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Business ethics
The principles of conduct governing an individual or group
Study of morality which is a kind of investigation that includes both the activity of investigating as well as the results of that investigation
A specialized study of right and wrong applied to business policies, institutions, and behaviors
An important study since businesses are some of the most influential institutions within modern society
A study of moral standards and how these apply to the social systems and organizations through which modern societies produce and distribute goods and services and to the behaviors of the people who work within the organization
Personal ethics
When referring to the rules by which an individual lives his or her personal life
Accounting ethics
When referring to the code that guides the professional conduct of accountants
Ethics
The discipline that examines one’s moral standards or the moral standards of a society
Moral standards
The norms about the kinds of actions believed to be morally right and wrong as well as the values placed on the kinds of objects believed to be morally good and morally bad
Systemic issues
Questions raised about the economic, political, legal, or other social systems within which businesses operate
These include questions about the morality of capitalism or of the laws, regulation, industrial structures, and social practices within which businesses operate
Corporate issues
Questions raised about a particular company
These include questions about the morality of the activities, policies, practices, or organizational structure of an individual company taken as a whole
Individual issues
Questions about a particular individual within an organization and their behaviors and decisions
These include questions about the morality of the decisions, actions, or character of an individual
Globalization
The worldwide process by which the economic and social systems of nations have become connected together so that goods, services, capital, knowledge, and cultural artifacts are traded and moved across national borders at an increasing rate
Multinational corporation
A company that maintains manufacturing, marketing, service, or administrative operations in many different host countries
Ethical relativism
The theory that, because different societies have different ethical beliefs, there is no rational way of determining whether an action is morally right or wrong other than by asking whether the people of this or that society believe it to be right or wrong by asking whether people of a particular society believe that it is
We do not agree with this kind of belief that there is not absolute moral standards because of the following:
It is a universal truth that it is bad to kill or harm another human being
The universal acceptance that we must always tell the truth
That we must love, respect, and care for each other
Etc., etc., etc.
Technology
Consists of all those methods, processes, and tools that humans invented to manipulate their environment
Information technology
The use of extremely powerful compact computers, the Internet, wireless communications, digitalization, and numerous other technologies that have enabled us to capture, manipulate, and move information in new and creative ways
Cyberspace
A term used to denote the existence of information on an electronic network of linked computer systems
Privacy related issues
The power to collect detailed information about individuals and companies that can be linked quickly to other databases
Copyright issues
Computerized information can be copied perfectly countless times without in any way changing the original
Development of nanotechnology
A field that encompasses the development of tiny artificial structures only nanometers (billionths of a meter) in size
Initial
Public
Offering
IPO
Share premium
Over and above the par value
Memo Entry Method
Authorized to issue xxx shares with Pxx par value
Subscription Contract
Subscribed share capital (temporary)
Republic Act No. 11232
Revised Corporation Code of the Philippines
Defined corporation as an artificial being created by operation of law, having the right of succession and the powers, attributes, and properties expressly authorized by law or incident to its existence.
Corporation
a body formed and authorized by law to act as a single person although constituted by one or more persons and legally endowed with various rights and duties.
the more popular form of business organization today.
Stockholders
Persons who put in capital in a corporation
Ex. Manila Electric Company, Jollibee Corporation, San Miguel Corporation, among others.
Separate legal entity
A corporation is an artificial being with a personality separate from that of its individual owners.
It has the capability of owning assets, incur liabilities, and enter into contracts under its own juridical name.
It can sue and be sued during its existence as an entity.
Created by operation of law
A corporation is generally created by operation of law.
The mere agreement of the parties cannot give rise to a corporation.
Right of succession
A corporation continues to exist notwithstanding the withdrawal, death, insolvency or incapacity of the individual owners.
Changes in the ownership structure do not dissolve a corporation.
Powers, attributes, properties expressly authorized by law
Being a creation of law, a corporation can only exercise powers provided by law and powers which are incidental to its existence.
The law provides the corporation during it entire existence certain powers and attributes that it can exercise as provided in RA No. 11232.
Ownership divided into shares
generally, proprietorship in a corporation is divided into units known as shares of stocks.
Those who would want to be partly owner of a corporation should buy and own shares of stocks.
Board of Directors (BOD)
Management of the business is vested in a board of directors elected by the stockholders.
The BOD is the governing body or decision-making body of a stock corporation.
Public or Government
According to Purpose
a corporation formed to render government service
Private
According to Purpose
a corporation formed for a private purpose, aim or benefit.
Quasi-public
According to Purpose
a private corporation which is given a franchise to perform functions of a public character.
Domestic
According to Law of Creation or Nationality
a corporation that is organized under Philippine laws.
Foreign
According to Law of Creation or Nationality
a corporation that is organized under the laws of other countries.
Multi-national
According to Law of Creation or Nationality
a corporation with assets, facilities, and operations in at least one or more countries other than its own country of origin.
Stock
According to Membership Holdings or Unit of Ownership
a corporation in which the capital is divided into shares of stock and is authorized to distribute dividends to the holders of such shares.
A stock certificate is a physical evidence of the shares of stock.
Stock corporations are generally profit-oriented.
Ex. Manila Electric Company, San Miguel Corporation, Bank of the Philippine Islands, among others.
Non-stock
According to Membership Holdings or Unit of Ownership
a corporation in which capital comes from fees or contributions given by individuals.
No part of its income is distributed as dividends and any profit shall be used to further the purpose(s) of the corporation.
Non-stock corporations are generally non-profit in nature and are organized for religious, charitable, scientific, etc. purposes.
Ex. non-profit educational institutions like De La Salle University, Ateneo de Manila University, among others.
Open
According to the Extent of Membership
a corporation whose ownership is widely held by many investors.
Closely held or family
According to the Extent of Membership
a corporation in which 50% or more of its stock is owned by five persons or less.
De jure
As to legal right
a corporation that has complied with all the legal and statutory requirements in order to be granted corporate existence.
De facto
As to legal right
a corporation in fact wherein incorporators exerted effort to incorporate in good faith, but failed to comply with some requirements.
Corporation sole
For the purpose of administering and managing, as trustee, the affairs, property and temporalities of any religious denomination, sect or church, a corporation sole may be formed by the chief archbishop, bishop, priest, minister, rabbi, or other presiding elder of such religious denomination, sect, or church.
Incorporators
persons who originally formed the corporation and whose names appear in the Articles of Incorporation and signatories thereof. They must be 5 but not more than 15 natural persons. They should not be artificial persons.
Stockholders or shareholders
owners of a stock corporation.
Members
persons who gave fees or contributions to a non-stock corporation.
Corporators
persons who compose the corporation whether as stockholders in a stock corporation or as members in a non-stock corporation.
Promoters
persons who undertake the necessary steps and procedures to organize the corporation.
Subscribers
persons who agreed to buy shares of stock but will pay at a later date.
Underwriters
persons who undertake to sell the shares of stocks to the general public.
Partnership
Formed by at least two persons
Starts with agreement among partners; may be formed orally
Unlimited liability
Limited life
Transfer of equity of a partner needs the consent of all the partners
Partner is an agent of the partnership
Corporation
Initially formed by at least five persons
Starts with the issuance of a certificate of incorporation issued by the Securities and Exchange Commissions (SEC)
Limited liability
Unlimited life
Stocks can be transferred from one stockholder to another without getting the consent of the other stockholders
Stockholders do not act as agents of the corporation
Promotion
makes preliminary arrangements and solicits subscription to raise sufficient capital for the business.
Incorporation
formalizes organization of the corporation by filing with SEC the necessary documentary requirements such as articles of incorporation. Upon approval, SEC issues a Certificate of Incorporation (i.e., Charter), the date of which is considered as the date of registration or incorporation.
Section 10 of the Revised Corporation Code of the Philippines states the number and qualifications of incorporators as follows:
Any person, partnership, association or corporation, singly or jointly with others but not more than fifteen (15) in number, may organize a corporation for any lawful purpose or purposes: Provided, that natural persons who are licensed to practice a profession, and partnerships or associations organized for the purpose of practicing a profession, shall not be allowed to organize as a corporation unless otherwise provided under special laws. Incorporators who are natural persons must be of legal age. Each incorporator of a stock corporation must own or be a subscriber to at least one (1) share of the capital stock. A corporation with a single shareholder is considered a One Person Corporation as described in Title XIII, Chapter III of this Code.
Commencement of the business
the business should start its business within two years from the date of incorporation.
Organization Cost
Costs incurred in connection with the formation of the corporation are recorded as an expense. Philippine Accounting Standards (PAS) 38 on Intangible Assets states that organization costs are treated as expense.
Ex. filing fees, cost of printing stock certificates, promoters’ commission and legal fees. Any one of the following account titles may be used in recording organization costs:
Pre-operating Expense
Organization Expense
Organization Costs
Par value
a share of stock that is given a definite or fixed value in the articles of incorporation.
No par value
a share of stock that has no fixed value; it may not be issued for less than P5.00.
Ordinary or Common share
the basic issue or ordinary type of shares. The ordinary share entitles the holder to the following basic rights:
to vote in stockholders’ meeting;
Right to share in corporate profits (dividends);
Right to share in corporate profits upon liquidation;
Right to purchase additional shares of stocks in the event that the corporation increases its share capital (pre-emptive right).
Preference or Preferred share
all of the basic rights of common shareholders applies to preferred shareholders except the right to vote. In addition, preferred shareholders entitles the them to some specific preferences over the ordinary share such as
Preference as to payment of dividends;
Preference as to distribution of assets upon liquidation.
Authorized shares
refer to the maximum number of shares which may be issued by a corporation as set forth in the articles of incorporation.
Issued shares
represent shares which were issued to stockholders in the past which at present may or may not be in the hands of stockholders.
Unissued shares
shares which have never been issued and are available for issuance in the future.
Outstanding shares
the total shares of stocks issued to subscribers or stockholders, whether or not fully or partially paid(as long as there is a binding subscription agreement) except treasury shares.
Treasury shares
shares which have been issued and fully paid for but subsequently reacquired by the issuing corporation by purchase or by donation.
Subscribed shares
shares which investors have contracted to acquire.
Subscription
is a contract between a subscriber (buyer of stock) and a corporation (issuer of stock) whereby the former purchases shares of stocks of the latter with the payment to be made at the later date.
Certificate of stock
a written acknowledgment by the corporation of the stockholder’s interest in the corporation and its net assets
Share premium of par value/stated value
this account is credited for contribution in excess of par or stated value
Pre-emptive right
the right of a stockholder to maintain his ownership interest in the corporation through purchase of additional shares when new capital is issued.
Authorization
records the maximum number of shares a corporation is authorized to issue.
Sale of stocks
a stockholder buys stocks and pays immediately in full. Stock certificate is issued to the stockholder.
Subscription
a subscriber enters into a contract to buy shares of stock.
Collection
a subscriber pays his subscription either partially or in full.
Issuance of certificate
if a subscription is fully paid; a stock certificate is issued to the subscriber.
labor or services
record the cost of the labor or services using the fair value of the services rendered
Subscription Receivable account title
always recorded at subscription price computed as follows:
Subscription receivable = number of subscribed shares x subscription price
Subscription price
the amount agreed by the subscriber (i.e., the buyer of stock) and a corporation (issuer of stock) of the shares of stock which is usually at par or above par value.
Subscribed Share Capital and Share Capital accounts
are always recorded/credited at par value.
Share Premium
is recorded/credited at amount in excess of par value computed as follows:
Share premium = (Subscription price – par value) x (subscribed shares)
Sustainability reporting
The disclosure and communication of environmental, social, and governance (ESG) goals and progress
Importance:
Enhances corporate reputation, builds consumer confidence, increases innovation, and improves risk management
Ordinary shares
also known as common stock
Preference shares
also known as preferred stock
Subscribed share
has been subscribed but not paid in full
Environmental, Social, and Governance
ESG stands for
contra
Treasury shares are ____ equity account
