BUSINESS ETHICS
Sole Proprietorship – A business owned by one
o Refers to principles about how businesses and
organizational members should behave.
SOCIAL RESPONSIBILITY
o An ethical framework which suggests that an
entity, be it an organization or individual, has an
obligation to act for the benefit of society at
large.
BUSINESS ORGANIZATION
o Entity engaged in business, which makes the
goods and services that people use each day.
These operate either for profit or not for profit.
There are generally three types of business
organizations operated for profit: service,
merchandising, and manufacturing businesses.
Business and Business Organization
o A business is an activity that is part and parcel of
human society: it is an entity in which economic
resources or inputs, such as materials and labor,
are put together and processed to provide goods
and services or outputs to customers.
o Businesses are usually complex enterprises
involving major activities like purchasing,
manufacturing, marketing, advertising, selling,
and accounting.
The objective of most businesses is to earn a profit.
o Profit is the difference between the amount
earned and the amount spent in buying,
operating, or producing something.
o The fundamental reason for examining the
activities of business from a moral perspective is
that business organizations, in principle, should
help in the promotion of the common good and
in the protection of person’s rights and interests.
Three (3) Types of Business Organizations operated for
Profit:
1. Service Businesses
o provide services rather than products to
customers.
2. Merchandising Businesses
o sell products they purchase from other
businesses to customers.
3. Manufacturing Businesses
o Manufacturing Businesses change basic inputs
into products that are sold to customers.
The Various Forms of Business Organization
1.
person.
Advantages:
(a) total undivided authority;
(b) low organizational cost and license fees;
(c) tax savings;
(d) no restrictions on type of business.
Disadvantages:
(a) unlimited liability;
(b) limitation on size;
(c) limited by managements; ability to be jack-of-all-
trades.
2. Partnership – an association of two or more people as
partners; it refers to an arrangement in which the
individuals share the profits and liabilities of a business
venture.
Chief characteristics:
(a) association of individuals;
(b) mutual agency - Mutual agency means that an act of
any partner is binding on all other partners, so long as the
act appears to be appropriate for the partnership. This is
true even when partners act beyond the scope of their
authority.
(c) limited life - Partnerships have a limited life.
Partnership dissolution occurs whenever a partner
withdraws or a new partner is admitted.
(d) unlimited liability - Each partner has unlimited
liability. Each partner is personally and individually liable
for all partnership liabilities. Creditor’s claims attach first
to partnership assets and then to the personal resources
of any partner, irrespective of that partner’s capital
equity in the company.
(e) co-ownership of property.
 A partnership is a legal entity for a certain
purpose.
 A partnership is an accounting entity for financial
reporting purposes.
 Net income of a partnership is not taxed as a
separate entity.
3. Corporation – An entity created by law that is separate
and distinct from its owners and its continued existence
is dependent upon the corporate statutes of the state in
which it is incorporated.
The characteristics that distinguish a corporation from
proprietorships and partnerships are:
o The corporation has separate legal existence
from its owners.
o The stockholders have limited liability.
 o Transferable ownership rights
o Ability to obtain capital
o The corporation can have a continuous lfe.
o The corporation is subject to numerous
government regulations.
o The corporation must pay an income tax on its
earning, and the stockholders are required to
pay taxes on the dividends they receive: the
result is double taxation of distributed earnings.
o An artificial/juridical “person” endowed with
ability for self-management, that is, the
management structure is at the discretion of the
board of directors
STEPS IN FORMING A CORPORATION:
o Application of incorporation – SEC
o The corporation is granted a charter ir articles if
incorporation. (Formally creating the
corporation)
o The corporate management and Board of
Directors then prepare a set of Bylaws (Rules and
Procedures).
o Cost may be incurred in organizing a corporation.
Legal fees, taxes, state incorporation fees,
license fees, promotional costs. Such costs are
considered Organization Expenses.

Comparison and Contrast Among the Various Forms of Business Organization

o The owner of a sole proprietorship has complete control over the company’s finances and operations. Sole
proprietorship are not required to consult with anyone when it comes to making business decisions.
o All partners of a partnership have input regarding how the company’s resources are used and other important
business decisions. In a partnership business, all partners are responsible for making decisions that will impact
the business. This may provide multiple viewpoints, which could potentially lead to better business decisions.
o The sole proprietor can maintain complete control over all aspects of the business. There are no shareholders to
pacify and no board of directors to appease. If you feel you need to purchase a piece of equipment, you do not
have to justify your actions to others.
o Corporations have an advantage when it comes to raising capital for the business – the ability to raise funds
through the sale of stock. Corporation file taxes separately from their owners. Owners of a corporation only pay
taxes on corporate profits paid to them in the form of salaries, bonuses, and dividends, while any additional profits
are awarded a corporate tax rate, which is usually lower than a personal income tax rate.
The Role of Each Form of Business Organization in
the Economy
o Small businesses owned by sole proprietors
contribute to economic development, job
creation, and the general health and welfare of
economies.
o Microbusinesses form a dynamic, integral part of
the market economy, providing goods and
services and a gateway by which millions enter
the economic and social mainstream of society.
o Large businesses, offer better jobs than small
businesses, in terms of both compensation and
stability. Also, corporations provide such
benefits as: links with suppliers, increased
consumer spending, the transfer of knowledge
from one firm to another, and the sharing of
pools of workers.
o However, competitive forces sometimes fail to
steer companies in a socially beneficial way and
instead, lead them to act in a socially harmful
manner. For example, a company might
knowingly pollute a neighborhood with
substance that is not yet illegal, in order too save
the costs of reducing its pollution and thereby be
more competitive.
o This wave of large corporations has brought with
it a host of new ethical issues, including the
possibilities of exploiting the workers who labor
at the new machines, manipulating the new
financial markets that finance the large
enterprises, and producing massive damage to
the environment.
The Purposes of Establishing Business
Enterprises/The Social Functions of
Business (Week 2)
o The fundamental reason for examining the
activities of business from the social and ethical
perspective is for the promotion of the common
good, protection of the individual’s interests,
and the preservation of the human society in
general. Without this ethical consideration,
business will be a chaotic human activity because
there will be no common understanding and
agreement about what is the right and wrong
human conduct.
Business’ Role in Poverty Alleviation
o Poverty is experienced and understood
differently by different people in different
regions and at different times. Broadly,
“poverty” is conceptualized as a deficiency or
shortage of some sort, typically in comparison
either to the living standards of others within the
same society or culture (called “relative
poverty”), or to a universal measure of adequate
provision (called “absolute poverty).
Continuing Extreme Poverty in the Midst of Economic
Growth
o Economic growth is rarely uniformly distributed
across a country. China’s coastal provinces,
linked to world trade and investment, have
grown much more rapidly than the hinterland to
the west of the country. India’s southern states,
also deeply integrated in world trade, have
experienced much faster economic
development than the northern regions in the
Ganges valley. Thus, even when average
economic growth is high, parts of a country may
be bypassed for years or decades (Sachs, 2005).
o Another reason for persistent poverty is the
failure of government. Growth may enrich
household linked to good market opportunities,
but it may bypass the poorest of the poor even
within the same community. The very poor are
often disconnected from market forces because
they lack the requisite human capital – good
nutrition and health and adequate education. It
is vital that social expenditures directed at
human capital accumulation reach the poorest
of the poor, yet governments often fail to make
such investments.
o A third possible reason for continued poverty in
the midst of growth is cultural. In many
countries, women face extreme cultural
discrimination, whether or not those biases are
embedded in the legal and political systems.
Business’ Role in Overcoming the Poverty Trap
o When countries get their foot on the ladder of
development, they are generally able to
continue the upward climb. All good things tend
to move together at each rising rung: higher
capital stock, greater specialization, more
advanced technology, and lower fertility (Sachs,
2005).
o Some studies show that small and medium
enterprises (SMEs)-defined usually as businesses
with up to 250 employees – are believe to be
important contributors to economic growth and
a tool to reduce poverty in developing countries.
Also, microfinance is believed to be an effective
tool in the arsenal of the war against poverty by
many witnesses to its success in many
developing regions around the world.
Areas of Business Most in Need of Ethical Attention
o Authentic and sustainable development means
working at the real solutions in order to
eradicate or at least alleviate poverty.
 o In agricultural-based economies such as the
Philippines, the ultimate solutions are to be
found in: countryside and rural infrastructures;
quality basic education for the children of the
poor and in Muslim areas, especially the
education of women; cash transfers to the
poorest of the poor; primary health services;
microcredit and microenterprise programs;
technical skills training for secondary school
students; and social housing such as that by
Gawad Kalinga.
o It has been found that, as far as food security in
the Philippines is concerned, focus should be
placed on addressing constraints on agricultural
finance in order to boost food productivity. For
this to happen, substantial investment s must be
made by both the government and the private
sector.
o Each role in a business organization involves
unique responsibilities (such as the obligations of
an employee to an employer or the fiduciary
duties of management to the shareholders) that
determine what a person should do. Ethical
issues arise in relatioships with every corporate
constituency, including: (a) employees; (b)
customers; (c) suppliers; (d) shareholders; and
(e) society at large.
In the case of the Philippines, it might be good to
examine issues relating to the following:
The Social Responsibility of Capitalist Business
Practices
Milton Friedman (American economist) famously
stated that the only social responsibility of business
is to increase profits. On the other hand, William
Sauser, in the Journal of Business Ethics article
“Ethics in Business: Answering the Call, “ explained
that business organizations have four levels of
responsibility:
(1) Earning a profit; (2) Legal responsibility; (3)
Ethical responsibility; and (4) Discretionary
responsibility. Responsibilities of businesses
beyond profit making have come to be called
Corporate Social Responsibility or CSR.
o CSR, as defined by the World Business Council for
Sustainable Development (WBCSD), is a
“continuing commitment by business to behave
ethically and contribute to economic
development while improving the quality of life
of the workforce and their families, the local
community, and society at large.
The Morality of Advertising
o Advertising presents several ethical issues, one
of them being Deceptive Advertisements.
Deceptive ads are those that make false
statements about or misrepresent the product,
for example, the picture presented in the
advertisement is different from the actual
product.
o Article 108 of the Consumer Act of the
Philippines (R.A. 7394) declares that “The State
shall protect the consumer from misleading
advertisements and fraudulent sales promotion
practices.
o Article 110 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 I
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 products or
services. An advertisement shall be false,
deceptive or misleading if it is not in conformity
with the provisions of this Act or if it is misleading
in a material respect. In determining whether
any advertisement is false, deceptive or
misleading, there shall be taken into account,
among other things, not only representations
made or any combination thereof, but also the
extent to which the advertisement fails to reveal
material facts in the light of such
representations, or materials with respect to
consequences which may result from the use or
application of consumer products or services to
which the advertisement relates under the
conditions prescribed in said advertisement,
runder such conditions as are customary or
usual.”
Basic Employee Rights, Job Discrimination, Other Labor-
Related Ethical Issues
o The Labor Code of the Philippines lays down the
rights of workers in relation to wages, rights to
self-organization, collective bargaining, security
of tenure, and just and humane conditions of
work.
o R.A. 6727 also known as the “Wage
Rationalization Act” mandates the fixing of the
minimum wages applicable to different
industrial sectors. This law rationalized wage
determination by establishing the mechanism
and proper standards through the creation of
Regional Tripartite Wages and Productivity
Boards (RTWPB’s).
o Book Four of the Labor Code of the Philippines
lays down the “Health, Safety, and Social Welfare
Benefits accorded to workers. Book Five,
entitled “Labor Relations,” lays down the policies
of the State with regard to labor. These policies
are:
 (1) to promote and emphasize the primacy of free
collective bargaining and negotiations including
voluntary arbitration, mediation and conciliation, as
modes of settling labor or industrial disputes;
(2) to promote free trade unionism as an instrument
for the enhancement of democracy and the
promotion of social justice and development;
(3) to foster the free and voluntary organization of a
strong and united labor movement;
(4) to promote the enlightenment of workers
concerning their rights and obligations as union
members and as employees;
(5) to provide an adequate administrative machinery
for the expeditious settlement of labor or industrial
disputes;
(6) to ensure a stable but dynamic and just industrial
peace;
(7) to ensure the participation of workers in decision
and policy making processes affecting their rights,
duties, and welfare.
Insider Trading
o Insider trading in the stock market is
characterized as the buy and for selling of shares
of stock on the basis of information known only
to the trader (an “insider,” somebody belonging
to the company, as opposed to the public) or to
a few persons. Insider trading, in finance is the
reverse of speculation. It is reward without risk,
wealth generated-and injury done to others-by
an unfair advantage in information.
Pollution and Resource Depletion
o The Encyclical Laudato Si’: On Care for Our
Common Home, issued by Pope Francis in 2015,
is a wake-up call to help humanity understand
the destruction that man is rendering to the
environment and his fellow man.
o Business organizations should take seriously the
task of caring for the earth, by regularly
embarking on projects seeking to diminish or
eradicate pollution, and to renew the natural
resources they tend to use up or deplete.
Whistle Blowing
o Whistle-blowing is the act, for an employee (or
former employee), of disclosing what he believes
to be unethical or illegal behavior to higher
management (internal whistle-blowing) or to an
external authority or the public (external
whistle-blowing).
Core Principles of Fairness, Accountability,
and Transparency (Week 3)
Notions of Accountability, Fairness and Transparency
o Business leadership affects the moral capability
and performance of organizations. Business
leaders influence the scope and character of
formal ethics programs and the integration of
ethics into everyday organizational life.
However, most practicing business leaders in
most countries most of the time are not held
accountable for dysfunctional moral, social and
environmental performance. Many are seldom
held accountable for adverse impacts of their
decision-making, for example, deepening
poverty, social disintegration, and
environmental degradation.
o There is a need to convince management that
they should develop their “integrity capacity”
which is the individual and/or collective
capability for repeated process alignment of
moral awareness, deliberation, character, and
conduct that demonstrates balanced
judgement, enhances sustained moral
development, and promotes supportive systems
for moral decision-making.
o These four key dimensions of integrity capacity –
process, judgement, development, and system
should present challenges for business leaders
so that they become more aware of moral
concerns and thus respond more effectively to
the problems that arise (Petrick and Quinn,
2001).
Accountability
Accountability – what it is:
o To be accountable is to be liable to explain or
justify one’s actions and decisions.
o Accountability is the process of explanation and
justification.
o Holding to account is the process of requiring
explanation and justification, but it is also about
testing, forming a judgement, and if necessary,
taking action.
o Accountability implies responsibility: it is
reasonable only to hold people to account for
those things for which they are responsible.
Accountability – what is not:
o it is not synonymous with responsibility.
o It does not imply a management relationship.
o It is not a “one off” annual event.
o It is not the same as appraisal.
o It is not about confrontation, “putting someone
in his place” or “giving him a hard time..”
Fairness
o It is the quality of making judgements that are
free from discrimination.
o Fairness, in the context of a business
organization involves balancing the interests
involved in all decision-making including any
decisions related to hiring firing (including the
investigatory process), and the compensation
and rewards system.
o Fairness has to do with justice, which is to give to
another that which is due him or her. More
concretely, justice: (1) looks at the balance of
benefits and burdens distributed among
members of a group; and/or (2) can result from
the application of rules , policies, or laws that
apply to a society or a group. IN general, the just
results of actions override utilitarian results.
Transparency
o Transparency is an issue that often emerged in
the documents by Pope Benedict XVI. Caritas
Veritate (CV) referred to transparency seven
times. The intrinsic or ethical salience of
transparency appears at the individual level,
while its instrumental salience manifests itself on
both the organizational and social levels, while
its instrumental salience manifests itself on both
the organizational and social levels.
o At the individual level, transparency acquires
intrinsic or ethical salience as an important
feature of a person’s relational between
individuals (CV 53, 54). Indeed, a transparent
approach allows an individual to be more
authentic and genuine in his/her relationships to
express his/her points of view and to actively
work to find shared meanings and objectives.
Notions of Competence, Professionalism, and
Responsibility
o Studies show that moral character and technical
competence are viewed as being equally
important for worker excellence. The greater
the need to engage with co-workers who have
different values, interests and needs, the more
important it becomes for employees to be able
to connect with colleagues, to understand
different perspectives, to balance sometimes
conflicting claims and to act competently both
interpersonal and ethically.
In order to do that, responsible worker needs a minimum
set of skills, as well as moral and relational qualities
(Whetstone, 2003). The following are the minimum
competencies expected of professionals:
o Technical Skills encompass the ability to apply
specialized knowledge or expertise.
o Human Skills is the ability to understand,
communicate with, motivate, support other
people, both individually and in groups, which
defines human skills.
o Conceptual skills are the skills and the mental
ability that managers must have to analyze and
diagnose complex situations.
o The first and most basic necessary skill for a
working professional is solid competence in the
human sphere, in the sphere of work. Such
competence requires the following
characteristics:
o (a) human maturity – a person works not only
hard but also efficiently, that is with
professionalism; and (b) work is done in a spirit
of service and love for those around us
o The working professional also needs “relational
intelligence (RI)” in order to connect and
interact effectively and respectfully with people
and stakeholders from various backgrounds,
diverse cultures, and with different interests,
inside and outside the organization, and to build
lasting and trustful relationships. RI is a
combination of emotional intelligence and
“ethical intelligence”.
o Part of the responsibility of the worker is to be
trustworthy: employees need to demonstrate
that they have integrity, benevolence, and
ability in situations where trust is important.
o This trustworthiness is all the more important in
managers: those who break this psychological
contract with subordinates, demonstrating they
are not trustworthy, will find employees are less
satisfied and less committed, have a higher
intent toward turnover, engage in less
citizenship behavior, and have lower task
performance.
o Managers who betray trust are especially likely
to be evaluated negatively by followers if there
is already a low level of leader-member
exchange.
The Relationship of Accountability/Stewardship?
Responsibility with Ethical Businesses
o Servant leaders go beyond their own
self-interest and focus on opportunities to help
followers grow and develop. They do not use
power to achieve ends; they emphasize
persuasion. Characteristics behaviors include
listening, empathizing, persuading, accepting
stewardship, and actively developing follower’s
potential. Because servant leadership focuses
on serving the needs of others, research has
focused on its outcomes for the well-being of
followers.
What are the effects of servant leadership?
o One study of 123 supervisors found it resulted in
higher levels of commitment to the supervisor,
self-efficacy, and perceptions of justice, which all
were related to organizational citizenship
behavior (OCB). This relationship between
servant leadership and follower appears to be
stronger when followers are focused on being
dutiful and responsible.
o Second, servant leadership increases team
potency, which in turn leads to higher levels of
group performance. Third, a study with a
nationally representative sample of 250 workers
found higher levels of citizenship associated with
focus on growth and advancement, which in turn
was associated with higher levels of creative
performance (Robbins and Judge, 2013).
o Responsibility for one’s education and work
experience has also been found to be related to
ethical behavior in organizations. The higher
level of moral reasoning, in turn, leads to more
ethical behavior.
The Notion of Organizational Diversity and the Role of
Women in Business Organization
Organizations use a variety of efforts to capitalize on
diversity, including recruiting and selection policies, as
well as training and development practices. Effective ,
comprehensive workforce programs encouraging
diversity have three distinct components.
o First, they teach managers about the legal
framework for equal employment opportunity
and encourage fair treatment of all people
regardless of the demographic characteristics.
o Second, they teach managers how a diverse
workforce will be better able to serve a diverse
make of customers and clients.
o Third, they foster personal development
practices. Much concern about diversity has to
do with fair treatment and fair opportunity.
Some diversity programs are truly effective in
improving representation in management.
Women in Organization
Several studies show that business organizations stand
to gain from the presence of women, especially on their
Board of Directors. Findings appear to show that,
among others:
o (1) firms employing more women managers
have probably done a better job of recruiting
capable managers from the total available
talent pool, and consequently will be in a better
position to link with customers, employees, and
other constituencies (Shrader et al., 1997); (2)
firms having a greater proportion of women
serving on their boards do engage in charitable
giving to a greater extent than firms having a
lower proportion of women on boards and firm
philanthropy in the areas of community service
and the arts (William, 2003);
o (3) investors (Singapore) value the diversity and
potential contribution of women on the board
of directors, that is, the appointment of female
directors may be viewed as a means of
improving corporate governance of firms whose
boards may be dominated by old-boys networks
(Ding and Charoenwong, 2013); and (4) since
women represent a significant proposition of
the customer base in many corporations, the
presence of female directors would bring the
female perspective to the boardroom and
positively impact the bottom-line of companies,
as explained by evidence that male CEO’s find
the viewpoints of female directors beneficial I
understanding female clients (Burke, 1994).
o Firms employing higher percentages of women
are likely to perform better inasmuch as they
are more progressive and more competitive
because their management contingents more
closely mirror the composition of existing
markets (Shradr et al., 1997).
Code of Ethics and Business Conduct
Code of Ethics
o When huge corporate scandals began to
proliferate, companies began creating
communications propaganda for building
corporate reputation. Feeling a need to improve
their images and facing increasing accusations
of corruption, businesses turned to ethical
codes to publicize their virtues and create a
more positive impression with stakeholders.
o Codes articulate ethical parameters of the
organization – what is acceptable and what is
not. They have been defined multiple times in
Journal of Business Ethics, sometimes
redundantly without building on earlier works
and other times adding new dimensions to the
understanding of a code. Kaptein and Wempe
(2002) describe them as policy documents
defining responsibilities of the organization to
stakeholders and articulating the conduct
expected of employees.
o Nijhof et al. (2003) note codes contain open
guidelines describing desirable behaviors and
closed guidelines prohibiting certain behaviors.
o As instruments to enhance social
responsibility, codes clarify the norms and
values the organization seeks to uphold
(Kaptein, 2004). Ethical codes differ from
mission statements by articulating the value
 system and answering the question “within
what ethical standards and values should the
mission be pursued”? Sufficient new evidence
exists to show that corporate codes can
successfully moderate ethical behavior.
o Carl Skoogland (2003), the former ethics
director of Texas Instruments, argues: “Ethical
managers must know what is right, value what
is right, and do what is right.” We believe these
are indeed the three key principles that are
essential in the practical and successful
management of ethics at the organizational
level.
Specific Philippine Examples
Ayala Corporation
Code of Business Conduct and Ethics
Ayala adopts as part of its basic operating principles, the
primacy of the person, shared values, and the
empowerment of people.
The company and its employees are guided by four core
values: integrity, long-term vision, empowering
leadership, and commitment to national development.
These values are expressed in the company’s Code of
Ethical Behavior, which sets and outlines the general
expectations and standards for employee behavior and
ethical conduct. The Code is in accord with the
company’s human resource policies, which include the
Code of Conduct that prescribes standards by which
employees are expected to conduct themselves. (Ayala
maintains fair dealings with its shareholder, customers,
employees and business partners)
What is Corporate Culture?
o Culture has profound influence on all aspects of
human behavior.
o Cultural influences change and culture evolves
as political, social, economic, and the
technological forces reshape the cultural
landscape (Usunier and Lee, 2005; Craig and
Douglas, 2006). Economic and physical
environments (populations, climate, geography,
etc.) are important issues for business
organizations; cultural environment
(communications, religions, values and
ideologies, education, social structure) has
special importance and relevance.
The Notion of Organizational Culture
o Corporate culture refers to the assumptions,
beliefs, goals, knowledge and values that are
shared by organizational members (Schwartz
and Davis, 1981; Deal and Kennedy, 1982;
Sathe, 1983; Schein, 1992). Such values and
beliefs, when supported by various operating
norms and rituals, can exert a decisive influence
on the overall ability of the organization to deal
wth the challenges that it faces (Morgan, 1997).
The Same culture scholars agree that
organizational culture is a phenomenon that
involvels beliefs and behavior; exists at a variety
of different levels in organizations; and
manifests itself in a wide range of features of
organizational life such as structures, control
and reward system, symbols, myths, and human
resource practices (Pettigrew, 1979; Scheiin ,
1992; Kotter and Heskett, 1992).
The Need for Ethical Organizational Culture
o The economics of organizations, however, has
to subject itself to ethics, and needs to focus on
how to employ those goods and resources as
well as human capabilities in accord with the
alternatives available, that is to say, it should
constantly seek a possible alternative by which
human beings can improve and grow, which in
the ultimate instance is what characterizes the
ethical organization (Polo, 1991). One way of
achieving this is the development of an
organizational culture that would ensure the
positive learning in the organizational members
and the formation of their character through
the virtues.
Creating Corporate Code of Ethics
Creating an Ethical Corporate Culture
A culture of character is the type of organizational
culture in which positive moral values are ingrained
throughout the organization. Pastin (1986) describes
organizations exhibiting what we call a culture of
character as those that possess the following four
stylistic markers:
o They are at ease interacting with diverse
internal and external stakeholder groups. The
ground rules of these firms make good of these
stakeholder groups part of the organization’s
own good.
o They are obsessed with fairness. Their ground
rules emphasize that the other person’s
interests counts as much as their own.
o Responsibility is individual rather than
collective, with individuals assuming personal
responsibility for actions of the organization.
These organization’ ground rules mandate that
individuals are responsible to themselves.
o They see their activities in terms of purpose.
This purpose is a way of operating that
members of the organization highly value.
Purpose ties the organization to the
environment.
o
To Pastin’s (1986) list, Sims (2005) has added:

o There exists a clear vision and picture of

integrity throughout the organization.
o The vision is owned and embodied by top
management, over time.
o The reward system is aligned with the vision of
integrity.
o Policies and practices of the organization are
aligned with the vision; there are no mixed
messages.
o It is understood that every significant leadership
decision has ethical value dimensions.
o Everyone is expected to work through
conflicting stakeholder value perspectives.

Creating Corporate Codes of Ethics

Saucer and Sims (2013) give the following suggestions for

creating Codes of Ethics in business organizations:

o Adopt a code of ethics

o Provide ethics training
o Hire and promote ethical people
o Correct unethical behavior
o Take a proactive strategy
o Conduct a social audit
o Protect whistle-blowers
o Empower the guardians of integrity
o Assure commitment from the top
o Communicate the standards of conduct widely
throughout the organization and the industry
o Designate an ethics officer with clear
responsibility for enforcing ethical standards
o Establish a process for reporting violations of
ethical standards and actively investigate all
reported violations
o Assure due diligence by the organization’s
board of directors
o Above all, lead by example.