Ethical Issues and Problems in

Business and the Corporate World

Lesson 4
Introduction
  Business is a productive human activity that brings
beneficial contribution to both people and society.

  Business
produces employment, fair deals, creativity,
advancement of technology, customer satisfaction, among
others.

  Ironically, however, business

is also an activity that
provides an opportunity for some unscrupulous people to
take advantage of others:
  e.g. the abuse of fiduciary relationship between employers and
employees and between the buyers and the sellers
1. Sexual Harassment
 What is Sexual Harassment?
  This
is an issue in the corporate world that must be
looked into because it can create a hostile and unhealthy
workplace for the employees.

  Forthis reason, the Congress of the Philippines enacted

the Anti-Sexual Act of 1995

  Declaring sexual harassment unlawful in the employment,

education or training environment, and other purposes.
 Anti-Sexual Act of 1995

  “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.

  Towardsthis end, all forms of sexual harassment in the

employment, education or training environment are
hereby declared unlawful.”
 The Civil Right Act of 1964
of United States of America

  Thisis where our law was patterned defines sexual

harassment as:

  ”Unwelcome sexual advances, requests for sexual favors, and

other verbal or physical conduct of a sexual nature constitutes
sexual harassment when submission to or rejection of this
conduct explicitly or implicitly affects an individual’s
employment, unreasonably interferes with an individual’s work
performance or creates an intimidating, hostile or offensive
work environment.”
 Republic Act No. 7877

  Defines sexual harassment as:

  Employer, employee, manager, supervisor, agent of the

employer, teacher, instructor, professor, coach, trainor or any
other person who, having authority, influence or moral
ascendancy over another in a work or training or education
environment demands, requests or otherwise requires any
sexual favor from the other, regardless of whether the demand,
request or requirement for submission is accepted by the
object of said act.”
 Why Sexual Harassment Occurs?
  Sexual
harassment occurs due to power struggle between
men and women as a response to a real or imagined loss
of power or as an expression of retaliation or a flexing of
the new power.

  This
also happens because some organizations and
managers allow it to happen.

  Historically, sexual
harassment has always occurred but
there used to be no label for such behavior.
  The industrial revolution brought about changes in the
traditional function of men and women which greatly
increased gender specialization and formed a new kind of
workplace in the western world.

  Theresponsibility of men and women became more

specialized.

  In
the past decades, things continue to change. More and
more women joined the workforce. They moved into
jobs that were traditionally held by men.
  Asa result of these changes, the balance is shifting. Sexual
harassment is one of the effect of this shift.

  When harassment is committed by a male against a

female, it may be a response to real or imagined loss of
power.

  When committed by a woman towards a man, it may be

an expression of retaliation or flexing of the new power.
Two Types of Sexual Harassment

1.  Quid Pro Quo harassment

2.  Harassment that creates a hostile

environment
1. Quid Pro Quo harassment

  This means “this for that” (something for something)

  This is defined as requiring a sexual favor or interaction as a

condition of employment or in exchange for an employment
benefit (such as promotion, transfer, pay raise).

  A manager uses his authority to grant pay increases and

promotions as a means to extort sexual favors from an
employee.
  e.g., “go to bed with me and you will get that promotion you want.”
2. Harassment that creates a hostile
environment

  Inthe hostile environment type of harassment, abuses

include verbal, physical and visual conduct that creates an
intimidating, offensive, or hostile environment in the
workplace that interferes with work performance.

  Thistype of harassment may be based on race, religion,

national origin, sex, age, marital status, veteran status,
sexual orientation, or disability.
Some examples of a hostile environment
1.  Unwanted touching, patting, and pinching against a
person
2.  Comments about your body, leering, wolf whistling,
insults of a sexual nature, persistently pestering for a
date.
3.  Displaying or circulating pornographic pictures with the
intention of harassing someone / Posting of explicitly
sexual materials
4.  Workplace blackmail- i.e. suggestion that sexual favors
may further your career (or refusal may hinder it)
5. Green jokes

6. Obscene letters

7. Sexual propositions

8. Suggestive looks
The profiles of the Victim and the Harasser:
1.  The victim as well as the harasser may be a woman or a
man. The victim does not have to be of the opposite
sex.

2.  The harasser can be the victim’s supervisor, an agent of

the employer, a supervisor in another area, a co-worker,
or a non-employee.

3.  The victim does not have to be the person harassed but
could be anyone affected by the offensive conduct.

4.  The harasser’s conduct must be unwelcome.

  It is helpful for the victim to directly inform the harasser that
the conduct is unwelcome and must stop.

  The victim should use any employer complaint mechanism or

grievance system available.

  Although the victim of sexual harassment and the person

accused of sexual harassment may be peers, more frequently
the victim is in a position of lesser power than the accused.

  The most common example is the boss-subordinate situation.

Harassment also occurs between customer/client and
providers.
 How Sexual Harassment Affects the
Workplace

  In the study made by Rexbook Magazine in 1981:

  140,000 men and women were interviewed pertaining to

sexual harassment.

  The result revealed that 80%of the persons interviewed

believed they have been sexually harassed.

  The study also showed that used of words, jokes, and gestures
were the type of harassment which created a hostile
environment or offensive work environment.
  It affected the individuals harassed and the person accused,
who may be innocent; such case can generate costly lawsuits,
unfavorable publicity or the invasion of privacy.

  It can also affect the bottom line of the employer, managers

and co-workers, and affect the entire life of an organization and
its members.
 How to Prevent Sexual Harassment in the
Workplace

  Asignificant step an organization can take in preventing

sexual harassment in the workplace is through creating a
safe, secure, positive work environment by putting into
practice a strong sexual harassment policy.

  Some example for policy development are:

1.  A broad anti-harassment/positive environment policy
that includes a statement that specifically addresses
sexual harassment

2.  A separate sexual harassment policy that covers all

organizational members

3.  Separate sexual harassment policy, one that addresses

non-management employees and one that addresses
management
  Sexualharassment is very costly and causes low morale
among employees and decrease in productivity.

  Annoyed, scared, disgraced people are incompetent of

performing well.

  Ifnot dealt with, sexual harassment may result in costly

lawsuits, dreadful publicity, and ruin of an organization
image that took years to establish.
  Riddance
of sexual harassment will come through the
commitment of the organization and employees.

  Mostperson, male and female, want a secure office, free

from threats and apprehension.
 Communicating the
Sexual Harassment Policy

  The best policy is ineffective if it is not communicated

well. Even if the company already has a well-written
policy, it is important to expose it regularly through:
  Permanent posting on bulletin board
  Memos
  Articles in the organization’s newsletter
  Meeting and trainings
  Training program may come up with various topics to support the
anti-harassment programs and to assure each employee of a safe and
harassment-free workplace environment
2. The Problem of Just Wage
 Work and Compensation
  Work
  is said to be for the purpose of obtaining economic gain for the
laborer.
  Most agreed that work is directed to the promotion of life.
  The duty to preserve one’s life implies the duty to work and
that each has a personal duty to take care of himself and not to
be a burden to other.

  Being
compensated for a work done or for services
rendered is the very essence of ‘work’.
  Compensation
  One is willing to work in exchange for remuneration or
rewards he will receive from working.
  Such remuneration may include both financial and non-financial
compensation.
  It can be in the form of wages, shares on profits, harvest or
commercial goods, in-kind payments and other remunerative
fringe benefits.

  The main objective of compensation is to create a system

of rewards that is equitable to the employer and
employee. Thus, the general concern is that justice should
be a substance of compensation.
 The Question of Just Wage
  Anumber of people all over the world commented on its
definition and have argued on the appropriate criteria to
consider in setting the so-called ‘Just Wage’.

  A just wage is defined as the remuneration which is

enough to support the wage-earner is reasonable and
frugal comfort.

  The Catholic Church tells us, “a just wage is the legitimate

fruit of labor.”
 DAILY MINIMUM WAGE RATES
National Capital Region (NCR)
Effective 01 July 2010

  Non-Agriculture
  P 382.00 P22.00 P 404.00
  Agriculture (Plantation and Non Plantation)
  P 345.00 P22.00 P 367.00
  Private Hospitals with bed capacity of 100 or less
  P 345.00 P22.00 P 367.00
  Retail/Service Establishments employing 15 workers or
less
  P 345.00 P22.00 P 367.00
  Manufacturing Establishments regularly employing less
than 10 workers
  P 345.00 P22.00 P 367.00
 Philippine Constitution

  Spread in various parts of the 1987 Philippine

Constitution are specific pronouncements and mandates
on the protection and promotion of the rights of workers
in the public and private sectors, as indicated in letter “g”
Sec 3 of Art. XIII.

  “That the workers are entitled to a living wage”

 Republic Act No. 6727

  The Wage Rationalization Act declared the policy of the

State to rationalize the fixing of minimum wages and to
promote productivity-improvement and gain-sharing
scheme to ensure a decent standard of living for the
workers and their families. The minimum wage rates shall
be adjusted in a fair and equitable manner, considering
existing regional disparities in the cost of living and other
socio-economic factors.
 Government Agencies Involved
  In
our country, determination of wages must also be
adequate and just.

  National Wage and Productivity Commission (NWPC)

  Regional Tripartite Wages and Productivity Boards
(RTWPB)

  These determine the minimum wage for Filipino workers

  They handle the minimum wage rates of the workers of each
and every region of the country.
 Factors to consider in
Formulation of Fair Wages

1. External Market Factor 2. Laws and Regulations

  These refers to the supply   Workers should be paid in

and demand for labor and
the so-called economic
conditions and
underemployment.
accordance with laws and
regulations issued by the
government. It requires
that employers pay at least
the minimum wage.
 Factors to consider in
Formulation of Fair Wages

3. Cost of Living 4. Prevailing Industry Rate

  The cost of living relates   Some claim that paying

to basic maintenance
needs and it must be
seriously considered in
formulation of wages. A
fair wage should be
sufficient to meet the
increase in cost of living.
workers the average of what
other companies are paying
for the same job result in a
fair wage. However not all
companies have a minimum
wage high enough to
maintain a decent standard
of living.
 Factors to consider in
Formulation of Fair Wages

5. Organizational Factors 6. Job Factor

  Assessment of what type   The nature of the job itself

of industry the
organization operates, the
size of the company, and
the organization’s
profitability to justify its
ability to provide fair
wages to its workers
should be considered.
entails the formulation of
a just wage. Duties,
responsibilities, and the
skills requirements of the
job are probably the most
considerable determinants
of fair wage.
 Factors to consider in
Formulation of Fair Wages

7. Individual Performance

  The trend is that individual

performance or
productivity ratings affects
the determination of
wage/salary increases.
 Some Issues on Just Wage
  Theminimum wage mandated by the government is not a
guarantee of a just and fair wage.

  Organizations and businesses usually conclude that they

are legally and morally right when they fulfill their mutual
agreement with the employees.

  Geographicaldifference hinder the formulation of a

perfectly common definition of fair wage. Some
communities have a higher cost of living than others.
  Wage indexation to cost of living, where wage is
automatically adjusted with the increases of cost of living,
is not usually met by majority of the employers.

  Companies have different interpretations of the justifiable

pay for certain job position, skills, and tasks. Thus, the
prevailing rate in industry alone could not perfectly
establish a just wage.
3. Gift Giving and Bribery
GIFT-GIVING
  Is
merely an act of extending goodwill to an individual in
an effort to share something with particular others.

  Giving
gift to customers, clients and business partners is a
common practice in the business community.

  It
is normally observed during special occasions like
Christmas, New Year, and sometimes even during
birthdays.
 Reasons why business usually
engage in gift-giving
1.  To show appreciation for a favor received

2.  To effectively establish goodwill with business

partners.

3.  To advertise

4.  To compete effectively against competitors

 The following are the common
forms of Gift-Giving
  Samples   Patronage awards
  Raffle coupons / (rewards)
certificates   Tie-up promotions
  Rebates / cash refund   Allowance
  Padding expense   Free goods
accounts   Tips
  Premiums
  Prizes
Is Gift-Giving Ethical or Unethical?
  Business gift of clients and business associates can raise
conflict of interest problems, and knowing where to draw
the line, between what is right and wrong, is not always
easy.

  The clear point is that those who cross that line,

intentionally or not, end up in big trouble.

  Itis indeed difficult to determine the morality of giving

gift.
  Most agree that accepting and receiving bribe is a
violation of professional ethics, but we may not always
find it easy to determine what is and is not a bribe.

  Not all examples of giving and accepting gift and amenities

qualify as bribery, just as not all cases of taking another’s
property should be considered theft.
 Factors in Determining the
Morality of Gift-Giving
1.  Value of the gift
2.  Purpose of the gift
3.  Circumstances under which the gift was given or
received
4.  Position between or relationship of the giver and
receiver
5.  Acceptable business practice in the industry
6.  Company policy
7.  Laws and Regulations
BRIBERY
  It
is defined as a practice of giving renumeration for
performance of an act that is inconsistent with the work
contract or the nature of the work one has been hired to
perform.

  It
is intended to induce people inside the business or
other organizations to make decisions that would be
justifiable according to normal business or other criteria.

  It
was the identified to be a form of corruption and is
generally immoral and for most is illegal.
  Renumerations, termed as bribes, can be in a form of
money, gift, entertainment, or preferential treatment.

  Example of bribery:
  A motorist offered a certain amount of money to a police
officer in order not to be issued a ticket for speeding.
  A construction company shared percentage of its income to a
civil servant in order to win a contract.
  A narcotics smuggler bribed a judge to lessen criminal
penalties.
Bribery is obviously unethical because of
the following reasons:

  It
is generally used as an instrument to gain personal or
corporate advantage.

  It corrupts the concept of justice and equality

  Bribery produces cynicism and a general distrust of

institution
  It
destroys people’s trust in the integrity of professional
services, of government and the courts, of law
enforcement, religion, and anything it touches.

  It
treats people as commodities whose honor can be
bought and sold. It thus tends to degrade the respect we
owe to other human beings.
4. The Morality of Advertising
  Advertising
plays a very significant role in marketing
goods and services.

  Without advertising, the consumers would not be aware

of the presence of diverse products and services available
in the market.

  Sometimes, eventhe mere presence of advertising can sell

a product due to consumer perception that a heavily
advertised product is a product of “good value”.
  Philip Kotler - famous marketing guru - defines advertising as:
  “any paid form of non-personal presentation and promotion of ideas,
goods, or services by an identified sponsor”

  Wells and Burnett likewise defined advertising as:

  “paid non-personal communication from an identified sponsor using
mass media to persuade or influence and audience”

  The primary purpose of advertising is 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.
  However, the use of advertising today has not been
serving its intended purpose since very little information
is conveyed to consumers and more often the
information is not even useful.

  From the point of morality, advertising in itself is not bad

or immoral since it helps achieve the goals of both the
seller and buyer.

  It
only becomes immoral when, in the attempt to
persuade consumers, the advertisements become
deceptive, misleading, and manipulative.
  There is only one criterion in evaluating the morality of
advertising, and that is “truth”.

  An advertisement that conveys truthful information is

morally permissible. If an advertisement contains false
statement and “lies”, then it is said to be immoral.

  There are also shortcomings to this approach since the

truth in advertising can be contrasted with either
falsehood or lying. Lying is immoral while falsehood is not
necessarily immoral.
 Some Issues in Advertising

Deceptive Advertising

  These are those which   An example of this is one

either make a false where pictures from the
statement and therefore, lie,
box of the product do not
or which represents the
product without making any look the same as the
statement. contents of the product, in
  This may not occur not only this case, the picture is
through sentences but also said to be deceptive.
through pictures, individual
words, or objects that can
deceive our eye and mind.
 Use of Weasel Words

  The use of weasel words   Help means to aid or

is often complementary to assist.
ambiguity in advertising.   We are usually
  Weasel words are used to accustomed to ads that
avoid from a direct or contain phases like: help,
fight, help prevent, help
straightforward statement.
stop
  One example of a
  Like, can be, up to, as
commonly used weasel much as, are used to imply
word is “Help” what cannot be said.
Exaggeration
  Consumers might also be
misled through
exaggeration. This occurs
when advertisements tend
to make false claims of the
benefits of the goods or
services which is actually
unsupported by valid
evidences.
  For example, claims that a
pain reliever provides “extra
pain relief” or is “50 percent
stronger than aspirin,” that it
“upsets the stomach less
frequently” or is “superior
to any other
nonprescription painkiller on
the market” contradict
evidence that all analgesics
are effective to the same
degree.
Psychological Appeals
  There are some
advertisements that are
directed at arousing human
emotional needs rather than
reason.
  Richard F. Taflinger defines
psychological appeal as a
visual or aural influence on
subconscious mind and
emotions. It influences by
implying that doing what is
suggested will satisfy a
subconscious desire.
  Psychological appeal does not
have to make sense, and often
should not have to be effective.
  Some psychological appeals
that advisers use to motivate
people to buy products are:
power, prestige, personal
enjoyment, masculinity, femininity,
curiosity, imitation, acceptance,
approval, self-esteem and the
most pervasive of all are sexual
pitches.
Ads Directed at Children
  Most advertisers have
recognized that advertising
to children is effective and
eventually became a big
business recently.
  Children are special group of
consumers who do not
regard reason.
  The average child is exposed
to more than 40,000 TV
commercials every year.
  The aim of advertisers is for
the children to pester their
parents to buy things for them.
Children generally remember
what they see.
  Kids are the most pure
consumers in that they tend to
interpret ads literally.
  Moreover, movies and
television shows are being
linked to the selling of toys and
other items featured in
commercials with character
stamped on various products.
 Philippine Law on Advertising
CONSUMER ACT OF THE PHILIPPINES

  Article 108 of the act declares that “The State shall protect the
consumer from misleading advertisements and fraudulent sale
promotion practices.”

  TheDepartment of Trade and Industry is responsible for

enforcing the provisions of the act.

  Withrespect to food, drugs, cosmetics, devices and

hazardous substance, the Department of Health is the
agency that oversees these products
 False, Deceptive and
Misleading Advertisement

  Article108 states that : it shall be unlawful for any person

to disseminate or to cause the dissemination of 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 or which is likely to induce directly or indirectly
the purchase of consumer product and services.”
 Special Requirements for Food, Drugs,
Cosmetics, Device or Hazardous Substance
1.  No claim in the advertisement should be made that is not
contained in the label or approved by DOH

2.  It is unlawful to advertise any food, drugs, cosmetic, device or

hazardous substance that is false, misleading, or deceptive, or
is likely to create an erroneous impression regarding its
character, value, quantity, composition, merit, or safety.

3.  Where a standard has been prescribed for a food, drugs,

cosmetic, or device, 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.
 Special Requirements for Food, Drugs,
Cosmetics, Device or Hazardous Substance
4. Advertisement of any food, drugs, cosmetic, device, or
hazardous substance may not make use of any reference
to any laboratory report of analysis required to be
submitted to the Department of Health, unless such
laboratory report is duly approved by DOH.

5. No advertisements for any food, drugs, cosmetic, device,

or hazardous substance may be allowed unless such
product is duly registered and approved by DOH.
 Philippine Association of National
Advertisers (PANA)

  In
1958, advertisers formed the Philippine Association of
National Advertisers (PANA). Since then, the PANA has
been engaged in a continuing campaign to regulate abuses
committed by untruthful advertisers.

  The PANA issued a Code of Ethics which includes the

following statement of general principles:
 Good advertising recognizes both its economic and social
responsibility to help reduce distribution costs and to
serve the public interest.

 Good advertising depends for its success on public

confidence. Hence, it cannot permit those practices that
tend to impair this confidence.

 Good advertising aims to inform the consumer and help

him buy intelligently.
 Good advertising tells the truth. It is accurate, honest, and
trustworthy.

 Good advertising conforms not only to the laws but also

to the generally accepted standards of good taste and
decency and to moral and aesthetic sentiments of the
country.

 Good advertising seeks public acceptance on the basis of

positive and constructive statements, made on the merits
of the product or service advertised, rather than by the
disparagement of competition.
 Good advertisement does not allow any activity that
involves the exploitation of the goodwill, attached to any
other firm, product or service. It does not imitate or
stimulate trademarks, firm names, packages, labels and
such advertising devices as illustration, copy, layouts, or
slogan.

 Good advertising helps to dignify the individual and

contribute to the building of a civilized society.
5. Office Romance
  Surveyssays that somewhere from 25-33 percent of the
employees at a given company have had office romances
once in their careers.

  About three-fourths of the people in the survey believe

that a romance at the office is acceptable.

  However, other believe that it is uncalled for and

unprofessional to mingle romance with business
purposes.
 What is Office Romance?

  It
is defined as a relationship between two people who
are employed by the same organization.

  It
is characterized by mutual attraction between the
parties and a desire for a personal, romantic relationship.

  Office
romance is likely to happen as long as men and
women work together.
The Company’s Stand
  Thecompany is trapped in the middle of office romances
present in the organization.

  Top management does not want to interfere unduly with

their employee’s personal life and their right for privacy.

  Conversely, they
do not want a workplace where
employees are uncomfortable to work.

  Thisis why a lot of companies come up with a policy that

covers office romances and educate all employees or the
guidelines and effects through trainings and seminars.
Benefits of Office Romance
  These benefits include friendship, mutual support to each
other at work, and other personal experiences.

  Employees involved in a love relationship overcome rough

times at work because of mutual support and inspiration.

  Employees tend to view work as fun even when pressures

begin to pile up.

  Romance becomes the reason to keep their jobs.

  Love and companionship in the office give the employees the

relief and reason to overcome problems that come along their
way.
Disadvantages of Office Romance
  Damaged professional reputations

  Disturb co-workers

  Changes in productivity

  Dating the boss

  Extramarital affairs
 Ethical Issues in Office Romance
  Interventions
  Some companies want to restrict their employees to engage in
office romance. Others are in favor of the positive effects of
office romance, but may want to lessen the bad effects.
  For example: some companies may allow relations between co-
workers with the same rank.

  Legal / Ethical Considerations

  When one or both involved parties are required to leave the
company, this risks legal encounters.
  Policies regarding office romance need to be decided with
vigilant thought and prudence, in order to respect the rights of
all members of the organization.
  Sexual Harassment
  Sexual harassment may sometimes arise when a bad workplace
romance is terminated.
  There are few reasons why this issue may exist.
  One of the persons involve in a failed romance may seek
vengeance, may try to revive, or would want to remove the
other person involved.
  There may be misinterpretation on the part of each party. One
may consider flirting acceptable which may eventually lead to a
romance, while another may consider it offensive and
therefore, a harassment.
6. The Problem of Fair Pricing
  Ingeneral, a fair price is one that man has not yet
resolved, though some factors are considered such as:
a)  The cost of material
b)  Operating and marketing expenses
c)  A reasonable profit margin

  These factors constitute to set price fairly though it is

not enough to provide a precise answer on what a fair
price is.
  One should assess the factors on which the price is
based and the processes that determine it.
 Ethical Issues in Fair Price

A.  True cost of the product is concealed

B.  Suggested retail price
C.  Use of electronic scanners
D.  Promotional pricing
E.  Follow the leader pricing
F.  Price gouging
G.  Price fixing

  The “Suki” system of the Filipino business compromises

the fair price of a regular customer from the new ones.
7. Trade Secrets and Corporate
Disclosure
TRADE SECRET
  A trade secret is the legal term for confidential business
information. That piece of information allows the company to
compete effectively.

  Examples of trade secret include customers identities and

preferences, vendors, product pricing, marketing strategies,
company finances, manufacturing processes, and other
competitively valuable information.

  These includes essentially any confidential business information

such as customer lists, financial information, employee data,
production cost or sales data, and documents memorializing
important negotiations
 Trade Secret Act
  The Trade Secret Act prevents wrongful taking of
confidential or secret information.

  Trade secret law prevents misappropriation, wrongful

taking, of trade secret information. A wrongful taking can
occur in a variety of manners.

  Forexample, the taking of information would be wrongful

when the taking is a breach of contract, breach of
fiduciary obligation, theft, and other illegal matters.
CORPORATE DISCLOSURE
  According to De George:
  The moral basis for corporate disclosure rests primarily on the
following arguments:

1. Each person has the right to the information he needs to

enter into a transaction fairly.

  The first basis speaks of information required for a fair

transaction.
  A transaction is considered fair if the person has the
appropriate information needed for the transaction
2. Each person has the right to those actions of others that
will seriously and adversely affect him or her.

  The second basis speaks of the moral responsibility of the

person.
  As stated in the law, it is clear that a person is not morally
permitted to harm others. But a person is permitted to do
something that “might” cause others harm.
8. Product Misrepresentation
Misrepresentation
  Misrepresentation is observed when there is a transformation
of information to misinformation.

There are two types of misrepresentation:

1.  Intentional Misrepresentation – a scenario whereby the
person is fully aware or deliberately misrepresents things,
commonly known as lying.
2.  Unintentional misrepresentation – a scenario whereby the
person is not aware and does not deliberately act on
misrepresenting things. It is a situation where the person
involved believes that it is the right and acceptable things to
do. It is commonly called as white lie.
Definition of Lying
  Lying can be defined as the act of making others believe
something that they, themselves, do not believe in.
  It happens when somebody tries to convince others with
untrue statements.

  St. Augustine defines lying as:

  A speech that is contrary to what the person is thinking with
the intention to deceive.
  A lie therefore, takes place when the person’s action are not in
congruence with his thoughts with the intention to deceive
others.
 Types of Lying
Use of ambiguous terms
  Itis the act of deliberately
using vague terms or
open-ended statements
that can have several
meanings to mislead
people that one is telling
the truth.
  Statement like: I was at the
office around 8:00 a.m.
Use of false statements
  It is the act of making a
statement from which
false conclusions may be
drawn eventually
misleading others.
  This is often observed in
advertising a product to
be the “best-seller” brand.
 Type of Lying
Through action
  It is a type of lying where
the person gets caught in
the act of wrongdoing.
  Example: when someone
is caught red-handed of
stealing and still denies the
accusation
Suppression of correct
information
  Itis an intentional or
unintentional act of hiding
the correct information
which eventually mislead
others.
  This act is sometimes
observed in some crime
scenes wherein a witness
conceals he truth for the
sake of his own security.
 Business Practices Involving
Misrepresentation and Lying
Other Type of Misrepresentation
1. Direct misrepresentation
  It is characterized by actively misrepresenting something
about the product or service. It gives the business a bad
name because deception and lying are used in the process of
selling the product to the customers.
2. Indirect misrepresentation
  It is characterized by omitting adverse information about the
product or service. It is passive deception and not as obvious
compared to direct misrepresentation. But it still contributes
to the impression that businessmen are liars and are out to
make quick moey.
 Some examples of misrepresentation

Direct Misrepresentation Indirect Misrepresentation

  Deceptive packaging   Caveat Emptor (let the

  Adulteration buyer beware)
  Misbranding or mislabeling   Deliberately withholding

  Short weighing
information
  Business ignorance
  Short-changing
  Short measuring
  Short numbering
  Misleading advertisement
9. The Morality of Labor Strike
Strike Action or Strike
  It
describe collective action undertaken by groups of
workers in the form of a refusal to perform work.

  Thisis a tactic often employed by labor unions during

collective bargaining with an employer.

  In
an ordinary usage, the term strike is often used to
describe all work stoppages, regardless of the origin of
the dispute.
Workers go on strike for different reasons:

  For higher compensation

  To improve the workplace
  For shorter working days
  To stop their wages from going down
  For more benefits
  Because they think their company has been unfair

 Conditions for employment include wages, hours,

sanitation, and safety, and several other circumstances that
affect the work of the workers.
 What are the Basic Rights of Employees?

  LABOR CODE OF THE PHILIPPINES

  Thisis an act to strengthen the constitutional rights of

workers to self-organization and free collective bargaining
and to penalize unfair labor practices.
 TYPES OF STRIKE
Sit-down Strike
  This is a strike in which
workers show up to work,
but refuse to work.
  It may include preventing
transports from entering
or living in an institution
or a company.
General Strike
  Thisis a strike affecting all
areas of a labor force
across many industries,
typically throughout an
entire country or a large
section thereof.
 TYPES OF STRIKE
Sympathy Strike
  This is a strike initiated by
workers in one industry
and supported by workers
in a separate but related
industry.
Jurisdictional Strike
  Thisrefers to a concerted
refusal to work
undertaken by a union to
assert its members’ right
to particular job
assignments and to
protest the assignment of
disputed work to
members of another
union or to unorganized
workers.
 TYPES OF STRIKE

Economic Strike Wildcat Strike

  Thisis based on a demand   Thisis against the will of

for better wages or the leadership of the
benefits than the employer union, or without a unon.
wants to provide.
 TYPES OF STRIKE

Slow down Strike Recognition Strike

  This
is a form of work   Thisis a kind of strike
stoppage in which forcing employers to
employees deliberately recognize and deal with
reduce their individual them.
production.
 Is There a Right to Strike?
  Theright to strike is integral to the process of wage
bargaining in an industrial economy.

  Any employee has a right to withhold his labor services

from an employer if he does not like the pay and benefits
the employer offers.

  Workers who are willing to work for a strike and the

employer who wishes to hire them have a legitimate right
to do so.
10. Whistle-Blowing
Whistle-Blowing
  This is the disclosure by an employee of confidential
information which relates to some danger, fraud, or other
illegal or unethical conduct connected with the
workplace, be it of the employer or his fellow employees.

  Whistle-blower
  This is someone in an organization who witnesses behavior by
members that is either contrary to the mission of the
organization, or threatening to the public interest, and who
decides to speak out publicly about it.
Whistle-blower
  He is a person, employee, or officer of any institution who
believes that he has been ordered to perform some act
or he obtained knowledge that the institution is engaged
in activities which:

a)  Are believed to cause unnecessary harm to third parties;

b)  Are in violation of human rights;
c)  Run counter to the defined purpose of the institution or
organization; and
d)  Informs the public of this facts.
 Types of Whistle-Blowing

Internal Whistle-Blowing External Whistle-Blowing

  Thisoccurs within the   This occurs outside the

organization. It is going
“over the head of
immediate supervisors to
inform higher
management of the
wrongdoing.”
organization. It is revealing
illegal and immoral
activities within the
organization to outside
individuals or groups such
as media men, public
interest groups, regulatory
body, or non-government
organization.
 Kinds of External Whistle-blowing
A.  Current – those who blow the whistle on present
employers.

B.  Alumni – those who blow the whistle on former

employers.

C.  Open – whistle-blower discloses his identity

D.  Anonymous – whistle-blower who does not disclose his

identity.
 External Whistle-Blower
 External whistle-blowers experience each of the following
forms of retaliation:

 Losttheir job or were forced to retire

 Received negative job performance evaluations
 Had work more closely monitored by supervisors
 Were criticized or avoided by co-workers
 Were blacklisted from getting another job in their field
 Internal Whistle-Blower
 Internalwhistle-blowing produces less retaliation but also
experience severe emotional effects of their whistle
blowing activity:

 Severe depression on anxiety

 Feeling of isolation or powerless
 Distrust of others
 Declining physical health
 Severe financial decline
 Problems with family relations
11. Multi-level Marketing (MLM) and
Pyramiding
Multi-Level Marketing

  Multi-level
marketing is a system of selling in which one
signs up other people to assist him, and they in turn,
recruit others to help them.

  It
is a system of selling through many levels of
distributors, thus the word “multi-level Marketing”

  Eachgets a percentage on the price of the product

being sold. This is also known as direct selling
companies.
  Common companies of this type are:
  Avon Cosmetics
  Triumph International
  Sara Lee Direct Selling
  Tupperware Phils.

  Most became successful because the main focus of their

activities is the product sale.
Pyramiding

  In
the classic “pyramid” scheme, participants attempt to
make money solely by recruiting new participants into
the program.

  The hallmark of these schemes is the promise of sky-

high returns in a short period of time for doing nothing
other than handling over your money and getting
others to do the same.
  Pyramidschemes focus on the exchange of money and
recruitment.

  Atthe heart of each pyramid is typically a representation

that new participants can recoup their original
investments by inducing others to make the same
investments.

  Eachperson you bring to your pyramid is promised future

monetary rewards or bonuses based on your
advancement up the structure.
  The fraudsters behind the pyramid scheme may go to great
lengths to make the program look like a legitimate Multi-level
marketing program.

  But despite their claims to have legitimate products or

services to sell, these fraudsters simply use money coming in
from new recruits to pay off early stage investors.

  But eventually the pyramid will collapse. At some point the

schemes get too big, the promoter cannot raise enough money
from new investors to pay earlier investors, and many people
except those at the very top of the pyramid, lose their money.
Many losers pay for a new winners.
  Pyramid operates on recruitment.

  It
starts with one person that encourages six participants
to join. The 6 recruits will again get six to join making the
number involved 36 and will recruit and recruit till they
reach 1296 participants in the pyramid.

  Atthe 13th level they need to have 13 billion new recruits

which is impossible to sustain the pyramid. The pyramid
will collapse when no new participants can be recruited.
 The Difference
between
Multi-Level Marketing
and
Pyramid
 MULTI-LEVEL MARKETING
(MLM)
1.  Legal
2.  Income generated only on
product sales.
3.  Provides training
program.
4.  Consumable, reasonably
priced quality products.
5.  Services legitimate
economic function such
as a channel of
distribution for relatively
small or new companies
with excellent products.
PYRAMID
1.  Illegal
2.  Income is generated solely
on the process of recruiting
others into the pyramid.
3.  No training program.
4.  Few retail sales and high
cost, slower moving
products.
5.  No legitimate economic
function such as no
economic benefits, but a
mere transfer of money
from one person to another
without legitimate business.
 MULTI-LEVEL MARKETING
(MLM)
6. Sponsoring participants
earn nothing by mere
sponsoring. Recruitment is
optional.
7. Earnings are ultimately tied
to product consumption of
end users.
8. Enormous efforts to sell are
exerted.
9. Largely, products are sold to
the consuming public.
10. Bonuses are based on sales
to final users who are not
members of the scheme.
PYRAMID
6. Recruiting participants get
benefits from recruitment.
7. Earning are tied to the act
of recruitment.
8. Little effort or no effort is
being made to sell to the
public.
9. Products are consumed
internally within the
organization.
10.Bonus entitlements are
based on goods absorbed
by members within the
structure.
  TheDirect Selling Association of the Philippines or DSAP
presented the final 8-point test to determine a pyramiding
company.

  According to them, if the answer to any of these

statements is no, then beware.You might just be a victim
of a pyramiding scam.
1.  Are there legitimate products?
2.  Is there and intent to sell the products?
3.  Do the products have fair market value?
4.  Is there a compelling reason to buy the products being
offered?
5.  Is there a product return policy?
6.  Will you receive commission on the joining fees of your
prospects?
7.  Is there a correlation between recruiting and distributor’s
commissions?
8.  If recruitment is to be stopped today, will participants still
make money?
Market saturation: An inherent problem in a
pyramid.

  Pyramid’s design can saturate the market with no one

noticing. It is designed to recruit so many salespeople,
who in turn will attempt to recruit more salespeople,
and so on until the market is saturated. It is
unstoppable, a human “churning” machine with no “off
button”. Out of control by design, its gears will grind up
the money, time and entrepreneurial energy of the well-
meaning who joined to supplement their income. When
the inevitable destiny occurs, the only money that may
be made isn’t from the product or service but from the
losses of people down the organization
Moral issues in pyramiding

1. Too much materialism and greed.

2. They con the public, making them believe that they

are a legitimate MLM.

3. The intentions are bad.

Legal Issues of Pyramiding
 The Department of Trade and Industry or DTI can take
action under two existing laws.

  Art. 53 of RA 7394 (the Consumer Act of the Philippines)

  states that chain distribution plans or plans or pyramid sales shall not
be employed in the sale of consumer products.

  RA 3883 or Business Name Law

  which empowers DTI to cancel license of any business which does
not conform with the registered business name or style.
Tips to consider when you make your
decision before joining a plan:

1.  Consult the 8 point test presented in this chapter.

2.  Bewareof plan that claim to sell miracle products or

promise enormous earnings. Just because a promoter of a
plan makes a claim doesn’t mean it is true. Ask the
promoter of the plan to substantiate claims with hard
evidence especially when the claims abut the product or
your potential earnings seem to good to be true.
3. Do not pay or sign any contract in an “opportunity
meeting” or any other high-pressure situation. Insist on
taking your time to think over a decision to join.

4. Remember that no amount of personal testimonial and

affirmation that there is money to gain in pyramiding will
dispute the fact that pyramiding, doesn’t create new
wealth. The only wealth gained by any participant is a loss
by another participant.
12. Unfair Competition
Is competition good or bad?
  Competitionis healthy and can be a motivation for firms
to produce better products or offer better services.

  Without competition, firm can just relax and quality will

suffer.

  Thus, competition becomes bad only when it eliminates a

competitor like in cutthroat competition.

  Somepractices include under cost selling or selling their

products below cost just to get rid of their competitors.
 Different Kinds of Competition
Monopoly
  Defined as a market
situation where there is
only one provider of a
kind of product or
service.
  It is and extreme type of
imperfect competition
characterized by an lack of
competition and a lack of
viable substitute goods.
Oligopoly
  A situation where there are
few sellers for a product or
service.
  It is a type of imperfect
competition where they can
not dictate price like a
monopoly can but the
members of an oligopoly
often turn into friendly
competitors, since it is in all
the members interest to
maintain a stable market and
profitable prices.
 Different Kinds of Competition

Perfect Competition

  It is a situation in which no
firm or consumer is large
enough to dictate prices.
  The prices are dictated by
the law of supply and
demand which states that
when the supply is scare, the
prices go up and when the
demand goes down, the
prices will go the same way
Difference Between a War and Competition

  Ina war, two contenders   In a business competition,

fighting hurl directly at
each other.
two or more parties are
vying for the opportunity to
provide the customer’s
needs whether it’s a product
or service.

 In short, competition is a rivalry to serve the

customer
 Difference between Fair and Unfair
Competition

  Fair
competition is doing   Unfaircompetition is
business under ethical unethical business
rules of conduct, behavior practice. Doing business
and judgment. Attaining with the goal of profit
success in business without regard to others.
through the merits of its
products or services.
In general, unfair competition consists of:
 Deceptive trade practices such as misinterpretation and
false advertising.
 Business interference to prevent competitor from
continuing with it’s business process or business contract.
 Anti-competitive market practices such as under cost selling
to kill the competitor.
 Defamation of a competitor or badmouthing a competitor
to a consumer.
 Caveat emptor or indirect misinterpretation by withholding
information from the buyer.
 Violation of intellectual property right such as copyrights,
patents, trademarks and service marks.
Government Measures:

The Intellectual Property Code of the Philippines

(R.A. 8293)

  It aims to provide an intellectual property and industrial

property system which will enhance the development of
domestic and creative activity, facilitate transfer of technology,
attract foreign investments, and ensure market access for our
products.
  Article 168 of R.A. 8293
  is specifically about unfair competition on the use of
trademarks, service marks, and trade names. This article states
that a person who has identified in the mind of the public the
good he manufacturers or deals in, his business from those of
others, whether or not a registered mark is employed, has
property right in the goodwill of the said goods identified, and
will protected as any other property rights.
The following shall be deemed guilty of unfair competition:

A.  Any person who is selling his goods and gives the
general appearance of the goods of another, either in
the goods themselves or in the wrapping of the
packages, which would likely influence buyers to believe
that the products being offered are those of a
manufacturer or dealer other than the actual
manufacturer.
B.  Any person who, by any artifice, or device, induces the
false belief that such person is offering the services of
another who has identified such services in the mind of
the public.

C.  Any person who shall make false statement in the

course of trade or shall commit any other act in bad
faith to discredit the goods, services, or business of
another.
13. Money Laundering
What is Money Laundering?
  Money Laundering is the process of disguising illegally obtained
money so that the funds appear to come from legitimate
sources or activities.

  Money laundering occurs in connection with a wide variety of

crimes, including illegal arms sales, drug trafficking, robbery,
fraud, racketeering, and terrorism.

  The principal objective of money laundering is to convert cash

to some other form of asset to conceal the illegal sources or
origin of cash income.
  The Term
"money laundering” is said to originate
from Mafia ownership of Laundromats in the United
States.

  Gangstersthere were earning huge sums in cash from

extortion, prostitution, gambling, and bootleg liquor.

  They
needed to show a legitimate source for these
monies.
  One of the ways in which they were able to do this was
by purchasing outwardly legitimate business and by
combining their illicit earnings with the legitimate earnings
they received from these businesses.

  Estimated size of the money laundering problem totals

more than $500 billion annually worldwide. This is a
staggering amount and detrimental by any calculation to
the financial systems involved.

  Clearly
the problem is enormous. It is also clear that
money laundering extends far beyond hiding drug profits.
Money Laundering Process
  Money laundering is a diverse and often complex process.
It basically involves three independent steps that often
occur simultaneously:

1. Placement - physically placing bulk cash proceeds. It is

during the placement stage that physical currency enters
the financial system and illegal proceeds are most
vulnerable to detection.
2. Layering – separating the proceeds from criminal activity
from their origins through layers of complex financial
transaction. Layering describes an activity intended to
obscure the trail which is left by “dirty” money.

3. Integration – providing an apparently legitimate

explanation for the illicit proceeds. During the final stage
in the laundering process, illicit funds are integrated with
monies from legitimate commercial activities as they
enter the mainstream economy.
Impact of Money Laundering in Society
  The possible social and political costs of money
laundering, if left unchecked or dealt with effectively, are
serious.

  Organized crime can infiltrate financial institutions,

acquire control of large sectors of the economy through
investments, or bribes to public officials.

  The economic and political influence of criminal

organizations can weaken the social fabric, collective
ethical standards, and ultimately the democratic
institutions of society.
  Mostfundamentally, money laundering is inextricably
linked to the underlying criminal activity that
generated it. Laundering enables criminal activity to
continue.

  Organizedmoney laundering has devastating social

consequences. Laundered funds provide financial
support for drug dealers, terrorism, and arms dealers
and other criminals to operate and expand their
criminal empires.
How can the Government prevent it?
  The Financial Action Task Force (FATF) on Money Laundering
has identified certain “choke” points in money laundering
process that the launderer finds difficult to avoid and where he
is vulnerable to detection.

  The Choke points identified are:

1.  Entry of cash into the financial system
2.  Transfer to and from the financial system
3.  Cross-border flows of cash
Financial Action Task Force (FATF)

  The role of Financial Action Task Force (FATF)

  is a multiple disciplinary body that brings together the policy-making
power of legal, financial. And law enforcement experts from its
members.

  The FATF monitors members progress in implementing anti-money

laundering measures; reviews and reports on laundering trends,
techniques, and counter-measures and promotes the adoption and
implementation of FATF anti-money laundering standards globally.
14. Conflict of Interest
Conflict of Interest
  This occurs when a person act in a way that is to his advantage
at the expense of the employing organization.

  It means something more than individual bias. There must be

an interest, ordinarily financial, that could be directly affected
by the work of the committee.

  Applies only to current interests. Does not apply to past and

future interests.

  Applies not only to the personal financial interest of the

individual but also to the interest of others with whom the
individual has substantial common financial interest if these
interests are relevant to the functions to be performed.
 Types of Typical Conflict of Interest

1. Self- Dealing 2. Accepting Benefits

  Forexample, you work for   Briberyis one example;

the government and use
your official position to
secure a contract for a
private consulting
company you own,
Another instance is using
your government position
to get a summer job for
your daughter
substantial gifts are
another. For example, you
are the purchasing agent
of your department and
you accept a case of liquor
from a major supplier.
 Types of Typical Conflict of Interest
4. Using your employer’s
3. Influence Peddling property for private advantage

  Here, the professional   This could be as obvious as

solicits benefits in
exchange for using her
influence to unfairly
advance the interest of a
particular party.
stealing office supplies for
home use. Or it might be a
bit more subtle, say, using
software which is licensed to
your employer for private
consulting work of your
own. In the first case, the
employer’s permission
eliminates the conflict; while
in the second, it does not
 Types of Typical Conflict of Interest
5. Outside employment or
Moonlighting 6. Post-employment

  An example would be   Here is a risky situation

setting up a business on
the side that is in direct
competition with your
employer.
can be one in which a
person who resigns from a
public or private
employment and goes into
business in the same area.
Key Elements:

1.  There is a private or personal interest. Often this is a

financial interest, but it could also be another sort of
interest, say, to provide a special advantage to a spouse
or child.

2.  Conflict of interest interferes with professional

responsibilities in a special way, namely, by interfering
with objective professional judgment.
15. Inside Trading
Inside Trading

  Thisrefers to the significant facts that have not yet made

public and are likely to affect stock prices.

  It
is being prohibited by the rules and regulations of the
Security and Exchange Commission (SEC)
SEC defines insider as:
1.  the issuer
2.  a director or officer of, or a person controlling the
issuer; gives or gave him access to material information
about the issuer or the security that is not generally
available to the public
3.  A government employee, officer of an exchange, clearing
agency and/or self-regulatory organization who has
access to material information about an issuer or a
security that is not generally available in public.
4.  A person who learns such information by a
communication from any of the foregoing insiders.
 Moral Arguments
  De George cites 2 aspects of this particular problem:

1.  One is that of someone within the firm using

information for his own private gain, at the expense of
the firm. (conflict of interest)

2.  The use of information by someone within the firm to

secure personal advantage over those not in the firm.
(breach of loyalty)
 Ethical Issues Relating to Insider Trading

  Itviolates fiduciary relationships b/w insiders and outside

clients.

  It
promotes greed and personal gain at the expense of
others.

  It
renders the transaction b/w two contracting parties as
unfair.
  Professor Jennifer Moore
  argues that insider trading is wrong because it undermines the
fiduciary relationship, which is central to business management.

  She contends by saying that employees have a duty to act in

the interests of the firm and its shareholders, but many ways of
profiting from insider information do not benefit the company
at all. Indeed, they may seriously damage its interests.