Conflict Management CM

Dear CMDNET,

In a recent conversation, an associate described a business practice which I had trouble classifying as ethical or unethical. Given that such ambiguous situations can be useful for studying and discussing ethical norms, I write to get some expert opinions on the matter.

The situation is as follows:

[BEGIN]

TCAG is one of many properties run by ICE properties.  Most, if not all other, apartment complexes in TCAG's local area provide light fixtures and or ceiling fans in all rooms of their apartments.  TCAG, however, provides no fixtures in the living room or bedrooms. When new tenants ask about this they state, "We like to let our residents customize their living experience" and that, if they need help, they can hire, Dillan, the maintenance man  to install fixtures after hours. Dillan charges $35 per light fixture and $50 per ceiling fan.

The management acknowledges verbally that their practice is inconsistent with norms in the local area, but their advertisements and written materials make no mention of the practice.  The management agreed to provide one tenant, who was not satisfied with this response, written confirmation that this is their practice and authorization to install, modify, and/or remove light fixtures. After one week, the tenant asked again and was told, "You need to be patient."

[END]

Thank you in advance for your input,

Jason

If the rentals are comparable, it also looks like passive fraud in that they are representing that they are providing a generic or fungible product (an apartment) but it lacks (at the same price point) a standard item (that they apparently bizarrely remove after each tenant moves out) and that they then surcharge for.  Living in the dark doesn't quite match the normative experience.

It would constitute an actionable DTPA (deceptive trade practices act) violation under the model act with the private cause of action provisions (such as they are in Texas) btw.

From: Conflict Management Division Listserv [mailto:CMDNET@AOMLISTS.PACE.EDU] On Behalf Of SMITA CHAUDHARY .
Sent: Saturday, June 04, 2016 10:56 PM
To: CMDNET@AOMLISTS.PACE.EDU
Subject: Re: [CMDNET] Real-world business ethics question

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Many thanks to Ethesis, Roy, Smita, and Stephen for making this an interesting discussion and Judith White and Mike Ryan for your comments to me directly. 

Your diverse viewpoints tell me there are many ways to look at this situation and brought my attention to potentially relevant standards (DPTA) and concepts (passive opportunism) I had not previously considered.  At very least, it seems that this scenario could make for some engaging material for a class exercise.  For now, I'll have to wait to learn how the story concludes. The tenant has now formally requested the policy by way of letter so the management's response should be somewhat telling.

For my part, I first thought the practice was probably ethically legit, but the explanation dubious: do residents really prefer to have to "customize" in this way? Later though, I began wondering about two potential ethical issues.  One was whether or not there is a conflict of interest in referring clients to their maintenance person who happens to be conveniently on site and in their employ.  The other was whether or not they are applying the policy uniformly rather than conveniently.

I say "conveniently" to echo Stephen's point that it seems unlikely that they would remove and discard perfectly good fixtures that former tenants installed and left behind.  Nevertheless, if they don't remove such fixtures, are they somehow, albeit passively, in violation of fair housing law?

The airlines have been doing this to customers for the last decade-charging for baggage that used to be free, charging for better seats in coach that used to be free, charging  for snacks that used to be free, etc. etc. etc. Does that also constitute 'passive fraud'?  

 

My understanding of passive fraud is that it is "a failure to disclose information when there is a duty to do so".  I don't think this  the landlord's behavior is a 'nice' business practice, but I fail to see the obligation of 'duty' on the part of the landlord-either in a legal or ethical sense. There doesn't appear to be 'active' fraud in that the apartment did not promise something which they did not deliver. The buyer should be responsible for asking what is included in the price rather than 'assuming' based on local norms or practices. 

 

Roy Lewicki

 

 

 

From: Conflict Management Division Listserv <CMDNET@AOMLISTS.PACE.EDU> on behalf of "Stephen R. Marsh" <000000787ffc2517-dmarc-request@AOMLISTS.PACE.EDU>
Reply-To: "Stephen R. Marsh" <ethesis@AOL.COM>
Date: Sunday, June 5, 2016 at 10:35 AM
To: "CMDNET@AOMLISTS.PACE.EDU" <CMDNET@AOMLISTS.PACE.EDU>
Subject: Re: [CMDNET] Real-world business ethics question

 

If the rentals are comparable, it also looks like passive fraud in that they are representing that they are providing a generic or fungible product (an apartment) but it lacks (at the same price point) a standard item (that they apparently bizarrely remove after each tenant moves out) and that they then surcharge for.  Living in the dark doesn't quite match the normative experience.

 

It would constitute an actionable DTPA (deceptive trade practices act) violation under the model act with the private cause of action provisions (such as they are in Texas) btw.

 

 

From: Conflict Management Division Listserv [mailto:CMDNET@AOMLISTS.PACE.EDU] On Behalf Of SMITA CHAUDHARY .
Sent: Saturday, June 04, 2016 10:56 PM
To: CMDNET@AOMLISTS.PACE.EDU
Subject: Re: [CMDNET] Real-world business ethics question

 

Hello Jason,

 

This seems to be associated with passive opportunism (Williamson, 1985; Wathne & Heide, 2000), if and only if TCAG is getting benefited in some way from the maintenance work carried out by Dillan.

 

Opportunism is the self interest seeking behavior using guile (deceit). Its passive form occurs when effort is withheld from or not put in to perform expected behavior.

 

Williamson, O. E. (1985). The Economic institutions of capitalism : Firms, markets, relational contracting. New York, NY: Free Press.

 

Wathne, K. H., & Heide, J. B. (2000). Opportunism in Interfirm Relationships: Forms , Outcomes and Solutions. Journal of Marketing, 64(4), 36–51.

 

Regards

 

Smita Chaudhry

IIM Calcutta

 

On Fri, Jun 3, 2016 at 10:05 PM, Jason Pierce <jason.pierce@uai.cl> wrote:

Dear CMDNET,

 

In a recent conversation, an associate described a business practice which I had trouble classifying as ethical or unethical. Given that such ambiguous situations can be useful for studying and discussing ethical norms, I write to get some expert opinions on the matter.

 

The situation is as follows:

 

[BEGIN]

 

TCAG is one of many properties run by ICE properties.  Most, if not all other, apartment complexes in TCAG's local area provide light fixtures and or ceiling fans in all rooms of their apartments.  TCAG, however, provides no fixtures in the living room or bedrooms. When new tenants ask about this they state, "We like to let our residents customize their living experience" and that, if they need help, they can hire, Dillan, the maintenance man  to install fixtures after hours. Dillan charges $35 per light fixture and $50 per ceiling fan.

 

The management acknowledges verbally that their practice is inconsistent with norms in the local area, but their advertisements and written materials make no mention of the practice.  The management agreed to provide one tenant, who was not satisfied with this response, written confirmation that this is their practice and authorization to install, modify, and/or remove light fixtures. After one week, the tenant asked again and was told, "You need to be patient."

[END]

 

Thank you in advance for your input,

Jason

 

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*************************************** This message was sent to you because you are subscribed to CMDNET which is an electronic list sponsored by the Conflict Management Division of the Academy of Management.

Please do not post messages with attached files. Commercial messages or spammed messages are not allowed on the list. The use of auto-responder "out-of-office" messages may also lead to your removal from the list.

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If you have problems with your subscription or messages posted to the list, please contact the list manager Eric Neuman (EricNeuman@creighton.edu).

*************************************** This message was sent to you because you are subscribed to CMDNET which is an electronic list sponsored by the Conflict Management Division of the Academy of Management.

Please do not post messages with attached files. Commercial messages or spammed messages are not allowed on the list. The use of auto-responder "out-of-office" messages may also lead to your removal from the list.

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Forgive me if I misunderstand, but it would seem that once a tenant pays for a light fixture, it becomes their property, and they can take it with them when they move out. What they are paying for that cannot be taken with them when they move is the *installation of the fixture* (i.e., labor cost to a qualified installer). The rather paltry costs cited would appear to only include labor for installation, not the fixture or fan itself.  [I guess what is left unstated in the scenario is whether additional cut-in and wiring needs to be done, i.e., whether installation also includes installing the wired BOX in the ceiling that a fixture or fan would attach to]

In any event, the actual fixture or fan would seem to be something tenants would take with them when moving, as they could re-sell or use it in a subsequent residence. From my own experience having two houses built (for us over the years from 2 different home building companies), builders only do "rough-ins" for ceiling lights, and only in certain rooms, at base price. If you want more than that (the actual light or fan; a rough in in another room that doesn't come with this standard) you have to pay extra. We paid extra to have a rough in in the family room of our current house and bought ceiling light/fan fixtures to install.

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