A New Model of Integrity: An Actionable Pathway to Trust, Productivity and Value (PDF File of Keynote Slides)
Michael C. Jensen
Social Science Electronic Publishing (SSEP), Inc.; Harvard Business School; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)
Landmark Worldwide LLC; Vanto Group
November 12, 2009
Barbados Group Working Paper No. 07-01
Harvard NOM Working Paper No. 07-01
1st IESE Conference on "Humanizing the Firm and the Management Profession" Presentation
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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.
The philosophical discourse, and common usage as reflected in dictionary definitions, leave an overlap and confusion among the four phenomena of integrity, morality, ethics, and legality. This overlap and confusion confound the four phenomena so that the efficacy and potential power of each is seriously diminished.
In this new model, we distinguish all four phenomena - integrity, morality, ethics, and legality - as existing within two separate realms. Integrity exists in a positive realm devoid of normative content. Integrity is thus not about good or bad, or right or wrong, or what should or should not be. Morality, ethics and legality exist in a normative realm of virtues (that is, they are about good and bad, right and wrong, or what should or should not be). Furthermore, within their respective realms, each of the four phenomena is distinguished as belonging to a distinct and separate domain, and the definition of each as a term is made clear, unambiguous, and non-overlapping.
We distinguish the domain of integrity as the objective state or condition of an object, system, person, group, or organizational entity, and, consistent with the first two of the three definitions in Webster's dictionary, define integrity as a state or condition of being whole, complete, unbroken, unimpaired, sound, perfect condition.
We assert that integrity (the condition of being whole and complete) is a necessary condition for workability, and that the resultant level of workability determines the available opportunity for performance. Hence, the way we treat integrity in our model provides an unambiguous and actionable access to the opportunity for superior performance, no matter how one defines performance.
For an individual we distinguish integrity as a matter of that person's word being whole and complete. For a group or organizational entity we define integrity as that group' or organization's word being whole and complete. A group's or organization's word consists of what is said between the people in that group or organization, and what is said by or on behalf of the group or organization. In that context, we define integrity for an individual, group, or organization as: honoring one's word.
Oversimplifying somewhat, "honoring your word", as we define it, means you either keep your word, or as soon as you know that you will not, you say that you will not be keeping your word to those who were counting on your word and clean up any mess you caused by not keeping your word. By "keeping your word" we mean doing what you said you would do and by the time you said you would do it.
Honoring your word is also the route to creating whole and complete social and working relationships. In addition, it provides an actionable pathway to earning the trust of others.
We demonstrate that the application of cost-benefit analysis to honoring your word guarantees that you will be untrustworthy. And that, with one exception, you will not be a person of integrity, thereby reducing both the workability of your life and your opportunity for performance. The one exception to this form of being out of integrity is, if when giving your word you have announced that you will apply cost-benefit analysis to honoring your word. In this case you have maintained your integrity, but you have also announced that you are an unmitigated opportunist. The virtually automatic application of cost-benefit analysis to one's integrity (an inherent tendency in most of us) lies at the heart of much out-of-integrity and untrustworthy behavior in modern life.
Regarding the relationship between integrity, and the three virtue phenomena of morality, ethics and legality, this new model: 1) encompasses all four terms in one consistent theory, 2) makes clear and unambiguous the "moral compasses" potentially available in each of the three virtue phenomena, and 3) by revealing the relationship between honoring the standards of the three virtue phenomena and performance (including being complete as a person and the quality of life), raises the likelihood that the now clear moral compasses can actually shape human behavior. This all falls out primarily from the unique treatment of integrity in our model as a purely positive phenomenon, independent of normative value judgments.
In summary, we show that defining integrity as honoring one's word (as we have defined "honoring one's word"): 1) provides an unambiguous and actionable access to the opportunity for superior performance and competitive advantage at both the individual and organizational level, and 2) empowers the three virtue phenomena of morality, ethics and legality.
PDF file of Keynote slides for seminars at the Gruter Institute Conference on Values, Harvard Business School, June 2006; Simon School of Business, U. of Rochester; Fisher College of Business, Ohio State University, Columbus, OH, Sept. 2006, Nottingham College of Business, Nottingham, UK, ESADE Business School, Barcelona, Spain; HEC, Paris, France, Nov. 2006, Yale Symposium on Corporate Governance, Inaugural Lecture, (Yale Law School and Yale School of Organization and Management), New Haven, CT, January 2007, Gruter Institute Squaw Valley Conference: Law, Brain and Behavior, May 2007, Harvard Business School Negotiations Organizations and Markets Seminar, Sept. 2007; Yale School of Management, Sept. 2007: MIT Sloan School of Management Leadership Center, Cambridge, MA, Oct. 2007; Harvard Law School Law, Economics and Organizations Research Seminar, Cambridge, MA, Oct. 2007; USC Marshall School of Business, Finance and Economics Dept. Distinguished Speaker Series, Nov. 2007; LeBow College Corporate Governance Conference, Philadelphia, PA, April 2008; Special Seminar Series, Business Department, Juan Carlos III University, Madrid, Spain, April, 2008; Herbert Simon Lecture, Rajk Laszlo College, Corvinus University of Budapest, Budapest, Hungary, April 21, 2008; Exeter at Said Business School, Oxford, UK, April 24, 2008; U. of Rochester Simon School of Business Alumni Seminar, NYC, May 5, 2008; DePaul U. Kellstdat School of Business, Chicago, IL, May 8, 2008; 1st IESE Conference on Humanizing the Firm and the Management Profession, IESE Business School, Barcelona, Spain, July 2, 2008 Stern Stewart International Finance Summit, Cape Town, South Africa, July 31, 2008; Concordia University John Molson School of Business, Montreal, Quebec, CA Sept. 16, 2008; Institute of Corporate Directors Conference on Governance and Financial Markets in North America, Montreal, Quebec, CA, Sept. 19, 2008; Duisenberg School of Finance, Amsterdam, Netherlands, Oct. 14, 2008; Paduano Faculty Research Symposium in Business Ethics, Stern School of Business, New York, Oct. 23, 2008; Olin School of Business Faculty Forum Sponsored by the Center for Research in Economics and Strategy and the Center for the Study of Ethics and Human Values, Washington University, St. Louis, MO, Nov. 6, 2008; Fisher School of Business, Ohio State U., Columbus, OH, Nov. 7, 2008; United States Air Force Academy, Platinum Series, Colorado Springs, CO, Jan. 21, 2009; Texas A&M Distinguished Lecture Series, College Station, TX, Feb. 10, 2009; Social Innovation Research Seminar Series, INSEAD, Fontainebleau, France, March 16, 2009; Distinguished Scholar/Teacher Lecture Series, McCombs School of Business, U. of Texas, Austin, Texas, Nov. 12, 2009; Hankamer School of Business, Baylor University, Waco, TX, Nov. 13, 2009.
Number of Pages in PDF File: 61
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
Date posted: September 20, 2008 ; Last revised: December 11, 2012