Northwestern University

College of Business Education

Laoag City

Good Governance and Social Responsibility

Final Handout

CHAPTER VI: CORPORATE GOVERNANCE AND CORPORATE SOCIAL

RESPONISBILITY

Shareholder VS. Stakeholder

Shareholders are always stakeholders in a corporation, but stakeholders are not always

shareholders. A shareholder owns part of a public company through shares of stock,
while a stakeholder has an interest in the performance of a company for reasons other
than stock performance or appreciation.

Understanding the Role of the Shareholder

A shareholder can be an individual, company, or institution that owns at least one share
of a company and therefore has a financial interest in its profitability. For example, a
shareholder might be an individual investor who is hoping the stock price will increase
because it is part of their retirement portfolio. Shareholders have the right to exercise a
vote and to affect the management of a company. Shareholders are owners of the
company, but they are not liable for the company’s debts.1 For private companies, sole
proprietorships, and partnerships, the owners are liable for the company's debts. A sole
proprietorship is an unincorporated business with a single owner who pays personal
income tax on profits earned from the business. 2

Understanding the Role of the Stakeholder

Stakeholders can be:

 owners and shareholders

 employees of the company
 bondholders who own company-issued debt
 customers who may rely on the company to provide a particular good or service
 suppliers and vendors who may rely on the company to provide a consistent
revenue stream

Although shareholders may be the largest type of stakeholders, because shareholders are
affected directly by a company's performance, it has become more commonplace for
additional groups to also be considered stakeholders.

What Is an Annual General Meeting (AGM)?

An annual general meeting (AGM) is a mandatory yearly gathering of a company's
interested shareholders. At an AGM, the directors of the company present an annual
report containing information for shareholders about the company's performance and
strategy.

Shareholders with voting rights vote on current issues, such as appointments to the
company's board of directors, executive compensation, dividend payments, and the
selection of auditors.

KEY TAKEAWAYS

 Shareholders who do not attend the meeting in person may usually vote by proxy,
which can be done online or by mail. 
 At an AGM, there is often a time set aside for shareholders to ask questions to the
directors of the company.
 Activist shareholders may use an AGM as an opportunity to express their
concerns.
How an Annual General Meeting Works
An annual general meeting, or annual shareholder meeting, is primarily held to allow
shareholders to vote on both company issues and the selection of the company's board of
directors. In large companies, this meeting is typically the only time during the year
when shareholders and executives interact.

The exact rules governing an AGM vary according to jurisdiction. As outlined by many
states in their laws of incorporation, both public and private companies must hold
AGMs, though the rules tend to be more stringent for publicly traded companies.

Public companies must file annual proxy statements, known as Form DEF 14A, with the
Securities and Exchange Commission (SEC). The filing will specify the date, time, and
location of the annual meeting, as well as executive compensation and any material
matters of the company concerning shareholder voting and nominated directors.

If a company needs to resolve a problem between annual general meetings, it may call
an extraordinary general meeting.

Qualifications for an Annual General Meeting

The corporate bylaws that govern a company, along with its jurisdiction, memorandum,
and articles of association, contain the rules governing an AGM. For example, there are
provisions detailing how far in advance shareholders must be notified of where and when
an AGM will be held and how to vote by proxy. In most jurisdictions, the following
items, by law, must be discussed at an AGM:

 Minutes of the previous meeting: The minutes of the previous year's AGM must
be presented and approved.
 Financial statements: The company presents its annual financial statements to
its shareholders for approval.
 Ratification of the director's actions: The shareholders approve and ratify (or
not) the decisions made by the board of directors over the previous year. This
often includes the payment of a dividend.
 Election of the board of directors: The shareholders elect the board of directors
for the upcoming year.

CHAPTER VII: ETHICAL ISSUES AND PROBLEMS IN BUSINESS AND THE

CORPORATE WORLD

Sexual Harassment - an issue in the corporate world that must be looked into because it
can create a hostile and unhealthy workplace for the employees. For this reason, the
Congress of the Philippines enacted the Anti-Sexual Act of 1995 or RA 7877 declaring
sexual harassment unlawful in the employment, education or training environment, and
other purposes.

Why does sexual harassment occur?

Sexual harassment occurs due to the power struggle between men and
women as a response to a real or imagined loss of power or as an expression of
retaliation or a flexing of the new power. This also happens because some
organizations and managers allow it to happen.

Two Types of Sexual Harassment

1. Quid Pro Quo Harassment - “this for that” (something for something) is
defined as requiring a sexual favor or interaction as a condition of
employment or in exchange for an employment benefit (such as promotion,
transfer, pay raise and the like).

2. Harassment that Creates a Hostile Environment - abuses include verbal,

physical and visual conducts that create an intimidating, offensive, or hostile
environment in the workplace that interferes with work performance. This
type of harassment may be based on race, religion, national origin, sex, age,
mental status, veteran status, sexual orientation or disability.
 How to Prevent Harassment in the Workplace?
A significant step an organization can take in preventing sexual
harassment in the workplace is through creating a safe, secure, and
positive work environment by putting into practice a strong sexual
harassment policy.

The Question of Just Wage

A just wage is defined as that remuneration which is enough to support the
wage-earner in reasonable and frugal comfort, “a just wage is the legitimate
fruit of labor.”

Philippine Constitution and Republic Act 6726 (The workers are entitled to a
living wage)

The Wage Rationalization Act declared the policy of the State to rationalize
the fixing of minimum wages and to promote productivity - improvement and
gain - sharing scheme to ensure a decent standard of living for the workers and
their families.

Gift Giving
It is merely and act of extending to an individual in an effort to share something
with them.

Businesses usually engage in gift - giving for the following reasons:

 To show appreciation for a favor received;
 To effectively establish goodwill with business partners;
 To advertise; and
 To compete effectively against competitors.

Factors in Determining the Morality of Gift - Giving

1. Value of the gift
2. Purpose of the gift
3. Circumstances under which the gift was given or received
4. Position between or the relationship between the giver or receiver
5. Acceptable business practice in the industry
6. Company policy
7. Laws and regulations

Bribery
The Morality of Advertising

Advertising - any paid form of non-personal presentation and promotion of ideas,

goods, or services by an identified sponsor

Advertising is not totally immoral. It only becomes unethical when the

advertisement becomes misleading, deceptive, and manipulative.

a. Misleading Advertisement
- do not misrepresent, do not make false claims but it makes claims such a way
that a normal person looking at it comes up with the wrong conclusion
b. Deceptive Advertisement
- makes a false statement or misrepresents the product
c. Manipulative Advertisement
- uses trickery or devious means

Whistleblowing
Whistleblowing is the act of drawing public attention, or the attention of an
authority figure, to perceived wrongdoing, misconduct, unethical activity within
public, private or third-sector organisations. Corruption, fraud, bullying, health
and safety violation, cover-ups and discrimination are common activities
highlighted by whistleblowers.
Money Laundering
Money laundering involves the transfer of illegally obtained money into a legal
institution, i.e. a bank. Money is obtained from criminal activity and carefully channelled
into legitimate organisations and businesses in order to disguise its true origin and avoid
alerting the authorities. According to the law, money laundering occurs when someone
attempts to conceal or disguise the nature, location, source, ownership, or control of the
proceeds of crime. Money laundering usually involves two crimes: the initial crime from
which criminals have profited, and the crime of trying to legitimise those proceeds by
exploiting financial institutions.

CHAPTER VIII: DEVELOPING GOOD WORK ETHICS

Introduction

A person’s attitude towards work determines the success or failure of one’s business or
personal enterprise. Work may either motivate or de-motivate a worker depending on his
perception and towards work itself. This chapter examines the human, philosophical and
theological meaning of work and their implications to the worker himself.

A. Definition of Work
Work is both a personal and social activity. As a personal activity, it is aimed at
developing a person and as a social activity, its purpose is the preservation of
human society. Work therefore, has moral and legal implications.

Work is the legitimate use of our mental and bodily powers for economic gain or
profit.
1. Work is the “use” or application of our physical powers to accomplish
certain tasks.
2. The purpose of work is to obtain an economic gain or power.

B. Theological Meaning of Work According to St. Thomas Aquinas

The angelic doctor of the church, St. Thomas Aquinas enumerates four purposes of
work in his treatise entitled, Summa Theologica:
1. It provides for one’s daily livelihood;
2. It provides idleness which is a source of many evils;
3. It curbs the rebellious flesh; and
4. It enables man to give aims from his material surplus.

C. The Human Perspective of Work

When he works:
- He accomplishes something
- He defines himself
- He measures his work as a person
- He develops himself
- He provides an occasion to relate with
others

D. How to Enjoy Work and Create Spiritual Values in the Workplace

 1. Practice the Golden Rule;
2. Guard your mouth;
3. Stop the green jokes;
4. Practice ethical behavior;
5. Learn to forgive;
6. Be generous;
7. Respect superiors and coworkers;
8. Be considerate;
9. Perform your work and fulfill your duties to the best of your ability;
10. Be a grateful person;
11. Do not bring problems in at home to the workplace or vice versa;
12. Be an inspiration to others;
13. Read the Bible every day;
14. Develop a personal relationship with God; and
15. Smile and enjoy your work.

E. Basic Duties of Employers

1. Respect the dignity of the workers;
2. Appreciate their work;
3. Never treat them as a slaves for making money;
4. Never assign them tasks beyond their strength, nor employ them in work not
suited to their age or gender;
5. Give them commensurate and fair wages;
6. Provide for their health and social recreation;
7. Instruct them on how to use their money wisely;
8. Instruct them to love their family; and
9. Provide them with opportunities for promotion.

F. Basic Duties of Workers

1. Work honestly and comply with all agreements;
2. Never inure (steal) capital, nor steal from the employers;
3. Never outrage (anger) the person of the employer;
4. Never employ deceit or violence in presenting a cause; and
5. Never consult with “agitators” or men of evil principles.

G. Protestant Work Ethic

Martin Luther (1483 - 1546) who started the Reformation during the Renaissance
period as a protest against some of the doctrines of the Catholic Church also came up
with a new perspective of work for his followers.

In summary, Luther believed that:

1. People could serve God through their work;
2. A person should work diligently his chosen occupation and should not try to
change from the profession to which he was called. To do so would be to go against
God’s will;
3. Work is perceived to be the universal base of society and the cause of differing
social classes; and
4. Each person should earn an income which would meet his basic needs, but to
accumulate wealth was sinful.
But it was Max Weber who developed further the Protestant Work Ethic, which
was founded on Calvinist tenets. In essence, the Protestant Work Ethic believes in
the following principles:
1. Predestination - the belief that God has chosen the elect.

2. All men must work, even the rich, because to work is the will of God.
3. Key elements of Protestant Work Ethic:
 - Self-discipline;
- Hardwork; and
- Ability to save money.
4. Living ascetically, e.g. frugally, self-denial, taboo, pleasures of the flesh.
5. Reinvest the profits of their labor into financing further ventures.
6. Selection of an occupation and pursuing it to achieve greatest profit
possible is perceived as a religious duty.
7. Other key elements include the following:
- Diligence;
- Punctuality;
- Deferment of gratification; and
- Primacy of the work domain.