MAP Insights

The country today is experiencing a crisis arising from the gross inequality in the distribution of income and wealth, and the inaccessibility of economic opportunities to a large segment of the population that is mired in poverty.

 

To be sure, the Philippine Statistics Authority (PSA) reports that the distribution of income in the country has improved in recent years. However, economic inequality persists and continues to be substantial.

 

The Oxford Committee for Famine Relief, or OXFAM, paints a much gloomier picture. Its latest report shows that the Philippines has the worst distribution of income and wealth in the ASEAN region where severe income inequality continues, despite steady macroeconomic growth. In its 2026 country report, OXFAM Pilipinas notes that the country’s recent upgrade to upper-middle-income status means very little “(to) millions of Filipinos who remain poor, excluded from public services, and highly vulnerable to climate and economic crises.”

 

OXFAM noted in particular that the richest 1 per cent of Filipinos earned nearly 20 per cent of the total national income, while the share of the lower 50 per cent of the population stood at just 14 per cent of the national income.

 

This situation is patently unsustainable, and there is an urgent need for the state to remedy this anomaly. Regrettably, the state has been unable (or worse, unwilling) to take the necessary corrective measures.  Foremost among the reasons for the state’s inaction is that many government officials have found common cause with culprits and criminal elements in the community, many of whom being prominent corporate figures, and engaged with them in various forms of corruption, the most audacious among which being the recent flood control scandals by which billions of pesos in project costs have been siphoned off from government coffers,

 

The Accountability of Business

 

Business is equally culpable, however.

 

The long-standing goal of business is the maximization of profits, the portion of the economic value produced by the firm that accrues to its owners, or shareholders, in the case of public corporations. All too often, business firms seek to achieve this goal by appropriating economic value from their other stakeholders by implementing what are collectively known as Shareholder Strategy.

 

Shareholder strategies are concerned solely with the financial interests of corporate shareholders and focused primarily on the twin goals of increasing revenues on the one hand and controlling costs on the other.

 

Traditional shareholder strategies emphasize maximizing returns on investment. This is done primarily by putting a lid on operating costs while maintaining a steady inflow of revenue. These business practices tend to contribute to economic inequality. Among them are the following:

• Controlling labor costs by paying workers the prevailing legal minimum wage rates;
• Scrimping on product development, quality improvement and customer services, measure that deprive customers of value for their money;
• Price gouging, a revenue-generating practice employed by monopolies that harms mainly the firm’s poor customers; and
• Ignoring costs of environmental damage resulting from the firm’s operation, a cost-avoiding practice that is more harmful to people who live in shanties than to those who live in airconditioned comfort.

 

An alternative strategy, one that is increasingly being pursued by progressive corporations, is called Stakeholder Strategy.

 

Stakeholder strategies are those that aim to maximize profits (or shareholder wealth, in the case of public corporations) by creating value for all of the firm’s other stakeholders, notably their manual workers. For example, by paying higher wages than the prevailing legal minimum rates, workers become more highly motivated and productive, and the firm more profitable in the long run.

 

Corporate Social Responsibility, or CSR, is a widely practiced business model that integrates social and environmental issues into the operations of the firm. By adhering to CSR, business firms pursue their usual objectives while at the same time taking on the responsibility of addressing society’s problems of poverty, economic inequality and environmental degradation.

 

The doctrine of CSR obligates business firms to assume the following four types of responsibility to society.

• Ethical responsibility – the general philosophical or religious belief that business firms are morally bound to do good to others;
• Philanthropic responsibility – the firm’s commitment to render financial or material assistance to those in need – the poor, the sick and the hungry;
• Economic responsibility – an obligation consisting of the different strategies by which business firms can help hasten economic growth and promote welfare; and
• Environmental responsibility – which includes the corporate obligation to reduce global warming by minimizing carbon emission, implementing proper waste disposal, and by shifting to renewable sources of energy.

 

These corporate responsibilities commit the firm to do good to others by sharing economic value with them that otherwise would have been part of profits, an apparent departure from the long-standing dictum that the sole function of the firm in modern society is to maximize profits

 

We continue to subscribe to the traditional theory that the goal of the firm in a Capitalistic society is to maximize profits, but maintain that the most efficacious way of doing so is by creating value for all other stakeholders in the firm – its workers, its customers, its business partners, and the community.

 

A more revolutionary approach to addressing economic inequality and global warming is one proposed by eminent French economist Thomas Piketty.

 

In his landmark book, Time for Socialism: Dispatches from a World om Fire, Piketty observes that the rampant abuses of business firms in capitalistic economies stems from a free market economy that has become too free-wheeling. He advocates a hybrid economic system that combines features of Capitalism and Socialism in order to put in check the rampant abuses of business firms, and to hold erring public officials accountable for their misdeeds. In this mixed system, the state plays a more dominant role in managing the economy for the greater interest of society

 

This idea is intriguing, but we fear that its implementation will be too disruptive and will introduce unforeseen forces that are too difficult to control. We prefer a gradual, incremental change strategy that will bring about predictable, steady improvements, rather than one that will bring the system to the desired state in one fell swoop.

 

(The article reflects the personal opinion of the author and does not reflect the official stand of the Management Association of the Philippines or MAP. The author is a member of the MAP Shared Prosperity Committee and Retired Professor of Economics and Management at UP Diliman. Feedback at <map@map.org.ph> and <nspoblador@gmail.com>).