Download Chapter 6 Managing Small Business Start-ups

Chapter 5
Ethics & Social Responsibility
Group 2
Hazel G. De Mesa
Gregorio M. Cudiamat
Fritzie P. Tangkia-Fabricante
Christopher L. De Jesus
Ma. Dolorosa E. Ferrer
Learning Objectives:
 Define Ethics and explain how ethical behavior relates to behavior
governed by law and free choice.
 Explain the Utilitarian, Individualism, Moral-Rights & Justice
approaches for Evaluating Ethical Behavior.
 Describe How both individual and organizational factors shape ethical
decision making.
 Define Corporate Social Responsibility and how to evaluate it along
economic, legal, ethical & discretionary criteria.
 Describe four (4) organizational approaches to environmental
responsibility and explain the philosophy of sustainability
 Discuss how ethical organizations are created through ethical
leadership and organizational structures and systems.
 Identify important stakeholders for an organization and discuss how
managers balance the interests of various stakeholders.
 CASE
Introduction:
In this topic: Discuss fundamental
approaches that help managers think
through ethical issues and by way of
understanding the approaches will help
managers build a solid foundation on
which to base future decision making.
Ethics:
 code of moral principles and values that
governs behaviors of a person or group with
respect to what is right or wrong
 sets standards as to what is good or bad in
conduct and decision making
 deals with internal values that are part of
corporate culture and shapes decisions
concerning social responsibility with respect to
the external environment
Three Domains of Human Action:
Domain of Codified Law:
(Legal Standard)
 values & standards are written into the legal system & enforceable
in the courts
 set of rules by lawmakers being followed
Domain of Ethics:
(Social Standard)
 No specific laws but have standards of conduct based on shared
principles and values about moral conduct that guide an individual
or company
Domain of Free choice:
(Personal Standard)
 Pertains to behavior about which the law is disregarded and
individual/organization has complete liberty or freedom
Ethical Dilemma:
 Disagreements about proper behavior.
 Concerns right or wrong values when values are in
conflict
 Right or wrong cannot be clearly identified
 A situation that arises when all alternative choices or
behaviors are deemed undesirable because of
potentially negative consequences, making it difficult to
distinguish right from wrong
 Involve a conflict between the needs the individual
versus the organization or the organization versus
society as a whole
 Example: Should a company implement mandatory
alcohol & drug testing for employees which may
benefit organization but reduce individual freedom
of employees?
Moral Agent:
 the individual who must make an ethical choice in an
organization
Manager:
 faced with tough ethical choices. Decision making is
based on norms and values as guide.
Different Approaches to describe
values for guiding ethical decision
making:
1. Utilitarian Approach:


moral behavior produces the greatest good for the greatest
number.
each alternative is considered and the one that optimizes the
satisfaction for the greatest number of people is selected.
Example:

An engineer for a residential subdivision was instructed by the VP for Finance to cut down the
cost of a proposed retaining wall by using ordinary concrete hollow blocks in some portions of
the wall. The engineer knows that if he would follow the VP’s instructions, the integrity of the
entire retaining wall will be affected, which may or may not result to the collapse of certain
portions of the wall. The VP told the engineer that if he will not change the plan, the company
will spend an additional P3 Million. This would mean higher cost of development, which will be
passed on the lot buyers. Higher price of lots per square meter would adversely affect sales,
which in turn, would mean lower sales revenue for the Company for the said year. The VP
likewise reminded the engineer that should the Company fail to meet the sales target for that
project, the employees, including the engineer, should not expect any bonus.

If the engineer were to use the utilitarian approach, he may be able to justify his decision to
follow the instructions of the VP. Lower cost of development would mean lower sales price for
the lot buyers. Further, if the sales target would be met because of the low selling price of the
lots, the employees of the Company would benefit because they would receive a bonus for that
year. Hence, more people will be benefited by following the VP’s instructions.
2. Individual Approach:
 contends that an act is moral when they
promote the individual’s best long-term
interests, which ultimately leads to a greater
good
 Individual Self-direction is paramount
 Individuals calculate the best long-term
advantage to themselves as a measure of a
decision’s goodness
 Individualism ultimately leads to behavior
towards others that fits standards of behavior
people want toward themselves.
 Can be described like Domain of free choice
Example:
 Should an executive secretary report his boss, an EVP,
for bringing home a brand new company desktop
computer for the personal use of the EVP’s daughter?
The EVP says that his daughter’s computer bogged
down and she will just be using it for a week. The
computer was bought by the Company for an
employee who happens to be on leave at that time,
and hence, nobody would be deprived of the use of the
computer.
 If the secretary were to use the individualism approach,
she may just decide to keep the incident to herself and
retain the trust and confidence of her boss.
3. Moral Rights Approach:
The ethical concept that moral decisions
are those that best maintain the rights of
those people affected by them
Asserts that human beings have
fundamental rights and liberties that
cannot be taken away by an individual’s
decision
Moral Rights to Consider:
1.
2.
3.
4.
5.
6.
right of free consent- Individual’s consent is treated
right to privacy- individuals have rights to their own
private life
right of freedom of conscience- Individuals may
refrain from carrying out any
right of free speech- truthful criticism of the ethics or
legality of actions of others
right to due process
right to life & safety- Individuals have a right to live
out of danger and away from hazards.
As a manager, we should avoid to
interfere with the basic rights of
others.
Example:
 A staff should be given a healthy work environment especially
during work hours.
 A staff being accused of stealing office property should still be
given due process in investigating the accusation before any
sanction will be given.
4. Justice Approach:
 Holds that moral decisions must be based on standards of equity,
fairness and impartiality
Types:
 Distributive justice- requires different treatment of people not
be based on arbitrary characteristics. Amount of treatment as
same level of responsibilities
 Procedural Justice- requires that rules be administered fairly
and impartially enforced
 Compensatory justice- individual should be compensated for
the cost of their injuries by the party responsible ; also,
individuals should not be held responsible for matters over
which the have no control.
Example:
 Senior agents have longer contract term of 5 months but with
bigger quota of 30M and bigger allowance of 12,000 pesos per
month; than Regular agents who has only 3 months contract
term and quota of 12M and has 8,000 pesos allowance per
month.
FACTORS AFFECTING ETHICAL CHOICES
 Ethical or unethical business practices usually reflect the values,
attitudes, beliefs & behavior patterns of the organizational culture
MANAGER & THE ORGANIZATION
 Manager- bring specific personality and behavioral traits to the job.
His/ her value system is shaped by personal needs, family
influence & religious background
Three Levels of Personal Moral Development
LEVEL 3:
Post Conventional
LEVEL 2:
Conventional
LEVEL 1:
Preconventional
Follow rules to avoid
punishment. Acts in
own interest.
Obedience for its own
sake
Leadership style:
Autocratic/coercive
Lives up to
expectations of
others. Fulfills duties
& obligations of
social system.
Upholds laws.
Guiding/encouraging,
team oriented
Employee Behavior:
Task Accomplishment
Work group collaboration
Follows self-chosen
principles of justice &
right. Aware that people
hold different values &
seeks creative solutions
to ethical
dilemmas.Balances
concern for individual w/
concern for common
good.
Transforming, or
servant leadership
Empowered employees,
full participation
ORGANIZATION
Values adopted within the
organization are highly
important especially in
making ethical choices
In the chapter, Exhibit 5.4 shows Questions for analyzing a
company’s Cultural Impact on Ethics:
1.
2.
3.
4.
5.
6.
Identify the organization’s heroes. What values do they represent?
Given an ambiguous ethical dilemma, what decision would they make
and why?
What are some important organizational rituals? How do they
encourage or discourage ethical behavior? Who gets the awards,
people of integrity or individuals who use unethical methods to attain
success?
What are the ethical messages sent to new entrants into the
organization- must they obey authority at all costs, or is questioning
authority acceptable or even desirable?
Does analysis of organizational stories and myths reveal
individuals who stand up for what’s right, or is conformity the
valued characteristic? Do people get fired or promoted in these
stories?
Does language exist for discussing ethical concerns? Is this
language routinely incorporated and encouraged in business
decision making?
What informal socialization processes exist, and what norms for
ethical/ unethical behavior do they promote?
Corporate Social Responsibility:
 Management’s obligation to make choices and take actions that
will contribute to the welfare and interests of society as well as the
organization
 Has become an important topic on the corporate agenda because
of corporate scandals, concerns about globalization and a growing
mistrust of business
Philippine Scenario:
 The League of Corporate Foundations (LCF) is a membership
association of over 70 operating and grant-making corporate
foundations and corporations, seeking to provide business
solutions to social problems in the Philippines through Corporate
Social Responsibility (CSR). For more information on the
Philippine companies that are members of LCF, please go to
http://lcf.org.ph.
 One of the companies that take corporate citizenship and social
responsibility seriously is Petron Philippines. For more information
on Petron’s CSR Programs, please go to
http://petron.com/socres.asp.
CSR – A Difficult Concept to Grasp.
Why?
 Different people have different beliefs as to
which actions improve society’s welfare.
 Covers a range of issues, many of which are
vague with respect to right or wrong.
(Example, companies declaring bankruptcy –
which is perfectly legal – to avoid financial
obligations to labor unions and suppliers).
 Managers must answer the question
“Responsibility to whom?”
ORGANIZATIONAL STAKEHOLDERS
From a CSR perspective, organizations
view the internal and external
environment as a variety of stakeholders.
Socially responsible organizations
consider the effects of their actions on all
stakeholder groups and may also invest
in a number of philanthropic causes that
benefit stakeholders.
A stakeholder is any group within or outside the
organization that has a stake in the
organization’s performance.
 Each stakeholder has a different criterion of
responsiveness because it has a different interest in
the organization.
 For example, Walmart’s aggressive bargaining
tactics with its suppliers to provide low prices for its
customers benefit the consumers, a stakeholder.
Some argue that such behavior is socially
irresponsible because it forces US manufacturers to
lay-off employees and outsource from low-wage
countries.
The organization’s performance affects
stakeholders but stakeholders can also
affect the organization’s performance and
success.
The Monsanto Case
 Most organizations are similarly influenced by a variety of
stakeholder groups.
Primary Stakeholders:
 without them, the organization cannot survive; when
any primary stakeholder group becomes seriously
dissatisfied, the organization’s viability is threatened
 examples are investors and shareholders,
employees, customers and suppliers
 investors, shareholders and suppliers are served by
managerial efficiency – the use of resources to
achieve profits
 employees expect work satisfaction, pay and good
supervision
 customers are concerned with the quality, safety,
and availability of goods and services
Other Important Stakeholders :
 Government – most corporations exist only under
the proper charter and license within the limits of
safety laws, environmental protection requirements,
and other laws and regulations issued by the
government
 Community – includes the local government, the
natural and physical environments and the quality of
life provided for residents; today, environmental
responsibility has become a primary issue
 Special Interest Groups – include trade
associations,
political
action
committees,
professional associations and consumerists
THE ETHICS OF SUSTAINABILITY AND
THE NATURAL ENVIRONMENT
Activist
Approach
Sustainability; Actively
conserve the environment
Stakeholder Approach
Address multiple
stakeholder concerns
Market Approach
Respond to customers
Legal Approach
Satisfy legal requirements regarding
environmental conservation
The model Shades of Green is used to evaluate a company’s
commitment to environmental responsibility.
It has 4 approaches/levels:
 Legal Approach – (the lowest level) the organization
does just what is necessary to satisfy legal
requirements.
 Market Approach – (the next step) there is a growing
awareness of and sensitivity to environment concerns,
primarily to satisfy customers
 Stakeholder Approach – (a further step) companies
attempt to answer the environmental concerns of
various stakeholder groups, the local community,
business partners and special interest groups
 Activist Approach – (the highest level) organizations
actively search for ways to conserve the earth’s
resources
 Sustainability or Sustainable Development – refers
to economic development that generates wealth and
meets the needs of the current generation while
saving the environment so future generations can
meet their needs as well.
 ISO 14001 is an international environment
management system that aims to boost the
sustainability agenda.
To become ISO 14001
compliance, firms develop policies, procedures and
systems that will continually reduce the
organization’s impact on the natural environment.
Sustainable Development in Shell
For oil giant Shell, contributing to
sustainable development means helping
meet the world’s growing energy needs in
economically, environmentally and
socially responsible ways. In short,
helping secure a responsible energy
future. For more information on this,
please click
http://sustainabilityreport.shell.com/2007.
CRITERIA OF CORPORATE
SOCIAL PERFORMANCE
Total corporate social responsibility can be
subdivided into 4 primary criteria.
Economic Responsibilities – be profitable
The business institution, being the basic
economic unit of society, has the
responsibility (a) to produce the goods
and services that society wants and (b) to
maximize profits for its owners and
shareholders.
Economic Responsibilities – be profitable
Under the profit-maximizing view, the
corporation should be operated on a
profit-oriented basis, with its sole mission
to increase its profits as long as it stays
within the rules of the game.
Economic Responsibilities – be profitable
The long-term pursuit of profits
necessitates being a good corporate
citizen.
The purely profit maximizing view is no
longer considered an adequate criterion
of performance.
Legal Responsibilities – obey the law
Businesses are expected to perform their
economic goals within the legal
framework.
In the Philippines, corporations have to
comply with national laws, the rules and
regulations issued by various
government agencies like PSE, SEC,
BIR, etc.
Ethical Responsibilities – be ethical, do what is
right, avoid harm.
 Include behaviors that are not necessarily
codified into law and may not serve the
corporation’s direct economic interests.
 To be ethical, decision-makers should act with
equity, fairness and impartiality, respect the
rights of individuals, and provide different
treatment of individuals only when relevant to
the organization’s goals and tasks.
Ethical Responsibilities – be ethical, do what is
right, avoid harm.
Unethical behavior occurs when
decisions enable an individual or
company to gain at the expense of other
people or society as a whole.
Discretionary responsibilities – contribute to
the community and quality of life.
 Organizations responsibilities that are
voluntary and guided by the organization’s
desire to make social contributions not
mandated by economics, law or ethics
 This is the highest criterion of social
responsibility because it goes beyond societal
expectations to contribute to the community’s
welfare.
MANAGING COMPANY ETHICS
AND SOCIAL RESPONSIBILITY
Management is responsible for creating
and sustaining conditions in which people
are likely to behave themselves.
Ethical business practices depend on
individual managers as well as the
organization’s values, policies and
practices.
3 PILLARS OF AN ETHICAL
ORGANIZATION
The
The Ethical
Ethical Organization
Organization
Ethical
Individuals
- Act with integrity
- Behave honestly
- Inspire trust
- Treat people
right
- Play fair
- Have high level
of moral
development
Ethical
Leadership
- Be a role model
- Uphold ethical
values in the
organization
- Communicate
about ethics
and values
- Reward ethical
behavior
- Swiftly discipline
unethical
behavior
Structures
And
Systems
- Corporate
culture
- Code of ethics
- Ethics committee
- Chief ethics
officer
- Ethics training
- Whistle-blowing
mechanism
Ethical Individual
Managers who are ethical possess
honesty and integrity, which is reflected in
their behavior and decisions.
Ethical managers must also encourage
the moral development of others.
Ethical Leadership
If people don’t hear about ethical values
from top leaders, they get the idea that
ethics is not important in the
organization.
Relevant site:
http://www.manilatimes.net/national/2007/mar/05/yehey/business/200
70305bus9.html
Ethical Leadership
Lower level managers and first line
supervisors are more important as role
models for ethical behavior because they
are leaders employees see and work with
on a daily basis.
Using performance reviews and rewards
effectively is a powerful way for
managers to signal that ethics counts.
Organizational Structures and Systems
Refer to the set of tools that managers
use to shape values and promote ethical
behavior.
Three of these tools are:
Code of Ethics
is a formal statement of the company’s
values concerning ethics and social issues;
it communicates to employees what the
company stands for. It states the values or
behaviors expected and those that will not
be tolerated, backed up by management
action.
PLDT’s Code of Ethics
 On March 30, 2004, the Board of Directors of
PLDT approved and adopted its Code of
Business Conduct and Ethics (the “Code of
Ethics”) that sets out its business principles
and standards of behavior and business
relationships.
 It is PLDT’s declared objective that all its
actions and those of its directors, officers and
employees must, at all times, be consistent
with the principles of accountability, integrity,
fairness and transparency.
PLDT’s Code of Ethics provides standards to foster honest and
ethical behavior including the following:
 Compliance with applicable laws, rules and
regulations;
 Ethical handling of conflicts of interest,
corporate opportunities and confidential
information;
 Protection and proper use of our assets;
 Fair dealing with our employees, customers,
service providers, suppliers and competitors;
PLDT’s Code of Ethics provides standards to foster honest and
ethical behavior including the following:





Compliance with our reporting and disclosure
obligations to the relevant regulators and the
investors;
Compliance with our disclosure and financial
reporting controls and procedures;
Assessment and management of risks involved in
our business endeavours; and
Adoption of international best practices of good
corporate governance in the conduct of our business.
For more information, please go to
http://www.pldt.com.ph/about-ethics.htm.
 Principle-based statements are designed to affect
corporate culture; they define fundamental values and
contain general language about company
responsibilities, quality of products and treatments of
employees.
 Policy-based statements outline the procedures to be
used in specific ethical situations like marketing
practices, conflicts of interest, observance of laws,
proprietary information, and political gifts.
 Ayala Corporation has a Policy on Conflict of Interest, which is
incorporated in its Manual of Corporate Governance. It defines
“conflict of interest” and outlines the procedure to be followed in
there is an actual or potential conflict of interest on the part of
directors. For more information on this, please click
http://www.ayala.com.ph/corpgov/policyconflict/asp.
 Ethical Structures represent the various systems, positions and
programs a company can undertake to implement ethical
behavior.
 An ethics committee provides rulings on questionable ethical
issues and assumes responsibility for disciplining wrongdoers. A
chief ethics officer oversees all aspects of ethics and legal
compliance.
 In the Philippines, the Securities and Exchange Commission
requires certain companies (publicly-listed companies and those
which require secondary licenses like banks, pre-need companies,
investment houses, etc.) to have certified compliance officers to
ensure that corporate governance principles and practices are
observed and laws are complied with.
 An ethics training program helps employees deal with ethical
questions and translate the values stated in a code of ethics into
everyday behavior.
 However, it is not enough to have an impressive ethics program.
The ethics program must be merged with day-to-day operations,
encouraging ethical decisions throughout the company.
Mechanisms for Supporting Whistle
Blowers – Employee disclosure of illegal,
immoral or illegitimate practices on the
employer’s part is called whistle-blowing.
Without effective protective measures,
whistle blowers suffer. To maintain high
ethical standards, organizations need
people who are willing to point out
wrongdoing.
 According to Grant Thornton’s International Business
Report 2008, two of every three local privately held
businesses in the Philippines have a support system
for whistleblowers to help detect not only business
fraud but also violations of company regulations by
employees.
 The IBR 2008, which covers 78,000 businesses in 34
countries and territories, also showed that the
Philippines ranked fifth in terms of support for
whistleblowers. (Taken from the Philippine Daily
Inquirer, 27 May 2008).
 For more info, please log on to
http://business.inquirer.net/money/breakingnews/view/2
0080527-139026/Philippines-a-good-place-forwhistleblowers-study-says.
ETHICAL CHALLENGES IN
TURBULENT TIMES
When organizations operate in




Highly competitive industries
Rapidly changing markets
Complex cultural and social environments
A strong corporate culture that emphasizes ethical
behavior becomes even more important because - it
guides people to do the right thing even in the face of
confusion and change.
ECONOMIC PERFORMANCE
Will good citizenship hurt performance?
 A recent study of the financial performance of large US
Corporations considered as “best corporate citizens” found that
they enjoy both superior reputations and superior financial
performances.
 One survey found that 70% of global CEOs believe corporate
social responsibility is vital to their companies’ profitability.
 People prefer to work for companies that demonstrate a high level
of ethics and social responsibility; these organizations can attract
and retain high quality employees.
 A study likewise showed that all things being equal, 2/3 of
customers say they would switch brands to do business with a
company that is ethical and socially responsible.
The Case of Empress Luxury Lines
Brief Statement of Facts[1]:
 Empress Luxury Lines had been experiencing sagging earnings
since 2001. Bookings went down while fuel costs kept on
increasing.
 Antonio, an employee of Empress, had been requesting for a
computer system upgrade ever since he’d taken the job two years
ago.
 Kevin, a probationary computer technician, informed Antonio
about the former’s meeting with Phil, the supervisor of Kevin.
 The night before Kevin’s meeting with Phil, EMPRESS’s computer
system had been hit by a power surge during a thunderstorm.
 Phil instructed Kevin to check out the damage on EMPRESS’s
computer system and was asked to report directly to Phil.
 Kevin reported to Phil that the damaged underground wires and
computer circuits could be repaired at a cost of $15,000.
Brief Statement of Facts[1]:
 After calling EMPRESS’s CFO, Phil instructed Kevin to dig up all
the underground wires and cables and haul them off before the
insurance adjustor appeared. This would mean that the damage
would go up to about $500,000, an amount that would cover the
costs of a computer system upgrade.
 Kevin refused to follow Phil’s instructions.
 Matt, another EMPRESS employee, did the job of digging and the
hauling of the underground wires.
 Since taking the job, Antonio heard rumors that EMPRESS had
successfully defrauded insurance companies before.
 No confidential mechanism is in place for employees to report
wrongdoing internally and no protections were available for whistle
blowers.
[1] The entire text of the case is found on pages 167-168 of the textbook.
Question No. 1

When determining what his obligations are to his subordinate,
Kevin, what decision would Antonio most likely reach if he
applied the utilitarian approach to decision making? What
conclusions would probably result if he employed the
individualism approach?
A) Ethical Dilemma

Should Antonio value integrity and honesty in his own and his
subordinate’s professional lives or should he value his work and
security of tenure at Empress?
B) Options
With respect to determining what Antonio’s obligations are to Kevin, Antonio
may choose to:
i.
advise Kevin that he will not interfere in this case and that he is leaving
it to Kevin to decide on what the latter should do;
ii.
advise Kevin that both of them would bring the matter to the attention
of the proper corporate officer/s of Empress (other and higher than the
CFO); or
iii.
advise Kevin to be silent about the matter considering that the
Company, as a whole, will benefit from the insurance proceeds.
C) Decision Using the Utilitarian Approach
If Antonio were to decide using the utilitarian approach, he would
advise Kevin to be silent about the matter. This decision will be
beneficial to the most number of concerned stakeholders.
The utilitarian approach holds that a decision maker is expected to
consider the effect of each alternative decision on all parties concerned
and select the one that optimizes the satisfaction for the greatest
number of people.
In this case, the stakeholders that will be primarily affected by the
decision are the Company and its shareholders, directors, officers, and
employees, Kevin and Antonio, and the insurance company.
Should Kevin maintain his silence, the Company would receive the
bloated insurance proceeds, thereby allowing it to upgrade its
computer system. The shareholders, directors, officers and employees
would also benefit from Kevin’s continued silence because the
Company would be able to improve its system without using corporate
funds. Hence, the cost of the upgrade would not reduce the
unrestricted retained earnings of the Company, which is the source of
the dividends to be declared in favor of the shareholders. The
Company will likewise have more funds for the compensation and
benefits of its directors, officers and employees.
By keeping silent about the insurance fraud, Antonio would not be
in danger of losing his job, either as a result of being fired or
because the Company would financially suffer from the negative
publicity or worse, a suit for insurance fraud.
Kevin, on the other hand, would have greater chances of being
regularized because the Company officers would realize that while
he will not perform the act itself, he is nevertheless willing to turn a
blind eye to certain shenanigans.
The only stakeholder here which would incur a cost is the
insurance company. However, from Antonio’s perspective,
whatever cost the insurance company would incur would be
acceptable to him because such cost would not directly affect him.
D. Decision Using the Individualism Approach
If Antonio were to decide using the individualism approach, he would not
interfere in this case and simply advise Kevin to decide on his own.
The individualism approach is of the view that acts are moral when they
promote the individual’s best long term interests. This approach is closest
to the domain of free choice.
Antonio’s long term self-interest would be best promoted by not interfering
in this case. Should Kevin decide to report the fraud to the insurance
companies, then Antonio can honestly say to the Empress’ bosses that he
had nothing to do with Kevin’s decision. And should the insurance
company decide to file a case against Empress and its corporate officers
for fraud, then Antonio would not be implicated in the case because he
had not advised Kevin to keep silent about the insurance fraud.
Further, by leaving the decision (on whether or not to report the fraud) to
Kevin, Antonio has adhered to the principle of free choice – that Kevin be
free to choose his own decisions.
Question No. 2
Put yourself in Antonio’s position and decide realistically what you would
do? Is your response at a preconventional, conventional or
postconventional level of moral development? How do you feel about
your response?
Answer:
If I were Antonio, the initial step that I would take, together with Kevin, is to
submit a confidential memo addressed to a corporate officer higher than the
CFO.
The CFO is Antonio’s boss. Hence, it would be futile if he were to submit the
complaint to the person who authorized the fraudulent act.
Addressing the issue internally first would be better for the Company than
going public right away. It is possible that the fraudulent act was not
sanctioned by the other officials of the Company and was simply decided
upon by a lone corporate official – the CFO. By reporting the matter to the
other officers first, Antonio will give the Company the chance to correct the
fraudulent act. And on the assumption that the higher officials of the
Company did not and would not have sanctioned such act (had they known
beforehand), then Antonio has spared the Company from all the negative
publicity and lawsuits that would possibly result from his act of going public
right away.
My next step would depend on the action of the Company to my confidential
memo. Should it decide to correct the action of the CFO, impose the
appropriate sanctions on the erring officers and inform the insurance
company that the amount of damage has been bloated, then I would leave it
at that.
However, should the Company fail or refuse to act on my memo, then I would
submit a letter to the proper government agency outlining the insurance
fraud committed by Empress. This letter-complaint would likewise be signed
by Kevin, who had personal knowledge of the transactions. This way, the
proper government agency which has jurisdiction over these kinds of fraud,
would be able to conduct an independent investigation.
I will not report the fraud to the concerned insurance agency because the
latter is an interested party. It is better to report the fraud to an independent
body which could do a fair and unbiased investigation on the matter. This is
the least that I can do as an employee of Empress.
I believe that my decision is at the postconventional level of moral
development. Despite the fact that the fraudulent act is sanctioned by a
high-ranking official of the company who happens to be my boss, I have
decided to contest his order because I know that said act runs counter to the
values of honesty and integrity. Despite the possibility that I may lose my
job for being a whistle-blower, I have decided to report the matter to the
higher-ups for appropriate action. More importantly, while retaining my
sense of honesty and integrity, I have acted fairly to my Company by giving
the latter the chance to correct a fraudulent act.
Question No. 3
If Antonio or Kevin were fired because they reported EMPRESS’s fraud, would they be
justified in removing all traces of their employment at the cruise line from their resumes
so they don’t have to explain to a prospective employer why they were fired? Why or
why not?
Answer:
No, they are not justified in removing all traces of their employment at Empress.
Antonio and Kevin owe their prospective employers honesty in their dealings. Failure to
state in their resumes their previous employment at Empress is dishonesty by
intentional omission. It is ironic that after losing their jobs for reporting a dishonest and
fraudulent act, they themselves would likewise do the same thing.
Further, nowadays, prospective employers conduct background check before hiring
employees. In the event that their new employers find out that they intentionally did not
disclose their previous employment and termination, this may be considered as fraud or
analogous to fraud, and hence, may be used as a ground for termination.
Antonio, who worked for Empress for 2 years, would also find it very hard to explain to a
prospective employer why he has no work for 2 years.
It would be better for Antonio and Kevin to state in their resumes that they were once
employed by Empress. During the interview, prospective employers normally ask why
they left their previous employer. It is during this time that Antonio and Kevin can
clearly explain the reason behind their termination, emphasizing that they value honesty
and integrity in their personal and professional lives.
Chapter 5
Ethics & Social Responsibility
Group 2
Hazel G. De Mesa
Gregorio M. Cudiamat
Fritzie P. Tangkia-Fabricante
Christopher L. De Jesus
Ma. Dolorosa E. Ferrer