Table of Contents

Instituting Ethical Codes of Conduct In Philippine Companies

A Term Paper Submitted to the Faculty of the Business Management Department College of Business De La Salle University

In Partial Fulfillment in the Requirements For the Course Human Resource Part One

Artadi, Louise Mari J. Gatdula, Maricris B. Hechanova, Roberto Jose G. April 13, 2011

Table of Contents

Table of Contents
1.0 Introduction .....1 1.1 1.2 1.3 1.4 1.5 1.6 1.7 2.0 Background of the study .1 Statement of the problem 2 Objectives of the study ....3 Proposition of the study ......3 Significance of the study..........3 Scope and Limitations......4 Definition of terms...........5

Review of Related Literature ..............................................................................................6 2.1 2.2 2.3 2.4 Defining ethical codes of conduct............................................................................6 Designing a code of conduct....................................................................................9 Implementation..................................................................................................11 Implications........................................................................................................13

3.0

Holcim Philippines, Inc.....................................................................................................15 3.1 3.2 3.3 3.4 Company Profile....................................................................................................15 Interviewee Profile ................................................................................................16 Human Resource Practice..................................................................................16 Insights...............................................................................................................19

4.0

Social Security System .....................................................................................................21 4.1 4.2 4.3 4.4 Company Profile....................................................................................................21 Interviewee Profile ................................................................................................22 Human Resource Practice..................................................................................23 Insights...............................................................................................................25

5.0

Concepcion-Carrier Air Conditioning Company.......................26 5.1 5.2 5.3 5.4 Company Profile....................................................................................................26 Interviewee Profile ................................................................................................27 Human Resource Practice..................................................................................28 Insights...............................................................................................................29

6.0

Cross Case Analysis ..........................................................................................................31 6.1 6.2 6.3 Summary ...............................................................................................................31 Human Resource Department................................................................................31 Existing Code of Conduct......................................................................................32 i

Table of Contents

6.4 6.5 7.0

Implementation of Code of Conduct..33 View on Code of Conduct..34

Conclusion and recommendation 7.1 7.2 7.3 Conclusion.............................................................................................................35 Recommendation for further studies......................................................................36 Recommendation on code of conduct....................................................................37

References .....................................................................................................................................44

ii

Introduction

Chapter 1 Introduction

1.1

Background of the Study

Around the world, there has been a growing interest within organizations to adopt ethical

codes of conduct. According to Somers (2001), three-quarters of all the firms in the United States have implemented formal codes of ethics with the number continuously increasing over the past few decades. In the Philippines, several multi-national corporations have brought their corporate codes of conduct and adapted them to the Philippine culture. Even local companies have created and implemented their own codes to set standards in their business practices, one of which is the Philippine Long Distance Telephone Company (PLDT). PLDT approved its code of conduct in 2004 and sets standards on compliance, competition and fair dealing, disclosure, and many others. The company created the code in the hopes of promoting accountability, integrity, fairness, and transparency (http://www.pldt.com.ph/governance/about/Pages/FAQs.aspx).

Ethical code in a corporation is one of the fundamental pillars of human resource training and development. It is but necessary to take proactive and constant efforts in making sure that the company not only learns, but also owns the ethical code. Applying ethical codes in a corporation is an owned responsibility that is equitable to any stakeholders action with its effects to other stakeholders as well. For one, actions of members could greatly affect society, not just its internal stakeholders. Companies, such as Enron, affected all stockholder and other investors as its stocks dropped nearly 200 percent after knowing the insider trading caused by top officers, like Former Enron Broadband Services executive Rex Shelby was sentenced in 2011

Introduction

on an insider trading charge linked to the investment fraud that destroyed the worlds largest energy trader 10 years ago (Calkins, 2011). If the ethical code were a top priority in Enron, it would not have caused the loss of the entire retirement fund of Enron employees and investments of hundreds of stockholders. It has caused a great impact not only on Enron, but society as well as energy trading faced a bump when it closed. Moving forward however, ethical codes, when applied well are beneficial as companies like Johnson and Johnson recalled entire Tylenol sales when seven Chicago locals died from cyanide-laced Tylenol. Johnson and Johnson set the bar as it practiced its credo, responsible to society in every practiced, that started the practice of other companies to do the same.

Corporations have benefited greatly from implementing ethical codes of conduct. The codes ensure that the companys employees practice moral values. Not only will that give the company a good reputation but it would also satisfy the most important aspect of business: the stakeholders.

1.2

Statement of the Problem

Instituting ethical codes of conduct in an organization has its pros and cons depending on

the company, its culture, and its people. The company must conduct thorough research to assess the current situation in the company to find out if instituting a code of conduct would be appropriate and if the provisions in the code are fair and effective. The company must take great care from the codes creation, to its implementation and to continuous monitoring. Implementing a code of conduct that is unsuitable could greatly affect the publics view of the company and even the companys operations.

Introduction

1.3

Objectives of the Study

This research paper aims to determine the factors to consider when determining the need

to institute a code of conduct. It will also evaluate the effectiveness and balance of company codes of conduct. Furthermore, it will identify whether all companies need a code of conduct. This research paper will compare three companies that fall into its scope of limitation to address further the research objectives.

1.4

Propositions of the Study

The following are the propositions made by the researchers: Proposition 1: It is likely that companies with no code of conduct will have problems

with ethical issues and decision-making.

Proposition 2: It is possible that companies that have codes of conduct have high integrity and internal guidance on proper ethical decision-making.

Proposition 3: It is also likely that the more detailed the code of conduct is in terms of explanation, the more efficient the employees are and the higher chances of them further understanding the meaning of the guided actions.

1.5

Significance of the Study

This study on ethical codes of conduct will expose the relevance and effects of this tool in

corporations. By tackling this issue, companies could actually discover the need to have a code to deal with some of their issues, especially concerning guiding their people. In addition, these 3

Introduction

companies could consider some points shared on the code of conduct, that will lead to further revisions and taken into consideration for application to their practice. There is a need for people to understand how the code of conduct could be beneficial to them and their growth for them to really to accept the practice as well. It is the decisions the company makes that truly reflect the company, the culture, and even the country where it operates. It is by educating more about the topic that proper plans of action could take place for the betterment of not only the company or the individuals, but to society as a whole.

1.6

Scope and Limitations

Companies use various code of conduct in order to have a better management of their

respective firms.

Knowing that code of conduct is being implemented in companies, the

different methods for implementing such conduct will also be taken into account. The literature will study the various methods used by firms in implementing the code of conduct while the methodology will focus on the effectiveness of the methods used by the companies in monitoring the performances of their employees.

The world we live in has been global such that good governance through the practice by the companies of code of conduct across the world (Batho & McNutt, 2005). Companies practice such code because of its benefits to the firms thus; the study will discuss the advantages that the code of conduct has for firms.

In the methodology, interviews of human resource officers from companies in Metro Manila will support the study of the effectiveness of code of conduct in their respective

Introduction

companies. It will make use of everyday experiences that seem to affect greatly the practice of code of conduct in their firms.

1.7

Definition of Terms
The reader could be confused with two similar in this paper namely the code of ethics and

code of conduct.

The main difference with ethics and conduct is that codes of conduct refer to the specific dos and donts of employees in their companies while code of ethics would just refer to what is morally right without specifying what to do and what not to do. Companies provide the codes of conduct given the practices of the said companies as well as their respective sanctions for noncompliance while companies do not necessarily provide ethical guidelines in a document. They are behavior or sets of standard as to how one should act in given scenarios.

Review of Related Literature

Chapter 2 Review of Related Literature

2.1

Defining Ethical Codes of Conduct

According to the International Federation of Accountants (2007), codes of conduct are

"principles, values, standards, or rules of behavior that guide the decisions, procedures and systems of an organization in a way that (a) contributes to the welfare of its key stakeholders, and (b) respects the rights of all constituents affected by its operations." The code of conduct is, therefore, a document that sets out specific procedures to address specific ethical situations. One cannot create a code of conduct without first understanding and establishing a code of ethics. The code of conduct and the code of ethics are two different things; while the former is a set of guidelines, the latter is more of a set of beliefs regarding ethical issues.

Hosmer (1994) clearly defined the root of all the ethical issues. He had a study as to how corporate strategy could be rooted from ethical reasoning. His study focused on the different conflicts encountered in the workplace as well as the role of ethics in the strategies that should take place. First, conflicts in the workplace are serious since the harm done by an individual benefits another individual. There are certain conflicts brought about by certain managers that benefit another individual. In some cases, conflicts would also arise simple because of selfinterest (Hosmer).

Knowing that conflicts are inevitable in companies, it is important to address these conflicts since it will improve the current condition of the company (Schwab, 1996). Schwab

Review of Related Literature

acknowledges the conflicts that Hosmer was able to identify but he argues that ethical issues are not the sole investment that the company could use in order to improve its current condition. Schwab had to question the inevitability of conflicts and focused his study on the possibility of reducing conflicts instead of focusing on the various ethical solutions to different conflicts (Schwab). He focused on the seemingly ethical practices which employees should be able to practice in order to reduce conflicts in the workplace. Some of these practices pertain to the proper treatment of employees regardless of position and experience. If the company treats the employees well, they will also reciprocate such treatment in which there are less or no conflicts at all that would arise.

In resolving the conflicts in the workplace, there are certain acceptable ethical procedures. There is a need to practice these procedures in order to have a better working environment. Hosmer (1994) proposed ten methods on how to address various conflicts in the workplace. According to Hosmer, these methods are the following: self-interests, personal virtues, religious injunctions, government requirements, utilitarian benefits, universal rules, individual rights, economic efficiency, distributive justice, and contributive liberty. He also states that self-interest is never taking any action that is not in the long-term self-interests of yourself and/or of the organization to which you belong.

Personal virtues revolve around the three core values of trust, honesty, and openness. As long as ones actions center on these three core values then that person is building healthy relationships. In this way, his actions would then be ethical and would avoid conflicts from arising. Religious injunctions explain that personal virtues are not enough in order to practice

Review of Related Literature

ethics in a situation. One must take into account compassion and kindness in all his dealings. In addition, his sense of commitment to his community should also be propelling him to do better in all his relationships inside and outside the workplace in order to achieve his communitys common goal. By the name itself, government requirements simply pertain to laws. In this world, it is a necessity to follow and abide by the laws of the real world.

The fifth guiding principle of ethical behavior is the utilitarian benefits. This simply pertains to the scope of ones actions. One must act if this will benefit the greater good. The sixth principle is the universal rule that simply means putting yourself at the feet of others. This is critical in making a decision. It is ethical to think as if you are in the shoes of other people in order to come up with the best decision. The seventh principle is the individual rights. This addresses the propensity of individuals to be self-centered. In line with this, this principle sets a standard as to the rights of individuals. The next principle is economic efficiency: to maximize a firms profits. No matter what constraints there are, it is vital for a firm to maximize its profits since it is only through maximizing profits that firms become efficient. The ninth principle is the distributive justice principle that discourages individuals from inflicting harm to those who are the least in society or workplace. It is very important not to inflict harm to those who are innocent and are not in any way doing harm to others as well. Lastly, the contributive principle according to Hosmer is never to take any action that will interfere with the right of all of us for our self-development and self-fulfillment to the limit of our abilities.

All these principles, when practiced, are ethical. In any situation, these principles must be implemented in order to come up with a well thought of decision which could address the

Review of Related Literature

problems in firms. Regardless of ones race, religion, sexuality and the like, these principles pertaining to ethics will apply since these all lead to the development of ones morality. Banerjee, Cronan, & Jones (1998) acknowledged the fact that ethical behavior is highly dependent on ones beliefs. The morality of the judgment made defines ethical behavior, as decision maker does not also sometimes know whether his decisions are ethical or unethical. These beliefs vary based on ones view on the situation but the common denominator is ones development of morality that is inherent in humans. Although, there are various factors a company should consider in situations where ethical behavior is necessary. The standards of the code of conduct set by the company must hold true in any situation since these codes are set based on different principles as stated previously. Once a company has set the code of ethics, the design and creation of the code of conduct naturally comes next.

2.2

Designing a Code of Conduct

Creating a code of conduct is not one of the simple things to do for a company. It may

seem obvious and may even seem unimportant at first, but the process one goes through to create such document is grueling as well as challenging. First, the goal of creating a code of conduct should be in mind, which is, to be able to come up with an ethics or values grounded on a set of regulations that molds the culture of the company to act with integrity and make the more favorable decisions for business benefit. Besides knowing the objective of the code of conduct, there is also a need to think in the deeper sense what the plan is for the code (International Federation of Accountants, 2007). An internal code for employees suffices if the main function of the code of conduct is to improve the internal management of ethical standards. On the other hand, if the company wants to improve its reputation and restore its credibility by

Review of Related Literature

communicating its commitment to its values to the general public, an external code is required (Graafland, 2004).

Where management wants to bring the group, closely ties together with the objective of the code. Developers must place themselves in the creation of the regulations since companies have the chance to exercise their skills and thoughts given the decisions that will forever change the culture and movement of people. The next point is that current behavior and culture of the company mirror codes of conduct or they can go extreme and try to enact major change in the company reflecting the future state of the group. This is so due to the inevitability of the code to be a reflection of the company. If ever the code though is too close to the current culture and standards, it does not give the incentive/driven for better performance. It becomes insignificant. However, if there is a great difference between the ideals in the code and the current state then there is loss in motivation and a chance of enacting change. There must be balance between the two extremes (Graafland, 2004).

Furthermore, in the creation of a companys code of conduct, there is a need of active participation from the board of directors for they set the standard and influence the behavior of their people. It is through them and maybe a senior manager to really uphold and monitor the development of the fulfillment of the set rules. The board must have the entire company in mind and have foresight to finalize a clean-cut code of conduct.

In addition, in creating the code of conduct, there must also be consideration of other cultures and possible effects to be sensitive and cautious to avoid any misinterpretations and

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Review of Related Literature

possible problems. The presence of local, national, and international regulations should also be in the minds of the developers so as not to go against higher authority. By not keeping the code streamlined with other higher laws, conflict and confusion shall arise and it would tell a lot about the credibility and competency of the company. Furthermore, it must be consistent until the end what the company wants for the code. There must be constant reminders of the initial reason for the production of the code. Lastly, there must be conscious effort to keep the codes in the hearts of the people with constant reminders and other promotional actions to ensure the effectiveness and proper awareness (International Federation of Accountants, 2007).

2.3

Implementation
In implementing an ethical code of conduct, a company should follow certain methods to

ensure its successful execution.

Adam & Rachman-Moore (2004) created a study on the

different methods of implementation: the formal method, informal methods, and personal method. A company may select any of these methods depending on which would best suit the culture and behavior of its employees.

Formal Method. This method calls for the creation and distribution of documents that specify the codes of conduct. Training and orientation, performance evaluation, and various enforcement strategies promulgate these documents to the employees. The dissemination of the code of conduct through the formal method may begin as early as recruitment.

Informal Methods. Socialization is the key element in these methods. The company disseminates the code of conduct through a social frame of reference. Mechanisms of informal

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Review of Related Literature

control may include a social dimension through which superiors regulate the behavior of subordinates, or employees regulate the behavior of their peers, through everyday interaction with one another in accordance with the organizations norms (Adam & Rachman-Moore, 2004). Through this method, employees adhere to the code simply because their peers and superiors pressure them to do so. The regular interaction between the organizations members causes them to act the same way and to a certain extent, have the same beliefs. Another informal method to take into consideration is the example set by the manager. Since one of the

expectations for a manager is to be a role model to his or her subordinates, the manager can easily influence their behavior. If a manager acts in accordance with the code of conduct, he or she influences the employees to do the same.

Personal Method. Empowering every individual in the company is the concept of the personal method. Since each employee has his or her own set of beliefs regarding different ethical issues, there is an expectation that they have a personal control on their conduct. The company can set the general code, and normally, the employees comply with it, but they do not act passive. They have an active role in interpreting the code and using it according to how they understand and perceive it.

Although there are methods, which companies would choose as a way to implement their code of conduct, there have been studies done by Tulder and Kolk (2001) regarding this idea. They found out that the company environment has a great impact on the implemented code of conducts effectiveness. Its effectiveness would still be highly dependent on its members who could have had a stake during the formulation of such code.

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Review of Related Literature

2.4

Implications
Instituting a code of conduct in a company has several implications. The effects that this

could bring to a company could, in a way, make it or break it. Having the employees follow a definite set of ethical practices has both advantages and disadvantages.

Advantages. In the study of Loverd (1989), codes of conduct set a standard on the ideal behavior of employees. According to Hosmer (1994), the advantages of ethical practices are consistency, timelessness, and objective. It shows consistency in decision-makings as one

practices ethics since there has been an agreement as to the standards they formed which are ethical. It is timeless, as it will last even for future employees. This means that the ethical principles do not just address the needs of the current employees but also of the future. The last is objectivity. Ethical practices are not biased or subjective. All of the criteria in the standard have a basis and a study supports why they are credible enough to for firms to practice (Hosmer). There is also a lasting appeal in using a code of conduct because it is far better to regulate corporate behavior through the corporate conscience rather than through government regulation (Kolk & Van Tulder, 2002).

Disadvantages. Knowing that there are advantages for these practices, there are also disadvantages. Schwab (1996) made a cost-benefit analysis in relation to the ethical practices done by the company. His results showed that there the investment for avoiding the need to practice of ethics has higher returns compared to being ethical. In simple terms, the cost is higher when a firm invests in ethical practices compared to when the firm is trying to invest in their employees.

13

Review of Related Literature

In the research done by Loverd (1989), he concluded that one of the most important processes involved in the creation and implementation of a code of conduct for firms. His study made use of the cost and benefit analysis that determines the root or cause of the wrong doings of employees. Practicing the code of ethics does not seem to have an impact to employees since employees find the benefits of unethical practices to be more beneficial. In addition, the code of conduct may address a certain issue but fails to address the root of the issue. Given this fact, there is a probability that such conflicts could arise again, employees will still practice unethical behavior, and the cycle just continues which makes it more costly (Schwab).

The success of the code of conduct heavily relies on an organizations members. The responsibility of detecting and reporting any violation to the code lies on the employees. However, many times, the violations go unnoticed or unsanctioned. If this is the case, the code cannot be implemented effectively and lose much of their potential for fostering behavioral change (Nitsch, Baetz & Hughes, 2005). In addition, Loverd (1989) concluded that although there are guidelines provided by the code of conduct, they seem to be in a general form such that the specifics of the guidelines are not addressing the issues in the company.

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Case No. 1 Holcim Philippines, Inc.

Chapter 3 Case No. 1 Holcim Philippines, Inc.

5.1

Company Profile
Holcim, Ltd. is a multi-national corporation founded in Switzerland in 1912. It is one of

the

leading

suppliers

of

cement

and

aggregates

around

the

world

(http://www.holcim.com/en/about-us.html). Today, it holds operations in over 70 countries. Holcim was established in the Philippines in 1974 and was renamed Holcim Philippines, Inc. after the integration of Alsons Cement Corporation and Union Cement Corporation (http://www.holcim.com.ph/en/about-us/corporate-profile.html).

Holcim Philippines is involved in the manufacture, sale, and distribution of cement and ready-mix concrete all over the country. It is the leading cement manufacturer in the Philippines. It holds operations in 13 regions with over 1700 employees. Holcims four major cement plants in La Union, Bulacan, Davao City, and Misamis Oriental have an annual installed clinker production capacity of 6.5 million metric tons and a yearly cement production capacity of 7.7 million metric tons. Holcim produces ready-mix concrete in its state-of-the-art concrete plants in Taguig and Paraaque (http://www.holcim.com.ph/en/about-us/facts-and-figures.html).

Holcim is very much rooted in values because the company believes that values are a driving force for change (http://www.holcim.com.ph/en/about-us/mission.html). These values include being a partner in nation-building and following sustainable practices. Through its values, the company can achieve its vision of provide foundations for society's future

15

Case No. 1 Holcim Philippines, Inc.

(http://www.holcim.com/index.php?id=4591).

The company has won several top industry

awards including the Presidential Mining Industry Award (Titanium Level) in 2006 and the Best Mining Forest Award in 2006 and 2007. It also holds the title of Leader of the Industry for three years in a row in the Dow Jones Sustainability World Index

(http://www.holcim.com.ph/holcimcms/uploads/PH/Holcim%20corp%20brochure%20final%20 %28low%20res%29.pdf).

5.2

Interviewee Profile
Mary Grace Cruz currently works for Holcim Philippines, Inc. as Manager for Leadership

and Development. She conceptualizes, develops, and ensures the sustainable implementation of a professional management system. She also handles supervisory development, leadership

values formation, employee engagement and other Human Resource Development programs to facilitate the building of a performance-oriented culture. Mrs. Cruz has been with Holcim since October of 2004. Prior to her stint with Holcim, she served as the HR Manager of JPT Central Corporate Holdings and Management Corporation from March 2001 to 2006. She graduated with a Bachelor of Science degree in Commerce Major in Economics and a Bachelor of Arts degree Major in Psychology from the College of the Holy Spirit in 1986. She received her Masters degree in Industrial Relations in 2005 from the University of the Philippines School of Labor.

5.3

Human Resource Practice

Holcim Philippines believes that committed, responsible, and skilled people are the

foundations from which it is built (http://www.holcim.com.ph/en/people-and-jobs.html). They 16

Case No. 1 Holcim Philippines, Inc.

also aim to be the employer of choice in the country. That is why the company puts a lot of importance in its Human Resource department. HR handles the training and development of all of the companys employees ranging from staff members to top executives. It implements several programs to cultivate a culture of performance within the organization, which encourages and values the contribution of people in an open and collaborative environment (http://www.holcim.com.ph/en/people-and-jobs.html). An important function of HR is to uphold the companys code of conduct.

Holcim has an instituted code of conduct that they call the Code of Behavior (COB). It embodies the principles, values, and standards that guide the employees' decisions and actions. It serves as a guide on how the companys employees should transact their daily business. The COB contains the companys vision, mission, and core values as well as general principles, guide behaviors, approach to non-compliance, reformative and corrective actions, due process, roles and responsibilities, communication process, and conflict of interest procedure. According to Mrs. Cruz, the Code of Behavior of the company describes the expected behavior required from all employees regardless of rank since its basis is the company values that support the company standards. These standards ensure business ethics in the highest form and the personal integrity of people behind it. Every new employee undergoes a session of COB orientation during every induction.

Because Holcim gives great importance to values, it strictly implements the COB in the organization. HR continuously monitors and observes the performance of all the employees to ensure that they comply with the guidelines stipulated in the COB. HR documents all the cases

17

Case No. 1 Holcim Philippines, Inc.

that fall under the COB using the established forms that begin with incident report, performance or behavioral gap report, notice of gap, and employee disclosure form, where employees disclose participation in a business outside of the company. The company's approach to non-compliance ranges from reformative and corrective where appropriateness of the action relies on the gravity, frequency, circumstance, and impact of the performance or behavior. For acceptable

performance and behavior, the company defines the norm and employs positive recognition of the action that reinforces our performance-based culture. The positive recognition comes in the form of variable compensation (performance bonus) and/or career movement (promotions, project assignments, recognition). Mrs. Cruz refused to disclose information regarding specific sanctions for negative behavior.

One of the recent cases that HR discovered was the non-compliance of some Finance employees to the established policies in the areas of fund management, cash advances, liquidation, and adherence to established approval process. Mrs. Cruz would not share the exact outcome of the case but she assured that the company took proper action on the situation and gave the appropriate sanctions to the delinquent employees. Among Holcims global group of companies, the local company is the first to put stringent discipline to its employees who have abused their positions that led to self-enriching practices.

Mrs. Cruz believes that a code of conduct is an important tool in a company as it serves as guide to the way it does its business. Therefore, it is necessary to put together this guide to establish common and consistent framework of understanding among all employees. However, believes that their current COB is better than a regular code of conduct because it has done a

18

Case No. 1 Holcim Philippines, Inc.

turn-around from the old manual and applications. It has done away from the template where they define the categories of offenses and its corresponding corrective actions. Holcims code builds on the general principles of the Global Code of Conduct, the code followed by the entire Holcim Group, and guides behaviors and any non-compliance to it. It has veered away from the description of violation, the corporate value it violates and its type of offense, which defines its gravity. Hence, interpretation whether its reformative or corrective rests on the immediate superior.

5.4

Insights
From the information gathered from the interview, it is clear that Holcim values its code

of conduct.

The company recognized the importance of having ethical conduct in their

operations and created a code that best suited its culture and people. The company strictly implements the code of conduct and HR consistently monitors compliance to it. Based on the study of Adam & Rachman-Moore (2004), Holcim follows the Formal Method of implementing the code of conduct. However, based on the last statements of Mrs. Cruz, wherein she said that interpretation rests on superiors, the company seems to follow a Personal Method of implementation as well. This mix of methods seems to work best for the company and it is commendable that they were able to formulate something that best suits them.

The Code of Behavior is obviously advantageous to the company because it sets a standard on the ideal behavior of employees. This is in accordance with the study conducted by Loverd (1998). However, the fact that the code in some way is open to interpretation could pose some future problems. Apart from that, Holcim has a good foundation concerning their Code of

19

Case No. 1 Holcim Philippines, Inc.

Behavior. The company designed the code properly since it contains a complete write-up of the companys values, principles, and others. They were able to provide rewards and sanctions for compliance or non-compliance to it. HR was greatly empowered to uphold the code and ensure the performance-oriented culture of the organization. Based on the case shared by Mrs. Cruz where they were able to discover the non-compliance of Finance employees, it proves that the Code of Behavior is extremely effective. Overall, Holcims example proves the importance of instituting a code of conduct in a company.

20

Case No. 2 Social Security System

Chapter 4 Case No. 2 - Social Security System

4.1

Company Profile
The government created the Social Security System (SSS) pursuant to Republic Act No.

1161 enacted in 1954. The government established SSS with the aim to protect employees particularly those in the private sector and the self-employed. The proponent of the

establishment of the said system was the former President Roxas whose primary objective was to give help to those who are minimum wage earners and low-income earners. Unfortunately, the congress did not approve the initial proposal. It was only in September of the year 1957 that the lawmakers realized the need for the approval of the Social Security System with the help of former President Elpidio Quirino (www.sss.gov.ph).

Social Security System administers two major programs namely the Social Security program and the employee compensation program that started in 1975. The employee

compensation program provides financial aid to those who are deeply ill, those who encountered an accident, or even those who could have encountered death. Although this program may seem to be of great help especially to those who are in deep financial crisis, only members of the program who are employees are the only privileged one to avail of the benefits of the said compensation program. Knowing that the program was able to cater to the needs of member employees, there was a need to open such program to another market. In 1980, the government made the program available to the self-employed. Self-employed workers like carpenters and farmers were able to avail of the benefits mentioned earlier. Aside from the employees and self-

21

Case No. 2 Social Security System

employed, minimum wage earners like the household workers and vendors were required to take part in the program. At first, the program may not seem beneficial to the members as it takes a part of ones salary but in the end, the members benefit from such program especially in unexpected crisis. Knowing that there are people who may think that the program is superfluous, higher authorities sanction the employers who do not comply with the requirements by the system.

The proper monitoring of the employers is necessary to help in facilitating with the proper contributions mandated in the law of the system that is beneficial to their employees. In addition to the two programs, SSS also provides funding for overseas Filipino workers, loans and amortizations and other employees compensation. All the said programs are aimed towards the improvement of the welfare of the employees and self-employed most especially those who are just minimum wage earners or low-income earners who are not able to set aside contingency funding (www.sss.gov.ph).

4.2

Interviewee Profile
Everni Lacson is the team head of the Human Resource Department of the Social

Security System. She has a college degree in Bachelor of Science major in Statistics. She has been with the company since 1982, thus putting her in service for 29 years now. She first started as a regular employee and worked her way through until such time that she became the head of the human resource department.

22

Case No. 2 Social Security System

4.3

Human Resource Practice

The interviewer, Maricris Gatdula, gathered most of the information from the Human

Resources Head of the company. Some of the information came from high-ranking employees of Social Security System. There are a number of roles that the human resource department is in charge of such as recruitment and implementation of code of conduct.

According to the interviewee, the human resource department is in charge of the recruitment of employees needed in a certain department. First, the department who is need of an employee must make a request to the HR department. The department must specify the position for the applicant as well as the other requirements needed such as the preferred age, gender, and educational attainment. After the request by the respective department, the HR department would now turn to an agency first. The agency now provides the probable

employees who met the said criteria. After which, the HR department will be giving an exam to those referred by the agency. In the event that the exam is passed, they are now qualified for an interview. Usually, this is a panel interview wherein the panel consists of five officers from various departments. Upon passing the interview, the company accepts the applicant as a

contractual worker for six months and the company will renew his contract until such time that he is qualified to be a regular employee.

Another role played by the HR department is the implementation of the code of conduct of the company. In SSS, there are a number of guidelines kept in mind by the employees. The interviewee gave the top three concerns of their company. The first is monitoring the attendance, followed by the uniform and the last is the proper decorum of their employees. In monitoring the

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Case No. 2 Social Security System

attendance, there a number of factors the company should take into account. For example, employees should complete the eight hours of work that is required of them. The HR department gives sanctions to the employees who are not able to meet the said hours. In addition, the company only allows employees to be late ten times otherwise; the company gives him the sanction for violating the code of conduct. The second guideline is the uniform. The company makes sure to convey and explain that the guidelines for the prescribed uniform of the employees. The guidelines for the uniform vary depending on the position and department but there are standards set as to what is the accepted in the company. The last common practice in the company is proper decorum. HR department also checks on the decorum of employees in the office, meetings and other office related events as employees are a microcosm of the company and it is important that they behave accordingly so as not to put the name of the company at stake.

In SSS, there have been actual cases that showed the importance of code of conduct in the company. For instance, there are employees would loiter during office hours. They would just roam around the premises of the office and waste time just to fill in the number of hours. Another application of the code of conduct is when employees go to work drunk and would still play cards inside the premises of the building. In the cases above, the HR department should reprimand those employees who violate the code of conduct. In addition, the HR must give the appropriate sanctions to those employees to prevent these situations from occurring again.

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Case No. 2 Social Security System

4.4

Insights
The human resource department of the company is a separate department that must be

present in all companies. The said department must continue with its goal to help in the better management of the company by improving the quality of work of not only the employees of the HR department but of all the other departments as well. For instance, the interviewer highly believes that it is necessary to monitor the attendance, uniform, and proper decorum of all the employees in the company. If the company would like to make sure that their employees deliver, one of the measurements they could use is the number of hours their employees render. Although it is necessary to monitor the number of hours employees render in the workplace, this does not guarantee the quality of their work but it is a step towards better quality thus, monitoring is necessary. As for the uniform, the interviewer believes that this is necessary since employees face their customers and there are customers who are very particular with what the employees wear. On the other hand, this may entail costs to the employees or employers but the benefits surely outweigh the costs thus, beneficial to both in the long run. Lastly, the interviewer also concedes to the need of monitoring proper decorum in the workplace. The interviewer highly believes that the employees attitude and proper decorum will result to an environment that is conducive to learning. In effect, this will help in improving the quality of work by the employees.

In conclusion, HR department plays a vital role in maintaining good quality of work output of the employees done through proper recruitment and hiring or proper implementation of the companys code of conduct.

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Case No. 3 Concepcion-Carrier Air Conditioning Company

Chapter 5 Case No. 3 Concepcion-Carrier Air Conditioning Company

5.1

Company Profile
The company website of Concepcion Carrier explains that in 1998, bringing together

Carrier Corporation, which is from the United States, and Concepcion Industries Inc. from the Philippines, Concepcion-Carrier Air Conditioning Company (CCAC) was established (http://www.carrier.com.ph/). It further explains that this company would end up expanding to various products such as heating and refrigerating and others, and later on be the market leader in the respective categories of these items. The company continues to give justice to the product excellence and innovation that Carrier has been proud of ever since, but adds that Filipino touch, making its products known and desired worldwide. Carrier is already the largest manufacturer of air conditioning and of other products and distributes all around through dealers, retailers and through other means.

CCAC has been at the top consideration of various companies for the quality products and commendable service they deliver for their consumers. NAIA Terminal 3, Market! Market!, and the GMA Network are just some of the major projects of the company, which proves their flexibility as well as their public trust as. (http://www.carrier.com.ph/)

The products of CCAC are not the only things society attributes to the company. They have also been at the forefront of preserving our environment, making sure that the processes they follow and even at the post-sale activities, they remain friendly to the world around us. 26

Case No. 3 Concepcion-Carrier Air Conditioning Company

Mentioned also in the company website (http://www.carrier.com.ph/), are their environmental efforts. They participate actively in the Philippine Ozone Desk of the Environmental

Management Bureau of the Department of Environment and Natural Resources and through other organizations and means that really ensure that what they do is not only for their consumers, but also for the good of the country and the world. A quote taken from the CCAC website (http://www.carrier.com.ph) summarizes the nature of the company, A heritage of technological innovation. Leadership in responsible environmental stewardship. Carrier

Corporation and CCAC - creating environments for life. Worldwide.

5.2

Interviewee Profile
The researchers communicated with Shiela S.C. Pangilinan, who is 37 years old, and is

currently the Senior Manager of the Human Resources Division of Concepcion-Carrier Air Conditioning Company. She has been with the company since mid-last year. She graduated with a degree of Bachelor of Science Major in Industrial Psychology from Assumption College in San Lorenzo Village, Makati City Philippines and, she is a member of the Mother Rosa Honors Society, which is an academic society.

Before being where she is today at CCAC, Sheila worked with Glaxosmith Kline Philippines, Inc. as the Human Resources Manager of the Global Manufacturing and Supply division for three years. She has also worked for Coca-Cola Bottlers Philippines for around ten years of her work life.

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Case No. 3 Concepcion-Carrier Air Conditioning Company

In CCAC, Sheila manages the day-to-day aspect of human resource activities focusing on labor relations, salaries, compensation, payroll, employee benefits, recruitment, and employee training along with Administration Management. She also continuously analyzes and evaluates current human resource practices for effectiveness, identifies opportunities for process improvement, monitors human resource plans and programs, researches best practices, assists in development of innovative processes and services as well as implementation of new programs. Another point, which is part of her job, is to conduct orientation for newly hired employees, familiarizing them with company policies and procedures and completing paperwork. In

addition, she manages personnel involved in investigations and assists or leads conflict resolution. An additional crucial part of her job is to submit and review HR monthly reports. As HR manager, she assists the management team in processing and conducting administrative investigation reviews, evaluates employee-administrative cases and submits it to Office of the General Counsel for final evaluation.

5.3

Human Resource Practice The Human Resource Division of CCAC does more or less, the usual activities that any

HR of company must fulfill.

They handle the life of each employee from recruitment,

succession planning, and even to dismissal. The team also specifically addresses attrition and even absenteeism. The role of their HR team includes the development and implementation of programs that will create a shared mindset through the company vision and values resulting to synergy and one company identity. They also work hand in hand with other management to provide a strategic approach in managing human resources to achieve corporate and individual goals and objectives. 28

Case No. 3 Concepcion-Carrier Air Conditioning Company

One job of HR that the researchers want to highlight is the assurance of the implementation and development in terms of the code of conduct. There was an initiation to commit to a code of conduct to make sure that they have an ethical way of doing business. Through this, they could have a set of guiding principles designed to help their professionals on how they conduct business. In CCAC, HR ensures that the code of conduct applies to all its employees and its controlled entities. In addition to stating rules that govern their actions, the code is an expression of fundamental values and it represents a framework for decision-making. The code supplements further explain the code. The code actually sets who they are and how they work. It focuses on the business and on how they can move forward.

5.4

Insights
Based on the new knowledge and understanding of the information gathered, the

researchers do believe it is beneficial for companies to have ethical codes of conduct. Though this code may seem as something that constraints each individual, the said code is actually the indicator on conducting ethical business and this will be the soul of the organization. The integrity, reputation, and profitability of the company ultimately depend upon the individual actions of its directors, officers, employees and representatives therefore it is important to be able to train, develop, and guide each person. Each person is responsible and accountable for

compliance with this code. Each one should also understand how important they are to the company, the business, to their investors and society. It might be that it is a given that

companies are ethical, but to take a step further and putting this, a code that takes accountability from all stakeholders is a fundamental step in making every person in a corporation of owning and practicing its code of ethics. This is the formalization of the process that in determines how

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Case No. 3 Concepcion-Carrier Air Conditioning Company

a company prepares, responds, and develops its human resource. It is especially important in situations that question and prove true ethical practice in a corporation.

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Cross Case Analysis

Chapter 6 Cross Case Analysis

6.1

Summary
The group was able to interview three companies namely Holcim Philippines, Social

Security System, and Concepcion-Carrier Air Conditioning Company. The interviewers focused on various human resource practices of these companies. They tried to determine the different views of the human resource departments with regard to the implementation of their code of conduct.

In summary, the three companies have been in existence for at least the past 10 years. Holcim and Concepcion-Carrier Air Conditioning are concentrated on manufacturing while Social Security System focuses on the service industry. In their 10 years of existence, these companies have seen the importance of a human resource department. Although the companies may have different styles of management and industry, they have similar goals and means of achieving their goals. These companies aim to improve the welfare of their employees and customers that makes the role of their human resource department vital in the company. The following paragraphs will further discuss these roles realized by the human resource department.

6.2

Human Resource Department

The three companies have similar ways of mobilizing their Human Resource

departments. Holcim and SSS both give emphasis on recruitment for their HR departments, while CCAC focuses more on human resource development. For instance, Holcim believes that

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Cross Case Analysis

it is the job of the HR to recruit even their top executives. The same way goes with SSS. However, SSS is more specific when it comes to recruitment. The departments in need are the ones requesting for the specific qualifications of the applicants they wish to employ from the HR. In the event that they have a vacant position, they will just have to submit a requesting form that includes all the qualifications of the said position. After which, the role of the HR begins. It is their responsibility to provide qualifications that the departments require of their applicants and most often than not, they are able to provide the departments their needs. After determining a pool of possible employees, succeeding processes will take place such as testing and interviews in which the requesting department will now be involved. As for Concepcion-Carrier, their HR handles recruitment as well, and goes through the strategic steps, but again, they focus more on the development of their employees. Their HR handles the strategic succession planning of the respective departments. They ensure that employees should always keep in mind the companys vision and values in establishing the companys identity in the industry.

6.3

Existing Code of Conduct

The three companies have various guidelines when it comes to the Code of Conduct. For

Holcim, they refer to this as the Code of Behavior (COB). The COB describes the expected behavior required from all employees. In the said company, the foundation for such code is their companys values. They believe that their employees must embody the companys vision, mission, and values.

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Cross Case Analysis

As for SSS, their focus is on the attendance, uniform, and proper decorum. HR believes that these three main aspects of employee life require more attention in achieving the companys vision and goals through the establishment of the necessary values to their employees.

Lastly, the code of conduct for Concepcion-Carrier is an effective instrument in guiding the way their employees are and the way they work. There is a similarity with CCAC and SSS in the sense that both give emphasis to attendance and punctuality, which is part of their code of conduct. They acknowledge the importance of complete attendance that would reflect the

quality of their employees work output as well.

Even if the codes of conduct of the three companies differ in many ways, they serve the same basic purpose. Overall, the companies use their codes of conduct to guide their actions in daily business.

6.4

Implementation of Code of Conduct

In all the companies interviewed, they gave emphasis to the proper implementation of the

Code of Conduct. Companies properly monitor the actions of their employees for the actions of anyone in the company will speak for themselves on a personal level, as well as the company they represent. It is their responsibility to be accountable for their actions thus the need for the implementation of such code. Holcim gives a great emphasis on their reward system. Holcim firmly believes in giving rewards and recognition to those employees who embody and practice the principles and values of the company.

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Cross Case Analysis

The codes of conduct of companies have great effects on the company in terms of their practice. For Holcim, part of their code of conduct is a provision on handling underground deals. The company gives proper sanctions for employees caught in the said practice. In CCAC, they have a similar ruling for their dealers. If a dealer is caught undermining the company and its practices, they are placed on probation and at the risk of being dismissed as an official dealer. For the last company, SSS, if their employees are caught loitering during their office hours, they shall be sanctioned for such behavior. In addition, if an employee entered the premises of the company drunk this entails a graver sanction for such misbehavior.

All the companies believe that the success of the code of conduct can only come from proper implementation. Each company utilizes their own means of implementing the code which best suits the companys culture and environment.

6.5

Views on Code of Conduct

Generally, code of conduct is truly vital in a company. The three companies have proven

the importance of such code through the interviews conducted. Although companies may have different guidelines as well as implementation when it comes to their Code of Conduct, they only have one. The said goal is to improve the quality of services their company offers through the establishment of the right values of their employees. The companies all view the code of conduct as essential to ensure the proper business practice of every person connected with the company. It speaks of the values and culture of the company, which is important to uphold. It ensures the integrity and assures public trust. It aids in guiding employees and sets the higher standard they are committed to given their service and commitment to the community.

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Cross Case Analysis

Chapter 7 Conclusion and Recommendation

7.1

Conclusion
After gathering and analyzing data gathered from three different firms, the researchers

believe that there should be an institution of ethical codes of conduct in companies. Input from all three companies encourages the practice and exhibit great pride in the implemented system that really guides their respective corporation.

With the implementation of the code of conduct being relatively new to some, there are certain factors to consider when determining the need for the code that will help companies. One factor to consider is the need of assurance of good practice in the work place. It is important for the managers to identify the need for ethical decision-making. In addition, another factor is the need to set standards. Not only is it about direct behavior, but also it is setting high standards that the community must meet as a reflection of trust and integrity of the company.

It is inevitable that there will be many differences in the code of conduct of various companies. Given the codes of CCAC, Holcim, and SSS, the researchers noticed that it really does vary and reflects the preferred culture of the company. It promotes fairness and justice, and proves to be an effective tool in workplace. Despite the variations in the specific content, good faith is always at the core of the creation of the code.

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Cross Case Analysis

With the objectives of the corporations and the practices it undergoes throughout its life, the researchers highly encourage the implementation of ethical codes of conduct. By complying to such a guide really ensures the good business practice of the people and trains them to practice ethical decision making in their day-to-day lives. It is developing these people to be more sensitive to the things around them and acknowledging their higher role and their commitment to a higher standard. It also protects the intentions and integrity of the company, which is important to its development.

Given the implications of good business practice, assurance of integrity and even commitment to human development, the researchers believe in instituting ethical codes of conduct for the betterment of not only the company, but also for the good of all.

7.2

Recommendation for Further Studies

The researchers based most of their information on the interviews conducted with the

human resource managers of the three companies. The data gathered is reliable on one hand because it comes from a first-hand source, but on the other hand, it is also unreliable because the HR managers would not disclose some vital information. They declined even to give the researchers a copy of their actual codes of conduct. There may be some bending of the truth behind the information because the HR managers would, of course, refrain from badmouthing the company or reveal any instances of bad practice.

To gather information that is more significant other researchers who wish to tackle this topic should consult the employees of the company to gain their feedback regarding the codes of

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Cross Case Analysis

conduct. Since they are the once who have to comply with it, they would be able to share what they really think and feel about the code. Future researchers may utilize survey forms in order to gather a great deal of answers quickly and effectively. The researchers should formulate the questions in such a way that even staff members would be able to answer them well. The questions should be straightforward and simple.

Future researchers should also consider studying more than just three companies in order to gain a wider perspective regarding the topic. They should not limit themselves to companies based in Manila, as well. To strengthen further their research, they may tap into companies in other provinces and even other countries.

Lastly, the researchers should find any means possible to gather copies of the actual code of conduct and observe their implementation in the companies. They should immerse

themselves in the companies offices and see the action for themselves. Through observation, companies cannot simply manipulate data and the researchers can make better insights.

7.2

Recommendation on Code of Conduct

Now that the results of the study have established the need for a code of conduct, it is

time to study the other aspects of the code of conduct for improvement. There are three main recommendations that the researchers would like to elaborate on. The first is on the guidelines. Guidelines must be set in such a way that it addresses the main concerns of the company. It would be of great help if the guidelines included in the code of conduct would specifically pertain to everyday experiences of their employees and clients and not just occasional incidents.

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Cross Case Analysis

This is vital since there are guidelines that employees take for granted. This is because they happen very seldom. There are also incidents that may be of less gravity but are rampant as they occur most of the time. Thus, there is a need to elaborate more on their occurrence and sanctions.

The second aspect of the code of conduct is the dissemination. Companies must be able to inform all of its employees about the code of conduct. It is not enough that companies just give their employees a copy of their code of conduct but that companies should provide a brief session regarding its contents. It is through the proper explanation of the code of conduct that their employees will be able to understand the importance of such code. Aside from this, companies must give updates to their employees frequently in order to keep them updated when changes in the code occur. Lastly, proper dissemination will also help in getting feedback from the employees regarding the points of improvement of the companys code.

The last aspect for the code of conduct to improve on is the implementation. There must be a just and fair implementation of the said conduct. Employers must be able to monitor all employees at all times. Companies should apply code of conduct to all employees regardless of their position and influence. After all, the conduct of conduct permits no exceptions.

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References

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