Decent work

The economy has been growing at an average rate of about 5% for the past few years. But why has the poverty situation not improved during the same period? One possible answer is that the economic growth has not brought more jobs for those who badly need them. "Jobless growth" is happening in many countries, even in the US. A more subtle answer to the question is that economic growth, even when it has produced jobs, has not produced decent jobs.

In a country where many consider themselves lucky to have any job at all and many employers consider themselves saints for just hiring, it's almost a fantastic proposition to even talk about "decent work". But this is exactly the concept the International Labour Organization has proposed and which the Philippine government has officially adopted. The country is among eight to join the ILO pilot program for the measurement of decent work.

Decent work was the topic of an interesting conference entitled "Measuring progress in Decent Work", sponsored by the Philippine Statistical Association and held at the Asian Development Bank last October 9. Teresa Peralta of the DOLE Bureau of Labor Employment Statistics (BLES) presented the promising work of her team in developing the Philippine Labor Index -- a first attempt at developing a local, country-level measure of decent work. Ms. Peralta’s team estimated PLI for 2004 to be 73.58 out of a maximum of 100. Though still at the developmental stage, I laud the DOLE’s initiative to better monitor the quality of Filipino jobs.

To appreciate the measurement of decent work, we need to understand the concept itself. What is decent work? The ILO web site explains that “decent work sums up the aspirations of people in their working lives. It involves (1) opportunities for work that is productive and delivers a fair income, (2) security in the workplace and social protection for families, (3) better prospects for personal development and social integration, (4) freedom for people to express their concerns, organize and participate in the decisions that affect their lives and (5) equality of opportunity and treatment for all women and men”.

An employer who is sincerely concerned about workers will find a lot of basic guidance from the above enumeration. However, a self-critical evaluation will not be so simple and will take a lot of real thinking on the employer’s part. On the matter of fair pay, for example, an employer could ask whether it’s right to pay an average rank-and-file employee 1/100th the pay of the CEO. 1/50th? The highly respected US-based furniture manufacturer Herman-Miller limits this ratio to 1/20.

What about giving workers the freedom to express their concerns and to participate in decision-making? How many top executives who protest Malacañang’s “heavy-handed” treatment of dissenters can welcome honest but critical feedback from the rank-and-file. Not many, I suspect.

Many employers in the Philippines, faced by the relentless onslaught of globalization or simply aiming to maximize investor profits, have taken the low road and given jobs which provide no stability or future to workers. This may be sensible as a short-term survival strategy but is unsound -- even anti-social -- as a core business strategy.

With some vision and a sense of solidarity with their countrymen, employers should consider graduating to high value, high creativity markets where committed and well-trained long-term workers can make a big difference. But are they up to the challenge? Or are they more interested in the low risk of cookie-cutter businesses which require no imagination, but only plenty of capital and docile workers? How employers respond to these questions ultimately reflect not only the decency of the work they provide but their own.

Published in Manila Times' Managing for Society, October 24, 2006

Employee welfare: The missing piece in CSR

Corporate social responsibility (CSR) is hot! The business magazines and the business sections of the broadsheets give it ample coverage. BizNews Asia's September 25 issue shows the Lopez's beaming on the front cover, apparently quite pleased with themselves given the magazine's assessment that "few Philippine CSR projects have the breadth, depth and reach of the Lopez Group's Knowledge Channel..."

Reviewing the annual reports of the top Philippine corporations, one is struck by how CSR has reached such prominence given its complete non-mention ten years ago, to a few token lines a few years ago, and now a separate annual report just on CSR being issued by companies such as Manila Water. Boy, have we really come a long way!

I can't help but be pleased, naturally. I've always found the Milton Friedman position that the only social responsibility of business was to increase its profits not only unsound but downright anti-social. Friedman would, I suspect, have only one thing to say to the Lopez's and all the top corporate managers in the local CSR movement: "You are stealing from the shareholders!"

Of course, the local Friedmanites couldn't possibly state this charge out loud because many of the local corporations prominent in the CSR scene are doing it with the blessing of the controlling (often, family) interest as in the case of the Lopez's. They couldn't very well be stealing from themselves, now could they? The minority shareholders could make the charge but ,given local corporate dynamics, that would be another whole different story.

The CSR picture isn't perfect, though. Even if I set aside the suspicion of some that the whole CSR thing is one huge PR extravaganza hiding old-fashioned corporate greed, I do have one big concern. Most of the CSR activities proudly narrated by CEOs and chronicled in the glossy materials given out during the increasingly frequent CSR conferences are missing one stakeholder as a beneficiary: the employees. The recent Asian Forum on Corporate Social Responsibility is a typical case in point. A scan of its program does show the mention of "employee" but only in the context of volunteerism. In other words, in local CSR-speak, the employee is mainly a giver, not a receiver.

Now this is a strange situation indeed. A major social responsibility of corporations has always been the provision of meaningful employment so that more people will benefit from the fruits of capitalism to better their lives, build families and help build our great nation. Why the conspicuous non-mention? I know for a fact that many companies are doing great things for their employees. What bothers me is that they dont' talk about it in relation to CSR. Is the employee not part of "society"?

This contrasts with the treatment of the book 1981 "Perspectives on the Social Responsibility of Business" which featured the thoughts of business leaders of the day such as Vicente Jayme, Sixto Roxas and Vicente Paterno. The book featured the Code of Ethics for Business then recently developed by the Bishops-Businessmen's Conference for Human Development. Jayme, reflecting on the importance of the Code wrote that "we can begin asking ourselves the kind of questions which will lead us to the ways by which we can 'humanize' the business firms we run. ... If I believe in respecting the dignity of my worker, how do I bring about the full promise of his potential? How am I promoting his spiritual and intellectual development? His technical competence? How am I making his work more fulfilling and meaningful for him? What kind of working conditions am I providing him? What else can I do to make my personal commitment to his dignity more real?"

I would certainly love to hear managers proudly explain their answers to Jayme's questions. I would grant that getting employees to volunteer for outreach projects surely enobles them and can even make their work more meaningful. But shouldn't companies be reporting on their "inreach" activities, too? Shouldn't management's concern for their fellowmen begin right at home, as shown by the improvement in the quality of lives of their own employees?

I'm intereted to see how the growing outreach-oriented CSR activities of the top companies will eventually reconcile with the growing contractualization, reduction in employee numbers, and creeping overwork in some of the same companies. The Philippine CSR boom is definitely a welcome development. We have moved forward in many ways but, perhaps, we have moved backward in a crucial way. And as long as the quality of work and family life of employees is not given the prominence it deserves, the "S" in CSR is missing a very important piece.

A tiresome false dilemma

I have always found it puzzling and frustrating that when the matter of the increasing exploitation of Filipino workers in the private sector comes up -- mainly through the loss of basic rights such as security of tenure, self-organization for collective voice, and living wage compensation -- the most common argument to justify the state of affairs is: "At least these people have jobs and income. Would we prefer that they don't have jobs at all?" The implication for workers is either they work (even while suffering indignities) or they starve. There is no middle ground.

I have heard this argument from businessmen, business leaders, business students and, to my eternal puzzlement, business faculty.

The argument is, of course, false in its face. This black-and-white fallacy has been around since the great Greek philosophers. The Sophists, whom Plato and Aristotle held in contempt, often tried to use such verbal maneuverings to trap people into thinking that there is no middle ground. For example, Plato described how the Sophist Euthydemus convinced the youthful Cleinias that he was either "wise or ignorant," offering no middle ground when indeed there should be.

The debate about contractualization of workers often brings up such sophistry. I define contractualization as the trend towards the use of temporary contract workers for jobs previously or usually done by permanent workers. While the law allows such a business practice in specific cases, my objection to it is if it is used to or results in the deprivation of workers of their rights to security of tenure, a living wage or a collective voice.

So, if the question is "Would you prefer that people have jobs or that they starve?" The simple answer is I prefer that they have decent jobs which provide what they need.

But what about the survival of the business? This is the second topic where fallacious reasoning comes in. In the first place, many business resorting to worker exploitation are nowhere near a "survival" type of situation. So it's not as if they are exploiting workers because the business is on the verge of collapsing.

But anyway, for the sake of argument, let's see where it brings us. So the argument is posed this way: "What would you prefer? That the workers are given what they need but the business collapses OR that the workers are constractualized but the business survives?" Again, the simple answer is that I would prefer that the workers are given what they need AND the business survives." To any discerning person, it must be patently clear that business collapse does NOT necessarily follow from humane treatment of workers.

Of course, I don't pretend to know a sure way of achieving such a middle ground. (Any businessman interested enough need only refer to the many business cases in the literature which demonstrate that companies may even improve its competitiveness by treating people right. This is not a guarantee of profitability, of course, but it suffices to show that treating people right does not necessarily harm profitability.) Nor is it my burden to show such a way since the challenge of running a humane business is the burden of the business person. The challenge has to be faced -- just like other business challenges such as ensuring steady supply of materials, ensuring that the competitive value of product/service offerings are attractive to customers, etc. -- and no amount of fallacious reasoning can be used to evade it. So can we stop the sophistry already and apply our creative thinking to how our businesses can humanely treat workers as partners in the enterprises they help run?

Unless, of course, the real reason for exploiting workers is not logical confusion but unmitigated greed. This is something else, entirely.

The Psychology of Labor and Employer Viewpoints

I wrote this for Manila Times' Managing for Society column last July 11

The Psychology of Labor and Employer Viewpoints
Ben Teehankee

From June 29 to July 2, De La Salle Professional Schools hosted the Annual Meeting of the Pacific Asian Consortium for International Business Education and Research (PACIBER) in Cebu. The consortium is composed of business schools from different countries who come together to network and to share research findings and teaching strategies This year’s theme was a look at emerging global practices in outsourcing and related work arrangements.

During the meeting, I moderated a panel session on Investment Decisions and Labor Concerns where Mr. Cedric Bagtas, Deputy Secretary-General of the Trade Union Congress of the Philippines (TUCP), gave an interesting picture of the local labor situation.

I always find it worthwhile having forums where employers and representatives of labor can share perspectives. Mr. Bagtas’ discussion on a number of issues on which labor and employers don’t see eye to eye was particularly informative and gave me insight on the challenges facing industrial relations in the country. By reflecting on how each side looks at these issues, I got clues on the psychology underlying the labor and employer positions, respectively.

The first issue is on the matter of hiring and firing. Mr. Bagtas explained that while labor prefers quick regularization, employers would prefer liberal hiring and firing rights -- employment-at-will, in other words. Employees need to plan their lives in order to meet their basic needs and to achieve certain life aspirations. For this reason, they need to be able to count on regular, sufficient and predictable income. Thus, they seek the legal protection that regular status is supposed to provide.

Employers, for their side, deal with various types of risks such as those that involve their markets, suppliers or even the political environment. Their concern for achieving acceptable returns given such risks lead them to manage labor as a risk. Employers lose expected returns when people they hire become uncooperative, fail to produce needed results, or simply become too expensive to maintain compared to the competition. They, therefore, want the safety valve of being able to let people go as needed.

On the matter of strikes, labor prefers the removal of restraints on the right to strike while, expectedly, employers would prefer to have a moratorium on strikes. Mr. Bagtas reported that actual strikes conducted in the country had steadily gone down from 581 in 1986 to 22 in 2005. It would appear that the country has become a haven of industrial peace. The underlying tension remains, however. Labor perceives a systematic weakening of their ability to legitimately strike because of anti-union tactics of companies. Employers worry about the ever looming threat of militancy in unions.

By examining these two issues, one sees that the underlying thinking of each side is not so different. Each side is simply managing risk. Interestingly, though, each side sees each other as a source of insecurity and strategizes accordingly. This thinking is reminiscent of the doctrine of MAD or mutually assured destruction which held between the US and the Soviets during the Cold War.

What will it take to move out of this low-trust thinking between labor and employers? What will be the symbolic equivalent of the fall of the Berlin Wall for these two sides? I don’t think it lies in better tactics for neutralizing each other as threats. I think that the mind-shift will come when labor and employers finally realize that their fates are intertwined. When this happens, both sides will know that a true social partnership between labor and employers is the only way to unleash the productivity that the country needs to achieve the development it deserves.

Outsourcing and the employment relationship

This was the column I wrote for BusinessWorld's View from Taft last July 5.

From June 29 to July 2, De La Salle Professional Schools hosted the Annual Meeting of the Pacific Asian Consortium for International Business Education and Research (PACIBER) in Cebu. This year’s theme was a look at emerging global practices in outsourcing and related work arrangements.

During the meeting, I was privileged to moderate an informative panel session on Investment Decisions and Labor Concerns. During the session, Mr. Abhik Ghosh, Senior Labor Administrator and Labor Relations Specialist at the International Labor Organization’s (ILO) Manila office, gave an update on the new ILO recommendation covering the Employment Relationship.

This is a timely contribution from the ILO since, with the increasing popularity of outsourcing and contingent work, we have seen various types of work arrangements which have blurred the nature of the relationship between employer and employee. As a result, the legal protection of worker rights as well as the responsibilities of employers in protecting such rights have weakened.

Interestingly, as more service companies around the world learn to unbundle and distribute the various components of their value delivery process facilitated by information technology around the world, it has become more difficult to define who the employer is. Triangular employment relationships, where the work or services of the worker are provided to a third party (the user) has increasingly become the norm. Unfortunately, such arrangements can render employees vulnerable to violations of their rights as workers. Worse, companies can be tempted to deliberately hide the true legal status of their employees precisely to escape responsibility for honoring employee rights.

Take call center agents, for example. During the early call center years, it wasn’t unusual to hear tales of random dismissals among permanent employees. Such employees, young as they were, had very rudimentary notions of their rights under the Labor Code. And given the absence of any labor organizing in the call center industry, similar abuses can easily continue. Certainly, it would be interesting to see how the legendary unhealthy working hours in the outsourcing industry will be addressed in the near term.

Thus, the ILO recommendation is an attempt to address the above difficulties. It is a natural progression following the 1998 ILO Declaration of Fundamental Principles and Rights at Work.
With increasing liberalization of international trade, including that of services, some sectors hope that labor standards would help mitigate the adverse effects on workers. This is especially crucial given that under the impetus of globalisation, some countries, including the Philippines, motivated by market-oriented economic doctrine and by a perception of unions as being obstructive to economic efficiency, are sorely tempted to pursue policies which put aside the rights of workers.

Mr. Ghosh explained that the recommendation encourages countries to create national policy that clarifies the existence of an employment relationship given the increasingly complex arrangements now available. Such policies may be based on, among others, the fact that work (1) is carried out according to instructions and under another party’s control, (2) involves integration of the worker in the organization of the enterprise, (3) is performed solely or mainly for the benefit of another person, (4) is performed personally by the worker, (5) is performed within specific working hours or at a workplace specified or agreed by another party is of a particular duration and has a certain continuity, and (6) requiring the worker’s availability involves provision of tools, materials and machinery by party requesting work. In addition, an employment relationship exists when there is periodic payment of remuneration to the worker and such payment is the worker’s sole or principal source of income.

I hope that countries will respond positively and firm up their local policies to make it easier to protect employee rights under the newer work arrangements. It remains to be seen how effective ILO standards can be, or how willing ratifying countries are to enforce the standards, in an increasingly globalized business environment. Locally, there are strong reasons why outsource companies should take care of protecting worker rights to decent work. The employees tend to be young and relatively unsophisticated, and thus vulnerable, about matters pertaining to rights at work. Secondly, turnover rates are extremely high, especially in the call center industry. Any improvement in employee treatment can only reduce such turnover and lead to improved efficiencies and service quality.

During the open forum, Mr. Ghosh was asked whether the protection of labor rights intended by the ILO recommendation is still relevant given the rigors of the globalized environment. He explained that the recommendation is based on the principle that labor is “not a commodity”. And here lies the root of the issue. Globalization pressures companies to precisely treat labor as a commodity in their pursuit of efficiency. Economic models on which company strategies are based assume that labor is a commodity.

There is little doubt that freer trade and the outsourcing trend in particular has become an economic boon for many in the country. It is gratifying that many of our educated young who are computer-savvy and fluent in English can gross P15,000 a month in their first job. It is encouraging that the local outsourcing industry leaders are taking initiatives to improve the working conditions of employees. It must be emphasized, however, that economics should never trump justice and the requirements of decent work. And one way to ensure this is by reminding employees and employers that they have a relationship which carries with it certain mutual obligations at all times.

Can corporations learn to care about people?

(Note: This was my Managing for Society column in
Manila Times on February 21, 2006.)

Time and again, public harms have been caused by
corporate activities. A short list of corporate
misbehavior includes harming the environment through
factory emissions, harming employees through the
contractualization of essential jobs, and harming
customers through misleading or debasing promotional
practices or the sale of substandard products and
services.

What strikes me most about corporate misbehavior is
not that they happen, because any person can make a
mistake and the corporation is an artificial person,
after all: It's the fact that such misbehaviors keep
happening. Could this be because corporate leaders
are incorrigible in their greed and completely
insensitive to society's expectations? I doubt it.
Basic decency seems sufficiently, if not abundantly,
available among corporate leaders. I believe that at
the root of the problem are flaws in the basic nature
and design of the corporate entity itself. These
flaws make it very difficult, if not impossible, to
ensure the decent behavior of corporations no matter
the character of their leaders.

The first flaw is that corporations treat human beings
as commodities. To a corporation people are things
with a monetary value: employees are pieces of
expenses and customers are pieces of revenue in an
income statement. A commodity is a thing that can be
bought, used, replaced or disposed of, as needed. In
this view, employees are best when they can be as
cheap, replaceable and disposable as possible. Also,
if they don't like the conditions of their employment,
the argument goes, they can always leave. Similarly,
the unhappy customer faced with an unsafe or
substandard product can always choose to buy a
competing product.

In a market-oriented, commodity world, there are no
commitments to people. Relationships are contractual,
temporary and purely utilitarian. David Ellerman,
former World Bank economist, takes very strong
exception to this view of people as things and likens
it to slavery. Arguing in particular against the
commodity treatment of employees, he says that "the
capitalist, like the slave owner, has used a legalized
fraud, which pretends the worker is an instrument...."

The second flaw is that the corporation is designed by
law to be mainly accountable to shareholders and,
therefore, tends to downplay the welfare of the people
it affects. Joel Bakan, law professor at the
University of British Columbia, asserts that the
modern corporation, with its tendency for relentlessly
pursuing profit even at the expense of others,
perfectly fits the profile of the psychopathic
personality. The chilling cost-benefit analysis used
by managers in a well-known car manufacturer in the
70s to justify the sale of what they knew to be an
unsafe car model illustrates Bakan's point. The
perverse corporate logic goes: it is often cheaper to
allow harm to people and just pay for it later, should
one get caught.

Can the corporation be reformed to care more for
people? In 1973, UP law professors Guevara, Campos
and Bautista proposed that corporations be allowed to
include in their bylaws the right of employees to
choose among themselves a representative who will sit
in the board. Strangely, the provision did not make
it to the final version of the Corporation Code in
1979. In Germany, partly through the efforts of the
Catholic labor movement and the Christian Democrats,
corporations with more than 2,000 employees are
required to have equal representation of employees and
shareholders in the board.

For the Philippines, the only Catholic country in
Asia, it is unconscionable not to give a voice to
employees in the governance of the corporation. Such
a revision to the corporation code is long overdue and
may usher the way for a more humane corporation.

The ethics of Wowowee

The recent ULTRA stampede tragedy, where more than 70 fans of the ABS-CBN program Wowoweee died, has triggered widespread discussions on the duties and accountabilities of business, especially large corporations. I haven't made up my mind about the incident although I've always been concerned about aggressively marketed TV programs whose main appeal is easy money.

I have reproduced below a code of ethics for business prepared by the Bishops-Businessmen's Conference for Human Development in 1979. It could be a useful document for doing a sober, principle-based analysis of the ULTRA tragedy.

Under the section on Towards the Customers is the principle that "business shall, in the production of goods and services, avoid anything that would be detrimental to the health, safety or growth of the proper user or beneficiary of such goods and services." Did the managers behind Wowowee observe this principle?

Under the section on Towards Society in General is the principle that "business shall pay proper regard to the environmental and social consequences of their business activity, with special attention to the duty of renewing resources where possible and minimizing waste and pollution, and not sacrifice safety or efficiency in the interest of short term profitability." Did the managers behind Wowowee observe this principle?

I am interested to find out.

Meanwhile, we all grieve for the victims. May their souls find eternal rest.

A CODE OF ETHICS FOR BUSINESS[1]

Prepared by the Bishops-Businessmen’s Conference for Human Development, October 23, 1979. Preamble added 1994.

P R E A M B L E

This code of Ethics has been formulated impelled by the belief that man has a dignity that must be respected, and that all the resources of the earth have been created for his growth and development.

As here presented, this Code is considered a major step in the on-going and changing process of understanding the growing role of business activity in the development of man and, as such, is open to further improvement.

This Code seeks to express systematically and coherently the principles of business practices accepted and professed by Philippine business at its best, and seek to apply these to current and changing needs.

It is the hope that this Code will serve as a general stimulus to renew and develop or amend existing standards, and that individual entities will expand and adopt it to the specific needs of their own organizations.

It is a general Code intended to be influential rather than coercive. It is hoped that individual entities will consciously adopt and embrace it as a statement of principles and, having done so, will be unwilling to incur the sanction of adverse public opinion through failure to live up to the Code.

Finally, it is a Code for all peoples, formulated on the premise that the modern manager must be a strategist for human development, and that the business is to build an enterprise oriented to the development of man.

THE CONCEPTS

Business, which embraces commerce and industry, is not an accidental human activity but an integral element of the social order; its primary purpose is to meet society’s human needs by providing goods and services as efficiently as possible. Those engaged in business should, therefore, recognize the following basic concepts:

• All business is essentially an expression of human relationships; not only with those who work in the enterprise, but also with those who own and provide financial resources, with those who supply it with materials and services, with those who buy its products or services, with the government, and with the wider public whose lives are affected by the business activity. The interests of all those members of society must be taken into account in formulating business policy. These interests, in themselves legitimate, will at times conflict. While conflict and tension can of themselves be constructive, the aim of business must always be to reconcile opposing interests in a balance of justice and mutual concern.
• The owners, management, the work force, the suppliers and sub-contractors, the customers, and government contribute to the performance of the business enterprise, and are therefore entitled to receive the proper worth of their contributions.
• The resources employed by a business enterprise are financial, technological and human. The human resources have a unique quality and should be employed in a manner consistent with personal dignity. The individual should be given opportunity to use and develop his facilities in his work. His contribution to the success of the enterprise should be properly recognized and rewarded.
• Business enterprise has a public responsibility to use all its resources efficiently. Profit in a system of free enterprise is a fundamental incentive, and is necessary for the maintenance and growth of the enterprise, for raising the quality of life, and for helping meet the broader needs of society.
• Competition and inventiveness are essential for the maintenance and continuing improvement of the quality of goods and services, for growth and for technological progress. However, to guard against unfair form of competition, a consistent standard of business behavior must be established and observed.
• In business, as in any other institution of society, any right or authority enjoyed by or entrusted to business presupposes, and is justified by, corresponding duties, responsibilities, and performance.
  

SOME PRINCIPLES FOR THE CONDUCT OF BUSINESS

Towards The Employees

Those responsible for business policy should consider not only the interests of those affected by the activities of the business.

Business shall recognize the unique position of employees as individuals with a vital stake in their work and at the same time with inherent obligations to their own families, and provide:

• For recognition that, although rates of pay may often be determined by union, economic and legal pressures, wages and salary policy should be based on the right of the employees to a fair and improving standard of living, irrespective of race, sex, age and creed;
• For a fair recruitment practice that affords equal opportunity to all qualified job-seekers;
• For job security, adequate compensation for employees in cases of separation and retirement, and for opportunities for fringe benefits;
• For a safe and healthy atmosphere in the work environment conducive to the physical and moral well-being and growth of the employees;
• For conditions in which human potentials and relationships can be developed at all levels of the work force, with a view to providing therein a sense of purpose and achievement; and
• For participative element so that the knowledge, experience and creativity of all whom work in the enterprise may contribute to the decision-making process.

Towards The Customers

Business shall, in the production of goods and services:

• Strive after a quality that will enable them to serve their purpose efficiently and effectively;
• Avoid anything that would be detrimental to the health, safety or growth of the proper user or beneficiary of such goods and services; and
• Seek to apply or make use of the discoveries and inventions of science with adaptations that will improve their products or services, thereby benefiting customers/users and increasing their number.
  
  In its marketing arrangements, business shall;
  
• Deliver the product or service in the quality, quantity, and time agreed upon, and at a reasonable price, and avoid the creation of artificial shortages, price manipulation, and like practices;
• Establish an after-sales and complaints service commensurate with the kind of product or service supplied and the price paid;
• Ensure that all mass media, promotional, and packaging communications be informative and true, and take into account the precepts of morality and the sound cultural values of the community, and manifest respect for human dignity.
  

Towards The Suppliers

Business shall ensure:

• That the terms of all contracts be clearly stated and unambiguous, and honored in full unless terminated or modified by mutual consent;
• That abuse of economic power in dealing with a smaller concern be avoided, and that, in all cases, terms of payment be strictly and fully observed. In general, payment should always be made promptly at the agreed time or, if no specific time is agreed upon, as quickly as may be reasonable, given the circumstances; and
• That no supplier be encouraged to commit his resources for apparently long-term purposes unless there are reasonable guarantees that the orders he receives from the business enterprise will not be terminated arbitrarily.
  

Towards The Owners and Other Providers of Capital

In the interest of the Owners and other Providers of Capital, business shall:

• Provide an adequate rate of return to those contributing capital to the enterprise, and ensure the security of their investment;
• Use their financial resources to provide goods and services responsibly and efficiently;
• Furnish the owners and other providers of capital such information as they may reasonably require, provided that it does not adversely affect the security or efficiency of the business; and
• Pursue the specific objectives of the Owners and other Providers of Capital provided these do not run contrary to any of the principles stated herein.

Towards The Local and National Government

Although it is the responsibility of government to enact legislation and formulate implementing policies and programs, it is the duty of business:

• To participate in the discussion of proposed legislation and/or its implementation affecting sectoral, regional, national and international interests; and
• To propose sound policies in the use of human and material resources.

Towards Society in General

Businessmen shall recognize in their decision-making the interest of the general public and, realizing that they are utilizing, to an important degree, the nation’s resources, shall:

• Take regular stock of their response to the basic needs of society and thus ensure that these needs are taken into account in all policy-making decisions;
• Do their best to ensure that the way they deploy their resources benefits society in general and does not conflict with the needs and reasonable aspiration of the communities in the areas where they operate;
• Pay proper regard to the environmental and social consequences of their business activity, with special attention to the duty of renewing resources where possible and minimizing waste and pollution, and not sacrifice safety or efficiency in the interest of short term profitability;
• As corporate citizens make such contributions as their resources will allow, to research, development and application of indigenous technology, and to the financing of social development projects;
• Consider the human and social costs of mechanization and technology;
• Establish a policy allowing employees, within reasonable limits, to contribute to the public and community service during the work time.

SOME ETHICAL PRINCIPLES FOR THE PROFESSIONAL MANAGER

The concepts and principles for the conduct of business outlined in this document are commended to the managers of business enterprises. Thus, although the manager is expected to act in the best interests of the business, he cannot be expected to act in a manner that is contrary to the law or to his conscience.

In particular, a manager should:

• Acknowledge that his role is to serve the business enterprise and the community;
• Avoid all abuse of executive power for personal gain, advantage or prestige;
• Reveal the facts to his superiors whenever his personal business or financial interests become involved with those of the company;
• Establish a policy regarding conflicts of interest based on the principle that decisions should be made in the best interest of the business enterprise, and decision makers should b on their guar against allowing personal consideration to distort their judgment; and
• Not tolerate any form of illegal data-gathering or any form of inducement that tends to distort normal commercial judgment;
• Be actively concerned wit the difficulties and problems of subordinates, treat them fairly and by example, lead them effectively, assuring to all the right o reasonable access and appeal to superiors;
• Recognize that his subordinates have a right to information on matters affecting them, and make provision for its prompt communication unless communication is likely to undermine the security and efficiency of the business;
• Fully evaluate the likely effects on employees and the community of the business plans for the future before taking a final decision; and
• Cooperate with his colleagues and not attempt to secure personal advantages at their expense.
  

A WAY TO USE THE CODE

The foundation of any business enterprise is its people and the character of its people. It has been proven, time and again, that a business succeeds and grows over the long term when the policy makers inculcate a tradition of sound management policies based on honesty, integrity, fairness and a respect and concern for its employees, the community in which it operates, and the public it serves. This booklet covers the essential principles to guide the policy makers in developing human resources for maximum effectiveness and growth.

As with any Code, only through a thorough understanding of its principles, and day-to-day use of policies and procedures stemming from these principles, can this Code be of any real value to a business enterprise.

Accordingly, it is suggested to those engaged in business that maximum benefit can be derived by three simple steps. These steps would hold true for any business enterprise regardless of size, whether private or public, whether a partnership or a sole proprietorship.

The first step would involve examination, understanding and acceptance of the Code by the policy makers. Assuming acceptance, then the code would be adopted officially, as is or with suitable modifications, as being a fundamental part of the running of the business enterprise and its principles would be disseminated to its employees.

As the Code deals with basic principles and cannot cover every conceivable situation nor is it sufficiently explicit to guide an individual in every instance, the next step would be for the policymakers to develop detailed guidelines and policies for use by their employees. The BBC plans to organize workshops which interested officials of any business enterprise would be free to attend and participate with the objective of formulating specific guidelines.

The third step would be necessarily an evaluation and regular audit of the implementation of the Code and its attendant policies and guidelines. This could be established as an annual procedure and serve to ensure adherence to the Code as well as to appraise the performance of the enterprise and its employees.

This entire process will take time but as the Code is assimilated and practiced and as its use becomes widespread, it is hoped that a high degree of professionalism, higher standards of conduct and justice will characterize all dealings in business. This, in turn, undoubtedly will contribute toward the basic premise of the Code – that through the application of its principles human development will prosper in our society and with it grater economic growth and prosperity for the people will be attained.

[1] Except for the Preamble, the code comes from Aquino, Rosemary (Ed). (1981). Perspectives on the social responsibility of business. Metro Manila: The Bishops-Businessmen’s Conference for Human Development, pp. 323-328.

The problem of contractualization

Wrote this piece for the Manila Times today. I think it's hightime for constructive solutions to the contractualization situation in business today. What do you think?

Lean and mean
MANAGING FOR SOCIETY
By Ben Teehankee, DBA

SUSAN (not her real name) works as a crewmember in one of my favorite fast-food places. She has a nice manner about her. She’s quick to smile, attentive and moves with a quick step. I complimented her on this while chatting with her. “How long have you been a regular employee?” I asked. Her expression changed quickly as she explained, with obvious discomfort, that she was on her third five-month contract and isn’t sure if she will ever be made regular. I quizzed her on why she accepted this arrangement and she replied, expectedly, that she couldn’t complain because it’s tough getting jobs nowadays.

Susan is just one among countless Filipinos who do essential jobs in companies who do not give them regular employment status. It’s probably my sheltered academic background, but I’m deeply bothered by the sight of fully capable humans turned into practical serfs by their employment situation. And this form of contractualization is a growing trend in the growth industries such as retailing and food services.

Why do companies do it? Some managers say that they do it to survive. They can’t afford to do otherwise. This is a compelling reason because, after all, even employees benefit from the long-term survival of the firm. A lack of job security seems a reasonable price to pay for the preservation of a troubled company. What makes this reason tough to swallow (putting aside the basic concern that the practice is blatantly against the law) is that even companies who are making a lot of money are moving toward more contractualization of essential jobs—often under elaborate “arms-length” subcontracting arrangements.

Other managers candidly admit to more basic reasons. For one, they feel the need for more flexible hiring arrangements given the unpre­dictability of our increasingly global business and financial markets. How can a company with a high fixed payroll cope with a business downturn? Surely, the managers reason, they must ensure the long-term survival of the firm.

Secondly, managers find it extremely difficult to stay price competitive when they hire regular employees because of mandated minimum wages and benefits. Cheap products from other countries are flooding the liberalized local markets like a tsunami and the reflex reaction is to scale down on payroll costs through contractual employment.

While the business reasoning is understandable, increasingly contingent employment causes real harms to employees. The lack of job security and the resulting loss of representation on their basic rights demean employees and make them docile. The lack of benefits and financial safety nets endanger employee health and, ultimately, their families. The long-term social costs of this trend will be very high as more employees are trapped in jobs without security and personal growth.

I think that managers need to have more social commitment and imagination in approaching the threats of global competitiveness. Hiring selectively, giving job security and developing people to be competent and flexible can unleash much needed creativity for delivering better-value products and services. This will not give the quick bottom-line results that cost minimizing does, but it takes the higher road which is better for people and the country in the long run.

The government should not sit idly by as this trend grows. The people need protection from the ravages of the market place. Government must broker continuing dialogues between labor and management for creative long-term solutions to move us out of the contractualization trap, which threatens to worsen our current social inequality even more.

Does the need to be lean justify being mean? I don’t think so. Susan deserves more. She is a human being and she is a Filipino.

Catholic Social Teaching and Corporate Governance

I'm putting together my thoughts for my upcoming (March?) Sen. Benigno Aquino professorial chair lecture which I've entitled "Building Humane Business Organizations: Catholic Social Teaching and Corporate Governance". After reading Joel Bakan's incisive "The Corporation" and watching the DVD based on the book, I thought that it would be timely to suggest inputs for reforming corporate excesses based on Catholic social teachings, especially since quite a lot of board directors in the top Philppine corporations are Catholics who graduated from the top Catholic schools.

Bakan's main thesis is that the legal corporation as constructed is essentially an externalizing machine which is designed to pursue profit. The corporation externalizes when it acquires profits without taking responsibility for the costs and harms caused on others. As such, it is amoral and, as an artificial person, could be reasonably described as psychopathic. This point is similar Kenneth Goodpaster's description of teleopathy, or a sickness of purpose, because a corporation may be solely interested in profit at all cost.

I agree with Bakan's thesis and even with his recommendation that basic reforms are needed in corporate law to make corporations more accountable to democratic governance. A parallel approach is available, I think, through corporate governance. I believe that one way to make corporations moral is to ensure that its governance is guided by moral principles. I will try to develop these points in my lecture.

After a term of Faith-based Management

And so the end of the term has come.

It was an interesting first run of the Faith-based Management course and I certainly learned a great deal for future runs!

The main points covered in the class were the following:

1. Managers who espouse the Christian faith often do not integrate their faith with how they work. The opportunity to achieve this integration is present through reflection guided by prayer and the regular practice of virtue in making managerial decisions. Christian managers can evolve from being secularizers or spiritualizers to being natural law, faith-based or prophetic managers.
2. The difficulty of integrating faith and work is often due to the overemphasis in business organizations of pursuing foundational goods (e.g., profit and material prosperity) while neglecting excellent goods (e.g., human growth and development, the common good).
3. The faith-based manager needs to move beyond foundational goods to pursue excellent goods. The purpose of the business firm is to pursue human development and the common good through the community of the firm supported by sustainable material resources. There are companies which have done this with some success such as RPM and ServiceMaster.
4. The virtues of prudence, justice, temperance and courage guides the manager in pursuing human development and the common good.
5. The BBC-HD Code of Ethics for Business gives a useful summary of key principles and standards for faith-based management in the Philippine setting.
6. In order to pursue human development and the common good in a business, the faith-based manager needs to ensure that jobs are properly designed to respect human dignity and to promote human development.
7. Providing a just wage is a crucial element in promoting integral human development and dignity. Just wages incorporate the concepts of living wage, equitable wage and sustainable wage. The living wage (based on the principle of need) is the minimum amount due to every independent wage earner by the mere fact that he or she is a human being with a life to maintain and a personality to develop. The equitable wage (based on the principle of contribution) is the contribution of an employee's productivity and effort within the context of the existing amount of profits and resources of the organization. The sustainable wage (based on the principle of economic order) is what the employer can pay given the economic health of the organization as a whole. The right of all employees of the company to be paid a living wage prevails over the right of owners/investors to earn a reasonable rate of return on their investment in the company. ESOPs, skill-based pay and gain-sharing are some approaches towards just wages.
8. A wider ownership of productive property (e.g., company equity) promotes employees' development and ultimately serves the common good. Employee ownership guarantees that management and employees alike can cultivate their individual interests only by building up the organization as a whole. Such a community must rest on a sound economic basis, which makes competencies in finance, marketing, operations, etc., essential preconditions.
9. Marketing is a means of building relationships for the common good by communicating products' real benefits. There is a risk, however, that marketing activities may simply serve to create more wants and desire to consume without promoting integral human development and without communicating anything that is true. Relationship marketing and integrated marketing communications have potential in promoting solidarity between the business and its stakeholders.
10. New product development must serve the common good and incorporate true goods as features and not merely apparent goods. QFD can help in promoting better relationships among those involved in product design and overcome obstacles to quality or design problems.

I found a number of things helpful in conducting the course:

• The Code of Ethics for Business developed by the Bishops-Businessmen's Conference on Human Development gave a neat and easy to use set of guidelines for the students to concretize the intent of the course.
• Two additional students from a dissolved class transferred to my class, further enriching the range of discussions.
• The students were very thoughtful in their comments in class.

There were challenges too:

• The students' workloads often prevented them from doing the necessary reading preparations, whether on the textbook or the encyclicals.
• More structured activities should have been made available for the students, including cases for analysis, to internalize the principles.

The best part of the course for me was to witness how students would apply the principles in their discussions and thought processes at work. For example, a student who was in the thick of overseeing a company retrenchment was struggling with how to conduct this difficult process in a humane manner and in a way that can retain as much of the precious talent as possible. He said: "One big example here is the inclusion of drivers and messengers to the program. It is acceptable in achieving the objective of reduction but I think the consideration of retaining at least one driver at the same time he is the messenger. This idea of multi-tasking is still better than hiring a third party or an agencythat will handle those chores. "

Although I think the company will eventually outsource these services anyway, it makes me happy that at least one manager considered options other than this.

Another student, A, had shared her misgivings about her company's people practices at the start of the term. Through her persistent advisory inputs to the top management, she was happy to report that her superiors have began to consider her suggestions for more development activities for personnel. I have high hopes for this student.

I'll prepare a short two-session version of this course for integration in my business ethics courses. This will enhance how we currently cover ethics for our students.

Class is in session!

After a lot of work, and with a lot of help from colleagues at De La Salle Professional Schools (DLS-PSI) Graduate School of Business, notably from:

Nenette Barrios, chair of the human resource management department, who supported the elective's approval at the department level, and
Tristan Macapanpan, vice-dean of the Ortigas campus, who volunteered to host the elective class;

the Faith-based Management elective class is off the ground. Hurray!

The class meets every Tuesday, 6:00 p.m. to 9:15 p.m. at the Ortigas campus of DLS-PSI Graduate School of Business.

Of course, there were key suppliers who acted as unwitting and "silent partners" of this educational enterprise. There was Notre Dame University Press, publisher of Managing as if Faith Mattered by Alford and Naughton. Unfortunately, NDUP ran out of stock of the book and we had to resort to photcopying for this first batch. They assure us of a new printing, though.

There is the Vine and Branches bookstore at Sta. Lucia who was my only source of The Soul of the Firm by William Pollard. I called OMF which is the publisher of the book and they're also out of stock!

And of course, there's Claretian Publications, which publishes that wonderful little volume Catholic Social Teaching: Our Best Kept Secret by De Berri and Hug. The book makes it easy to get an overview of more than 100 years of Catholic social teaching in one afternoon. I love the summaries!

Of course, organizing this course would have been easier if the main book publishers publish such books also. Paging Pearson, Addison-Wesley, McGraw-Hill, Thomson, etc.!

I wrote a Managing for Society column on the occasion of the first day of class.

The first group of MBA students in the elective is a wonderful bunch and I'm sure I'll have a great time knowing and learning from them as the term progresses. They're all interested in how faith can lead them to become better managers and/or to be closer to their calling. E, for example, is a hospital and school owner and manager who wants the institutions she manages to be of better service to society. C is a bank branch manager who wants to better understand how to help those whom she supervises to integrate their spiritual life with their work life in the bank. I'm inspired by such commitments. I would be privileged to work under such managers. In fact, I have requested E if we can have one class session in her school or hospital.

As an unexpected but welcome bonus, we have P, a French exchange student, enrolling in the class. It's an interesting coincidence that on this maiden offering of the class, we have a French woman present, when it was the French priest John Baptiste de La Salle who made the original commitment to form the Brothers of the Christian Schools to address the needs of the poor through education! St. La Salle is now the Patron Saint of Catholic Teachers.

Another interesting French connection: I found out while doing the research for this class that the French entrepreneur-industrialist Leon Harmel was a pioneer (1870 to 1914) in promoting Christian industrial models. Let me quote from the book about him: "Harmel’s model factory at Val-des-Bois demonstrated that mutual accord and respect were possible between labor and management. Harmel turned his profitable spinning mill into a Christian corporation. His ethical business practices captured the attention of Pope Leo XIII and inspired his encyclical "Rerum Novarum." Harmel also encouraged his workers to make pilgrimages to Rome. The collaboration of Pope Leo XIII and Léon Harmel laid the foundation of enterprises that collectively became known as the movement of Christian democracy." Vive la France!

For those who still doubt that Christian social tradition applies to the "real world" of business, it's noteworthy that it was a practicing businessman like Harmel who inspired Pope Leo XIII to address the plight of workers in Rerum Novarum, thus, starting a string of papal writings on social justice culminating with Centessimus Annus. The teachings ARE based on reality!

I'm getting a lot of help in the class, through her encouraging presence and eager participation, from my colleague Mabel Gaite, who is the coordinator of DLS-PSI's Center for Social Responsibility and Human Development and also the Campus Minister. Mabel has been an unwitting collegial guardian angel (and expert resource on faith-related teachings) in my effort to integrate my faith into my work as a management educator. Thank you, Mabel!

So the class journey begins.

Faith-based management

It's official. I will be teaching an elective course for MBA students entitled "Faith-based Management" during the 2nd trimester of SY 2005-06. The core material will be Alford and Naughton's "Managing as if Faith Mattered." The book's title is an interesting play on Schumacher's "Economics as if People Mattered" and it's just as intriguing and enlightening.

The core premise of the course is that Christian managers must live and manage with integrity, i.e., integrate their work and their faith. This leads to interesting questions: What kind of person should a faith-filled manager be like? How should he manage the people under him? What kinds of products/services should he offer? How should he design work? And so on.

Being an elective course, it remains to be seen if students will even enroll. But it would be interesting so see how MBA students, steeped in the corporate world, will respond to the possibility of deepening their faith through their own corporate work.

One my most interesting learning in designing the course is about Reell Precision Manufacturing (RPM). This company was created by its founders (former 3M employees) on Christian principles and in so doing not only started a viable and profitable company but also showed how Christian principles can actually be applied in the hyper-practical world of modern day manufacturing.

"Reell" is a German word which means "honest, trustworthy and good". The company's espoused beliefs reflect its Christian roots which put human dignity front and center. Not surprisingly, the company won the American Business Ethics Award in 2002. Co-founder Bob Wahlstedt shares here his reflections after 30-years of leading Reell. I'm struck by the creativity Reell's management displayed during crucial moments in its history when its commitments were tested. Such creativity gave birth to management practices that deserves emulation by other companies such as teach-equip-trust and target wages.

As part of the course, the class will be researching on Philippine companies which are managed along faith principles. That should be exciting and be worth writing a book about.

The search for humanistic managers

Managers come in all shapes and sizes. There are the "dictator" types, "gentle" types, "bitaw" or micro-manager types. I'm really interested in the humanistic types. These are bosses who bring out the best in people by giving them respect and treating them as partners in the enterprise.

I wrote a couple of columns for Manila Times on this theme:

Employers and labor can think like partners
Business and people development

I'm now in the process of searching for humanistic Filipino managers who are able to balance people development and financial results as well as Herb Kelleher of Southwest Airlines, Horst Schulze of The Ritz-Carlton Hotel and William Pollard of ServiceMaster. I have some leads and I'll report here what I find out out. I'll be happy to get leads from readers.

Human capital and globalization

I joined a research forum this afternoon on human capital issues in relation to globalization. It was a very informative exchange of views on how Philippine businesses, most of them family-based, are approaching people development to remain competitive.

As it turns out, investments in people development remains very low in our country. Which is a shame since we are blessed with so much human resource and it's only logical that they be developed for us to be competitive.

What we are seeing is the opposite -- more violations of the minimum wage laws, more contractualization and more use of women who tend to be more accepting of unfair labor arrangements (as hypothesized by one of the researchers).

I certainly hope that more business financiers and managers can adopt more people partnership approaches in their enterprises so that they can unleash the creativity and commitment so essential today for competitiveness.

Starting up

I've decided to start blogging to share my thinking on how management can be a force for the common good. It's also a way to explore this blogging phenomenon which many are saying is an information revolution of sorts. Only time will tell.

As to managing for the common good, management schools mainly focus on achieving private good. As a management educator, I've always been worried about this.

This is nothing new, of course. Management writers from Russell Ackoff to Henry Mintzberg have complained about the lack of social concern reflected in much of management education. More recently, David Korten and Joel Bakan have made more pointed comments about the damaging nature of business corporations. Although radical, their message needs to be studied carefully, if only to find antidotes to some of the valid problems they point to -- such as the tendency for many corporations to abuse the environment and to ignore workers' rights.

I've shared some of my thinking on managing for society in a Manila Times column of the same title which comes out every Tuesday. See for example:

What is business for?
Number games
Stocks and shareholder voice
Pope John Paul II: A great management thinker
Pope John Paul II: A great management thinker–Part II

Nowadays, I'm developing a course on Catholic Social Teaching and Management which I may be able to run in September. I'm developing the course in memory of Pope John Paul II whose writings, especially Centesimus Annus, have had a great deal of influence on my thinking about the role of business and the manager in society. I hope to write here about my experience in developing and running this course.

I'd like to get comments from people who are also thinking about the positive role that management can play in society.