Learning Module: A. Ethical Issues in Employer-Worker Relations Learning Objectives
Learning Module: A. Ethical Issues in Employer-Worker Relations Learning Objectives
Learning Module: A. Ethical Issues in Employer-Worker Relations Learning Objectives
Conflict of Interest
A conflict of interest is an actual or a potential violation of a fiduciary
duty of loyalty to the business owner.
Conflict of interest exists when “the independence and impartiality of
decision-makers is compromised due to competing interests
influencing the outcome of a decision, for personal benefit in
particular.”
For example, there is a conflict of interest when a human resources
manager interviews a job applicant who happens to be his or her
godson. The manager has a potential interest to extend care toward
somebody who is close to him or her. This personal interest conflicts
with the interest of the business owner who wants the best qualified
candidate for the job position.
Nepotism (favoring one’s relatives and friends) is a common practice
of organizations in the Philippines.
There is also a conflict of interest when the purchasing officer favors
buying the supplies from a company that he or she is also a part-
owner.
According to John Boatright, the following are other examples of
conflict of interest:
Self-dealing – activities that are those transactions wherein
the employee (usually, somebody who has power in the
company) uses his or her position to gain personal profits to the
detriment of the company where he or she has the duty of
loyalty and care. “If a director, for instance, would benefit from
the sale of land or real estate to the corporation, the deal must
be an economically prudent deal for the corporation. The
director must not promote such a real estate transaction if only
the director benefits, while the corporation would gain more
from an alternative transaction.”
Direct competition – this happens when the employee has
another business activity that directly competes with his or her
current employer. The employee may even use the knowledge,
skills and other assets that he or she gets from the company in
order to use it for his or her own business undertaking.
Use of confidential information – some employees
especially in the top-level position of the firm possess
confidential and valuable information. Examples of confidential
information are trade secrets and patent rights. When an
employee uses this information for his or her personal interest,
then he or she is also disloyal to the company.
Accepting bribes – bribes in the form of money or privileges
would always work for the advantage or interests of the
employee who receives it. The burden of bribery’s legal
implications lies not only on the shoulders of the bribed
employee; the company may also be found to be legally liable.
In short, the acceptance of a bribe by a fiduciary is not to the
interest of the firm.
A dilemma may arise when one finds it difficult to distinguish between
a bribe and a gift. The employee must be knowledgeable enough
about the policies of the company with regard to gift-giving in order to
avoid the possible conflict of interest.
The employee must also be attentive in order to determine whether
the gift-giver does not expect anything in return or whether the
intention of gift-giving is an honest token of gratitude or an attempt to
influence the receiver of the gift.
A very expensive gift may not really be a gift at all but a bribe.
When a luxury car ordinarily cost 6 million pesos and a government
official gets a very big discount by buying it for only 1.5 million pesos,
there is a reason to believe that this offer is not merely a gift. The gift-
giver may be expecting something in return.
Whistleblowing
Indeed, the employee has the moral duty to be loyal to the employer.
But what if the employee discovered company activities and operations
that are illegal, unethical, and harmful to the public or to the
environment? In some instances, the employee has the moral duty to
break its loyalty towards the company and think of his/her greater
responsibility towards the public. This leads to the rise of the
phenomenon that we call whistleblowing.
Whistleblowing is an attempt by a member or former member of an
organization to disclose wrongdoing in or by the organization.”
Velasquez maintains that whistleblowing is morally justifiable under
certain condition:
First, the whistleblower must have sufficient and accurate
evidences of the wrongdoing. One should not blow the whistle
based on hearsay and unfounded accusations.
Second, the whistleblower must have already exhausted all
means to resolve the issue internally with his or her superiors.
He or she has found ways to correct the wrongdoing through
the various mechanisms that the company offers.
Third, there should be a high probability that whistleblowing
would lead to the correction of the wrongdoing.
Lastly, the wrongdoing must be something so serious that it
justifies the potential harmful effects to the whistleblower and
his or her family and to other involved parties.
Whistleblowing is not an easy thing to do. The whistleblower may be
compared to a dwarf who fights the giant that is the corporation.
Business owners must devise mechanisms in order to encourage their
workers to report at once to the management any illegal or unethical
practice that they witness.
Businesses must collaborate with the government in formulating
meaningful laws that would encourage whistleblowers and protect
their rights; that is, if the business is true to its promise of being
morally upright and socially responsible.
Tax Evasion
The online Business Dictionary defines taxation as “a means by which
governments finance their expenditure by imposing charges on citizens
and corporate entities.”
Benjamin Franklin said, “In this world nothing can be said to be
certain, except death and taxes.”
With regard to the object being taxed, we can say that there are two
kinds of taxation:
Individual taxation – refers to taxation directed to the
individual citizen who gain income and who consume goods and
services.
Business taxation – refers to taxation directed to the income
accumulated by the different forms of business establishments
such as sole proprietorship, partnership and corporations.
A business has to pay taxes in many forms:
Corporate taxes – coming from the corporate income
Value-added taxes – coming from the direct sales of products
Fees – implemented in localities such as business permits and
licenses.
Why do we have to pay taxes? Why should business institutions pay
taxes? The main reason behind the imposition of taxes is to provide
and sustain the activities of the government. Another reason is for the
purpose of social welfare and wealth redistribution.
There are two (2) common ways of escaping the net of taxation:
Tax evasion – failure to make full disclosure to the
government
Tax avoidance – use of lawful tax planning techniques
Tax evasion is both illegal and unethical. Tax avoidance is legal but
raises some ethical questions.
Investopedia defines tax evasion as “an illegal practice where a
person, organization, or corporation intentionally avoids paying
his/her/its true tax liability.
Common practices of tax evasion include: underreporting of income,
overstatement of expenses, use of fictitious receipts, the keeping of
double sets of books, false or fictitious entries in books, fictitious
transactions in the name of dummies, nonrecording of sales, and
others.
One author defines tax avoidance as involving “legal rearrangements
of one’s economic activities in order to lower the tax liability. This is
done by moving capital or labor to areas, geographical or otherwise,
where tax rates are lower and/or by manipulating the tax parameters
through the legal means to spread or defer the tax liability over time
thereby effectively reducing the tax rate.
Tax evasion is usually accomplished with the help of unscrupulous
government official while tax avoidance is usually planned and
implemented with the help of experts such as accountants, lawyers
and financial managers.
Filipino economist Rosario Manasan said that the impact of tax
avoidance on the economy is very similar with tax evasion practices:
“loss of government revenue, increase in taxpayer’s after-tax income,
and perverse effects on the equity and efficiency goals of the tax
system.
It is reported that tax evasion costs the Philippine government an
amount of 360 billion pesos every year.
Why is tax evasion ethically wrong?
First, when you evade taxes you also undermine the most
important purposes of taxation that were discussed above. You
do not contribute to the maintenance of a government that
ensures and promotes peace, security and the well-being of the
whole society.
Second, when you evade taxes you disobey a legitimate
government entrusted to create laws that are beneficial to the
society. Just like ordinary citizens, businesspersons have the
moral duty to follow the laws, especially those that directly
pertain to the workings of their businesses.
What if we go to an extreme situation wherein a government is proven
to be oppressive, inhuman, and unjust? For example, should you still
honestly pay your taxes to a government that kills people who openly
oppose it? Would you pay taxes to a leader like Adolf Hitler? On these
extreme instances, it is difficult to blame some people who decide not
to pay taxes. For them, it is not just proper not to pay taxes, it may
even be one’s duty not to cooperate with an oppressive government
by not paying your taxes.
Bribery
Bribery is generally considered as a form of corruption.
According to the Gallup Survey done in 2012, “about two in three
adults worldwide believe corruption is widespread in the businesses in
their countries.
In 2013, Transparency International released its global survey called
Corruption Perception Index (CPI). It shows that Denmark and New
Zealand are perceived to be the least corrupt among all the countries
in the world. The Philippines was 94th in the rank.
According to Scott Turrow: “Bribery occurs when property or personal
advantage is offered, without the authority of law, to a public official
with the intent that the public official act favorably to the offeror at
any time or fashion in execution of the public official’s duties.”
Why is Bribery ethically wrong?
According to Scott Turrow: First, bribery violates the
fundamental notion of equality. The briber becomes unfair in
relation to other businesspersons who want to do business with
the government, the playing field is no longer level. The briber
has an advantage over and against other businesspersons. This
is a violation of fundamental justice and fairness resulting to
clear inequality among businesspeople, thus, bribery is
considered as a crime against justice.
Second, it undermines the vitality of the institutions affected.
Bribery and corruption may be contributory to why people lose
their trust in public institutions such as the government and
business.
Bribery seriously hurts the economy of a country. Lots of resources
that may be used for meaningful programs are lost in corrupt
practices.
What business ethicists found out is that corruption, bribery, and
extortion are certainly unethical practices. These acts violate
fundamental ethical principles and values that the society holds to be
important. Furthermore, these acts have many harmful effects to
economic, political, social, and business institutions.
Environmentalism
Environmentalism generally refers to “a concern with safeguarding the
natural world and its various elements and the differing ways in which
such a concern is expressed by people.”