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Business Ethics in Real Estate


Business ethics still remains one of the most important areas in business practice influenced by internal and external factor, cultural and social changes. Real estate industry represents a diverse market in terms of human resources and services provided. One strong and persistent pull of foreign workers to the United States is the availability of jobs. The labor market has always demanded huge pools of both skilled and unskilled workers. Labor and government have often acted together to procure additional human resources through the use of immigration legislation. During last decades, low wages and unequal pay is still a problem for many employees in real estate industry. This situation is caused by inadequate ethical principles and lack of state control over moral duties and responsibilities of real estate agencies.

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In real estate industry, the admittance of large numbers of foreign workers into the United States has always been viewed with ambivalence by Americans. In the context of international business and cultures, cross-national interaction involves complex human relations dynamics. From this perspective, the interchange of ideas, thoughts, and motives must be communicated at appropriate levels of cultural awareness. Thus, the term cross-national interaction is used to mean the interchange and interrelation of culturally different ideas, thoughts, and motives in business dealings (Tatray, 2002).

In addition to laws that prohibit discrimination based on race, religion, national origin, and sex, there is one congressional act that specifically addresses the rights of alien workers: the Immigration Reform and Control Act of 1986. This act delineates the legal conditions that pertain to hiring aliens. Specifically, it is illegal to knowingly hire an undocumented alien. The act poses penalties in the forms of fines and imprisonment for employers and individuals within their organization who hire an unauthorized alien without complying with the statute. Immigrants not only have to worry about how to protect themselves from their neighbors; many of them also try to separate themselves from African Americans and other American minorities (McLean and Eldred, 2005). American minority groups, the objects of intense discrimination, often view foreign workers as hostile competitors. There is much basis in fact to this belief. African Americans and other minorities have in many instances had immigrants take their jobs. To keep the diversity pot boiling, some employers make a conscious effort to keep all the diverse groups separated along racial, nationality, or ethnic line (Encyclopedia of Ethics 2001).

The impact of unethical behavior on real estate sector is extremely negative. The industry looses real estate professionals because of low pay and unethical practices towards foreign workers. Financial issues involve legal suits and penalties imposed on real-estate agencies and organizations (Donaldson et al. 2002). The purpose of a business is to maximize long-term owner value by selling goods and/or services; promotions and pay raises should therefore go to those who contribute most to long-term owner value. In practice, of course, organizations may well have more than one objective–these days even orchestras and universities can ill afford to ignore their finances. But to give the highest orchestral honors to the accountant rather than to the virtuoso soloist or the conductor, would be as perverse as rewarding the business’ staff on their ability to whistle.

Because maximizing shareholder value requires taking a long-term view, and long-term views require confidence (Tatray, 2002). Where discrimination exists, pay rates of the lower-paid sex must be raised to equal those of the higher-paid sex. In a landmark decision, a federal court rejected a claim that the jobs of men and women have to be identical for them to receive equal pay and asserted that they need only be “substantially equal.” The act, which is enforced by the Labor Department’s Wage and Hour Division, permits wage differentials based on a bona fide seniority or merit system, or a system that measures earnings by quantity or quality of production, or any other factor other than sex. Another disadvantage to women and minorities are company training programs specifically designed for them (Crane and Matten, 2004).

These programs tend to stigmatize the participants and also give them superficial exposure to various departments but few, if any, challenging job responsibilities. This kind of training perpetuates “token” and “reverse discrimination” beliefs of white workers. Ergo, some companies unintentionally reinforce stereotypes about incompetent women and minority workers. Such programs seldom provide trainees exposure to available role models farther up in the hierarchy. It is important for organizations to link women and minorities not only to female and minority mentors but also to white male mentors. However, all training for new employees should be available to every employee. Ideally a job-rotation system would be implemented for as many leadership positions as feasible (Encyclopedia of Ethics 2001).

In seeking to maximize long-term owner value, the real estate industry cannot ignore the interests of any of its stakeholders, because whether they are employees, customers, suppliers, lenders, or shareholders, they all affect the operations of the business. Their tastes and preferences, including their moral preferences, will influence their willingness to deal with the business and must be taken into account in calculations of long-term owner value (Chen et al 1997). Given the very different views of the various stakeholders worldwide, it is not surprising that businesses vary as much as they do. Nevertheless, operating within a market framework and a presumption in favor of legal compliance, the teleological approach offers a system of business ethics which can be seen to be applicable everywhere and always–which is valid across all geographical, cultural, and temporal boundaries (Tatray, 2002).

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Universally applicable principles of business ethics are thus perfectly possible. Understanding the nature of principles and the limited purpose of business does not, of course, eliminate the existence of genuine moral dilemmas or the need to make difficult decisions (Tatray 2002). In real estate sector, effective management requires clear and constructive dialogue between corporate offices and the foreign branch. Consequently, in order to successfully implement an ethics program in an overseas facility, representatives from corporate headquarters must attempt to communicate with foreign managers on their own terms, considering the cultural values context in which these managers operate (Beauchamp and Bowie, 2003).


In sum, business ethics should be a core of real estate industry in order to keep and retain professionals and customers. Thus, real estate agencies might be obligated to contribute more to charity in the country where it is based. But such an obligation derives from a general duty of beneficence that creates an obligation everywhere the firm operates. Compensatory justice would indicate that the firm has a responsibility to correct the wrongs of the system in which it has participated. While it may be extremely important for U.S. companies to maintain a strong stance on certain expected standards of ethical conduct, it may be equally important for these companies to recognize when alternative value systems can contribute meaningful ethical lessons to the strategy of the firm


Beauchamp, T., and Bowie, N. (eds). (2003). Ethical Theory and Business, 7th edn, Upper Saddle River, NJ: Prentice Hall.

Chen, S.-J., Ho, Ch., Jordan, B. D. (1997). Real Estate and the Arbitrage Pricing Theory: Macrovariables vs. Derived Factors. Real Estate Economics, 25 (1), p. 505.

Crane, A. and Matten, D. (2004). Business Ethics: A European Perspective, Oxford: Oxford University Press.

Donaldson, T., et al. (2002), Ethical Issues in Business, 7th edn, Upper Saddle River, NJ: Prentice Hall.

Encyclopedia of Ethics. (2001), Becker, L. C. (edt). Routledge; 2nd edition.

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McLean, A. J. Eldred, G. W. (2005). Investing in Real Estate, 5th Edition. Wiley; 5 edition.

Tatray, D. (2002). Alchemy, Real Estate and the Culture of Conservation in Byron Bay. Journal of Australian Studies 1 (1), p. 131.

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