Michael Jensen’s and Werner Erhard’s Talk on Integrity

Posted by Robert Jackson, Managing Editor, Harvard Law School Corporate Governance Blog, on Friday November 9, 2007 at 1:35 pm
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Last week, in Harvard Law School’s Seminar in Law, Economics, and Organization, Professor Michael Jensen and Werner Erhard presented a paper on integrity that they co-authored with Steve Zaffron. The slides used in their talk are available here.

The abstract of their paper, entitled Integrity: A Positive Model that Incorporates the Normative Phenomena of Morality, Ethics, and Legality, runs as follows:

“We present a positive model of integrity that provides powerful access to increased performance for individuals, groups, organizations, and societies. Our model reveals the causal link between integrity as we distinguish and define it, and increased performance 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 role in productivity has been largely ignored or unnoticed 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 terms 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. Furthermore, within their respective realms, each of the four belongs to a distinct and separate domain. Integrity exists in a positive realm devoid of normative content. Morality, ethics and legality exist in a normative realm of virtues, but in separate and distinct domains.

This new model: 1) encompasses all four terms in one consistent theory, 2) makes clear and unambiguous the ‘moral compass’ potentially available in each of the three virtue phenomena, and 3) provides this clarity in a way that 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. Integrity is, thus, not about good or bad, or right or wrong, or what should or should not be.

We distinguish the domain of integrity as the objective state or condition of an object, system, person, group, or organizational entity, and define integrity as: a state or condition of being in 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 what is said by or on behalf of the group or organization being whole and complete. 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 be keeping your word, you say that you will not to those who were counting on your word and clean up any mess 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 one’s integrity guarantees you will not be a trustworthy person (thereby reducing the workability of relationships); and, with the exception of some minor qualifications, also ensures that you will not be a person of integrity (thereby reducing the workability of your life). Your performance, therefore, will suffer. The virtually automatic application of cost-benefit analysis to honoring one’s word (an inherent tendency in most of us) lies at the heart of much out-of-integrity and untrustworthy behavior in modern life.

In conclusion, we show that defining integrity as honoring one’s word provides 1) 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.”

Keynote slides of the presentation are available here.

 

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