ࡱ> GIF 3bjbjcTcT 4>>>+XXh.000000$TTi..@^0?.??(TT?X a: Ethical Investing for Real Estate Companies We've heard and heard and heard again our agent's desires to be viewed as professionals in providing services to our clients and customers. But how can this happen if our company's most important asset becomes eroded by our own sending of messages of unethical behavior? Every act and every action of salespeople, managing brokers and company leaders sends out a message about our ethics and our values. During a recent Counselors of Real Estate (CRE) conference dealing with The Ethics of Organizations, I was exposed to the rethinking and reshaping of the connections between individuals and their institutions. The concept of moving beyond compliance-only behavior within the limits of the law and into the coming age of ethics was introduced. Believe it or not, our real estate practices are quickly becoming the subject of social auditing by all of those who know of or use our services. It's easy to convince most of us of the concept of Moral Progress of the Individual following a complaint against a salesperson to a grievance committee. The difficult task is creating a training session in the company to shield against unethical value-related decisions and behavior. Ethics requires us to give up the idea that an act is proper simply because it is permissible or that sometimes is ethical so long as it is legal. Some ethicists believe the quality of family life and parental skills form the basis for individual character. Tolerance towards let us do our own thing or what's the big deal has destroyed values and has contributed towards an unwillingness to stand-up for what's right. We have extended unethical behavior and values into our businesses by telling the managers they are paid to make decisions - so when important ethical decisions are needed, make them. But no longer, according to Gary Edwards of the Ethics Research Center, Companies are now informing their executives on how to make moral and ethical decisions. So, just what are other professionals and companies doing? In 1979 nearly 73% of the Fortune 500 companies had written Codes of Ethics according to Edwards. These were, for the most part, reactive documents to the scandals of the 1970's written by lawyers for other lawyers. By 1984 those Fortune 500 companies grew only to 74% of all companies with a Code of Ethics. This decade produced no meaningful change. But this 1974-1984 period was a period of training for most companies; and 1988 surveys showed (following the 1980's Wall Street scandals) that 85% of the 2,000 companies surveyed had brought the lawyers back into the code of conduct writing mode. Today 11% of those 2,000 companies surveyed have formed ethics departments. How do companies deal with misconduct in 1995? What happens when you appoint a blow the whistle ombudsman? Well, the heads of ethics departments claim their ethics programs have had an effect on employee behavior, but so far it's not enough. Why? Because for most it's coming too late. Many times serious misconduct in organizations reaches ordinarily good people trying to keep the required performance (job security). This results in the need to do something they know is wrong. Decent people under pressure to perform (years ago this pressure was referred to as temptations) can make wrong decisions which can wreck the best of business reputations. Many decisions dealing with business leave the person's personally-high ethical standards and values at the door to the office. Managing-brokers and owners many times create an environment where decent people can't perform to expectations. Setting objectives that require compromise doesn't create better business. The era of decision trees, model forecasting, goals by statistics, performance and other performance-oriented goals can be a fundamental cause of illegal and unethical behavior. Ethics is sometimes defined as where the law ends. Stepping into misconduct to avoid punishment has been the reaction to goals dictated by many managers in the past, but it should continue no longer. Rule of thumb tests for ethical behavior according to Edwards include how would it appear on the front page of the newspaper or can you tell your children what you did at work today? Admittance of the importance of profitability in many large companies has contributed to the nervousness of ethics. People feel comfortable judging other people's ethics says Michael Josephson of the Josephson Institute in Marina Del Rey, California, but everyone is ethical in his or her own eyes. Ethics has been defined by Josephson in terms of moral duties and virtues that flow from six core ethical values, which he calls the Six Pillars of Character: Trustworthiness, Respect, Responsibility, Justice and Fairness, Caring, Civic Virtue & Citizenship. Today's more complex task of performing real estate services requires you to think before you act; consider the consequences on all people affected; think for the long term; be reliable; be accountable; accept responsibility for the consequences of your choices and set a good example for those who look up to you. These attributes, according to Josephson, form the basis of responsibility. Harvard Business School's Tom Piper claims confidence in business ethics has dropped from 55% in the 1960's to less than 20% today and there's been a breakdown of trust in the business community. Young people have a great fear of appearing naive says Piper. The fear of failure as perceived in their eyes coupled with inadequate goals supports the younger business people's unwillingness to fail for anything they believe important. But failure in the eyes of those that are judging may easily be calculated at a higher tolerance level than those set by these younger business workers. So, with this downward trend in our outlook towards business ethics, how important are these issues to our services, our institutions and our communities? How do we replace cynicism with a voice of hope or a sense of purpose to turn this trend away from our real estate office? According to Ron Green of Dartmouth College, ethics in the real estate profession is based on 1) Our defense of the claim that we are professionals, 2) Stress on ethical behavior, and 3) Minimizing that stress by managing items that cause diversion to ethical practice. As REALTORS we are committed to high standards of conduct by adherence to our professional standards. We are trusted to place the client's interest before our own. Our quality of service can cause a major impact on the client's well-being, states Dr. Green. We are into whose hands the client typically entrusts confidential information or other resources of value. The move of real estate services to a fiduciary relationship with individual clients will require stricter adherence to the Code of Ethics that supports and justifies this client trust. Inherent conflicts of interests are in our daily activities. What about government mandates which literally force non-compliance? This activity can set a model of action by employers that is exactly what our efforts in ethical behavior are trying to eliminate. Emotional fueling of perceived lack of due care will become more prevalent. Connie Bagley of Stanford University suggests case law has developed in deciding issues and what effect a transaction may have on shareholders, customers and clients, and requires what is in the best interest of others. More than half the states in the nation have constituency statues which are permissive to looking at other stockholders. The you didn't think about me argument is becoming more common in complaints. The legal profession's practice of teaching the calculus such as What are the chances of being caught shouldn't be continued. Bagley argues, Blaming the lawyer is a typical reaction to bad ethics, but the client usually knows what the lawyer is doing. But should we make unethical acts unlawful? No, the law is too blunt an instrument. If compliance with the law in your business is all you have, then you haven't done the job on business ethics suggests Kirk Hanson of Stanford University. We must train our employees (agents) to see the ethical dilemma in their jobs Hanson insists. The executive's task of managing and communicating values is carried out through simple things such as newsletters and the creation of mission statements. How the leader talks and how the leader performs defines the values and trains the employees to identify these ethical dilemmas. Hanson states, Constant reinforcement is required. How you handled conflicts in the past and communicated values builds positive aspects of organizational integrity. Years of reinforced integrity pushes most beyond simple compliance with the law. Tom Donaldson of Georgetown University comments on the compromising of fundamental values, we are conducting business across the borders of many communities and cultures. Not all clients are like us. We try to translate our language to other cultures, and to others that don't understand our business. It is important to recognize the ethics of your buyer or seller. Donaldson provides the following guidance on ethical behavior: Before judging try to understand. When you hit a wall, seek creative solutions. Remember that sometimes there is no compromise. Complaint hot-lines, formation of an ethics department or just having an open door policy can be appropriate initial steps. But how do larger manufacturing/marketing companies as well as local real estate offices combat the disconnection of profit performance and corporate ethics? Hanson suggests you evaluate your company's management practices against your credo, mission statement or company objectives. Take tremendous action now. Hanson states anyone can do it after a disaster. They are prepared to discuss it then; but to take action now is the tough job. In our business, as in all businesses, ethics needs definition. If we make a determination of what ethics is for us as well as those who work for and alongside us, then you can expect them to at least understand what level of performance or behavior is expected the next time the situation is presented. Set up your ethical guidelines before the disaster occurs. Don't make those in your community guess at what you expect from their behavior. They want to be told. They should be told where the line is drawn. So, the next time, when a pal in the competitor's office simply asks you to initial your seller's verbal acceptance, or when you let it slide because it's only a contract sale or you clearly know your customer doesn't understand the agency relationship you have with the seller, just remember others are watching and learning from your behavior. Contact: John M. Thistlethwaite, CRE, GAA, SRS, SRI, CEI, CES John M. Thistlethwaite Interests 3401 Lake Avenue Fort Wayne, Indiana 45805 426-7134 John M. 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