The Hidden and Heretofore Inaccessible Power of Integrity: A New Model (PDF of Keynote Slides)

87 Pages Posted: 23 May 2014 Last revised: 19 Sep 2014

Werner Erhard

Independent

Michael C. Jensen

Social Science Electronic Publishing (SSEP), Inc.; Harvard Business School; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Date Written: September 18, 2014

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 presentation 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=1542759, and 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., The Hidden and Heretofore Inaccessible Power of Integrity: A New Model (PDF of Keynote Slides) (September 18, 2014). Harvard Business School NOM Unit Working Paper No. 10-068; Barbados Group Working Paper No. 10-02. Available at SSRN: https://ssrn.com/abstract=2439838 or http://dx.doi.org/10.2139/ssrn.2439838

Michael C. Jensen (Contact Author)

Social Science Electronic Publishing (SSEP), Inc. ( email )

7858 Sanderling Road
Sarasota, FL 34242
United States
617-510-3363 (Phone)
305 675-3166 (Fax)

HOME PAGE: http://ssrn.com/author=9

Harvard Business School ( email )

Soldiers Field
Negotiations, Organizations & Markets
Boston, MA 02163
United States
617-510-3363 (Phone)
305-675-3166 (Fax)

HOME PAGE: http://drfd.hbs.edu/fit/public/facultyInfo.do?facInfo=ovr&facId=6484

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

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