The ethical status of an organisation refers to the extent to which ethics is practiced by its people both internally and relative to external stakeholders. People who interact with an organisation, such as employees, customers, suppliers or investors, assess the ethical status informally all the time. They base their conclusions on various sources of information, such as press reports, what employees say about the company and its leaders, how customers, suppliers and other stakeholder groups are treated, and on gaps between what is said versus what is done in practice.

Their opinion about the ethics of the organisation may rest on a combination of experiences and perceptions, but it represents the reality on which they will act. A positive view offers many benefits, while a negative view can be damaging on many fronts: for corporate reputations, for brand equity, for customer retention, or even for the on-going operation of the business (the latter illustrated by the impact of the ethical scandal associated with Wendy Machanik).

Although not recognised to the same extent, an industry also has an ethical status. This is made up of the ethical behaviour - or lack thereof - of all the member companies and their people.

Within the commercial property industry businessman Roux Shabangu’s business dealings are relevant examples. His R137m lease with the Independent Complaints Directorate is reportedly at a grossly inflated rental. The Public Protector, Thuli Madonsela, also found that the leases for new police headquarters in Pretoria and Durban, involving Shabangu, were unlawful and amounted to maladministration. Shabangu’s defence against the probe exposed that many lease agreements with the Department of Public Works were concluded without a tender process. The consequences of this saga within the public sector have been significant: The Public Works Minister, Gwen Mahlangu-Nkabinde, was dismissed and the National Police Commissioner, General Bheki Cele, was suspended pending the outcome of an investigation. Deflecting these incidents as being confined to the public sector misses the point that, irrespective of whom the landlord or the tenant is, this still reflects on the commercial property industry.

Managing an industry’s ethical status is more difficult than for a single organisation. It warrants the attention of industry bodies, not only to avoid the costs associated with a negative ethical status, but also to gain the benefits of a sound ethical status. There are many initiatives which would support this goal, among them the following:

• Articulating the ethical goals of the industry and formulating a supporting ethics strategy to ensure that ethics serves as an industry asset rather than a liability. This can include, for example, the development of a common ethics policy.

• Actively promoting the importance of ethics and the value of proactively managing ethics among member companies. Ethics should be viewed as a source of competitive advantage, and building ethical capital should be a corporate goal. Ethics should not be addressed reactively, after a problem has arisen. It should be regularly measured and monitored using an ethics survey such as the Ethics Monitor.

• Encouraging industry leaders to openly support ethical business practices. This is especially relevant given that leadership is widely regarded as the factor which influences ethics the most. Leaders effectively “teach” their followers and other observers and stakeholders what is right or wrong and acceptable or unacceptable by what they say and do - and by what they don’t speak out or act against.

• Creating greater awareness of the values that are associated with the industry. Values are a key determinant of ethics – but it is the values that are lived and demonstrated, not the espoused values, that are most impactful. Fairness would be one of the applicable values for the property industry, which should translate into fair rentals and reasonable increases. It should not be necessary for the Constitutional Court to protect tenants against excessive rental increases as in the March ruling for a residential property.

• Monitoring the extent to which your industry respects and supports a triple bottom line approach (encompassing economic, social and environmental goals). This approach has continued to gain recognition as a sustainable approach to business and to gain ground as a growing societal expectation. Property developers are likely to face this challenge as regards environmental concerns, where the competing demands between development and conservation create difficult choices and lend themselves to a negative outcome if not managed well.

These issues can provide insight into your industry’s ethical status. The value in this is to see the industry as others do and to serve as a starting point for further ethical development. The fact that the commercial property industry may appear to be more ethical than, for example, the auction industry, is neither reason for self-congratulations nor grounds for complacency. It should instead prompt action to consolidate and maintain a sound ethical status.

By Cynthia Schoeman
Published in the South African Property Review, a SAPOA publication, May 2012