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Paper 0346V5-0
Professional ethics
Contents
Learning outcomes
1. Introduction
2. What is ethics?
3. Ethics and the law
4. Ethical dilemmas
4.1 American accounting model (William May, 1990)
4.2 Laura Nash 12-question model (Nash, 1981)
4.3 Mary Guys values, rules and decision model (Guy, 1990)
4.4 Case study
5. Business ethics
6. Professional ethics
7. Codes of conduct
8. Ethics and the internationalisation of property-based professions
References and Bibliography
Appendix A: RICS: Rules of Conduct for Firms 2007 Version 5
Appendix B: RICS: Rules of Conduct for Members 2007 Version 4
Appendix C: Professional ethics guidance note: Part 1 introduction
Appendix D: Professional ethics guidance note: Part 2 case studies
Professional ethics
Learning outcomes
After studying this paper you should be able to:
Explain the meaning and origins of ethics and comment on the relationship
between ethics and the law.
Discuss the concepts of business ethics and professional ethics in the context
of the construction and real estate industries and the wider surveying
profession.
Professional ethics
1 Introduction
In recent years, changes in both business practice and client expectations have
brought ethical considerations to the forefront of current business thinking.
A number of recent reports have emphasised the need for greater openness and
transparency in business dealings, and have highlighted the fact that contemporary
business problems cannot always be resolved by legislation and experience.
Accordingly, many of the professional institutions have drafted guidance on ethics for
their members, and businesses are also now more willing to set out publicly their
ethical standards.
This paper begins by considering some very basic ethical concepts. These are then
used to define and clarify both business ethics and professional ethics, and to consider
the place of professional codes of conduct in the modern international construction
and real estate industries.
2 What is ethics?
Ethics is defined in the Oxford English Dictionary as the science of morals. The
word is derived from the Greek ethos, of which one meaning might be the set of
moral values and principles which underpin any particular society.
Ethics is a branch of philosophy concerned essentially with theories of goodness
and badness, of right and wrong, of morality, and of the good of the many
contrasted with the good of the self. Sages such as Buddha and Confucius, and
religious leaders such as Jesus and Mohammed, each made recommendations about
the way people should live their lives, but the formal study of ethics really originates
with the Greek philosopher Socrates in the 5th century BC.
More recently a wide range of theories of ethics has been proposed, linking concepts
such as goodness and beauty, virtue, benevolence and self-interest, with the choice of
alternative courses of action being dependent upon their pleasant or unpleasant
consequences.
Modern philosophers tend to argue that ethics is essentially a product of our
humanity; that human beings are driven to bring about changes for the better in their
environment, and that the motives from which they act depend largely upon a
combination of their personal and collective ethical value systems. There is of course
a question of perception here, in that one person or groups motivation might be
drawn from their particular perception of the world, which may be very different from
the way other equally rational individuals or groups see things. Culture plays a
fundamental role in determining our basic norms and values as well as the
environment in which our ethical values develop.
So how are our ethical beliefs formed, and is there such a thing as a universal set of
ethical values? On the face of it, we might argue that the vast majority of human
beings would agree, for example, that one should always tell the truth and keep ones
word, that society should support the weak, that the exploitation of children and the
taking of human life is wrong, and so on. And yet any of us can readily think of
situations in which we would be prepared to make exceptions to most, if not all of the
above.
Professional ethics
Professional ethics
4 Ethical dilemmas
Ethical dilemmas are defined as those issues that require us to use an ethical value
system to determine a course of action that is, an issue that cannot be satisfactorily
determined by the use of facts and technical rules alone. They are often, but not
always, management issues involving both people and a moral question for
example, whether or not to report a colleague whom you suspect of offering or
accepting corrupt payments.
A variety of theoretical approaches have been proposed as to the guiding principles to
follow in determining how we might react to such questions. Some of the most
important include whether the decision should be based primarily upon:
doing unto others as you would have them do unto you (as popularised by
Immanuel Kant 17241804);
some form of group consensus for example, actions are defined as morally
right if all of the stakeholders in a particular situation might reasonably think
the proposed actions would be acceptable by anyone looking at the matter in
an impartial and informed way (the NORM theory proposed by Ronald Green,
1994).
Professional ethics
Professional ethics
4.3 Mary Guys Values, Rules and Decision Model (Guy, 1990)
Values
Before offering a decision model, Guy suggests that one might keep 10 core values
in mind. By evaluating how these values relate to an issue under consideration, and
by analysing who the stakeholders are in the decision, the ethical implications of an
action become clearer.
1. Caring treating people as ends in themselves, not as means to ends.
2. Honesty being truthful and not deceiving or distorting the facts.
3. Accountability accepting the consequences of ones actions and the
responsibility for ones decisions and their consequences.
4. Promise keeping keeping ones commitments.
5. Pursuit of excellence striving to be as good as one can be. Being diligent,
industrious, committed, becoming well informed and well prepared.
6. Loyalty being faithful and loyal to those with whom one has dealings.
7. Fairness refraining from taking undue advantage of anothers adversities.
8. Integrity using independent judgement and avoiding conflicts of interest,
refraining from self-aggrandisement, and resisting economic pressure.
9. Respect for others recognising each persons right to privacy and selfdetermination and having respect for human dignity.
10. Responsible citizenship having ones actions accord with societal values.
Rules
Guy also suggests five rules which integrate these values and might be of assistance
in codifying ones ethical decision making:
Rule 1 Consider the well-being of others, including non-participants. This rule
emphasises caring and respect for others.
Rule 2 Think as a member of the community, not as an isolated individual. This
emphasises loyalty, integrity, respect for others, and responsible citizenship.
Rule 3 Obey the law, but do not depend solely on it. This again emphasises integrity
and responsible citizenship.
Rule 4 Ask What sort of person would do such a thing? This emphasises all the
values by calling each into question.
Rule 5 Respect the customs of others, but not at the expense of your own ethics.
This emphasises accountability, fairness, integrity, and respect for others.
Professional ethics
Decision Model
1. Define the problem. Isolate the key factors in question and diagnose the
situation to define the basic problem and to identify the limits of the situation.
2. Identify the goal to be achieved. It is essential that a goal is clearly defined to
avoid going astray.
3. List all possible solutions to the problem. All alternatives that will address the
problem and achieve the goal are considered.
4. Evaluate each alternative to determine which best meets the requirements of
the situation. This requires a thorough analysis of each alternative, which
involves measuring the benefits, costs and risks of each, as well as identifying
the likely intended and unintended consequences.
5. Identify the one course of action that is most likely to produce the desired
consequences within the constraints of the situation. This requires selecting the
alternative that maximises the most important values and holds the most
promise of achieving the goal, while solving the problem as effectively as
possible.
6. Make a commitment to the choice and implement it. This requires converting
the decision into action.
7. Which model to use for analysing ethical problems depends entirely upon
individual personal preferences. If required, any of the models could be
modified to suit individual needs. The important thing is that such models can
provide a sound and sensible template to aid the individual to make wellinformed, carefully thought out and justifiable decisions.
Professional ethics
Professional ethics
On balance, none of the stakeholders would want to live in a world where this
rule prevails and thus, on the basis of the above analysis, this rule cannot be
accepted.
Professional ethics
Jims employer would be doing a lot of soul searching. If the decision was
made to go for financial gain at the expense of everything else, the firm would
have to carry a mighty responsibility. The fact that the dealings might become
public, or that firm could be charged with breaking anti-bribery laws, or that
the position of staff could be jeopardised, not to mention the potential for
damage to the companys name and reputation, should be enough to make the
potential financial gain look much less worthwhile. Given the risks, an
enterprising employer would be likely to look for new markets elsewhere.
If the firms decision were to give up the corrupt market, at least for the time
being, Jims wife and family would feel more secure and could be proud of
the fact that Jim had maintained his own moral code.
Jims colleagues would be happier, and those priding themselves on their
integrity would feel happier working for a firm with integrity.
The new market would lose a potential investor and a chance of development.
If others adopted the same stance it would eventually become clear that
corruption was not a sustainable strategy.
Jims home market would remain intact, and the firm would maintain its
reputation for honesty and fairness.
On balance, on the outcome of this analysis, this rule would be supported by
the stakeholders concerned and would therefore be accepted.
5 Business ethics
Many ethical problems are often most apparent in the ways in which we choose to do
business. Business ethics may be considered to be the study and analysis of moral
principles and moral decision making as it applies to the business world. We therefore
need to apply the ethical principles set out above to the solution of business problems.
Note that the business ethics inherent in any particular marketplace are very much
determined by local custom and practice. As indicated in the case study above, they
may lead to serious conflicts between the prevailing norm and the business policies of
companies and/or people who customarily operate under a different set of rules.
Cadbury (1987), for example, noted that in international business there are stark
differences between different societies regarding the legitimacy of special payments
to win orders or contracts the existence of cultural relativism. However, others
(Wellman, 1963) have argued strongly in favour of an absolutist approach to business
ethics.
Irrespective of whether one takes an absolutist or a culturally relative view, it is now
generally acknowledged that a well publicised, robust set of ethical business
standards can provide a considerable marketing advantage.
Professional ethics
6 Professional ethics
The concept of professional ethics, as representing the standard of performance and
service the general public can expect to receive from a professional practitioner, has
historically been a major issue. From as early as the 19th century professional
societies gave members a freedom to practise, secure in the knowledge that both they
and their clients were protected by professional codes of conduct.
The need for such codes was restated in 1971 by the Ormrod Committee on Legal
Education, which said that:
A profession involves a particular kind of relationship with clients or patients
arising from the complexity of the subject matter, which deprives the client of the
ability to make informed judgements for himself and so renders him to a large
extent dependent upon the professional man. A self-imposed code of professional
ethics is intended to correct the imbalance in the relationship between the
professional man and his client and resolve the inevitable conflicts between the
interests of the client and the professional man or of the community at large.
Note that in this area the concept of evolving (i.e. culturally relative) ethical
frameworks is generally considered to be of major importance. For example, the
Royal Institution of Chartered Surveyors (RICS), in a recent discussion paper (RICS,
2000), stated that:
Professional ethics is a process, i.e. ethics is not a fixed text which can be learnt
once. It is a way of reviewing behaviour against constantly changing standards.
What may be ethical today, or in a particular society, may be viewed differently
by others or at another time . What is perceived as ethical depends on the
viewpoint of the individual. However, this can be influenced by a variety of
factors including published codes and statements.
There are many definitions of professional ethics, but that endorsed by RICS in 2000
is perhaps typical of many in the traditional sentiment it expresses. It clearly has its
roots firmly anchored in the duty-based 17th and 18th-century philosophies of John
Locke and Jean-Jacques Rousseau, and in the 18th and 19th-century utilitarianism of
Jeremy Bentham and John Stuart Mill.
[Professional ethics is the] giving of ones best to ensure that clients interests are
properly cared for, but in doing so the wider public interest is also recognised and
respected (Professional Ethics and the Rules of Conduct of the Royal Institution
of Chartered Surveyors, H Land FRICS, CPD Study Pack, College of Estate
Management).
Professional ethics
7 Codes of conduct
Considerable research has been carried out into the formulation and effectiveness of
both corporate and professional codes of conduct. Most of this work, however (e.g.
Chatov, 1980; White and Montgomery, 1980; Sanderson and Varner, 1984; Webley,
1993), has concerned corporate American codes. In addition to issues such as bribery
and conflict of interest, other issues commonly included are green issues,
discrimination and harassment, labour relations, safety, and fair remuneration.
Langlois and Schlegelmilch (1990) discovered differences between European and
USA codes, but only in areas of employee relations and politics.
Considerable research has also been carried out into the effectiveness of the codes in
assuring standards. Stead et al. (1990) recommend that, to be most effective, codes
should be developed in an open, participative environment involving as many
employees as possible. It follows that professional associations might also wish to
involve their memberships in developing their codes of conduct, and Trevino and
McCabe (1994) found that the active involvement of members in code development,
interpretation and review was a significant factor in ensuring general acceptance.
However, research has also suggested that the true motivation for companies to
produce corporate codes of conduct may have little to do with ensuring standards and
much more to do with largely non-ethical ends. Maintaining corporate profits
(Cressey and Moore, 1983) and protecting the corporation against criminal liability or
other damage stemming from employee misconduct (Stevens, 1994) have been shown
to be the prime motivation in many cases. Among the professions, critical studies of
the codes of conduct of accountants (Mitchell et al. 1994) and solicitors (Carver,
1995) have revealed that the primary reasons for code adoption have been to enhance
status and protect members interests. In many cases the codes are imprecise and
largely incapable of objective application. As an example, preliminary research
(Smith, 1995) into the requirements of the codes of conduct of the various
professional surveying bodies in South-East Asia shows that, although all provide for
various penalties to be imposed on members whose conduct is deemed to be
unethical, this concept is only defined in the most subjective of terms. The
Australian Institute of Quantity Surveyors, for example, states that Members are
required to provide professional services of a high standard and to maintain a high
standard of integrity and taste, whilst the Hong Kong Institute of Surveyors requires
that No Member shall conduct himself in a manner unbefitting a Member of the
Institute. None, however, make any attempt to define what objective standards will
be used to judge whether or not members actually comply.
In terms of the penalties for transgression, Allmon and Grant (1990) discovered that
code transgression could be widespread without apparent guilt or remorse. Hence
Clutterbuck (1992) and Ford and Richardson (1994) advocate rewards for code
adherence and sanctions for violations. Studies suggest that codes may be effective in
promoting ethical behaviour when combined with sanctions (Singhapakdi and Vitell,
1990; Weeks and Nantel, 1992). Despite the lack of objectivity however, Pitt and
Groskaufmanis (1990) found that 68% of employers surveyed had terminated an
employee contracts for code violation, and 32% claimed to have formal enforcement
measures. Many professions have corresponding disciplinary procedures.
There is, therefore, a need for the development of clearer and more objective
professional and corporate codes of conduct that are soundly based in ethical theory.
Appendices C and D, although superseded, provide some useful examples of ethical
dilemmas and issues.
Professional ethics
Professional ethics
RICS clearly appreciates that what is accepted as ethical behaviour depends upon the
viewpoint of the individual but within the context of the view of society as a whole.
This being the case, any code must either be restricted to particular countries, or
broad enough to be acceptable in all possible situations in which chartered surveyors
might find themselves. In formulating their guidance (see Appendix C), the
Institution has clearly chosen to follow the latter course.
SELF-ASSESSMENT QUESTION
Read the ethical dilemmas set out on page 6 of Appendix C and attempt to decide how
you would resolve them.
Check your assessment against the analysis set out in Appendix D.
Professional ethics
Allmon D E and Grant J (1990) Real Estate Sales Agents and the Code of Ethics: a
Voice Stress Analysis, Journal of Business Ethics, 9: 807812.
Business Ethics (undated) The Caux Principles, available from 52 South 10th Street,
Suite 110, Minneapolis, MN 55403 612-962-4700, USA.
Cadbury, Sir A (1987) Ethical Managers Make Their Own Rules, Harvard Business
Review, 65(5): 6973.
Carver A (1995) Ethics and the Civil Society: John Stewart Mills Legacy in the
1990s, Chapter 3 in S Stewart and G Donleavy (eds) Whose Business Values? Some
Asian and Cross-cultural Perspectives, Hong Kong: Hong Kong University Press.
Chatov R (1980) What Corporate Ethics Statements Say, California Management
Review, 22(4): 2029.
Clutterbuck D (1992) The Role of the Chief Executive in Maintaining an Ethical
Climate, London: Clutterbuck Associates.
Cressey D and Moore C A (1983) Managerial Values and Corporate Codes of
Ethics, California Management Review, 25: 5377.
Ford R C and Richardson W D (1994) Ethical Decision-Making: a Review of the
Empirical Literature, Journal of Business Ethics, 13: 205221.
Goodpaster K E (1984) Ethics in Management, MA: Harvard Business School.
Guy M (1990) Ethical Decision Making in Everyday Work Situations, New York:
Quorum Books.
Hong Kong Ethics Development Centre (undated) Ethics for professionals
(architecture, engineering and surveying): A resource portfolio for Hong Kong
Universities.
Laing (1997) Statement of ethics and business principles, John Laing plc.
Langlois C C and Schlegelmilch B B (1990) Do Corporate Codes of Ethics Reflect
National Character? Evidence From Europe and the United States, Journal of
International Business Studies, fourth quarter: 519539.
Leisinger K M (1995) Corporate Ethics and International Business: Some Basic
Issues, Chapter 9 in S Stewart and G Donleavy (eds) Whose Business Values? Some
Asian and Cross-cultural Perspectives, Hong Kong: Hong Kong University Press.
May W W (ed.) (1990) Ethics in the Accounting Curriculum: Cases and Readings,
American Accounting Association.
Mitchell A, Puxty T, Sikka P and Willmott H (1994) Ethical Statements as
Smokescreens for Sectional Interests: The Case of the UK Accountancy Profession,
Journal of Business Ethics, 13(1): 3951.
Nash L (1981) Ethics without the sermon, Harvard Business Review, 59: 7990.
Professional ethics
Professional ethics
Appendix A:
RICS: Rules of Conduct for Firms 2007
Version 5
Please turn overleaf for Appendix A.
Regulation
RULES OF
CONDUCT FOR FIRMS
04 JUNE 2007
VERSION 5
WITH EFFECT FROM 01 JANUARY 2012
RULES
Regulation
Foreword
The Rules of Conduct for Firms apply to firms that RICS regulates. They cover those matters
which are dealt with at firm level. The Rules focus on our regulatory goals and adopt the five
principles of better regulation:
Proportionality
Accountability
Consistency
Targeting
Transparency
For firms requiring further guidance, we have prepared a series of help sheets on different
aspects of the Rules. These can be found at www.rics.org/regulation.
These Rules provide a strong foundation for RICS and for the firms it regulates, helping
to protect the public and uphold the reputation of the profession.
Eve Salomon
Chair
Regulatory Board
James M Allan
Honorary Secretary
03
Regulation
These Rules of Conduct for Firms are made by the Regulatory Board of the Royal Institution of
Chartered Surveyors (RICS) under Article 18 of the Supplemental Charter 1973 and Bye-Law 5
of RICS Bye-Laws. Version 5 of these Rules shall apply from 01 January 2012.
Scope
These Rules set out the standards of professional conduct and practice expected of Firms
registered for regulation by RICS. These Rules do not repeat obligations placed on Firms by
the general law, for example in the areas of discrimination and employment.
Not every shortcoming on the part of a Firm, nor failure to comply with these Rules, will
necessarily give rise to disciplinary proceedings. However, a failure to follow any guidance
associated with the Rules is a factor that will be considered should it be necessary to examine
the activities of a Firm. In such circumstances the Firm may be asked to justify the steps it took
and this may be taken into account.
A Firm should be guided as much by the spirit of the Rules as by the express terms.
Part I General
Interpretation
1.
04
Communication
2.
A Firm shall at all times act with integrity and avoid conflicts of interest and avoid any
actions or situations that are inconsistent with its professional obligations.
Competence
4.
A Firm shall carry out its professional work with due skill, care and diligence and with
proper regard for the technical standards expected of it.
Service
5.
A Firm shall carry out its professional work with expedition and with proper regard for
standards of service and customer care expected of it.
A Firm shall have in place the necessary procedures to ensure that all its staff are properly
trained and competent to do their work.
Complaints handling
7.
A Firm shall operate a complaints handling procedure and maintain a complaints log.
The complaints handling procedure must include an Alternative Dispute Resolution (ADR)
mechanism that is approved by the Regulatory Board.
Clients money
8.
A Firm shall preserve the security of clients money entrusted to its care in the course of
its practice or business.
A Firm shall ensure that all previous and current professional work is covered by adequate
and appropriate professional indemnity insurance cover which meets standards approved
by the Regulatory Board.
05
Regulation
A Firm shall promote its professional services only in a truthful and responsible manner.
Solvency
11. A Firm shall ensure that its finances are managed appropriately.
Arrangements to cover the incapacity or death of a sole practitioner
12. A Firm which has a sole principal (i.e. a sole practitioner or a sole director in a corporate
practice) shall have in place appropriate arrangements in the event of that sole principals
death or incapacity or other extended absences.
Use of designations
13. A Firm registered for regulation must display on its business literature, in accordance with
the Regulatory Boards published policy on designations, a designation to denote that it is
regulated by RICS.
Information to RICS
14. A Firm shall submit in a timely manner such information about its activities, and in such
form, as the Regulatory Board may reasonably require.
Co-operation
15. A Firm shall co-operate fully with RICS staff and any person appointed by the
Regulatory Board.
06
Regulation
RICS HQ
Parliament Square
London SW1P 3AD
United Kingdom
Worldwide media
enquiries:
E pressoffice@rics.org
Contact Centre:
E contactrics@rics.org
T +44 (0)870 333 1600
F +44 (0)20 7334 3811
Europe
(excluding
United Kingdom)
Rue Ducale 67
1000 Brussels
Belgium
Asia
Room 2203
Hopewell Centre
183 Queens Road East
Wanchai
Hong Kong
Americas
60 East 42nd Street
Suite 2918
New York, NY 10165
USA
Oceania
Suite 2, Level 16
1 Castlereagh Street
Sydney
NSW 2000
Australia
T +32 2 733 10 19
F +32 2 742 97 48
ricseurope@rics.org
United Kingdom
Parliament Square
London SW1P 3AD
United Kingdom
Africa
PO Box 3400
Witkoppen 2068
South Africa
Middle East
Office F07, Block 11
Dubai Knowledge Village
Dubai
United Arab Emirates
India
48 & 49 Centrum Plaza
Sector Road
Sector 53, Gurgaon 122002
India
Professional ethics
Appendix B:
RICS: Rules of Conduct for Members 2007
Version 4
Please turn overleaf for Appendix B.
Regulation
RULES OF
CONDUCT FOR MEMBERS
04 JUNE 2007
VERSION 4
WITH EFFECT FROM 01 JANUARY 2011
RULES
Regulation
Foreword
The Rules of Conduct for Members apply to all members worldwide. They cover those matters
for which individual members are responsible and accountable in their professional lives.
The rules focus on our regulatory goals and adopt the five principles of better regulation:
Proportionality
Accountability
Consistency
Targeting
Transparency
For members requiring further guidance, we have prepared a series of help sheets on different
aspects of the rules. These can be found at www.rics.org/regulation.
These Rules provide a strong foundation for RICS and its members, helping to protect the
public and uphold the reputation of the profession.
Eve Salomon
Chair
Regulatory Board
James M Allan
Honorary Secretary
03
Regulation
These Rules of Conduct for Members of RICS are made by the Regulatory Board of the Royal
Institution of Chartered Surveyors (RICS) under Article 18 of the Supplemental Charter 1973
and Bye-Law 5 of RICS Bye-Laws. Version 4 of these Rules shall apply from 01 January 2011.
Scope
These Rules set out the standards of professional conduct and practice expected of Members
of RICS. These Rules do not repeat obligations placed on Members by the general law, for
example in the areas of discrimination and employment.
Not every shortcoming on the part of a Member, nor failure to comply with these Rules, will
necessarily give rise to disciplinary proceedings. However, a failure to follow any guidance
associated with the Rules is a factor that will be considered should it be necessary to examine
the behaviour of a Member. In such circumstances a Member may be asked to justify the steps
they took and this may be taken into account. A Member should be guided as much by the
spirit of the Rules as by the express terms.
Part I General
Interpretation
1.
In these Rules, unless the context otherwise requires, Member means a Chartered Member,
non-Chartered Member, Honorary Member or a member of the attached classes.
Communication
2.
04
Members shall at all times act with integrity and avoid conflicts of interest and avoid
any actions or situations that are inconsistent with their professional obligations.
Competence
4.
Members shall carry out their professional work with due skill, care and diligence and
with proper regard for the technical standards expected of them.
Service
5.
Members shall carry out their professional work in a timely manner and with proper
regard for standards of service and customer care expected of them.
Members shall plan, undertake, record and evaluate appropriate continuing professional
development and, on request, provide RICS with evidence that they have done so.
Solvency
7.
Members shall ensure that their personal and professional finances are
managed appropriately.
Information to RICS
8.
Members shall submit in a timely manner such information, and in such form,
as the Regulatory Board may reasonably require.
Co-operation
9.
Members shall co-operate fully with RICS staff and any person appointed by
the Regulatory Board.
05
Regulation
RICS HQ
Parliament Square
London SW1P 3AD
United Kingdom
Worldwide media
enquiries:
E pressoffice@rics.org
Contact Centre:
E contactrics@rics.org
T +44 (0)870 333 1600
F +44 (0)20 7334 3811
Europe
(excluding
United Kingdom)
Rue Ducale 67
1000 Brussels
Belgium
Asia
Room 1804
Hopewell Centre
183 Queens Road East
Wanchai
Hong Kong
Americas
60 East 42nd Street
Suite 2918
New York, NY 10165
USA
Oceania
Suite 2, Level 16
1 Castlereagh Street
Sydney
NSW 2000
Australia
T +32 2 733 10 19
F +32 2 742 97 48
ricseurope@rics.org
United Kingdom
Parliament Square
London SW1P 3AD
United Kingdom
Africa
PO Box 3400
Witkoppen 2068
South Africa
Middle East
Office F07, Block 11
Dubai Knowledge Village
Dubai
United Arab Emirates
India
48 & 49 Centrum Plaza
Sector Road
Sector 53, Gurgaon 122002
India
Professional ethics
Appendix C:
Professional ethics guidance note: Part 1
introduction
Please turn overleaf for Appendix C.
Regulation
MAINTAINING PROFESSIONAL
AND ETHICAL STANDARDS
01 APRIL 2010
Regulation
It is our view that by applying the following set of standards, in their professional and personal
life, members and RICS regulated firms would meet the high standards of behaviour expected
of them, particularly under the following Bye-Laws and Rules:
Bye-Law 5.2.1:
Every Member shall conduct himself in a manner befitting membership of RICS.
Rule 3 of the Rules of Conduct for Members:
Members shall at all times act with integrity and avoid conflicts of interest and avoid any actions
or situations that are inconsistent with their professional obligations.
Rule 3 of the Rules of Conduct for Firms:
A Firm shall at all times act with integrity and avoid conflicts of interest and avoid any actions or
situations that are inconsistent with its professional obligations.
Core values
Act honourably
1
Never put your own gain above the welfare of your clients or others to whom you have a
professional responsibility. Always consider the wider interests of society in your
judgements.
Share the full facts with your clients, making things as plain and intelligible as possible.
Take full responsibility for your actions and dont blame others if things go wrong.
Be aware of the limits of your competence and dont be tempted to work beyond these.
Never commit to more than you can deliver.
Give clear and appropriate advice. Never let sentiments or your own interests cloud your
judgement.
02
Regulation
Remember that both your public and private behaviour could affect your own, RICS and
other members reputations.
Home Inspectors
03
Regulation
Continue to adopt an effective procedure for handling complaints which were made to the
firm prior to it ceasing to trade/becoming unregulated by RICS.
Clients money
2
On ceasing to trade ensure that the security of clients money is preserved until all
monies have been distributed. In the event of a firm becoming un-regulated by RICS
inform your clients that the monies are no longer covered by the RICS Clients Money
Protection Scheme.
Maintain run-off cover for a minimum period of six years. This ensures you are not exposed
to claims during the period following ceasing to trade or becoming unregulated by RICS.
It is advisable to contact your broker for more detailed advice
Further information
Contact us on 020 7695 1670 if have further questions or email regulation@rics.org.
Additional help sheets and other guidance material can be found at www.rics.org/regulation.
04
rics.org
Regulation
RICS HQ
Worldwide media
enquiries:
E pressoffice@rics.org
Contact Centre:
E contactrics@rics.org
T +44 (0)870 333 1600
F +44 (0)20 7334 3811
Europe
Asia
Room 1804
Hopewell Centre
183 Queens Road East
Wanchai
Hong Kong
Americas
The Lincoln Building
60 East 42nd Street
Suite 2918
New York, NY 10165
USA
Oceania
Suite 2, Level 16
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Professional ethics
Appendix D:
Professional ethics guidance note: Part 2 case
studies
Please turn overleaf for Appendix D.
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