Business integrity: morality check

Integrity is central to the identity of professions such as accountancy. Not
only are accountants required by their professional bodies’ codes of ethics to
be straightforward and honest in all professional and business dealings but from
a personal point of view, integrity can bring its own rewards.

People of integrity will derive a sense of satisfaction, accomplishment and
achievement from knowing that they have tried to do the ‘right thing’. From a
wider community perspective, they may also gain the respect and admiration of
others.

But integrity is also important for business and the economy. The bottom
line is that integrity, both actual and perceived, is fundamental to
establishing trust. Trust relies on relationships, actions and interactions as
well as perceptions.

Damage control

When somebody lies or is suspected of lying, an element of doubt creeps in.
The organisation’s reliability, credibility and reputation is questioned – and
trust is damaged. And the time and cost required to check information and
rebuild trust may result in missed business and investment opportunities.

At a wider level, integrity is a pre-requisite of economic development and
growth. Unethical practices such as bribery, corruption and money laundering
are clear examples of how the lack of integrity on the part of some individuals
is to their benefit at the expense of whole countries by distorting resource
allocation, undermining trust and adversely affecting economic development.

Integrity is associated with moral values such as honesty, fairness and
truthfulness. However, does equating integrity to honesty, fairness and
truthfulness provide an adequate explanation of what integrity means in terms
of day-to-day business behaviour?

Let’s assume that you are a finance director of a start-up in the highly
competitive telecommunications industry.

The company is funded by private equity investors who expect yearly returns
of 15% on the funds they invested in the company. As FD, you are under pressure
from the chief marketing officer and the chief executive to approve the release
of funds into inappropriate investments and projects in order to reassure the
private equity investors that the new start-up company is busy and doing its
job.

But would the average man on the street describe you as a person of
integrity if you registered your concerns with other executive directors and
left it at that?

What if you registered your concerns with other executive directors and if
that didn’t work, informed the private equity investors? What if you then left
the company, even if this damaged your career and resulted in financial loss to
you and your family?

Behaving with integrity is tricky since the principle of integrity involves
not only moral values, but other considerations, such as commitment and
personal qualities.

Individuals of integrity are guided by moral values and motives, which are
translated into commitments. They draw on qualities such as open-mindedness to
assess what the right thing to do is from a wider community perspective.

Their commitments in pursuit of doing the right thing are also likely to
require personal qualities, including perseverance and courage, if they are to
lead to the hard-won achievements expected of individuals of integrity.

For people to have integrity, their moral values, motives, commitments,
qualities and achievements need to be consistent, aligned and interconnected.

This is easy to say, but difficult to do in practice since an individual’s
judgement and behaviour will be influenced by personal, social, organisational
and environmental factors, some of which may help and others hinder.

A person of integrity is likely to be honest and truthful, fair, open and
adaptable, comply with laws, promote community interests, take corrective
action and show consistency.

There will always be ambiguity when evaluating whether or not an individual
has integrity since any assessment will be influenced by the assessor’s own
beliefs about how a person of integrity ought to behave and they, in turn, will
be influenced by context and culture.

Cultural etiquette

For example, in some countries challenging and questioning senior managers
in the search of the truth may be interpreted as behaviour which lacks
integrity since it disrespects more senior management.

The concept of integrity should apply as much to an organisation as it does
to individuals. But how, given that an organisation is actually a collection of
individuals from different backgrounds, with different beliefs, values and
motives, working in different departments, responsible for different goals,
processes and activities?

What is needed is a robust framework that links individuals to a common view
of the organisation’s moral values, motives, commitments, qualities and
achievements.

Our proposed framework has five key drivers – leadership, strategy,
policies, information and culture. These drivers need to be interconnected,
mutually reinforcing and effective throughout the organisation.

Failure of a driver in one area can undermine the integrity of the entire
organisation. Whereas Enron’s code of conduct valued integrity, it did not
prevent some of its executives from becoming involved in self-enriching
transactions.

Leaders are perfectly placed to instil integrity in their organisation by
influencing its strategy, objectives, structure, policies, procedures,
decision-making, communication and culture. They should lead by example and
demonstrate the behavioural characteristics associated with integrity such as
honesty, truthfulness, fairness and compliance with laws.

Thus, there is a clear link between personal and organisational integrity,
although the importance of this link will be dependent on a number of factors,
including the seniority and the responsibilities of the individual concerned,
as well as the culture of the organisation.

What is clear is that integrity is a complicated matter of crucial
importance to individuals, organisations and economies. So, go and cajole your
leaders and if you are a leader yourself, look at your policies. Just don’t
wait until things go wrong.

Anne Davis is ethics manager at the ICAEW