WEEK 1

Lesson 1: Introduction to Good Governance and Social Responsibility

Topic: Introduction to Good Governance and Social Responsibility

At the end of this module, you are expected to:

Learning Outcomes:  Categorize the different actors in governance.
 Examine the characteristics of good governance and the
importance of corporate social responsibility.

LEARNING CONTENT
Introduction:
Good governance is not only important for corporations, it’s important for society. To
begin with, good corporate governance improves the public’s faith and confidence in its
corporate leaders. Legislative processes were designed to protect societies from known
threats and to keep problems from occurring or reoccurring. Recent corporate scandals
shed light on the effect that corporations have on social responsibility. The new focus on
corporate social responsibility increases corporations’ responsibility and accountability
to their stakeholders. As a result, we’re seeing corporations increasingly place pressure
on themselves to improve best practices for corporate governance with the goal of
enhancing their relationships with stakeholders. The largest attraction for corporations
to direct some of their attention on sustainability is that it ultimately improves
corporations’ ability to thrive and prosper. (Price, 2018)
Lesson Proper:

WHAT IS GOOD GOVERNANCE?

Recently the terms "governance" and "good governance" are being increasingly used in
development literature. Bad governance is being increasingly regarded as one of the
root causes of all evil within our societies. Major donors and international financial
institutions are increasingly basing their aid and loans on the condition that reforms that
ensure "good governance" are undertaken.
GOVERNANCE
The concept of "governance" is not new. It is as old as human civilization. Simply put
"governance" means: the process of decision-making and the process by which
decisions are implemented (or not implemented). Governance can be used in several
contexts such as corporate governance, international governance, national governance
and local governance.
Since governance is the process of decision-making and the process by which
decisions are implemented, an analysis of governance focuses on the formal and
informal actors involved in decision-making and implementing the decisions made and
the formal and informal structures that have been set in place to arrive at and implement
the decision.
Government is one of the actors in governance. Other actors involved in governance
vary depending on the level of government that is under discussion. In rural areas, for
example, other actors may include influential land lords, associations of peasant
farmers, cooperatives, NGOs, research institutes, religious leaders, finance institutions
political parties, the military etc. The situation in urban areas is much more complex.
Figure 1 provides the interconnections between actors involved in urban governance. At
the national level, in addition to the above actors, media, lobbyists, international donors,
multi-national corporations, etc. may play a role in decision-making or in influencing the
decision-making process.
All actors other than government and the military are grouped together as part of the
"civil society." In some countries in addition to the civil society, organized crime
syndicates also influence decision-making, particularly in urban areas and at the
national level.
Similarly formal government structures are one means by which decisions are arrived at
and implemented. At the national level, informal decision-making structures, such as
"kitchen cabinets" or informal advisors may exist. In urban areas, organized crime
syndicates such as the "land Mafia" may influence decision-making. In some rural areas
locally, powerful families may make or influence decision-making. Such, informal
decision-making is often the result of corrupt practices or leads to corrupt practices.
 Figure 1: Urban actors

GOOD GOVERNANCE
Good governance has 8 major characteristics. It is participatory, consensus oriented,
accountable, transparent, responsive, effective and efficient, equitable and inclusive and
follows the rule of law. It assures that corruption is minimized, the views of minorities
are taken into account and that the voices of the most vulnerable in society are heard in
decision-making. It is also responsive to the present and future needs of society.
 Figure 2: Characteristics of good governance
Participation
Participation by both men and women is a key cornerstone of good governance.
Participation could be either direct or through legitimate intermediate institutions or
representatives. It is important to point out that representative democracy does not
necessarily mean that the concerns of the most vulnerable in society would be taken
into consideration in decision making. Participation needs to be informed and organized.
This means freedom of association and expression on the one hand and an organized
civil society on the other hand.
Rule of law
The rule of law refers to the institutional process of setting, interpreting and
implementing laws and other regulations. It means that decisions taken by government
must be founded in law and that private firms and individuals are protected from
arbitrary decisions.
Good governance requires fair legal frameworks that are enforced impartially. It also
requires full protection of human rights, particularly those of minorities. Impartial
enforcement of laws requires an independent judiciary and an impartial and
incorruptible police force.
Transparency
Transparency means that decisions taken and their enforcement are done in a manner
that follows rules and regulations. It also means that information is freely available and
directly accessible to those who will be affected by such decisions and their
enforcement. It also means that enough information is provided and that it is provided in
easily understandable forms and media.
Transparency is an important aspect of good governance, and transparent decision
making is critical for the private sector to make sound decisions and investments.
Accountability and the rule of law require openness and good information so higher
levels of administration, external reviewers and the general public can verify
performance and compliance to law.
Governments have access to a vast amount of important information. Dissemination of
this information through transparency and open information systems can provide
specific information that firms and individuals need to have to be able to make good
decisions. Capital markets depend for example on information openness.
Responsiveness
Good governance requires that institutions and processes try to serve all stakeholders
within a reasonable timeframe.
Consensus oriented
There are several actors and as many view points in a given society. Good governance
requires mediation of the different interests in society to reach a broad consensus in
society on what is in the best interest of the whole community and how this can be
achieved. It also requires a broad and long-term perspective on what is needed for
sustainable human development and how to achieve the goals of such development.
This can only result from an understanding of the historical, cultural and social contexts
of a given society or community.
Equity and inclusiveness
A society’s well-being depends on ensuring that all its members feel that they have a
stake in it and do not feel excluded from the mainstream of society. This requires all
groups, but particularly the most vulnerable, have opportunities to improve or maintain
their well being.
Effectiveness and efficiency
Good governance means that processes and institutions produce results that meet the
needs of society while making the best use of resources at their disposal. The concept
of efficiency in the context of good governance also covers the sustainable use of
natural resources and the protection of the environment.
Accountability
Accountability is a key requirement of good governance. Not only governmental
institutions but also the private sector and civil society organizations must be
accountable to the public and to their institutional stakeholders. Who is accountable to
whom varies depending on whether decisions or actions taken are internal or external to
an organization or institution? In general, an organization or an institution is accountable
to those who will be affected by its decisions or actions. Accountability cannot be
enforced without transparency and the rule of law.
CONCLUSION
From the above discussion it should be clear that good governance is an ideal which is
difficult to achieve in its totality. Very few countries and societies have come close to
achieving good governance in its totality. However, to ensure sustainable human
development, actions must be taken to work towards this ideal with the aim of making it
a reality.

Lesson 2: Ethics

Topic: Ethics

At the end of this module, you are expected to:

Learning Outcomes:
 discuss the different criteria for decision-making
 identify ethical issues when they arise and recognize
the approaches available for resolving them

LEARNING CONTENT
Introduction:
Ethics is considered the moral standards by which people judge behavior. Ethics
is often summed up in what is considered the “golden rule”—do unto others as you
would have them do unto you. In business, there are many different people you have to
answer to: customers, shareholders and clients. Determining what to do when an ethical
dilemma arises among these different interests can be extremely tricky and as such
business ethics as a field is complex and multi-faceted.
Lesson Proper:
Business ethics can be defined as written and unwritten codes of principles and
values that govern decisions and actions within a company. Companies and
businesspeople who wish to thrive long-term must adopt sound ethical decision-making
practices. Companies and people who behave in a socially responsible manner are
much more likely to enjoy ultimate success than those whose actions are motivated
solely by profits. In many cases, doing the right thing often leads to the greatest
financial, social, and personal rewards in the long run. (White, Mary Gormandy,
Sundblad, Donna and Finely, Amy)
It is a form of applied ethics that examines ethical rules, theories and principles in
business context. Generally, speaking is a normative discipline, whereby particular
ethical standards are advocated and then applied. It makes specific judgments about
what is right or wrong, which is to say, it teaches what ought to be done and what ought
to be done, (De George, 1999).
Some business ethics are imposed by law. For example, the SEC governs the
way investment bankers and stock brokers do business, and court rules dealing with
attorney client privilege dictate some ethical decisions for attorneys. However, there are
also business decisions that do not fall within the guidelines of the law, in which ethical
or moral judgments must be made. www.yourdictionary.com
An ethical approach is becoming necessary both for corporate success and a
positive corporate image. Following pressure from consumers for more ethical and
responsible business practices, many organizations are choosing to make a public
commitment to ethical business by formulating codes of conduct and operating
principles. In doing so, they must translate into action the concepts of personal and
corporate accountability, corporate giving, corporate governance, and whistle
blowing. dictionary.bnet.com
Ethics sets standards as to what is good or bad in conduct and decision making.
Ethics deals with internal values that are a part of corporate culture and shapes
decisions concerning social responsibility with respect to the external environment.
Criteria of Ethical Decision Making

1. Utilitarian Approach – It holds that moral behavior

produces the greatest good for the greatest number. A
decision maker is expected to consider the effect of
each decision alternative on all parties and select the
one that optimizes the satisfaction for the greatest
number of people.
2. Individualism Approach – Contends that acts are
moral when they promote the individual’s best long-
term interests. Individual self-direction is paramount,
and external forces that restrict self-direction should
be severely limited.
3. Moral – rights Approach – asserts that human
beings have fundamental rights and liberties that
cannot be taken away by an individual’s decision.
Six Moral Rights should be considered during decision making.

1.
1. The right of free consent
2. The right to privacy
3. The right of freedom of conscience
4. The right of free speech
5. The right to due process
6. The right to life and safety
4. Justice Approach – Holds that moral decisions must be based on standards of
equity, fairness, and impartiality.
Three Types of Justice

1. Distributive justice – requires that different treatment

of people not be based on arbitrary characteristics.
2. Procedural justice – requires that rules be
administered fairly.
3. Compensatory justice – argues that individuals should
be compensated for the cost of their injuries by the
party responsible.
Some Reasons for Unethical Behavior

1. Moral Relativism – claims that morality is relative to

some personal, social, or cultural standard and that
there is no method for deciding whether one decision
is better than the other.
2. Kohlberg’s Levels of Moral Development – a
person’s ethical behavior is affected by his level of
moral development, certain personality variables, and
such situational factors as the job itself, the supervisor,
and the organizational culture.
Kohlberg’s Three Levels of Moral Development

1. The pre-conventional level – is characterized by a

concern for self.
2. The conventional level – is characterized by
considerations of society’s laws and norms.
3. The principled level – is characterized by a person’s
adherence to an internal moral code.

Lesson 3: Corporate Social Responsibility

Topic: Corporate Social Responsibility

 At the end of this module, you are expected to:
Learning Outcomes:
 examine fully the contextual factors that influence CSR
 compare and contrast ethics and corporate social
responsibility

LEARNING CONTENT
Introduction:
Good governance is not only important for corporations, it’s important for society. To
begin with, good corporate governance improves the public’s faith and confidence in its
corporate leaders. Legislative processes were designed to protect societies from known
threats and to keep problems from occurring or reoccurring. Recent corporate scandals
shed light on the effect that corporations have on social responsibility. The new focus on
corporate social responsibility increases corporations’ responsibility and accountability
to their stakeholders. As a result, we’re seeing corporations increasingly place pressure
on themselves to improve best practices for corporate governance with the goal of
enhancing their relationships with stakeholders. The largest attraction for corporations
to direct some of their attention on sustainability is that it ultimately improves
corporations’ ability to thrive and prosper. (Price, 2018)
Lesson Proper:
Corporate social responsibility (CSR), also known as corporate responsibility,
corporate citizenship, responsible business, sustainable responsible business (SRB), or
corporate social performance, is a form of corporate self-regulation integrated into a
business model. Ideally, CSR policy would function as a built-in, self-regulating
mechanism whereby business would monitor and ensure its adherence to law, ethical
standards, and international norms. Business would embrace responsibility for the
impact of their activities on the environment, consumers, employees, communities,
stakeholders and all other members of the public sphere. Furthermore, business would
proactively promote the public interest by encouraging community growth and
development, and voluntarily eliminating practices that harm the public sphere,
regardless of legality. Essentially, CSR is the deliberate inclusion of public interest into
corporate decision making, and the honoring of a triple bottom line: People, Planet, and
Profit. (Wikipedia)
Corporate social responsibility (CSR) can be defined as the "economic, legal,
ethical, and discretionary expectations that society has of organizations at a given point
in time" (Carroll and Buchholtz 2003, p. 36). (www.uitp.com)
Corporate social responsibility is related to, but not identical with, business ethics.
While CSR encompasses the economic, legal, ethical, and discretionary responsibilities
of organizations, business ethics usually focuses on the moral judgments and behavior
of individuals and groups within organizations. Thus, the study of business ethics may
be regarded as a component of the larger study of corporate social responsibility.
(www.uitp.com)
 CSR is often used to promote voluntary corporate initiatives, as an alternative to
additional or existing mandatory regulations. The International Chamber of Commerce
has aggressively promoted a standards-free concept of "corporate responsibility" that
enables companies to proclaim their "responsibility" without necessitating companies to
meet minimum standards.
Corporate social responsibility (CSR) promotes a vision of business
accountability to a wide range of stakeholders, besides shareholders and investors. Key
areas of concern are environmental protection and the wellbeing of employees, the
community and civil society in general, both now and in the future.
Some of the drivers pushing business towards CSR include:

1. The shrinking role of government

In the past, governments have relied on legislation and regulation to deliver social and
environmental objectives in the business sector. Shrinking government resources,
coupled with a distrust of regulations, has led to the exploration of voluntary and non-
regulatory initiatives instead.

2. Demands for greater disclosure

There is a growing demand for corporate disclosure from stakeholders, including
customers, suppliers, employees, communities, investors, and activist organizations.

3. Increased customer interest

There is evidence that the ethical conduct of companies exerts a growing influence on
the purchasing decisions of customers. In a recent survey by Environics international,
more than one in five consumers reported having either rewarded or punished
companies based on their perceived social performance.

4. Growing investor pressure

Investors are changing the way they assess companies' performance, and are making
decisions based on criteria that include ethical concerns.

5. Competitive labor markets

Employees are increasingly looking beyond paychecks and benefits, and seeking out
employers whose philosophies and operating practices match their own principles. In
order to hire and retain skilled employees, companies are being forced to improve
working conditions.

6. Supplier relations
As stakeholders are becoming increasingly interested in business affairs, many
companies are taking steps to ensure that their partners conduct themselves in a
socially responsible manner. Some are introducing codes of conduct for their suppliers,
to ensure that other companies' policies or practices do not tarnish their reputation.
 Some of the positive outcomes that can arise when businesses adopt a
policy of social responsibility include:

1. Company benefits:
Improved financial performance;
Lower operating costs;
Enhanced brand image and reputation;
Increased sales and customer loyalty;
Greater productivity and quality;
More ability to attract and retain employees;
Reduced regulatory oversight;
Access to capital;
Workforce diversity;
Product safety and decreased liability.

2. Benefits to the community and the general public:

Charitable contributions;
Employee volunteer programs;
Corporate involvement in community education, employment and homelessness
programs;
Product safety and quality.

3. Environmental benefits:
Greater material recyclability;
Better product durability and functionality;
Greater use of renewable resources;
Integration of environmental management tools into business plans, including life-cycle
assessment and costing, environmental management standards, and eco-labeling.
Criteria in Evaluating Corporate Social Responsibility
1. Economic Responsibilities – its responsibility is to
produce the goods and services that society wants
and to maximize profits for its owners and
shareholders.
2. Legal Responsibilities – businesses are expected to
fulfill their economic goals within the legal framework.
 Legal responsibility defines what society deems as
important with respect to appropriate corporate
behavior.
3. Ethical Responsibilities – includes behaviors that
are not necessarily codified into law and may not
serve the corporation’s direct economic interests.
Organization 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.
4. Discretionary Responsibilities – is purely voluntary
and is guided by a company’s desire to make social
contributions not mandated by economics, law or
ethics.

WEEK 2
Lesson 4: Corporate Social Responsibility (Continuation)

Topic: Corporate Social Responsibility

Learning At the end of this module, you are expected to:

Outcomes:  understand how social responsibility affects the other
areas of corporations
 discuss other CSR issues

LEARNING CONTENT:
Human resources
A CSR program can be an aid to recruitment and retention, particularly within the
competitive graduate student market. Potential recruits often ask about a firm's CSR
policy during an interview, and having a comprehensive policy can give an advantage.
CSR can also help improve the perception of a company among its staff, particularly
when staff can become involved through payroll giving, fund raising activities or
community volunteering.
Risk management
Managing risk is a central part of many corporate strategies. Reputations that
take decades to build up can be ruined in hours through incidents such as corruption
scandals or environmental accidents. These can also draw unwanted attention from
regulators, courts, governments and media. Building a genuine culture of 'doing the right
thing' within a corporation can offset these risks.
Brand differentiation
In crowded marketplaces, companies strive for a unique selling proposition that
can separate them from the competition in the minds of consumers. CSR can play a
role in building customer loyalty based on distinctive ethical values. Business service
organizations can benefit too from building a reputation for integrity and best practice.
As corporations pursue growth through globalization, they have encountered new
challenges that impose limits to their growth and potential profits. Government
regulations, tariffs, environmental restrictions and varying standards of what constitutes
labor exploitation are problems that can cost organizations millions of dollars. Some
companies use CSR methodologies as a strategic tactic to gain public support for their
presence in global markets, helping them sustain a competitive advantage by using
their social contributions to provide a subconscious level of advertising. (Fry, Keim,
Meiners 1986, 105) Global competition places particular pressure on multinational
corporations to examine not only their own labor practices, but those of their entire
supply chain, from a CSR perspective.

THE STAKEHOLDER CONCEPT

According to Post, Lawrence, and Weber, stakeholders are individuals and
groups that are affected by an organization's policies, procedures, and actions. A
"stake" implies that one has an interest or share in the organization and its operations,
per Carroll and Buchholtz. Some stakeholders, such as employees and owners, may
have specific legal rights and expectations in regard to the organization's operations.
Other stakeholders may not have specific rights granted by law, but may perceive that
they have moral rights related to the organization's operations. For example, an
environmental group may not have a legal right in regard to a company's use of natural
resources, but may believe that they have a moral right to question the firm's
environmental policies and to lobby the organization to develop environmentally friendly
policies.
Primary stakeholders have some direct interest or stake in the organization.
Secondary stakeholders, in contrast, are public or special interest groups that do not
have a direct stake in the organization but are still affected by its operations.
The owners of a firm are among the primary stakeholders of the firm. An
organization has legal and moral obligations to its owners. These obligations include,
but are not limited to, attempting to ensure that owners receive an adequate return on
their investment. Employees are also primary stakeholders who have both legal and
moral claims on the organization. Organizations also have specific responsibilities to
their customers in terms of producing and marketing goods and services that offer
functionality, safety, and value; to local communities, which can be greatly affected by
the actions of resident organizations and thus have a direct stake in their operations;
and to the other companies with whom they do business. Many social commentators
also suggest that companies have a direct responsibility to future generations and to the
natural environment.
 An organization's responsibilities are not limited to primary stakeholders.
Although governmental bodies and regulatory agencies do not usually have ownership
stakes in companies in free-market economies, they do play an active role in trying to
ensure that organizations accept and meet their responsibilities to primary stakeholder
groups. Organizations are accountable to these secondary stakeholders. Organizations
must also contend with civic and special interest groups that purport to act on behalf of
a wide variety of constituencies. Trade associations and industry groups are also
affected by an organization's actions and its reputation. The media reports on and
investigates the actions of many companies, particularly large organizations, and most
companies accept that they must contend with and effectively "manage" their
relationship with the media. Finally, even an organization's competitors can be
considered secondary stakeholders, as they are obviously affected by organizational
actions. For example, one might argue that organizations have a social responsibility to
compete in the marketplace in a manner that is consistent with the law and with the best
practices of their industry, so that all competitors will have a fair chance to succeed.
ENVIRONMENTAL ISSUES
Corporations have long been criticized for their negative effect on the natural
environment in terms of wasting natural resources and contributing to environmental
problems such as pollution and global warming. The use of fossil fuels is thought to
contribute to global warming, and there is both governmental and societal pressure on
corporations to adhere to stricter environmental standards and to voluntarily change
production processes in order to do less harm to the environment. Other issues related
to the natural environment include waste disposal, deforestation, acid rain, and land
degradation. It is likely that corporate responsibilities in this area will increase in the
coming years.
GLOBAL ISSUES
Corporations increasingly operate in a global environment. The globalization of
business appears to be an irreversible trend, but there are many opponents to it. Critics
suggest that globalization leads to the exploitation of developing nations and workers,
destruction of the environment, and increased human rights abuses. They also argue
that globalization primarily benefits the wealthy and widens the gap between the rich
and the poor. Proponents of globalization argue that open markets lead to increased
standards of living for everyone, higher wages for workers worldwide, and economic
development in impoverished nations. Many large corporations are multinational in
scope and will continue to face legal, social, and ethical issues brought on by the
increasing globalization of business.
TECHNOLOGY ISSUES
Another contemporary social issue relates to technology and its effect on society.
For example, the Internet has opened up many new avenues for marketing goods and
services, but has also opened up the possibility of abuse by corporations. Issues of
privacy and the security of confidential information must be addressed. Biotechnology
companies face questions related to the use of embryonic stem cells, genetic
engineering, and cloning. All of these issues have far-reaching societal and ethical
implications. As our technological capabilities continue to advance, it is likely that the
responsibilities of corporations in this area will increase dramatically.
The Emergence of Corporate Social Responsibility
Heightened corporate attention to CSR has not been entirely voluntary. Many
companies awoke to it only after being surprised by public responses to issues they had
not previously thought were part of their business responsibilities. Nike, for example,
faced an extensive consumer boycott after the New York Times and other media outlets
reported abusive labor practices at some of its Indonesian suppliers in the early 1990s.
Shell Oil’s decision to sink the Brent Spar, an obsolete oil rig, in the North Sea led to
Greenpeace protests in 1995 and to international headlines. Pharmaceutical companies
discovered that they were expected to respond to the AIDS pandemic in Africa even
though it was far removed from their primary product lines and markets. Fast-food and
packaged food companies are now being held responsible for obesity and poor nutrition.
Debates about CSR have moved all the way into corporate boardrooms. In 2005,
360 different CSR-related shareholder resolutions were filed on issues ranging from
labor conditions to global warming. Government regulation increasingly mandates social
responsibility reporting. Pending legislation in the UK, for example, would require every
publicly listed company to disclose ethical, social, and environmental risks in its annual
report. These pressures clearly demonstrate the extent to which external stakeholders
are seeking to hold companies accountable for social issues and highlight the
potentially large financial risks for any firm whose conduct is deemed unacceptable.
While businesses have awakened to these risks, they are much less clear on
what to do about them. In fact, the most common corporate response has been neither
strategic nor operational but cosmetic: public relations and media campaigns, the
centerpieces of which are often glossy CSR reports that showcase companies’ social
and environmental good deeds. Of the 250 largest multinational corporations, 64%
published CSR reports in 2005, either within their annual report or, for most, in separate
sustainability reports—supporting a new cottage industry of report writers.
How Corporate Responsibility Can Survive the Recession
Corporations engaged in recession-driven cost-cutting are trimming or eliminating
corporate responsibility initiatives. Though corporate survival is key and consumer
skepticism of business CR initiatives at an all-time high, such actions are short-sighted.
Now more than ever, businesses need to be saying "yes" rather than "no" to their social
responsibilities. There are five key reasons:

1. Critical cross-border global issues require multinational corporations and

their CEOs to lead in the search for solutions, recession or not.
2. Recession results in more poverty and exacerbates problems that national
governments and NGOs alone cannot solve.
3. The global economic crisis has increased distrust of business.
Corporations with a strong commitment to CR are better able to withstand
the downdraft and put the brakes on increased regulation.
 4. Employees are attracted to and motivated to stay with socially responsible
companies and want to see commitment to CR initiatives continue through
tough times.
5. An increasing proportion of consumers are willing to pay price premiums
for products and services marketed by companies with proven and
sustained track records of doing good.
Despite these arguments, the pressure for CR cost cuts in the face of recession
is often inescapable. But the companies most vulnerable to cuts are those that have not
embraced and embedded CR in their corporate DNA. There are four progressive levels
of CR commitment:
First, there are companies that see CR only in terms of corporate philanthropy.
They find it relatively easy to cut their annual donations.
Second, there are companies that have integrated support for a social cause into
their marketing programs. They are less likely to let go, as their brand equities have
become entwined with particular causes. For example, the American Express Red card
donates a percentage of the value of card member purchases to the fight against AIDS.
A third level of engagement finds CR considerations embedded in a company's
daily operations. Qualifying suppliers, for example, might be required to comply with
environmental and labor practice standards. Starbucks has long purchased more fair-
trade coffee than any other company in the world, while Wal-Mart has moved rapidly in
recent years to catch up in its operational commitment to CR.
Fourth and finally, there are companies that have internalized CR values into
their corporate cultures, mission statements and daily decision-making. The Johnson &
Johnson credo puts the interests of customers, employees and community ahead of
those of shareholders. In the words of former CEO James Burke, doing so "ensures that
the interests of all stakeholders are maximized."
The further along this CR continuum a company is, the less likely it is to trim its
CR commitment in the face of an economic downturn. In fact, some companies are
finding that pursuing environmental CR initiatives during this recession is helping them
to cut costs and increase their CR budget without changing prices. Cadbury, for
example, has lowered its energy input costs and invested the savings in a commitment
to buying only fair-trade cocoa.
A growing segment of consumers worldwide considers CR evaluations important
in selecting among brands across a wide range of categories. In previous recessions,
this segment typically shrank rapidly in size as price considerations became paramount.
But, thanks to heightened public awareness of issues like global warming, CR concerns
are now more deeply and broadly embedded in the consumer psyche. CR is
increasingly a mainstream consumer concern, no longer the province of a wealthy niche.
Regardless of recession, some cutting-edge companies are capitalizing on the
growing consumer interest in CR to both do well and differentiate themselves at the
same time. The UK-based global retailer, Tesco PLC, has taken the lead in promoting
its Sustainable Consumption Initiative, now being copied by Wal-Mart. Tesco plans to
require carbon footprint information to be placed on the label of every product sold in its
stores. Terry Leahy, Tesco's CEO, wants to make it easy for consumers to incorporate
environmental impact criteria in their purchasing. As he says: "To achieve a mass
movement in green consumption is to empower everyone, not just the enlightened or
the affluent." Corporations cannot change the world on their own. They need to
empower their customers to help change the world for themselves.
CEO leadership, such as Terry Leahy is providing, is essential for corporate CR
commitments not merely to survive but to advance during the economic downturn. As
David Gergen has stated: "More CEOs need to sign up as reformers."
Research suggests that those corporations that develop a reputation as being
socially responsive and ethical enjoy higher levels of performance. However, the
ultimate motivation for corporations to practice social responsibility should not be a
financial motivation, but a moral and ethical one.
Different organizations have framed different definitions - although there is
considerable common ground between them. The definition used by Business Respect
since 2001: CSR is about how companies manage the business processes to produce
an overall positive impact on society. - Mallen Baker, Founding Director, Business
Respect.
 Companies need to answer two aspects of their operations. 1. The quality of their
management - both in terms of people and processes (the inner circle). 2. The nature of,
and quantity of their impact on society in the various areas.
Outside stakeholders are taking an increasing interest in the activity of the
company. Most look to the outer circle - what the company has actually done, good or
bad, in terms of its products and services, in terms of its impact on the environment and
on local communities, or in how it treats and develops its workforce. Out of the various
stakeholders, it is financial analysts who are predominantly focused - as well as past
financial performance - on quality of management as an indicator of likely future
performance.
The World Business Council for Sustainable Development in its publication
"Making Good Business Sense" by Lord Holme and Richard Watts, used the following
definition. "Corporate Social Responsibility is the continuing commitment by business
to behave ethically and contribute to economic development while improving the
quality of life of the workforce and their families as well as of the local community and
society at large"
The same report gave some evidence of the different perceptions of what this
should mean from a number of different societies across the world. Definitions as
different as "CSR is about capacity building for sustainable livelihoods. It respects
cultural differences and finds the business opportunities in building the skills of
employees, the community and the government" from Ghana, through to "CSR is about
business giving back to society" from the Philippines.
For instance, the CSR definition used by Business for Social Responsibility
is: "Operating a business in a manner that meets or exceeds the ethical, legal,
commercial and public expectations that society has of business”.
On the other hand, the European Commission hedges its bets with two
definitions wrapped into one: "A concept whereby companies decide voluntarily to
contribute to a better society and a cleaner environment. A concept whereby
companies integrate social and environmental concerns in their business operations
and in their interaction with their stakeholders on a voluntary basis".
When you review each of these, they broadly agree that the definition now
focuses on the impact of how you manage your core business. Some go further than
others in prescribing how far companies go beyond managing their own impact into the
terrain of acting specifically outside of that focus to make a contribution to the
achievement of broader societal goals. It is a key difference, when many business
leaders feel that their companies are ill equipped to pursue broader societal goals, and
activists argue that companies have no democratic legitimacy to take such roles. That
particular debate will continue.
San Miguel Corporation Inc.
Doing business is about having a harmonious and long-lasting relationship with
customers. Corporate Social Responsibility extends this relationship to other
stakeholders such as the communities where these corporations operate. It is no longer
the battle cry of corporations to simply make profit for its stockholders.
Now, more than ever, corporations are guided by values from which it bases its
every business decision.
For San Miguel Corporation, integrity, teamwork, respect for others and social
responsibility are just a few of its corporate values that guide them every day. Through
its corporate social responsibility arm, San Miguel Foundation Incorporated, San Miguel
Corporation proactively reaches out to others to bring forth change that will enable
communities to live better lives.
San Miguel Foundation, Inc. has crafted various programs and projects that
address contemporary issues on livelihood, health, education, the environment and
disaster relief following its overall direction of Enterprise, Education and the
Environment.
A Commitment to Social Responsibility Social issues permeates almost all
aspects of business. How a corporation manages such issues has much to do with how
seriously it takes its social responsibility to heart.

The San Miguel Group's corporate citizenship goes beyond its commitment to its
consumers, employees, and key stakeholders in government and the communities
where it operates. Past and current programs focus on specific projects where it makes
a difference.
Our Core Values
Passion for Success
We will constantly strive for excellence. We will be the best we can be and create
value in everything we do. We will be proactive and entrepreneurial, propelled by a
sense of urgency, competitiveness and total dedication to results.

Teamwork
With trust and respect for each other and with unity and purpose, we will work
toward our shared aspirations, transcending boundaries along functional and
organizational lines.

Respect for our People

We recognize our employees as individuals and are committed to nurturing their
individual capabilities. We will uplift the dignity of labor by encouraging our people to be
the best in their fields. We are committed to creating a work environment that
encourages open communication, camaraderie and professional growth.

Customer Focus
 We will be our customers’ preferred choice. They will choose our products and
services above others because we provide them with products and services that exceed
their expectations.

Innovativeness
We will encourage creativity and ingenuity in our processes and systems,
products and services. We will be forever looking for ways to outdo ourselves, always
striving to be the first to anticipate consumer needs and deliver something better.
Integrity
In the conduct of our business, we will be guided by what is ethical, fair and right.
We believe in profit with honor and are committed to good governance and the highest
moral standards.

Social Responsibility
We believe social responsibility and corporate citizenship are integral parts of our
business. We are committed to improving lives of people in the communities where we
live and work.
Community and Enterprise Development
These are projects have active community involvement and are implemented
with the objective of benefiting a larger number of people. This includes medical
missions, community clinics, barangay strengthening and enterprise development.
Education
San Miguel Foundation supports literacy in the Philippines through scholarship
assistance, supplemental feeding, book donation and functional literacy programs.
Environmental and other programs
The environmental program of San Miguel Foundation Inc. covers the protection
of land, water, and air. On a smaller scale, the Foundation conducts tree-planting
projects on areas identified by different San Miguel Corporation (SMC) plants. Tree-
planting projects are usually scheduled to coincide with plant celebrations.
The Foundation advocates the protection of coastal waters through its Coastal
Resource Management, which engages in mangrove reforestation, artificial reef
installation and regeneration of marine resources. Training on waste management and
donation of trash bins through plant facilities are also conducted.
Disaster Management

This project includes relief distribution to calamity-stricken areas and

rehabilitation activities such as provision of livelihood projects and repairs of school
buildings and day care centers.
 San Miguel Business Units play an active role as well as the employees who
answer the call for fund raising campaigns.
Local Consumer Activities
These are marketing and Sales projects to support their operation either in areas
where SMC have a stronghold or in areas where they want to establish their position.

In the study conducted by Porter and Kramer (December 2006) entitled the Link
between Competitive Advantage and Corporate social Responsibility they found out that
governments, activists, and the media have become adept at holding companies to
account for the social consequences of their activities. Myriad organizations rank
companies on the performance of their corporate social responsibility (CSR), and,
despite sometimes questionable methodologies, these rankings attract considerable
publicity. As a result, CSR has emerged as an inescapable priority for business leaders
in every country.

Many companies have already done much to improve the social and
environmental consequences of their activities, yet these efforts have not been nearly
as productive as they could be—for two reasons. First, they pit business against society,
when clearly the two are interdependent. Second, they pressure companies to think of
corporate social responsibility in generic ways instead of in the way most appropriate to
each firm’s strategy.
The fact is, the prevailing approaches to CSR are so fragmented and so
disconnected from business and strategy as to obscure many of the greatest
opportunities for companies to benefit society. If, instead, corporations were to analyze
their prospects for social responsibility using the same frameworks that guide their core
business choices, they would discover that CSR can be much more than a cost, a
constraint, or a charitable deed—it can be a source of opportunity, innovation, and
competitive advantage.
The study conducted by Falck and Heblich entitled Corporate Social
Responsibility: Doing Well by Doing good) mentioned that by strategically practicing
corporate social responsibility (CSR), a company can 'do well by doing good'; in other
words, it can make a profit and make the world a better place at the same time. CSR is
regarded as voluntary corporate commitment to exceed the explicit and implicit
obligations imposed on a company by society's expectations of conventional corporate
behavior. Hence, CSR is a way of promoting beneficial social trends in order to enhance
society's basic order, which we define as consisting of obligations that cover both the
legal framework and social conventions. Due to globalization, companies are now less
constrained by society's basic order than they have been in the past.
Lesson 5: Filipino Values: Nature, Constellation and Context

Topic: Filipino values: nature, constellation and context

 At the end of this module, you are expected to:
Learning  understand the nature, constellation and context of
Outcomes: Filipino values;
 weigh out different Filipino Values and assess how values
are affected by society and how society can be affected
by the values held by its members.

LEARNING CONTENT:
WHAT ARE FILIPINO VALUES? WHAT IS DISTINCTLY FILIPINO IN OUR VALUE SYSTEM?
The Filipino value system arises from our culture or way of life, our distinctive way of becoming
human in this particular place and time. We speak of Filipino values in a fourfold sense.
First, although mankind shares universal human values, it is obvious that certain values take on
for us a distinctively Filipino flavor. The Greek ideal of moderation or meden agan, the Roman in
medio stat virtus, the Confucian and Buddhist "doctrine of the Middle", find their Filipino
equivalent in hindi labis, hindi kulang, katamtaman lamang.
Secondly, when we speak of Filipino values, we do not mean that elements of these Filipino
values are absent in the value systems of other peoples and cultures. All people eat, talk and
sing, but they eat different foods, speak various languages and sing different songs. Thus, we
easily recognize Filipino, American, Chinese, Japanese or any other foreign food, language or
music. The difference lies in the way these elements are ranked, combined or emphasized so
that they take on a distinctively Filipino slant or cast. For instance, in China, honesty and hard
work may rank highest; Chinese and Japanese cultures give great value to politeness and
beauty; American culture to promptness and efficiency; and Filipino culture to trust in God and
family centeredness. In this sense of value-ranking and priority of values, we can speak of
dominant Filipino values.
Thirdly, universal human values in a Filipino context (historical, cultural, socio-economic,
political, moral and religious) take on a distinctive set of Filipino meanings and motivations. This
is true not only of the aims and goals, beliefs, convictions, and social principles of the traditional
value system of the lowland rural family(4) but also of what Fr. Horacio de la Costa, S.J. calls the
Filipino "nationalistic" tradition (pagsasarili, pagkakaisa, pakikisama, pakikipagkapwa-tao,
and pagkabayani.(5)
A Filipino value or disvalue does not exist alone, in isolation or in a vacuum. Filipino values
like bahala na, utang na loob, hiya, pakikisama, pakiusap are clustered around core values like
social acceptance, economic security, social mobility, and are always found in a definite context
or set of circumstances. Both positive values and negative disvalues together form a
characteristic constellation in school (aralan at dasalan [studying and praying], kuwentuhan at
laruan [story telling and game], inggitan at tsismisan [envying and gossiping]), which differs from
the configuration found in government offices
(pagkakaisa [unity] , pagkabayani [heroism], intriga [intrigue], palakasan [show of
power], sipsipan [bribery], palusot), in business firms (palabra de honor [word of
honor], delicadeza [finesse], "commission", "kickback", padulas [grease money], lagay [bribe]),
or in the barrio barangays
(paggalang [honoring], pagdadamayan [comforting], bayanihan [cooperation], bahala na [come
what may], utang na loob [gratefulness], hiya[shame]/pakiusap[appear], palakasan [show of
power]). To change a framework of values, it may be necessary to change the constellation and
context of those negative values that hinder Filipino and Christian development.
Fourthly, we can speak of Filipino values in the sense that the historical consciousness of
values has evolved among our people. The Filipino concept of justice has evolved from
inequality to equality, and to human dignity; from the tribe, to the family, and to the
nation(6). Filipino consciousness of these different values varies at different periods of our history.
It is only in the last two decades that the Filipino people have become more conscious of
overpopulation and family planning, environmental pollution (Kawasaki sintering plant) and
wildlife conservation (Calauit Island), and the violation of human rights (Martial Law), active non-
violence and People Power (1986 non-violent Revolution).

THE FILIPINO VALUES

Values
 may be defined as those standards of which a group or society judges the
desirability and importance of persons, ideas, actions and goals.
 are shared convictions or beliefs in what are considered contributory to the
welfare of the group.

From these definitions, we can clearly see how values are affected by society and, in turn,
how society can be affected by the values held by its members.
Two of these traits are positive traits and show the strengths of the Filipino character:
Katapatan and Pakikipagkapwa-tao. The other two seem to hinder the advancement of
the Filipinos. These are the "Bahala na" attitude and the "Kanya-kanya" syndrome.
Pakikipagkapwa-tao and Family Orientation: This indigenous Filipino trait is the
regard for the dignity of others and being with them. It consists of all levels of interaction
with one's fellowman in times of crisis, like illness and death. This is embodied in the
concept of neighbourliness like mutual visiting and exchange of food. Pleasant
attitudes are also exhibited towards relatives and friends such as extending moral and
emotional support. This is also evidenced in the insertion of many light scenes wherein
there is light-hearted bantering, jokes among friends and kin.
Because of the Filipino's collective nature, they have a deep sense of concern for one's
dignity and respect. This pakikipagkapwa-tao is manifested in their sensitivity to other
people's feelings. This is often evidenced in the relations among the characters. Polite
language, soft pleasing voices and meek manners are employed to avoid open
disagreement with others. Personal relationships are likewise almost always important
in any transaction among the characters.
Katapatan: The Filipino virtue of righteousness in thought and deed. In a person, this
virtue strengthens him against cheating and lying. It results in the cooperation and trust
among neighbors, friends and co-workers. This positive character trait is dominantly
displayed in Philippine movies and television by its leading characters. Viewers are
attracted to the character and story because righteousness is considered a rare trait
nowadays and the expression of this in the leading protagonist gives them hope in
siding with the good.
Bahala na: Extreme reliance on higher force or fate. Bahala na is a common expression
among Filipinos which rests on the fatalistic outlook and strong dependence on spirits. It
literally, the Bahala na means "Leave it to God." The abundance of superstition can
further encourage the superstitiousness of the Filipinos. This can promote the lack of
initiative among Filipinos. Rather than relying on one's own effort and industry to solve
problems, one leaves his fate to gods or "spirits". This trait also encourages the Filipino
to be matiisin or being too patient for long suffering.
Kanya-kanya: A negative Filipino trait is a selfish and self-serving attitude. This is often
elicited when one's peer has gained honor or prestige. Most if not all of the conflicts in
the Filipino stories are a result of envy and jealousy. This "crab mentality" that
characterizes many Filipinos is counter-productive.
Certain negative behaviors may be picked up by the youth if they are consistently
exhibited and are not shown in the end to have negative consequences. At the same
time, an understanding of the strengths of the Filipino character would help in
recognizing the traditional and positive Filipino values that should be perpetuated.

Buhay OFW provides tips and information regarding the Philippines. Filipino products
and goods are also sold as donation efforts to help underprivileged Filipinos.

VALUES OF MODERN FILIPINO

PANANALIG
Faith - Madonna and Child epitomize the kind of faith every Filipino carries in the heart
an assurance that the Divine Being watches over each and every one of us.
KATAPATAN
Faithfulness - Resembling marriage bands, this arrangement celebrates the modern
Filipino hero's faithfulness to husband or wife, as well as faithfulness to country and all
the ideals for which our Republic stands.
PAG-AARUGA
Nurturing - Every Filipino child grows and learns under the wing of a mentor who instills
in the child the sense of love, compassion, heroism and courage.
KASIPAGAN
Industry - The Fruits of the earth spring forth only through our industry and it is only
through our work that we will be able to achieve the rebuilding of our mother country,
the task of every one of us, modern Philippine heroes all.
TIBAY NG LOOB
Courage - Stalwart and firm in idealism and goodwill, the modern Philippine hero
stands by his or her values and ideals.

*** END of LESSON ***

Lesson 12: Labor Code of the Philippines (P.D. 442)

Labor Code of the Philippines

Topics:
- Overtime Pay & Night Shift Differential Pay
Learning Outcomes: At the end of this module, you are expected to:
1. Compute overtime pay and Night Shift Differential Pay
2. Compute compensation for a rest day, Sunday, or Holiday work.

LEARNING CONTENT:

The labor code of the Philippines stands as the law governing employment
practices and labor relations in the Philippines. It was enacted on Labor Day of 1974 by
president Ferdinand Marcos, in the exercise of his legislative powers.

Contents:
 Book i- Pre-employment
 Book ii- Human resource development program (training for special
workers, handicapped, learners, apprentice)
 Book iii- Conditions of employment
 Book iv- Health, safety, and social welfare benefits
 Book v- Labor organizations
 Book vi- Post-employment
 Book vii- Transitory and final provisions

Features:
 hiring and termination of private employees;
 the conditions of work including maximum work hours and overtime;
 employee benefits such as holiday pay, thirteenth-month pay, and
retirement pay;
 and the guidelines in the organization and membership in labor unions
as well as in collective bargaining.

The labor code contains several provisions which are beneficial to labor. It
prohibits termination from employment of private employees except for just or
authorized causes as prescribed in articles 282 to 284 of the code. The right to trade
union is expressly recognized, as is the right of a union to insist on a closed shop.
 Strikes are also authorized for as long as they comply with the strict requirements
under the code, and workers who organize or participate in illegal strikes may be
subject to dismissal. Moreover, Philippine jurisprudence has long applied a rule that any
doubts in the interpretation of the law, especially the labor code, will be resolved in favor
of labor and against management.

Closed shop - is a form of union security agreement under which the employer
agrees to only hire union members, and employees must remain members of the
union at all times in order to remain employed.

Union shop - is a form of a union security clause under which the employer agrees
to hire either labor union members or nonmembers but where all non-union
employees must become union members within a specified period of time or lose
their jobs.

Strike action - often simply called a strike, is a work stoppage caused by the mass
refusal of employees to work. A strike usually takes place in response to employee
grievances.

Book I- Pre-employment

Art. 12. Statement of objectives. - it is the policy of the state:

A) to promote and maintain a state of full employment through improved manpower

training, allocation, and utilization;
B) to protect every citizen desiring to work locally or overseas by securing for him the
best possible terms and conditions of employment;
C) to facilitate a free choice of available employment by persons seeking work in
conformity with the national interest;
D) to facilitate and regulate the movement of workers in conformity with the national
interest;
E) to regulate the employment of aliens, including the establishment of a registration
and/or work permit system;
F) to strengthen the network of public employment offices and rationalize the
participation of the private sector in the recruitment and placement of workers, locally
and overseas, to serve national development objectives;
G) to ensure careful selection of Filipino workers for overseas employment to protect
the Philippines' good name abroad.

Recruitment and placement of workers

General Provisions

Art. 13. Definitions.

A) "worker" means any member of the labor force, whether employed or unemployed.

B) “recruitment and placement" refer to any act of canvassing, enlisting, contracting,

transporting, utilizing, hiring, or procuring workers, and includes referrals, contract
services, promising or advertising for employment, locally or abroad, whether for profit
or not: provided, that any person or entity which, in any manner, offers or promises for a
fee, employment to two or more persons shall be deemed engaged in recruitment and
placement.

C) "private fee-charging employment agency" means any person or entity engaged in

recruitment and placement of workers for a fee which is charged, directly or indirectly,
from the workers or employers or both.
D) "license" means a document issued by the department of labor authorizing a person
or entity to operate a private employment

E) "private recruitment entity" means any person or association engaged in the

recruitment and placement of workers, locally or overseas, without charging, directly or
indirectly, any fee from the workers or employers.
F) "authority" means a document issued by the department of labor authorizing a
person or association to engage in recruitment and placement activities as a private
recruitment entity.
G) "seaman" means any person employed in a vessel engaged in maritime navigation.
H) "overseas employment" means employment of a worker outside the Philippines.

I) "emigrant" means any person, worker, or otherwise, who emigrates to a foreign

country by an immigrant visa or resident permit or its equivalent in the country of
destination.
 Book III - Conditions Of Employment

Hours of work

Art. 82. Coverage

The provisions of this title shall apply to employees in all establishments and
undertakings whether for profit or not, but not to government employees, managerial
employees, field personnel.

Members of the employer's family are dependent on him for support, domestic
helpers, persons in the personal service of another, and workers who are paid by
results as determined by the secretary of labor inappropriate regulations.

As used herein, "managerial employees" refer to those whose primary duty

consists of the management of the establishment in which they are employed or of a
department or subdivision thereof, and to other officers or members of the managerial
staff.

"Field personnel" shall refer to non-agricultural employees who regularly perform

their duties away from the principal place of business or branch office of the employer
and whose actual hours of work in the field cannot be determined with reasonable
certainty.

Art. 83. Normal hours of work

The normal hours of work of any employee shall not exceed eight (8) hours a day.

Health personnel in cities and municipalities with a population of at least one

million (1,000,000) or hospitals and clinics with a bed capacity of at least one hundred
(100) shall hold regular office hours for eight (8) hours a day, for five (5) days a week.

Exclusive of time for meals, except where the exigencies of the service require
that such personnel work for six (6) days or forty-eight (48) hours, in which case, they
shall be entitled to additional compensation of at least thirty percent (30%) of their
regular wage for work on the sixth day.
 For purposes of this article, "health personnel" shall include resident physicians,
nurses, nutritionists, dietitians, pharmacists, social workers, laboratory technicians,
paramedical technicians, psychologists, midwives, attendants, and all other hospital or
clinic personnel.

Art. 84. Hours worked

Hours worked shall include:

1. A) all-time during which an employee is required to be on duty or to
be at a prescribed workplace; and
2. B) all-time during which an employee is suffered or permitted to
work.
Rest periods of short duration during working hours shall be counted as hours worked.

Art. 85. Meal periods

Subject to such regulations as the secretary of labor may prescribe, it shall be
the duty of every employer to give his employees not less than sixty (60) minutes time-
off for their regular meals.

Art. 86. Night shift differential

Every employee shall be paid a night shift differential of not less than ten percent
(10%) of his regular wage for each hour of work performed between ten o’clock in the
evening and six o’clock in the morning.

Art. 87. Overtime work.

Work may be performed beyond eight (8) hours a day provided that the
employee is paid for the overtime work, an additional compensation equivalent to his
regular wage plus at least twenty-five percent (25%) thereof.

Work performed beyond eight hours on a holiday or rest day shall be paid an
additional compensation equivalent to the rate of the first eight hours on a holiday or
rest day plus at least thirty percent (30%) thereof.

Art. 88. Under time is not offset by overtime.

Under-time work on any particular day shall not be offset by overtime work on
any other day. Permission given to the employee to go on leave on some other day of
the week shall not exempt the employer from paying the additional compensation
required in this chapter.

ARt. 89. Emergency overtime work.

Any employee may be required by the employer to perform overtime work in any
of the following cases:

A) when the country is at war or when any other national or local emergency has been
declared by the national assembly or the chief executive;
B) when it is necessary to prevent loss of life or property or in case of imminent danger
to public safety due to an actual or impending emergency in the locality caused by
serious accidents, fire, flood, typhoon, earthquake, epidemic, or other disaster or
calamity;
C) when there is urgent work to be performed on machines, installations, or equipment,
to avoid serious loss or damage to the employer or some other cause of similar
nature;
D) when the work is necessary to prevent loss or damage to perishable goods; and
E) where the completion or continuation of the work started before the eighth hour is
necessary to prevent serious obstruction or prejudice to the business or operations of
the employer.
Any employee required to render overtime work under this article shall be paid
the additional compensation required in this chapter.

Art. 90. Computation of additional compensation

For purposes of computing overtime and other additional remuneration as

required by this chapter, the "regular wage" of an employee shall include the cash wage
only, without deduction on account of facilities provided by the employer.

ART. 91. Right to a weekly rest day.

A) it shall be the duty of every employer, whether operating for profit or not, to provide
each of his employees a rest period of not less than twenty-four (24) consecutive hours
after every six (6) consecutive normal workdays.
B) the employer shall determine and schedule the weekly rest day of his employees
subject to collective bargaining agreement and such rules and regulations as the
secretary of labor and employment may provide. However, the employer shall respect
the preference of employees as to their weekly rest days when such preference is
based on religious grounds.

Art. 93. Compensation for a rest day, Sunday, or holiday work.

(a.) Where an employee is permitted to work on his scheduled rest day, he shall
be paid an additional compensation of at least thirty percent (30%) of his regular
wage. An employee shall be entitled to such additional compensation for work
performed on Sunday only when it is his established rest day.

(b.) When the nature of the work of the employee is such that he has no regular
workdays and no regular rest days can be scheduled, he shall be paid an additional
compensation of at least thirty percent (30%) of his regular wage for work performed on
Sundays and holidays.

(c.) Worked performed on any special holiday shall be paid an additional

compensation of at least thirty (30%) of the regular wage of the employees. Where
such holiday work falls on the employee's scheduled rest day, he shall be entitled to
additional compensation of at least fifty (50%) of his regular wage.

(d.) Where the collective bargaining agreement or other applicable employment

contract stipulates a higher premium pay payment than that prescribed under this article,
the employer shall pay such a higher rate.

Art. 94. Right to holiday pay.

(a) Every worker shall be paid his regular daily wage during regular holidays,
except in retail and service establishments regularly employing less than ten (10)
workers.

(b) The employer may require an employee to work on any holiday but such
employee shall be paid a compensation equivalent to twice his regular rate; and

What are the regular holidays observed in the Philippines?

(c) as used in the article, “holiday” includes:

o New Year’s Day,
o Maundy Thursday,
o Good Friday,
 o On the Ninth of April,
o On the First of May,
o On the Twelfth of June,
o 2nd of November
o 3oth of November
o The Twenty-Fifth And
o Thirtieth of December And
o The Day Designated by law for holiday as the general
election.
Art. 95. Right to Service Incentive Leave.
A.) Every employee who has rendered at least one year of service shall be entitled to a
yearly service incentive leave of five days with pay.

B) This provision shall not apply to those who are already enjoying the benefit herein
provided, those enjoying vacation leave with pay of at least five days, and those
employed in establishments regularly employing less than ten employees or in
establishments exempted from granting this benefit by the secretary of labor and
employment after considering the viability or financial condition of such establishment.

C) The grant of benefit over that provided herein shall not be made a subject of
arbitration or any court or administrative action.

Art. 96. Service charges.

All service charges collected by hotels, restaurants, and similar establishments
shall be distributed at the rate of eighty-five percent (85%) for all covered employees
and fifteen percent (15%) for management. The share of the employees shall be equally
distributed among them. In case the service charge is abolished, the share of the
covered employees shall be considered integrated into their wages.
END OF LESSON
References:
Lesson 13: Equal Employment Opportunities and Affirmative Action

Topics: Equal Employment Opportunities and Affirmative Action

Learning Outcomes: At the end of this module, you are expected to:
 Compare their rights as a person, be it about their ethnicity,
disability, or gender and their security in their work places.

LEARNING CONTENT:
Equal Employment Opportunity - involves the right of persons to apply and be
evaluated from employment opportunities without regard to race, color, religion, age,
national origin, sex, disability, or status of a disabled.

Affirmative action
 A policy designed to redress past discrimination against women and minority groups
through measures to improve their economic and educational opportunities;
 The term affirmative action refers to policies that take race, ethnicity, physical
disabilities, military career, sex, or a person's parents' social class
 A policy or program providing advantages for people of a minority group who are seen
to have traditionally been discriminated against, with the aim of creating a more
egalitarian society through preferential access to education, employment, health care,
social welfare, etc
 Policies of governments and other institutions that are designed to actively promote
and advance the status and the social and occupational participation of groups of people
designated by sex, ethnicity or other shared characteristics

Job Discrimination - refers to the unjust act of differentiating one group of people not on
the basis of personal merit but on the basis of partiality or bias.
Laws protect employees from receiving unequal treatment on the basis of race,
gender, age, citizenship, national origin, religion, marital status, disability, or labor union
activity. When employers use these factors against their workers, they have committed
employment discrimination.

Types of Job Discrimination

Age Discrimination
Age discrimination refers to an employer making hiring or promotion decisions
based on the employee's age, according to the EEOC website. This practice is a
violation of the Age Discrimination in Employment Act (ADEA), which protects people
who are 40 and over. An employer cannot choose to hire an employee because the
selected candidate is younger than others who competed for the job. During an
interview process, employers should not ask the applicant's age, or the company risks
being accused of age discrimination, particularly if that person is not hired for the job.

Unequal Pay
It is important for employers to recognize that employees of similar qualifications,
education and skill, should receive equal pay, as stated on the EEOC website.
According to the Equal Pay Act, male and female employees with similar roles and
responsibilities should be paid equally. If there is a need to pay unequal wages to
employees, the company should have significant justification to show the reason.
Sex Discrimination
Any conduct deemed as sexually inappropriate, including the expectation of
sexual favors in exchange for employment benefits, is considered sex discrimination.
Insensitive and seemingly harmless jokes or comments could land the employer in
trouble with the EEOC. Employers are also prohibited from discriminating against
female employees, or terminating their employment, due to pregnancy. Companies are
required to investigate allegations of sexual harassment, and all discrimination
complaints, and prevent hostile work environments by providing ongoing training for
current staff and new employees.

Stereotypes Against women

1. There are fields of occupation, which are traditionally suitable for women
because of their “sensitive, vulnerable and fragile” nature
2. There are types of work, which may not be fitting to women due to their
biological condition like monthly period
3. The inability of women to cope up with certain job requirements since their
common gender personality and aptitude traits make them unsuitable for those jobs

Note: Such generalizations about women are not only biased or prejudicial but also
untrue. Because of wrong person, women are not assigned to the tasks traditionally
directed to men and the result is that some women are never given the necessary break
to prove themselves (Burchell and Fagan, 2004)

Employees with Disabilities

Terminating an employee or not hiring an applicant, because of a medical illness
or physical disability violates the laws mandated by the EEOC, according to their
website. The Americans with Disabilities Act (ADA) requires employers to provide
reasonable accommodations for employees with disabilities. This allowance includes
temporary adjustments to work schedules or job duties.

Race, Color, or National Origin

Employers working with diverse employees should be careful not to display any
behavior that could be discriminatory based on race, color, or national origin. Comments,
jokes or statements that draw unwanted attention to an employee based on any of
these factors could be considered discriminatory

What Constitutes Discrimination in the Workplace?

1. Protected Class
 Discrimination only applies to legally protected classes of people. Federal law--laws
passed by the U.S. Congress that applies in all states)--protect against many types
of discrimination, including pregnancy, age, disability, race, color, national origin,
gender and religion. Most states also have laws that protect the same classes of
people. Additionally, many states also protect against sexual orientation
discrimination.

2. Tangible Action

The most common type of discrimination is called "tangible employment action."

Tangible employment action occurs when an employee experiences a significant
change in employment status. This would include such actions as refusing to hire,
demoting, refusing to promote, refusing to grant a raise, diminishing pay or
terminating.

3. Harassment-

The other most common type of discrimination is referred to as either harassment

or hostile work environment. Harassment occurs when the employer or a manager
or supervisor of the employer makes comments or physical gestures that are
outrageous and abusive to an employee within a protected class. Legitimate
discrimination claims based on hostile work environment often include repeated
slurs, derogatory language or physical contact. The actions must be severe and
pervasive enough that a reasonably person would find the workplace abusive and
hostile.

4. Illegal Connection –

Discrimination is sometimes difficult to discern because the discriminator action

must be directly connected to the protected class. If an employer is demeaning and
verbally abusive, but the employer's actions have no connection to the employee's
protected class, then the employer has not committed discrimination. For example,
if an employer yells at a female employee, talks down to the female employee and
refuses to promote the female employee, but the employer never says or does
anything to reasonably suggest that the employer is acting that way because the
employee is a woman, then the employer has not discriminated against the
employee.

What Are the Causes of Discrimination in the Workplace?

Discrimination in the workplace is upheld through a system where decision-
making power is maintained by one particular group. Non-compliance to affirmative
action causes discrimination.
Identification - Discrimination factors are race, color, religion, sex (including pregnancy),
national origin, age (40 or older), disability or genetic information. These factors cause
discrimination when used to determining applicant status, promotion potential or
disciplinary action.
Pre-employment Screening- Credit rating or economic status can adversely affect an
employment application. The employer must prove this is essential to the position when
soliciting this information.

Benefits- Other causes for workplace discrimination are an abusive relationship of

employer and employee through the granting of breaks, leave approval and work station
assignment.

Universal Human Rights- "Everyone has the right to work, to free choice of employment,
to just and favorable conditions of work and to protection against unemployment.
Everyone, without any discrimination, has the right to "equal pay for equal work," as
stated by the Universal Declaration of Human Rights. A violation of these individual
rights causes unlawful discrimination.

Safe Working Conditions- Physical and psychological safety are basic human rights.
Forced labor, an unsafe or toxic work environment, and unreasonable work hours cause
workplace-related discrimination.

Manager's Duties Against Discrimination

The manager of an organization has a legal and moral obligation to fight discrimination
in the workplace. His duties include, following directions given by the Equal Employment
Opportunities Commission, implementing policies and procedures in line with the Civil
Rights Act and dealing with any concerns or complaints members of staff have
regarding discrimination in the workplace.

1. Civil Rights

It is the manager's legal duty to implement company policy that follows both
federal and state legislation. Title 7 of the Civil Rights Act 1964, provides that there shall
be no discrimination in the workplace based upon, race, color, religion, sex or national
origin. The Equal Pay Act of 1963, states that workers should be paid equally and fairly
and gender is not a valid reason for variations in pay. It is the responsibility of the
manager to keep abreast new developments in discrimination law and any amendments
made to existing legislation. Failure to fulfill this duty can result in severe criminal
punishments personally and for the company.

2. Follow Advice From the Equal Employment Opportunity Commission

The Equal Employment Opportunity Commission, to monitor and enforce

discrimination laws in the workplace. The Commission will examine a company's
procedures and policies and make suggestions for improvement. Failure of the manager
to follow these suggestions can result in the Commission enforcing civil penalties, such
as implementation of a positive discrimination program. Positive discrimination
programs seek to repair any imbalance by hiring more of the discriminated minority.
3. Deal with Complaints and Concerns

The manager is responsible for dealing with any concerns that a member of staff
has regarding discrimination. She has a duty to investigate every reported case. This
involves interviewing those involved with the discrimination, any direct witnesses and
reviewing any CCTV footage that may exist. The manager has a duty to prepare a
written report, which can be used as evidence in a court of law if necessary. The
manager has a moral duty to protect the interest of the person experiencing
discrimination and protect their identity as far as possible. If the matter cannot be
resolved within the company, the manager has a duty to report the discrimination to the
authorities if it is serious, or to provide information and assistance for the employee to
seek help.

What are the Ethical Principles involved in Job Discrimination?

Discrimination in the workplace is wrong and socially irresponsible because of the
following reasons:

1. Discrimination in hiring is disservice in the long run.

2. It is actually double jeopardy
3. Most importantly, it is wrong to discriminate a group or an individual by reason of ethics.
4. When business discriminates, it consciously or unconsciously affirms that one group is
inferior or subordinate to another group.
Example: People from the province are less qualified than those coming from the
city; or USLT graduates are more qualified than SPUP; French employees are
better than Filipinos.
This is a violation of the fundamental right to be treated as equals!!!!

END OF LESSON

Lesson 13: Good Working Conditions: Basic Employee Right

Topics: Good Working Conditions: Basic Employee Right

At the end of this module, you are expected to:

Learning Outcomes:

 Critique the rules and conventions of employment.

LEARNING CONTENT:
 Good Working Condition: Basic Employee Right
Working Condition - refers to the safety and healthfulness of the workplace, particularly
the physical work environment and the procedures followed in performing the work.
Note: labor history is a witness to some poor and even dangerous working conditions,
long working hours, insufficient safety measures; exploitation of women and worst is the
child labor. All of which become notorious when the factory system and sweatshops
have been introduced during the industrial revolution.
Factory- refers to a large establishment employing scores of people involved in mass
production of industrial or consumer goods
Sweatshops- a small manufacturing establishment where tired employees work long
hours under substandard conditions for low wages
Dimensions of Working Condition

1. Structure of Workplace- consist of sector of affiliation, employment status,

size of the company.
2. Physical Environment- involves exposure to dangerous substances, heavy
loads and corporal risks.
3. Working Time Issues- weekly hours, commuting time, shift work and a typical
work pattern.
4. Organizational Environment- job content- refers to repetitive tasks and pace
of work
5. Social Environment and Psychosocial risks- harassment and discrimination in
offices and factories
6. Work-related outcomes concerned with perceptions of health risk, work
absences and job satisfaction.
What is the so-called Systems Approach in the Workplace?
Safety engineering- develop to prevent industrial accident, control of the4 work
environment to reduce or eliminate hazards

Effects of industrial accidents and unsafe working conditions

1. Temporary or permanent injury

2. Illness
3. Death
4. Reduce efficiency
5. Loss productivity
Right to good working condition

1. Physical health of the workers is not endangered

2. Morals are safeguarded
3. Young people’s normal development is not impaired
 4. Female have the right to work in accordance with their gender.
Worker-friendly requirements

1. Proper illumination and ventilation in the workplace

2. Availability of exits and extinguisher
3. First aid, family welfare and other services
4. Separate comfort rooms
5. Others (depending upon the nature of the business)
Duties of employers regarding work hazards

1. Offer wages that reflect the risk-premium prevalent in other similar but
competitive labor market
2. Provide employees with suitable health insurance programs
3. Collect information on health hazards that coincide with a given job and make
such information available to employees
Note: employees taking higher risk will be rewarded with higher compensation.
Employee rights to social security and health benefits

1. SSS or GSIS (maternity, sickness, disability, retirement, death and prison)

2. PAG-IBIG (housing and other loans)
3. ECC benefits for work related contingencies
4. Other benefits
Five general categories of insurance

1. Old-age and invalid survivor’s insurance

2. Health and maternity insurance
3. Family allowances
4. Work-injuries insurance
5. Unemployment insurance
Note: Working conditions vary depending on the kind of company, the nature of the job
and the position one holds.

END OF LESSON
Lesson 15: Anti-Sexual Harassment (RA 7577)

Topics: Anti-Sexual Harassment (RA 7577)

At the end of this module, you are expected to:
Learning Outcomes:
 Examine the different types of sexual harassment, different issues and
problems concerning labor, the responsibilities and duties of labor
organizations, and the social responsibility of a good corporate manager
 such as making themselves aware of employee rights and observing and
respecting these rights.

LEARNING CONTENT:

Sexual harassment - form of unlawful sex discrimination, which includes unwanted verbal or
physical behavior of a sexual nature that occurs in the workplace or in an educational
setting under certain conditions.
- always an unsolicited and unreciprocated behavior
- illegal if it creates an environment that is hostile or intimidating, if it interferes with a
person’s work or school performance, or if acceptance of the harasser’s behavior is
made a condition of employment or academic achievement
- form of discrimination

2 Types of Sexual Harassment:

1. Sexual Coercion – explicitly or implicitly made as a condition for favorable decisions

affecting one’s employment, gain, or loss of tangible job benefits.
2. Sexual annoyance- not directly related to anyone’s employment, still creates an
intimidating, hostile, or offensive environment in the workplace.
SEXUAL HARASSMENT
Sexual Misconduct
Unwelcome sexual advances, requests for sexual favors,
and other verbal or physical conduct of a sexual nature
Plus
Philippine Anti- Sexual Harassment Act of 1995 defines Sexual harassment “The sexual
favor made as a condition in the hiring or in the employment, reemployment or continued
employment of said individual, or in granting said individual favorable compensation, terms,
conditions, promotions, or privileges; or the refusal to grant the sexual favor results in limiting.
Segregating or classifying the employee which in any way would discriminate, deprive, or
diminish employment opportunities or otherwise adversely affect said employee.”

Strictly speaking, Sexual harassment is sexual coercion, a condition for favorable decisions
affecting one; job. In a strict legal sense, Sexual harassment could be committed by somebody
having authority or moral ascendancy over another- usually by male superior.

Manifestations of Sexual harassment

1. Verbal harassment- consists of lewd comments or remarks, offensive jokes, or

outright propositions.
2. Physical form- range from a naughty glance, leering, kissing and intentionally
brushing against a person to pinching, touching, and any sexual assaults.
3. Visual form or use of objects or pictures
The European Commission Code of Practice (1993) presents a list, which may include the
following:
 Touching including pats, hugs or akbay, cuddles, kissing or beso-beso,
fondling, pinching and staring
 Standing too close, bending over or extending legs or bodies over desks
 Leering, watching women go up open staircases, making persistent eye
contact
 Gestures using hands, tongue, mouth, pieces of instrument, and fondling of
private parts
 Suggestive comments about one’s body, clothes, personal lives, partners
 Innuendoes, sexist or lewd remarks or jokes
 Display of sexually explicit materials. Sexual or sexist telephone calls, fax
messages, e-mail, graffiti, letters, or notes

Difference between verbal sexual harassment and compliment

Compliment - produces a good feeling so much so one wants the interaction to go on
Verbal Sexual harassment - more on the behavior that is coercive, unsolicited, and
embarrassing on the part of the victim

Note: Sexual harassment is not based on the perpetrator’s good feeling but on the victim’s bad
feeling. A compliment produces a good and healthy feeling on the receiver while verbal sexual
harassment definitely produces a diseased feeling.

Note: The Philippine Anti-Sexual Harassment Act of 1995 makes sure that accountability falls
both on the harasser and the employer. It imposes a DUTY on the employer to prevent or deter
any commission of acts of sexual harassment. For when an employer fails to act after knowing
the commission of offense, he/she will be held liable in solidarity for damages arising from the
acts of sexual harassment. If found guilty, the offender is penalized by imprisonment from one to
six months ranging from P10,000 to P20,000 or both at the discretion of the Court.

Consequences of SH
1. Socio-emotional Damage
 Psycho-emotional stress
 A degrading aftermath
 Self-doubt
 Breakdown of relationship
2. Economic Consequences
 Loss of income
 Interruption of one’s career
  Forfeiture of benefits

Ethical Principles Violated by SH

 It is a dishonor to human dignity and a direct transgression to basic human
rights

1. Right to be treated with respect

2. Right to a good working environment
3. Right to equal opportunity
4. Right to job security

Note:
When ignored, SH can exact a high cost to the company in terms of:
 Loss of productivity
 High absenteeism among affected employees
 Disruptions of work
 Retraining of new workers because of high turnover
 Low morale
 Tarnished corporate public image
 Tangible cost associated with legal suits

SOCIAL RESPONSIBILITIES of MANAGERS

 It is management’s legal and social responsibilities to carry out a strict policy
against SH.

ECCP defines the following duties:

 To explain and positively promote the policy to their staff
 To ensure a working environment free of visual forms of sexual harassment
 To be alert to any practice of verbal forms of harassment and ready to take
necessary action accordingly
 To be responsive and supportive to any member of staff who complains about
it
 To ensure complete confidentiality in dealing with all cases of SH
 To ensure full and clear advice on the procedure
 To deal with cases promptly
 To provide additional appraisal and counseling sessions to staff member who
have difficulty in an accepting and implementing the policy
 To attend training sessions related to SH
 END OF LESSON
Lesson 15: Child Labor

Topics: Challenging Child Labor

At the end of this module, you are expected to:
Learning Outcomes:
 Determine the evil effects of child labor

 Identify approaches to the problem of child labor

LEARNING CONTENT:

Child labor - refers to illegal employment of children below 18 years old.

 Under the law, child labor is defined as any work or economic activity performed
by a child that subjects him or her to any form of exploitation, or is harmful to his or
her health and safety, or physical, mental, or psycho-social development.
 Most underage children are forced to labor to support their poor families due to
poverty.
 Because of child labor, children suffer from malnutrition.
 Instead of idling their time in a classroom, these children were rather roam around
the streets and risking their lives just to earn enough money for their families.
 The United Nations Commission on Human Rights reports that if this exploitative
is a fact of life in the affluent society, it is even more shameful and disgraceful in poor
and developing countries.

2001 data
4 million child laborers in the Philippines
 5 million – unpaid workers
 900,000 – private workers
 350,000 – household helps
 270,000 – self-employed

2011 data
 There are 5.59 million child laborers toiling in the Philippines and almost all of
them are working in hazardous conditions, according to a survey financed by the
International Labor Organization (ILO).
 The 2011 Survey on Children conducted by the National Statistics Office (NSO)
showed that out of the 29.019 million Filipino children aged 5-17 years old, about
18.9 percent or 5.59 million, were already working.
  This is higher than the 4 million Filipino working children registered in a 2001
survey conducted by the ILO and the US Department of Labor.
 In the Philippines, according to the Philippine Statistics Authority (PSA), about 95
per cent of child laborers are in hazardous work. 69 per cent of these are aged 15-17
years old, beyond the minimum allowable age for work but still exposed to hazardous
working conditions. Children work in farms and plantations, in dangerous mines, on
streets, in factories, and in private homes as child domestic workers. Agriculture
remains to be the sector where most child laborers can be found at 58 per cent.
 6% of our child laborers are unprotected from hazardous environment that put
their health and life and risk, which include long exposure to deadly chemicals as
well as physical dangers.
 Child labor is a bold illustration of prioritization of material realities over the human
person or profit maximization at all cost.

GLOBAL MARCH AGAINST CHILD LABOR

 was launched by the Office of the President on January 16, 1998 at Quezon
Memorial Circle in Quezon City.
 Symbolic protest against Child Labor practice.
 International Labor Organization declared June 12 as Anti-Child Labor Day

 The Philippines has adopted the Philippine Program Against Child Labor (PPACL)
as the official national program on the elimination of child labor. This is a
convergence of the efforts of government, the private sector, employers’ groups,
trade unions, NGOs and international development institutions towards the
prevention, protection and removal from hazardous and exploitative work of child
labor victims and, as may be appropriate, healing and reintegrating them.

 The ILO has been supporting the Philippines in the implementation of the PPACL
through its International Programme on the Elimination of Child Labour (IPEC).
Presently, ILO is managing a Project funded by the US Department of
Labor called Country Level Engagement and Assistance to Reduce Child Labor
(CLEAR). It aims to enhance the capacity of the Philippines to reduce child labor by
supporting its actions in addressing the recommendations contained in the "Finding
on the Worst Forms of Child Labor Report" of the USDOL.

What constitute Child Labor?

RA 7610 (June 17, 1992)

 Special Protection of Children against Child Abuse, Exploitation and
Discrimination Act
 Approved by the President of the Philippines, Corazon C. Aquino
RA 7658 (May 12, 1994)
 was issued by the DOLE which provides that, among others, it is illegal to
employ children under 15 years of age.

What are the dire reasons why children work?

1. Poverty
2. Traditional distorted beliefs
3. Convenience on the part of the employer

What are the evil consequences of Child Labor?

Children who work may suffer in 4 areas: Physical, Mental, Emotional and Moral.

1. Physical Deterioration
2. Mental Wasting
3. Low Aspiration
4. Moral Decay

Difference between child labor and child work

Child labor Child work

 Work burdens the child; too heavy for  Work is appropriate to child's age and
child's age and capabilities mental capabilities
 Child works unsupervised or  Supervised by responsible and caring
supervised by abusive adults adults
 Very long hours of work; child has  Limited hours of work; does not hinder
limited or no time for school, play or the child from going to school, playing
rest or resting
 Workplace poses hazards to child's  Workplace is kept safe and child
health and life friendly, does not pose hazards to
health and life of the child
 Child is subject to psychological,  Child's physical, emotional and mental
verbal, or physical/sexual abuse well-being are nourished even in the
work environment
 Child is forced by circumstances or by  Child works voluntarily to participate in
coercive individuals to work the family responsibility of maintaining
the household
 Child is justly compensated materially
  Limited or no positive rewards for the and psychologically
child
 Child's work is regulated by law or
 Child's work is excluded from governed by family/community norms
legislation, social security and benefits and values
 Child's work is used for exploitative,  Child's work serves as a vehicle for
subversive or clandestine operations or social advancement and improvement
disguised illegal activities in the child's quality of life

Are parents legally liable?

Under RA 7610
 Signed by Pres. Corazon C. Aquino on June 17, 1992
 The law attaches criminal liability to any parents who, by his/her actuation,
deprived his/her parental love, care, protection and education.

Are parents morally liable?

Child Labor is a socio-ethical issue for the global community, including
business. The primary responsibility for eliminating child labor should be shouldered by
national governments and international bodies such as the International Labor
Organization or ILO and the United Nations or UN.

What are the multiple approaches to the problem of child labor?

1. Labeling
 Seeks to ensure that a single product or product type is free from child labor.
 Products now carry a label indicating to consumers that the product was
manufactured under their fair and equitable conditions and without the use of
child labor.
 Critics suggest that labeling is generally too simplistic an approach by which
to combat such problem, for it is extremely hard to guarantee that a product has
been manufactured without the use of child labor.
 However, such labels can bring benefits when they are supported by
rigorously applied audit process.

2. Codes of Conduct and Supplier Guidelines

 Can be useful when introduced by companies with a detailed understanding
of the complexities of child labor.
 In the absence of external monitoring and verification, codes of conduct may
be seen as, and proved to be, little more than rhetoric and may even prove
counterproductive if introduced without sufficient thought.
How do businesses learn from the experiences of others?
Focus of Customers
 Reputation preservation with customers

Do some businesses focus on suppliers and the community?

 A company that focuses on the needs of its suppliers and local community
stakeholders might well have a different response to the same problem.
 Rather than seeking to eliminate all work undertaken by children, it might choose
instead to change the nature of the work, in line with ILO recommendations and ideally
in consultation with a local community-based organization.
 Or provide employment to their parents, if such case is not unlikely. This option
needs a lot of sustained planning and preparation.

Elimination or change in the role of children

 The benefit to both the company and the child will be greatest if the changes
are introduced in a controlled fashion, possibly over a period of time. Whatever
the response is, good communication with all affected stakeholders is absolutely
essential.

END OF LESSON
Lesson 17: Unions: Responsibilities and Duties

Topics: Unions: Responsibilities and Duties

Learning Outcomes: At the end of this module, you are expected to:
 Examine the responsibilities and duties of labor organizations.

LEARNING CONTENT:

LABOR ORGANIZATIONS

DEFINITION OF TERMS
Labor organization – any union or association of employees in the private sector which exists in whole or in
part for the purpose of collective bargaining or of dealing with employers concerning terms and conditions
of employment.

Union – any labor organization in the private sector organized for collective bargaining and for other
legitimate purposes.

Legitimate Labor Organization or Labor Union – Any labor organization as defined above registered with
DOLE.

NOTE: Not every legitimate labor organization can act as bargaining representative and be certified as
such. This is true ONLY of a union that has won in certification election or has been voluntarily recognized
by the employer.

Art. 234: Requirements of Registration

PRINCIPLE OF AGENCY APPLIED

1. Principal – Employees
2. Agent – local/chapter
3. Agent of Agent – federation

PURPOSE OF FORMATION OF LABOR UNIONS: for securing fair and just wages and good working
conditions for the laborers; and for the protection of labor against the unjust exactions of capital.

CLASSIFICATION OF LABOR ORGANIZATIONS

1. National Union/Federation – any labor organization with at least 10 locals/chapters each of
which must be a duly certified or recognized collective bargaining agent.
2. Industry Union – group of legitimate labor organizations within an identified industry,
organized for collective bargaining or for dealing with employers concerning terms and
conditions of employment, within an industry or for participating in the formulation of social and
employment policies, standards, and programs in such industry registered with DOLE
3. Trade Union Center – group of registered national unions or federations organized for the
mutual aid and protection of its members and for assisting such members in collective
bargaining or for participating in the formulation of social and employment policies, standards,
and programs duly registered with the Department.
4. Alliance – aggregation of unions existing in one line of industry or in a conglomerate, a
group of franchisees, a geographical area, or an industrial center.
 5. Company union – a labor organization which in whole or in part, is employer-controlled or
employer dominated.

MODES OF ACQUIRING LEGITIMACY FOR LABOR ORGANIZATIONS

1. Registration with the BLR – Bureau of Labor Relations

2. Chartering or issuance of a federation or national union of a chartered certificates

Purpose of Registration
Registration with the BLR is the operative act that gives rights to a labor organization.

1. It is the fact of being registered with the DOLE that makes a labor organization legitimate in the
sense that it is clothed with legal personality to claim representational and bargaining rights
enumerated in Article 242 or to strike or picket under Article 263.

1. The requirement of registration is NOT a curtailment of the right to association. It is merely a

condition sine qua non for the acquisition of legal personality by labor organizations, associations
or unions and the possession of the rights and privileges granted by law to labor organizations.
2. It is a valid exercise of police power since the activities in which labor organizations, associations,
or unions of workers are engaged affect public interest, which should be protected.

WHERE TO FILE APPLICATION FOR REGISTRATION

1. For registration of independent labor unions, chartered locals, worker’s association shall be filed
with the Regional Office where the applicant principally operates. It shall be processed by the
Labor Relations Division at the Regional Office.
2. Applications for registration of federations, national unions or worker’s associations operating in
more than one region shall be filed with the BLR or the regional offices, but shall be processed by
the BLR.

ART. 241: RIGHTS AND CONDITIONS OF MEMBERSHIP IN A LABOR UNION

1. Deliberative and Decision-Making Right – the right to participate in deliberations on major policy
questions and decide by secret ballot.
2. Right to Information – the right to be informed about:
1. the organization’s constitution and by-laws
2. the collective bargaining agreement, and labor laws
3. Rights Over Money Matters – the rights of the members:
1. Against imposition of excessive fees;
2. Right against unauthorized collection of contributions or unauthorized
disbursements;
3. To require adequate records of income and expenses;
 4. To access financial records;
5. To vote on officers’ compensation;
6. To vote on special assessments;
7. To be deducted a special assessment only with the member’s written authorization

1. Political Right – the right to vote and be voted for, subject to lawful provisions on qualifications and
disqualifications.

NOTE: Any violation of the above rights and conditions of membership shall be a ground for cancellation of
union registration or expulsion of an officer from office, whichever is appropriate. At least 30% of all the
members of the union or any member or members specifically concerned may report such violation to the
BLR.

UNION MEMBERSHIP
 Any employee, whether employed for a definite period or not, shall, beginning on his first
day of service, be considered an employee for purposes of union membership.

WHO ARE PROHIBITED FROM BECOMING MEMBERS/ OFFICERS OF A LABOR ORGANIZATION

1. non-employees
2. Subversives or those engaged in subversive activities
3. Persons who have been convicted of a crime involving moral turpitude shall not be eligible for
election as union officer or for appointment to any position in the union

LIMITATIONS:
The labor organization cannot compel employees to become members of their labor organization

1. if they are already members of rival union.

2. Subversives
3. The members of religious organizations whose religion forbids membership in labor organization

LEVY OF SPECIAL ASSESSMENTS OR EXTRAORDINARY FEES

REQUIREMENTS (RAMM)

1. Written resolution
2. Resolution must have been approved by a majority of all the members
3. The approval must be at a general membership meeting duly called for that purpose
4. The Secretary of the organization shall record the minutes of the meeting, which shall be attested
to by the President. The minutes include:
1. The list of all members present;
 2. The votes cast; and
3. The purpose of the assessment or fees.

CHECK-OFF – a method of deducting from an employee’s pay at prescribed period, the amounts due to
the union for fees, fines or assessments.

NATURE AND PURPOSE OF CHECK-OFF

 Union dues are the lifeblood of the union.
 All unions are authorized to collect reasonable membership fees, union dues, assessments and
fines and other contributions for labor education and research, mutual death and hospitalization
benefits, welfare fund, strike fund and credit and cooperative undertakings.

REQUIREMENTS WITH REGARD TO CHECK-OFFS

No special assessment, attorney’s fees, registration fees or any other extraordinary fees may be checked
off from any amount due an employee without an individual written authorization duly signed by the
employee.

The authorization should specifically state the:

1. Amount
2. Purpose
3. and the beneficiary of the deduction

Exceptions:

1. For mandatory activities provided under the Code; and

2. When non-members of the union avail of the benefits of the CBA:
1. Said non-members may be assessed union dues equivalent to that paid by members
2. Only by a Board Resolution approved by majority of the members in a general meeting
called for this purpose.

UNION DUES VS AGENCY FEES

UNION DUES – regular monthly contributions paid by the members to the union in exchange for the
benefits given to them by the CBA and to finance the activities of the union in representing them.
- May not be deducted from the salaries of the union members without written consent of the workers
affected
AGENCY FEES – dues equivalent to union dues, charged from the non-union members who or benefited
by or under the CBA
- May be deducted from the salary of employees without their written consent

ART. 241: RIGHTS AND CONDITIONS OF MEMBERSHIP IN A LABOR ORGANIZATION

RIGHTS OF A LEGITIMATE LABOR ORGANIZATION (USERFOE)

1. Undertake activities for benefit of members;

2. Sue and to be sued;
3. Exclusive representative of all employees;
4. Represent union members;
5. Furnished by employers of audited financial statements;
6. Own properties; and
7. Exempted from taxes

REPORTORIAL REQUIREMENTS TO BE SUBMITTED BY LEGITIMATE LABOR ORGANIZATION:

1. Constitution and by-laws, or amendments thereto, minutes of ratification, and the list of members
who took part in the ratification of the constitution and by-laws within 30 days from adoption or
ratification of the constitution and by-laws or amendments thereto;
2. List of officers, minutes of the election of officers, and list of voters within 30 days from election;
3. Annual financial report within 30 days after the close of every fiscal year; and
4. List of members at least once a year or whenever required by the Bureau.

EXTENT OF THE RIGHT TO SELF-ORGANIZATION

1. To form, join and assist labor organizations for the purpose of collective bargaining through
representatives of their own choosing; and
2. To engage in lawful concerted activities for the same purpose or for their mutual aid and protection.

PERSONS/EMPLOYEES ELIGIBLE TO JOIN A LABOR ORGANIZATION FOR PURPOSES OF

COLLECTIVE BARGAINING

1. All persons employed in commercial, industrial and agricultural (CIA) enterprises; and
2. In religious, charitable, medical or educational (RCME) institutions whether operating for profit or
not
PERSONS/EMPLOYEES ELIGIBLE TO JOIN A LABOR ORGANIZATION FOR MUTUAL AID
AND PROTECTION (AIRSIW)

1. Ambulant - travelling
2. Intermittent – irregular, broken; alternating
3. Rural
4. Self-employed people
5. Itinerant workers - wandering
6. Workers without any definite employers

PERSONS/EMPLOYEES WHO ARE NOT GRANTED THE RIGHT TO SELF-ORGANIZATION:

(HEMACEN)

1. High level or managerial government employees

2. Employees of international organizations with immunities
3. Managerial employees
1. Whose functions are normally considered as policy-making or managerial
2. Whose duties are of a highly confidential or highly technical in nature

1. Members of the Armed Forces of the Philippines, including police officers, policemen, firemen and
jail guards
2. Confidential employees
3. Employees of cooperatives who are its members
4. Non-Employees

ELIGIBILITY OF FOREIGNERS TO FORM LABOR ORGANIZATION

Aliens working in the country with valid permits issued by DOLE may exercise the right to self-organization
and join or assist labor organizations of their own choosing for purposes of collective bargaining provided
further that said aliens are nationals of a country which grants the same or similar to Filipino workers. This
embodies the principle of reciprocity.

ART. 244: RIGHT OF EMPLOYEES IN THE PUBLIC SERVICE

RIGHT TO STRIKE:

GOCCs WITH ORIGINAL CHARTER: Employees cannot stage strikes since they are governed by Civil
Service Law. They are enjoined by Civil Service Memorandum Circular No.6 under pain of administrative
sanctions from staging strikes, demonstrations, mass leaves, walkouts and other concerted activities.
GOCCs WITHOUT ORIGINAL CHARTER: The GOCC is created under the Corporation Code, the
employees are covered by the Labor Code. Therefore, the employees have the same rights as those as
employees of private corporations, one of which is the right to strike.

BARGAINING RIGHTS

GOCC WITH ORIGINAL CHARTER: Corporations with original charters cannot bargain with the
government concerning the conditions of their employment. However, they can negotiate (through CBA or
MOA) with the government on those terms and conditions of employment which are not fixed by law. Thus,
they have limited bargaining rights.

GOCC WITHOUT ORIGINAL CHARTER: The GOCC created under the Corporation Code being governed
by the Labor Code can bargain with the government concerning the terms and conditions of
employment. Thus, they have unlimited bargaining rights.

NEGOTIABLE TERMS AND CONDITIONS OF EMPLOYMENT IS GOCCs WITH ORIGINAL CHARTER

1. Schedule of vacation and other leaves;

2. Work assignments of pregnant women;
3. Personnel growth and development;
4. Communication system – lateral and vertical;
5. Provision for protection and safety;
6. Provision for facilities for handicapped personnel;
7. Provision for first-aid medical services for married women;
8. Annual medical/physical examination; and
9. Recreational, social, athletic and cultural activities and facilities.

THE FOLLOWING ARE CONSIDERED NOT NEGOTIABLE

1. Those which require appropriation of funds, such as:

1. increase in salary emoluments and

2. Other allowance not presently provided for by law;
3. Facilities requiring capital outlays;
4. Car plan;
5. Provident fund;
6. Special hospitalization, medical and dental services,
7. Rice/sugar/other subsidies;
8. Travel expenses; and
9. Increase in retirement benefits
 2. Those that involve the exercise of management prerogatives, such as:

1.
1. Appointments;
2. Promotion;
3. Assignments/details;
4. reclassification/upgrading of position;
5. Revision of compensation structure;
6. Penalties imposed as a result of disciplinary actions;
7. Selection of personnel to attend seminar, trainings, study grants;
8. Distribution of work load; and
9. External communication linkages

To sum up, government employees covered by E.O. No. 180 may organize, even unionize, and negotiate
employment conditions not fixed by law but they cannot strike.

WHERE TO REGISTER:
Government employees’ organizations shall register with the Civil Service Commission and DOLE.
The application shall be filed with the BLR, which shall process the same in accordance with the provisions
of LC.

Applications may also be filed with the Regional Offices of DOLE, which shall immediately transmit said
applications to the BLR within 3 days from receipt thereof.

ISSUANCE OF REGISTRATION CERTIFICATE

Upon approval of the application, a registration certificate shall be issued to the organization recognizing it
as a legitimate employees’ organization with the right to represent its members and undertake activities to
further and defend its interest.
The certificates of registration shall be jointly approved by the Chairman of Civil Service Commission and
Secretary of Labor.

ART. 245: INELIGIBILITY OF MANAGERIAL EMPLOYEES TO JOIN ANY LABOR ORGANIZATION;

RIGHT OF SUPERVISORY EMPLOYEES

1. MANAGERIAL EMPLOYEES – those who are vested with powers or prerogatives to lay down and
execute management policies and/or to hire, transfer, suspend, lay-off, recall, discharge, assign or
discipline employees.
 REASON OF INELIGIBILITY
 1. Managerial employees are the alter ego of the employers and this they are
supposed to be on the side of the employer to act as its representatives, and to see to
it that its interests are well protected. The employer is not assured of such protection if
these employees are union members.
2. In the same manner, the labor union might not be assured of their loyalty to the
union in view of the evident conflict of interest. The union can also become company-
dominated with the presence of managerial employees in union membership.

2. SUPERVISORY EMPLOYEES – those who, in the interest of the employer, effectively recommend
such managerial actions if the exercise of such authority is not merely routinary or clerical in nature but
requires the use of independent judgment.

SUPERVISORY EMPLOYEES may form, assist, join a labor organization on their own and NOT with
the rank-and-file employees.

3. CONFIDENTIAL EMPLOYEES – is one entrusted with confidence on delicate matters, or with the
custody, handling or care and protection of the employer’s property.

ART. 247: UNFAIR LABOR PRACTICES

NATURE:

1. Criminal offenses against the State;

2. Violations of civil rights of both labor and management;
3. Violate the constitutional right of workers and employees to self-organization;
4. Are inimical to the legitimate interests of both labor and management, including their right to
bargain collectively and otherwise deal with each other in an atmosphere of freedom and mutual
respect;

ELEMENTS:

1. employer-employee relationship between the offender and the offended; and

2. Act done is expressly defined in the Code as an act of unfair labor practice.

NOTE: Prohibited acts are all related to the workers’ self-organizational right and the observance of a CBA,
except Art. 248[f], dismissing or prejudicing an employee for giving testimony under the Code

UNFAIR LABOR PRACTICES OF EMPLOYER

1. INTERFERENCE
 To interfere with, retrain or coerce employees in the exercise of their right to self-organization
2. YELLOW DOG CONDITION
To require as a condition for employment that person or employee shall not join a labor organization
or shall withdraw from one to which he belongs.
YELLOW DOG CONTRACT – a promise exacted from workers as a condition of employment that they are
not to belong to, or attempts to foster, a union during their period of employment. It is null and void
because:

1. It is contrary to public policy for it is tantamount to involuntary servitude.

2. It is entered into without consideration for employees in waiving their right to self-organization.
3. Employees are coerced to sign contracts disadvantageous to their family.
3. CONTRACTING OUT
To contract out services or functions being performed by union members when such will interfere
with, retrain or coerce employees in the exercise of their right to self-organization

DOES ART. 248[c] mean that an employer cannot contract out work?

1. Contracting out services is not ULP per se. It is ULP only when the following conditions exist:

1.
1. The service contracted out are being performed by union members; and
2. Such contracting out interferes with, restrains, or coerce employees in the exercise of their
right to self-organization.

HOWEVER, when contracting out is being done for business reasons such as decline in business,
inadequacy of equipment or to reduce cost, then it is a valid exercise of management prerogative.

4. RUNAWAY SHOP – an industrial plant moved by its owner from one location to another to
escape labor regulations or state laws or to discriminate against employees at the old plant
because of their union activities.

COMPANY-DOMINATION OF UNION
To initiate, dominate, assist or otherwise interfere with the formation or administration of any labor
organization, including the giving of financial or other support to it or its organizers or officers.

COMPANY UNIONISM/CAPTIVE UNIONISM

Considered as a ULP because the officers will be beholden to the employers and they will not look
after the interest of whom they represent.
INITIATION OF THE COMPANY UNION IDEA BY:

1. Outright formation by employer or his representatives;

2. Employee formation on outright demand or influence by employer; and
3. Managerially motivated formation by employees

FINANCIAL SUPPORT TO THE UNION BY:

1. Employer defrays union expenses;

2. Pays attorney’s fees to the attorney who drafted the Constitution or by laws of the union;

EMPLOYER ENCOURAGEMENT AND ASSISTANCE

Immediately granting of exclusive recognition as bargaining agent without determining whether the
union represents majority of the employees.
SUPERVISORY ASSISTANCE
Soliciting membership, permitting union activities during work time or coercing employees to join the
union by threats of dismissal or demotion.

5. DISCRIMINATION:
To discriminate in regard to wages, hours of work, and other terms and conditions of employment in
order to encourage or discourage membership in any labor organization.

TEST: Whenever benefits or privileges given to one is not given to the other under similar or identical
conditions when directed to encourage or discourage union membership.

THREE COMPONENTS OF DISCRIMINATION:

1. It prohibits discrimination in terms and conditions of employment in order to encourage or

discourage membership in the union;
2. It gives validity to union security agreements; and
3. It allows an agency shop arrangement whereby agency fees may be collected from non-union
members.

6. DISCRIMINATION BECAUSE OF TESTIMONY

To dismiss, discharge or otherwise prejudice or discriminate against an employee for having given
or being about to give testimony under this Code.
 7. VIOLATION OF DUTY TO BARGAIN
The following acts are held to constitute refusal to bargain:

1. Alleging that the union is irresponsible;

2. Transferring operation to elude the union; (run-away shop);
3. Delaying negotiations by discussing unrelated matters;
4. Refusal to accept requests to bargain;
5. Rejecting a union’s offer to prove it’s majority claim;
6. Shutdown to avoid bargaining; and
7. Engaging in surface bargaining

SURFACE BARGAINING – going through the motions of negotiating without any legal intent to reach an
agreement. Involves the question or whether or not the employer’s conduct demonstrates an unwillingness
to bargain in good faith or is merely hard bargaining.

8. PAID NEGOTIATION
To pay negotiation or attorney’s fees to the union or its officers or agents as part of the settlement of
any issue in collective bargaining or other disputes.

9. VIOLATION OF CBA
The violation must be gross; flagrant and/or malicious refusal to comply with the economic
provisions of the CBA.

UNFAIR LABOR PRACTICES OF LABOR ORGANIZATIONS

1. To restrain or coerce employees in the exercise of their right to self-organization. However, a
labor organization shall have the right to prescribe its own rules with respect to the acquisition
or retention of membership;
2. To cause or attempt to cause an employer to discriminate against an employee, including
discrimination against an employee with respect to whom membership in such organization
has been denied or to terminate an employee on any ground other than the usual terms and
conditions under which membership or continuation of membership is made available to other
members;
3. To violate the duty or refuse to bargain collectively with the employer provided that it is the
representative of the employees;
4. To cause or attempt to cause an employer to pay or deliver or agree to pay or deliver any
money or other things of value, in the nature of exaction, for services which are not performed
or not to be performed, including the demand for a fee for union negotiations;

FEATHERBEDDING (make-work activities) – refers to the practice of the union or its agents in causing or
attempting to cause an employer to pay or deliver or agree to pay or deliver money or other things of value,
in the nature of exaction, for services which are not performed or not to be performed, as when a union
demands that the employer maintain personnel in excess of the latter’s requirements.

PERSONS CIVILLY LIABLE FOR ULP:

1. Officers and agents of employer;

2. Labor organization, officers and agents; and
3. Agents and officers who participated or authorized or ratified to act.

SWEETHEART DOCTRINE – considers it ULP for a labor organization to ask for or accept negotiation or
attorney’s fees from the employer in settling a bargaining issue or dispute

Resulting CBA is considered a “sweetheart contract” – a CBA that does not substantially improve
the employees’ wages and benefits and whose benefits are far below those that are provided by law.

BLUE SKY BARGAINING – is defined as making exaggerated or unreasonable proposals. Whether or not
the union is engaged in blue-sky bargaining is determined by the evidence presented by the union as to its
economic demands, Thus, if the union requires exaggerated or unreasonable economic demands, it is
guilty of ULP.

END OF LESSON
Lesson 18: Social Responsibility Towards the Consumers, End Users and General Public

Topics: Social Responsibility Towards the Consumers, End Users and General Public

At the end of this module, you are expected to:

Learning Outcomes:
 Distinguish the deceptive practices used by manufacturers and sellers and
public.

LEARNING CONTENT:

Issues probed in this chapter:

1. Product safety - the legal and the moral responsibilities of the manufacturers
and the pros and cons of government regulations designed to protect consumers.
2. The responsibilities of business to consumers concerning products’ quality,
prices, labeling and packaging.
3. Deceptive, the morally questionable techniques used in advertising.
 4. The choice between the “reasonable” consumer and “ignorant” consumer
standards is the basis for identifying deceptive advertisements.
5. Advertising and children.
6. The social desirability of advertising in general- is it a positive feature of our
economic system? Does it manipulate or merely respond to consumer needs?

Product Safety
 The increasing complexity of today’s economy and the growing dependence
of consumers on business for their serial and enrichment have high lightened
businesses responsibilities to consumers- particularly in the area of product
safety
 Because consumers are not in position of technical expertise to judge the
sophisticated products that are necessary for contemporary life, they must rely
primarily on the conscientious efforts of business to ensure consumer safety.

Legal Liability of Manufacturers

 If a defective product injures any of us, we can sue the manufacturer of that
product.

Contractual relationship- simply the sale that is the exchange of money for a commodity
of the certain description.
 It is an important source of moral and legal responsibilities for the
producer.
 It obligates business firms to provide customs with a product that ties
up to the claims the firm about the product.
Due care
- the idea that consumers and sellers do not meet as equals and that consumers
interest are particularly vulnerable to being harmed by the manufacturer, who has
knowledge and expertise the consumer does not have.
- According to this view, manufacturers have an obligation, above and beyond any
contract, to exercise due care to prevent consumer from being injured by defective
products.

Caveat emptor- “Let the buyer beware”

- We associate it with an era of patent medicines and outrageously false product claims
- It symbolizes a period in which consumers themselves had greater legal responsibility
to accept the consequences of their product choices
Doctrine of strict product liability
 Holds that the manufacturer of a product has legal responsibilities to
compensate the user of that product for injuries suffered because the
products defective condition made it unreasonably dangerous, even
though the manufacturer has not been negligent in permitting the defect to
occur.
 Under this doctrine, a judgment for recovery of damages could
conceivably be won even if the manufacturer adhered to strict quality-
control procedures.

Arguments of critics regarding the Doctrine of Strict Product Liability:

1. They contend that the doctrine is unfair


o If a firm has exercised due care and taken reasonable precautions to
avoid or eliminate foreseeable dangerous defects, they argue, then it
should not be held liable for defects that are not its fault- that is for defects
that happen despite its best efforts to guard against them.

2. Its advocates contend, first that only such a policy leads firm to bend over
backward to guarantee product safety.
3. Proponents of strict liability contend that the manufacturers are best able to
bear the cost of injuries due to defects.

Protecting the public

*Congress created one of the most important of these agencies in 1972 when it passed
the Consumer
Product Safety Act. This act empowers the Consumer Product Safety Commission to
“protect the public against unreasonable risk of injury associated with consumer’s
products”. The five-member commission sets standards for products the entire
consumer product marketing process from manufacturer to final sale,
In undertaking policy function, the commission aids consumers in evaluating product
safety, develops uniform standards, gather data, conducts research and coordinates
local, state and federal product safety laws and enforcement.
*Safety regulations may also prevent individuals from choosing to purchase a riskier,
though less expensive products.

CONTROVERSY OVER LEGAL PATERNALISM

 The doctrine that the law may justifiably be used to restrict the freedom
of the individuals for their own good.
  Paternalism is a large issue that can’t be done, justice here, but in
regard to safety regulations, three comments are in order:

1. The safety of same products or some features affect not just the consumers who
purchase the products but third parties as well
2. Anti-paternalism gains plausibility from the view that individuals know their own
interest better than anyone else and they are fully informed and able to advance
those interests.
3. The controversy over legal paternalism pits the values of individual freedom and
autonomy against social welfare.

How effective is regulation?

 There is no doubt that in some case regulation interferes with rather than the
safeguarding consumers’ interests.
 Regulations often prod business to recognize and to act on their
responsibilities to consumers.
 Sometimes even without applying the force of law, agencies can affectively
safeguard the health and safety of consumers.

Do regulations help business meet its responsibility to consumers?

 The answer is generally yes but sometimes no.
 Nonetheless, the prevailing view today among business people favors self-
regulation. Such a view certainly is in keeping with the tenet of classical
capitalism and is arguably an attractive ideal.
 However, self-regulation can easily become an instrument for subordinating
consumer interest to profit making when two goals clash.
 Under the guise of self-regulation, business may end up ignoring or
minimizing responsibilities to consumers.

The Responsibilities of Business

Simply obeying the rules and regulations does not exhaust the moral
responsibilities of business in the area of consumer safety. The exact nature of those
responsibilities is difficult to specify in general, because much depends on the particular
products or service being provided. But abiding by the following steps would do much to
help the business behave morally with respect to consumer’s safety.

1. Business should give safety the priory warranty by the product

- This injunction is important because businesses often based safety
considerations strictly on cost.
 1. One is the seriousness of the injury the product can cause
2. Frequency of occurrence

2. Business should abandon the misconception the accidents occur exclusively as a

result of product insures and that is thereby absolved of all responsibility
- At one time such a belief may have been valid, but in using today’s highly
sophisticated products, numerous have followed product instructions explicitly and have
still been injured.
- In any case, the point is that the company shares responsibility for product
safety with the consumers.
- Both manufacturers and retailers have an obligation to try to anticipate and
minimize the ways their product can cause harm, whether or not those products are
unused.
- If a product poses a serious threat, a company may need to take extraordinary
measure to ensure continued safe use to it.

3. Business must monitor the manufacturing process itself

- Companies should periodically review working conditions and the competence
of key personnel. At that design stage of the products ways, the product might fail and
the consequences of that failure may affect the business.
- Testing should be rigorous and simulate the toughest conditions. Tests should
not assume that the product will be used in just a way the manufacturer intends it to be
used.
- When a product moves into production, it often changes in a variety of ways.
These changes should be documented and referred to some appropriate party, such as
safety engineer, for analysis. The firm must be scrupulous about coordinating
department activities so that manufacturing specifications are not changed without
determining any potential dangers related to these changes.

4. When a product is ready to be marketed, companies should have their product

safety staff review their market strategy and advertising for potential safety
problems.
- This step is necessary because both product positioning and advertising
influence how a product is used, which in turn affects the likelihood of safety problems.
 5. When a product reaches the market place, firms should make available to
consumers written information about the products performance.
- This information should include operating instruction, the products safety,
features, conditions that will cause it to fail, a complete list of the ways (it should not be
used) the product can be used, and a cautionary list of the ways should not be used.

6. Companies should investigate consumer complaints

- This process encourages firms to deal fairly with consumers and to use the
most effective source of product improvement the opinions of those who use it.

*Even if firms seriously attended to these safety considerations, they couldn’t guarantee
an absolute safe product. Some hazards invariably attach to certain products, heroics
efforts notwithstanding. But businesses much acknowledge and discharge its
responsibilities in this area. Morally speaking, no one’s asking for an accident and injury
proof products, only those manufacturers do everything reasonable approach that is
ideal.

OTHER AREAS OF BUSINESS RESPONSIBILITY

1. Product Quality- most people would agree that business bears a general
responsibility to ensure that the quality of the product measures up the claims
made about it and to reasonable consumer expectations. (ex. Warranties)

Two Kinds of Warranties

* Expressed warranties- are the claims that the sellers explicitly state. It includes
the assertions about the products characteristics, assurance of the product
durability and other statements on warranty cards labels wrap and packages or in
the advertising of the product.
* Implied warranties- Include the claim, implied in any sale that a product is fit for
its ordinary, intended use. The law calls it implied warranty of merchantability.

2. Prices- the conventional determinant of product prices such as overhead,

operating expenses and the costs of materials and labor.
- Manufacturer’s trade or human psychology when they sell substantially price increase
by reducing the quality or the quantity of the product.

3. Price- fixing- is widely recognized as a violation of the rules of the game in a

market system whose ideal is open and fair price competition.
-Merchants cannot morally charge whatever they want or whatever the market will bear
any more than employees can play workers whatever they wish or get away with.

4. Labeling and Packaging- Business general responsibility to provide clear,

accurate, and adequate information undoubtedly applies to product labeling
relate primarily to truth telling and consumers primary source of the product
information.
-The moral issues involved in labeling and packaging relate primarily to truth telling and
consumer exploitation.
-Sound moral conduct in this matter must rest on a strong desire to provide consumers
with clear and useable information about the price, quality and quantity of a product so
they can make intelligent comparison and choices.

DECEPTION AND UNFAIRNESS IN ADVERTISING

ADVERTISING- form of “information’

 A certain kind of communication between a seller and a potential
buyer.
 It is the practice of attracting public attention to a product or
business for the purpose of increasing sales
Two features of Advertising:

1. It is publicly addressed to a mass as a distinct from a private message to a

specific individual.
2. Advertising is intended to induce several members of its audience to buy the
sellers product.
An advertisement can succeed in this intent in two main ways;

1. By creating a desire for the sellers’ product in consumers

2. By creating a belief in constitute that the product is a means of satisfying some
desire the buyer already has.
*Advertising provides consumers with information about goods and services.
*Advertising conveys very little information.
*The goal of advertising is to persuade us to buy the products that are being turned.

END OF LESSON
Lesson 19: Social Responsibility Towards the Consumers, End Users and General Public
Topics: Social Responsibility Towards the Consumers, End Users and General Public (Contin

Learning Outcomes: At the end of this module, you are expected to:
 Recognize the importance of knowing the rights and powers of consumers and buyers.

LEARNING CONTENT:

Ethical Problems in Providing Service to Customer

Problems in providing service

 Production
 Provides opportunities for unscrupulous person to commit
undesirable practice such as:
 using sub-standard raw materials
 substituting quality ingredients to inferior ones

 Marketing
 Selling to uninterested and reluctant customers such as:
 Making false statement about the quality, content and
usefulness of the product

How Providing Service Becomes a Disservice

Misrepresentation
2 Types:
1. Intentional Misrepresentation-deliberate and willful, commonly
called lying
2. Unintentional Misrepresentation-not deliberate, the one making
may not be aware that he is engaging in such, commonly called
white lie
Indirect Misrepresentation
 Omitting adverse information about the products or a service
1. Caveat emptor- “let the buyer beware”; the buyer is not
obligated to reveal any defect in product or service he is
selling
2. Business Ignorance-business is unable to provide the
customer with complete information he needs to make a fair
decision
Over persuasion
  The process of appealing to the emotion of a prospective
customer and moving him into buying an item of merchandise he
needs.

ETHICAL PROBLEMS AND CONCERNS IN SELLING

Selling-the practice of exchanging goods for money.

1. Lying and manipulation

2. Price gouging-is the practice of pricing a product far above normal market value
on the basis that consumers have no other way to buy the product.
3. False Prices
4. Commission
5. Conflict of interest-occurs when people’s professional decisions and actions
are influenced by their personal interests.
Principles of Ethical Selling

1. Think long-term-don’t take shortcut or cut corners

2. Elevate the goal-not only to make a sale but to provide mutually beneficial
relationship
3. Change the tactics-never lie to, deceive, or manipulate potential customers
4. Learn to listen-forego the “canned and planned presentation”

ETHICAL PROBLEMS IN PRICE DETERMINATION

Price- the amount paid for goods or for services rendered

Price Theories
1. Man is entitled to enjoy the fruit of his labor and may therefore
establish any price he pleases for the goods he has produced.
2. Price depends on the law of supply and demand.

Methods of Determining Fair Price

1. Fair is related to fair return (profit)
 Pricing structure is fair when its profit is equal to the average
profit in the same industry for the same amount of a capita; and
total resources used
2. Price in Fixed Price System is Fair Price
  The seller is expected to establish the lowest price for his goods
and the customer is in turn expected to take or leave them at the
price quoted
 The same price for a particular product is charge for all buyers in
its store
3. Bargaining or Movable Price System
 Takes place in an open market where the price of goods tends to
reach the lowest point possible because of the pressure of
competition
 It is also time consuming, induces the seller and the buyer to lie
from each other and the price is not uniform for all buyers of the
same product.
4. Bidding
 Business resort to bidding to get the approximation of the fair
price

Pricing Practices (unethical)

1. Varying Price Policy-varies depending on the buyer (favored buyer;
bargaining ability)
2. Follow the leader pricing-what is being sold is of the same quality as
well-known brands
3. Odd price policy-the good is at a cheaper price
4. Loss leader pricing-makes the customer believe that all articles being
sold in the store are on sale

SURVEY OF LAWS ON BUSINESS ETHICS

RA 7394. The Consumer Act of the Philippines of 1991

PROTECTION AGAINST DECEPTIVE, UNFAIR AND UNCONSCIONABLE SALES ACTS OR

PRACTICES
Art 48. The State shall promote and encourage fair, honest and equitable relations
among parties in the consumer transactions and protect the consumer against unfair
and unconscionable sales acts or practices.

Art 50. A deceptive act or practice by a seller or a supplier in connection with the
consumer transactions violates this act whether it occurs before, during or after the
transaction. An act or practices shall be deceptive whenever the producer, manufacturer,
supplier or seller through concealment, false representation of fraudulent manipulation
induces a consumer to enter into sales or lease transaction of any consumer products
or service.

WEIGHTS AND MEASURE

 The act provides that all instruments for determining weights
and measures in all consumer and related transaction shall be
tested, calibrated and sealed every six months by the official sealer.
Metric System
 It is unlawful to offer any consumer product to the public without
appropriate price tag, label or making publicly displayed to indicate
the price. Said products shall not be sold at higher price than that
stated therein and without discrimination to all buyers.
 It must be written clearly, indicating the price of the consumer
product per unit in pesos and centavos

UNETHICAL PRACTICES RELATING TO FOOD, DRUG AND COSMETIC DEVICES

RA No. 3720 Food, Drug and Cosmetic Act

 The consumer act designates the DOH as the government agency to
implement the provision of the act on food, drugs, cosmetics and devices

Prohibited acts:
1. The manufacturer, importation, exportation, sale, offering for sale or
distribution of any adulterated or misbranded food, drug, device and
cosmetic.
2. Refusal of manufacturer to permit entry or inspection of BFAD agents
or to allow samples to be collected
3. Giving of false guarantees or undertaking
4. Forging, counterfeiting or falsely representing or without proper
authority, any mark, stamp tag, label or other identification device required
or authorization by law.
5. The manufacture, importation, exportation, sale, offering for sale
distribution or transfer of any drug or device without being registered or
licensed by DOH.
6. Offering for sale of drug or devices beyond their expiration date
7. The sale and distribution of a batch of drugs without batch certification
when required
8. The introduced or deliver for introduction into commerce any mislabel
hazardous substances or ban hazardous substances

Penalties such as fines and imprisonment are imposing on those violating the
provision of the Act.
 TRADEMARKS, TRADE NAMES AND SERVICE MARKS

TRADEMARK
 includes any distinctive mark, name, symbol or device or any
combination thereof
 defined as a word, letter, device or symbol used in connection with
merchandise and pointing distinctively to the origin or ownership of the
article to which it is applied

Trade name
 includes individual name, surname, firm names, trade name,
devices or words

Service mark
 means a mark used in the sale or advertising of services to identify
the service of one person and to distinguish them from the service of
other and includes names and distinctive feature of radio and other
advertising

Collected Trademark or Collective Trade name

 Used by the members of a cooperative or association or other
collective group or organization. (ex. Rotary International, Knight of
Columbus, YMCA

Consumer Protection
What is consumer protection?
Consumer protection pertains to measures that promote the rights of clients, enable
them to make informed choices and protect them from unscrupulous acts that deny
them the true value and optimum benefits of microfinance services such as credit,
deposits/savings, insurance and remittances and transfers. Consumer protection is
necessary to safeguard the interests of consumers of microfinance services from
adverse effects
brought about by undesirable practices of providers. Undesirable practices happen
because of -
unfair and undue competition which can encourage conduct of aggressive and
inappropriate strategies
among providers;
lack of access to information by clients which can lead to poor transaction decisions;
and
incompatible interests of service providers and consumers (asymmetric information and
moral hazard problems).

How can we ensure consumer protection?

Consumer protection can be ensured through measures such as -
transparency of transactions;
implementation of regulations on financial practices;
promotion of consumer literacy and greater access to information; and
implementation of mechanisms for filing and handling consumer complaints and
grievances.

What is the Consumer Protection Act?

Republic Act 7394, otherwise known as the Consumer Act of the Philippines of 1991, is
the legal basis for consumer protection in the country. It embodies the state policy on
the protection of consumers and establishes the standards of conduct for business and
industry in the country. Title IV (Consumer Credit Transaction) of the Act requires the
transparency or full disclosure of the true cost of credit transactions and determination
of interest and finance charges. Said provision reiterates the intent of RA 3765 (The
Truth in Lending Act) requiring creditors and providers of loans, as well as credit-
granting NGOs, to furnish their borrowers, prior to the consummation of any transaction,
a clear written statement disclosing the amount, interest and other finance charges
relative to their loan.

What are other existing laws, rules and regulations that provide protection to
consumers against unscrupulous acts and practices of financial providers?
RA 8791 (General Banking Law of 2000)
RA 7906 (Thrift Banks Act of 1995)
RA 7353 (Rural Banks Act of 1992)
RA 6938 (Cooperative Code of 1990)
RA 3591; RA 3591 as amended (2004) (PDIC Charter)
RA 8553 (Financing Company Act of 1998)
RA 9474 (An Act Governing the Establishment, Operation and Regulation of Lending
Companies of 2007)
Batas Pambansa Bilang 68 (Corporation Code of 1980)
PD 612 (Insurance Code of 1974)
IC Memorandum Circular 9-2006
BSP Manual of Regulations for Banks (MORB)
Related BSP Circulars
Related SEC Memorandum Circulars

What information do you need to know when availing of microfinance products or

services?
eligibility and documentary requirements of the transaction
face amount transacted whether to be financed, deposited, insured, paid or transferred
interest rate, finance charges & taxes to be paid
amount of amortization/premiums to be paid for loans and insurance, respectively
duration/maturity of contract/policy
penalties and other charges
benefits & returns from the transaction
terms of payment including manner and frequency of payments, grace period
terms and conditions for claiming benefits

Filing and Handling Consumer Complaints and Grievances

When does one file a complaint?
One can file a complaint when there is
any violation of his/her rights as a consumer;
willful neglect of duties of financial and insurance providers that results in the loss or
non-enjoyment of benefits of clients;
non-disclosure of material information relative to the transaction; or
unjustifiable delay in processing of loans or claims that extends beyond the period
agreed upon

Duties of Business before Transaction

1. Production- it is the duty of the manufacturers not only to guarantee the

customer’s satisfaction but also to take precautionary measures to make sure
that the consumers are not harmed by the products they sell.
 2. Information- that the company makes only those promotional literature or
advertisements which do not contain any deceptive or misleading description,
claims or illustrations

Duties of Business during Transaction

1. The duty to comply with the terms of sales contracts.

2. The duty to fully disclose the nature of a product and services
3. The duty to avoid misrepresentation
4. The duty to avoid coercion and undue influence

Duties of business after Transaction

1. Feedback system
2. Resolving complaints
3. Compensatory justice

Government Agencies Created to protect Consumers

1. Department of Trade and Industry
 Questionable service practices with regard to repair
 Sale of mislabeled products
 Fraudulent advertising
 Sale of counterfeit goods
 Failure to award raffle prizes\violation of the Price Tag Law
 Complaints regarding real estate transaction
 Breach of contract or warranty
 Violation of the sales promo mechanics
 Sale of defective or substandard product (no product standard
mark)
2. Department of health
 Adulterated/banned/mislabeled food and drugs
 Hazardous substances
 Cosmetics
3. Department of Interior and Local Government
 Defective or tampered weighing scales
4. Bangko Sentral ng Pilipinas
 Incomplete or non-disclosure of true cost of credit extended to
consumers
 END OF LESSON
Lesson 21: Social Responsibility Towards Competitors

Topics: Social Responsibility Towards Competitors

At the end of this module, you are expected to:
Learning Outcomes:  distinguish a healthy and bad competition.
 examine different kinds of competitors and the competencies needed to
play fairly the rules of the game in competition.

LEARNING CONTENT:
Challenging Market Dominance and Price Fixing Scheme
Drivers of Free Market and Global Competition

1. The Globalization of Competition

 With the spreading of trade liberalization and deregulation, there is
now closer integration of domestic and international markets.

2. Better Informed and More Discerning Customers

 Advancement in international communication, increased access to
knowledge and information and the increased integration of markets
have led to internationalization of consumer demands and
preferences; resulting to very discriminating customers who are
demanding more product differentiation and specialization.

3. Increasing Number of Competitors

 Many enterprises are entering international and liberalized national
markets.
Globalization
 the process by which the economic and social systems of nations are
connected together so that goods, services, capital and knowledge move freely
between nations.
Free Trade
 a system of trade policy that allows traders to act and or transact without
interference from government
 According to the law of comparative advantage the policy permits trading
partners mutual gains from trade of goods and services.
The Law of Comparative Advantage = states that each member in a group of trading partners
should specialize in and produce the goods in which they possess lowest opportunity
costs relative to other trading partners.
Protectionism is the economic policy of restraining trade between states, through methods
such as tariffs on imported goods, restrictive quotas, and a variety of other government
regulations designed to discourage imports, and prevent foreign take-over of domestic markets
and companies.

Protectionist policies
A variety of policies can be used to achieve protectionist goals. These include:

1. Tariffs: Typically, tariffs (or taxes) are imposed on imported goods. Tariff rates usually
vary according to the type of goods imported.
2. Import quotas: To reduce the quantity and therefore increase the market price of
imported goods.
3. Administrative Barriers: Countries are sometimes accused of using their various
administrative rules (e. g. regarding food safety, environmental standards, electrical
safety, etc.) as a way to introduce barriers to imports.
4. Anti-dumping legislation Supporters of anti-dumping laws argue that they prevent
"dumping" of cheaper foreign goods that would cause local firms to close down.
5. Direct Subsidies: Government subsidies (in the form of lump-sum payments or cheap
loans) are sometimes given to local firms that cannot compete well against foreign
imports.
6. Export Subsidies: Export subsidies are often used by governments to increase exports.
Export subsidies are the opposite of export tariffs, exporters are paid a percentage of the
value of their exports.
7. Exchange Rate manipulation: A government may intervene in the foreign
exchange market to lower the value of its currency by selling its currency in the foreign
exchange market.

Interventions include:
 subsidies,
 taxes and tariffs,
 non-tariff barriers, such as regulatory legislation and quotas,
 inter-government managed trade agreements such as the GATT
 any governmental market intervention resulting in artificial prices.

Features of free trade

 trade of goods without taxes (including tariffs) or other trade barriers (e.g., quotas on
imports or subsidies for producers)
 trade in services without taxes or other trade barriers
 The absence of "trade-distorting" policies (such as taxes, subsidies, regulations, or laws)
that give some firms, households, or factors of production an advantage over others
 Free access to markets
 Free access to market information
  Inability of firms to distort markets through government-
imposed monopoly or oligopoly power
 The free movement of labor between and within countries
 The free movement of capital between and within countries
Free market
 is a market without economic intervention and regulation by government
except to enforce ownership ("property rights") and contracts.
 It is the opposite of a controlled market, where the government regulates how
goods, services and labor are used, priced, or distributed.
 Advocates of a free market traditionally consider the term to imply that
the means of production is under private, not government control as well
Free-market economy is an economy where all markets within it are unregulated by any parties
other than those players in the market. In its purest form the government plays a neutral role in
its administration and legislation of economic activity neither limiting nor actively promoting it (for
example neither regulating industries let alone owning economic interests nor offering subsidies
to businesses let alone protecting them from internal/external market pressures).
 The theory holds that within an ideal free market, property rights are
voluntarily exchanged at a price arranged solely by the mutual consent
of sellers and buyers.
 In the marketplace, the price of a good or service helps communicate
consumer demand to producers and thus directs the allocation of resources
toward consumer, as well as investor, satisfaction.
 Free-market economics is closely associated with laissez-faire economic
philosophy, which advocates approximating this condition in the real world by
mostly confining government intervention in economic matters to regulating
against force and fraud among market participants.
 In social philosophy, a free-market economy is a system for allocating goods
within a society: purchasing power mediated by supply and demand within the
market determines who gets what and what is produced, rather than the state. A
free market may refer narrowly to national economies, or internationally; specific
reference to international markets is referred to as free trade (for goods) or lack
of capital controls (for money). Early proponents of a free-market economy in
18th century Europe contrasted it with the medieval, early modern,
and mercantilist economies which preceded it.

Ethical justification
The ethical justification of free markets takes two forms.
 It appeals to the intrinsic moral superiority of autonomy and freedom (in the
market), deontology-that is an approach to ethics that judges the morality of an
action based on the action's adherence to a rule or rules.
 The other is a form of consequentialism—a belief that decentralized planning by a
multitude of individuals making free economic decisions produces better results in
regard to a more organized, efficient, and productive economy, than does a centrally-
planned economy where a central agency decides what is produced, and allocates
 goods by non-price mechanisms. An older version of this argument is
the metaphor of the Invisible Hand, familiar from the work of Adam Smith.
UNFAIR COMPETITION
 means any FRAUDULENT, deceptive, or dishonest trade practice that is
prohibited by STATUTE, regulation, or the COMMON LAW.
 It consists of a body of related doctrines that gives rise to several different
causes of actions, including:
(1) actions for INFRINGEMENT of PATENTS, TRADEMARKS, or copyrights;
(2) actions for wrongful APPROPRIATION of trade names, TRADE DRESS, and trade
secrets; and
(3) actions for publication of defamatory, false, or misleading representations.
The law of unfair competition serves five purposes.
First, it seeks to protect the economic, intellectual, and creative investments made by
businesses in distinguishing themselves and their products.
Second, the law seeks to preserve the good will that businesses have established with
customers over time.
Third, the law seeks to deter businesses from appropriating the good will of their competitors.
Fourth, the law seeks to promote clarity and stability by encouraging customers to rely on a
merchant's TRADE NAME and reputation when evaluating the quality and prices of rival
products.
Fifth, the law of unfair competition seeks to increase competition by providing businesses with
incentives to offer better goods and services than others in the same field.

END OF LESSON
Lesson 22: Social Responsibility Towards the Competitors

Topics: Social Responsibility Towards the Competitors (Continuation)

At the end of this module, you are expected to:
Learning Outcomes: distinguish a healthy and bad competition.

 examine different kinds of competitors and the competencies

needed to play fairly the rules of the game in competition.

LEARNING CONTENT:
The Law of Unfair Competition
1. Free Market Theory Underlying the Law
The freedom to pursue a livelihood, operate a business, and otherwise compete in the
marketplace is essential to any free enterprise system. Competition creates incentives for
businesses to earn customer loyalty by offering quality goods at reasonable prices. At the same
time, competition can also inflict harm. The freedom to compete gives businesses the right to
lure customers away from their competitors. When one business entices enough customers
away from a competitor, the competitor may be forced to shut down its business or move to a
different location.
2.Interference with Business Relations
No business can effectively compete without establishing good relationships with its
employees and customers. In some instances the parties execute a formal contract to
memorialize the terms of their relationship. In other instances business relations are based on a
less formal oral agreement. Most often, however, business relations are conducted informally
with no contract or agreement at all. Grocery shoppers, for example, typically have no
contractual relationship with the supermarkets that they patronize. The law of unfair competition
regulates all three types of relationships, formal, informal, and those falling somewhere in
between.
3. Infringement upon Trademarks, Trade Names, and Service Marks
Before a business can establish commercial relations with customers and other businesses, it
must create an identity for itself, as well as for its goods and services. Economic competition is
based on the premise that consumers can intelligently distinguish between products offered in
the marketplace. Competition is made difficult when rival products become easily mistaken for
each other, since one business may profit from the sale of a product to consumers who believe
they are buying a rival's product. Part of a business's identity is the good will it has established
with customers, while part of a product's identity is the reputation it has earned for quality and
value. As a result, businesses spend tremendous amounts of resources identifying their goods,
distinguishing their products, and cultivating good will.
The four principal devices businesses use to distinguish themselves are trademarks, service
marks, trade names, and trade dress.
Trademarks consist of words, logos, symbols, slogans, and other devices that are affixed to
goods for the purpose of signifying their origin and authenticity to the public. The circular black,
blue, and white emblem attached to the rear end of motor vehicles manufactured by Bavarian
Motor Works (BMW) is a familiar trademark that has come to signify meticulous craftsmanship
to many consumers.
Trade names are used to identify CORPORATIONS, partnerships, sole proprietorships, and
other business entities. A trade name may be the actual name of a business that is registered
with the government, or it may be an assumed name under which a business operates and
holds itself out to the public. For example, a husband and wife might register their business as
"Sam and Betty's Bar and Grill," while doing business as "The Corner Tavern." Both names are
considered trade names under the law of unfair competition.
Trade dress refers to a product's physical appearance, including its size, shape, texture, and
design. Trade dress can also include the manner in which a product is packaged, wrapped,
presented, or promoted. In certain circumstances particular color combinations may serve as
trade dress. For example, the trade dress of Chevron Chemical Company includes the red and
yellow color scheme found on many of its agricultural products. Chevron Chemical Co., v.
Voluntary Purchasing Groups, Inc., 659 F.2d 695 (5th Cir. 1981).
Note: When a business uses a trademark, service mark, trade name, or trade dress that is
deceptively similar to competitor's, a cause of action for infringement of those intellectual
property interests may exist. The law of unfair competition forbids companies from confusing
customers by using identifying trade devices that make their businesses, products, or services
difficult to distinguish from others in the market.
Infringement upon Copyrights and Patents and Theft of Trade Secrets
The intangible assets of a business include not only its trade name and other identifying trade
devices but also its inventions, creative works, and artistic efforts. Broadly defined as trade
secrets, this body of commercial information may consist of any formula, pattern, process,
program, tool, technique, mechanism, or compound that provides a business with the
opportunity to gain an advantage over a competitor. Although a trade secret is not patented or
copyrighted, the law of unfair competition awards individuals a property right in any valuable
trade information they discover and attempt to keep secret through reasonable steps
The owner of a trade secret is entitled to its exclusive use and enjoyment. A trade secret is
valuable not only because it enables a company to gain advantage over a competitor, but also
because it may be sold or licensed like any other property right. On the other hand, commercial
information that is revealed to the public, or at least to a competitor, retains limited commercial
value. Consequently, courts vigilantly protect trade secrets from disclosure, appropriation, and
theft. Businesses may be held liable for any economic injuries that result from their theft of a
competitor's trade secret, as may other opportunistic members of the general public. Employees
may be held liable for disclosing their employer's trade secrets, even if the disclosure occurs
after the employment relationship has ended.
Valuable business information that is disclosed to the public may still be protected from
infringement by COPYRIGHT and PATENT law. Copyright law gives individuals and businesses
the exclusive rights to any original works they author, including movies, books, musical scores,
sound recordings, dramatic creations, and pantomimes. Patents give individuals and
businesses the exclusive rights to make, use, and sell specific types of inventions, such as
mechanical devices, manufacturing processes, chemical formulas, and electrical equipment.
Federal law grants these exclusive rights in exchange for full public disclosure of an original
work or invention. The inventor or author receives complete legal protection for his or her
intellectual efforts, while the public obtains valuable information that can be used to make life
easier, healthier, or more pleasant.
False Advertising, Trade Defamation, and Misappropriation of a Name or
Likeness
A business that successfully protects its creative works from theft or infringement may still be
harmed by FALSE ADVERTISING. Advertising need not be entirely false in order to be
actionable under the law of unfair competition, so long as it is sufficiently inaccurate to mislead
or deceive consumers in a manner that it inflicts injury on a competitor. In general businesses
are prohibited from placing ads that either unfairly disparage the goods or services of a
competitor or unfairly inflate the value of its own goods and services. False advertising deprives
consumers of the opportunity to make intelligent comparisons between rival products. False
advertising also drives up costs for consumers who spend additional resources in examining
and sampling products
Three specific types of representations:
(1) false representations that goods or services have certain characteristics, ingredients, uses,
benefits, or quantities;
(2) false representations that goods or services are new or original; and
(3) false representations that goods or services are of a particular grade, standard, or quality.
Advertisements that are only partially accurate may give rise to liability if they are likely to
confuse prospective consumers. Ambiguous representations may require clarification to prevent
the imposition of liability. For example, a business which accuses a competitor of being
"untrustworthy" may be required to clarify that description with additional information if
consumer confusion is likely to result.
Trade DEFAMATION is a close relative of false advertising. The law of false advertising
regulates inaccurate representations that tend to mislead or deceive the public. The law of trade
defamation regulates communications that tend to lower the reputation of a business in the eyes
of the community. A species of TORT LAW, trade defamation is divided into two
categories, LIBEL AND SLANDER.
Trade libel generally refers to written communications that tend to bring a business into
disrepute, while trade slander refers to defamatory oral communications. Before a business may
be held liable under either category of trade defamation, the First Amendment requires proof
that a defamatory statement was published with "actual malice," which the Supreme Court
defines as any representation that is made with knowledge of its falsity or in reckless disregard
of its truth. The actual MALICE standard places some burden on businesses to verify, prior to
publication, the veracity of any attacks they level against competitors.
It is also considered tortious for a business to appropriate the name or likeness of a famous
individual for commercial advantage.

Trust (monopoly)
A special trust or business trust is a business entity formed with intent to monopolize business,
to restrain trade, or to fix prices.
Monopoly (from Greek monos / μονος (alone or single) + polein / πωλειν (to sell)) exists when a
specific individual or an enterprise has sufficient control over a particular product or service to
determine significantly the terms on which other individuals shall have access to it. (This is in
contrast to a monopsony which relates to a single entity's control over a market to purchase a
good or service. And contrasted with oligopoly where a few entities exert considerable influence
over an industry). Monopolies are thus characterized by a lack of economic competition for
the good or service that they provide and a lack of viable substitute goods. The verb
"monopolize" refers to the process by which a firm gains persistently greater market share than
what is expected under perfect competition.
Antitrust Laws
 laws enacted against unfair competition.
 Purpose is to promote and safeguard competition and to punish
anticompetitive behavior
 Example is Sherman Antitrust Act; Clayton Antitrust Act of 1914
Scope:
 Price fixing between competitors
 Abuses of market power by a monopolist or dominant firm
 Agreements between competitors to restrict output (cartel)

Oligopoly

 A market dominated by a small number of participants who are able to collectively

exert control over supply and market prices.

Cartel
 A cartel is a formal (explicit) agreement among competing It is a formal
organization of producers and manufacturers that agree to fix prices, marketing,
and production.
There are several factors that will affect the firms' ability to monitor a cartel:

1. Number of firms in industry

The lower the number of firms in the industry, the easier for the members of the cartel to monitor
the behavior of other members.

2. Characteristics of products sold by the firms

Cartels that sell homogeneous products are more stable than those that
sell differentiated products.

3. Production costs of each member

Similar cost structures of the firms in a cartel make it easier for them to co-ordinate, as they will
have similar maximizing behavior as regards prices and output.

4. Behavior of demand
If an industry is characterized by a varying demand (that is, a demand with cyclical fluctuations),
it is more difficult for the firms in the cartel to detect whether any change in their sales volume is
due to a demand fluctuation or to cheating by another member of the cartel.

5. Frequency of sales and their characteristics

If each firm's sales consist of a small number of high-value contracts, then it can make a
relatively large short-term gain from cheating on the agreement and thereby winning more of
these contracts.

END OF LESSON