FAR EASTERN UNIVERSITY HIGH SCHOOL

Accountancy, Business and Management

Nicanor Reyes Street, Sampaloc Manila

Lesson 1: Responsibilities and Accountabilities of Entrepreneurs to Stakeholders

Entrepreneurs have a moral obligation to reconcile and balance the rights and
obligations of their stakeholders such as customers, employees, suppliers, and other
stakeholders. In this lesson, we will discuss and understand this matter.

Learning Objectives

At the end of this lesson, the students should be able to:

1. Define the meaning of conflict of interest.

2. Describe the difference between accountability and responsibility.
3. Identify the different social responsibilities of entrepreneurs to its stakeholders.
4. Analyze various articles to determine whether they advocate for honest policies and
practices.

Accountability vs. Responsibility

Accountability and responsibility are two

terms commonly considered interchangeable.
However, there are key differences between the two
terms.

Reference: Contact Center Pipeline

Accountability refers to the obligation of an individual or organization to account for

its activities, accept responsibility for them, and disclose the responsibilities in a
transparent manner.

Lesson 1: The Role of Business and Social Economic Development

 FAR EASTERN UNIVERSITY HIGH SCHOOL
Accountancy, Business and Management
Nicanor Reyes Street, Sampaloc Manila

A good example of taking accountability is the recall of Toyota between the years
2009-2010. According to an article published in Harvard Business (2011), the recall of
Toyota was due to the improper installation of an all-weather floor mat from an SUV into a
loaner Lexus sedan by a dealer which lead to the vehicle’s accelerator getting stuck, causing
a tragic, fatal accident and launching the most challenging crisis in Toyota’s history (Jeffrey
Liker, 2011). The company’s president, Akio Toyoda, publicly apologized, promised
improvements, and took concrete actions to regain public trust. They stopped production,
made a thorough investigation of the issue and implemented stricter quality control
measures. This is a good example of accountability as Toyota owned up to their mistakes by
being transparent and took corrective action to protect its customers and maintain the trust
that they have.

Responsibility, on the other hand, refers to

the duty or obligation to satisfactorily perform or
complete a task that one must fulfill, and which
has a consequential penalty for failure. In the
business setting, as discussed in the previous
modules. Businesses are not just created for
profit but rather businesses need to have a duty,
a responsibility, that gives and protects their
stakeholders. Reference: Career Addict

A good example of this is Starbucks Corporate Responsibility to its stakeholders. As

mentioned in their website, they are “Committed to upholding a culture where diversity is
valued and respected.” They go far as much as defining the diversity in the form of an
equation that goes “DIVERSITY = INCLUSION + EQUITY + ACCESSIBILITY”

Lesson 1: The Role of Business and Social Economic Development

 FAR EASTERN UNIVERSITY HIGH SCHOOL
Accountancy, Business and Management
Nicanor Reyes Street, Sampaloc Manila

What is Conflict of Interest?

As mentioned in our previous module it is sometimes

difficult to follow your point of view and the views of the entity.
The question of whether you follow your own view or follow the
rules set before you by the entity. In line with this, this is where
the conflict of interest comes into play.

Reference: Case IQ

Conflict of interest is defined as an intentional and deliberate action or decision that

results in getting personal gain, while adversely affecting the company. A good example of
conflict of interest involves an employee who works for a company but also owns a business
similar in nature to his/her employer. In short, he/she becomes a competitor to his/her own
employer. In a situation like this, the employee is asked to resign or is terminated due to
conflict of interest.

There is conflict of interest if an employee in charge of recruitment hires a relative

who is not qualified for the position. Similarly, if the employee fails to disclose that a
candidate for a position is a relative, this employee practices unethical behavior.

Employees who post negative comments against their employer is another example.
In the same way, disclosing confidential information to the employer’s competitor is a
ground for conflict of interest. Another example is when an employee works part time in a
competing company. Getting consultancy work and providing advice to another company
engaged in a similar venture is also unethical. It is also unethical for any employee to get
involved in a romantic relationship with his superior.

Conflict of interest can be prevented by establishing formal ethical standards and

policies on unethical behavior. Violations should be dealt with accordingly.

Lesson 1: The Role of Business and Social Economic Development

 FAR EASTERN UNIVERSITY HIGH SCHOOL
Accountancy, Business and Management
Nicanor Reyes Street, Sampaloc Manila

Social Responsibility of Entrepreneurs to its Stakeholders

The following are the social responsibilities of the entrepreneurs to its stakeholders…

1. To the Customers

Reference: CIO

There are eight basic rights that the entrepreneur has to its customers:
a. Right to Basic Needs – customers must not be deprived of the basic
needs of survival. These include food, clothing, shelter, education, and
healthcare. These things should be available at affordable prices.
b. Right to Safety – customers should be safeguarded against goods and
services that are hazardous to human health.
c. Right to Information – Consumers have the right to be properly informed
and not be misled by dishonest advertisements, labels, or packaging. They
are entitled to honest and truthful information so they can select the best
products and services.
d. Right to Choose – Consumers are free to select from an array of quality
products and services available in the market.
e. Right to Representation – Consumers have the right to participate in the
formulation and execution of policies and guidelines on consumer welfare
and protection.

Lesson 1: The Role of Business and Social Economic Development

 FAR EASTERN UNIVERSITY HIGH SCHOOL
Accountancy, Business and Management
Nicanor Reyes Street, Sampaloc Manila

f. Right to Redress – Consumers have the right to be compensated or

reimbursed on any purchase or availment of goods and services which do
not meet the expected standards of quality.
g. Right to Education – Consumers have the right to acquire the skills
needed to always be an informed customer.
h. Right to a Healthy Environment – Consumers have the right to safe and
conducive place to live and work free from any form of danger.

2. To the Investors – Entrepreneurs plays a crucial role in ensuring that investors

receive fair treatment and that their investments are protected and nurtured.

Reference: Forage

To be more specific the following are the key responsibilities of an entrepreneurs

towards its investors.
a. Give Correct Information – It is the responsibility of the entrepreneurs to
provide accurate, honest and updated information about the company’s
financial position, performance and potential risks to the investors.
- Regular financial reports, updates about changes in business strategies
and disclosure regarding market challenges should suffice.

b. Be Transparent – entrepreneurs must provide to its investors any major

changes, difficulties and developing opportunities that affect such
investment. Regularly scheduling reports, meetings, and open
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Lesson 1: The Role of Business and Social Economic Development

 FAR EASTERN UNIVERSITY HIGH SCHOOL
Accountancy, Business and Management
Nicanor Reyes Street, Sampaloc Manila

communication thus building investors’ confidence and minimizing

understanding

c. Provide Fair Return on Investment – as part of investing in the business its

only natural that investors shall have the right when it comes to appropriate
returns on the capital, they put into the business. Doing all these things is a
tedious task for entrepreneurs whose company can still earn their profit
indefinitely. To uphold this an entrepreneur must make strategic decisions
that enhance the value of the company, managing risks, and making sure
distribution of profits to investors through dividends or stock appreciation.

d. Strengthen Share Prices – Entrepreneurs should engage in a good business

strategy, innovativeness and a broadening of market opportunities in the light
of optimizing the company’s strengths and the financial health of the
organization with a view of improving market reputation. As always with
improved financial health on the ground, so also expansion takes place in
attracting more investors and increasing shareholder confidence.

e. Give What is Due – In accounting, equity is defined as the residual interest

after all liabilities has been paid. This principle of this is highlighted in this
responsibility of an entrepreneur, to keep his promises with investors and,
therefore, pay out all his financial obligations like dividends, interest
payments, and equity shares.
- In addition, they should respect the rights of an investor by making them
privy to major company decisions such as voting for corporate policies and
elections to the board. Giving all investors equal treatment and cementing
long-term relationships that encourage future investments.

Lesson 1: The Role of Business and Social Economic Development

 FAR EASTERN UNIVERSITY HIGH SCHOOL
Accountancy, Business and Management
Nicanor Reyes Street, Sampaloc Manila

3. To the Employees – Employees being the backbone of any entity, it’s only just and
natural that the entrepreneur handling its employees ensure that they will be able to
motivate and provide professional growth opportunities for its employees.

Reference: CommBox

By fulfilling these responsibilities, they can create a productive, ethical, and

sustainable work environment. Below are the key responsibilities of an employee:

a. Paying Wages and Benefits – This refers to entrepreneurs must provide

salaries that comply with labor laws and industry standards, as well as
offering benefits such as health insurance, paid leaves, bonuses, and
retirement plans. Providing proper compensation motivates employees and
fosters loyalty and productivity.

b. Create and Maintain a Safe Workplace – Creating a safe workplace is

essential for employee’s well-being and productivity. Implementing safety
measures, providing proper training, and complying with occupational health
and safety regulations to prevent workplace accidents and hazards. It also
includes emergency preparedness, providing protective equipment when
necessary, and fostering a culture of safety awareness.

Lesson 1: The Role of Business and Social Economic Development

 FAR EASTERN UNIVERSITY HIGH SCHOOL
Accountancy, Business and Management
Nicanor Reyes Street, Sampaloc Manila

c. Create a Non-Discriminative Workplace – Entrepreneurs must ensure that

hiring, promotions, and workplace interactions are evaluated objectively. In
other words, it is based on merit and skills rather than gender, age, race,
religion, or other discriminatory factors.

d. Create and Maintain a Favorable Working Environment – Entrepreneurs

should cultivate a workplace culture that promotes teamwork, open
communication, work-life balance, and mental well-being. Giving employees
all the necessary resources they need, reducing workplace stress, and
encouraging collaboration contribute to a more productive and engaged
workforce.

e. Respect for Human Rights – It includes ensuring fair treatment, preventing

exploitation, and addressing any form of harassment, forced labor, or unfair
dismissal. Employees should be given a place or a platform to voice concerns,
report any grievances, and participate in decision-making without fear of
retaliation.

f. Support Career Development – Growth and professional development

should be invested or given to its employees through training programs,
mentorship, workshops, and opportunities for promotions. Encouraging
employees to enhance their skills and advance in their career’s benefits both
the individual and the company by fostering a knowledgeable and motivated
workforce.

g. Manage Their Performance – Setting clear expectations, provide

constructive feedback, recognize outstanding contributions, and offer
solutions for improvement. Implementing fair performance appraisals and
reward systems encourages employees to perform at their best in the
workplace.
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Lesson 1: The Role of Business and Social Economic Development

 FAR EASTERN UNIVERSITY HIGH SCHOOL
Accountancy, Business and Management
Nicanor Reyes Street, Sampaloc Manila

4. To the Suppliers – Entrepreneurs heavily relied on its suppliers to delivers its goods,
raw materials, and services as they are essential in the business operations. Below
are the responsibilities of an entrepreneur to suppliers.

Reference: DFreight

a. Practice Fair Pricing and Licensing – exploiting suppliers by demanding

excessively low process or unfair contract terms are the things that
entrepreneurs must avoid. In negotiating with the suppliers, entrepreneurs
must ensure that pricing agreements are reasonable and mutually beneficial.

b. Maintain Constancy – having a stable purchasing patterns, providing clear

demand forecasts, and avoid abrupt changes in orders unless necessary are
the things an entrepreneur can do to maintain constancy.

c. Maintain Confidentiality – one of the responsibilities of an entrepreneur

when they have a supplier is having access to the supplier information,
information such as pricing structures, manufacturing processes, and trade
secrets. Maintaining confidentiality fosters trust and strengthens supplier
relationships.

d. Pay on Time – in the financial perspective paying on time avoids late fees, but
in an ethical perspective it helps strengthens the relationship and ensures the
continued supply of quality goods and services.

Lesson 1: The Role of Business and Social Economic Development

 FAR EASTERN UNIVERSITY HIGH SCHOOL
Accountancy, Business and Management
Nicanor Reyes Street, Sampaloc Manila

e. Pay Correctly – Overpayments, underpayments, or deductions without prior

agreement can cause disputes and financial strain. Practicing transparent
invoices and thorough record-keeping help prevent payment-related conflicts.

f. Select Suppliers with Discernment – Factors such as product quality,

reliability, ethical business practices, sustainability, and pricing should be
considered by an entrepreneur. To fulfill this selecting supplier can be difficult,
but as an entrepreneur selecting reputable suppliers helps maintain product
and service standards while minimizing risks related to unethical sourcing or
supply chain disruptions.

5. To the Government – the following are the responsibilities of an entrepreneur to the

government.

Reference: Philstar

a. Observe Laws, Rules, and Regulations – entrepreneurs must comply with all
legal requirements, including business registration, labor laws,
environmental regulations, and industry-specific guidelines. Most
importantly, entrepreneurs should stay updated on policy changes and
implement necessary adjustments to remain compliant.

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Lesson 1: The Role of Business and Social Economic Development

 FAR EASTERN UNIVERSITY HIGH SCHOOL
Accountancy, Business and Management
Nicanor Reyes Street, Sampaloc Manila

b. Pay Taxes – it is a fundamental duty of every entrepreneur as taxes is the life

blood of any government and it funds the education, healthcare,
infrastructure, and national security. Declaring accurately the income is a
must, filing tax returns on time, and ensuring correct tax payments are just the
bare minimum of the things that an entrepreneur must do as it helps maintain
a fair and functional economy.

c. Avoid Illegal Trade Practices – entrepreneurs must maintain its businesses

ethically and refrain from engaging in unfair or illegal trade practices such as
smuggling, counterfeiting, price fixing, and monopolistic activities. As these
things harms consumers, disrupt fair competition, and weaken the economy.
Maintaining ethical business operations build trust and promote sustainable
growth.

d. Disclose Financial Statements – as discussed in the previous modules, and

how the effects of Enron have impacted the industry as a whole transparency
is one of the things that every entrepreneur must always observe. They must
ensure that financial reports reflect true and fair financial conditions,
preventing fraud and maintaining public confidence.

e. Avoid Corruption – Upholding integrity and avoid engaging in bribery, fraud,

and corrupt dealings with government officials. Corruption weakens
institutions, discourages investments, and damages economic stability.
Instead, entrepreneurs should promote ethical business practices,
accountability, and transparency in all transactions.

f. Assist in Implementing Socio-Economic Policies – Aside from making profit

every business should support government initiatives aimed at improving the
country’s economy and society. Participating in programs that promote
employment, sustainability, technological innovation, and social
responsibility. The effects of these projects make the businesses to be more
inclusive and help promote progress in society.

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Lesson 1: The Role of Business and Social Economic Development

 FAR EASTERN UNIVERSITY HIGH SCHOOL
Accountancy, Business and Management
Nicanor Reyes Street, Sampaloc Manila

g. Contribute to Economic Stability – As discussed in the Entrepreneurship

subject, businesses help creates jobs, produce goods and services, and helps
invest in local industries. As entrepreneurs, promoting business practices
helps sustain market confidence, attract foreign investments, and ensure
long-term economic growth.

6. To the Community and Environment – as an entrepreneur, promoting sustainable

development practices by ensuring the business contribute positively to society and
the environment is a must.

Reference: Sir Ronald Cohen (2021)

Below are the key responsibilities that need to be considered:

a. Consider Public Input – Listening not just to your customers but also to the
whole community, in ways of feedback and making responsible business
decisions that align with public interest, helps you stand out.

b. Take Care of the Community – Support local initiatives through job creation,
corporate social responsibility programs, and community development
projects.

c. Comply with Environmental Legislation – Following all environmental laws

and regulations to prevent pollution and have your business be sustainable
and has the chance to live for a very long time.

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Lesson 1: The Role of Business and Social Economic Development

 FAR EASTERN UNIVERSITY HIGH SCHOOL
Accountancy, Business and Management
Nicanor Reyes Street, Sampaloc Manila

d. Dispose of Waste Properly – Implementing safe and responsible waste

management practices to minimize pollution and health risks.

e. Reduce, Reuse, Recycle – Adopting sustainable practices by minimizing

waste, reusing materials, and recycling whenever possible to reduce
environmental and potentially financial impact to the business.

f. Conserve and Protect Biodiversity – Ensure that business operations do not

harm local wildlife, forests, or ecosystems, and actively participate in
conservation efforts.

g. Use Scarce Natural Resources Wisely – Practice responsible resource

management by optimizing energy, water, and raw materials to ensure
sustainability for future generation.

References

• Harvard Business Review. (2011, February). Toyota’s recall crisrs: Full of mistakes
but full of lessons. https://hbr.org/2011/02/toyotas-recall-crisis-full-of
• Starbucks EMEA Careers (n.d.) Corporate responsibility.
https://www.starbucksemeacareers.com/en/Corporate-responsibility

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Lesson 1: The Role of Business and Social Economic Development

 FAR EASTERN UNIVERSITY HIGH SCHOOL
Accountancy, Business and Management
Nicanor Reyes Street, Sampaloc Manila

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Lesson 1: The Role of Business and Social Economic Development