Plato’s observation that humanity is by nature lawless and non-moral is certainly borne out by the South African business landscape littered with unethical business behaviour and corporate governance failures, perpetrated by business leaders in positions of power and influence. Examples are:
- Construction companies collude − 2010 Soccer World Cup stadia
- Aurora saga – reckless management and collapse of the Pamodzi minesAfrican
- Investment Bank – reckless lending
- Tiger brands – bread price-fixing
- Sasol − dubious BEE deal
- PPC − public conflict between board and CEO
- Lonmin and the Marikana – massacre
- PetroSA and Oilgate – scandals
- Pinnacle Holdings – alleged bribery scandal
- Fidentia – greed
- Telkom – corporate governance failure
- SOEs e.g. SABC, SAA and Eskom – corporate governance and board failures
According to King III, company leadership should ensure integrity permeation in all aspects of the company and its operations. Ethical standards should be integrated into all company strategies, operations, practices, conducts, policies and procedures.
The cases mentioned raise questions about behaviour integrity measurement. This article proposes a means by which companies can actually measure integrity levels and address issues proactively to circumvent human greed and weakness.
Capitalism and integrity
Capitalism denotes an economic system in which investment in and ownership of production means, distribution, and exchange of wealth are maintained chiefly by private individuals or corporations Characterised by competitiveness, asset ownership and profit maximisation, capitalism perpetuates individualistic and egocentric economic agendas as opposed to socially focused agendas, thereby dividing society into haves and have-nots – a system wired to ‘breed’ greed and corruption.
From a socialist perspective, capitalism implies the social system whereby the means for producing and distributing goods (factories, transport, etc.) are owned by a small minority, i.e. the capitalist class. The working class majority must sell their work ability in return for a wage or salary, producing goods and services which are subsequently sold at a profit by the capitalist class. Exploitation of the working class enables the capitalist class to live off the profits, while reinvesting part thereof for further wealth accumulation.
The numerous definitions of integrity are founded on personal qualities such as honesty, trustworthiness, strong moral principles and ethical standards that are congruent with one's personal values and beliefs, and good character demonstrated through qualities such as righteousness and sincerity.
The contemporary corporate governance approach allows for modern-day expression and concepts pertaining to capitalism, i.e. the triple bottom line, stakeholder inclusivity and the company as a good corporate citizen. Essentially it proposes that a company should pursue its financial objectives responsibly by behaving accountably towards the society and environment – signifying a philosophical gap between what capitalism is and what corporate governance expects.
Integrity is the bridge, the choice to do that which is right (Kant’s Good Will). Right behaviours, also referred to as ‘proactive morality’, suggest that a business, as an integral part of the community, should maximise shareowners’ profits while serving the objectives of internal and external stakeholders, thereby contributing to the creation of a better society.
Internal stakeholder integrity bridge
External stakeholder integrity bridge
A singular focus on egocentric needs and objectives of the self, thoughts and behaviours will prevail in the highly competitive world of capitalism because of humanity’s mental flaws and weaknesses. This approach is entrenched in capitalist ideas like ‘survival of the fittest’, which Immanuel Kant refers to as humanity’s animal-like instincts/needs to increase chances for survival.
However, by the time these thoughts and behaviours are detected as overt behavioural outcomes, such as serious corporate governance breaches, it is often too late to prevent irreparable damage to the company. Continuous and proactive measuring of the organisation’s behavioural integrity is needed in order to ‘flag’ leadership.
No universal standard exists against which organisational integrity can be measured and benchmarked. Most organisations entrench integrity as a bouquet of value-based behaviours in their codes of ethics and conduct. For example:
- Honest business transacting
- Respectful treatment of employees
- Zero tolerance regarding bribery
The integrity statements above are typically measured as ‘measurable behaviours’ during performance appraisals. A 360° Likert scale input system is often utilised, supposedly based on objective experience and observation. However, it is susceptible to subjective perception. Believing in another’s honesty suggests total trust and lack of suspicion, thus making the observer prone to the halo effect when assessing the honesty of another, especially if the other has the ability to confabulate with utter conviction!
These measures will therefore always possess a degree of subjectivity, thereby rendering their outcomes less valid and reliable, as opposed to a more objective measure of thoughts and behaviour, e.g. polygraph tests.
This article focuses on the measurement of the organisation as a whole, not the individual. Organisations could use quantitative surveys as a continuous and cumulative measure of how external and internal stakeholders experience and perceive integrity-based behaviours of others, thus affording leadership a ‘snap shot’ of the integrity levels within the organisation.
Measures of integrity
Organisational integrity can best be described via qualitative human experiences and perceptions, which, if expressed by a collective of people and quantitatively measured, can render a highly valid and reliable image of the true empirical picture of an organisation’s integrity. However, leadership should also observe other collaborating/supporting measures like staff turnover rates, disciplinary cases, dissent and others.
Various authors’ research and writings on the issues of values and company codes of ethics, and conduct directed me to categorise and describe eight dimensions of integrity in organisations which could be measured via a survey method. They are:
Values: Overt behaviours that add value
Regulation: Policies, procedures, codes and systems regarding integrity-driven organisational behaviours
Conduct practices: Effective and conclusive addressing of conduct and misconduct via reporting and counselling systems and channels
Organisational culture: Collective beliefs, values, and behaviours in an organisation, determining its unique identity
Leadership: The most important aspect of an integrity-driven organisation – followers should perceive leadership as living examples of ethical behaviours
Attitude, trust and climate: Prevailing attitudinal and trust levels of stakeholders find expression as an organisational 'climate'. A negative climate is characterised by low levels of trust and negative attitudes, which is symptomatic of underlying experiences and perceptions of unethical behaviours and is a powerful indicator of the integrity experiences/perceptions of internal stakeholders
Misconduct propensity: Stakeholders’ experience/perception of people within the organisation with unethical tendencies and lack of integrity
Organisation relational wellness: Interpersonal relating levels such as low levels of politicking, high levels of organisational citizenship and similar issues determine relational wellness in organisations. Healthy relating is usually indicative of a happy work environment with a high level of ethics and integrity. Conversely, unhealthy relations display higher unwellness levels and can lead to increased unethical behaviour among stakeholders, resulting in various organisational disorders.
A quantified average of the eight dimensions could therefore produce a composite organisational integrity perception index, utilisable by leadership as an integrity levels measure – a basis for decision making, interventions and similar activities.
Integrity and capitalism: Oxymoron or measurable match?
In my view, the juxtaposition of integrity and capitalism definitely does not constitute an oxymoron! Just as things like profitability, solvency and liquidity can be measured as hard quantums, by the same token we can measure integrity via a quantitative measure, and over time when correlations are drawn between quantified financial and integrity measurements, I am convinced that integrity and capitalism will emerge as a measurable match, i.e. both will be equally quantifiable, and correlations between the two will be able to be determined.
Dr Jacques van Zyl
Dr Jacques van Zyl is a psychologist and director of AssessmentWorld Pty Ltd, a computer-based psychometric and survey development organisation. He is a member of the Ethics Institute of South Africa and facilitates Corporate Governance and Ethics modules at MBA and executive education levels. (za.linkedin.com/in/jacquesvanzyl)