Business Ethics and Corporate Social Responsibility

Business

A business is an organization or enterprising entity engaged in commercial, industrial or professional activities.

Investopedia

An organization or economic system where goods and services are exchanged for one another or for money.
-Business Dictionary.com

-requires some form of investment and enough customers to whom its output can be sold on a consistent basis
in order to make a profit.

Business Organization

A business organization is an individual or group of people that collaborate to achieve certain commercial goals.

Some business organizations are formed to earn income for owners.

Other business organizations, called nonprofits, are formed for public purposes.
These businesses often raise money and utilize other resources to provide or support public programs.

FORMS OF BUSINESS ORGANIZATION

1. Sole proprietorships – one individual
in business for himself.
They make up 72% of all businesses and take in 5% of total profits.
They are the simplest to form because of
the small amount of capital needed to start up.
Disadvantages of Sole proprietorships
A. Unlimited liability (debt) - have to forfeit
their personal possessions as well as
their
businesses. (auto, other business, house,
savings)

Examples are beauticians, dentists, lawyers, B. Burden of sole responsibility – must

dry-cleaning and lawn care and lemonade stands. have business sense.

Advantages of a Sole Proprietorship C. Limited potential for growth –

collateral (any
A. Easy to quit the business if the thing of value to guarantee a loan [like
owner decides to do so. There are giving up
no co-owners to consult. your personal possessions) [Let’s say
you put
B. Owners receive the entire profit. your home up for collateral but have to
give it up]
C. Easy to form–no complicated legal documents or
complicated tax forms, small amount of capital needed.
D. Difficult to attract qualified employees–
Personal satisfaction (psychological-being your can’t
own boss) prestige and a sense of accomplishment. offer fringe benefits. [Let’s say you ask for
more benefits]
E. Short life span – depends on owner’s
D. Total control – can make decisions
health and competence. If the owner
quickly, can hire and fire easily, can
dies, it is over.
respond quickly to trends.
2. Partnership - business
operated by 2 or more people.

They are the least common with only 8% and take in only 11% of profits.

Two Forms of Partnerships

2.1. General – equal decision making & unlimited liability

among partners.
2 2. Limited – some non-active partners join as an
investment (and thus have limited liability-just the
investment, not the property). He is a “silent” partner.

Advantages of Partnerships
[“Two heads are better than one.”]

a.Specialization – specific duties assigned to

different partners.
b. Sharing of losses. Can borrow more and can sustain
heavier losses.
c. Easy to form. Small amount of money to start & operate.
d. Shared decision making – more informed decisions.
e. Personal satisfaction – sense of accomplishment.

Disadvantages of Partnerships
a. Disagreements among partners –
conflicts delay decisions, lower employee
morale, & lessen efficiency. Each partner
is responsible for the acts of all other
partners. Must choose good partners.
Corporations can operate like a sole
proprietor. Inc. means the business is a
corporation. Treated by the courts as
an“artificial person”. They can sue, be sued,
enter into contracts, and pay taxes.

b. Have to share the profits.
c. Unlimited liability – can lose their
business and personal possessions.
d. Limited life – sickness, conflicts,
or death can end the partnership.
3. Corporations – a business organization
recognized as a separate legal entity (existence).
Stockholders – are the owners of a corporation who invest
by buying shares.
Stock – the certificate of ownership.
Corporations make up about 20% of business organizations
but produce over 90% of total sales.
Corporate Trivia
A corporation can be sued but the people
who own the corporation (stockholders) can
not be sued.
A corporation has potentially perpetual life.
1.) Nearly all large companies are
corporations.
2.) Nearly all corporations are small
companies.
3.) Therefore, a small minority of
corporations constitute nearly all the large
companies.
In other words, of 4 million corporations,
about 2,000 are large companies, and these
2,000 large corporations constitute the vast
majority of the nation’s large companies.
Also, the 15% of corporations that do more
than Php1 million in sales take in in 85% of
the receipts of corporations
Corporate Bonds – a certificate issued by a corporation in
exchange for money borrowed from investors. There is a
written promise to repay the amount borrowed at a later
date (an I.O.U.) lending money for 10, 20, or 30 years.
Bondholders are creditors, not owners.

Advantages of Corporations from a Stockholders Viewpoint

A 1. Limited liability – limited to the amount invested. His
personal assets may not be seized to pay corporate debts.
B 2. May earn a profit without working.

Advantages From the Corporation’s Viewpoint

A 1. Separation of ownership from management – can hire
the best management available. Specialized talent can be
hired in all areas.
B 2. Easy to raise capital – can issue stocks or sell bonds
allowing the corporation to tap the savings of thousands.
C 3. Longevity – they have a life independent of their owners.

Disadvantages of a Corporation

Disadvantages from the stockholders point of view.

When stockholders earn a profit, they feel no great sense

of pride.

Disadvantages from the corporation’s point of view.

A 1. Slow in decision making – must go thru chain of command

B 2. Many government restrictions – must follow regulations of the

SEC, comply with laws on merging and maintain many records.

C 3. Heavy organizing expenses – pay for its charter and then

depending on the state, expenses can run from a few
hundred to thousands of dollars.

D 4. Double taxation – when a company distributes profits

(dividends) to its stockholders, they have to pay personal
income tax on dividends in excess of Php100. Corporations
earnings are subject to taxation.
The income tax on corporations is 15% on the first Php50,000;
25% from Php50,001- Php75,000; 34% from Php75,001-Php100,000;
39% from Php100,001-Php335,000; 35% from 335,001-Php10 mil.
38% from 10M-18.3million; & a flat 35% overPhp18.3 million.