BESR SG 12 Q3 0103
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Harvard University**We aren't endorsed by this school
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BUSINESS 145256
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Management
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Jan 7, 2025
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19
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Unit 1: The Role of Business in Social and Economic Development Lesson 1.3 Business Operations and Stewardship Contents Introduction 1 Learning Objectives 2 Quick Look 3 Learn the Basics 4 Core Principles in Business Operations 5 Fairness 6 Accountability 7 Transparency 8 Stewardship 9 Case Study 11 Keep in Mind 13 Try This 13 Photo Credits 18 Bibliography 18
Unit 1: The Role of Business in Social and Economic Development Lesson 1.3 Business Operations and Stewardship Introduction Are you interested in establishing a start-up? What type of enterprise do you have in mind? What would be its purpose? As the owner, what should you be concerned about in daily operations? Business organizations tend to focus on increasing their profit, minimizing their loss, and expanding their business. After all, in an increasingly complex and competitive economic environment, enterprises tend to advance the best interest of their owners and shareholders. To what extent do their interests have to be satisfied? What principles would ensure that businesses enrich not just specific individuals but also the society as a whole? 1.3. Business Operations and Stewardship 1
Unit 1: The Role of Business in Social and Economic Development In this lesson, you will learn about the core principles in business operations and how stewardship can play a significant role in promoting genuine social and economic development. Learning Objectives At the end of this lesson, you should be able to do the following: ● Define the core principles in business operations. ● Expound on how the core principles are practiced in business. ● Relate the core principles to stewardship in business. DepEd Competency Give examples of how fairness, accountability, and transparency are practiced in business and nonprofit organizations. (ABM_ESR12-IIIa-d-1.4). 1.3. Business Operations and Stewardship 2
Unit 1: The Role of Business in Social and Economic Development Quick Look Establishing the Business Culture Imagine that you established a company. As part of the onboarding of the employees, the company distributed a study manual and a series of Web-based modules for them to complete. The purpose of the training was to impart the company’s defined principles, policies, and standards. Through the training, the employees learned that they must: a. report to designated management if a colleague is misbehaving; b. be responsible for their output and decisions in their work; c. not be employed by companies that are of the same nature of business; d. abide by the rules and regulations of the company; and e. disclose if they are interested in other businesses, especially competing companies. Directions: Classify the given points in the following categories. Write the corresponding letter in the right column. Table. Core Principles in Business Operations Fairness Accountability Transparency Questions to Ponder 1. What are the essential values in creating relationships within a business organization based on the activity? __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ 1.3. Business Operations and Stewardship 3
Unit 1: The Role of Business in Social and Economic Development 2. Why are these principles necessary in business operations? __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ 3. What instances or situations in business operations should these principles be applicable? __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ Learn the Basics Businesses provide goods and services to the people. Society allows businesses to exist because they contribute to socioeconomic development by generating jobs, providing knowledge and training, improving the economy, and contributing to community development. To ensure that businesses contribute to society and the economy, they must abide by the core principles in their business operations. The core principles serve as a fundamental guide that can lead organizations towards better stewardship. The core principles in business operations and the duty of stewardship are relevant to public, business, and nonprofit sectors. Essential Question How can stewardship help businesses impact the development of society and the economy? 1.3. Business Operations and Stewardship 4
Unit 1: The Role of Business in Social and Economic Development Core Principles in Business Operations While the objective of business operations is to generate wealth, businesses must not ignore the appropriateness of how they fulfill this objective. Unfortunately, It is common knowledge that many organizations resort to bribery and other illegal acts to maximize their profit. These practices have led to increased state oversight over businesses. To curb corruption, the government regulates their operations. In the course of business operations, various transactions with clients, customers, and stakeholders happen; thus, the core principles of fairness, accountability, and transparency must be upheld at all times. Figure 1. Businesses must operate with the fundamental principles at their core. Fairness Fairness is defined as the expression of neutrality. For instance, a person who is impartial and unbiased in making decisions is said to be fair. In business, there is fairness when financial considerations are made not for the benefit of specific individuals or groups, but for the welfare of all interested parties. Fairness can be practiced in business operations. Following government policies, business organizations must treat their employees, suppliers, and customers fairly. In particular, treating employees with equity exhibits fairness. Employers should provide just wages and 1.3. Business Operations and Stewardship 5
Unit 1: The Role of Business in Social and Economic Development benefits, avoid favoritism and discrimination, and prohibit unethical hiring practices, such as backdoor hiring. Meanwhile, suppliers and vendors can be selected through competitive bidding. Businesses can engage in honest and objective dealings with their clients and customers. Also, they can be in compliance with government regulations. However, fairness is subjective—what seems fair to one may seem unfair to another, and vice versa. Thus, the practice of fairness requires careful evaluation and good judgment. Accountability Accountability is the principle of assuming responsibility for the outcome of one's action or performance. It should be applied by executives, managers, and employees at every level of the business. Also, the whole organization should also ensure accountability as it deals with external entities. Accountability entails the process of setting expectations, performing tasks, and responding to the outcome. For instance, the shareholders of a corporation delegate powers to their chosen board of directors. The group is expected to perform its task to meet the shareholders' expectations. The members are answerable for the good and bad outcomes of their undertakings. Accountability is crucial; in a system where individuals are held accountable, abuse of power can be avoided. Doing due diligence in performance and governance, as well as in safeguarding legitimacy, is a manifestation that an organization adheres to the principle of accountability. Moreover, it is also a significant aspect in avoiding mischief and fraud in finance and accounting. Accountability measures make it easy for any member of the organization to monitor corruption in transactions and business dealings, and thus avoid mischief and fraud in finance and accounting. Government also demands accountability from businesses by requiring them to undergo financial and compliance audits. Audits affirm that the reported information is fair and compliant with accounting standards. They discourage the tampering of financial data and any maneuvering. As a result, the confidence of investors and funders, customers and clients, and the general public is enhanced. 1.3. Business Operations and Stewardship 6
Unit 1: The Role of Business in Social and Economic Development Check Your Progress What are the benefits of ensuring accountability in every decision? _________________________________________________________________________________ _________________________________________________________________________________ Transparency Transparency entails honesty and openness in all the undertakings in which an organization is involved. Organizations that conceal fraud and corruption often lose their reputation and investors or funders. In a world that is becoming more competitive and integrated, organizations must establish their credibility with their clients and stakeholders and gain their trust to make a lasting and meaningful impact. However, a clear line must be drawn between confidentiality and transparency. Confidentiality prohibits the sharing of personal and sensitive information without the consent of those involved. On the other hand, transparency encourages the dissemination of all readily available and relevant information to all users to allow them to make informed decisions. Transparency matters when certain information is critical in acquiring knowledge, building confidence, and making decisions. Transparency is especially important in financial accounting, where all transactions are recorded, and money is accounted for. Transparency is vital in fostering loyalty from people. When they appreciate that nothing is withheld from them, they give a full commitment. When important pieces of information are clearly communicated, interested parties can make sound and informed decisions. Check Your Progress Differentiate transparency from confidentiality by providing examples. _________________________________________________________________________________ _________________________________________________________________________________ 1.3. Business Operations and Stewardship 7
Unit 1: The Role of Business in Social and Economic Development Closer Look Fairness in Hiring Mr. de la Cruz is a human resource associate at Build Co., a big company engaged in construction, and is responsible for processing applications of new hires. His nephew, who has recently graduated with an engineering degree, is seeking a new job in construction. Mr. de la Cruz advised him to file his application at Build Co. and inhibited himself from participating in the application process. Even Presidents Are Accountable The board of directors of an airline company has appointed its new president. The company is faced with decreased demand and numerous challenges brought about by the worldwide health crisis. Being under immense pressure to secure a recovery for the company, the president negotiated huge loan contracts to sustain its business operations. He vowed to take responsibility for the results of his decisions. Informing the Public Winnie is the Vice President of Chicago Zoo, a world-renowned animal theme park visited by millions of tourists annually. During the year, she discovered the purchase of exotic and endangered animals from Africa. Management believed that the addition of these animals would increase the number of customers for the zoo. The CEO wanted to release a memo stating that all animals were donated, but Winnie refused to post it. 1.3. Business Operations and Stewardship 8
Unit 1: The Role of Business in Social and Economic Development Stewardship As businesses and nonprofit organizations must always observe fairness, accountability, transparency in their operations, they strive to improve and maximize their wealth. Between these two objectives, how can organizations maintain a balance while contributing to the overall development of society? The answer lies in the appropriate and effective practice of stewardship. Stewardship is the conduct, supervision, and management of one's resources that are entrusted to another's care. Stewardship is an ethic that prioritizes organizational goals and the stakeholder’s well-being over individual or sectarian interests. Thus, stewards recognize that they are responsible for the resources entrusted to them, exhibit a strong attachment to the business, and have a strong desire to work towards its success. Without stewardship, individuals only focus on their desires. Business stewards recognize that people, capital, and the environment are resources that need to be protected and developed. Any action or decision that misuses or harms those resources is detrimental to the future of the business. By exercising business stewardship, one prioritizes the growth and development of resources over the short-term objective of raising profit. Stewardship success is measured by its positive impact on people, profit, and planet (or environment). Any action or decision that misuses or harms those resources would be detrimental to the future of business. Through stewardship, the growth and development of resources are prioritized over the short-term objective of raising profit. Closer Look Taking Care of People, Profit, and Planet Farmer’s Coffee Company upholds stewardship in its operations. It recognizes that its long-term success will be determined by its management of resources—the people, profit and the planet. It ensures that the salaries and benefits of its employees are fair, and the terms of contract with farmer-suppliers are mutually beneficial. 1.3. Business Operations and Stewardship 9
Unit 1: The Role of Business in Social and Economic Development The owners and managers regularly assess their operations to ensure that the capital is used efficiently. It also implements a strict policy on waste segregation and environmental protection. To minimize waste, it uses recyclables and purely biodegradable materials for packaging and takeout. Sustainability is one of the most important effects of stewardship. If businesses apply good stewardship, its resources would be abundant, and its operations would become stable and profitable. As a result, businesses grow continuously to meet the needs and demands of their customers without harming the world around them. Similarly, nonprofit organizations that practice stewardship gain strength and create meaningful impact on their communities. Figure 2. Stewardship of the planet, profit, and people contributes to sustainability. Organizations that adhere to the core principles of business operations and practice stewardship consider the impact of their operations on the community and society. Thus, they observe fairness, accountability, and transparency in managing people, capital, and the environment. 1.3. Business Operations and Stewardship 10
Unit 1: The Role of Business in Social and Economic Development Case Study The Fukushima Disaster On March 11, 2011, Japan's worst nuclear crisis started in the Fukushima Daiichi Nuclear Power Plant. It followed a magnitude 9.2 earthquake, one of the strongest in recent history. At a glance, the company governing the plant might have a valid explanation for what happened. After all, calamities are inevitable, and the risk responses feasibly available are only risk transfer or acceptance. However, as investigations were pursued, questions about the company's corporate governance surfaced. The shortcomings of its directors were put in the spotlight. The company’s defined corporate governance states that it seeks to ensure sustainable growth in business and long-term shareholder value. The company seeks to ensure sustainable growth in business and long-term shareholder value. It values communication and mutual trust with its stakeholders. Also, efficient business practices and auditing and supervisory functions are supposedly central to its corporate governance. Furthermore, independent directors are a must in its board structure to maintain integrity and effective decision-making. However, the company faces a different reality behind the seemingly well-structured corporate governance. While it follows a board composition that includes outside or independent directors, the inside directors, or those who have tenure in the company, have a greater influence in decision-making. In 2002, the company falsified its safety test records, and in 2007 a fire at the Nigiita Nuclear Plant and leaks were concealed from the public. These breaches of corporate governance undoubtedly led to Japan's world nuclear crisis. After all the revelations and investigations, various reforms circulated in Japan for an intensified oversight of corporate fairness, accountability, and transparency – which indeed are the core principles in business operations. 1.3. Business Operations and Stewardship 11
Unit 1: The Role of Business in Social and Economic Development Tokyo Electric Power and the disaster at Fukushima Daiichi | Corporate Governance Tricker, Bob and Chris Mallin. “Tokyo Electric Power and the disaster at Fukushima Daiichi.” Corporate Governance (Corporate Governance, April 20, 2011), https://corporategovernanceoup.wordpress.com/2011/04/20/to kyo-electric-power-and-the-disaster-at-fukushima-daiichi/, last accessed on October 31, 2021. Keep in Mind ● Businesses play a significant role in the development of the economy and society. This ideal should reflect in their overall goals and objectives, as well as their operations and internal decisions. ● To ensure that businesses advance the interest of the whole society, they must abide by the core principles of business operations: fairness, accountability, and transparency. ● Fairness entails neutrality, impartiality, and free from influence. Accountability requires that every leader and unit is answerable and liable to their actions and the outcome of their performance. Transparency means honesty and openness, showing all relevant information and data that affects stakeholders’ decision-making. ● The core principles of business operations are essential in stewardship. Stewardship is the recognition of the business’s role in developing its resources to achieve stability. Business stewards take responsibility for the people, profit, and planet. 1.3. Business Operations and Stewardship 12
Unit 1: The Role of Business in Social and Economic Development Try This A. Matching Type. Match the words in A with the words in column B. Column A Column B _____________ 1. answerability a. accountability _____________ 2. environment b. fairness _____________ 3. employees c. people _____________ 4. production machines d. planet _____________ 5. neutrality e. profit _____________ 6. impartiality f. transparency _____________ 7. suppliers _____________ 8. openness _____________ 9. liability _____________ 10. revenue 1.3. Business Operations and Stewardship 13
Unit 1: The Role of Business in Social and Economic Development B. Short-Answer Response (Identification). Which core principle is being upheld or impaired in the following situation? Write the correct answer on the provided space before each number. ________________ 1. The Chief Financial Officer of the company conducted a meeting with the board of directors regarding the financial status as of its month-end operations. ________________ 2. The head of the HR department preferred the applicant who happens to be her niece over the applicant with the most suitable credentials for the job position. ________________ 3. The accounting staff of a company engaged in construction saw that there were manipulations made by the finance controller in the purchase price of construction materials and its actual price, and he kept quiet about it. ________________ 4. The hotel staff has made an error by delivering the wrong food to a guest. The staff realized this when he saw the actual food ordered on another tray, and he immediately reported this to his supervisor, and they went up to the guest to correct the mistake. ________________ 5. Anna and Sally were tasked to create diagrams about the COVID-19 pandemic. They both were given a week to finish their work and present it by then. Anna showed hers entirely by the end of the week, while Sally did not. But she still got her project approved because she and their manager were close friends. 1.3. Business Operations and Stewardship 14
Unit 1: The Role of Business in Social and Economic Development Practice Your Skills Company Mapping Do research on a company that you are interested in. You may check their company website, news articles, and publications, official social media page, etc. Examine their company history, background, mission, vision, core values, and ownership structure. Illustrate your findings using a concept map and answer the following questions: (For items 1-2, draw the concept map here.) 3. Based on your findings, does the company pronounce adherence to the core principles of business operations and stewardship? Explain your answer. __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ 1.3. Business Operations and Stewardship 15
Unit 1: The Role of Business in Social and Economic Development 4. Give one example of the company’s corporate social responsibility activity that is relevant in pursuing good stewardship in the business. __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ 5. The Corona Virus Disease (COVID-19) has deeply affected the lives of people all over the world. Various multinational companies greatly struggled in terms of stability since the pandemic had a huge impact on their financial and economic performance, as well as the safety of their constituents. In times like this, how can companies prioritize being a good steward while pursuing the goals of the business amid the pandemic? __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ _________________________________________________________________________________________ Challenge Yourself Answer the following questions: 1. Consider yourself in this situation: You work as an accounting staff in the finance department of a non-stock, non-profit hospital, and part of your job is to compile the supporting documents and process the payments for the purchases made by the hospital. One of the suppliers, who happens to be your uncle, spoke with you and asked if you could process the payment to their company ahead of the other suppliers. He told you that he had already talked with the finance head about this matter and that he agreed. How will you respond to this situation without impairing your fairness and objectivity towards the other suppliers? Will you talk about this with your superior? Why or why not? 1.3. Business Operations and Stewardship 16
Unit 1: The Role of Business in Social and Economic Development __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ 2. How will you uphold fairness, transparency, and accountability in an environment wherein self-interest is prioritized by the leaders rather than the overall growth and development of the business organization? How will you encourage your colleagues to do the same? __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ 3. Group Activity: Form a group with your classmates and discuss among yourselves the problems and conflicts which may be faced in the business while upholding and maintaining the core principles. Choose one problem and elaborate your answer in the space provided. __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ 1.3. Business Operations and Stewardship 17
Unit 1: The Role of Business in Social and Economic Development Photo Credits Woman placing sticky notes on wall by Jason Goodman is free to use under the Unsplash license via Unsplash. Bibliography CFI Education. “Accountability.” Accessed October 30, 2021. https://corporatefinanceinstitute.com/resources/careers/soft-skills/accountability/. Cossin, Didier, Ong Boon Hwee, and Sohie Coughlan. “Stewardship: Fostering Responsible Long-Term Wealth Creation.” Research Gate. Last modified January 2015. https://www.researchgate.net/publication/316973832_Stewardship_Fostering_Respo nsible_Long-Term_Wealth_Creation. Kappel Mike. “Transparency In Business: 5 Ways To Build Trust.” Forbes, April 3, 2019, https://www.forbes.com/sites/mikekappel/2019/04/03/transparency-in-business-5-w ays-to-build-trust/?sh=597639626149. Riahi-Balkaoui Ahmed. “Fairness in Business.” Journal of Insurance and Financial Management. Accessed October 30, 2021. https://www.academia.edu/52839596/Fairness_In_Business. 1.3. Business Operations and Stewardship 18