Best Practices Ethics Report #10 PDF

REPORT #10 Ethics 2014_BestPractices_Covers.indd 10 9/9/14 2:30 PM  best practices R E P O R T #1 0 Ethics...

REPORT #10 Ethics 2014_BestPractices_Covers.indd 10 9/9/14 2:30 PM  best practices R E P O R T #1 0 Ethics Published by the Foundation for Community Association Research BP10_Ethics_layout_CC.indd 1 9/9/14 2:09 PM  Acknowledgments The Foundation for Community Association Research gratefully acknowledges the follow- ing individuals and groups for their support of and contribution to this survey. Without their donations of time and expertise, this publication would not have been possible. Contributors Foundation Board of Directors, 2013–2014 Sandra K. Denton, cmca, lsm, pcam, Missouri City, TX President Debra Warren, cmca, pcam, San Rafael, CA James H. Dodson, IV, cmca, ams, pcam, Ewa Beach, HI President Elect Lynn Voorhees, rs, Farmingdale, NJ John Hammersmith, cmca, ams, pcam, Greenwood Vice President Elise V. Saadi, esq., Chandler, AZ Village, CO Treasurer Kathy Beaulne, ams, pcam, Missouri City, TX Sandra Matteson-Pierson, lsm, pcam, Sandestin, FL Secretary Brenda Harrington, Reston, VA Edward D. Thomas, cmca, ams, pcam, Frederick, MD Immediate Past President Sandra K. Denton, cmca, lsm, Debra A. Warren, cmca, pcam, San Rafael, CA pcam, Missouri City, TX Peer Review Committee Philip Adams, cmca, pcam, Richmond, VA James H. Dodson, IV, cmca, ams, pcam, Ewa Beach, HI Tyler P. Berding, esq., Walnut Creek, CA Marc D. Markel, esq., Houston, TX Lynn Boergerhoff, Lakeville, MN Jack McGrath, Colts Neck, NJ Kathryn C. Danella, cmca, lsm, pcam, Boca Raton, FL Skip Daum, Granite Bay, CA James H. Dodson, IV, cmca, ams, pcam, Ewa Beach, HI Malchiel Raj Doraisamy, Sarasota, FL Christine Danielson Isham, Finleyville, PA Jack McGrath, Colts Neck, NJ Joseph P. Waldron, ams, pcam, cirms, Nashville, TN Staff Thomas M. Skiba, cae, CEO David Jennings, cae, sphr, Executive Director Jake Gold, cae, Director of Programs Copyright and Use Permission ©Copyright 2014. Foundation for Community Association Research. 6402 Arlington Blvd., Suite 500 Falls Church, VA 22042 Readers are encouraged to download and reproduce the Best Practices Reports for community association managers, board members, individual homeowners, and community association-related industry professionals without permission of the Foundation for Community Association Research provided the following terms are met: this document must be reproduced in its entirety including the use permission statement; and this document may not be added to, modified, amended, or otherwise altered from the original as presented here. Readers and users agree not to sell copies of this document or otherwise seek compensation for its distribution. “This document is designed to provide accurate and authoritative information in regard to the subject matter covered. It is provided with the understanding that the publisher is not engaged in rendering legal, accounting or other professional services. If legal or expert advice is required, the services of a competent professional should be sought.”—From a Declaration of Principles, jointly adopted by a Committee of the American Bar Association and a Committee of Publishers. ISBN 978-0-941301-80-0 BP10_Ethics_layout_CC.indd 2 9/9/14 2:09 PM  E T H I C S best practices Community Associations Institute (CAI) and the Foundation for Community Association Research are dedi- cated to conducting research and acting as a clearinghouse for information on innovations and best practices in community association creation and management. What are Best Practices? The Foundation for Community Association Research is proud to offer function-specific Best Practices Reports in the community association industry. Using a variety of sources including, but not limited to, recommendations from industry experts and various indus- try-related publications, the Foundation has developed best practices in select topic areas. The outcomes of the Best Practices project include: Documented criteria for function-specific best practices Case studies of community associations that have demonstrated success A showcase of community excellence The benefits of benchmarking and developing best practices abound—improving quality, setting high performance targets and proving that it’s possible to reach them, strengthening cost positions, developing innovative approaches to operating and man- aging practices, accelerating culture change by making organizations look outward rather than inward, and bringing accountability to those organizations. The Foundation’s entire catalog of Best Practices Reports is available at www.cairf.org as a free download and for sale in print from CAI’s bookstore at www.caionline.org/shop. BP10_Ethics_layout_CC.indd 3 9/9/14 2:09 PM  best practices Contents Introduction.....................................................................................................................1 What Is Ethics?...........................................................................................................1 What Is Business Ethics?.............................................................................................1 Section 1. Developing a Code of Ethics for Your Organization.....................................2 Process for Developing a Code of Ethics...................................................................2 Section 2. Managing Ethics in the Workplace................................................................5 Ten Benefits of Managing Ethics in the Workplace...................................................6 Enforcement Process and Protocol.............................................................................8 Section 3. CAI’s Ethical Framework...............................................................................10 Professional Manager Code of Ethics.......................................................................10 Professional Reserve Specialist (RS) Code of Ethics................................................12 Reserve Specialist (RS) Code Clarification Document............................................13 Community Insurance & Risk Management Specialist (CIRMS) Code of Ethics....15 CIRMS Code Clarification Document.....................................................................16 Code of Ethics Enforcement Procedures for Community Associations Institute’s Designation Ethics Committee............................................................................17 Model Code of Ethics for Community Association Board Members.......................28 Section 4. Unethical Conduct.......................................................................................29 Where Can Unethical Conduct Occur?...................................................................29 Ethical Decision Making...........................................................................................30 Case Studies: Ethical Dilemmas................................................................................31 Case 1: Cooper Management..............................................................................31 Case 2: Village Oaks Master Planned Community.............................................32 Case 3: Oakridge Office Condominiums............................................................34 Case 4: Green Management—Maggie Clark......................................................35 Section 5. Best Practices Ethics Survey.........................................................................37 Section 6. Best Practices – Solutions.............................................................................42 Ewa by Gentry Policy Resolution: Code of Ethics for Board and Committee Members...............................................................................................................42 Hammersmith Management Company Code of Business Conduct and Ethics.......48 Additional Resources......................................................................................................54 About the Foundation for Community Association Research.......................................55 About Community Associations Institute (CAI)...........................................................55 BP10_Ethics_layout_CC.indd 4 9/9/14 2:09 PM  E T H I C S Introduction Before we discuss ethics for community associations and the professionals and homeown- er volunteers who support them, it is important to put forth some common, universally agreed-upon definitions. They can be found in the Complete Guide to Ethics Management: An Ethics Toolkit for Managers (© Carter McNamara, MBA, PhD, Authenticity Consulting, LLC). What Is Ethics? Simply put, when someone is employing ethics, he or she recognizes what is right and what is wrong and is choosing to do the right thing; however, as a great deal of business ethics literature will attest, “the right thing” is not always straightforward. For example, most ethical dilemmas in the workplace are not simply questions of “Should Bob steal from Jack?” or “Should Jack lie to his boss?” Philosophers have been debating ethics for at least 2,500 years, since the time of Socrates and Plato. Many ethicists consider today’s emerging ethical beliefs to be tomor- row’s laws, regulations or rules. Values that guide how we ought to behave are consid- ered moral values—respect, honesty, fairness, responsibility, etc. Statements around how these values are applied are sometimes called moral or ethical principles. What Is Business Ethics? The concept has come to mean various things to various people, but, generally, it’s com- ing to know what is right or wrong in the workplace and doing what’s right—usually in regard to products and services and to relationships with stakeholders. In times of funda- mental change, values that were once followed inherently are now strongly questioned or no longer followed. Consequently, there is no clear moral compass to guide leaders through complex workplace dilemmas. Attention to ethics in the workplace sensitizes leaders and staff to how they should act. Perhaps most important, in times of crises and confusion, attention to business ethics helps ensure that when leaders and managers are struggling, they can retain a strong moral compass. However, applying business ethics offers numerous other benefits, as well (see page 6). As young children, many of us learned The Golden Rule: treat others as you would like to be treated. This universal ethical standard has been found in historical and reli- gious writings in every culture. The challenge in business comes with the acknowledg- ment that the stakes are often high—we are competitive and we want to win. So, the questions we must ask ourselves are: How do we want to be treated? Do we have the will to follow The Golden Rule? This publication offers guidance on how to create and implement tools and poli- cies to ensure that ethical behavior is clearly defined and that consistent practices are employed in your workplace. 1 BP10_Ethics_layout_CC.indd 1 9/9/14 2:09 PM  SECTION 1 Developing a Code of Ethics for Your Organization Process for Developing a Code of Ethics How do you develop a corporate code of ethics? There are four steps: 1. Developing a Value Statement 2. Drafting the Code of Ethics 3. Reviewing and Adopting the Code of Ethics 4. Communicating and Training To create the most comprehensive and complete policy, your development team should include all levels of the organization, as the proposed code of ethics will ulti- mately be reviewed by all staffers (and the board of directors, where applicable) as well as the institution’s attorney. Here are some key factors to consider when developing a corporate code of ethics. Your values should adhere to relevant laws and regulations. This ensures that your organization is not in danger of breaking any of them. Review which values produce the top three or four traits of a highly ethical and successful product or service in your area. For example, for accountants those traits would be objectivity, confidentiality, accuracy, etc. Identify values needed to address current issues in your workplace. Appoint one or two people to interview key staff in order to gather descriptions of major issues in the workplace. Collect descriptions of behaviors that produce the issues. Consider which of these issues is ethical in nature—e.g., those related to respect, fairness, and honesty. Identify the behaviors needed to resolve these issues and which values would generate those preferred behaviors. Included here may be values that some people would not deem as moral or ethical—e.g., team building and promptness—but for managers, these practical values may add more relevance and utility to a code of ethics. Identify any values needed based on findings during strategic planning. Review infor- mation from your SWOT (strengths, weaknesses, opportunities and threats) analysis. What behaviors are needed to build on strengths, shore up weaknesses, take advantage of opportunities and guard against threats? 2 BP10_Ethics_layout_CC.indd 2 9/9/14 2:09 PM  E T H I C S Consider any top ethical values that might be prized by stakeholders. For example, consider expectations of employees, clients/customers, suppliers, funders, members of the local community, etc. Collect from the above steps the top five to ten ethical values that are high priori- ties in your organization. Examples might include: 1. Trustworthiness: honesty, integrity, promise-keeping, loyalty 2. Respect: autonomy, privacy, dignity, courtesy, tolerance, acceptance 3. Responsibility: accountability, pursuit of excellence 4. Caring: compassion, consideration, giving, sharing, kindness, loving 5. Justice and fairness: procedural fairness, impartiality, consistency, equity, equality, due process 6. Civic virtue and citizenship: law-abiding, community service, protection of environment These are also known as the “Six Pillars of Character,” developed by The Josephson Institute of Ethics. Compose your code of ethics; attempt to associate at least two examples of behav- iors that reflect each value. Critics of codes of ethics assert that they seem vacuous because many only list ethical values and don’t clarify these values by associating examples of behaviors. Include wording to indicate that all employees are expected to conform to the values stated in the code of ethics, and specify where employees can go if they have any questions about the code. Obtain review from as many key members of the organization as possible. Announce and distribute the new code of ethics (unless you are waiting to announce it along with any new codes of conduct and associated policies and procedures). Ensure that each employee has a copy and post the docu- ment in appropriate public places throughout the facility. Update the code at least once a year. Almost more important than the code itself is its rolling development: continued dialogue and reflection around ethical values produce ethical sensitivity and consensus. Therefore, revisit your codes at least once a year—and include a general review of important provisions two or three times a year. Note that you cannot include values and preferred behaviors for every possible ethical dilemma that might arise. Your goal is to focus on the top ethical values needed in your organization and to avoid potential ethical dilemmas that seem mostly likely to occur. 3 BP10_Ethics_layout_CC.indd 3 9/9/14 2:09 PM  Depending on your particular role—community manager, board member or CEO of a management company or business partner—the process you undertake for reviewing, drafting, adopting and communicating a code of ethics will differ slightly. Here are some general guidelines for each role. Board Members The code of ethics for a board should be developed as a collaborative effort with all board members and the community manager. Once this group has agreed upon the general content, the board’s counsel should review it prior to its adoption. When associations conduct their annual board elections, this code should be pro- vided to candidates so they understand what is expected of board members. The full board, including any new members, should review and discuss the code of ethics annually; ideally, each board member signs a commitment to adhere to the code. This could be done as part of the annual board member orientation. Throughout the year, the board should also receive reminders of their obligations to abide by the code of ethics. Management Company CEO The code of ethics for your company should embrace the culture and philosophy you desire. Consideration should also be given to the various codes required when certified by CAI as a manager (CMCA, AMS, PCAM, LSM) and management company (AAMC). Typically, a code of ethics for a company will become part of the employee hand- book. Each employee should be asked to sign the acknowledgment page in the hand- book upon employment; however, communication should not stop here. Employees should be reminded of the code of ethics at staff meetings throughout the year and—most important—in advance of the holiday season, when gift giving by vendors is commonplace. CEOs should also advise their boards and key business partners of the company’s code. Before a company adopts a code of ethics it should consult with an employment attorney to be sure that the code does not create any employment issues for the company. Community Manager Employed by Association In cases where the community manager and other employees are employed directly by the association, the process and education are the same as that of a management company CEO. 4 BP10_Ethics_layout_CC.indd 4 9/9/14 2:09 PM  E T H I C S SECTION 2 Managing Ethics in the Workplace Codes of ethical conduct need to be active policy documents, developed and nurtured by all staff and personnel, in order to create an ethical culture within an organization. For a code to have true meaning and full buy-in, it cannot be a set of rules or guidelines handed down from above: everyone within the organization—not just senior manage- ment—must be a part of the implementation process. Implementing a code of ethics in the workplace should be accomplished by a col- laborative group, with each member having his or her own responsibilities. Here are some of the key staff roles: CEO: If your CEO isn’t fully behind the creation and continued promotion of your ethics policy, then your employees will know it. The CEO should be the champion of your ethics program. In most organizations, he or she will announce the program and back its development. Most important, he or she needs to lead from a clear understand- ing of what the company has determined is ethical behavior. An ethics committee, composed of a wide range of staffers, reviews and promotes the quality and usefulness of the workplace code—not their own personal codes of behavior. This committee promotes ethics policies and determines if an ethics issue or violation needs to be addressed. A clear understanding of the importance of this group needs to be made by the CEO or leader. An ethics administrator: Some organizations actually appoint an ethics administrator who can be used as a sounding board or a resource for staffers to determine whether an ethics violation has taken place. This person may or may not be part of your human resource staff but should have a working knowledge of your personnel manual and code of conduct. Ethics officer: This position is held by a trained employee within your organization, and his or her role is to take on ethics violations. It is important for this officer to have hands-on contact with the various departments within your organization. Ombudsman: This person is considered an impartial intermediary in regard to a violation, and employees can go to him or her with any concerns or questions they may have on ethical issues. Typically, this person is not in a supervisory position. An ongoing role of your ethics committee is it to promote the code of conduct within your organization. Some possible promotional strategies are listed below. Attach a copy of the code of conduct to new hires’ offer letters so that new employ- ees are familiar with the code from the very first day. Distribute newsletters and discuss ethical issues at every employee meeting. Prepare posters that present ethical dilemmas that employees may find themselves in—and what to do if this happens. Ensure that contractors and business partners are aware of your policies as well. Active engagement with them should help deter such potential issues as gratuities and gifts for awarding of contracts. 5 BP10_Ethics_layout_CC.indd 5 9/9/14 2:09 PM  Give your staff practical examples of the type of behaviors you are seeking to avoid. Continually encourage positive behavior and practices to ensure that all employees are aware of company policies. Ten Benefits of Managing Ethics in the Workplace Many people are aware of the moral benefits of business ethics, but there are other ben- efits as well. The following list from Carter McNamara’s Complete Guide to Ethics Management: An Ethics Toolkit for Managers describes various types of benefits that come from managing ethics in the workplace. 1. Attention to business ethics has substantially improved society. Only decades ago, children in our country worked 16-hour days, and disabled workers were condemned to poverty and often starvation. Trusts controlled some markets to the extent that prices were fixed and small businesses choked out. Employees were unfairly termi- nated for frivolous and unjust reasons, and influence was applied through intimida- tion and harassment. Then society reacted and demanded that businesses place high value on fairness and equal rights. Anti-trust laws were instituted. Government agen- cies were established. Unions were organized, and employment laws and regulations were established. 2. Ethics programs help maintain a moral course in turbulent times. Business ethics are critical during times of fundamental change—times much like those faced now by businesses, both non- and for-profit. During such times, there is often no clear moral compass to guide leaders about what is right and wrong. Continued attention to workplace ethics increases awareness for leaders and staff on how they should act—consistently. 3. Ethics programs cultivate strong teamwork and productivity. Ethics programs align employee behaviors with those top-priority ethical values preferred by the organization’s leaders. Usually, an organization finds surprising disparity between its preferred values and the values actually reflected by behaviors in the workplace. Ongoing attention and dialogue about values in the workplace build openness, integrity, and community—critical ingredients of strong teams. Employees feel durable alignment between their values and those of the organization and react with better motivation and performance. 4. Ethics programs support employee growth and meaning. Attention to workplace ethics helps employees deal with situations—both good and bad—in the organization and in their private lives. Employees can better deal with whatever comes their way. 5. Ethics programs are a type of insurance policy—they help ensure that policies are legal. An increasing number of lawsuits pertain to personnel matters and to the effects an organization’s services or products have on stakeholders. As mentioned earlier, ethical principles often predate legal decisions: the principles are often applied to current, major ethical issues that later become legislation. A workplace that pays attention to ethics ensures that it has highly ethical policies and proce- dures, and it’s far better to ensure ethical practices now than to incur costs of litiga- tion later. A major intent of well-designed personnel policies is to ensure ethical treatment of employees—for example, in matters of hiring, evaluating, disciplining 6 BP10_Ethics_layout_CC.indd 6 9/9/14 2:09 PM  E T H I C S and firing. Drake and Drake note that “an employer can be subject to suit for breach of contract for failure to comply with any promise it made, so the gap between stated corporate culture and actual practice has significant legal, as well as ethical, implica- tions” (California Management Review, V16, pp. 107–123). 6. Ethics programs help avoid criminal acts “of omission” and can lower fines. Ethics programs tend to detect ethical issues and violations early on so they can be reported or addressed. In some cases, if an organization is aware of an actual or potential viola- tion and does not report it to the appropriate authorities, then this inaction can be considered a criminal act—e.g., in business dealings with certain government agen- cies, such as the Department of Defense. The Federal Sentencing Guidelines specify major penalties for various types of ethics violations; however, the guidelines poten- tially lower fines if an organization has clearly made an effort to operate ethically. 7. Ethics programs help manage values associated with quality management, stra- tegic planning and diversity management—a benefit that deserves far more attention. Ethics programs identify preferred values and ensure that organizational behaviors are aligned with those values. This effort includes recording the values, developing policies and procedures to align behaviors with preferred values and then training all personnel about the policies and procedures. This overall effort is very useful for several other programs in the workplace that require behaviors to be aligned with values, including quality management, strategic planning and diversity management. Total quality management places high priority on certain operating values, e.g., trust among stakeholders, performance, reliability, measurement and feedback. Eastman and Polaroid use ethics tools in their quality programs to ensure integrity in their relationships with stakeholders. Ethics management techniques are highly useful for managing strategic values—e.g., expanding market share and reducing costs. McDonnell Douglas integrates their ethics programs into their stra- tegic planning process. Ethics management programs are also useful in managing diversity. Diversity is about much more than appearance: it’s about acknowledging different values and perspectives. Diversity programs require recognizing and apply- ing diverse values and perspectives—these activities are the basis of a sound ethics management program. 8. Ethics programs promote a strong public image. Admittedly, managing ethics should not be done primarily for reasons of public relations. But, frankly, the fact that an organization regularly gives attention to its ethics sends a strong positive message to the public. People see those organizations as valuing people more than profit, as striving to operate with the utmost of integrity and honor. Aligning behavior with values is critical to effective marketing and public relations programs. Consider how Johnson and Johnson handled the Tylenol crisis versus how Exxon handled the oil spill in Alaska. Bob Dunn, president and CEO of San Francisco–based Business for Social Responsibility, puts it best: “Ethical values, consistently applied, are the cor- nerstones in building a commercially successful and socially responsible business.” 9. Ethics programs have overall benefits to the company. Donaldson and Davis explain in “Business Ethics? Yes, But What Can It Do for the Bottom Line?” (Management Decision, V28, N6, 1990) that managing ethical values in the workplace legitimizes 7 BP10_Ethics_layout_CC.indd 7 9/9/14 2:09 PM  managerial actions, strengthens the coherence and balance of the organization’s cul- ture, improves trust in relationships between individuals and groups, supports greater consistency in standards and qualities of products and cultivates greater sensitivity to the impact of the enterprise’s values and messages. 10. Formal attention to ethics in the workplace is simply the right thing to do. If your organization is quite large—if it includes several large programs or depart- ments—then you may want to develop an overall corporate code of ethics and then a separate code to guide each of your programs or departments. Also note that codes should not be developed out of the human resource or legal departments alone, as is too often done. Codes are insufficient if intended only to ensure that policies are legal. All staff must see the ethics program being driven by top management. Codes of ethics and codes of conduct may be the same in some organizations, depending on the organization’s culture and operations, and on the ultimate level of specificity in the code(s). Enforcement Process and Protocol Regrettably, too many organizations find themselves scrambling when an actual ethical issue surfaces. An ethics program is often established as a result of an ethical action or incident that has occurred. An organization creates an ethical environment by establish- ing policies and practices that ensure all employees are treated ethically and then enforc- ing those policies. With some pre-planning, your organization can establish a process that can cover many of the situations faced daily by your business. The process below details how to file an ethics complaint and offers some general guidelines. How to File a Complaint Alleged ethics violations should be filed on a prepared form that is distributed from your HR office or is included in your employee handbook. This form should include the com- mittee or group to whom the ethics violation form will be addressed. The handbook or form should clearly state how long the employee has to file the complaint (normally, one to 90 days after the violation occurred). Complaints filed after much time has passed are often harder to substantiate, as critical information is lost over time. The primary things the ethical form should have are: Complainant’s name, position, home address, phone number, and e-mail address Name and position of the person who allegedly violated the rule or acted unethically A specific outline of the alleged ethical violations Any evidence, including statements by others or facts that corroborate the specific statement or complaint made The complainant’s signature 8 BP10_Ethics_layout_CC.indd 8 9/9/14 2:09 PM  E T H I C S Evidence: What Constitutes a Violation? Once the ethical violation is received, the committee appointed to review the violation must determine whether there is a violation of the code of conduct. The committee should acknowledge receipt of the ethics violation and then create a timeline as to how long the preliminary inquiry will take. The committee should review the complaint with the following in mind: Is the violation within the scope of the code of ethics agreed upon by your organiza- tion, or is this violation simply bad judgment? The committee may do a preliminary inquiry of the evidence. If sufficient evidence is present, then they may proceed on to a full investigation. If the evidence does not substantiate a full investigation or does not fall within the code of conduct, the complainant should be notified of the inquiry within 30 days of the outcome of the inquiry. This should be done in writing and should outline the findings of the committee (i.e., why they do not believe this is an ethical violation). Ideally, three to five people (depending on the size of your organization) should serve as your ethics committee responsible for determining whether the complaint is a true violation, and, if so, then completing the full investigation. If a full investigation is indicated, a time should be set aside when the committee can hear from not only the complainant but also the accused. Based on the evidence and the accounts from both sides, the committee can then determine their findings. Again, the complainant and the alleged violator should receive something in writing regarding the committee’s decision. Care should be taken to keep all pertinent information and the final decision confidential. Example #1: Mary Roberts goes to her supervisor regarding the work of a coworker, Greg Thomas. Greg uses his company laptop to complete his work, but Mary has seen Greg use that laptop for a course he is taking at night. Mary states that this is against company policy. Upon inves- tigation, the ethics committee reviews the violation and finds that although Greg’s conduct is not in keeping with company policy, it is not an ethics violation. The committee recommends a disciplinary write-up of Greg even though no ethical violation was found. In the end, both Mary and Greg receive a copy of the ethics complaint and are given an update by the com- mittee in writing. Example #2: Tom Richards, a management company executive, needs to grow his business in order to get his bonus each year. He sees that Jake Brown, a manager with another local company, has been successful in bringing in all types of new business for a competing company. Tom offers Jake a salary far exceeding that of his current company as well as additional vacation days and a four-day workweek. Another executive in Tom’s company files a complaint stat- ing that Tom’s incentives to Jake constitute an ethical violation. The committee reviews the company policy and the incentives, and finds that an ethics violation has been committed. The committee’s findings are written up and forwarded on to the owner of Tom’s company. Overall, fairness is a key consideration in ethics violations. If the violation has been treated with fairness and consistency, then all employees will likely respect the decisions made by your committee. 9 BP10_Ethics_layout_CC.indd 9 9/9/14 2:09 PM  SECTION 3 CAI©s Ethical Framework Over the years, Community Associations Institute (CAI) has adopted codes of ethics for its professional and volunteer members. They are included here as the example of the standards that are formally in place today for the community association industry. Professional Manager Code of Ethics The Manager Shall: 1. Comply with current bylaws, standards and practices as may be established from time to time by CAI subject to all federal, state and local laws, ordinances, and regulations in effect where the Manager practices. 2. Participate in continuing professional education through CAI and other industry related organizations. 3. Act in the best interests of the client; refrain from making inaccurate or mislead- ing representations or statements; not knowingly misrepresent facts to benefit the Manager. 4. Undertake only those engagements that they can reasonably expect to perform with professional competence. 5. Exercise due care and perform planning and supervision as specified in the written management agreement, job description or duly adopted Board policies. 6. Disclose all relationships in writing to the client regarding any actual, potential or perceived conflict of interest between the Manager and other vendors. The Manager shall take all necessary steps to avoid any perception of favoritism or impropriety during the vendor selection process and negotiation of any contracts. 7. Provide written disclosure of any compensation, gratuity or other form of remu- neration from individuals or companies who act or may act on behalf of the client. 8. Ensure that homeowners receive timely notice as required by state statutes or legal documents and protect their right of appeal. 9. Disclose to the client the extent of fidelity or other contractually required insur- ance carried on behalf of the Manager and/or client and any subsequent changes in coverage, which occur during the Manager’s engagement if the amount is lower than the contract amount requires. 10. See that the funds held for the client by the Manager are in separate accounts, are not misappropriated, and are returned to the client at the end of the Manager’s engagement; Prepare and furnish to the client accurate and timely financial reports in accordance with the terms of the management agreement, job description or duly adopted Board policies. 10 BP10_Ethics_layout_CC.indd 10 9/9/14 2:09 PM  E T H I C S 11. Recognize the original records, files and books held by the Manager are the prop- erty of the client to be returned to the client at the end of the Manager’s engage- ment; maintain the duty of confidentiality to all current and former clients. 12. Refrain from criticizing competitors or their business practices; Act in the best interests of their Employers; Maintain a professional relationship with our peers and industry related professionals. 13. Conduct themselves in a professional manner at all times when acting in the scope of their employment. 14. Not engage in any form of price fixing, anti-trust, or anti-competition. 15. Not use the work products of colleagues or competing management firms that are considered proprietary without the expressed written permission of the author or the management firm. Compliance with the Professional Manager Code of Ethics is further amplified in the Code Clarification Document provided by CAI. 11 BP10_Ethics_layout_CC.indd 11 9/9/14 2:09 PM  Professional Reserve Specialist (RS) Code of Ethics Revised July 1999 The Reserve Specialist Shall: 1. Comply with current standards or practices as may be established from time to time by CAI and the Reserve Specialist (RS) Designation Review Board. 2. Not make any inaccurate or misleading representations or statements to a prospec- tive client. 3. Undertake only those engagements the Reserve Specialist can reasonably expect to perform with professional competence. 4. Exercise due care and exhibit adequate planning and supervision. 5. Disclose in writing to the client any actual, potential or perceived conflict of inter- est if the client may have dealings with another party in some way related to the Reserve Specialist. 6. Not knowingly misrepresent facts to benefit the Reserve Specialist. 7. Conduct himself or herself in accordance with the Reserve Specialist requirements. 8. Not hold himself or herself out to anyone as being a Reserve Specialist desig- nee until such time as he or she receives written confirmation from the Reserve Specialist Designation Review Board or CAI of receipt of the designation. 9. Abide by the redesignation policy of CAI. Compliance with the Professional Reserve Specialist (RS) Code of Ethics is further amplified in the Code Clarification Document provided by CAI. 12 BP10_Ethics_layout_CC.indd 12 9/9/14 2:09 PM  E T H I C S Reserve Specialist (RS) Code Clarification Document Authority The Code derives its authority from Community Associations Institute (CAI). CAI’s Board of Trustees and the Reserve Specialist Review Board have established a minimum standard of professional ethical performance for those individuals who receive the Reserve Specialist (RS) designations from CAI. Those individuals or entities who have received the professional Reserve Specialist designation (RS) from CAI are subject to this Code. Definitions The Code shall apply in any Reserve Specialist-client relationship where the RS receives some form of compensation for professional services offered or provided to the client. Because the Code is designed to establish a standard of conduct for the Reserve Specialist, it is equally applicable to individuals and firms. An individual who agrees to abide by this Code shall also be responsible to see that any other person or firm under his/her supervision shall comply with the Code. Amplification The following information and examples are provided by CAI to further explain some of the tenets of the Code of Ethics and correspond to the numbered paragraphs in the Code of Ethics: 1. Current standards or practices are those numbered 1 through 8 in the Code. Reserve Specialists who practice in states with legislative requirements for their profession must comply with those laws. 2. Inaccurate or misleading representations are oral or written statements made with knowledge of their falsity. 3. Undertake only those engagements the RS can reasonably perform is the essential key here. The Reserve Specialist should not undertake engagements that he or she cannot perform in the required time frame and with professional competence. 4. Adequate planning and supervision. The Reserve Specialist must plan his or her own work and adequately supervise his or her employees’ work so that the work is performed with professional competence. 5. Disclosure of any possible conflict of interest is essential. Disclosure must be in writ- ing and sufficiently in advance of the selection process to allow full consideration of the possible conflicts and any alternatives. The fact that the client may still choose the Reserve Specialist’s related entity is not a violation of the Code, provided ample disclosure was given. Future The Board of Trustees and the Reserve Specialist Designation Review Board may expand application of this Code and reserves the right to update or amend both the Reserve Specialist Code of Ethics and the Code Clarification Document. Any such revision, 13 BP10_Ethics_layout_CC.indd 13 9/9/14 2:09 PM  updating, or amendment shall be promptly promulgated to Reserve Specialist members and, after due notice, will apply to all members subject to the Code. Disciplinary Action After an internal investigation and hearing as provided in CAI’s Ethics Enforcement Procedures Policy, a Reserve Specialist found to be in violation of this Code shall face a sanction in accordance with the enforcement policies adopted by the CAI Board of Trustees. The extent of such sanction shall be commensurate with the nature, severity, and intent of the violation. In a situation where a firm, principal(s), or supervisory staff are involved, sanctions may be imposed on more than one individual or the firm itself. Please answer the following questions. Have you ever been convicted of fraud, misrepresentation, and/or misappropriation of funds or property? If yes, attach a detailed explanation. Yes No Have you ever been subject to disciplinary action by any professional organization? If yes, attach a detailed explanation. Yes No Signature By signing below, I agree to abide by the CAI Professional Reserve Specialist Code of Ethics and to be subject to disciplinary action as adopted by the Board of Trustees. Printed Name Signature Firm Name (if employed by a firm or as a principal or supervisory staff member) Printed Name Signature of an Officer of That Firm Acknowledged before me on this day: Notary Signature Notary Commission Expiration Date 14 BP10_Ethics_layout_CC.indd 14 9/9/14 2:09 PM  E T H I C S Community Insurance & Risk Management Specialist (CIRMS) Code of Ethics December 2002 The Community Insurance & Risk Management Specialist Shall: 1. Comply with current standards or practices as may be established from time to time by CAI. 2. Not make any inaccurate or misleading representations or statements to a prospec- tive client. 3. Undertake only those engagements the Community Insurance and Risk Management Specialist can reasonably expect to perform with professional competence. 4. Exercise due care and exhibit adequate planning and supervision. 5. Strive to establish and maintain dignified and honorable relationships with those whom they serve, with fellow practitioners, and with members of other profes- sions. 6. Obey all laws and regulations, and avoid any conduct or activity which would cause unjust harm to others. 7. Conduct himself or herself in accordance with the Community Insurance and Risk Management requirements. 8. Not hold himself or herself out to anyone as being a Community Insurance & Risk Management Specialist designee until such time as he or she receives written con- firmation from CAI of receipt of the designation. 9. Abide by the redesignation policy of CAI. 10. Assist in improving the public understanding of Insurance and Risk Management. Compliance with the Community Insurance & Risk Management Specialist (CIRMS) Code of Ethics is further amplified in the Code Clarification Document provided by CAI. 15 BP10_Ethics_layout_CC.indd 15 9/9/14 2:09 PM  CIRMS Code Clarification Document Authority The Code derives its authority from Community Associations Institute (CAI). CAI’s Board of Trustees has established a minimum standard of professional ethical perfor- mance for those individuals who receive the Community Insurance & Risk Management Specialist (CIRMS) designation from CAI. Those individuals who have received the Community Insurance & Risk Management Specialist (CIRMS) from CAI are subject to this Code. Definitions The Code shall apply in any client relationship where the CIRMS receives some form of compensation for professional services offered or provided to the client. Because the Code is designed to establish a standard of conduct for the Community Insurance & Risk Management Specialist, it is equally applicable to individuals and firms. An individual who agrees to abide by this Code shall also be responsible to see that any other person or firm under his or her supervision shall comply with the Code. Future The Board of Trustees may expand application of this Code and reserves the right to update or amend both the Code of Ethics and the Code Clarification Document. Any such revision, updating, or amendment shall be promptly promulgated to Community Insurance & Risk Management Specialist (CIRMS) members and, after due notice, will apply to all members subject to the Code. Disciplinary Action After an internal investigation and hearing as provided in CAI’s Ethics Enforcement Procedures Policy, a Community Insurance & Risk Management Specialist (CIRMS) found to be in violation of this Code shall face a sanction in accordance with the enforce- ment policies adopted by the CAI Board of Trustees. The extent of such sanction shall be commensurate with the nature, severity, and intent of the violation. In a situation where a firm, principal(s), or supervisory staff are involved, sanctions may be imposed on more than one individual or the firm itself. 16 BP10_Ethics_layout_CC.indd 16 9/9/14 2:09 PM  E T H I C S Code of Ethics Enforcement Procedures for Community Associations Institute’s Designation Ethics Committee Adopted by Board of Trustees 5/6/95 Revisions Approved by Board of Trustees 10/24/13 A. Scope These Procedures apply to alleged violations of the published PROFESSIONAL MANAGER CODE OF ETHICS (“Code”) of Community Associations Institute (“CAI”). Individuals who have achieved AMS, LSM, and/or PCAM designations, and Management Companies with the AAMC accreditation, are subject to the Code. Each AMS, LSM, or PCAM professional manager member is personally responsible for his or her actions and any disciplinary actions arising from a complaint or eventual sanctions shall be against the individual and not against any association or firm. Each AAMC member is responsible for the actions and omissions of its employees, and any complaint or eventual sanctions shall be imposed against the company and may also be imposed against responsible individuals at the company as well. For purposes of these Procedures, the term “Designee” shall apply to an AMS, LSM, PCAM, and AAMC member. It should be emphasized that actions taken under these Procedures do not constitute enforcement of law, although referral to appropriate federal, state, or local govern- ment agencies may be made about the conduct of Designees in appropriate situations. Individuals initially bringing complaints are not entitled to any relief or damages by virtue of this process, although they will receive notice of the actions taken. In addition, commercial disputes among private parties are not appropriate matters for review under these Procedures; only the ethical conduct of Designees is proper subject matter for review under these Procedures. B. Ethics Committee Organization 1. The Designation Ethics Committee shall be comprised of at least 15 members and a maximum of 25 members and shall report to the Board of Trustees of CAI (“Board”). The term of each Committee member shall be for three years and the terms of the members shall be staggered. Committee members’ terms shall run concurrently with the terms of the Trustees and Officers of CAI. All appointments shall be made by the President of CAI, subject to approval by the Board. 2. Of the total members of the Designation Ethics Committee, at least six members shall be PCAM designees, one shall be an RS designee, and one shall be a CIRMS designee. Current Officers of CAI may not serve concurrently as a member of the Designation Ethics Committee. For purposes of this section, CAI Officer means a person cur- rently serving in the position of President, President- Elect, Secretary, Treasurer, or other CAI Board of Trustees officer position. 3. Members of the Committee may be re-appointed to successive terms without limitation. In the event a member resigns or is unable to serve, the then current 17 BP10_Ethics_layout_CC.indd 17 9/9/14 2:09 PM  President of CAI shall appoint a replacement Committee member for the balance of the unexpired term, subject to approval by the Board. 4. The President of CAI shall designate the Chairperson (the “Chairperson”) and the Vice-Chairperson (the “Vice-Chairperson”) of the Designation Ethics Committee. The Chairperson and the Vice-Chairperson shall serve one-year terms in such capacity and may be re-appointed to successive terms without limitation. The Vice-Chairperson shall perform all the duties of the Chairperson at any time that the Chairperson is unable to do so. 5. The Chairperson shall appoint three or more Designation Ethics Committee Members to one or more Review Panels, which shall have the task of conducting an Inquiry as to the merits of a Complaint and making a recommendation of actions to be taken under these Procedures to the Designation Ethics Committee Chair. The Chairperson shall appoint a Chair of each Review Panel established. The Review Panel members shall serve for such terms as determined by the Chairperson. 6. The Chairperson shall appoint a Hearing Panel, as follows: the Hearing Panel shall be composed of the Chairperson and/or Vice-Chairperson of the Designation Ethics Committee and at least four other individuals who are not on the Review Committee and who do not have a conflict of interest with the Complainant or the Designee that is the subject of the Complaint (“Subject Designee”). One member shall be a non-Trustee attorney who is a member of the College of Community Association Lawyers, one member will be from the APCM Board, one member will be from the Business Partners Council, and the remaining member shall be either a former Chair of the APCM Board, a Past President of CAI, or a current or former member of the Designation Ethics Committee. The Hearing Panel members shall serve for such terms as determined by the Chairperson. 7. Complaints involving an AAMC member or those AMS, LSM, or PCAM members affiliated with an AAMC member shall follow these additional guidelines: a. The Subject Designee may include the firm as well as the PCAM member responsible for the AAMC member’s management program and other Designees; b. The AAMC member is responsible for the ethical behavior of all employees, including any AMS, LSM, or PCAM designees under its direction. The AAMC member is subject to sanctions for violations of any of its affiliated staff members; c. The person responsible for the AAMC member’s management program (“Supervising PCAM member”) will be advised of any complaint regarding the AAMC or any affiliated Designees; d. To the extent possible, the review and inquiry under these Procedures shall be conducted simultaneously in situations where the AAMC member and one or more of its affiliated Designees are involved; e. Any determination will recognize and be in accordance with established legal principles of responsibility and liability with respect to agency law and the employer/employee relationship; and 18 BP10_Ethics_layout_CC.indd 18 9/9/14 2:09 PM  E T H I C S f. Resulting sanctions, if any, may vary against those involved based upon degree of violation and responsibility. C. Allegations 1. Any person (the “Complainant”), including a Designation Ethics Committee Member, may initiate a complaint regarding alleged violations of the Code by submitting to CAI’s Chief Executive Officer or his designee a written complaint (the “Complaint”) signed by the Complainant. The Complaint shall be submitted on the approved Ethics Complaint Form and shall include information specifying: a. The identity of the Subject Designee who is alleged to have violated the Code, along with a narrative summary of the circumstances and events leading to the alleged violation, and reference to the section(s) of the Code alleged to have been violated; b. Evidence (which may include written documentation, corroborating statements by other persons, or specific information as to persons who may be contacted to provide such corroboration) supporting the allegation(s); c. Complainant’s name, address, e-mail address, and telephone number; and d. If the Complaint is filed by a community association, the Board of Directors of that association must attach an approved and witnessed Resolution indicating a majority of the Board members approve the filing of the Complaint. A Complaint also may be self-initiated by the Chairperson on behalf of the Committee based on any information, such as a news source or anonymous complaint. 2. If the Complaint submitted is not in compliance with the Procedures as outlined under section 1(a)-(d) above, CAI’s Chief Executive Officer or his designee may return the Complaint with instructions on compliance with CAI Procedures. All Complaints conforming to the filing requirements shall be promptly forwarded by CAI’s Chief Executive Officer or his designee to the Chairperson. If the Complaint originates in the market area of the Chairperson, the Chairperson has a personal or professional relationship with any of the parties named in the Complaint, or the Chairperson is in any way associated with any individual named in the Complaint, CAI’s Chief Executive Officer shall forward the Complaint to the Vice- Chairperson, and the Vice-Chairperson shall perform the functions of Chairperson for that Complaint. Should the Vice Chairperson have any of the same conflicts as the Chairperson, the Complaint will then be forwarded to another Committee Member, selected on a basis of seniority, until a member does not have a conflict. The Chief Executive Officer shall also advise the Chairperson of all designations held by the Subject Designee and all dates such designations were received. 3. Upon receipt of the Complaint, the Chairperson shall review the Complaint and make an initial determination whether the Complaint, on its face, raises an actual question of ethics under the Code within 30 days of receipt of the complaint from staff. 19 BP10_Ethics_layout_CC.indd 19 9/9/14 2:09 PM  a. If, in the determination of the Chairperson, there is a legitimate question of ethics in the Complaint, the Chairperson shall delegate to the Review Panel the authority to make such inquiries and preliminary investigations as to the matters covered by or related to the Complaint as they deem appropriate (“Inquiry”). Allegations of incidents occurring before the Subject Designee received his or her designation(s) will not be considered further by the Designations Ethics Committee. b. If the Complaint, on its face, does not state a claim that is actionable under the Code, or otherwise contains unreliable or insufficient information, or is patently frivolous or inconsequential, the Chairperson may dismiss such Complaint, with written notice to the Complainant from the Chief Executive Officer. 4. For each matter that the Chairperson determines requires an Inquiry, the Chairperson shall ensure that the Chief Executive Officer or his designee promptly provides written notice to the Subject Designee of the identity of the complaining party, the nature of the Complaint specifying the provisions of the Code that are alleged to have been violated (with a copy of these Procedures and the Code), the potential sanctions, and stating that the Subject Designee shall have the oppor- tunity to respond to the Chairperson regarding the Complaint within 30 days of receipt of the notice. The Chairperson also shall ensure that the Complainant receives written notice that the Complaint is being reviewed. D. Inquiry The following shall govern any Inquiry by the Review Panel: 1. The Review Panel shall have the task of conducting an Inquiry as to the merits of the Complaint and making a recommendation to the Hearing Panel as to whether a violation of the Code has occurred and any recommended sanction. The Chairperson of the Designation Ethics Committee may be consulted but shall not actively participate in the Inquiry conducted by the Review Panel. 2. Since the nature and seriousness of each alleged violation of the Code will vary, the Review Panel shall use its best judgment regarding the degree of investigation required. The Review Panel shall review the response of the Subject Designee and may seek further information or interview the Subject Designee. The Inquiry also may include such actions as: a. Telephone conversations with individuals involved; b. Requests for written or published materials; and c. Visits to the locations(s) involved. 3. The CAI Chief Executive Officer, his or her designee, and/or CAI legal counsel may consult with the Review Panel with respect to any questions as to compliance with these Procedures or applicable legal principles. 4. Within 60 days from the receipt of the response from the Subject Designee, the Review Panel shall issue a written report to the Chairperson with a copy to the CAI 20 BP10_Ethics_layout_CC.indd 20 9/9/14 2:09 PM  E T H I C S Chief Executive Officer. This report shall explain the background and investigative steps of the Inquiry, the findings of the Review Panel with respect to particular sections of the Code considered to be violated and the sanctions recommended, if any, and the basis for the recommendation, and shall include all related documents, correspondence, and other materials obtained and considered during the investiga- tion. Included in this report must be one of the following recommendations: a. No hearing is needed; b. No hearing is needed but a Letter of Warning as defined below should be sent; c. The matter should be suspended pending the outcome of an active criminal or civil investigation; or d. A hearing should be conducted and the recommendations of the Review Panel considered by the Hearing Panel. 5. Within 15 days after his or her receipt of such report, the Chairperson shall ensure that written notice is given to the Subject Designee providing a copy of the report and recommendation of the Review Panel and indicating that: a. The Complaint has been dismissed; b. A Letter of Warning is recommended, which indicates that there was or there is the potential for impropriety which does or could border on a violation of the Code; or c. There will be a hearing on the Complaint, with the date and time of the hearing that will be conducted by telephone or video conference specified, and including another copy of the Procedures and advising the Subject Designee that he or she has the opportunity to provide additional written information to be considered by the Hearing Panel in response to the report by the Review Panel. E. Designation Ethics Hearing 1. Unless the Chairperson decides otherwise, a single hearing will be conducted regarding the same or similar complaints even if they are against more than one Designee affiliated with an AAMC member and the AAMC member. 2. A majority of the Hearing Panel, including the Chairperson or Vice-Chairperson, shall qualify as a quorum with a majority vote of those present necessary to reach any decision. 3. The agenda for the Hearing shall be established by the Chairperson in accordance with the following outline: a. Report of the Review Panel, which may be presented by the Chair or another member of the Review Panel. b. Response of the Subject Designee(s). c. Questions from the Hearing Panel. 21 BP10_Ethics_layout_CC.indd 21 9/9/14 2:09 PM  Hearing Panel members are able to question or seek additional clarification during each of these steps, in the presence of the Subject Designee. The rules of evidence and other legal requirements of trials or similar proceedings are not applicable. It is not expected that legal counsel will represent the Subject Designee during the Hearing, but may be granted permission to be in attendance to assist the Subject Designee in presenting his or her response. 4. Immediately following the hearing, the Hearing Panel shall convene in executive session to reach a decision. The Chief Executive Officer, designated CAI staff member, and CAI’s legal counsel may attend the executive session in a non-voting capacity. The Review Panel member(s) and the Subject Designee shall not be present during the deliberations and voting. These individuals may be called back to answer ques- tions during deliberations. The Hearing Panel shall reach one of these two decisions: a. Dismiss the Complaint, in which event there is no further action within CAI; or b. Determine the Subject Designee has committed a violation of one or more of the sections of the Code and is subject to sanctions as determined by the Hearing Panel in its discretion. The Hearing Panel shall issue a written report of its determination, which report shall include the findings and determination of the Panel with respect to particular sections of the Code considered to be violated and the sanctions imposed, if any, and the basis for the recommendation. F. Sanctions If the Hearing Panel determines a Subject Designee has violated one or more provisions of the Code of Ethics and a sanction is warranted, the following sanctions are available: 1. Admonishment The Hearing Panel can instruct the CAI Chief Executive Officer to issue a letter to the Subject Designee admonishing his or her actions and warning of the con- sequences of subsequent violations. Admonishments are issued when the hearing panel finds that violations occurred, but were not the result of deliberate action and the accused would benefit from the opportunity to apply the admonishment to growing their professionalism. A letter of Admonishment shall be kept confidential and shall be placed in the designee’s file. 2. Censure The Hearing Panel can instruct the CAI Chief Executive Officer to issue a letter of censure to the Subject Designee. Censures are distinguishable from admonish- ments in that the hearing panel has concluded that the violation is of a nature that in addition to corrective action a public notice and reprimand of the breach of the code is warranted. All censures will be public in nature. 22 BP10_Ethics_layout_CC.indd 22 9/9/14 2:09 PM  E T H I C S 3. Suspension The Hearing Panel can instruct the CAI Chief Executive Officer to take action to suspend the CAI designation of the Subject Designee for a certain period of time. 4. Revocation This sanction is reserved for the most serious of offenses. The Hearing Panel can instruct the CAI Chief Executive Officer to revoke the CAI designation of the Subject Designee. Revocation is permanent and not subject to reinstatement. The Hearing Panel, upon rendering its decision on the appropriate sanction, shall forward its recommendation to CAI’s Board of Trustees for approval. Once acted upon by CAI’s Board of Trustees, the decision of the Hearing Panel, as approved or modified by the Board, shall be final and written notice of any such action shall be given to the Subject Designee, which action shall be public as determined by the Hearing Panel except for a private admonishment. Notice to the Subject Designee shall also include notification of the right of the Subject Designee to appeal the determination of the Hearing Panel in writing within 30 days of receipt of the notice. The CAI Chief Executive Officer shall also notify the Complainant of any action and the nature of the action, as well as such other organizations, entities, or state agencies as determined by the Hearing Panel, but in each case only after the time for an appeal has expired and no appeal has been made. 5. Publication: a. An announcement of a censure, suspension, revocation, or other sanction con- sidered severe by the Designation Ethics Committee shall be published in those national and/or chapter periodicals defined by the appropriate designating com- mittee. b. The announcement shall include the name(s) of the Designee(s), the types of sanction(s), and the section(s) of the Code which were determined to have been violated. G. Appeal 1. Within 30 days from receipt of notice of a determination by the Hearing Panel that