Ethics Case Studies
Ethics Case Studies
Ethics Case Studies
April 2003
Professional ethics guidance note:
Part 2 case studies
Suggested response to ethical issues and dilemma outlined in Part 10 of Guidance
Notes on Professional Ethics
Problem 1
Problem 2
Problem 3
Problem 4
Problem 5
Problem 6
Problem 7
Problem 8
Valuers associates
Dodgy work sheets!
Middle East contract
Terrible landlord!
Cheap and cheerful
Chateau Margaux
Save that tree!
You scratch my back, and Ill scratch yours..
General advice:
It is not easy to define solutions to problems like these. Sometimes several options
can be given. More than one solution may be appropriate in a given context. The
practitioner must follow his or her convictions and professional judgement. The acid
test, however, is whether the chosen option reflects the principles set out in the RICS
Guidance Notes on Professional Ethics, and complies with RICS Rules of Conduct.
These suggested responses offer avenues for thought only, and discussion.
Introduction
The following represents a discussion of the nature of the ethical issues, dilemmas,
factors and considerations comprised in the identified problem scenario. A standard
framework has been devised that treats similarly all the Examples of Ethical Issues
and Dilemmas in Section 10 (10.1.1 10.1.7), page 5 of the RICS Guidance Notes
on Professional Ethics. The framework employed for analysis of each scenario is as
follows:
A.
B.
C.
D.
E.
Problem
History and creation of problems
Departure from good practice
Ethical dilemmas for resolution
Solutions that preserve business integrity and relationships
effective agent for D, were he to become landlord. In this, D may have acted
innocently, seeing the arrangement as logical and economical in the appointing of
agents with good ability. However, has VA acted unwisely in allowing negotiations to
reach this point without warning D that it could not enter into simultaneous contracts
with both vendor and purchaser of the site?
Departure from good practice
Even if the contracts were not to be contemporaneous,1 knowledge by VA of the
possibility that it could enter, even at a later stage, into an agreement to manage and
engage in sub-letting on the part of the purchaser could induce it to influence the
offer price it recommended to the vendor. Moreover, the fact that agreement to act
as manager and agent for D for a larger fee than that paid to it by the vendor,
favourably disposes VBA towards D rather that A, in whose best interests VA should
act, through its Terms of Business and moral obligation. The thorough knowledge of
codes of conduct expected of a competent and honest practitioner should have led
VA to proceed very cautiously. The scenario, though, leads one to suppose VA has
realised it is poised on the edge of a precipice and has paused to consider its action.
Ethical dilemmas for resolution
For the avoidance of doubt client includes past and prospective clients, in this
context:
The foundation of the dilemma surrounding this problem is conflict of interest, which
has three aspects:
(i)
(ii)
(iii)
Client/client conflict: the vendor (A) wishing to sell the site for the
highest price consistent with market rate, local land values, any special
value attaching to the site and aspirations for investment capital, and the
purchaser (D) with concern for the lowest reasonable offer the purchaser
will accept consistent with his own valuation of the site and plans for its
development (but see Rules 19 of Rules of Conduct. Solutions that
preserve business integrity and relationship, below).
Client/Member2 conflict: central to negotiation of price is Valuers
Associates primary duty to A in return for a fee but which now has an
expectation of a fee from the purchaser (and a higher fee, besides) that it
will gain by possibly acting against the interests of the client/vendor
Inter-client/Member conflict: in which a Member cannot act
i.e. if the contract for selling the site were to be completed before that for management and subletting were struck up.
2
meaning a Member of RICS
3
op.cit.s.11.1.4
4
The Nature of Negotiation, Joe and Sue Carpenter (1999) in Negotiation, Lewicki, Roy, J, Saunders,
David M and Minton, John, W, (1999), 3rd edition, (Boston: McGraw Hill)
In (ii) the Member has abrogated discretion towards his client and could, if
disclosing privileged information concerning A to D, be guilty of breach of
confidentiality.5
Solutions that preserve business integrity and relationships
Rule 19 of the Rues of Conduct (conflict between the interests of clients) states that
where a conflict arises or may arise between the interests of two or more clients of a
firm, a Member shall consider whether or not he or his firm is prepared to act or
continue to act for any or all of those clients and, if he decides to act or continue to
act, he shall:
(a)
(b)
(c)
(i)
(ii)
disclose to each client the possibility and nature of the conflict, the
circumstances surrounding it and any other relevant facts;
advise them in writing to seek independent advice on the conflict, and
inform each client in writing that neither he personally nor his firm can act
or continue to act for him unless thereafter either:
the clients request him to do so unconditionally; or
subject to specified conditions that the Member has put in place
arrangements for handling the conflict which the clients have approved in
writing as acceptable to them.
Rule 18 of the Rules of Conduct (conflict between the members interest and a
clients interest), states that where a conflict arises or may arise between a
Members interests or those of any associate of his and the interests of his client, a
Member shall consider whether or not he or his firm is prepared to act or continue to
act for that client and, if he decides to act or continue to act, he shall:
(a)
(b)
(c)
(i)
(ii)
op.cit.11.1.7
1979, ch.38; in particular ss.15. (1)-(6), Interests on clients money; 18.-(1)-(7), Information to
clients of prospective liabilities; and 21.-(1)-(6), Transactions in which an estate agent has a personal
interest.
7
Italics to emphasise the relevance of this advice to the scenario in question
An option of reserving right to sanction if matters to not improve can be declared but would be in the
judgement of those dealing with the situation at first hand.
9
A difficulty with this option is that could be viewed as giving approval to irregular practice that is
counter to the general spirit of RICS codes of conduct. However, QSP is engaged unavoidably in
damage limitation and it must chart the best course through the hazards (see also Part F, General
Advice herein).
any future competitive tendering exercise for preferring a different organisation.10 The
development company should therefore have no occasion to sever relationships, as
the awarding of contracts to a different contractor for future work should be seen as
fair.
Problem 3 Middle East contract
Professional Service Partnership (PSP) has an on-going assignment in the Middle
East. When the new partner-in-charge arrives on site, he finds that a number of his
key staff have personal connections with the government and contractors. It is
strongly suspected that such relationships involve the taking or giving of substantial
benefits without informing PSP head office. There is a major long-term contract
involving the host government and local contractors that was negotiated before his
arrival. The contract has been approved by head office and awaits his signature.
What should the partner do?
Scenario
We do not know whether the partner-in-charge was party to the contract negotiations,
but s/he certainly was unaware of personal connections between key staff of
Professional Services Partnership (PSP), the host government and contractors. In
view of the fact that commission of works by a government is likely to be large in
scope and with significant financial implications, PSP will be interested in maintaining
the good business relationships with the government that it has enjoyed through
previous assignments and to continue these into the future. However, the partner-incharge is faced with a fait accompli in being expected to sign the contract, possibly
under some psychological pressure because of his/her responsibility towards both
company and client, and, inevitably, will violate professional codes of conduct in so
doing, unless able to renegotiate ethically sound terms that would avoid vitiating the
entire commercial scheme.
History and creation of problems
Key staff in PSP appear to have engaged in corrupt practice of which the company
was unaware. On first examination, it is probable they have breached the terms of
their contract of employment by acting in their personal interests rather than those of
the company. We do not know if they received inducements from the client or
contractors to help secure the new assignment but, naturally, they would be under
such a suspicion until investigations are carried out.11 Further, unless the key staff
involved in the current contract negotiations are entirely different from those in
previous contracts, it is conceivable that other agreements connected with the ongoing assignment were similarly affected and that a history of corrupt practice may
be revealed.
Departure from good practice
PSP has a duty to ensure that its staff receives directions about probity in business
matters, to circulate a policy document among them and to make them aware of the
consequences of departing from its provisions. Those engaged in developing
relationships with external organisations and personalities or in positions of
responsibility for preparing contracts, discussing costs and terms, and indeed those
key members likely to work in close collaboration with clients, contractors or agents,
whether in preparation for a contract or its operation, are placed in special positions
of trust. A company should take steps to ensure it is comfortable over the integrity of
10
There is an unwritten moral justice that a company in this position of QSP should be allowed to
protect itself against malpractice provided, as in this instance it can do so without accusation.
11
The RICS Guidance Notes of Professional Ethics, s11.1.1
those employees.12 A company must also check the credentials of new staff to
ensure there is no history of irregular practice on their record or in the opinions of
referees.13 That there is evidence of irregularity in the present situation signifies that
PSP has not shown sufficient care in selection of staff or monitoring of procedures,
neither has it ensured that only sufficiently well-regarded staff are given authority to
deal with matters applied to the substance of their work.14 With senior and executive
staff, a system of disclosure of other connections and interests in the same or a
related sector of the industry is advisable, as those at the top of their careers and
influence frequently build legitimate associations with other organisations, or can
become shareholders.15 All such precautions would be normal in a well-regulated
organisation able to give assurance over ethical standards applied to its business,
clients and employees.16
Ethical dilemmas for resolution
The authority of the partner-in-charge to sign the contract appears not to be in
question but PSP is silent as to whether s/he has authority not to sign. S/he is now
in a bind because signature in possession of present knowledge would make the
partner complicit in gross irregularity; no truthful explanation offered for unwillingness
to sign could avoid disclosure of suspicious actions by key staff and the negligence of
the company to have regularised practice and procedures within its administration.
The new contract is therefore at risk with serious consequences for both agreements
already entered into and those entertained in future.
Solutions that preserve business integrity and relationships
One course of action is immediate withdrawal from the assignment, instant dismissal
of the key staff concerned and, at the same time, elimination of future business
potential with the client. However a company wishing to prosper for the sake of its
directors, shareholders and employees could be said to have no other obligation than
to follow its registered objects of business; in fact there is a real, though sometimes
weakly-expressed, moral obligation on the part of the company to the welfare of
these groups. Business does not consist of challenges and decision-making
polarised into rightness or wrongness. Just compromises can be reached with
great care while having regard for the law. In the RICS Guidance Notes on
Professional Ethics, it is recognised that Members may have to adjust behaviour in
response to particular situations while accepting responsibility for departing from the
rules of conduct and be prepared for consequences at law.17 In such a situation, a
Member should be prepared to give reasons for such departure and keep careful,
chronologically arranged records of actions taken.
If the partner-in-charge wishes to salvage the situation, the following might be
contemplated. A stay of 48 hours before signing the contract could be requested.
This may not be regarded by the client as unusual as often details require
verification, even at the last minute. Additionally, in certain cultures, it is often
regarded as discourteous to rush into business closure and there is first an elaborate
exchange of pleasantries. In this breathing space, a brief but urgent investigation of
the roles and actions of the suspect staff would be undertaken both at the host
location and, via telephones, Telex, Internet or other means, at the company
headquarters.
12
ibid.s.8.1.3
ibid.s.8.1.3
14
ibid.s.8.1.4
15
ibid.s.11.1.4
16
ibid.s.2.5
17
Introduction to Guidance Notes on Professional Ethics
13
18
21
ibid.s.7.1.1
ibid.s.7.1.2
ibid.s.7.1.3
ibid.s.7.1.4
ibid.s.11.1.2
ibid.s.1.1.8
ibid.s.11.1.9
ibid.s.11.1.15
ibid.s.11.1.16
ibid.s.11.1.14
34
This is so-called negative advertising in which a product or service is deliberately disparaged by the
promoter to create an innovative approach reckoned actually to attract buyers because they are
incredulous at the damaging statements.
35
The RICS Guidance Notes of Professional Ethics, s.11.1.1
36
We do not know if SD Consulting has been satisfied with the operation of the contract and, therefore,
whether a future relationship is contemplated. The company has not used these suppliers before.
One of the key factors in enabling the development to proceed, is the removal of a
mature oak tree at the site entrance in order to improve junction visibility. Within the
practice, there is a young Chartered Surveyor who has very strong views on
protecting the environment. He has been working with the client on this commission
and suggests that he should invite some of his friends from the local airport extension
campaign to come and occupy the tree and should use the opportunity to gain
publicity for the firm and the services which you are able to provide. What would be
your instructions?
Scenario
This is a familiar situation in the conflict between construction and conservation in
todays rural society. Here, an idealistic Chartered Surveyor is assisting his
companys client to resist a building development but has engaged in forms of public
protest leading, possibly, to civil disobedience that do not arise from his professional
duties towards either client or practice. Moreover, he has presumed that any
publicity gained from this action can be used to promote the practice and its services.
History and creation of problems
The distinction between professional duty and freedom to act according to
conscience or private conviction is a matter for the practice partners or directors to
draw with the employee.
Departure from good practice
Does the Chartered Surveyor concerned misunderstand his role as a chartered
surveyor, if we can imagine his proposed actions are in any way consistent with
professional behaviour? There is an ongoing obligation on the practice to ensure
behaviour continues to comply with codes of conduct through monitoring and audit or
procedures, performance review and personal appraisal. A clear indication should
have been given of the overarching imperative to comply with ethical rules when the
member of staff was newly appointed,43 at which juncture the opportunity either for
the employee to declare personal interests that might clash with the business of the
practice, or for the practice to make its own enquiry on the matter, could have been
taken.
Moreover, professionals who do not work within the parameters of the law may be
subject to criticism and even discipline by their employers and professional bodies.
The Chartered Surveyor concerned has (or will have) offended against the code of
conduct regarding political and social behaviour.44 Using the occasion to advertise or
promote the practice does not directly contravene RICS code of practice rules in their
present form of expression but is likely to bring the practice and the profession into
disrepute for manifest opportunism and is against the general spirit of ethical
behaviour for which the rules provide. However, specific constraints on advertising
demand that it should be fair and not misleading45 and it could be said that
association of the practice with public protest takes unfair advantage of media
exposure against those surveyors who do not use such means and, further, it
misleads in that it is no part of the legitimate service of the practice or profession to
engage in public demonstration for or on behalf of itself or its clients.
Ethical dilemmas for resolution
43
44
45
ibid.s.8.1.3
ibid.s.11.1.17
ibid.s.11.1.14
The issue here is simple in that the surveyor concerned has confused his personal
convictions with professional responsibility and is risking the reputation of the
practice. It is assumed the practice does not wish to enlist in the public protest and
prefers to dissociate itself with the actions of its surveyor in creating and escalating
the demonstration. The clients views may be significant in that she could feel the
public protest will fuel her argument and it would be an important matter for
determination whether she approves of, or even encourages, the action. Loss of
business caused by withdrawing from instructions if the practice disapproves of its
clients methods must be measured against the loss of reputation to the profession if
it were seen encouraging unprincipled actions.
Solutions that preserve business integrity and relationships
The young Chartered Surveyor must be given an opening in which to relinquish his
activist role and revert to entirely professional practice, having been given an
explanation of his errors, their effects and likely breach of ethical rules. In the event
of his failure to agree, the practice must decide whether removing him to another
commission is sufficient to curtain his unprofessional activity, or whether disciplinary
procedure should be applied, with the eventual prospect of dismissal.
Problem 8 You scratch my back, and Ill scratch yours..
You have quoted a fee of 5,000 for a survey of a commercial property. The
potential client advises you that a competitor had quoted 4,500, and suggests the
job is yours, if you match that quote.
Scenario
A potential client is engaging in a Dutch auction in attempting to persuade you to
lower your fee to match that of a competitor so as to gain a commission.
History and creation of problems
How was your original fee of 5,000 reached? In reducing your quote, to match your
competitors, is there a danger that you will not be able satisfactorily to carry out the
survey? What if the competitor then lowers his quote to 4,000. Where will this end?
Departure from good practice
To submit to Dutch auction pressures or attempting to win favour by compromising
on fees could violate RICS rules of ethical conduct governing fair competition46 and
could, even remotely suggest amenability to bribes.47
Ethical dilemmas for resolution
You will be tempted to win a commission by adjusting your fee to oust a competitor
and gain preference, especially if business is poor. For the modest sum mentioned
in this problem the survey is likely to be small in scope and would not take long.
Could you recognise that, having cut costs, this may affect the rules for future
commissions with this client? What will prevent your gain on this occasion turning
into loss on another?
Solutions that preserve business integrity and relationships
Are you satisfied as to the basis of your original quotation? Quoting fees that do not
properly reflect a professional persons use of time, and expertise as required, may
not be of long-term benefit to your practice, either professionally or commercially.
However, the RICS, in response to OFT requirements, no longer promotes scale
fees. This suggests a degree of competition, is desirable, but it must be tempered
46
47
ibid.s.11.1.9
ibid.s.11.1.1