Summary of Chapter 3: SEC Code of Corporate Governance for Publicly-Listed Companies

• The SEC approved the Code of Corporate Governance for publicly-listed companies on November
10, 2016 to promote an ethical corporate culture and align with governance developments.

• Publicly-listed companies must establish a Code of Business Conduct and submit a Corporate
Governance Manual outlining ethical standards and acceptable practices.

• The Board of Directors is responsible for implementing the code and ensuring compliance by
management and employees.

• While many companies have developed such codes, implementation and compliance monitoring
remain a challenge.

• The SEC Code serves as both a reference and guideline for current corporations and a learning
resource for future professionals and business leaders.

Governance Responsibilities
Principle

The Company should be headed by a competent, working board to foster the long-term success of the
corporation and to sustain its competitiveness and profitability in a manner consistent with corporate
objectives and the long-term best interests of its shareholders and other stakeholders.

Recommendation 1.1 - 1.6

• The Board should have members with relevant expertise and maintain a mix of competence.

• A majority should be non-executive directors to ensure independent judgment.

• Companies should have policies for director training, board diversity, and a structured governance
framework.

• A Corporate Secretary and Compliance Officer should assist the Board but remain independent.

2. Establishing Clear Roles and Responsibilities of the Board

Principle

The fiduciary roles, responsibilities and accountabilities of the Board as provided under the law, the
company’s articles and by-laws. And other legal pronouncements and guidelines should be clearly
made known to all directors as well as to shareholders and other stakeholders.

Recommendation 2.1 - 2.12

• The Board must act in good faith, oversee company strategy, and ensure long-term viability.

• A competent and qualified Chairperson should lead the Board.

• A succession plan should be in place for key officers to ensure stability and growth.

• Remuneration should align with long-term company interests, avoiding conflicts of interest.

• A transparent nomination and election policy should be in place for Board members.

• The Board must ensure proper governance of related party transactions (RPTs).

• The Board is responsible for selecting and assessing the CEO and key management officials.

• Performance management frameworks should be implemented for company executives.

• Internal control systems should be established to manage conflicts of interest.

• An enterprise risk management (ERM) framework should be in place for effective risk oversight.
 • A Board Charter should be available to define roles and be publicly accessible on the company’s
website.

3. Establishing Board Committees

Principle: Board committees should be set up to the extent possible to support the effective performance
of the Board’s functions, particularly with respect to audit, risk management, related party and corporate
governance concerns, such as and remuneration. The composition, functions and responsibilities of all
committees established should be contained in a publicly available Committee Charter.

• Recommendation 3.1: The Board should establish specialized committees to improve its
effectiveness.

• Recommendation 3.2: An Audit Committee should oversee financial reporting, internal controls,
audits, and compliance. It should have at least three non-executive directors, with the majority
(including the Chairman) being independent and possessing expertise in accounting, auditing, or
finance.

• Recommendation 3.3: A Corporate Governance Committee should handle governance

responsibilities, including nomination and remuneration functions. It should consist of at least three
independent directors, including the Chairman.

• Recommendation 3.4: A Board Risk Oversight Committee (BROC) should be formed to oversee
enterprise risk management. It should have at least three members, with a majority being
independent directors. The Chairman should not lead any other committee. At least one member
should have expertise in risk management.

• Recommendation 3.5: A Related Party Transaction (RPT) Committee should review all significant
related party transactions. It should have three non-executive directors, at least two of whom
should be independent, including the Chairman.

• Recommendation 3.6: Each committee should have a publicly available Charter detailing its
purpose, structure, membership, operations, and performance evaluation standards.

4. Fostering Commitment

• Principle: To show full commitment to the company. The directors should devote the time and
attention necessary to properly and effectively perform their duties and responsibilities,
including sufficient time to be familiar with the corporation’s business.

• Recommendation 4.1: Directors should actively participate in Board, Committee, and Shareholder
meetings, either in person or via video conferencing, except for valid reasons like illness or
emergencies. They should review meeting materials and seek clarifications as needed.

• Recommendation 4.2: Non-executive directors should not serve as directors in more than five
publicly listed companies to ensure they can fully prepare for meetings and oversee long-term
company strategies.

• Recommendation 4.3: Directors must inform the Board before accepting directorship in another
company.

5. Reinforcing Board Independence

Principle: The board should endeavor to exercise an objective and independent judgment on all corporate
affairs.

• Recommendation 5.1: The Board should have at least three independent directors, or one-third of
the total members, whichever is higher.

• Recommendation 5.2: Independent directors should meet all qualification criteria and should not
have any disqualifications.
 • Recommendation 5.3: Independent directors should serve for a maximum of nine years. After this
period, they are permanently barred from re-election as independent directors but may be elected
as non-independent directors. If the company wants to retain them as independent directors, it
must provide justification and seek shareholder approval.

• Recommendation 5.4: The roles of Chairman of the Board and Chief Executive Officer (CEO)
should be separate, with clearly defined responsibilities.

• Recommendation 5.5: If the Chairman is not independent, the Board should appoint a Lead
Independent Director.

• Recommendation 5.6: A director with a material interest in a corporate transaction must abstain
from deliberations on the matter.

• Recommendation 5.7: Non-executive directors (NEDs) should hold separate meetings with
external auditors and heads of internal audit, compliance, and risk functions—without executive
directors present—to ensure checks and balances. The Lead Independent Director should chair
these meetings.

6. Assessing Board Performance

Principle: The best measure of the Board’s effectiveness is through an assessment process. The Board
should regularly carry out evaluations to appraise its performance as a body, and assess whether it
possesses the right mix of backgrounds and competencies.

• Recommendation 6.1: Conduct an annual self-assessment, including the Chairman, directors, and
committees, with an external facilitator every three years.

• Recommendation 6.2: Implement a performance evaluation system with clear criteria and
shareholder feedback.

7. Strengthening Board Ethics

Principle: Members of the Board are duty-bound to apply high ethical standards, taking into
account the interests of all stakeholders.

• Recommendation 7.1: Adopt a Code of Business Conduct and Ethics, ensuring proper dissemination
and public access.

• Recommendation 7.2: Ensure proper implementation, monitoring, and compliance with the Code.

8. Enhancing Company Disclosure

Principle: The company should establish corporate disclosure policies and procedures that are
practical and in accordance with best practices and regulatory expectations.

• Recommendation 8.1: Ensure timely, accurate, and complete financial and operational
disclosures.

• Recommendation 8.2: Require directors and officers to report share dealings within three
business days.

• Recommendation 8.3: Disclose board members’ and executives’ credentials and potential
conflicts of interest.

• Recommendation 8.4: Clearly outline Board and executive remuneration, including individual
compensation and retirement provisions.

• Recommendation 8.5: Disclose Related Party Transactions (RPTs) and significant transactions in
governance reports.
 • Recommendation 8.6: Provide full, fair, and timely disclosures on major company events, with
independent price assessments for asset transactions.

• Recommendation 8.7: Publish corporate governance policies in the Manual on Corporate

Governance and on the company’s website.

9. Strengthening External Auditor Independence

Principle: The company should establish standards for the appropriate selection an external auditor, and
exercise effective oversight of the same strengthen the external auditor’s independence and enhance
quality.
• Recommendation 9.1: The Audit Committee should manage auditor appointment, reappointment,
removal, and fees, with shareholder ratification.
• Recommendation 9.2: The Audit Committee Charter should outline responsibilities for auditor
independence and audit effectiveness, with annual reviews.
• Recommendation 9.3: Disclose non-audit services in the Annual Report to avoid conflicts of interest.

Summary of Chapter 4: SEC Code of Corporate Governance (Continued)

10. Increasing Focus on Non-Financial and Sustainability Reporting
Principle 10
The company should ensure that the material and reportable non-financial and sustainability
issues are disclosed.
• Companies must disclose material non-financial and sustainability issues.
• Boards should adopt global sustainability reporting frameworks and policies on Economic,
Environmental, Social, and Governance (EESG) issues.
11. Promoting Comprehensive and Cost-Efficient Access to Information
Principle 11
The company should maintain a comprehensive and cost-efficient communication channel for
disseminating relevant information. This channel is crucial for informed decision-making by
investors, stakeholders and Other interested users.
• Companies should maintain effective communication channels for investors and stakeholders.
• Media and analyst briefings should be used to disseminate timely and relevant information.
12. Strengthening Internal Control Systems and Risk Management
Principle
To ensure the integrity, transparency and proper governance in the conduct or its affairs, the
company should have a strong and effective internal control system and enterprise risk
management framework.
• Companies should implement strong internal control and enterprise risk management (ERM)
frameworks.
• An independent internal audit function should ensure transparency and accountability.
• A Chief Audit Executive (CAE) should oversee internal audits, whether in-house or outsourced.
• A separate risk management function should assess and monitor key risks.
• A Chief Risk Officer (CRO) should lead ERM with adequate authority and resources.
13. Promoting Shareholder Rights
Principle
The company should treat all shareholders fairly and equitably, and also recognize, protect and
facilitate the exercise of their rights.
• Shareholders should be treated fairly, with their rights clearly disclosed in governance documents and
on the company’s website.
• Shareholder participation should be encouraged by providing meeting notices at least 28 days in
advance.
• Voting results should be published the next working day, and meeting minutes within five business
days.
• A dispute resolution mechanism should be available for shareholder conflicts.
• An Investor Relations Office (IRO) should engage with shareholders and attend meetings.
14. Respecting Stakeholder Rights and Providing Redress

Principle
The rights of stakeholders established by law, by contractual relations and through voluntary
commitments must be respected. Where stakeholders’ rights and/or interests are at stake.
Stakeholders should have the opportunity to obtain prompt effective redress for the violation of their
rights
• Stakeholder rights must be respected, whether established by law, contracts, or voluntary commitments.
• Boards should identify stakeholders and foster cooperation for sustainable business practices.
• Policies should ensure fair treatment, protection, and clear grievance mechanisms for stakeholders.
15. Encouraging Employee Participation
Principle
A mechanism for employee participation should be developed to create a symbiotic environment.
Realize the company’s goals and participate in its corporate governance processes.
• Companies should create policies that encourage employees to contribute to corporate governance and
company goals.
• Anti-corruption policies should be implemented and communicated through training programs.
• A whistleblowing mechanism should protect employees who report unethical practices.
16. Encouraging Sustainability and Social Responsibility
Principle
The company should be socially responsible in all its dealings with the communities where it
operates. It should ensure that its interactions serve its environment and stakeholders in a
positive and progressive manner that is fully supportive of its comprehensive and balanced
development.
• Companies should operate responsibly, ensuring their actions benefit society and the environment.
• Business and social progress should be interdependent, fostering long-term sustainability.
• Corporate Social Responsibility (CSR) initiatives should be actively pursued to contribute to economic,
social, and environmental development.

REVIEW QUESTIONS: CHAPTER 3

Here are the answers to the multiple-choice questions based on the provided images:
1. Audit committee activities and responsibilities include which of the following?
o d. None of the above
2. Which of the following audit committee responsibilities has the SEC mandated?
o d. All of the above
For the exercises, here are the answers:
Exercise 1
Each requirement helps address the risk of fraud in publicly traded organizations:
a. Boards need to consist of at least 3 independent directors or 1/3 of the board, whichever is higher.
• Ensures independence in decision-making, reducing the likelihood of fraud and conflicts of
interest.
b. Boards need to hold regular executive sessions of independent directors without management
present.
• Encourages unbiased discussions, preventing undue influence from management and enhancing
oversight.
Exercise 2
Each responsibility helps mitigate fraud risk:
a. Obtaining an annual report from the external auditor on internal controls, regulatory problems, and
threats to independence.
• Ensures transparency and identifies weaknesses that could lead to fraud.
b. Discussing financial statements with management and external auditors.
• Improves accuracy and reliability of financial reporting.
c. Discussing earnings press releases and financial guidance in meetings.
• Prevents misleading information from being shared with analysts and investors.
d. Discussing risk assessment and risk management policies.
• Helps identify and mitigate potential financial risks.
e. Meeting separately with management, internal auditors, and external auditors periodically.
• Encourages open communication and independent verification of information.
f. Reviewing audit problems or difficulties with the external auditor.
• Ensures any issues in financial reporting are addressed promptly.
g. Setting clear hiring policies for employees or former employees of external auditors.
• Prevents conflicts of interest and maintains audit integrity.
h. Regularly reporting to the board of directors.
• Ensures oversight and accountability in financial matters.
Audit Committee & Corporate Governance Questions
1. Weak audit committee impact:
o Weaknesses in the audit committee reduce oversight, increasing the risk of financial
misstatements and fraud.
o Ineffective evaluation of internal controls may lead to material weaknesses, affecting
financial reporting integrity.
2. Importance of communication with shareholders & investors:
o Ensures transparency and trust.
o Helps in investor decision-making and regulatory compliance.
3. Objective of a strong internal control system:
o Safeguard assets.
o Ensure financial accuracy.
o Prevent fraud and errors.
o Promote efficiency and compliance.
4. Purpose of an independent internal audit function:
o Provide unbiased assessments of internal controls.
o Detect and prevent fraud.
o Improve operational efficiency.
5. Responsibilities of the Chief Audit Executive (CAE):
o Oversee internal audits.
o Ensure regulatory compliance.
o Report findings to management and the board.
o Evaluate and improve risk management.
6. Activities of the Risk Management Department:
o Identifying risks.
o Assessing potential impacts.
o Implementing risk mitigation strategies.
o Monitoring and reviewing risk controls.
7. Shareholders’ rights relate to:
o Voting in corporate decisions.
o Receiving dividends.
o Accessing financial reports.
o Legal recourse for mismanagement.
8. Encouraging employee participation in corporate governance:
o Employee representation on boards.
o Ethical training programs.
o Feedback mechanisms.
o Performance-based incentives.
9. True or False: Sustainability reporting includes voluntary corporate disclosures on sustainability
initiatives.
o True
10. True or False: Non-financial reporting, corporate social responsibility reporting, and triple
bottom-line reporting are sustainability-related terms.
• True
Chapter 4: Audit Committee & Corporate Governance Questions
1. Impact of a weak audit committee on financial reporting:
o The audit committee oversees financial reporting and internal controls. If it is weak or
ineffective, there is a higher chance of errors, fraud, or misstatements in financial
reports.
o A weak audit committee can fail to detect or prevent financial risks, leading to regulatory
issues and loss of investor confidence.
2. Why corporations need effective communication with shareholders & investors:
o Transparency builds trust and encourages investment.
o Keeping investors informed about financial health, risks, and company strategies helps in
making informed decisions.
o Proper communication helps companies comply with legal requirements and avoid
misinformation.
3. Objective of a strong internal control system:
o Protects company assets from fraud or theft.
o Ensures financial statements are accurate and comply with regulations.
o Helps improve efficiency in business processes.
o Prevents financial losses by identifying risks early.
 4. Purpose of an independent internal audit function in a publicly-listed company:
o Ensures an unbiased review of financial records and internal controls.
o Helps detect fraud or mismanagement.
o Provides assurance to shareholders and regulators about the company’s financial health.
5. Four key responsibilities of the Chief Audit Executive (CAE):
o Managing internal audit functions and ensuring compliance with policies.
o Reporting audit findings to senior management and the board.
o Assessing and improving risk management strategies.
o Making recommendations to enhance operational efficiency.
6. Activities of the Risk Management Department:
o Identifying potential risks (financial, operational, reputational, etc.).
o Evaluating the impact of these risks.
o Implementing policies to reduce or manage risks.
o Continuously monitoring and updating risk management strategies.
7. Shareholders’ rights relate to:
o Voting Rights: They can vote on important corporate decisions.
o Dividends: They have the right to receive profits if distributed.
o Information Rights: They must be given access to company financial statements.
o Legal Protection: They can take legal action against mismanagement.
8. Encouraging employee participation in corporate governance:
o Employees can be part of decision-making processes through representation on boards
or committees.
o Companies can provide training on ethical business practices.
o Feedback mechanisms can be established for employees to raise concerns.
o Performance-based incentives can motivate employees to contribute to governance.
9. True or False: Sustainability reporting includes voluntary corporate disclosures on sustainability
initiatives, plans, and outcomes.
o True. Sustainability reporting is not always mandatory, but many companies voluntarily
disclose their efforts in areas such as environmental impact, social responsibility, and
ethical business practices.
10. True or False: Non-financial reporting, CSR reporting, and TBL reporting are all sustainability-
related terms.
• True. These terms relate to how companies report their impact beyond financial performance.

Sustainability Reporting Questions

11. Definitions and how they relate to sustainability reporting:
• Non-financial reporting: Focuses on social, environmental, and governance factors rather than
financial results.
• Corporate Social Responsibility (CSR) reporting: Shows a company’s efforts toward social and
environmental responsibility.
• Triple Bottom-Line (TBL) reporting: Measures a company’s success based on three pillars—
People (social impact), Planet (environmental impact), and Profit (economic impact).
• Relation to sustainability reporting: Sustainability reporting includes all these concepts as it aims
to give a complete picture of a company’s environmental and social impact.
12. Factors driving the demand for sustainability reporting:
• Regulations: Governments and regulators require companies to disclose their environmental and
social impacts.
• Investor interest: Investors want to know if a company is sustainable and manages risks properly.
• Consumer preference: Customers prefer businesses that are environmentally and socially
responsible.
• Competitive advantage: Companies with good sustainability practices attract more investors and
customers.
13. Why independent assurance of sustainability reports is needed:
• Ensures credibility of the data reported.
• Prevents greenwashing (false or exaggerated claims about sustainability).
• Builds trust with investors, customers, and regulators.
14. Is it unethical to provide a sustainability report without assurance?
• Yes, because without assurance, stakeholders cannot be sure if the report is accurate or truthful.
• It could mislead investors and customers about the company’s real environmental and social
impact.
Chapter 5: Introduction to Ethics

Ethics – can be defined broadly as set of moral principles or values that govern the actions and decisions
of an individual or group. While personal ethics vary from individual to individual at any point in time,
most people within a society are able to agree about what is considered ethical and unethical behavior.
In fact, a society passes laws that define what its citizens consider to be more extreme forms of unethical
behavior.

Characteristics and Values associated with Ethical Behavior

Integrity – Be principles, honorable, upright, courageous and act on convictions; do not be twofaced or
unscrupulous, or adopt and end-justifies-the means philosophy that ignores principle

Honesty – Be truthful, sincere, forthright, straightforward, frank, candid; do not cheat, steal, lie, deceive
or act deviously

Trustworthiness and Promise Keeping – Be worthy of trust, keep promises, full commitments, abide by
the spirit as well as the letter of an agreement do not interpret agreements in an unreasonably technical
or legalistic manner in order to rationalize noncompliance or create excuses and justification for breaking
commitments.

Loyalty (Fidelity) and Confidentiality – Be faithful and loyal to family, friends, employers, client and
country; do not use or disclose information learned in confidence; in a professional context, safeguard
and the influences and conflicts of interest.

Fairness and Openness – Be fair and open-minded, be willing to admit error and, where appropriate,
change positions and beliefs, demonstrate a commitment to justice, the equal treatment of individuals,
and tolerance for acceptance of diversity; do not overreach or take advantage of another’s mistakes or
diversities.

Caring for Others- Be caring, kind and compassionate; share, be giving, be of service to others; help
those in need and avoid harming others.

Respect for others – Demonstrate respect for human dignity, privacy and the right to self-determination
of all people, be courteous, prompt, and decent; provide others with the information they need to make
informed decisions about their own lives; do not patronize, embarrass, or demean.

Responsible Citizenship – Obey just laws; if all law unjust, openly protest it; exercise all democratic rights
and privileged responsibly by participation (voting and expressing informed views), social consciousness,
and public service; when in a position of leadership or authority, openly respect and honor democratic
processes of decision making, avoid unnecessary secrecy or concealment of information, and assure that
others have all the information they need to make intelligent choices and exercise their rights.

Pursuit of Excellence- pursue excellence in all matters, in meeting your personal and professional
responsibilities, be diligent, reliable, industrious and committed; perform all tasks to be the best of your
ability, develop and maintain a high degree of competence, be well informed and well prepared, do not
be content with mediocrity; do not “win at any cost”.

Accountability – Be accountable, accept responsibility for decisions, for the foreseeable consequences of
actions and inactions, and for setting an example of others. Parents, teachers, employers, many
professionals and public officials have a special obligation to lead by example, to safeguard and advance
the integrity and reputation of their families, companies, professions and the government itself; an
ethically sensitive individual avoids even the appearance of impropriety, and takes whatever actions are
necessary to correct or prevent inappropriate conduct of others.

Why is Ethical Behavior Necessary?

Ethical behavior is necessary for society to function in an orderly manner. It can be agreed that ethics is
the glue that holds a society together.

Why do people act unethically?

Most people define unethical behavior as conduct that differs from the way they believe would have
been appropriate given the circumstances. Each of us decides for ourselves what we consider unethical
behavior, both for ourselves and other. It is important to understand what causes people to act in
manner that we decide is unethical.

There are two primary reasons why people act unethically:

1. The person’s ethical standards are different from those of society as a whole, or
2. The persons choose to act selfishly.

CATERGORIES OF ETHICAL PRINCIPLES

Principles of Personal Ethics include among others

• Basic justice, fairness

• Respect for the right of others
• Concern for the right of others
• Concern for the well-being on welfare of others
• Benevolence, trustworthiness, honesty
• Compliance with the law

Professional Ethics include among others

• Integrity, impartiality, objectivity

• Professional competence
• Confidentiality
• Professional behavior
• Avoidance of potential or apparent conflict of interest

Business Ethics include among others

• Fair competition
• Global as well as domestic justice
• Social responsibility
• Concern for environment

THE NEED FOR PROFESSIONAL ETHICS

To understand the importance of a Code of Ethics to professionals, one must understand the nature of a
profession as opposed to other vacation.

There is no universally accepted definition of what constitutes a profession; yet, for generations, certain
types of activities have been recognized as professions while others have not.

Medicine, law, engineering, architecture and theology are examples of disciplines long accorded
professional status. Public accounting is relatively new as far as the ranking of the professional status.

Public accounting is relatively new as far as the ranking of the professions have several common
characteristics. The most important of these characteristics are:

1. A responsibility to serve the public

2. A complex body of knowledge
ffi. Standards of admission to the profession
4. A need for public confidence

Careless work or lack of integrity of a professional may lead the public to a negative view toward the
entire profession. All professionals must have public confidence of the public to be successful.
Consequently, the members of the different professions act in unison by deriving their respective code of
conduct.
Code of Good Governance for the Profession in the Philippines (E.O. No. 220, June 2ffi, 200ffi)

This Code is adopted by the Professional Regulation Commission (PRC) and the 42 Professional
Regulatory Boards to cover an environment of good governance in which all Filipino professionals shall
perform their tasks. While each profession may adopt and enforce its own code of good governance and
code of ethics, it is generally recognized that there is a general commonality among the various codes.
This code which covers the common principles underlying the codes of various professions could be used
by all professional who face critical ethical question sin their work.

General Principle of Professional Conduct

Professional are required not only to have an ethical commitment, a personal resolve act ethically, but
also have both ethical awareness and ethical competency. Ethical awareness refers to the ability to
discern between right and wrong, while ethical competency pertains to the ability to engage in sound
moral reasoning and consider carefully the implications of alternative actions.

Specific Principle of Professional Conduct

1. Service to Others
2. Integrity and Objectivity
ffi. Professional Competence
4. Solidarity and Teamwork
5. Social and Civic Responsibility
6. Global Competitiveness
7. Equality of All Professions

Chapter 6: Business Ethics

Basic Concept of Business Ethics

Business Ethics refers to standards of moral conduct, behavior and judgement in business. It involves
making the moral and right decisions while engaging in such business activities as manufacturing and
selling a product and providing a service to customers. Business ethics is an area of corporate
responsibility where businesses are legally bound and socially obligated to conduct business in an ethical
manner.
Business ethics is based on the personal values and standards of each person engaged in business.

PURPOSES OF BUSINESS ETHICS

Main Purpose – The main purpose of business ethics is to help business and would-be business to
determine what business practices are right and what are wrong. Hopefully, they are going to us this
knowledge to guide them in making the right business decisions.

Special Purpose – There are other purposes which are corollary to the main purpose. These purposes
include the following:

1. To make businessmen realize that they cannot employ double standards to the actions of other
people and to their own actions.
2. To shown businessmen that common practices which they have thought to be right because they
see other businessmen doing it, are really wrong.
ffi. To serve as a standard or ideal upon which business conduct should be based.

SCOPE AND IMPACT OF BUSINESS ETHICS

Economic Impact

A business has an economic impact on society through the wages it pays to its employees, the materials
that it buys from their suppliers and the prices it charges its customers. It would have a positive social
impact on its employees if they are paid fair living wages and benefits. It will have a positive effect on its
suppliers that they paid fairly and on time for their supplies. The effect on its customers is positive if the
business gives them good value for the price they pay for the products and services.

Social Impact

The social impact of corporate governance contributes to the ethical climate of society. If business offer
bribes to secure work or other benefits, engage in accounting fraud or breach regulatory and legal
limitations on their operations, the ethics of society suffer. In addition, a deteriorating ethical
environment, such as corruption may unfairly raise the price of goods for consumers or the quality of the
product or service compromised.

Environmental Impact

Environmental protection is a key area of business influence on society. Businesses that implement good
environmental policies to use energy more efficiently, reduce waste and in general lighten their
environmental footprint can reduce their internal costs and promote a positive image of their company.
The environmental initiatives of a business leader often force competitors to take similar action for an
increased beneficial effect on the environment.

Impact on Business Managers

The concepts and principles for the ethical conduct in business are relegated to the managers of the
business enterprise. Thus, although the manager is expected to act in the best interest of the business,
he cannot be expected to act in manner that is contrary to the law or to his conscience.

In particular, a manager should:

• Acknoledge that his role is to serve the business enterprise and the community;
• Avoid all abuse of executive power for personal gain, advantage or prestige;
• Reveal the fact to his superior whenever his personal business of financial interests’ conflict with
those of the company;
• Be actively concerned with the difficulties and problems of subordinates, treat them fairly and
by example, lead them effectively, assuring to all the right of reasonable access and appeal to
superiors;
• Recognize that his subordinates have a right to information on matter affecting them, make
provision for its prompt communication unless such communication is likely to undermine the
security and efficiency of the business;
• Fully evaluate the likely effects on employees and the community of the business plans for the
future before taking a final decision and
• Cooperate with this colleagued and not attempt to secure personal advantage at their expense