Beyond Agency Theory: The Hidden and Heretofore Inaccessible Power of Integrity (PDF of Keynote Slides)

70 Pages Posted: 16 Feb 2010 Last revised: 23 Jul 2022

See all articles by Werner Erhard

Werner Erhard

Independent

Michael C. Jensen

Harvard Business School; SSRN; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI); Harvard University - Accounting & Control Unit

Multiple version iconThere are 3 versions of this paper

Date Written: August 31, 2012

Abstract

There is far too much concern today about the conflicts of interest between people; for example, conflicts of interest between agents and owners - a favorite topic of Jensen - and not enough attention paid to the damage caused by an individual's conflict of interest with himself or herself. We argue here that a large amount of the damage inflicted on people and organizations is caused by actions of individuals that are not in their own self interest. That is, people consistently impose costs on their loved ones, friends, associates, partners, employers and the public by actions that are not in their own self interest.

In this talk we focus on the integrity issues that cause huge problems in the lives of most individuals and to every one we come in contact with. These slides draw on the work on a new model of integrity that we have co-authored with Steve Zaffron and is available at: http://ssrn.com/abstract=920625, http://ssrn.com/abstract=1452759, http://ssrn.com/abstract=1511274

We present a positive model of integrity that, as we distinguish and define integrity, provides powerful access to increased performance for individuals, groups, organizations, and societies. Our model reveals the causal link between integrity and increased performance, quality of life, and value-creation for all entities, and provides access to that causal link. Integrity is thus a factor of production as important as knowledge and technology, yet its major role in productivity and performance has been largely hidden or unnoticed, or even ignored by economists and others.

Keywords: Integrity, Morality, Ethics, Legality, Sincerity, Productivity, Performance, Lies, Lying, Managing Earnings, Smoothing Earnings, Collusion, Development, Disclosure Strategy, Fiduciary Responsibility, Financial Reporting, Accounting Errors, Fraud, Corporate Governance

JEL Classification: G34

Suggested Citation

Erhard, Werner and Jensen, Michael C., Beyond Agency Theory: The Hidden and Heretofore Inaccessible Power of Integrity (PDF of Keynote Slides) (August 31, 2012). Harvard Business School NOM Unit Working Paper No. 10-068, Barbados Group Working Paper No. 10-02, Available at SSRN: https://ssrn.com/abstract=1552009 or http://dx.doi.org/10.2139/ssrn.1552009

Michael C. Jensen (Contact Author)

Harvard Business School ( email )

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Negotiations, Organizations & Markets
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United States

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European Corporate Governance Institute (ECGI) ( email )

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Harvard University - Accounting & Control Unit ( email )

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