).
 Price theories
 The Cost Theory of Prices
 Fair price of good depends on how much it
costs for the seller to make the product
available to the buyer & on calculation of a
reasonable profit.
 Market Theory of Prices
 Value is a function of utility and scarcity
 The more useful the commodity the higher
the price.
 Law of supply and demand affects the
price
 What makes a fair price?
 Fair means acceptable and just.
 Acceptable. A fair price is satisfactory
 Just. Judgment that the price has been
justified.
 Difference between fair price & just price
is personal and social fairness.
 A price is fair when…
 Buyer & seller must negotiate the terms
of exchange voluntarily;
 Buyer & seller must agree to the
exchange without unusual constraint;
 Buyer & seller must have adequate
information about the things to be
exchanged.
 Why price for a product or service has
to be established?
 man is entitled to enjoy the fruits of his
labor
 Price depends on the law of supply and
demand
 Factors that determines a fair price
 Cost of materials
 Operating and marketing expenses
 Reasonable profit margin
 Ethical issues in fair price
 The true cost of the product is concealed
 Suggested retail price
 Use of electronic scanners
 Promotional pricing
 Follow the leader pricing
 Price scratching
 Price fixing
Market Structure
 The market presupposes the setting of a
fair price depending on its structure.
 Buyers and sellers bargain with each
other in setting prices.
 Sellers would normally ask for a higher
price and buyers offer less than they
expect. Through bargaining, each would
arrive at a fair market value reasonable
to both parties.
Just or Unjust Price
 St. Thomas Aquinas, a brilliant Italian Dominican
set a price principle on what is considered as a just
price:
 “buying and selling were instituted for the common
good of both parties since each needs the products
of the other. Therefore, the contract between them
should rest upon an equality of things to things.
The measure of the value of a thing, which is
exchanged, should be given by its money price.
Hence, to sell a thing dearer or to buy a thing
cheaper than it is worth is unjust.”
CONCLUSION
 For a business venture to progress, it needs to have an ample
amount of profit.
 Profit can be narrowly defined as income less expenses;
however, profit is more broadly categorized on building a
reputation for excellent products, services and business
practices.
 Profits provide owners with a return on their investment, to
increase pay for workers, to buy additional resources, to
research new products or services and to support their
communities.
 The price it pays to customers must also be equal to its
internal factors that run the whole business enterprise.
 Businesses therefore set prices high enough to make profit, but
not too high or consumers may think the price is unfair.