Recently we wrote of the fact that many real estate companies who proclaim that ethics is highly important to them, do not actually show that to be the case. Few companies have a program that seeks to reinforce the values that they proclaim. More than a few REALTORS^® -- both brokers and agents -- have expressed to me that the whole notion of having such a program is completely foreign to them. Hence, over the next few weeks, we will review some thoughts about how a company might put together such a program. We begin with a look at how this issue is important for other industries as well.

The United States Sentencing Guidelines for Organizations contains valuable lessons for real estate brokers. This is not because real estate brokers are especially liable to be candidates for federal sentencing. Rather, it is because the Guidelines lay out procedures that are relevant to anyone who might be interested in establishing an ethically corporate culture, regardless of whether or not their business might be at special criminal risk.

Chapter VIII of the Guidelines manual enumerates factors that might mitigate the punishment imposed on an offender of corporate federal regulations. It spells out certain organizational programs and procedures that, if present, would be relevant to consider. The reason these programs and procedures would count as mitigating factors in the sentencing of an offender is that they are intended to be preventive measures that an organization might take in its efforts to avoid wrongdoing.

In a word, the guidelines say this: "If you do these things, then that shows that you have been trying to prevent illegal and/or unethical behavior by your employees and/or agents. Your efforts in this regard cannot completely excuse you for such behavior by your employees or agents, but they will count as mitigating factors in determining your punishment."

The aim of the Guidelines is to provide organizations with, "…a structural foundation from which an organization may self-police its own conduct through an effective compliance and ethics program." The idea behind this is pretty simple. It is this: If an organization wishes its agents and employees to be ethical and compliant with both moral norms and civil regulations, then that organization needs to adopt a set of procedures that shows its employees and agents how to behave in such a manner.

Why/how is this of relevance to real estate brokers? There are two reasons. One is simply a matter of -- shall we say? -- sincerity. Practically every real estate brokerage on the planet claims that ethics is one of its highest priorities. What do these brokerages actually do to demonstrate that such claims are in fact true? Frequently, nothing. The Guidelines present practical, doable, procedures that would give teeth to such proclamations.

Secondly, but I truly believe of considerably lower priority overall, is that brokerages are in fact more and more at risk of facing federal sentencing situations. We have spoken here before of the many ways in which virtually "standard" real estate practices with respect to title, mortgage, and escrow companies may be violative of federal law under the Real Estate Settlement and Procedures Act (RESPA). Moreover, it is not idle to note that the Consumer Financial and Protection Bureau is still in business when it comes to pursuing real estate companies and affiliates who are violating these regulations.

Any broker who is concerned that his or her organization, or its agents and/or employees, might be inclined to violate federal regulations covering "kickbacks" and illegal incentives would do well to consider instituting organizational programs, consistent with the sentencing guidelines, that aim to educate agents as to the "do's" and "don'ts" of these matters.

The Guidelines offer some straightforward and practical suggestions that any organization -- including real estate brokerages -- might employ in order both to minimize their risk and also to put into practice their claims that they intend to be ethical and honorable companies. We will look at specific suggestions of the Guidelines in the next column.