Business Ethics

Module 2

Target

There are roles of business and non-profit organizations in social and economic
development of our country.
In your previous lesson, you are done with the different forms of business
organizations. You are already familiar with examples of them, some of which are
found in our locality. You also tackled how these organizations contribute to
socioeconomic development
This module would provide you with information and activities that will help
you understand how fairness, accountability, transparency and stewardship is
observed in business and non-profit organizations

After going through this module, you are expected to:

1. Illustrate how fairness, accountability, transparency and stewardship is observed in

business and non-profit organizations

Jumpstart

Activity 1: Guess Me!

Direction: Answer the following questions. Choose your answers from the options
inside the box. Write it on the space provided.

Transparent Blonde

Fair Pilot

Account Flight Steward

1. An individual who is a member of an aircrew employed by airlines aboard

commercial flights, primarily to ensure the safety and comfort of passengers.
_____________
2. Filipinos usually have a brown skin color. How about the skin color of most
Americans? _______________
3. Going to banks to open it, is often advised by financial analysts in order to
practice the habit of saving. What is it? _____________

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4. It is the quality of being easily seen through? _______________

Discover
Introduction

You have just finished answering your first activity. There are words in the
given choices which you will encounter in this module but will be discussed in the
context of business.

Business leadership affects the moral capability and performance of

organizations. Business leaders influence the scope and character of formal ethics
programs and integration of ethics into everyday organizational life. However, most
practicing business leaders in most countries most of the time are not accountable for
dysfunctional moral, social, and environmental performance. Many are seldom held
accountable for adverse impacts of their decision making, for example, deepening
poverty, social disintegration, and environmental degradation. There is a need to
convince managements that they should develop their “integrity capacity” which is the
individual and/or collective capability for repeated process alignment of moral
awareness, deliberation, character, and conduct that demonstrates balance
judgement, enhances sustained moral development, and promotes supportive systems
for moral decision-making. These four dimensions of integrity capacityprocess,
judgement, development, and system should present challenges for business leaders
so that they become more aware of moral concerns and thus respond more effectively
to the problems that arise (Petrick and Quinn, 2001).

Looking back in our objective on the previous pages, “Illustrate how fairness,
accountability, transparency and stewardship is observed in business and non-profit
organizations.”

Let as first try to understand the different concepts that are in our objective by
giving the principles their definitions and some discussions of each.

Fairness

The quality or state of being fair, especially: fair or impartial treatment: lack of
favoritism toward one side or another.

Fairness is the quality of being reasonable, right, and just.

In simple terms in Filipino, it is translated as

“Patas” and “Pagkamakatarungan”

FAIRNESS
It is the quality of making judgements that are free from discrimination.
Judges, umpires and teachers should all strive to practice fairness. Fairness comes

from the old English faeger, meaning “pleasing, attractive.” This makes sense given
that the word is also used to describe physical beauty. Fairness can refer to someone’s

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good looks, or if someone is very pale and blond, you might not notice the fairness of her
complexion. When someone shows fairness in making a decision, he is pleasing all
parties involved and offering a solution that is attractive to everyone.
Fairness in the context of a business organization involves balancing the interests
involved in decision making including any decisions related to hiring, firing (including the
investigatory process), and the compensation and rewards system. Recent research has
expanded the meaning of equity or fairness. Historically, equity theory focused on
distributive justice, the employee’s perceived fairness of the amount of rewards and who
received them. However, organizational justice draws a bigger picture. Employees

perceived their organizations as just when they believe rewards and the way they are
distributed are fair. In other words, fairness or equity can be subjective; what one person
sees as unfair may be perfectly appropriate for another. In general, people see allocations
or procedures favoring themselves as fair. Overall, fairness has to do with justice, which
is to give to another that which is due him or her. More concretely, justice: (1) looks at
the balance of benefits and burdens distributed among members of a group; and/or (2)

can result from the application of rules, policies, or laws that apply to a society or a
group. In general, the results of actions override utilitarian results.

Accountability

The quality or state of being accountable, especially: an obligation or

willingness to accept responsibility or to account for one's actions. It is the obligation
of an individual or organization to account for its activities, accept responsibility for
them, and to disclose the results in a transparent manner. It also includes the
responsibility for money or other entrusted property.

Accountability is taking or being assigned responsibility for something that you

have done or something you are supposed to do.
In simple Filipino terms, it is translated as “Pananagutan.”

To record on business leadership accountability is mixed at best. In Great Britain,

continental Europe, and Australia, the practice of social and environmental accounting has
gained a strong foothold and expanded the scope of business leader accountability

beyond maximizing shareholder wealth. The works of the Institute and Ethical

Accountability (an international professional body committed to strengthening social

responsibility and ethical behavior of the business community and non-profit organizations)
and other empirical research groups have demonstrated the corporate social performance-
financial performance link. Unfortunately, many of today’s business people are not made to
account for their activities and outcomes, especially for the things that go wrong and for their
unethical actions.

Why is accountability important?

Sound accountability structures are most important aspect of prevention and detection of
corruption. A civil society organization without proper accountability systems is fragile and
open to rumours about mismanagement and abuse of power. Accountability – what it is and
what it is not:

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 To be accountable is to be liable to explain or justify one’s actions and
decisions.

 Accountability is the process of explanation and justification.

 Holding to account is the process of requiring explanation and justification, but it is
also about testing, forming a judgement, and if necessary, taking action.
 Accountability implies responsibility: it is reasonable only to hold people to account
for those things which they are responsible.
 It is not synonymous with responsibility. Although with responsibility comes
with being accountable or accountability. But still, the two words are with different
meanings.

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Transparency

Lack of hidden agendas and condition, accompanied by the availability of full

information required for collaboration, cooperation, and collective decision making.

Minimum degree of disclosure to which agreements, dealings, practices and

transactions are open to all for verification.

Essential condition for a free and open exchange whereby the rules and reasons
behind regulatory measures are fair and clear to all participants.

Transparency in finance refers to the extent to which shareholders, investors

and other stakeholders have ready access to a company’s or market’s data, such as
audited financial reports, market depth, price levels, and the planned actions and
behaviors of its senior management.

Transparency is the quality of allowing light to shine through. A transparent

window allows you to see what's on the other side, and a transparent business
similarly keeps information visible rather than hidden. This openness usually
starts at the management level and applies to the ways that leaders treat
employees, especially with regard to sharing information.

The real meaning of transparency in business goes beyond rules and guidelines
with a genuine willingness to share information (information disclosure)
so employees feel kept in the loop and understand what is actually going on with
the company.

In simple Filipino terms, it is translated as “Panganganinag.” It has something

to do with honesty and some (if not all because of legalities with regards to the nature
of the business or non-profit organizations) information disclosure to the stakeholders
including the employees and concerned public.

Transparency has become increasingly popular word in recent times. In this context,
associated academic literature has recently analysed several issues associated with
corporate transparency such as the ethical justifications for information disclosure, the
ethical nature of corporate information transparency, or the use of transparency in
management-employee
relationships.
On the organizational level, the instrumental salience of transparency is referred
to in two instances. In the first case, transparency is identified as an important
mechanism for guaranteeing social accountability. In some non-profit organizations and
non-government organizations which do humanitarian acts of helping other people
during
times of crisis or calamities and also during non-crisis times appropriate information
disclosure is necessary to inform donors how their money is used by these
organizations.
Transparency allows stakeholders to understand whether the activities of social
institutions such as international organizations and non-government organizations
provide a genuine service to civil society and whether money is used properly.

Stewardship

The conducting, supervising, or managing of something, especially: the careful

and responsible management of something entrusted to one's care

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 Stewardship means the management or care of something, particularly the kind
that works. If your company is making money, there’s probably been careful
stewardship — or, a lot of luck.

Stewardship is the responsibility of looking after property.

In simple Filipino terms, it is translated as “Pamamahala” or “Pangangasiwa.”

To be easily understood, in other books it is contradicted to ownership. Because

if you are a steward, you don’t own the thing or the business itself that you are
managing. You don’t own it, other people owned it. You are only there to manage it.
You are a steward.

Stewardship is closely related to managing one’s property with utmost diligence. Like
in managing other people’s business registered in their names. So you are a manager or a
steward. You are an employee of that business. But an employee with an utmost diligence.
Someone who cares for that business. Because stewardship has something to do with
servant leadership. Servant leadership focuses on serving the needs of others. Servant leaders
do not use their power to achieve ends; they emphasize persuasion. The

characteristic behaviors of a servant leader includes listening, empathizing, persuading,

accepting stewardship, and actively developing followers’ potential.

Business or Business Organization

An entity formed for the purpose of carrying on commercial enterprise. Such an

organization is predicated on systems of law governing contract and exchange,
property rights, and incorporation.

The term business organization describes how businesses are structured and
how their structure helps them meet their goals. In general, businesses are designed
to focus on either generating profit or improving society. The basic categories of
business organization are sole proprietorship, partnership, and corporation.

A business organization is an individual or group of people that collaborate to

achieve certain commercial goals.

Non-profit Organizations

In the Philippines, not-for-profit organizations (NPOs) are typically organized as

"non-stock corporations" registered under the Corporation Code. Non-stock
corporations may be formed for charitable, religious, educational, professional,
cultural, fraternal, literary, scientific, social, civic service, or similar purposes, such as
trade, industry, agricultural and similar chambers, or any combination thereof
(Revised Corporation Code Section 87). The Securities and Exchange Commission
(SEC) of the Philippines serves as the registration authority for nonstock corporations.
Some non-stock corporations register as foundations.

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 Non-profit organizations are formed in order to conduct activities and
transactions for purposes other than shareholder financial gain, while at the same
time providing the same asset protections and limited liabilities of a standard
corporation. A non-profit corporation can make a profit, but this profit must be used
strictly to forward the goals rather than to provide earned income (in the form of
dividends) to its shareholders. It is understood that most of the transactions and
activities of a Non-profit Corporation will not be commercial in nature.

Deepen

At this point let’s read and analyze the case below. Make your stand and write it
in a separate sheet of paper.

CASE ANALYSIS

Hotel Prima is a four-star hotel employing 700 people. Peter,

Lawrence, and Alex are the major owners/top -level managers, and it
follows that they control the company. For several years, their hotel made big
profits, so they were inspired to introduce a scheme that allowed their employees
to buy stocks of their company which increased in value after five years, and
would continue to increase as the years went by. Their employees, because of
satisfaction for the way the three handled hotels finances, treated the company
as their own and did their best in doing respective jobs.

Although the hotel was doing well and the three major owners/top-
level manager practiced corporate social responsibility through the above-
mentioned scheme, the company was not law-abiding; this was because it did
not pay the correct taxes to the government. The company has ordered their
accountants to practice the so-called double accounting system. Through this
practice they were able to save millions of pesos which they used to increase
their capital and give additional benefits to all their employees.
Peter, Lawrence and Alex had shared the belief that the government was not
using taxpayer’s money properly, so the three agreed that their company should
not pay some of its taxes.

Rubrics

Criteria Excellent 4 Good 3 Fair 2 Poor 1

Grammar The sentences The sentences The sentences All sentences

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 were constructed were were constructed were
with constructed with many errors grammatically
correct grammar. with some in grammar. incorrect
errors in
grammar.
Clarity All the thoughts Most of the Some thoughts The thought
of were very clear. thoughts were were clear. can’t be
thoughts clear understood.
Reasoning The stand was The stand is The stand is not The stand is
well reasoned somewhat so reasonable. completely
out. reasonable. unreasonable.

Gauge
Directions: Please answer the following questions bellow to test whether you have
finally grasped the lesson. Encircle the letter of your chosen answer.

1. It means “to be liable to explain or justify one’s action and decisions”.

A. Accountability B. Fairness
C. Stewardship D. Transparency
2. This principle implies responsibility, which means, it is reasonable only to hold
people to account for those things for which they are responsible.
A. Fairness B. Accountability
C. Stewardship D. Transparency
3. Which principle looks at the balance of benefits and burdens distributed among
members of a group?
A. Accountability B. Fairness
C. Stewardship D. Transparency
4. Which principle involves the balancing the interests involved in all decision
making including any decisions related to hiring, firing, and compensation and
rewards system?
A. Accountability B. Transparency
C. Stewardship D. Fairness
5. Which of the following has something to do with ethical justifications for
information disclosure?
A. Accountability B. Fairness
C. Stewardship D. Transparency
6. Which principle describes leaders who go beyond their self-interest and focus on
opportunities to help followers to grow and develop?
A. Accountability B. Fairness
C. Stewardship D. Transparency
7. The staff of the Accounting department of ABC Company received an increase in
salary this year while the other department staff of ABC Company did not. What
principle is violated in this scenario?
A. Accountability B. Fairness
C. Stewardship D. Transparency
8. The Accountant of DEF Corporation assigned some of his work to her accounting
staff. At the end of the month a much-needed report is already due but the staff
was not able to finish the said report. The management team and the Board of
Directors asked the accountant to answer for the glitch of work done undone.
What principle is shown in this scenario?
A. Accountability B. Fairness
C. Stewardship D. Transparency

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9. MBA Company Financial Report was shown to its employees and stakeholders
through printing it on a national circulation of a newspaper. What principle is
illustrated in this scenario?
A. Accountability B. Fairness
C. Stewardship D. Transparency