Chapter 1

BUSINESS ETHICS AS
FOUNDATION FOR CSR
WHAT IS GOOD GOVERNANCE?
• Good governance is about the process for making and implementing
decisions.
• Its not about making 'correct' decisions, but about the best possible
process for making those decisions.
• Good-decision making processes and good governance share several
characteristics.
• All have positive effect on various aspects of local government
including consultation policies and practices, meeting procedures,
service quality protocols, councilor and office conduct, role
clarification and good working relationship.
Seal of Good Housekeeping
• In an effort to further strengthen accountability at
the LGU level, DILG introduced the Seal of Good
Local Governance, a derivative and improved
version of the Seal of Good Housekeeping.
• Introduced by the late and former DILG secretary
Jesse Robredo in 2011, the SGH monitors and
awards LGUs with good performance in internal
housekeeping specifically in the areas of local
legislation, development planning, resource
generation, and resource allocation.
• Retaining the SGH module, the first element of the
SGLG will look into LGUs adherence to the
procurement process.
ASSESSMENT AREAS

 Disaster Preparedness
 Social Protection
 Business Friendliness and
Competitiveness
 Peace and Order
 Environmental Management
 Financial Administration
MUNTINLUPA CITY AWARDED THE SEAL OF GOOD LOCAL GOVERNANCE SEPT. 2015
 WHAT ARE THE MAIN CHARACTERISTICS OF GOOD
GOVERNANCE?
• Accountable - Accountability is a fundamental requirement of good
governance. Local government has an obligation to report, explain
and be answerable for the consequences of decisions it has made
on behalf of the community it represents.
• Transparent - People should be able to follow and understand the
decision-making process. This means that they will be able to clearly
see how and why a decision was made - what information, advice
and consultation council considered, and which legislative
requirements council followed.
WHAT ARE THE MAIN CHARACTERISTICS OF GOOD
GOVERNANCE?
• Responsive. Local gov't. should always try to serve the needs of the
entire community while balancing competing interests in a timely,
appropriate and responsive manner.
• Equitable and Inclusive. A community's well-being results from all its
members feeling their interests have been considered by council in
the decision-making process. This means that all groups, particularly
the most vulnerable, should have opportunities to participate in the
process.
WHAT ARE THE MAIN CHARACTERISTICS OF GOOD
GOVERNANCE?
• Effective and Efficient - Local gov't. should implement decisions and
follow processes that make the best use of available people,
resources and time to ensure the best possible results for their
community.
• Participatory - anyone affected by a decision should have the
opportunity to participate in the process for making that decisions.
• Follows the Rule of Law - Decisions are consistent with relevant
legislation or common law and within the powers of council
Ethics also known as Moral Philosophy, is the
study of morality

Morality- pertains to beliefs about right and wrong,

good and evil

Beliefs- refer to the set of values, rules, principles

and theories of morality that guide our actions,
define our values and give us reasons for being
Business Ethics

Business ethics are the moral

principles that act as guidelines
for the way a business conducts
itself and its transactions. In many
ways, the same guidelines that
individuals use to conduct
themselves in an acceptable way –
in personal and professional
settings – apply to businesses as
well.

https://corporatefinanceinstitute.com/resources/knowledge/other/business-ethics/
Determining Right and Wrong

Acting ethically ultimately means

determining what is “right” and
what is “wrong.” Basic standards
exist around the world that
dictate what is wrong or unethical
in terms of business practices.

https://corporatefinanceinstitute.com/resources/knowledge/other/business-ethics/
Is the term “business ethics” an oxymoron?
• “business” and “ethics” are strange bedfellows
• business ethics is an oxymoron, a phraseology that produces an
effect by self-contradiction
Why is ethical management important to
business?
• Ethical management means the basic behavioral principles of
business ethics that corporations must strictly comply with in their
relations with shareholders, customers, suppliers, employees, local
communities, and the environment.

• Ethical management is practically considered by all business leaders

as relevant to business survival and corporate reputation
ROLE OF ETHICS IN MANAGEMENT
Ethical management in the workplace
• Ethical management is the foundation of CSR in the
workplace, which covers those ethical issues arising
from the employer-employee relationship, such as
the rights and obligations justly owed between
them.

• Preventing discrimination issues in the workplace

include the practice of affirmative action and
fighting sexual harassment, child labor, and other
discriminatory practices on the bases of gender,
race, religion, and physical attractiveness
ROLE OF ETHICS IN MANAGEMENT
Ethical management regarding intellectual
property rights
• This may take into account the
issues regarding bioprospecting
and biopiracy, copyright,
patent, and trademark
infringement, business
intelligence, employee trading,
and industrial espionage
ROLE OF ETHICS IN MANAGEMENT
Ethical management in sales, advertising, and
marketing
• Business ethics and social
responsibility deal with the
issues on pricing and price fixing,
moral dimension of the anti-trust
or anti-cartel law, bait and
switch, viral marketing, pyramid
scandal, and sex in advertising.
Ethical management regarding intellectual
property rights
Bio-prospecting is the scientific research that looks for useful
products in the nature to create pharmaceutical products.
Compensation has to be given to the community or the country
from where the natural resource has been obtained.

Bio-piracy is the development of these pharmaceutical products

without giving compensation to the community that nurtured and
protected the organisms on which these products are based.
ROLE OF ETHICS IN MANAGEMENT
Ethical management in production
• This area of business ethics deals
with the duties of a company to
ensure that products and
production processes do not
cause harm. The stakeholders
involved are the consumers, the
general public, and almost
always the environment.
ROLE OF ETHICS IN MANAGEMENT
Ethical management in finance, accounting and
auditing
• manipulation of financial
markets, bribery, facilitation
payments, fraud and false
reporting
Can a company become a corporate citizen without being ethical?

• No. Business ethics seeks to determine whether a particular behavior,

decision, or action of an individual or organization is morally right or
wrong. It is not subjective, rather, it is objective , the the basis is a
universal standard common to all. Business ethics is related to corporate
social responsibilitry, although the former is primarily personal and CSR is
mainly social

• The wisest thing to do, it seems, is to practice business ethics first, and
then practice CSR.

• We cannot practice CSR without business ethics

Ethical management go beyond public relations and profitability

• It might happen, as a consequence of practicing social responsibility

and ethical management that sales go up because the company
projects an angelic image

• Individuals do not practice business ethics and corporations do not

benchmark CSR to do public relations and increase sales

• You practice ethics because it is your philosophy of management;

you benchmark CSR because it is the right thing to do
Shoud there be CSR department?

• It is advantageous if a company has a CSR department, which should

not be headed by a lawyer because ethical management is beyond
legal and regulatory compliance. It requires the involvement of
everyone.
• CSR code of conduct, corporate citizenship, employee volunteeriesm,
resource sharing and management, social investment, and
sustainable development
• CSR in interested in broadening participation in social development
efforts by getting more people to participate in poverty-alleviation
programs and community involvement
Shoud there be CSR department? con't

• The goal of both business ethics and CSR is the moral excellence of all
players in the business
• The goal of business ethics is personal excellence and that of CSR is
corporate excellence. Excellence is an open-ended goal, which means
a personal and corporate decision to enter the room for improvement
and become better citizens of the world (Maximiano, 2003)
 Chapter 2
BUSINESS ETHICS
AND CSR COMPARED
 WHAT IS Corporate Social Responsibility
(CSR)?
• A company's sense of responsibility
towards the community and
environment (both ecological and social)
in which it operates. Companies express
this citizenship (1) through their waste
and pollution reduction processes, (2) by
contributing educational and social
programs, and (3) by earning adequate
returns on the employed resources.

http://www.businessdictionary.com/definition/corporate-social-responsibility.html
BUSINESS ETHICS AND CSR
• Business ethics and CSR have evolved, because business leaders are
increasingly becoming involved with responsibilities toward the
community beyond the legal limits imposed on them.(Herbert
Simon, 1945); Hence, CSR is beyond regulatory and legal
compliance.

• Peter Drucker (1993), in his book The Practice of Management was

among the first authors to explicitly address the “social
responsibilities of business”, while Simon focuses more on the moral
or ethical dimensions of individual behavior in an organization.
BUSINESS ETHICS AND CSR
• Brenner (1992), observes that a corporate ethics program is made up
of values, policies, and activities that impact the propriety of
organizational behaviors.

• CSR is part of the work ethics of a corporation, preferably it is

interwoven into the way a corporation thinks and does its business.

• CSR is business ethics concretized and reflected in corporate values.

BUSINESS ETHICS AND CSR
• In Philips' (2003) stakeholder theory, it directly links ethics or
business ethics with CSR.
• “Continuing commitment by business to behave ethically and
contribute to economic development while improving the quality of
life of the workforce and their families as well as of the local
community and society at large” (Center for Corporate Citizenship,
2003)
• Business ethics is related to CSR as the moral basis of the corporate
citizenship, that is business leaders are engaged in CSR practice
because they believe they are ethically accountable to society.
Business Ethics and CSR both are beyond compliance with the law

• Ethical standard has to be higher than legal compliance

• Ethical people do not need rules and laws to guide their actions.
They always try to do the right thing.

• The law does not prohibit many acts that would be widely
condemned as unethical
Similarities between CSR and business ethics

• Beyond profit- meaning that business learbs to genuinely address

the common public good beyond that of corporate interest

• Beyond compliance- that business responds to higher standards and

principles beyond mere obedience to the law

• Beyond form-that the company goes beyond public relations and

image building
Similarities and common characteristics existing between CSR and
business ethics

1. Both are beyond compliance with the law

2. Both are not tantamount with relativism
3. Both are born with universal values
4. Both are not utilitarian
5. Both are pragmatic and practical
6. Both are about firm conviction
7. Both are beyoc public relations
8. Both are centered on total human development
Business Ethics and CSR both are not tantamount to relativism

• Relativism professes that all beliefs are equally valid, and the truth
is relative-depending on the situation, level of modernization,
environment, and individual preference (Redfern & Crawford 2004)
Business Ethics and CSR both are not tantamount to relativism
Concept of Relativism

Ethical relativism - says that morality depends on a social construct

Situation ethics - teaches that right or wrong is based on the
particular situation
Cognitive relativism - says that truth itself has no objective standard
Cultural relativism - explains that certain cultural practices are
acceptable depending on cultural contexts
UNIVERSAL VALUES OF BUSINESS ETHICS AND
CSR
• Both deal with human conduct, practices, decisions, way of doing
things, including both external observable and internal observable
intentions, including universal moral values.

• Business ethics and CSR is about values (corporate and personal)

• Values like honesty, providing assistance to a needy person,

patience, protecting the environment, business integrity, and
keeping one's word.
UNIVERSAL VALUES OF BUSINESS ETHICS AND
CSR
• There are values that are universally valid and is recognized by all
and everywhere.

• There is only one universal language for all business practitioners

and professionals everywhere -- the true, the just, the fair, and the
good.
Business Ethics and CSR both are pragmatic and practical

• Ethics and CSR should be applied in day to day operations as part of

the core business. They are practical, pragmatic and alive.
• Ethics and CSR can become an integral part of the work ethics of a
company.
• CSR is the result of a deep conviction that there is something
superior than the truth which is social involvement. Its not about
memorization but involvement.

“A good theory without daily living is deceased, just as faith without

action is dead.”
Business Ethics and CSR both are about firm conviction

• Business ethics and CSR is about firm conviction.

• Corporate involvement is not about feelings, since ethical standards
are not just emotional or sentimental issues.
• Ethics is a fixed standard, objective, permanent, and grounded on
the strongest convictions about what is right and wrong.
• CSR constitutes a firm's decision, and a solid conviction. It refers to
the myriads of the extraordinary and ordinary decisions and
practices, which men and women of goodwill make, and the lasting
values for which they stand (Maximiano, 2003)
Business Ethics and CSR go beyond public relations and profitability

• Individuals do not practice business ethics and corporations do not

benchmark CSR to do public relations and increase sales

• You practice business ethics because it is our philosophy of

management; you benchmark CSR because it is the right thing to do
Business Ethics and CSR are both centered on total human
development

• If the emphasis in CSR is the correct management of all corporate

resources, goods and services, it is because business is for the
betterment of everyone's well being.

• Business is for every man and woman, and all business activities
(CSR) are only means for the total and wholesome development of
every individual. (Paul VI, 1968)
IS TOTAL HUMAN DEVELOPMENT AN ISSUE IN
CSR AND ETHICAL MANAGEMENT?
• The total development of the human person embraces the physical
and the spiritual, material and immaterial, financial and moral
• Progress must be for all.
• Economic development is a means to an end, and the end is the
total welfare of every individual.

• The human person is the central issue in social philosophy, business

ethics and CSR.
EVOLUTION OF BUSINESS ETHICS AND CSR
CSR and ethical management are evolving continuously following
several phases or periods.

• First Phase - Company sees profit and only profit. No enterprise goes
into business to be altruistic or philanthropic; otherwise, it is a
nonprofit organization. The overriding concern at this initial stage is
profit maximization.
• Second Phase - Company complies with laws and regulations, which is
the minimum requirement of being a corporate citizen.
EVOLUTION OF BUSINESS ETHICS AND CSR
CSR and ethical management are evolving continuously following
several phases or periods.
• Third Phase - Company conforms to ethical requirements to build its
image, as it reassesses and safeguards its reputational value. Pepsi
Cola in Myanmar, HP and The Gap in El Salvador established their
ethical departments and changed their corporate behaviors to
enhance their corporate images.
• Ultimate Phase - Company institutionalizes CSR and ethical
management because it is the right thing to do. It is some kind of
noblesse oblige. The enterprise truly becomes socially responsible and
relegate profit motive to secondary objective.
EVOLUTION OF BUSINESS ETHICS AND CSR
RESPONSIBILITY SOCIETAL EXPECTATION EXAMPLES
Economic Required Be profitable,
Maximize sales,
Minimize costs, etc.
Legal Required Obey laws and
regulations
Ethical Expected Do what is right, fair and
just
Discretionary Desired / Expected Be a good corporate
(Philanthropic) citizen
ETHICALLY ACCOUNTABLE AND SOCIALLY
RESPONSIBLE IN A GLOBALIZING SOCIETY
Code of Conduct cover 4 major business areas: basic human rights,
employee practices and policies, consumer protection, and
environmental stewardship.
• Fraud, unethical and deceptive practices by CEOs and business leaders
travel fast around the world.
• High technology and globalization are drivers for companies to be
ethically accountable and socially responsible.
• Globalization is a double-edged sword with both negative and positive
implications on the planet and its people.
ETHICALLY ACCOUNTABLE AND SOCIALLY
RESPONSIBLE IN A GLOBALIZING SOCIETY
• Social Accountability 8000 is a notable evolution of a global standard providing
a framework for the independent verification of ethical practice, principally in
the manufacturing industry.
• SA-8000 involves auditing companies by independent assessors on a wide range
of issues, such as child labor, health and safety, freedom of association, the
right to collective bargaining, discrimination, and compensation.
• It is apparent that cultures around the world adopt some core universal values
like truthfulness, justice and fairness, freedom, interdependence, solidarity,
tolerance, social responsibility, human dignity and respect for life.
• These universal values may lead to the establishment of some sort of
international principles for the welfare of all - led by the private business as
agent for world benefit.
HOW DID CSR BEGIN IN THE PHILIPPINES
• Venezuela- Dividendo Voluntario, 1964
• Philippine Business for Social Progress (PBSP), 1970, has grown to
more that 160 member companies, all of which have pledged to set
aside 1% of net income before taxes to bankroll and subsidize
development programs
• The new millennium saw company and private foundations sprouting
like mushrooms to share God's blessings and help improve peoples
quality of life. Ayala, Petron, San Miguel Corp, Gokongwei Group,
Metro Pacific, Lopez Group, Aboitiz Group, Pfizer, Tan Yan Kee, SM.