Ethical Issues and the

Institutionalization of
Business Ethics
Maria Tania Mae S. Rosario
A conflict of right (ethical) or wrong
(unethical) or situation forcing
alternatives on an entity seeking
ethical behavior. What Is an
Ethical Issue?

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Biggest Ethical Issues Facing Businesses in PH

Bribery Disclosure and Confidentiality

• This is the most common dilemma for • The most effective weapon against
Filipino businessmen. The common excuse corruption is transparency. However, most
is government corruption, but the biggest businessmen oppose complete disclosure
sources of bribery are businessmen. Bribery often with the excuse that everybody keeps
distorts market mechanisms, creates unfair secrets.
competitive advantage and leads to
inefficient allocation of national resources.
In real terms, it adds tremendous additional
costs to the food budget of the poor,
removes improving efficiency as a motive
for remaining competitive and discourages
legitimate investments.

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Biggest Ethical Issues Facing Businesses in PH

Insider Dealing Consumerism

• This is not only limited to the stock • There are four basic rights that
market. It is a practice rampant in many corporations owe to the public, namely,
firms especially in such sensitive areas safety, full information, choice, and
like purchasing and sales. redress.

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Biggest Ethical Issues Facing Businesses in PH

Determining Executive Pay Other issues

• During the Marcos era when the danger

of a communist takeover was a real • Aside from these five areas, there are
possibility, many concerned corporate other illegal activities that were faced
heads were discussing the possibility of by ethical issues such as smuggling.
agreeing on the gap between the highest-
and lowest-paid workers in the
company.
• Some suggested that the highest-paid
executive should not be paid more than
2,500 percent than the lowest paid. The
Leftist threat has become negligible and
this issue has also become forgotten. TREY 5
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While President Aquino and his Bureau of
Customs have moronically focused on
opening OFWs balikbayan boxes to
squeeze more revenues, smuggling by
big-time traders has exploded to
unprecedented levels under this regime.
Nearly one-fourth of imports into the
country in the last five years have been
unreported and untaxed, totaling $94
billion – for an astronomical P4 trillion.
That’s more than four times the estimated
smuggled value of just $21 billion from
2005 to 2009.
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The Aquino government lost revenues from duties and value-added
taxes on these smuggled goods in the last five years, totaling P760
billion, as a result of the massive collusion between traders and the
Bureau of Customs, the likes of which had never been seen in the
country’s postwar history.
To give you an idea of the magnitude of those P760 billion foregone
revenues, that could have doubled the budget of the public works
department to start the building of two MRT-type of mass transport
systems to solve the horrendous traffic problem in the metropolis.
Alternatively, it could have doubled the education department’s budget
so that the poor will enjoy totally free education.

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Aquino’s failure to curb corruption is one of his biggest
sins against the nation, which remarkably though he has
been able to keep largely unnoticed.

These figures are based on data from the International

Monetary Fund’s Direction of Trade Statistics, which
allows us to compare exports to the country as reported
by the exporting country, and the Philippines’ imports,
as reported by the Bureau of Customs, to come up with
an estimate of the value of smuggled goods.
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The discrepancies in the two sets of
figures may in part be due to
reporting errors, for instance due to
different reporting times. However,
especially when the discrepancies
involve significant amounts and
when a time-series is available, the
methodology approximates the
magnitude of smuggling in a country.
The methodology has been routinely
used by international-trade
economists and multilateral
Smuggling has been institutionalized.” Source: Based on IMF
institutions. DOT data
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The validity of the method is such that the import figures for
other countries known to be relatively free of smuggling –
such as Europe and Saudi Arabia– do not show such massive
discrepancies.

The accompanying table and chart show that the estimated

value of goods smuggled into the country jumped as soon as
Aquino took office, rocketing in 2009 from just $8 billion in
2009 or just 15 percent of the imports as reported by the
exporting countries to $26 billion last year, more than a fourth
of the actual imports.

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“It’s the biggest open secret in Manila,” a veteran broker put
it. “Biggest as I’ve never seen such blatant smuggling ever in
my 30 years in this business. Open because we brokers all
know it and how to do it. And secret, as this government has
managed to keep under the public radar, what is really their
biggest racket.”

The broker added “Just go to Divisoria or any mall, or any

supermarket, and you won’t have a doubt at all that smuggling
has been so rampant under this administration. It’s been
institutionalized.”

- RIGOBERTO D. TIGLAO
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CHAPTER OBJECTIVES
The Institutionalization of Business Ethics
• Distinguish between the voluntary and
mandated boundaries of ethical conduct
• Provide specific mandated requirements
for legal compliance in specific
• Provide an overview of regulatory efforts
that provide incentives for ethical
behaviour
• Provide an overview of highly appropriate
core practices and their relationship to
social responsibility.

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Institutionalization in business ethics
relates to established laws, customs,
and the expectations of
organizational ethics programs
considered a requirement in
establishing reputation.

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 Organizations need to maintain an ethical culture and manage
stakeholder expectations for appropriate conduct. They achieve
these ends through corporate governance, compliance, risk
management, and voluntary activities. Corporate governance is
structured by a governing authority that provides oversight as well
as checks and balances to make sure that the organization meets its
goals and objectives for ethical performance.

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• Voluntary practices – management
initiated beliefs, values, and
voluntary contractual obligations of
a business. Giving employees a
positive work environment.
Three dimensions
• Core practices – highly appropriate to effective
and common practice that helps
ensure compliance with legal business ethics
requirements, industry self-
regulation, and social expectation. compliance
• Legally Mandated boundaries –
externally imposed boundary of
conduct, such as laws, rules,
regulations, and other requirements.
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Corporate governance is structured by a
governing authority that provides oversight
authority that provides oversight as well as
checks and balances to ensure that the
organization meets its goals and objectives
for ethical performance.
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ELEMENTS OF AN ETHICAL CULTURE
• An ethical culture
creates an
environment to
structure behaviour
that is evaluated by
stakeholders. These
three elements have
different impacts on
behaviours.
Organizational
decisions on such
issues as governance,
codes of ethics, ethics
training, and legal
compliance are shaped
by the ethical culture.
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Legal Compliance

• Laws and regulations established by

governments
• Laws regulating business passed because
stakeholders believe business cannot be
trusted to do what is right in certain areas,
such as consumer safety and environmental
protection.

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Types of Laws
• Civil law defines the rights and duties of
individuals and organizations
• Criminal law prohibits specific actions and
imposes punishment for breaking the law
• The difference is enforcement
• Criminal laws enforced by the state or
nation
• Civil laws enforced by individuals
(generally in court)

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Most laws affecting businesses fall into 5 categories …

• Regulating competition
• Protecting consumers
• Protecting equity and safety
• Protecting the environment
• Those that encourage ethical conduct

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Laws Regulating Competition
• The issues surrounding the impact of
competition on businesses' social
responsibility arise from the rivalry among
businesses for customers and profits.
• When businesses compete unfairly, legal
and social responsibility issues can result.
Intense competition sometimes makes
managers feel their company’s survival is
threatened.

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ANTITRUST LAWS: A GLANCE
AT THE PHILIPPINE
COMPETITION ACT

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• Antitrust laws, also referred to as “competition laws”, are
statutes developed to protect consumers from predatory
business practices by ensuring that fair competition exists in
an open-market economy.
• Competition laws regulate and prohibit several questionable
business activities such as market allocation/ de facto
monopoly whereby companies agree to steer clear of each
other's identified geographical market or territories; bid
rigging whereby conspiring entities manipulate the market
with a view of retaining current market share and price for
each entity; and price fixing whereby two or three entities
agree on the same selling price.
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• Signed into law on 21 July 2015, Republic Act No. 10667,
otherwise known as the Philippine Competition Act (“PCA”)
is the first consolidated framework regulating competition in
the Philippines.
• With the key objective of regulating and prohibiting
monopolies and combinations in restraint of trade or unfair
competition to improve the overall welfare of consumers by
giving them more choices at possibly lower prices.

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The key features of the PCA include:
Prohibition on:
(1) anti-competitive agreements
(2)abuse of dominant position
(3) anti-competitive mergers and acquisitions

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What are anti-competitive
agreements?

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The second type of anti-competitive agreements
include those which contemplate controlling or
setting production, markets, technical developments
or investment; and dividing or sharing the market, by
volume or sales or purchases, territory, type of goods
or services, buyers or sellers or any other means.
These pertain to schemes undertaken by competing
entities in order to keep a geographical area, market
share, sales or other market factors within their
control.
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Laws Protecting Consumers
Laws that protect consumers
require businesses to provide
accurate information about their
goods and services and follow
safety standards.

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Consumer Act of the Philippines (R.A. 7394 )
Purpose
This law is designed to prevent business that
engage in fraud or specified unfair practices
from gaining advantage over competitors
and provide additional protection of the
weak and those unable to take care of
themselves
Declaration of Basic Policy
It is the policy of the State to protect the
interest of the consumer, promote his
general welfare and to establish standards
of conduct for business and industry.
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OBJECTIVE
• Protection of consumers against hazard to health and
safety;
• Protection of consumers against unfair and
unconscionable sales act and practices;
• Provision of information and education to facilitate sound
choice and the proper exercise of rights by the consumer;
• Provision of adequate rights and means of redress;
• Involvement of consumer representative in the
formulation of social economic policies

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CONSUMER RIGHTS
• Right To Basic Needs
• Right To Safety
• Right To Information
• Right To Choice
• Right To Representation
• Right To Redress
• Right To Consumer Education
• Right To A Healthy Environment

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WHO ARE THE AGENCIES CONCERNED?

• Department of Health:
Food, drugs, cosmetics, devices,
and substances
• Department of Agriculture
Products related to agriculture
• Department ofTrade and Industry:
Other consumer products not
specified above.

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Philippine Lemon Law (R.A. 10642)
The Basics of Philippine Lemon Law
• A lemon car is a defective brand
new unit that’s bought from an
authorized dealer in the country.
• Protected by the law up to 12
months after purchase or within
vehicle’s first 20, 000 km of total
distance traveled.

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 • Any factory defects found around
the brand new unit that don’t
meet the manufacturer’s
specifications or warranty claims
are covered by the law.
• Consumer may request (in writing)
the dealer to have the defective
unit fixed within the 12-month
time period for at least 4
attempts.
• Consumer must return the unit
within 30 days from the previous
repair attempt otherwise the
previous repair may be considered
as successful.
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 TheBasicsofPhilippineLemonLaw
Philippine Lemon
During the period of unit repair or availment
Law (R.A. 10642) of Lemon Law Rights, the dealer shall provide
the consumer with either a daily
transportation allowance or a service
vehicle.
If ever the DTI deemed the issue in favour of
the consumer, he or she can request a dealer
to replace the unit with a similar model or a
vehicle of higher value. Should the
consumer choose to have a more expensive
model, he or she has to pay additional cost.
On the other hand, the consumer may return
the defective unit and demand a full refund
withcollateraldamagepay.
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 Laws Promoting
Equity and Safety

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Occupational Safety and
HealthStandards
(RA.11058)

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 MAJOR
ENVIRONMENTAL LAWS
INTHE PHILIPPINES

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REPUBLIC ACT 9003
ECOLOGICAL SOLID WASTE MANAGEMENT ACT OF
2000
• In partnership with
stakeholders, the law aims to
adopt a systematic,
comprehensive and ecological
solid waste management
program that shall ensure the
protection of public health and
environment. The law ensures
proper segregation, collection,
storage, treatment and disposal
of solid waste through the
formulation and adaptation of
best eco-waste products.
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 REPUBLIC ACT 9275 PHILIPPINE CLEAN WATER ACT
OF 2004
The law aims to protect the
country's water bodies from
pollution from land-based sources
(industries and commercial
establishments, agriculture and
community/household activities). It
provides for comprehensive and
integrated strategy to prevent and
minimize pollution through a multi-
sectoral and participatory approach
involving all the stakeholders.
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 REPUBLIC ACT 8749 PHILIPPINE CLEAN AIR ACT OF
1999
The law aims to achieve and
maintain clean air that meets
the National Air Quality
guideline values for criteria
pollutants, throughout the
Philippines, while minimizing
the possible associated
impacts to the economy.
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 REPUBLIC ACT 6969 TOXIC SUBSTANCES,
HAZARDOUS AND NUCLEAR WASTE CONTROL ACT
OF 1990
The law aims to regulate restrict or prohibit the importation,
manufacture, processing, sale, distribution, use and disposal of
chemical substances and mixtures the present unreasonable risk
to human health. It likewise prohibits the entry, even in transit,
of hazardous and nuclear wastes and their disposal into the
Philippine territorial limits for whatever purpose; and to provide
advancement and facilitate research and studies on toxic
chemicals.
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 PRESIDENTIAL DECREE 1586 ENVIRONMENTAL
IMPACT STATEMENT (EIS) STATEMENT OF 1978
The Environment Impact Assessment System was
formally established in 1978 with the enactment of
Presidential Decree no. 1586 to facilitate the attainment
and maintenance of rational and orderly balance
between socio-economic development and
environmental protection. EIA is a planning and
management tool that will help government, decision
makers, the proponents and the affected community
address the negative consequences or risks on the
environment. The process assures implementation of
environment-friendly projects.

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 ThankYou
Imee R.
09178770275
santiniparisbea@gmail.com
San Beda College Alabang

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