I do my best to make sure this blog and my social media channels provide positive messages, intended to work towards solutions. I’ve described the space as a “snark-free zone.” This time, I’m going to rant a little. It may come off a little snarky, but the goal remains the same – solutions.
It’s A Big Deal
I’m angry. A headline the other day read “Maryland HOA Management Company Accused of Taking $2.5M from Associations.” This company appears to have taken advantage of their client’s trust and misappropriated their funds. The allegation seems well founded. Jerks.
I’ve been angry before. Almost three years ago to the day, a former management company owner pleaded guilty to the same amount of theft from several of his clients from the same county in Maryland. Déjà vu I was still a management company executive at the time. We took over one of their clients several months before their house of cards fell. Fortunately, the CEO hadn’t gotten his hands on their funds, but I still remember the files coming over in black trash bags. You can imagine the quality of the financial records.
The vast majority of professionals engaged in community association management would never even think of perpetrating such malfeasance upon their clients. A large percentage of us dedicated to serving community associations see it as more than a job. We recognize it for what it is – a trust. So we work hard to live up to that trust. And yet, the entire industry gets tainted every time a bad player does something like this. Honest people get painted with a broad brush of distrust and disrespect. That makes me angry.
Don’t get me wrong, in very rare occasions bad actors have darkened our industry in the past. In some cases, it led to beneficial legislation. One management company failed to disclose ownership interest in service companies they recommended to their clients. In that state, that practice is now illegal. In another case ten years ago, an executive with an ownership interest in a management company was sentenced to prison for embezzling over $3M in finds from 400 clients. That led to manager licensing in Virginia. The former case might not seem as bad as the latter, but both speak to the core of the problem – abuse of trust.
Think About the Little Things
There are codes of ethics in place to set standards. For years the Community Associations Institute has required all credentialed managers to adhere to a code. To review the document and a very detailed Code Clarification Report, click here.
A written code can’t prevent bad actors. When I stumble across emails where a manager has shared a competitor’s proposal with their favored contractor and allowed that contractor to submit his proposal afterward, I get angry. Even though that manager didn’t embezzle money, that’s a direct violation of the anti-competition clause.
Other situations aren’t so obvious. I understand that some contractors like to give gifts to managers. It’s part of relationship building. However, it can quickly become a slippery slope. When a contractor who regularly treats a manager to ballgames and dinners seems to get preferential treatment from that manager, a line may have been crossed. When it starts to walk, talk and smell like an “Ol’ Boys Network,” it probably is. If it becomes quid pro quo, it’s a problem. The schmooze fest makes me angry. And a little nauseous.
Loopholes
There used to be a gap. CAI’s ethics code didn’t apply to management companies that held the AAMC designation. That allowed some companies to receive remuneration from business partners to be on a recommended vendor’s list without disclosing this to their clients. In the political realm, I believe they call it “pay for play.”
I interviewed a few managers who were looking to leave a firm in part due to the pressure they felt to promote the preferred vendors. Technically, they were not violating the manager’s code of ethics because they didn’t get directly remunerated for the recommendation. The companies weren’t violating anything because the manager’s code didn’t apply to them. But the whole thing made these managers uncomfortable, and rightly so.
I am pleased to report that this gap has been closed. As of 2016, the manager’s code of ethics applies to management companies with the AAMC designation. Bravo, CAI!
Trust, But Verify
Most financial malfeasance can be averted. Boards have reason to be hurt and angry when they learn that the managers they entrusted with members’ assets have abused that trust by unethical and criminal behavior. Still, Board members cannot escape the fact that governing documents require they exercise fiduciary responsibility. The buck stops with them. In too many cases of theft, Boards either did not have controls in place, were asleep at the switch, or some combination of the two. It didn’t have to happen. CAI publishes guidelines I urge EVERY Board to consider and make sure are in place. Fraud protection procedures and a modicum of oversight mitigate against the possibility of theft.
Please Do Something Else For A Living
If you are a manager or a management company and do not appreciate the depth of what is entrusted to you, please quit. Don’t be a jerk. Do something else for a living. This industry needs dedicated, ethical people with the heart of a servant. Those character traits seem more and more rare these days, but they still alive and well in the community association industry. What we do makes a difference. Help us advance this industry, or please get out of the way.
Beyond The Code
Here’s the bottom line. Those of us who serve community associations are taking care of other people’s stuff. They need to be able to trust us. The heart of ethics is trust, not a formal code that can only legislate actions. Intentions are important. We need to be golden. Period. With trust in such short supply in the world at large, we need to go above and beyond.
I never saw the movie Do The Right Thing by Spike Lee. But I remember seeing a clip that has stayed with me ever since I first saw it.
The Mayor: Doctor…
Mookie: C’mon….what, what?
The Mayor: Always do the right thing.
Mookie: That’s it?
The Mayor: That’s it.
Mookie: I got it. I’m gone.
Always do the right thing. Got it?