Feb 6

Feb 6 Ethics in Business

Ethics vs. Morality, or Both Together?

My Grandma used to say: “It takes all kinds to make a world” and she always said it when she was exasperated with people. Over time I think I have met almost every “type” of person in the real estate world - some very good, some not so much. The business jungle is filled with carnivores, but thankfully there are rules.

Existing laws governing ethical practices in real estate, general business activity and professional licensing exist of course, but knowledge of them and caring enough to fully comply can be a different matter. Being on the good side of the law is proper ethical behavior, but then there are the situations where I am right by the rules, but morally conflicted. Humm….what to do?

A real-life example:

An area I developed in for years had granite rock layers, sub-surface. Unfortunately, granite sometimes contains naturally occurring arsenic, a water soluble and highly toxic element that has been associated with multiple types of cancer with long term exposure at even minute levels. My state Department of Ecology was well-aware of the local arsenic potential and had set up very stringent guidelines for testing and approval of well water for household use. One of the many inorganic solutes that required testing was the amount of arsenic drawn from a well intended to be used to supply potable household water, i.e., drinking water.

Follow along closely:

Arsenic is measured in PPM (parts per million) and at the time anything less than 50 PPM of arsenic was considered safe for household use. But wouldn’t you know it, the state had proposed doubling the safety factor, planning to reduce the allowable amount of arsenic down to 25 PPM. They had given us advance notice of the proposed change and I was still in the time period where 50 PPM was going to be ok for a few months.

The Problem:

Meanwhile, I had to supply individual potable water hookups for 6 lots that were stuck way out on the far edge of a much bigger project and separated from it by a big chunk of dedicated open space. My choice was to drill individual wells on each of the 6 lots, or run a long PUD waterline to them, curving along the edge of the open space. The PUD line was way more expensive, so I decided to dig two test wells on the far lots, Lot 1 and Lot 6, to get an idea about how much arsenic, if any, might be in the immediate area.

Luckily, both test wells turned out to be below what was the maximum allowable arsenic level. I forget the exact measurements, but they were somewhere in the mid 30’s in PPM. This was less arsenic than the current allowable standard of 50 PPM, but more arsenic than would be allowed under the new standards of 25 PPM that were proposed to be put in place soon.

Morals Put to The Test:

It looked like I could get away with digging the individual wells and closing the lots with a builder that I had lined up. He would have time to get building permits before the change. That’s what he wanted to do for sure and he had zero problem with the future decrease in allowable arsenic, as long as it was legal right now. He didn’t care about the future change or its possible long-term effects, yet because the current rules allowed it his position was ethically solid.

I was more conflicted on the moral side. The future residents would be moving into starter and step up homes. Homes for families with kids. I had 2 kids at home at the time and I was just picturing what the arsenic could do to the future residents, both young and old, with prolonged exposure. I talked to some water experts and discovered that filtration was possible, but the systems were costly and very maintenance intensive. I didn’t feel good about some lazy homeowner complying in the real world and could just visualize a situation where the system wouldn’t be serviced for years, if ever. The state wasn’t geared for enforcing it at the single family home level since it would be an individual well servicing a single dwelling unit. Too much for them to keep up on. In other words, it was up to the homeowner.

What’s My Part?

I am not a saint and I have made plenty of mistakes in my life. I feel the worst guilt when I see the hurt on the face of someone that I caused through moral laxity. Just the same, it would have been pretty easy to rationalize the whole thing by telling myself that I was selling to the builder and he was selling to the future owners. As long as I disclosed everything I knew to the builder on the Vacant Land Disclosure Statement, I would be ethically clean of anything having to do with the eventual homeowners … and legal to boot. Future disclosures to potential homeowners were up to him.

But, I just couldn’t do it.

The project had a single investor and he was a sober and principled man. I told him the whole story and that I had decided if he wanted to drill individual wells, he would have to do it himself. He had made a ton of money on the earlier phases, so he was in a pretty good mood about the project, but he didn’t go along with me for that reason. His reason was similar to mine: We both knew more of just about everything than a typical homeowner would know and neither one of us felt right about knowing the change was coming and sliding by on the current rules. Rules that were proposed to be changed for a good reason, based on real science. It cost us about $60 grand more to run the PUD line than drilling the wells, but it still felt better in the end.

You might say: “What a Dope!”

Some might figure that so long as you are legally covered then the rest is caveat emptor (buyer beware). Maybe so, but that’s not me and it felt better knowing that no amount of arsenic was going to wind up in the baby formula of some unsuspecting mother whose husband was too lazy and stupid to maintain an essential filtration system.

If another developer would have made a different decision I don’t judge him as long as he follows the law, but I have to be able to look in the mirror in the morning and be reasonably happy with myself. That’s what it took in this case.

I always try to remember that my business actions today can have cascading consequences on the lives of others. These consequences are not always immediately known, but if I take good care of others through ethical business practices blended with my own moral principals, I’ll also be taking good care of myself. That’s worth remembering for me because guilt is hell to live with.