An industry code of ethics protects the honest participants of that industry and their customers, facilitating satisfied clients, ultimately generating more profits for those in the industry. Properly constructed and enforced codes of ethics can benefit the profitability of everyone that participates in that industry, including the customers.
The equipment leasing industry is not exempt from the need of codes of ethics. Up until this point in time, the major leasing associations have independently established their own codes of ethics that individual members have agreed to adhere to. Each association has also developed its own mechanism for enforcement of its own code of ethics, with some enforcing their code of ethics more aggressively than others.
It is important to note that many times, the ethical course of action does not equate to the business course of action. The objective of the two goals may be very different. The ethical course of action revolves around fairness and equitable behavior. The business course of action revolves around the maximizing of profit. An industry or a business within the industry that maintains the goal of maximizing profit without consideration to ethical behavior is a business and an industry that is asking for problems.
The common elements found in different leasing association’s codes of ethics are:
It’s easy to see how different business situations present several ethical issues. For example, when a lessor or intermediary broker knows that a lease was declined by a funding source due to the low credit score of a personal guarantor, can that reason be revealed to the equipment vendor who referred the transaction to the lessor or intermediary broker? If not, what should the vendor be told as the reason for the lease not being approved? Would any such statement be a false or misleading statement?
Another dilemma is whether or not it is ethical for a company trying to be awarded a lease to refer the customer to some negative industry press about their competitor? Is that disrespecting competition?
And perhaps the issue that is struggled with the most is that of fiduciary funds. If there is an approval of a transaction and the lessee rejects the approval, is the lessor or intermediary entitled to keep some of the advance funds as compensation for their time expended in obtaining the approval? Are they entitled to their costs and expenses? Should the entire advance be retained if the lessee “wrongfully” refuses the approval? What is a “wrongful” refusal of an approval?
As you think about it, the business perspective with the goal of profit maximization answers to the above dilemmas are clear. But as you think further, the ethical resolution to the dilemmas become very cloudy. First, whose perspective is right? Is your perspective the one that has to be ethically satisfied, or does the ethical satisfaction of the customer, vendor and funding source take precedence over that of the lessor or intermediary? What perspective is best for positive public perception of the industry?
So to ask the question, what is the importance of the role of ethics in the leasing industry? Clearly, it is a combination of things. From the perspective of those in the industry, ethical conduct will ultimately maximize long-term profits. Returning an advance payment to a customer that wrongfully walked away from a commitment will preserve your relationship with the vendor, who can provide many more leases to you. The customer may even come back to you later for another lease. Retaining funds in a fiduciary capacity will enable you to return those funds. Preserving the confidence of the parties to the transaction will make you their confidant, they will trust you. Because you have earned their trust, they will try to do business with you again. The ethical behavior will maximize your long-term profits.
From the perspective of those outside of the industry, leasing will be a trusted business, a leasing company will be perceived to be a trusted business partner, not just someone else that wants to do business with a customer or a vendor. Leasing will be perceived as that business, which provided the financing to companies to help them grow or obtain the equipment needed to complete a project and make their business successful. If the mention of the word “leasing” were to connote those attributes in the minds of vendors and customers, then clearly ethics in leasing will have earned its proper place in the industry.
The goals to reflect the proper place of ethics in the industry: Be ethical in what you do, put your interests last to those of your customers. You will live another day, you will get more business. Ethical behavior will maximize your long-term profits. Strive toward helping your customers to think of you as their business partner. Who would want to be partners with someone unethical?
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