Chapter 6 Managing Small Business Start-ups

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Chapter 5Ethics Social Responsibility
Group 2 Hazel G. De Mesa Gregorio M.
Cudiamat Fritzie P. Tangkia-Fabricante Christopher
L. De Jesus Ma. Dolorosa E. Ferrer
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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

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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.

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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

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Three Domains of Human Action
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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

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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?

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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.

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• Different Approaches to describe values for
  guiding ethical decision making

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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 VPs 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 VPs instructions.

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2. Individual Approach

• contends that an act is moral when they promote
  the individuals 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
  decisions 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

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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
  EVPs daughter? The EVP says that his daughters
  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.

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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
  individuals decision

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Moral Rights to Consider

• right of free consent- Individuals 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.

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Example

• As a manager, we should avoid to interfere with
  the basic rights of others.

• 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.

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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.

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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

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Three Levels of Personal Moral Development
LEVEL 3 Post Conventional 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.
LEVEL 2 Conventional Lives up to expectations of
others. Fulfills duties obligations of social
system. Upholds laws.
LEVEL 1 Preconventional Follow rules to avoid
punishment. Acts in own interest. Obedience for
its own sake
Leadership style Autocratic/coercive
Guiding/encouraging, Transforming, or
team oriented servant
leadership Employee Behavior Task
Accomplishment Work group
collaboration Empowered employees, full
participation
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ORGANIZATION

• Values adopted within the organization are highly
  important especially in making ethical choices

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In the chapter, Exhibit 5.4 shows Questions for
analyzing a companys Cultural Impact on Ethics

• Identify the organizations 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 whats 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?

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Corporate Social Responsibility

• Managements 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
  Petrons CSR Programs, please go to
  http//petron.com/socres.asp.

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CSR A Difficult Concept to Grasp. Why?

• Different people have different beliefs as to
  which actions improve societys 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?

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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.

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A stakeholder is any group within or outside the
organization that has a stake in the
organizations performance.

• Each stakeholder has a different criterion of
  responsiveness because it has a different
  interest in the organization.
• For example, Walmarts 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.

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• The organizations performance affects
  stakeholders but stakeholders can also affect the
  organizations performance and success.

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The Monsanto Case

• Most organizations are similarly influenced by a
  variety of stakeholder groups.

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Primary Stakeholders

• without them, the organization cannot survive
  when any primary stakeholder group becomes
  seriously dissatisfied, the organizations
  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

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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

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THE ETHICS OF SUSTAINABILITY AND THE NATURAL
ENVIRONMENT
Activist Approach Sustainability
Actively conserve the environment

• The model Shades of Green is used to evaluate a
  companys commitment to environmental
  responsibility.

Stakeholder Approach Address multiple stakeholder
concerns
Market Approach Respond to customers
Legal Approach Satisfy legal requirements
regarding environmental conservation
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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 earths resources

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• 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
  organizations impact on the natural environment.

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Sustainable Development in Shell

• For oil giant Shell, contributing to sustainable
  development means helping meet the worlds
  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.

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CRITERIA OF CORPORATE SOCIAL PERFORMANCE

• Total corporate social responsibility can be
  subdivided into 4 primary criteria.

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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.

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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.

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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.

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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.

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Ethical Responsibilities be ethical, do what is
right, avoid harm.

• Include behaviors that are not necessarily
  codified into law and may not serve the
  corporations 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 organizations goals and tasks.

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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.

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Discretionary responsibilities contribute to
the community and quality of life.

• Organizations responsibilities that are voluntary
  and guided by the organizations 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 communitys
  welfare.

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MANAGING COMPANY ETHICSAND 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 organizations values,
  policies and practices.

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3 PILLARS OF AN ETHICAL ORGANIZATION
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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.

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Ethical Leadership

• If people dont 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/ye
  hey/business/20070305bus9.html

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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.

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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

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Code of Ethics

• is a formal statement of the companys 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.

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PLDTs 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 PLDTs 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.

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PLDTs 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

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PLDTs 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.

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• 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.

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• 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.

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• 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.

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• Mechanisms for Supporting Whistle Blowers
  Employee disclosure of illegal, immoral or
  illegitimate practices on the employers 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.

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• According to Grant Thorntons 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/vi
  ew/20080527-139026/Philippines-a-good-place-for-wh
  istleblowers-study-says.

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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.

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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.

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The Case of Empress Luxury Lines

• Brief Statement of Facts1
• 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 hed taken the job two years ago.
• Kevin, a probationary computer technician,
  informed Antonio about the formers meeting with
  Phil, the supervisor of Kevin.
• The night before Kevins meeting with Phil,
  EMPRESSs computer system had been hit by a power
  surge during a thunderstorm.
• Phil instructed Kevin to check out the damage on
  EMPRESSs 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.

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• Brief Statement of Facts1
• After calling EMPRESSs 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 Phils 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.

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• 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 subordinates professional lives or
  should he value his work and security of tenure
  at Empress?
• B) Options
• With respect to determining what Antonios
  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.

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• 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 Kevins
  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.

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• 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
  Antonios perspective, whatever cost the
  insurance company would incur would be acceptable
  to him because such cost would not directly
  affect him.

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• 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 individuals
  best long term interests. This approach is
  closest to the domain of free choice.
• Antonios 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
  Kevins 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.

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• Question No. 2
• Put yourself in Antonios 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 Antonios 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.

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• 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.

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• Question No. 3
• If Antonio or Kevin were fired because they
  reported EMPRESSs fraud, would they be justified
  in removing all traces of their employment at the
  cruise line from their resumes so they dont 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.

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Chapter 5Ethics Social Responsibility
Group 2 Hazel G. De Mesa Gregorio M.
Cudiamat Fritzie P. Tangkia-Fabricante Christopher
L. De Jesus Ma. Dolorosa E. Ferrer