Chapter 7

Fiduciary Relationship

Employment contract is fiduciary since it holds in trust the agreement between

the employer and the employee. It creates rights and obligations for both parties who
are often interests and personal interest in implementing this agreement.
Resolutions to ethical issue are often required before any decisions on this
matter are made. According to John Hermes Randall, Jr. and Justin Bucher:
If each were to act according to the criterion of ultimately attaining the
pleasures that most satisfy him, conflict would result which would be detrimental to the
general welfare of most concerned.
If it is true that what turns out to be morally “good” is something that individuals
desire, it is nevertheless not true that whatever they desire is good.
There is a distinction between what people desire and what is desirable. The
morally desirable is what they would desire after examining the inter-relation of all the
ends which concern them and as many consequences as they can foresee. As pointed
out by Clarence Irving Lewis:
The achievement of the good is desirable but conformity to the right is
imperative.
An employee should not subordinate the organizational interest to his personal
advantage when performing his organizational duties and obligations. Here, the
employee’s perception is a critical factor. The difference in his perceptions is important
in determining the ethical values off his actions. As Lewis pointed out:
However, before the right and the good are to be related they must first be
distinguished, and their distinction is at least as difficult as finding the essential
connection between the two.
In effect, an employee places himself in a position where his superior could
thrust him since his superior has control over his advancement in the organization. Why
should it be otherwise? Sometimes, the managerial decisions are contrary to the
fundamental interests of the employees. These uncertainty concerning ethical standards
establishes a situation in which their fiduciary relationship and conflicts of interests
could be tested.
Conflict of Interest
Managers are committed to support the pecuniary interests of their
organizations. This view is based in part on common sense and loyalty to their
organizations. As pointed out by James A.F. Stoner and Charles Wankel:
The actions of managers are influenced by their personal values. For example,
managers who are motivated by economic values will tend to stress the importance of
growth for their companies. Managers who are motivated more by social values, on the
other hand, might be willing to sacrifice some company growth to improve conditions
for their employees. Of course, values are not the only factors that will influence a
manager’s decisions. The specific situation a manager faces will have a great influence
on, or even dominate, how a manager behaves.
Compromise is permissible in business, but only compromising on issues, not on
principles. People believe what they want to believe, not what is true. As such, Thomas
M. Garrett said:
Management and employees should avoid violations of their fiduciary
relationships and situations which might weaken their independence of judgment and
action.
At a glance the relationships had sounded so simple. Yet, it is a difficult
undertaking if it is viewed as fiduciary responsibility since the manager is to hold it like
a trustee. As a trustee, certain conflicts of interests may arise. As Stoner and Wankel
observe:
The most subtle conflicts, both actual and potential, arise not because of a direct
financial interest, but because of friendship or family loyalty. The problem is all the
more difficult since both of these factors can often play a legitimate part in business.
Frank Lynch believes that social acceptance, economic security and social
stability are the three basic aims that motivate and control an immense amount of
Filipino behavior.
In an organization, people have personal and organizational interests. As a
result, they are faced with the ethical problem of conflict of interest whenever they are
considering certain organizational matters. As pointed out by Felix A. Nigro and Lloyd G.
Nigro:
Conflict-of-interest situations, however, are not only ones in which public
employees may be guilty of unethical conduct.
 Conflict of interest is also a personnel problem in business. This is one of the
weaknesses of any organization. In such instance, the two American authors said:
“Favoring one of the agency’s “policies” over the others does not exemplify high
integrity.”
Besides, it influences not only the behavior of people in the organization, but
also their relationship in the workplace. Moreover, problems can be created by it. One
such problem is the existence of businessmen have been ready to exploit the vacuum in
legal regulation without regard for the consequences to its victims. Unfortunately,
employees cannot avoid being influenced by them. According to Robert Presthus:
On the whole, and not unexpectedly, given the traditional official-clientele
relations in most bureaucracies, access seems generally easy, as an average of almost
two-thirds of officials rank their agencies at two highest levels. Here, as noted, access
is eased by the common functional interests and the representational ethics that
characterize bureaucratic-interest group interaction. A fair amount of occupational
interchange occurs among them, but more important perhaps is the mutual sharing of
common technical backgrounds of knowledge and experience. Their exchange of valued
currencies further reinforces their bases of accommodation.
When individual pursues his personal interest while working for the attainment of
the organizational goals, conflict of interest is inevitable. As such, management should
consider the compatibility between the organizational goals and personal values of its
personnel assigned to accomplish them.
Business organizations are searching for individuals with a high degree of
personal integrity. Such individuals have established a reputation with high ethical
standards.
The organization should, therefore, recruit employees who are honest, ethical
and who will build on that reputation. The organization and its management should be
committed to reinforcing those basic values and to encouraging their use in all phases
of the operations of the organization.
In very organization, liberation in management practices and openness in
cultural acceptance of society are indispensable to its continued existence and progress.
The Philippines has very good laws on conflicts of interests and all that is needed
is more stringent implementation of them.
The best watchdogs of dishonest and unfair business practices are the
competitors of those dishonest businessmen. One such dishonest practice is acquiring
information illegally. In such a situation, if he has taken advantage of his position to do
it, he has no choices or options left, expect to resign his position in the organization. On
the other hand, he takes as a grain of salt the tips passed onto him by well-meaning
friends. Their information could have more form than substance.
In the same token, Harold Koontz, Cyril O’Donnell and Heinze Weinrich
observed:
Although there is general agreement on the need for, and benefits of ethical
codes and principles, it is difficult to establish them.
One such problem in business ethics is the passing of secrets acquired by
individuals by virtue of his connection with other business organizations. Such unethical
practice is being justified by others as necessary in the management of the business
affairs of the organization. They point out that in art, there are no rules, excepts that is
no rule. Since management is an art, then there are no rules in management.
It is unethical, if not illegal, for companies in competition with one other to have
directors in common or to acquire stock in other companies to lessen competition
between them.
In this situation, if he behaves contrary to his better judgement, he will be
asking for problems that could be avoided. He lets his common sense prevail in solving
his problems of conflict of interest.
Under certain circumstances, the employee compensation of the organization
becomes an area of conflict of interest. As Peter F. Drucker noted:
Financial reward must not be bribes; they must not create the atmosphere in
which executives can neither quit nor be fired. This raises serious doubts regarding the
various schemes for delayed compensation that, for tax reasons, have lately becomes
so popular in American business.
In this connection, it is important to consider that the organization is a system of
individuals. All individuals should work not only to maintain their human dignity but also
to strengthen the organizational stability. This shows the complexity of such
relationship. Their ethical practices could minimize conflicts and division among them in
attaining the organizational goals.

Breach of Faith
Breach of faith is one of the ethical problems of business relationships with other
companies caused by their employees.
While the problems are so obvious, they are taken for granted by many people.
What is meant by breach of faith?
 Faith is an individual’s unquestioning belief of something.
Because of his faith, he has complete trust or confidence given to him by others.
An individual who commits a breach of faith is considered to be a disloyal or
dishonest person. That breach of faith is caused by many factors is understandable.
One such factor is the result of a misunderstanding between two individuals. In such
situation, small disagreements could easily be blown out of proportion. Hence,
misunderstanding should be clarified and disagreements be promptly settled. Delays
could create a breach which might be difficult to amend later on.
Solving problems concerning breach of faith are not easy undertakings. However,
he should guard himself against tendencies to worry about things that may never
happen. Thinking and worrying are two different things. Nevertheless, he had nothing
but contempt for this unethical business practice.
In solving the problem of breach of faith, the individual’s way of thinking is an
important factor. Positive thinking produces positive results. Thus, he avoids negatives
for it lessens his vitality and efforts to overcome organizational problems. Thus, he
evaluates his behavior as to its ethical value. As pointed out by Randall and Buckler:
What distinguishes mere physical behavior from conduct in which a so-called
moral element enters? In other words, under what conditions is subject to ethical
evaluation, to the application of ethical judgement?
Sometimes there are ethical values that cannot be measured, and the easiest
solution is to disregard them. Thus, the breach of faith in many business transactions or
agreements.
While many people avoid bad faith in their business dealing, they cannot totally
eliminate it. Certainly, everything has its limitations.
Values are special kind of beliefs centrally located within one’s total system, how
one ought or ought not to believe with or not worth attaining. According to Richard T.
de George:
Business and morality are related in a number of significant ways… some of
these relations are obvious. They are so obvious that we take them for granted, and
hence we tend to ignore them. Other are subtle. They are so subtle that again we tend
to ignore them. But whether obvious or subtle they form part of the makeup of our
daily lives and experience.
One such ethical issue taken for granted is the breach of faith. Hence, there is a
need of knowing and understanding it.
 Without considering every individual to be trustworthy and with noble character,
no faith is possible in human realization.
Breach of faith is a moral conduct of an individual. Moral conduct was explained
by Randall and buckler as “conduct that (1) is voluntary, and (2) affects the basic
direction of our living.”
Apparently conduct involves two aspects namely the voluntariness of the act
between the two individuals and its effects on their future relationship.
If their purpose were to be realized in working together for a common purpose,
they must have confidence and trust with each other. To do so, they must possess
moral values.
Breach of faith is also a purposive activity. According to Randall and Buckler:”
Purposive activity is the adoption of a means to attainment of some end or aim.”
A concern for the moral character and social development of both people in
business and government is needed. The courage to trust should be developed among
them. In Ardis Whitman’s view:
No great human achievement has ever been accomplished without trust. Nor has
man been able to achieve greatness without trust.
Dedication, patriotism and companionship should be the characteristics of
government employees since they hold positions of public trust. As such, they are
expected to protect public interest. According to Michael Mont Harmon:
Public interest is the continually changing outcome of political activity among
individuals and groups within a democratic political system.

Business Morality
Morality is personal. The feeling of goodness is moral and it is immoral when one
feels bad after doing something. It is the “rightness” or “wrongness” of an action. It is
also being in accord with moral principles.
Business morality is a useful mechanism of social control, while morality is
contextual. Morality depends on the circumstances and the facts in the particular case.
As pointed out by Abraham Kaplan:
A particular decision is not right because it accords with principles; the principles
is valid only as it is warranted by the rightness of the particular decisions it
encompasses.
 Morality makes business decent. Business will be less self-destructive if it stands
in awe of moral rules which cannot be changed at the whim of individuals, but which
owe their authority from the common consent of the people. Unselfishness is the key
for reaping benefits for oneself. When one tries to help others, he will also be rewarded
in the process. As Ernest Dale said:
In addition, many businessmen were restrained from various kinds antisocial
conduct by their own ethical principles.
Thus, they attend to their duty ahead of pleasure. They act decisively on
business matters. But not at the expense of others. They take responsibility for their
effect on other people.
Unfortunately, some businessmen used the device of moral relativism, which is
the law of profit. They profit from the product of another’s efforts. They are, therefore,
alert for the opportunity.
It is said, however, that a businessman gets all the facts when he takes time to
study all the angles.
Moreover, he doesn’t let himself get caught in a game of one-up-manship in his
involvement with others.
Moral decency and basic ethical conduct are essentials in the effective
management of the organization, particularly, in managerial decision-making. As John
Stuart Mills observed:
The human faculties of perception judgement, discrimination feeling, mental
activity, and even moral preference, are exercised only in making a choice. He who
does anything because it is the custom makes no choice. He gains no practice either in
discerning or in desiring what is best. The mental and moral, like the muscular powers,
are improved by being used.
Enforcing morality in business is no trivial act. In emphasizing the social role of
business, Alvar O. Elbing, Jr. and Carol J. Elbing pointed out:
The fundamental reason why it is impossible to formulate an adequate moral –
or amoral – rationale for business around a purely economic-technical system. It is a
social system as well. The moral nature of the business institution derives from the fact
of its pervasive social nature. . . . . The firm as a social system acting upon a larger
social system is a vast procedure of social relationships and molder of social values.
Today’s continuous technological revolution is social revolution in which value issues in
here.
 People tend to improve their own moral values, while objecting to the imposition
of other people’s moral values on them. In explaining the moral model, Elbing and
Elbing said:
In this moral model, the arbiter of the social and moral value of economic
goods is the marketplace. Thus, it is not necessary to be concerned with the social
value of goods since the office of the marketplace is to perform this function. The fact
that a commodity is not purchased or cannot compete in the marketplace is held as
evidence that it is not a social good. The marketplace being the arbiter of social values,
the morality of business and businessmen is primarily taken care of in the very
production of goods and services which society chooses as valuable. That a business
competes successfully in prima facie evidence of the social value of that business over
its less successful competitors. In such a broad formulation of the value issue, value
problems need not be matters of direct concern for business, since its primary moral
function is fulfilled in successful competition in a marketplace which arbitrates values.

Chapter 8
Business Secrecy and Espionage
Many individuals take for granted the problems created by business secrecy and
espionage in their daily works. Yet these are of critical importance to business relations
with employees.
While the problems of business secrecy and espionage has been felt, perceived,
and recognized generally in business by both management and labor, how to solve the
problem could not be clearly defined.
All individuals in an organization hold positions of trust and responsibility. They
are committed to serve their organization with integrity, competence and dedication. A
clear understanding of this commitment is significant because of its contributions to the
maintenance of business ethics. Their network of relationships links them together in
the management process.
Regardless of cause, business secrecy impedes the flow and circulation of
information and ideas in the organization, thus, affecting the undertaking of cooperative
projects for the common interests of business and the general public. Hence, it is
important for the employees to know and understand how business secrecy and
espionage affect their organization. Once they learn of such effects to them and the
business they become meaningful.
Because of espionage, many business limit the free exchange of information on
their research and product development programs. Hence, the incentive not to be open
and above-board in their business development exists now. As such, they secure their
laboratories and experimental stations from outsiders.
What are the limits imposed by business secrecy and espionage on business
ethics?
At the individual level, business secrecy is difficult to maintain if the personnel’s
area of discretion is considered.
Secrecy is only one of the approaches to bring the justness of its cause.
There should be a better alternative to this situation. In the process of
implementing deliberate and planned ethical actions, the business relationship could be
transformed into something better. However, there are secret efforts to manipulate
events and people in ways to serve the interests of particular individuals or business
organizations.
Ethical standards on business secrecy should be enforced to inculcate to the
employees through the operations of a fair system of rewards and punishments and
through the power of example and persuasion by the managers. This kind of
participation in the management process is less familiar to many individuals and groups
in business.

Business Secrecy
The right information at the right time can make a crucial difference between
business success or failure. Hence, the importance of confidential information. Although
he will be tempted to tell it to others, it is best that he keeps it a secret. Moreover, he
must be careful when relaying information passed on to him that he does not modify or
change what was said. Certainly, trade secrets impeded the flow and circulation of
information and ideas. According to Richard T. de George:
Information and knowledge are vital aspects of many businesses. They may give
one business an advantage over another, and hence, in a competitive situation, one
business may not wish to share its knowledge and information even if in doing so it
would not lessen its own knowledge and information. Information and knowledge,
moreover, often represent a financial investment by a firm. Some knowledge is costly to
obtain or develop.
What appear to be insignificant details could later prove to be valuable
information. Confidential matters should be discussed only with persons of proven trust
or duly authorized persons of the organization. Thus, he is cautions where he places his
trust. However, being too insistent upon doing everything by himself could lead to
reduction not only of his productivity but also of others.
 It behooves him, therefore, to be cooperatives with others, even those who have
caused him problems in the past. Old personal misunderstanding can be ironed out in
the interest of the organization.
He might derive greater satisfaction out of doing things for others than he will be
merely serving his personal interest hence, he is helpful. Such is the rationalization of
an individual for using his personal prerogatives or human rights.
His compassion for others is commendable. However, he is careful not to bind
himself in a misguided attempt to do good to others. Doing things right must be
measured by one’s compliance to the rule of law. There appears to be a lot of wrong
things with the free enterprise system. But many individuals are vague in their
recommended solutions.
Things he does on the spur of the moment should turn out to be fun, the same
may not be true with activities which are too structured. It is important to understand
that certain business practices should be considered in studying business relationship.
This would include a study of the nature of human relations and organizational
behavior.
It is difficult to obtain clear and accurate data on the economic performance of a
business organization and its problems. This is partly due to the secrecy that governed
many of its actions. Without business ethics, it would be difficult for businessmen to
trust anyone.
The businessmen have minds that are not only complex but also futuristic.
Because their decisions are futuristic, they have some real elements of risk. Although
they possess an intellectual discipline that is highly scientific, their actions seem to be
unscientific because of the novelty of their approach to many contemporary problems.
As William Colby said: “There are societies and political systems, however, that cling
tenaciously to secrecy as a basis for power.”
The dilemma of business is become acute. If business must go out and get
support from the government in solving its problems, it should be expected that
government, in the end, will control business. On this matter, James Schlesinger
pointed out: “Power, of course, is equivocal. It can be misused as it can be well used.”
In the process, Daniel P. Moynihan noted:
The great question – always – of political philosophers concerns the nature of
the individual and the claims which the state may have on the individual.
In the enforcement of laws, the government must be responsive in the demand
of secrecy of some public documents. Accordingly, William R. Hopkins and associates
pointed out the importance of values to government employees:
 Values are attitudes that individuals have regarding the importance of objects,
activities, or other things. They are developed as a result of where and how you have
lived.
Thus, the general public must be confident on the way the government is
handling the secrecy of its records.
Espionage in Business
There are increasing complaints about espionage in business since information s
vital to the interest of the organization. According to Rosemary Stewart:
The tempo of change has speeded up, hence, the demands made on managers
to plan for, and adjust to, change are greater. All change requires both abilities. Some
changes can be planned for in great details, for instance, the switch to a new model.
Others may be unforeseeable but, if the organization is kept sufficiently flexible, it will
be able to cope with the unexpected. The number of completely unexpected changes
can be kept to a minimum by foresight. Changes also mean adjustment. Without it the
planning will be unsuccessful.
The vast majority of businessmen would not like to encourage business
espionage. However, gathering information is not an easy task. As the organizational
environment grows more complex, the task will become more difficult to accomplish. As
Dalton E. McFarland said:
One aspect of the information problem is that if obtaining information from other
companies. Much intercompany information is pooled through trade association or is
willingly exchanged in conferences, by telephone, letter, and informal contacts. Some
information, however, is regarded as secret from the general public and from
competitors. Examples includes new products, inventions, styling changes, bids, merger
plans, cost data, military data, and so on. Obtaining this kind of information, obviously
valuable in planning, is termed industrial or business espionage.
Espionage is the act or practice of spying or watching closely and secretly on
others. As McFarland pointed out:
The extent of industrial espionage cannot be precisely known, since neither spies
nor victims are communicative.
Espionage is a big business in the industrial world. In fact, according to
McFarland:
Many thousands are employed in obtaining undercover information. Espionage
has rapidly increased because of three convergent forces: the tremendous increase in
the need for information by business organizations; the availability of many persons
trained during the war years in methods of wire-tapping, surveillance, and intelligence
work; and the extensive improvements and increasing sophistication of information-
gathering devices. The insatiable pleasure that some executives are willing to take to
obtain it even by illegal means. Espionage may produce vital information from
competitors more quickly and more cheaply than ethical methods of industrial
intelligence.
Most businessmen would agree that espionage is not good business practice.
Behind it are the deeply ingrained attitudes of people. As such, the ethical dimensions
of business should be considered in the managerial decisions. Here, government should
play a part, too. The laws are quite clear on the subject of espionage in business. There
is no question of its illegality. There is no doubt, however, that it is part and parcel of
the business scene.
In protecting its interests, management does not take things for granted.
Because the future is very uncertain, it keeps an open mind towards new
circumstances. Thus, according to McFarland:
Companies protect themselves against industrial espionage by elaborate system.
Security starts with the employment, as far as possible, of persons of established
integrity. For key positions, a security investigation is made. Physical facilities equipped
with locks and other safeguards, and the constant vigilance of executives, are required.
Even so, leakages can be expected to occur.
Since information is vital to the interest of the organization, managers are
attentive when conversing with others. Something can be placed together from
information he gets from different sources. He listens attentively when smart people
speak. Someone he will be talking to may furnish him with a brilliant point of view he
has not yet considered. Thus, it behooves him to do more listening than talking because
valuable information might be forwarded to him from the least expected sources.
Others may talk to him about things of little consequences. However, his mind
will turn them out and focus on important objectives.
He hears only suggestions of those he knows and trusts. Someone he meets
casually might innocently implant information that could get off course. He doesn’t
jump into anything without weighing all of its merits. Hence, he seeks verification of
any supposedly confidential information passed on to him. His source may blend facts
and fiction.
Information from “insiders” should be taken with a grain of salt. A portion of
what they say could have value, but the rest may be just hot air.
His mind readily responds to new ideas which could benefit his company. He
uses his wisdom to help sort good suggestions from bad ones. He does not take
chances speculating on the unknown. It is best that he trusts only what he can grasp in
his mind or in his hand. Thus, people knows little about what might be flying false
colors and attempts to deceive him.
A manager makes concerted effort to firm up important relationships. Benefits
can be derived between them. He is sociable. He plans a schedule so that he can drop
in on a number of friends for brief visits.
A manager is alert for a unique opportunity that he can put to immediate use.
However, in some of his dealings, he strengthens his position if he does not reveal too
much information.
It isn’t just his bright ideas that make him a winner, but the fact that he includes
everyone in this plans makes them feel needed. They are responsible for helping him
achieve a material goal.
A help can be a reality if a person starts now to take the practical measures to
bring it into being. He develops a definite plan.
His business organization may gain from something another originated. Boldness
will be rewarded, but rashness will not. On the whole, the managers keep on the know
on what is going on, not only within his organization, but also outside of it.

Chapter 9
Honesty and Expense Accounts
The importance of honesty in business has remained essentially unchanged. One
way of testing the employee’s honesty is in the use of expense accounts, such as
representation and transportation expenses.
The use of expense accounts might compromise his honesty as a responsible
human being of society. People do what they want to do. As such, people make many
mistakes as individuals since everyone has weakness.
Concentration on matters that are personally important to him is not selfishness.
Sometimes it is essential important to think of himself first. However, he must tend to
benefit from doing things that help others as well as himself.
Regardless of his involvement. It is best to give business matters top priority. He
serves first and attends to his personal interest later. Since he is in the employ of
another, he makes sure that he produces what is expected of him. Should he fail to
meet his mark, it will be on his record. It is bad enough to be wasteful with his own
resources but there is also a chance that he might be careless with the holding of
others.
Honesty is tested in the employee’s motives for his action. It is an important act
deserving of encouragement. According to John Herman Randall, Jr. and Justin Buchler:
Although doubtless not all actions are moral actions, all actions may under
certain circumstances assume moral significance.

Honesty
For any ethical organizations, honesty work is a virtue worthy of emulation by
the employees. Employees give priority to the accomplishment of their jobs, but they
also allocate time for pleasure.
The secret of success for any individual is to put himself into his work. He has to
take some risks to advance his career in the organization. One such risk is to assume
that the management will recognize his honesty in all his undertakings for the
organization. If he enjoys what he is doing, there is a strong probability that he will
make it to the top. Of course, there is a great probability that he will find success,
provided his purposes are noble and his goals are ethical. Let his finer qualities, like
honesty, prevail in this situation.
Objectives can be accomplished with considerable ease, provided his methods
are in line with his highest ideals. Consequently, he must not deviate from the ethical
standards of his organization.
This suggests that the employee’s honesty is not only tested in terms of his
accounting of his financial accountability, but also in the use of his official time. Nothing
impresses better than that for honesty and sincerity in the performance of one’s duties
and obligation. Thus, he takes time to put his affairs in order. He learns to distinguish
the unimportant from the urgent matters. He gives matters relating to his work top
priority. Opportunities will develop themselves that can be expanded upon.
In view of this, even though he may have a chance to take advantage of another
to his credit, he will not do so. Here is where his honesty could be properly measured.
Because of tendencies to see things as people would like them to be, rather than
as they actually are, he works hard not to distort his judgements. According to Robert
Albanese: “Within particular organizations, employees at one level of the organization
may perceive events differently than those at another level.”
Nothing has changed. It is best not to makes promises to others if there’s a
possibility that he cannot deliver. He should know his limitations.
 Unless he is self-disciplined, there is a chance that he will waste a lot a valuable
time getting started. He sets a schedule and makes his hours count. Self-discipline will
be required in managing his resources. If he lets his guard down, he may dissipate his
funds foolishly.
Important judgements must be based upon the realities and existing factors, not
upon the way a person would like things to be moved. He is not only logical, but also
honest in his business dealing. He avoids the corrupting influence of dishonesty.
According to W.W Wenrich: “Explanations based upon internal events or entities have
little value in prediction and control.”
Moreover, a manager cannot teach his subordinates honesty unless he himself is
honest. Hence, he does not postpone doing something he knows should be done right
away. He must admit and correct immediately his past errors or what he has been
doing incorrectly. This is needed if he wants his relationship with the organization to be
better in the future. However, not all people have the same opportunity.
No organization has a monopoly of virtue. Its acceptability depends on the
integrity of people in the organization. Acceptance strengthens organizational unity. As
such, there is a need for honesty and competence in the organization.
Businessmen acted as they did because they are human beings. As Vernon A.
Musselman and Eugene H. Hughes said:
Although most businessmen strive to be honest, some seem to have one set of
standards for their personal lives and another for use in business.
Many employees receive, or have control over, funds of their organization.
Hence, many managers appear ready to settle for honesty and competence in working
with their people. As Reinhold Niebuhr stated:
Social life, when consciously managed and manipulated, does not develop
perfect equilibria of power. Its capricious disposition of power generates various forms
of domination and enslavement. Human society therefore requires a conscious control
and manipulation of the various equilibria which exist in it. There must be an organizing
center within a given field of social vitalities. This center must arbitrate conflicts from a
more impartial perspective than is available to any party of a given conflict; it must
manage and manipulate the processes of mutual support so that the tensions inherent
in them will not erupt into conflict; it must coerce submission to the social process by
superior power whenever the instruments of arbitrating and composing conflicts do not
suffice; finally it must seek to redress the disproportions of power by conscious drifts of
the balances whenever they make for injustice.
Expense Accounts
An employee is given an expense account to be used for the benefit of the
organization. It deals with the ethical values of the proper use of such account of both
the employee and the management of the organization.
The ethical lines in the use of expense accounts may be drawn by allowing lines
between personal interests and organizational responsibilities.
Expense accounts delineate the character of an individual which is most badly
needed by an organization among its personnel. Unfortunately, all too often employees
fail the test of honesty in this regard. One is, therefore, forced to argue that there is
something wrong with the values in education. According to Ernest Dale:
Theoretically, expense accounts are not compensation at all. The executive who
collects money from the company on this score is merely getting back his own money
that he has had to spend company business – for entertaining customers, hotel bills,
and plane fares. If a company wants its executive to belong to an expensive country
club so they may entertain customers there, it seems only fair that it should pay the
dues. Similarly, it may want to save an executive’s valuable time by placing a company
car or plane at his disposal.
However, it is undeniable that part of this expense money does constitute a form
of extra income in some case. If an executive can entertain a customer at lunch almost
every day and often at dinner, too, he is getting a large number of free meals. Similarly,
he may attend a business meeting of one kind or another at a resort and in this way
get a partial vacation free.
Some companies have been fairly indifferent in this matter, and some executives
– and rank – and – file salesmen – have taken advantage of “business expense”
provisions which make money received in compensation for business expenses
nontaxable. But it is very difficult for a company to draw up rules ensuring that is
executives will be reimbursed for all legitimate business expenses and yet prevent any
freeloading. . . . . Almost any type of general rule is likely to be unfair to some.
Since an employee is not only representing himself but also his organization,
then he is required to act properly with dignity and responsibility at all times. As such,
an expense account is given to him to accomplish his purpose. According to Thomas M.
Garrett:
The problem involving expense accounts arise from three relationships: the
relationship of the recipient to the company, the relationship of the grantor to the
recipient and the company, and the recipient and the company to the tax laws.
 Such relationships are business problems and they require business solutions. In
doing so, certain ethical values for business exist in this situation.
Expense accounts are funds given by the management of organization to its
employees for limited purposes. As such Garrett has said:
Expense accounts can be divided into the following three general policies:
1. A flat allowance whether annual or per diem is given to the employee.
2. The employee is directly reimbursed for expenses already incurred.
3. The employee charges his expenses, and the company reimburses the seller.
This form is often combined with the second.
It should be understood that expense accounts should be used by the
employees, but their goals are the pursuit of profits for the organization and
not for their personal interest. However, anything is possible in using expense
accounts. Thus, he tries to determine his expenditures in advance, then
budgets his use of time accordingly. Without a definite plan he could yield to
extravagance. Thus, he doesn’t lose time.
In the case of his expense accounts, he doesn’t take chances just because
his associates or others do so. Indeed, they are accountable to their
decisions. In another instance, expense accounts should never use merely to
show that an employee is performing his work. Thus, merely being busy
won’t suffice. He must find useful outlets for his talents and time for the
organization. He can organize his day without losing too much time. He can
recognize the complex interdependence of each upon all interest, but to
provide his organization better service.
Instead of trying to embellish facts to impress others, the truth will earn
him respect and admiration. Exaggeration won’t. he will instinct know how to
put things in proper context.
He will feel very sensitive about his personal problems; he does not create
complications – there is no need to. He is adept in handling which affect
others as well as himself.
Cost control and abiding by a budget is essential if he hopes to come out
on the profit side of the ledger. A sure way to foul up one’s entire schedule is
to brush aside tasks requiring immediate attention. Thus, he doesn’t ignore
what needs doing. He strives to keep his financial affairs in proper balance.
There will be a time of reckoning if he spends more than he’s taking in. Thus,
he cuts down on his expense accounts.
Tenacious efforts will be required if he hopes to achieve his objectives.
Taking shortcuts could lead to deadened streets.
Business and pleasure do not mix well. It is best to forego trying to
promote business matters in a social setting.
 An employee projects himself into social situations that will give him
opportunities to make new contracts. People he meets there could be
important to him. Thus, he tries to keep his schedule as flexible as possible.
He is duty conscious and does what is expected of him. But he also allows
himself some time to participate in pleasurable pursuits that could not be wasted. In
fact, he needs to involve in activities depart from the usual routine. A unique idea may
dominate his thinking. He does not discount it just because it departs from his normal
way of operation.
His greatest benefits will come through his more progressive contracts. He
avoids involvement with people who think of “status quo,” especially
individuals who are unprincipled.
Quite a lot can be accomplished once he sets his mind to it. He can be
especially effective in advancing the interests of all concerned. Hence, it is
important that he exercises self-control regarding his expenditure. Yielding to
extravagant whims could cause regrets. Thus, he strives to be prudent in his
undertaking by minimizing his expenses for outside interest. He does not
make commitment that could cause him more than he could afford for
himself and his organization