Research Handbook on Organisational Integrity (Research Handbooks in Business and Management series) 1803927925, 9781803927923

Table of contents :
Front Matter
Copyright
Contents
Contributors
1. Introduction to Research Handbook on Organisational Integrity
PART I Positions of organisational integrity
2. Managing for organisational integrity
3. Contemporary research into organisational integrity
4. Concepts closely related to organisational integrity
5. Integrity, integrity violations and integritism
PART II Perspectives on organisational integrity
6. A nature perspective on organisational integrity
7. An evolutionary perspective on individual integrity in organisations
8. A spiritual perspective on organisational integrity
9. A criminological perspective on organisational integrity
10. A positive behavioural ethics perspective on organisational integrity
11. An intersubjective perspective on organisational integrity
12. A practical reasoning perspective on corporate integrity
13. A discursive justification perspective on organisational integrity
14. A virtue ethics perspective on organisational integrity
15. A contractual perspective on organisational integrity
16. A regulatory perspective on organisational integrity
17. An institutional perspective on organisational integrity
18. A corporate governance perspective on organisational integrity
19. A critical perspective on organisational integrity
PART III Dimensions of organisational integrity
20. Organisational integrity as social coherence
21. Organisational integrity as congruence
22. Organisational integrity as wholeness
23. Organisational integrity as a virtue
24. Organisational integrity as an epistemic virtue
PART IV Characteristics of organisational integrity
25. Organisational integrity and responsibility
26. Organisational integrity and accountability
27. Organisational integrity and voice
28. Organisational integrity and inclusion
29. Organisational integrity and transparency
30. Organisational integrity and hypocrisy
31. Organisational integrity, citizenship, and legitimacy
32. Organisational integrity, trust, dissociative identity, and HR
33. Organisational integrity and success
PART V Management of organisational integrity
34. Integrity management systems
35. The weak point analysis as a method for measuring and improving organisational integrity
36. Organisational integrity, culture, and performance
37. Operationalising integrity within supply chains
Index

Citation preview

RESEARCH HANDBOOK ON ORGANISATIONAL INTEGRITY

Research Handbook on Organisational Integrity Edited by

Muel Kaptein Professor of Business Ethics and Organisational Integrity, Erasmus University Rotterdam, the Netherlands

Cheltenham, UK • Northampton, MA, USA

© The Editor and Contributing Authors Severally 2024

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical or photocopying, recording, or otherwise without the prior permission of the publisher. Published by Edward Elgar Publishing Limited The Lypiatts 15 Lansdown Road Cheltenham Glos GL50 2JA UK Edward Elgar Publishing, Inc. William Pratt House 9 Dewey Court Northampton Massachusetts 01060 USA A catalogue record for this book is available from the British Library Library of Congress Control Number: 2023951252 This book is available electronically in the Business subject collection http://dx.doi.org/10.4337/9781803927930

ISBN 978 1 80392 792 3 (cased) ISBN 978 1 80392 793 0 (eBook)

EEP BoX

Contents

List of contributorsviii 1

Introduction to Research Handbook on Organisational Integrity1 Muel Kaptein

PART I

POSITIONS OF ORGANISATIONAL INTEGRITY

2

Managing for organisational integrity Lynn Sharp Paine

3

Contemporary research into organisational integrity Carole L. Jurkiewicz

24

4

Concepts closely related to organisational integrity Duane Windsor

36

5

Integrity, integrity violations and integritism Leo Huberts

54

PART II

8

PERSPECTIVES ON ORGANISATIONAL INTEGRITY

6

A nature perspective on organisational integrity Craig Dunn

70

7

An evolutionary perspective on individual integrity in organisations Marc Orlitzky

83

8

A spiritual perspective on organisational integrity Tracy H. Porter, Kelly Gillerlain, and Nicholas Messina

97

9

A criminological perspective on organisational integrity Nina Tobsch, Benjamin van Rooij, and Marieke Kluin

111

10

A positive behavioural ethics perspective on organisational integrity Linda Klebe Treviño, Niki A. den Nieuwenboer, and Jennifer Kish-Gephart

129

11

An intersubjective perspective on organisational integrity Wim Vandekerckhove

162

12

A practical reasoning perspective on corporate integrity Thomas Donaldson

175

13

A discursive justification perspective on organisational integrity Dirk Ulrich Gilbert, Michael Behnam, and Maximilian J. L. Schormair

190

v

vi  Research handbook on organisational integrity 14

A virtue ethics perspective on organisational integrity Ignacio Ferrero, Maria Clara Ames, and Mauricio C. Serafim

210

15

A contractual perspective on organisational integrity Ben Wempe and Johan Wempe

226

16

A regulatory perspective on organisational integrity Martin de Bree and Annemiek Stoopendaal

243

17

An institutional perspective on organisational integrity Timo Fiorito and Michel Ehrenhard

257

18

A corporate governance perspective on organisational integrity Peter Verhezen

280

19

A critical perspective on organisational integrity Marcel Becker and Edgar Karssing

301

PART III DIMENSIONS OF ORGANISATIONAL INTEGRITY 20

Organisational integrity as social coherence Marvin T. Brown

319

21

Organisational integrity as congruence Anthony D. Molina

335

22

Organisational integrity as wholeness Thomas Maak and Nicola M. Pless

352

23

Organisational integrity as a virtue Miguel Alzola

363

24

Organisational integrity as an epistemic virtue Marco Meyer

377

PART IV CHARACTERISTICS OF ORGANISATIONAL INTEGRITY 25

Organisational integrity and responsibility Mihaela Constantinescu

394

26

Organisational integrity and accountability Natasha V. Christie

415

27

Organisational integrity and voice Brett Beasley with Mary Gentile

430

28

Organisational integrity and inclusion Geoffrey A. Silvera, Jonathan M. Fisk, and Courtney N. Haun

448

29

Organisational integrity and transparency Colin Higgins and Samuel Tang

470

Contents  vii 30

Organisational integrity and hypocrisy Gökhan Kılıçoğlu and Derya Kılıçoğlu

485

31

Organisational integrity, citizenship, and legitimacy Jacob Dahl Rendtorff

497

32

Organisational integrity, trust, dissociative identity, and HR Roger C. Mayer and Paul W. Mulvey

511

33

Organisational integrity and success Madeleine J. Fuerst and Christoph Luetge

525

PART V

MANAGEMENT OF ORGANISATIONAL INTEGRITY

34

Integrity management systems Jeroen Maesschalck, Alain Hoekstra and André van Montfort

542

35

The weak point analysis as a method for measuring and improving organisational integrity Carsten Stark and Yannik Morbach

36

Organisational integrity, culture, and performance Abidoun Owoloja and Louise Manning

577

37

Operationalising integrity within supply chains Louise Manning

591

558

Index610

Contributors

Miguel Alzola is Grose Family Professor and Associate Professor of Business Ethics at Fordham University in New York City, USA. Miguel’s research interests lie at the intersection of moral psychology, organisational behaviour, and moral philosophy. He champions the character approach to business and has published on the psychology of virtue, the reconciliation of empirical and normative research in business ethics, corporate reputation, the responsibilities of business in wartime, human resource management, and corporate political activities. His work has been published in leading business ethics journals and has received numerous awards and research grants. Maria Clara Ames is Associate Researcher at AdmEthics – Ethics, Virtues, and Moral Dilemmas in Administration at the State University of Santa Catarina, Florianópolis, Brazil, where she concluded her PhD in Administration. She is additionally doing a Master’s in Governance and Culture of Organizations at the University of Navarra, Spain. She has published articles in journals such as Business Ethics: The Environment and Responsibility, Public Organization Review, and Journal of Contemporary Administration. Her main research interests are on virtue ethics, ethics and artificial intelligence, and anthropological foundations for administration. Brett Beasley is Term Assistant Teaching Professor at the University of Notre Dame, IN, USA and the Writer and Editorial Program Manager for Notre Dame Research. His research focuses on strategies for communicating ethics and values. He is the co-author of O’Hara’s Heirs: Business Education at Notre Dame and his other writings have appeared in a wide variety of scholarly and popular publications. He holds degrees from Calvin University, Loyola University Chicago and the University of Notre Dame. Marcel Becker is Associate Professor of Ethics at Radboud University, Nijmegen, the Netherlands. He specializes in virtue ethics and works in different fields of applied ethics. As a philosopher, he considers it as his main task to ‘shuttle’ between societal problems and centuries-old wisdom. He has written books on the ethics of public administration, digital ethics, and judicial ethics. He also offers reflections on these fields to students at Radboud University, as well as in wider public arenas. Michael Behnam is Dean of the Quinlan School of Business at Loyola University Chicago, IL, USA and Professor of Strategy and International Business. Previously he was Professor and Dean of Graduate Programs and Academic Affairs at the Sawyer Business School, Suffolk University in Boston, MA, USA. His work has been published in leading journals such as Academy of Management Journal, Journal of Business Ethics, Business Ethics Quarterly, Business Strategy and the Environment, Business & Society, and Journal of Management Inquiry. Martin de Bree is Postdoctoral Researcher at Rotterdam School of Management, Erasmus University Rotterdam, the Netherlands. His main research focus is on the effectiveness of regulation and law systems and the interface between public and private parties with regard viii

Contributors  ix to law and regulation from an organisational studies perspective. His publications cover innovative law-making and regulation, meta-regulation, system-based regulation, self-regulation, compliance management, and public and corporate governance. Marvin T. Brown created the ongoing blog ‘Climate of Justice Project.org’ after retiring from the philosophy department, the University of San Francisco, CA, USA in 2020. Like his latest book, A Climate of Justice: An Ethical Foundation for Environmentalism, the blog tries to promote a social climate of mutual recognition and reciprocity to handle our climate crisis. While his earlier work concentrated on the ethical relationship between organisations and society, he currently focuses more on the relationships between social worlds and the planet. Natasha V. Christie is Associate Professor of Political Science and Public Administration at the University of North Florida, Jacksonville, FL, USA. Before joining the university, she worked as a court analyst for the circuit court, which serves as the inspiration for much of her academic work in the field of public administration. She has published on topics such as accountability in the public sector, teaching programme evaluation, felon disenfranchisement policies, and the meaning behind how we talk about criminal justice policies. Mihaela Constantinescu is Lecturer at the Faculty of Philosophy, University of Bucharest, Bucharest, Romania and Executive Director of the Research Centre in Applied Ethics (CCEA). Her research includes virtue ethics, business ethics, human–robot interaction, and artificial intelligence ethics, with a focus on the normative interplay between the concepts of moral responsibility and moral agency in relation to individuals, organisations, and artificial intelligence systems. Before moving to academia, she worked as a communications consultant in the private, governmental, and non-governmental organisation fields. Thomas Donaldson is Mark Winkelman Professor at the Wharton School of the University of Pennsylvania, Philadelphia, PA, USA. His interests include ethics, corporate governance, and corporate responsibility. His books include The Ethics of International Business, Corporations and Morality, and Ties That Bind (with T. Dunfee). His articles have appeared in the Academy of Management Review, Ethics, Harvard Business Review, Business Ethics Quarterly, and Economics and Philosophy. He served as Associate Editor of the Academy of Management Review and the Business Ethics Quarterly. Craig Dunn holds an endowed Professorship of Business and Sustainability at Western Washington University, Bellingham, WA, USA and is Associate Professor Emeritus of San Diego State University, CA, USA. He holds a PhD in Business Policy with a minor in Philosophy. His research interests include managerial ethics, corporate social responsibility, and the meaning of work. Craig is active in the International Association for Business and Society, serving on the Board of Directors as well as being a Past President. Michel Ehrenhard is Associate Professor of Strategic Entrepreneurship in the Hightech Business and Entrepreneurship Department of the University of Twente, Enschede, the Netherlands. He studies entrepreneurial strategies for responsible organising aided by technology as a change enabler or market opportunity. Some examples are mission drift caused by algorithmic decision-making, opportunity recognition for sustainable nanotechnology, and impact measurement of a rural services platform. His work has appeared in journals such as Organization Science, Journal of Business Venturing, and Social Science & Medicine.

x  Research handbook on organisational integrity Ignacio Ferrero is Professor of Business Ethics at the University of Navarra, Pamplona, Spain. He has been Visiting Scholar at Bentley University, at Harvard University, and at the University of Notre Dame. He has published several books on business ethics and articles in academic journals such as Business Ethics Quarterly, Journal of Business Ethics, Business Ethics: A European Review, and Business and Society Review. He is co-founder of the research group on virtue ethics in business and management, with a worldwide network of collaborators. Timo Fiorito is Postdoctoral Researcher in the Department of Organization Sciences at the Vrije Universiteit Amsterdam, the Netherlands. His research deals with corporate responsibility and misconduct, organisational institutionalism, governance, values, and related institutional processes. In his current research he focuses on partnerships between law enforcement agencies and financial firms established to detect and address financial crimes. His work has been published in Research in the Sociology of Organizations, Journal of Change Management, and Journal of Public Affairs. Jonathan M. Fisk is Associate Professor in the Department of Political Science at Auburn University, AL, USA, as well as the internship coordinator for the Master of Public Administration programme. He also serves as Chairperson for the American Society for Public Administration’s Section on Environmental and Natural Resource Administration and is on the graduate education committee for the International City and County Management Association. His publications have covered energy policy, environmental policy, water policy, and diversity, equity, and inclusion. Madeleine J. Fuerst is PhD Researcher at the Chair of Business Ethics at the Technical University of Munich, Germany. Her PhD focuses on the conceptualisation and measurement of the organisational integrity construct, on which she has published in leading journals, including Business Ethics, the Environment & Responsibility and Business and Society Review. She holds a Master’s degree from Ludwig Maximilian University of Munich. She is also Director at a management consultancy where she advises international companies in business and cultural transformation. Mary Gentile is the creator of Giving Voice to Values, a pioneering curriculum for values-driven leadership shared in over 1,450 sites globally and featured in Financial Times, Harvard Business Review, Stanford Social Innovation Review, and McKinsey Quarterly. She is a consultant, speaker, and author, and was the Richard M. Waitzer Bicentennial Professor of Ethics at UVA Darden, Charlottesville, VA, USA (2016–22), faculty at Babson College (2009–2015) and writer/manager/faculty at Harvard Business School (1985–95). She holds a BA from The College of William and Mary, Williamsburg, VA, USA and PhD from the State University of New York at Buffalo, NY, USA. Dirk Ulrich Gilbert is Professor of Business Ethics and Management at the University of Hamburg, Germany. He received his PhD from the University of Frankfurt, Germany and held positions at the University of New South Wales, Sydney, Australia and the University of Nuremberg, Germany. His most recent research focuses on international accountability standards, labour rights in global supply chains, political corporate social responsibility, and responsible management education. He has published in internationally acclaimed journals

Contributors  xi such as Business Ethics Quarterly, Business & Society, Journal of Management Inquiry, Management International Review, and Journal of Business Ethics. Kelly Gillerlain has been Full Professor of business, marketing, and management at Tidewater Community College, Norfolk, VA, USA since 2005 and Full Adjunct Professor at University of Maryland Global Campus, Adelphi, MD, USA since 2016. She has held administrative positions as an academic dean, a dean of student life and conduct, and a campus dean overseeing a campus of approximately 8,000 students. She has co-authored marketing and social media marketing courses using Open Education Resources. Courtney N. Haun is Assistant Professor and Director of the Healthcare Administration Undergraduate Program in the Department of Healthcare Administration and Informatics at the School of Public Health at Samford University, Homewood, AL, USA. As a healthcare scholar, Haun’s research is focused on the influence of multifaceted factors (e.g., diversity, equity, and inclusion; patient experience; punctuating events) on organisational and care quality outcomes. She also serves as Samford University’s Inaugural Diversity Faculty Fellow. Colin Higgins is Professor of Management in the Deakin Business School, Deakin University, Melbourne, Australia. His research studies how business organisations respond to and shape the broader sustainability agenda through their reporting activity. He has published in leading accounting, management, and sustainability-related journals. He was the 2022 Division Chair of the Social Issues in Management Division of the Academy of Management, a fellow of the International Association for Business & Society, and Co-Editor-in-Chief of Business & Society. Alain Hoekstra has more than twenty years of experience as an integrity management expert. He studied Public Administration at Erasmus University Rotterdam, the Netherlands and has worked in different positions for the Dutch Ministry of the Interior and Kingdom Relations (currently as a senior policy advisor for the Dutch Whistleblowers Authority). His PhD focused on integrity management at the Rotterdam School of Management and he has published numerous articles on this topic. He is also active in several committees and working groups to advise national and international institutions. Leo Huberts is Emeritus Professor of Public Administration at the Department of Political Science and Public Administration of the Vrije Universiteit Amsterdam, the Netherlands. His main areas of research concern systems of governance and power and the quality, integrity, and ethics of governance. He is author or editor of more than 20 books and many articles on the influence on governmental policy, power theory and measurement, police administration and integrity, public corruption and fraud, and integrity management. Carole L. Jurkiewicz is Ethics and Public Integrity Faculty Affiliate at the University of Colorado – Colorado Springs, CO, USA and the owner of Jurkiewicz & Associates. She spent 34 years as a tenured professor and chair at top universities in the USA. She has published over 190 books, articles, and chapters. She has received numerous awards for scholarship, teaching, and leadership in the profession. In 2020 she received the international Lifetime Achievement Award for Ethics and Integrity. Muel Kaptein is Professor of Business Ethics and Organisational Integrity at the RSM Erasmus University, Rotterdam, the Netherlands. His books include Ethics Management

xii  Research handbook on organisational integrity (1998) and The Balanced Company: A Theory of Corporate Integrity (2002). His articles have appeared in Academy of Management Review, Journal of Management, Journal of Organizational Behavior, and Human Relations. He has published over twenty-five articles in Journal of Business Ethics. He served as Section Editor of the Journal of Business Ethics (2002–18). He is also Equity Partner at KPMG Integrity & Compliance. Edgar Karssing is Professor of Philosophy, Professional Ethics and Integrity Management at Nyenrode Business Universiteit, Breukelen, the Netherlands. He has a background in philosophy and economics. Edgar has been doing research on integrity in professional practice since 1995. He obtained his PhD from Erasmus University Rotterdam, the Netherlands. Derya Kılıçoğlu is Associate Professor at Eskişehir Osmangazi University, Turkey. She has been a visiting researcher at the University of Cambridge, UK and Manchester Metropolitan University, UK. Her research interests include organisational change, leadership in education, organisational behaviours, and educational policy. Her articles have been published in journals such as Oxford Review of Education, Studies in Philosophy and Education, and Educational Management, Administration & Leadership. Gökhan Kılıçoğlu is Associate Professor at Eskişehir Osmangazi University, Turkey. He has been a visiting researcher at the University of Cambridge, UK and Manchester Metropolitan University, UK. He has had several papers published in Oxford Review of Education, Studies in Philosophy and Education, and Educational Management, Administration & Leadership. His research interests are organisational hypocrisy, educational policy, leadership in educational organisations, and the sociology of education. Jennifer Kish-Gephart is Associate Professor of Organization Studies at the Isenberg School of Management at the University of Massachusetts in Amherst, MA, USA. Broadly, her research interests include behavioural business ethics, diversity, and inequality. Her research has been published in top-tier management outlets, including the Academy of Management Journal, Academy of Management Review, Journal of Applied Psychology, Journal of Management, and Research in Organizational Behavior. She serves on the editorial boards of the Academy of Management Journal, Business Ethics Quarterly, and Journal of Management. Marieke Kluin is Assistant Professor of Criminology at the Faculty of Law, Leiden University, the Netherlands. She is involved in teaching and coordination of various courses at the undergraduate and graduate level. Her interdisciplinary research focuses on white-collar crime, environmental crime, compliance, and regulatory enforcement. At present, she is involved in projects which focus on corporate crime by using a life-course criminology perspective, public perceptions of (environmental) crime, toxic corporate culture, and multinationals in court. Christoph Luetge is Full Professor of Business Ethics at the Technical University of Munich, Germany and the Director of the TUM Institute for Ethics in Artificial Intelligence. He is Distinguished Visiting Professor at Tokyo University, Japan and has held further visiting positions at Harvard and others. Having taken his PhD in 1999 and his habilitation in 2005, he was awarded a Heisenberg Fellowship by the German Research Foundation in 2007. His books have been published by Oxford University Press, Palgrave Macmillan, Edward Elgar, and others.

Contributors  xiii Thomas Maak is the inaugural Professorial Chair in Ethics at the University of Queensland Business School, Brisbane, Australia. Prior to joining the University of Queensland, he served as Director of the Centre for Workplace Leadership and Professor of Leadership at the University of Melbourne, Australia. He held appointments at ESADE, INSEAD, Wharton, and the University of St Gallen, Switzerland. His work focuses on responsible and values-based leadership at the individual, group, and organisational level, linking ethical theory, political philosophy, relational thinking, and stakeholder theory. Jeroen Maesschalck is Professor at the Institute of Criminology at KU Leuven, Belgium. His research focuses on public sector ethics as well as management in the criminal justice system. He has consulted on ethics management both within Belgium (local, regional, and federal government) and internationally (e.g., the Organisation for Economic Co-operation and Development). He studied Public Administration and Philosophy at the University of Ghent, Belgium and at the London School of Economics, UK. He holds a PhD in Social Sciences from KU Leuven. Louise Manning is Professor of Sustainable Agri-food Systems at the Lincoln Institute for Agri-food Technology, University of Lincoln, UK. She has published over 125 peer-reviewed papers, several books, and multiple book chapters in the areas of food policy, food supply chain management, sustainability, and organisational integrity. Roger C. Mayer is Professor of Leadership in the Department of Management, Innovation and Entrepreneurship at the Poole College of Management, NC State University, Raleigh, NC, USA. He received a PhD from Purdue University, West Lafayette, IN, USA. A leading scholar on trust in organisations, his research has been published in many premier scholarly journals and cited tens of thousands of times (according to Google Scholar). He serves on the editorial boards of Journal of Management, Journal of Managerial Psychology, and Journal of Trust Research. Nicholas Messina received a doctorate in management at Cleveland State University, OH, USA. His research focuses on healthcare administration, broadly addressing topics such as teams and crisis management, and his dissertation specifically addresses the impact of caregiver burden on workplace outcomes. He has been published in peer-reviewed journals including the Journal of Hospital Management and Health Policy and Management Research Review, along with presenting at multiple conferences. Marco Meyer has led a research group at the University of Hamburg, Germany since 2020, focusing on the ethical and political implications of organisational knowledge and decision-making. He holds a PhD in Philosophy from the University of Cambridge, UK and a PhD in Economics from the University of Groningen, the Netherlands. His main publications have focused on organisational ethics, the ethics of finance, and economic justice. Anthony D. Molina is Associate Professor and Chairperson of the Department of Political Science at Kent State University, OH, USA. Previously, he held positions at the University of South Dakota, Vermillion, SD, USA and at Cleveland State University, OH, USA. His research focuses on administrative ethics, public service integrity, and comparative anti-corruption policy. His work has appeared, among other venues, in American Review of Public Administration, Public Integrity, Administration and Society, Public Administration Quarterly, and the International Journal of Organization Theory and Behavior.

xiv  Research handbook on organisational integrity André van Montfort is Associate Professor in Public Administration at Vrije Universiteit Amsterdam, the Netherlands, a deputy judge in the district court of Overijssel, and the local ombudsman of the Dutch municipalities of De Wolden and Hoogeveen. His research focuses on the design and functioning of integrity management systems and administrative legal procedures. He has recently (co-)edited study books on law for non-lawyers and public policy. Yannik Morbach is Lecturer in Economic Sociology at Hof University, Germany and a PhD student at the University of Erlangen–Nuremberg, Germany. He is also Managing Director of a process management firm. His PhD revolves around fairness norms and refusal of payment in consumer transactions. He obtained his Bachelor’s degree in Business Administration from Hof University and his Master’s degree in Sociology from Otto-Friedrich-University Bamberg, Germany. Paul W. Mulvey is Alumni Distinguished Undergraduate Professor in the Poole College of Management at NC State University, Raleigh, NC, USA. Paul earned a PhD from The Ohio State University, Columbus, OH, USA and a Bachelor’s degree from Lehigh University, Bethlehem, PA, USA. He has won several teaching awards and his research focuses on employee motivation and rewards, compensation systems, teams, recruitment, organisational culture, and toxic leadership. His research has been published in journals including the Academy of Management Journal, Industrial Relations, and Organizational Behavior & Human Decision Processes. Paul serves as an associate editor of Group and Organization Management. Niki A. den Nieuwenboer is Associate Professor of Organizational Behavior and Business Ethics at the University of Kansas School of Business, Lawrence, KS, USA. Her research focuses on (un)ethical behaviour in the workplace, ethics and compliance management, and neurodiversity at work. She has published scholarly articles in top management journals and is currently serving as Associate Editor for Business Ethics Quarterly. Marc Orlitzky is Research Fellow at the University of Warsaw, Poland. His research interests focus on integrity/business ethics, evolutionary theory, corporate performance, psychometric meta-analysis, and organisational behaviour and human resources management. His award-winning research has appeared in such journals as Organization Studies, Organizational Research Methods, Personnel Psychology, Business Ethics Quarterly, Journal of Business Ethics, Academy of Management Perspectives, AMLE, Business & Society, International Journal of Human Resource Management, Long Range Planning, and Research Policy, among many others. Abidoun Owoloja began his career as a banker with Zenith Bank Nigeria, where he worked for more than a decade. He holds an undergraduate degree in Microbiology as well as two Master’s degrees, one in Environmental Quality Management and the other in Agri-food Technology, the latter at the University of Lincoln, UK. Lynn Sharp Paine is Baker Foundation Professor and John G. McLean Professor, Emerita, at Harvard Business School, Boston, MA, USA, where she co-founded the required MBA course Leadership and Corporate Accountability. She has written widely on leadership and corporate governance, with a focus on combining high ethical standards and outstanding financial results. Her most recent book is Capitalism at Risk: How Business Can Lead. She has served

Contributors  xv on numerous boards and advisory panels, including The Conference Board’s Blue Ribbon Commission on Public Trust and Private Enterprise. Nicola M. Pless is Chaired Professor of Management at the University of South Australia, Adelaide, Australia and former Vice President Leadership Development. She served at the World Bank, as Honorary Jef-Van-Gerwen Chair (University of Antwerp, Belgium), and on the faculties of ESADE, INSEAD, and the University of St Gallen, Switzerland. She is the recipient of several research and teaching awards (including the Aspen Institute’s Faculty Pioneer Award). Her research has appeared in leading academic journals (e.g., Human Resource Management, Journal of Business Ethics, Journal of Management Studies) and has been featured in the media (e.g., BBC, Business Week, Fortune). Tracy H. Porter is Associate Professor of Management at Cleveland State University, OH, USA. Within this role she teaches a variety of healthcare management courses. Her research currently focuses on the healthcare management field and specifically the influence of leadership and individual differences on the context. Her research has been presented at a variety of international conferences and published in top-tier journals such as Health Care Management Review, Medical Care Research & Review, and Journal of Vocational Behavior. Jacob Dahl Rendtorff is Professor of Philosophy of Management and Ethics at Roskilde University, Denmark. His research has a broad perspective on philosophy of management, business ethics, sustainability, corporate social responsibility, bioethics and biolaw, human rights, political theory, and philosophy of law. His recent book is Philosophy of Management and Sustainability: Rethinking Business Ethics and Corporate Social Responsibility in Sustainable Development. Benjamin van Rooij is Professor of Law and Society at the Faculty of Law, the University of Amsterdam, the Netherlands. He directs the Center for Law and Behavior, also at the University of Amsterdam. He is also a Global Professor of Law at the University of California, Irvine, CA, USA. He studies and teaches on the interaction between law and behaviour. His current research focuses on individual differences in compliance, toxic corporate culture, and assumptions about behavioural change. Maximilian J. L. Schormair is Assistant Professor in Business Ethics at Trinity Business School, Trinity College Dublin, Ireland. He received his PhD in the field of business ethics from the University of Hamburg, Germany. His research interests focus on multistakeholder governance, stakeholder engagement, political corporate social responsibility, deliberative democracy, business and human rights, and corporate sustainability. His research has been published in journals such as Business Ethics Quarterly, Business & Society, and Journal of Business Ethics. Mauricio C. Serafim is Full Professor in the Department of Public Administration and the Administration Graduate Program at the State University of Santa Catarina, Florianópolis, Brazil. He leads the research group AdmEthics – Ethics, Virtues and Moral Dilemmas in Administration. His academic experience covers the areas of administration and organisational studies and his research interests include moral dilemmas and rationality in organisations; innovative practices of research, teaching and learning in ethics in administration; tech ethics; and interfaces between ethics and anthropological dimension in administration.

xvi  Research handbook on organisational integrity Geoffrey A. Silvera is Associate Professor in the Department of Health Services Administration at The University of Alabama at Birmingham, AL, USA. He also serves on the editorial board of Quality Management in Healthcare and as Associate Editor of the Patient Experience Journal. Primarily, his research centres on the influence of strategic management on patient experience, patient safety, health information technology, and diversity, equity, and inclusion. In addition to his scholarly contributions, he has aided organisations in the development, strategic initiation, and sustaining of inclusionary practices and has led professional workshops on these topics. Carsten Stark is Senior Professor for Organization Studies and International Management at Hof University, Germany, as well as Director of the Institute of Corruption Prevention. He earned his PhD at the University of Bamberg, Germany and previously worked as an assistant professor at the University of Siegen, Germany. Prior to this, he studied sociology, political science, and history at the universities of Marburg, Jena, and Düsseldorf, Germany, with major research interests in corruption, political sociology, and internet democracy. Annemiek Stoopendaal worked as Assistant Professor of Organizational Anthropology in Health Care at the Department of Health Policy and Management, Erasmus University Rotterdam, the Netherlands. Her research interests are in healthcare management and governance, with specific emphasis on the work and behaviour of healthcare managers, complex interventions, and the governance, regulation, and supervision of quality and safety in healthcare. She is interested in the boundaries and bindings between different levels in the organisation of healthcare. Samuel Tang is Lecturer in Business and Sustainable Development and Course Director of the Business and Sustainability MSc at University College London, UK. He is an Aspen UK Rising Leaders Fellow and Education Industry Network Ambassador. He works with small and medium-sized enterprises on their sustainability strategy and was a member of Business Green’s Net Zero Festival 2022 Advisory Board. His research on business responses to climate change, environmental regulation, and transparency in business sustainability has been published in leading geography and management journals. Nina Tobsch is PhD Researcher at the University of Amsterdam, the Netherlands where she studies the relationship between organisational culture and organisational crime, with a specific focus on departmental culture and police misconduct. Linda Klebe Treviño is Distinguished Professor of Organizational Behavior and Ethics in the Smeal College of Business at Pennsylvania State University, State College, PA, USA. She has published over ninety peer-reviewed articles and three books. She is an elected member of the Academy of Management Fellows. Ethisphere named her one of business ethics’ 100 most influential people in 2015. In 2018, her research was named among the most impactful because of its representation in management textbooks and it was ranked in the top 1 per cent by citations in Web of Science from 2006 to 2016. Wim Vandekerckhove is Professor of Business Ethics at EDHEC Business School, France. He holds a PhD from Ghent University, Belgium. Before joining EDHEC, he held a lecturer post at Ghent University and visiting scholarships at the University of Oslo (Norway), Griffith University (Australia), and the International Anti-Corruption Academy (Laxenburg, Austria), and was Professor of Business Ethics at the University of Greenwich (London, UK). Wim has

Contributors  xvii been Editor-in-Chief for Philosophy of Management and currently serves as Section Editor for the Journal of Business Ethics. Peter Verhezen has been Visiting Professor at the University of Antwerp, Belgium since 2013. Prior to this, he was Associate Professor at the University of Melbourne, Australia from 2007 until 2019 and Research Fellow at the Harvard Kennedy School, Cambridge, MA, USA from 2010 until 2012. He has published in the fields of global governance, boards, and business ethics. As partner of the Boardroom Partnership, he advises boards on risk, governance, and environmental, social, and governance investments. Ben Wempe is Emeritus Professor in the Business-Society Management department at Erasmus University Rotterdam, the Netherlands. He has taught on corporations and justice and the moral limits of markets. He has published in Organizational Studies, Business Ethics Quarterly, and the Journal of Business Ethics, among others. He is a regular attendee of international conferences such as The International Association for Business and Society (IABS) and The Society for Business Ethics. In 2007 he organised IABS’s annual conference in Florence. Johan Wempe is Emeritus Professor in Business Ethics at the School of Business and Economics, Vrije Universiteit Amsterdam, the Netherlands. His research interests include corporate integrity, sustainability, governance, artificial intelligence and ethics, and the circular economy. He has published articles in the Journal of Business Ethics, Business Ethics: A European Review, Journal of Corporate Citizenship, Journal of Cleaner Production, and Voluntary Sector Review. He is the author of the books The Balanced Company (2002) and Management en Moraal (1991). Johan was a partner at KPMG. He is the founder of CSR Netherlands. Duane Windsor is Lynette S. Autrey Professor of Management at Rice University’s Jesse H. Jones Graduate School of Business, Houston, TX, USA. His main research interests are corporate social responsibility, stakeholder theory, and environmental sustainability. He is interested in anti-corruption reform theory and practice. He has published in such journals as Business & Society, Business Ethics Quarterly, Journal of Business Ethics, Journal of Business Research, Journal of Management Studies, Philosophy of Management, and Public Administration Review.

1. Introduction to Research Handbook on Organisational Integrity Muel Kaptein

The answer to the question, “Why study organisational integrity?” could be short and sweet: “Organisational integrity is a rich concept”. To the logical follow-up question, “Why is organisational integrity a rich concept?”, the answer could be: “Organisational integrity is valuable, unique, versatile, and holistic”. Therefore, these are four reasons why organisational integrity is a rich concept. The concept of organisational integrity is a rich one primarily because organisational integrity itself is valuable. Organisational integrity is precious, admired, important, and even necessary and essential (Erhard, Jensen, & Zaffron, 2018; Koehn, 2005). Without integrity, there is no society, and without organisational integrity, no organisations. Therefore, the study of organisational integrity is valuable and relevant because this contributes to the science and practice of integrity of organisations and thus of society. The concept of organisational integrity is a rich one because organisational integrity is unique. It is unique not because it is scarce in practice, at least we hope it is not, but because organisational integrity is about the singularity, individuality, originality, authenticity, purity, and genuineness of organisations (Dunn, 2009). Integrity is what makes organisations unique. Therefore, it is quite unique and fascinating to study organisational integrity precisely because the integrity of organisations is unique. The concept of organisational integrity is a rich one because organisational integrity is versatile. Organisational integrity has many definitions, interpretations, forms, layers, and dimensions, and it contains many perspectives and ideas (Audi & Murphy, 2006). Organisational integrity is therefore a multifaceted and inexhaustible subject to study because it can be explored in many ways and constantly leads to new insights. Finally, organisational integrity is a rich concept because organisational integrity is holistic. Through organisational integrity’s versatility, integrity offers coherence in the sense that integrity is about consistency, connection, unity, and wholeness (Dunn, 2009). Organisational integrity is a holistic concept because it is about the interconnection and interdependency of the parts of organisational integrity. Organisational integrity is therefore so holistic, comprehensive, and challenging to study because all these interconnections and interdependencies are interrelated and complex. These four reasons for the richness of the concept of organisational integrity are also the four qualities of the design of this Research Handbook on organisational integrity. If the above four reasons are important qualities of organisational integrity, then obviously these four reasons are also desirable qualities of a book on organisational integrity. A good, rich book on organisational integrity should therefore also be valuable, unique, versatile, and holistic. Thus, these four design qualities have been used as guiding principles in compiling this handbook. These four qualities (alternatively, values or virtues) may also be employed by the reader as assessment criteria for this book. 1

2  Research handbook on organisational integrity The four design qualities for the book are discussed below in the following order: its value, uniqueness, versatility, and finally its holistic character. This introductory chapter concludes with two other qualities of organisational integrity, namely humility and gratefulness.

VALUE OF THIS BOOK Just as organisational integrity is a valuable concept, so this book hopes to be valuable too. This book aims to be of value by providing readers with tools for doing their own research on organisational integrity. It is about how organisational integrity can be defined, operationalised, and organised, its importance and impact, and the perspectives and theories in studying it. This book describes the research done in the field of organisational integrity and some of the desirable new research directions. That this book is a handbook does not mean that readers will be tutored in doing their own research. The book is not an instruction manual, though it does aim to be handy by providing an overview of important insights into the subject of organisational integrity. The book also aims to be valuable by inspiring readers to conduct research on organisational integrity. The richness of this concept as shown in the book will hopefully not only be recognised and acknowledged by readers but also inspire them: that because organisational integrity is such a rich concept, and quite valuable, unique, multifaceted, and holistic to examine, readers would then be encouraged to start their own research on it. The book is successful if it manages to do this, thus further unlocking the richness of the concept itself. Now is the right time to bring forth this Research Handbook. The concept of organisational integrity has been around for about four decades. The fields of business and public administration ethics emerged at the end of the last century, and this was exemplified by the launch of journals such as Journal of Business Ethics in 1982, Business Ethics Quarterly in 1991, Business Ethics: A European Review in 1992, and Public Integrity in 1999. Since then, much has been published on organisational integrity. Lynn Sharp Paine’s 1994 Harvard Business Review article, “Managing for organisational integrity,” which has since been cited more than 2,000 times, has been a catalyst for research on organisational integrity. Now that research on this subject has been around for some time, the questions arise as to what this has all brought about and delivered, where we are now, and what the future could and should look like vis-à-vis this research area. It is with this in mind that the chapters in this book contain critical and engaging reviews of the relevant literature with the aim of providing impetus for research in organisational integrity in the coming decades.

UNIQUENESS OF THIS BOOK The richness of this book also lies in the fact that it is special. The book is unique or special in at least three ways. The book is unique because it consists completely of original chapters. All 37 chapters are unique: they are original contributions that have not yet been published elsewhere. Thus, this handbook does not contain any reprints. Incidentally, this does not mean that the authors have not drawn on their previous publications; if they did, this has been kept to a minimum.

Introduction  3 This book is particularly unique because it is the first research book to deal with organisational integrity in a general sense. The books that have appeared on this topic are either about the integrity of private organisations (e.g., Integrity in Business and Management, edited by Orlitzky and Monga, 2018) or the integrity of public organisations (e.g., Handbook on Corruption, Ethics and Integrity in Public Administration, edited by Graycar, 2020). The present Research Handbook deals with both types of organisations, i.e., businesses and governmental organisations. This provides an opportunity to bring the disciplines of business ethics and public administration ethics closer together because of the many similarities between the integrity of private and public organisations. While this handbook contains chapters that deal primarily with organisations in either one of these two sectors, in most cases the value to the other sector is also discussed. This book is likewise unique because it contains many original, in the sense of new, insights. It not only provides an overview and review of existing research but also aims to provide new insights that will trigger new research. The limited scope of this introductory chapter does not allow the enumeration of all these new insights. In any case, as a reader, it will be enriching to discover for yourself the new insights in this book. But to give a sneak peek and whet the reader’s curiosity, I would like to mention three new insights. A relatively new insight is the term “integritism”, which refers to the abuse of integrity that Leo Huberts warns against in his chapter. Also new is the plea, argued by Linda Klebe Treviño, Niki A. den Nieuwenboer, and Jennifer Kish-Gephart, for research to focus more on ethical behaviour rather than on unethical behaviour as current research tends to do. Also novel are the four desirable characteristics of integrity management models developed by Jeroen Maesschalck, Alain Hoekstra, and André van Montfort in their chapter. As mentioned above, these are but three of the many new insights this book contains. The book’s uniqueness also consists in its versatility. As far as we know, there is no other book on organisational integrity that features quite as many different authors. This brings us to the third design quality used for this book, namely its versatility.

VERSATILITY OF THIS BOOK This book seeks to unlock the richness of integrity by putting together a versatile book. This versatility consists of a rich diversity of authors, topics, and styles of chapters. A rich diversity of authors, 62 in total, contributed to this book. Almost half of the chapters are single authored. The authors represent various scientific positions (from PhD student to Emeritus), nationalities (more than 13 countries), academic affiliations (from more than 45 universities), and gender (30 per cent of the authors are female). The authors come from a variety of disciplines such as philosophy, political science, economics, ethics, psychology, sociology, criminology, engineering, public administration, and business administration. This book also has a rich diversity of topics that range from the definitions and forms of integrity and organisational integrity to the elements of and methods for managing organisational integrity. For example, there are chapters on the hypocrisy of organisations, on an evolutionary perspective on organisational integrity, and on the integrity in the supply chain. This diversity of topics and approaches means that there is no definition of organisational integrity given in this introductory chapter. Even if such a universally valid definition were to (ever) exist, it would not do justice to the very diversity proposed by and presented in this book’s

4  Research handbook on organisational integrity chapters. The lack of such a definition may perhaps be frustrating for the reader but hopefully it is a sign of the richness of integrity. The book is also characterised by a rich diversity of styles. The authors were not asked to contribute to a strictly defined template; each chapter reflects its author’s own approach, structure, and writing style. As a result, a diversity of styles has emerged, within certain margins, from personal to objective, from positive to critical, and from descriptive and evaluative to argumentative, creative, and innovative. Partly as a result of this, the sizes of the chapters range from 6,000 to 17,000 words. This does not mean that this book is a random collection of chapters. Rather, the diversity is held together precisely by the structure provided between the chapters. This brings us to the fourth design quality of this book, namely holism.

HOLISTIC CHARACTER OF THIS BOOK The richness of organisational integrity is its being holistic. For this research book, holistic means there is coherence between the various chapters. All authors have been selected for their proven scientific qualities, such as their scientific publications, and they have all received instructions on the purpose and format of the handbook. Apart from these, unity in the diversity of the chapters is achieved through a careful selection of the topics (to avoid, among other things, too much overlap between the chapters) and providing structure. This handbook consists of five parts that aim to complement each other, although there is some overlap, fortunately. The first part is about the positions of organisational integrity. This comprises four chapters that address the current state of research on organisational integrity and clarify its scope and boundaries. The chapters deal with where the research on organisational integrity stands and what organisational integrity is and is not. Lynn Sharp Paine describes what has remained unchanged and what has been learned in the past 30 years since her 1994 article in the Harvard Business Review. Carole L. Jurkiewicz presents a critical reflection on contemporary research on organisational integrity and many questions for follow-up research, some of which, incidentally, are picked up in the rest of the book. Duane Windsor’s chapter is on integrity in relation to other concepts and terms. A positioning is especially important today because of the complex challenges organisations face. As Windsor writes, “Defining organisational integrity and closely related concepts in this set of circumstances has acquired dramatically increased importance”. Leo Huberts’ chapter deals with eight different views on integrity and 10 types of integrity violations tailored to politics and government. The second part is about perspectives on organisational integrity. This part contains chapters that deal with a variety of different theoretical perspectives for studying organisational integrity. Each perspective emphasises different elements of organisational integrity and involves different research. The following are the perspectives covered sequentially: ● ● ● ●

nature perspective by Craig Dunn; evolutionary perspective by Marc Orlitzky; spiritual perspective by Tracy H. Porter, Kelly Gillerlain, and Nicholas Messina; criminological perspective by Nina Tobsch, Benjamin van Rooij, and Marieke Kluin;

Introduction  5 ● positive behavioural ethics perspective by Linda Klebe Treviño, Niki A. den Nieuwenboer, and Jennifer Kish-Gephart; ● intersubjective perspective by Wim Vandekerckhove; ● practical reasoning perspective by Thomas Donaldson; ● discursive justification perspective by Dirk Ulrich Gilbert, Michael Behnam, and Maximilian J. L. Schormair; ● virtue ethics perspective by Ignacio Ferrero, Maria Clara Ames, and Mauricio C. Serafim; ● contractual perspective by the brothers Ben Wempe and Johan Wempe; ● regulatory perspective by Martin de Bree and Annemiek Stoopendaal; ● institutional perspective by Timo Fiorito and Michel Ehrenhard; ● corporate governance perspective by Peter Verhezen; and ● critical perspective by Marcel Becker and Edgar Karssing. The third part focuses on the dimensions of organisational integrity and contains different aspects of the term organisational integrity: Marvin T. Brown’s organisational integrity as social coherence, Anthony D. Molina’s organisational integrity as congruence, and organisational integrity as wholeness by Thomas Maak and Nicola M. Pless. The part concludes with a chapter by Miguel Alzola on organisational integrity as a virtue and a chapter by Marco Meyer on organisational integrity as an epistemic virtue. The fourth part of this Research Handbook is on the various characteristics of organisational integrity. This part deals with important virtues of organisational integrity. The characteristics of organisational integrity discussed are, consecutively: responsibility by Mihaela Constantinescu, accountability by Natasha V. Christie, voice by Brett Beasley and Mary Gentile, inclusion by Geoffrey A. Silvera, Jonathan M. Fisk, and Courtney N. Haun, transparency by Colin Higgins and Samuel Tang, anti-hypocrisy by Gökhan Kılıçoğlu and Derya Kılıçoğlu, citizenship and legitimacy by Jacob Dahl Rendtorff, trust by Roger C. Mayer and Paul W. Mulvey, and success by Madeleine J. Fuerst and Christoph Luetge. The subject of the fifth and final part is management of organisational integrity: how the integrity of organisations can be organised. Jeroen Maesschalck, Alain Hoekstra, and André van Montfort formulate criteria for integrity management models and review five such existing models. Carsten Stark and Yannik Morbach describe an original method for measuring organisational integrity, namely the weak point analysis. Abidoun Owoloja and Louise Manning write about embedding organisational integrity in the culture and performance of the organisation. Finally, Louise Manning discusses operationalising integrity within supply chains.

TWO OTHER QUALITIES I hope that the operationalisation of the above four design qualities has resulted in a rich research book, one that is valuable, unique, versatile, and holistic, and shows the richness of organisational integrity. The study of organisational integrity is valuable, unique, versatile, and holistic, so hopefully this book provides many impulses for much new research on organisational integrity. This introductory chapter concludes with two other qualities or virtues of integrity. These are the two virtues mentioned by Treviño, den Nieuwenboer, and Kish-Gephart in their chapter.

6  Research handbook on organisational integrity The first quality is humility. Humility means that, despite the above “selling points” for the book, I do not claim this book to be perfect. For any imperfections, for instance too much overlap or too much diversity between chapters, the editor is ultimately responsible. In such cases: mea culpa. The editor is also ultimately responsible for chapters of insufficient quality. However, the hope at least is that such inferiority inspires the reader to do the same research better. All this incompleteness is inherent in integrity because organisational integrity could never be described exhaustively. At the same time, I did my best, but without much success, to make this book diverse by trying to include more authors from Asia or Africa, more female authors, and to include other types of organisations, such as non-governmental organisations. Similarly, many topics are missing from this book, but fortunately this is inherent to a rich concept like organisational integrity. The second quality is gratitude. A warm thank you to all the authors for the rich quality of their contributions to this handbook, and for their dedication and integrity. The fact that the authors voluntarily devoted a substantial part of their time to writing and submitting their chapters on time, even in the absence of any financial rewards or any form of contract, says a lot about their commitment to integrity. Special thanks to the authors whose submitted contributions were not included in this book. Hopefully, their writings will eventually find a place elsewhere. Thanks also to all those who agreed to contribute but were unable to due to circumstances beyond their control. I hope your work too will eventually come to fruition. Many thanks as well to the reviewers, who voluntarily and anonymously read draft chapters. Of course, thanks also to the publisher, who saw from the beginning the value of a handbook on organisational integrity and managed to shape all the authors’ loose files into one book. The quality and commitment of the publisher in the creation of this handbook is hopefully indicative of its efforts in promoting and making it accessible to many. I close this chapter in the same way I often close lectures, speeches, and meetings. From the richness of organisational integrity and the importance of nurturing and unlocking it together in scholarship and practice, the wish: “Long live integrity!”

REFERENCES Audi, R., & Murphy, P. E. (2006). The many faces of integrity. Business Ethics Quarterly, 16(1), 3–21. Dunn, C. P. (2009). Integrity matters. International Journal of Leadership Studies, 5(2), 102–125. Erhard, W. H., Jensen, M. C., & Zaffron, S. (2018). Integrity: A positive model that incorporates the normative phenomena of morality, ethics, and legality (abbreviated version). In M. Orlitzky, & M. Monga (Eds.). Integrity in Business and Management. New York: Routledge, pp. 11–39. Graycar, A. (2020). Handbook on Corruption, Ethics and Integrity in Public Administration. Cheltenham: Edward Elgar Publishing. Koehn, D. (2005). Integrity as a business asset. Journal of Business Ethics, 58, 125–136. Orlitzky, M., & Monga, M. (Eds.). (2018). Integrity in Business and Management. New York: Routledge. Paine, L. S. (1994). Managing for organizational integrity. Harvard Business Review, 72(2), 106–117.

PART I POSITIONS OF ORGANISATIONAL INTEGRITY

2. Managing for organisational integrity My take after three decades Lynn Sharp Paine

When I wrote “Managing for Organizational Integrity” in 1994, I hoped that it would help companies act more responsibly – that is to say, more in line with accepted ethical standards and their own espoused values and commitments (Paine, 1994). At the time, many business leaders were just waking up to the damaging effects of corporate misconduct not only for the companies involved but also for trust in business more generally. As a result, they were starting to develop ethics and compliance programmes to help reduce the incidence of such episodes. But many of these programmes were based on flawed assumptions about the drivers of misconduct and therefore seemed unlikely to have their intended effect. A large proportion of the breakdowns in corporate responsibility I had studied could not be attributed to rogue actors or “bad apples”, as was typically assumed at the time. Instead, many involved ordinarily decent people either not recognising the ethical aspects of issues they were dealing with or simply acting in response to organisational pressures and directives. For companies to act more responsibly, managers needed to see ethics as an organisational issue and not just a personal issue, and they needed to design and lead their organisations accordingly – or so it seemed to me. As I reread the article today, its core ideas strike me as sound and no less relevant than they were 30 years ago, notwithstanding the proliferation of ethics and compliance programmes in companies around the world since then. I am thinking, in particular, of the ideas about the origins of corporate misconduct, different ethics strategies, and the role of management in ensuring organisational integrity. At the same time, the article is clearly dated in some respects. I smiled when reading that the Sears Auto Centers debacle that came to light in 1992 cost the company some $60 million in total. For comparison, shareholders suing Wells Fargo in 2020 over its fake accounts scandal have alleged that it destroyed more than $54 billion in shareholder value.1 Fines alone have been put at $4.5 billion (Flitter, 2022; Stempel, 2021). Clearly, the stakes for companies are much higher today. Perhaps more important from a practitioner point of view, the article does not address the role of corporate boards. In fact, the term “board of directors” is mentioned only once in passing, and the term “corporate governance” does not appear at all. Yet, it is clear today that organisational ethics is as much a governance issue as it is a management issue. In the reflections that follow, I begin by reviewing core insights from the 1994 article that seem worth reiterating. In the first section, I share some personal experiences and discuss the organisational origins of corporate misconduct using examples drawn from the decades since the article was written. I then turn to the differences between compliance-orientated and integrity-orientated ethics strategies and review how compliance programmes have changed in the last 30 years. I argue that despite these changes, an integrity-orientated approach is still preferable for companies that are serious about earning and keeping the trust of their core stakeholders and society at large. The final section discusses corporate boards and how their 8

Managing for organisational integrity  9 role with regard to ethics has evolved in recent decades. I conclude with some thoughts about the board’s role in fostering organisational integrity. I continue to hope that these ideas will help companies act more responsibly and urge corporate leaders to take them to heart.

REVISITING THE CORE IDEAS: THE ORIGINS OF CORPORATE MISCONDUCT When I wrote “Managing for Organizational Integrity”, I was drawing on a decade of research and personal experience that had convinced me that a new approach to corporate ethics was needed. In a brief stint as a lawyer after graduate school and law school, for example, I had been asked to research insurance coverage for a raft of lawsuits being brought against Johns-Manville Corporation for injuries and deaths from exposure to asbestos. At the time, Johns-Manville was the leading manufacturer of asbestos products and supplier of raw asbestos in the United States. In that work, I learned that company management had known about the dangers of asbestos since the 1930s but had actively suppressed information linking it to cancer to protect the business. I became deeply curious about how respected executives could have made a series of decisions that were so clearly disastrous not only for workers and others exposed to asbestos but for the company itself. Shortly thereafter, in 1982, with its asbestos-related liabilities projected to exceed its assets, Johns-Manville shocked the business world by becoming the largest U.S. industrial corporation ever to declare bankruptcy. Then, a couple of years later, I was asked to advise on a new Defense Industry Initiative on Business Ethics and Conduct being organised by a consortium of U.S. defence contractors in response to recommendations put forth by the Packard Commission. President Ronald Reagan had appointed the commission to study defence procurement following a series of scandals involving fraud, waste, and abuse in the industry. Chaired by Hewlett-Packard co-founder David Packard, the commission had recommended, among other things, that defence contractors promulgate and enforce codes of ethics that addressed the unique problems of defence procurement.2 In my work for the initiative, I learned about the origins of these problems and saw that, contrary to public belief, they could not be chalked up simply to unethical individuals – they were systemic and had their roots in management and organisational practices. By this time, social science research had already shown that people’s behaviour is shaped as much by situational and contextual factors as by individual character. The 1963 Milgram experiments by Yale Professor Stanley Milgram had shown people’s willingness to set aside their ethical qualms in deference to perceived authority figures (Milgram, 1963). Similarly, the 1971 “prison” experiments by Stanford Professor Philip Zimbardo had demonstrated the power of context to alter people’s ethical orientation; after only a few days in a simulated prison context, the individuals assigned to be “guards” became abusive towards the “prisoners”, causing the “prisoners” to experience acute stress and anxiety (Haney, Banks, & Zimbardo, 1973). Role-play research by Professor Scott Armstrong of the Wharton School had shown that mock boards of directors were willing to approve continued sales of a drug known to be lethal to some customers in fulfilment of their assigned role to maximise value for shareholders (Armstrong, 1977, p. 204). And so on. Yet, the insights from this research and their implications for management and business ethics had not made their way into business school classrooms or the ranks of professional management.3 Most people I spoke with back then thought that ethics was a matter of individual character; that character was fixed

10  Research handbook on organisational integrity and unchanging over time; and that corporate misconduct was the work of bad actors, having nothing to do with management.4 In the article, I used the case examples of Sears Auto Centers and Beech-Nut Nutrition Corporation to challenge the view that individual character is fixed and unchanging, and to show how organisational factors – such as the culture, structure, systems, practices, and processes put in place by management – can corrupt the behaviour of both individuals and the organisation as a whole. At Sears, for example, management implemented a new goal-setting and compensation system to spur sales at the company’s auto repair centres across the United States. Minimum work quotas were introduced, and the hourly wage system was replaced by a system of base pay with productivity incentives for meeting targets. Service advisers were given product-specific sales quotas – sell so many brake jobs, shock absorbers, alignments, and so on per shift – and paid a commission on sales. Those who failed to meet the quotas could be transferred or have their work hours reduced. The unsurprising result is that when employees found themselves unable to meet the quotas, a significant number of them resorted to exaggeration and lying – telling customers their cars’ brakes were worn out and dangerous when they were not, for example. In the end, Sears faced charges of fraud filed by the state attorney general in each of more than 40 states. The new quota and compensation system apparently did not help Sears’ financial performance. In 1992, the year the scandal came to light, Sears had a $3.9 billion loss, the largest in its then-106-year history (Brooks, 1993). As this example illustrates, how a company is managed and led can make it harder – or easier – for individual employees to act ethically and for the organisation as a whole to meet its responsibilities to its stakeholders and the public at large. Thirty years on, this seems like an obvious point, but it perhaps bears repeating, as corporate misconduct does not appear to have abated over this period. If anything, its scope, scale, and impact have all increased as companies have gotten larger, more complex, and more far-flung, and the pressures to deliver ever greater returns have intensified. Consider some of the high-profile cases that have made the headlines over the years since the article was published: healthcare fraud at Columbia/HCA (1997), labour abuses in the supply chain at Nike (1998), unsafe tires at Bridgestone/Firestone (2000), related party transactions and accounting fraud at Enron (2001), accounting fraud at WorldCom (2002), corrupt payments at Siemens (2007), mortgage lending abuses at Countrywide Financial (2006) and Wall Street banks (2008), diesel emissions cheating at Volkswagen (2015), fake accounts at Wells Fargo (2016), bribery at Odebrecht (2016), sexual harassment at Uber (2017), misuse of personal data at Facebook (2018), airliner safety at Boeing (2019), fraudulent financial reporting at Wirecard (2020), opioid marketing at AmerisourceBergen, Cardinal Health, McKesson, and other drug distributors and makers (2022) – to name a few.5 Keep in mind that most cases of corporate malfeasance do not make the headlines. The particulars of these cases are quite varied and well worth studying in their own right. Each involves a unique mix of individual, organisational, and external circumstances, and its own set of ethical issues. But they all reinforce the first general point I was trying to make in my 1994 article – that corporate misconduct and irresponsibility are often rooted in organisational and management choices rather than in premeditated wrongdoing by malicious individuals (although, to be sure, that exists as well). If you dig into these cases, you will find organisational features and management behaviours similar to those discussed in the article, such as managers flying ethically blind and making decisions without any thought for the ethical issues involved. We don’t know precisely what

Managing for organisational integrity  11 factors went into the decisions made by managers in most of these companies, but for a few the public record provides a glimpse. For instance, a Siemens manager involved in arranging illicit payments for contracts before the scandal broke in 2007 described his role: “I was not the [one] responsible for bribery. I organized the cash” (Schubert & Miller, 2008). “I didn’t really look at it from an ethical standpoint”, he also noted (PBS Frontline, 2008). Similarly, when a top executive of Bridgestone/Firestone was asked by a member of the U.S. Congress about the company’s failure to act more quickly on discovering problems with the safety of its tires, he replied: “I am sorry to say that I believe [we looked at it from a financial point of view but not a consumer safety point of view]”.6 In the same vein, lawyers for Enron reportedly reassured executives about certain accounting practices, noting that “no one has reason to believe that it is inappropriate from a technical standpoint” (quoted in Cummings, Hamburger, & Kranhold, 2002). Judging from the overall behaviour of other companies in the ad hoc list above, it seems doubtful that decision makers in any of them put much weight on ethical considerations – if they thought about them at all. Compensation systems that seem to invite, if not encourage, unethical behaviour also show up again and again. The quota and incentive system put in place by managers of Wells Fargo’s community banking division in 2011 is an example. Interestingly, it was quite similar to the quota and incentive system that got Sears into trouble in 1992.7 Under the community banking division’s “Great 8” programme, employees were expected to sell an average of eight financial products to each of the bank’s customers and, on that basis, were assigned daily sales quotas. For hitting their targets, employees could earn bonuses of up to $2,000 per quarter on top of their quarterly base salary of $7,500. Daily scorecards ranked individual employees against sales goals, and daily conference calls reviewed branch managers’ performance against quotas set by their regional managers. Managers falling short were reportedly criticised and embarrassed in front of their colleagues. Between 2011 and 2016, this system seemed to be helping Wells Fargo grow its revenues.8 In 2016, however, the truth behind the figures came to light. It turns out that employees unable to meet their targets had resorted to opening unauthorised accounts in customers’ names and charging them for unwanted and unneeded products without their knowledge and consent. From 2011 to 2016, employees of the division opened more than 3.5 million fake accounts – notwithstanding the company’s various compliance programmes, ethical business practices initiative, and espoused long-term customer focus.9 During this period, the bank had a total shareholder return of more than 100 per cent,10 and the CEO’s compensation averaged over $20 million per year.11 Weak controls and ethically lax cultures are another feature of the more recent cases as well as the earlier ones. Perhaps the most striking recent example is Odebrecht, the Brazilian conglomerate caught up in Operation Car Wash (Lava Jato in Portuguese), the investigation of corrupt payments in Brazil’s construction industry launched in 2014. Following its admission of guilt for paying bribes and as part of its settlement with Brazilian, U.S., and Swiss authorities, Odebrecht implemented state-of-the-art audit, internal control, and compliance functions. Prior to the scandal, however, the holding company and some other parts of the Group had not had an internal audit or compliance function at all.12 By comparison, at Enron or Siemens, for example, compliance and control functions existed while the wrongdoing was ongoing, but these functions were underfunded or understaffed or simply disregarded. Similarly, AmerisourceBergen had a system for reporting suspicious opioid orders, but that system was thinly resourced, and the company’s sales personnel reportedly found ways to circumvent it.13

12  Research handbook on organisational integrity I could go on with other examples, but my intent here is not to catalogue all of the organisational and management factors that can lead to corporate misconduct and irresponsibility. My purpose is to show the continuing importance of understanding that corporate malfeasance cannot be written off to rogue actors or bad people. It is an organisational phenomenon whose roots lie in the decisions that managers make in the ordinary course of managing. How managers make decisions and what they decide – what opportunities to pursue, what goals to set, how to measure performance, how to pay people, how much to invest in risk management, technology, training and so on – together have a profound influence on how individuals do their jobs and whether the company as a whole acts responsibly. While I believe this connection is more widely understood today than it was in 1994, the steady stream of cases involving large-scale corporate malfeasance over the last three decades suggests that it is worth repeating.

REVISITING THE CORE IDEAS: DIFFERENT ETHICS STRATEGIES As noted earlier, the late 1980s and early 1990s was a period in which companies were just starting to pay attention to ethics and values, and to create ethics, values, compliance, and corporate conduct programmes. To some extent this development was spurred by stepped-up law enforcement and the adoption, in 1991, of the U.S. Federal Sentencing Guidelines for Organizations, which provided that companies convicted of a crime would pay a lower fine if they could show that they had an effective compliance programme.14 But it was also driven by business leaders’ own growing awareness of the damaging effects of misconduct as well as by several popular management books on the importance of culture and values for a company’s longevity and financial performance.15 Ongoing media attention to corporate malfeasance also played a critical role. I remember one manager’s succinct reply when I asked why his company was developing an ethics programme. His answer: “60 Minutes” (the popular television news show known for hard-hitting stories on corporate wrongdoing).16 I followed these developments closely and decided to do field research on the new programmes companies were adopting. This research revealed that these programmes could be grouped into two broad categories. One, which I called compliance-orientated, focused mostly on compliance with law and was geared to preventing individual misconduct. It involved educating employees about the standards they were expected to follow, establishing controls to ensure that they did so, setting up whistle-blower “hotlines” to receive reports of suspected wrongdoing, investigating such reports and, in cases of substantiated wrongdoing, imposing discipline and taking corrective action. These programmes tended to be lawyer-driven and typically hewed closely to the template for compliance programmes laid out in the Federal Sentencing Guidelines to ensure that, should the company be convicted of wrongdoing, it would be eligible for a reduced fine. Today, we might call this a “defensive” approach to ethics. The approach was also akin to the first generation of quality programmes that focused on end-of-line inspection and monitoring of outputs rather than building quality into product design and production processes. The other approach, which I called integrity-based, focused on acting in accord with the organisation’s own espoused values and commitments and was geared to enabling responsible conduct. I described an integrity approach as “broader, deeper, and more demanding” than a legal compliance approach. Broader in the sense that it seeks to enable responsible conduct –

Managing for organisational integrity  13 not just to avoid wrongdoing. Deeper in that it concerns the guiding values and commitments of the organisation and the design of all its operating systems and processes – not just the legal standards it is required to follow and the design of its compliance programme. And more demanding in that it calls for an active effort to define the company’s values and commitments, and (I should have said) to align its activities and operations accordingly. Above all, I emphasised, an integrity strategy sees organisational ethics as the work of management – not as something that can be outsourced to the legal function or even to a separate ethics function. When I wrote the 1994 article, the term “organisational integrity” was not widely used. In fact, I had not seen it anywhere in the business ethics or management literatures. However, it struck me as capturing the essence of this second approach – in particular, its focus on the behaviour of the company as a whole and not just on the behaviour of individuals, its appeal to aspirational values and not just minimum standards, and its embrace of active self-governance and not just acquiescence to externally imposed requirements. The managers taking this approach were putting forth a positive vision of ethics as a source of organisational strength and not just a tax on the company’s operations – something that was decidedly rare at the time both in practice and in academia. In those years, the academic field of business ethics was almost exclusively concerned with corporate wrongdoing and misbehaviour. In assuming that companies can be responsible, law-abiding actors in society, these managers were also (whether they knew it or not) rejecting the view, popular among financial economists, that corporations cannot have responsibilities, let alone purposes, values, and aspirations, because they are “legal fictions” or “artificial persons”.17 At the end of the article I conjectured that an integrity-orientated approach might, paradoxically, be more effective at preventing misconduct than a compliance-orientated approach even though preventing misconduct is an explicit purpose of most compliance programmes. This conjecture was based in part on the inherent nature of compliance programmes. They are mostly about individual offenders and typically do not address root causes of misconduct which often lie, as discussed above, in organisational factors or management decisions. It was also clear to me from my professional experience as well as my research that taking the law as your standard of conduct is very risky. As I described in the article by way of example, executives at Salomon Brothers were not legally obligated to disclose the government trading desk improprieties they discovered in 1991, but their failure to do so led to a crisis of confidence and costly loss of trust in the firm and its leadership among all its stakeholders. I was also well aware that the law is a lagging indicator of society’s norms and expectations. A course of action that harms other people but that is not explicitly unlawful today can turn into a calamity for the company down the road when the law catches up. The case of Johns-Manville that I worked on as a young lawyer is a case in point. When the executives in charge decided to suppress information about the health effects of exposure to asbestos, they were not breaking any law. But that didn’t stop tens of thousands of plaintiffs from filing lawsuits decades later when their asbestos-related injuries manifested themselves. When juries heard that executives had actively suppressed information linking asbestos to cancer, they increasingly turned against the company and began to award plaintiffs ever greater punitive damages. As described above, mounting asbestos liabilities eventually led to the company’s bankruptcy.18 From where I sit today, it seems more urgent than ever for business leaders to understand the differences between these two strategies for embedding ethics and to appreciate the inherent limitations of a compliance strategy. To be sure, compliance programmes have gotten much

14  Research handbook on organisational integrity more sophisticated over the last three decades, and the criteria used by the U.S. Department of Justice for assessing them have gotten more demanding.19 Board-level oversight is now considered a basic component of an effective programme, and prosecutors today take into account such matters as whether compliance-related factors are included in the company’s management performance and incentive system.20 Among the factors a prosecutor might consider, for example, is whether the company gives promotions or rewards to managers or employees for improving the compliance programme or, conversely, withholds promotions or rewards because of compliance failures. Expectations for periodic analysis of compliance data and testing of internal controls related to compliance have also become more rigorous. Yet, for all the investment in compliance programmes in recent decades, it’s hard to see much improvement in corporate behaviour.21 Note that the majority of errant companies listed above actually had compliance and ethics programmes in place at the time they were engaged in misconduct. In its 2013 annual report, for example, Wells Fargo made numerous references to its compliance programmes and reported that 99.96 per cent of eligible team members had completed the Code of Ethics and Business Conduct annual training that year.22 Some compliance experts see the solution in better measurement of compliance programme effectiveness: whether the hotline works, whether the firm is responsive to allegations, what employees actually learn from compliance training.23 The case for better measurement certainly has merit – all too often hotlines don’t work, investigations take too long, and compliance training is mind-numbingly dull. Nonetheless, better measurement of compliance programmes seems unlikely to have much effect on the more fundamental drivers of corporate behaviour seen in the examples discussed above. Moreover, the law’s limits as a standard of conduct have not changed since I wrote the article. The law is still (and in a dynamic society always will be) a lagging indicator of norms and expectations. It is especially problematic as a guide to conduct for companies on the cutting edge of new technologies. There was no law against writing algorithms to maximise user engagement on social media when Instagram was being developed in 2009 – or even in 2019 when Facebook’s in-house research showed that spending time on Instagram was harming the mental health of teen girls.24 But the fact that Instagram’s algorithms are not unlawful doesn’t make them any less harmful. The stunning advances in technology and its applications over the last few decades have presented companies with many new ethical questions. For most of them, the law simply has no answer. And I have not even mentioned the conundrums that arise for companies doing business in multiple jurisdictions with different, and sometimes conflicting, laws and legal systems. By reviewing the limits of a compliance-based approach to ethics, I am not suggesting that companies don’t need an effective compliance programme. They emphatically do. In most industries, employees cannot be expected to be familiar with all the relevant laws and regulations. But compliance programmes can only do so much given their inherent nature and design. And it must be acknowledged that a compliance programme is just one of many factors that influence decision-making and behaviour. A company’s behaviour is also shaped by the qualities and capabilities of its leaders, the design of its incentive and reward systems, its structure and information flows, its decision-making processes, its members’ shared values and beliefs (including those about the company’s purpose and responsibilities), and the context in which it operates. It is the interaction among these and other factors that creates a company’s ethical climate and drives its ethical performance.

Managing for organisational integrity  15 Moreover, organisational integrity cannot be reduced to the individual integrity of the company’s members. That is, even if individuals are acting with integrity the company as a whole can have an integrity problem. For example, when the sales force and the delivery team work in silos under different incentive systems, it is all too common for the sales force to make promises the delivery team cannot fulfil, putting the company’s reputation for integrity and reliability at risk. Similarly, responsible managers can fail to see an emerging ethical problem for quite some time if relevant information remains dispersed and fragmented across the organisation’s different functions and divisions as it was at Bridgestone/Firestone in the run-up to the tire recall crisis of 2000.25 Corporate compliance officers are rarely, if ever, in a position to fix or even see such problems, given their focus on individual misdeeds. External context also matters. Capital markets pressures, competitive dynamics, macro-economic conditions, the legal and cultural environment – all affect how people and companies behave and the extent to which various ethical norms are observed.26 Ethical problems rooted in external factors are difficult, if not impossible, to address with standard compliance programme tools. Combatting bribery in an environment where corruption is widespread, for example, may require an investment in training to improve employees’ selling skills, or innovation to differentiate the company’s offerings, or redesign of the company’s go-to-market strategy. These activities all go well beyond the standard compliance and ethics programme tool kit.27 The many conversations I’ve had with managers over the past 30 years have convinced me that the distinction between compliance- and integrity-based approaches is not well understood. There seems to be a bias or natural inclination towards thinking of ethics in terms of compliance – particularly in the United States, and among managers with training in finance and law. That inclination may reflect those fields’ underlying assumption that human behaviour is driven mainly by carrots and sticks – material rewards and penalties – and the related tendencies to discount structural factors that limit or enable action and to minimise the motivational power of leadership, values, aspirations, and other influences. But it might also be related to the fact that when companies experience misconduct, they turn to lawyers for protection and advice – and for good reason, I might quickly add. But the influx of lawyers, auditors, and controllers – most of whom think in terms of rules, standards, and enforcement – usually means that the remediation effort is mostly about strengthening compliance and controls rather than strengthening the company’s capacity to operate with integrity. Yet that is what is needed for the company to repair its reputation, earn back trust, and achieve its full potential to create value for its stakeholders and society.

A MISSING PIECE: THE BOARD OF DIRECTORS In the 1994 article, I emphasised that “organizational integrity depends on the integration of the company’s values into its driving systems”. I highlighted five characteristics of companies that at the time appeared to have had some success at implementing an integrity-orientated approach to ethics: ● The company has a set of guiding values and commitments that make sense and are clearly communicated.

16  Research handbook on organisational integrity ● Company leaders are personally committed, credible, and willing to take action on the values they espouse. ● The espoused values are integrated into the normal channels of management decision-making and are reflected in the company’s critical activities. ● The company’s systems and structures support and reinforce the espoused values. ● Managers throughout the company have the decision-making skills, knowledge, and competencies needed to make ethically sound decisions on a day-to-day basis. Noticeably missing from this list, at least from my vantage point today, is any mention of the company’s board of directors. A fair question is why the role of the board is not discussed in the article since the board is, by law, a corporation’s governing body. If ethics is important for the company, then presumably it should be of concern to the board. Part of the reason the article is silent on boards is that, back then, the role of the board rarely came up in my field research on companies’ ethics programmes. The article’s discussion of the Martin Marietta ethics initiative notes in passing the role of the board’s audit and ethics committee in overseeing the management steering committee for the initiative. But the managers I spoke to in the course of doing this research typically said little, if anything, about their company’s board. In retrospect, their relative silence on this topic was indicative of the times. In the early 1990s, boards of directors were thought by many to be lackeys of management, rubber stamps with little real power to carry out their legally mandated governance role.28 At the time, the vast majority of large U.S. companies were led by a chief executive officer who was also chairman of the board, and directors were often members of this individual’s professional and social network if not friends or fellow CEOs. Even though most boards of major companies had nominating committees for selecting directors, the influence of the Chairman/ CEO was significant and often decisive. Many directors were beholden for their positions to the CEOs of the companies they served, and many boards functioned more as clubs than as governing bodies. This state of affairs was of particular concern to institutional investors, whose numbers and clout had increased throughout the 1980s. Seeing a link between weak boards and poor performance, these investors were just beginning to campaign for more effective boards and better corporate governance. California Public Employees’ Retirement System (CalPERS), then the world’s fourth largest pension fund, was a leader in this regard, using shareholder proposals at poorly performing companies as a tool to “goad the boards into doing their job”.29 For boards that had a defined role in ethics at that time, it was mainly a matter of helping formulate the company’s ethical standards or dealing with crises triggered by misconduct. A Conference Board study of 124 companies in 22 countries found that about 41 per cent of the studied companies’ boards participated in drafting the company’s ethical standards in 1991, compared to 21 per cent in 1987.30 Notably, the 1991 U.S. Federal Sentencing Guidelines for Organizations was silent on the role of boards in overseeing compliance and ethics programmes.31 When it came to ethics, values, compliance, or corporate responsibility, the board’s role was decidedly in the background – if it had one at all. That would soon change, however. In 1996, the Court of Chancery in Delaware, legal home to more than 60 per cent of the Fortune 500 and more than 50 per cent of all U.S. listed companies, issued a decision that for the first time ever ascribed to corporate directors a legal duty to oversee corporate compliance.32 In the Caremark decision, which was affirmed by the Delaware Supreme Court

Managing for organisational integrity  17 in 2006,33 the court said that a board’s failure to ensure that the company has a reasonable information and reporting system for monitoring compliance would be a breach of directors’ fiduciary duty of loyalty. Many boards took notice, even though the possibility of director liability for breach of the duty was quite remote, given that liability could be imposed only if directors knowingly and consciously failed to exercise their oversight responsibility. The board’s role in overseeing compliance and ethics was further elevated following the Enron, WorldCom, Tyco, and other accounting scandals of 2001–2002. The involvement of senior executives in these scandals suggested to many observers the need for both stronger boards and for board-level oversight of ethics. In 2002, The Conference Board’s Commission on Public Trust and Private Enterprise, a 12-member group convened by The Conference Board to examine the causes of the scandals and make recommendations for restoring confidence in American capital markets, put forth a set of recommendations on corporate governance that explicitly called for boards to oversee corporate ethics and to strengthen their stance on ethics.34 (Full disclosure: I served on the commission.) That same year, the U.S. Congress adopted the Sarbanes–Oxley Act, which established new requirements for board audit committees and mandated disclosure of whether companies had a code of ethics for their chief executive and top financial and accounting officers.35 Two years later, in 2004, the U.S. Sentencing Commission amended the Organizational Sentencing Guidelines to make the board’s role in overseeing compliance and ethics programmes more explicit and to provide guidance on what that role entails.36 Since the guidelines apply to many types of organisations, the guidance was necessarily quite general, but it made clear that board-level oversight is essential to an effective programme.37 Notably, the 2004 amendments to the guidelines also changed the terminology for company programmes to “compliance and ethics program[s]” (from “program[s] to prevent and detect violations of law”).38 Today, few would question the importance of the board for corporate ethics. It is now written into law and widely accepted.39 But what, precisely, does that role entail? My impression is that many corporate directors believe it is mostly about overseeing the compliance and ethics programme. That typically means reviewing and approving updates to the company’s code of conduct and periodically hearing from the company’s chief compliance and ethics officer about various compliance and ethics programme activities: employee training and communications efforts, the volume and types of alerts received through the hotline, investigations undertaken, allegations validated, disciplinary action taken, and so on. In most companies, responsibility for overseeing the compliance and ethics programme is assigned to a committee, often the audit committee, whose chair then reports on its review to the full board. The chief ethics and compliance officer may also report to the full board periodically. This approach to the board’s role is thus very much in line with what I have described as a compliance-orientated approach to ethics. As has become increasingly clear, however, a company’s ability to operate with integrity depends on the board taking a broader view of its role. That is in part because the company’s ability to operate with integrity presupposes a framework defining the company’s purpose, responsibilities, and values, and it is the board that validates this framework. Today, it is widely understood that the board sets a company’s strategic direction, establishes its ethical standards and values, and approves critical policies and commitments. In most companies, the CEO and top management team actually develop and propose the framework but it is ultimately the board, as the corporation’s governing body, that gives its approval. Unless the

18  Research handbook on organisational integrity board endorses an integrity-orientated framework, it will be very difficult for management to implement one. Moreover, many of the decisions that boards themselves make are far more consequential for the company’s ethics than the ethics programme per se. Consider the appointment (or removal) of a CEO, which is arguably a board’s most important function. As illustrated by a number of the cases discussed above, the qualities and capabilities of the CEO have a profound influence not only on how individuals in the company behave but also on whether the company as a whole behaves responsibly. This influence plays out through all aspects of the CEO role – as decision maker, strategist, role model, and architect of the company’s systems, structures, and processes. This is not just a matter of the “tone” set by the CEO, although that is important. Consider the effect of choosing a CEO who doesn’t understand that poorly designed incentives can drive misbehaviour (think of the CEO at Sears), who makes decisions without considering ethical issues that may be involved (think of the executive at Bridgestone/ Firestone), or who behaves in ways that are disrespectful of others (think of the founder and former CEO of Uber). Large-sample research is also beginning to show how the personal values of CEOs play out in the strategies they choose. Recent work has found, for instance, that materialistic CEOs, compared to those who are more frugal, tend to favour higher-risk strategies and be less sensitive to negative externalities imposed on third parties and the public (Bushman et al., 2018). Boards also exert a powerful influence on the company’s ethics through the executive compensation and incentive systems they adopt. The Sears and Wells Fargo examples discussed above illustrate the powerful effects of pay systems on the behaviour and ethics of frontline employees and mid-level managers. The effects are no less powerful and arguably more so for senior executives given the very large amounts that are often at stake. Flawed incentives, for instance, played a role in driving the fraudulent accounting practices that came to light at Enron, WorldCom, Tyco, and other companies in the early 2000s.40 They were also a critical factor in the excessive risk-taking that led to the financial crisis of 2008.41 A growing body of research is finding links between the design of executive pay and other behaviours with implications for corporate ethics – such as the likelihood of accounting fraud (Johnson et al., 2009), the management of positive corporate news (Edmans et al., 2018), or the propensity to invest in stakeholder relations (Flammer & Bansal, 2015). CEO appointments and executive compensation are just two examples (out of many) board decisions that have a critical influence on a company’s ethical climate and performance. But they are enough to show why directors would be mistaken to see their role in ethics solely in terms of overseeing the compliance and ethics programme. As these examples suggest, the decisions directors make in the ordinary course of carrying out their governance function are even more fundamental. A compliance and ethics programme cannot make up for a poor CEO or a flawed executive pay plan. If directors want the company to act as a responsible, law-abiding organisation whose actions match its espoused values and commitments, the board needs to govern with that objective in mind. Corporate integrity does not happen by accident. Nor can it be driven solely by a compliance and ethics programme. In 1994, I wrote that achieving and maintaining organisational integrity was “the work of management”. Today, it would be more accurate to say that while maintaining organisational integrity is the work of management, it is ultimately the role of the board to ensure that organisational integrity is a leading priority for the company and that the company’s governance processes and structures fully support it.

Managing for organisational integrity  19

CONCLUDING REFLECTIONS Much has changed in business and the world since I wrote the article. Companies have gotten larger and more complex, and their activities now span the globe. Digitalisation and advances in technology have enabled new business models and transformed the nature of work in many industries. The rise of institutional investors and activist hedge funds has intensified the pressure on companies to deliver ever-increasing financial returns,42 and the heightened expectations of all stakeholders have brought other new demands – for higher wages, flexible work, environmentally sustainable products. In the early 1990s, few companies saw climate change, racial injustice, or political dysfunction as part of their remit. Today, companies are expected to do their part to address these and a host of other societal problems.43 In 1994, trade barriers were falling and tensions among trading nations were easing. Today, global trade is slowing and the world is beset by geo-political tensions. And these are just a few changes of the last 30 years. What has not changed, however, is the need for corporate integrity. Not only is corporate integrity essential for each and every company to achieve its own potential to create value for its stakeholders and society, it is also the basis of a well-functioning economy and public trust in business. My hope is that the research gathered in this volume will contribute to advancing our understanding of this important topic.

NOTES 1.

2. 3. 4. 5. 6.

7. 8.

In re Wells Fargo & Co. Securities Litigation, Consolidated Amended Class Action Complaint for Violations of The Federal Securities Laws, No. 1:20-CV-04494 (GHW), (S.D.N.Y. Nov. 9, 2020), p. 7 (“All told, investors lost over $54 billion in market capitalization, including a drop in Wells Fargo’s share price of over 22.5% after the conclusion of the congressional hearings”). www​.cohenmilstein​.com/​sites/​default/​files/​Wells​%20Fargo​%20​-​%20Consolidated​%20Amended​ %20Complaint​%2011092020​.pdf. President’s Blue Ribbon Commission on Defense Management. (1986, June 30). A Quest for Excellence, Final Report to the President, at xxix. https://​dair​.nps​.edu/​bitstream/​123456789/​3705/​ 1/​SEC809​-RL​-86​-0106​.pdf. A few business school faculties were beginning to do research on these issues, however. See, for example, Treviño & Youngblood (1990). See also Gaertner (1991). Opponents of ethics education in business schools typically held this view as well. The dates shown are meant to indicate the rough time frame for when the misconduct was acknowledged or revealed to the public, or when related legal charges were filed or settled. In most cases, the underlying behaviour in question would have started many years before the date shown. The Recent Firestone Tire Recall Action, Focusing on The Action as it Pertains to Relevant Ford Vehicles: Hearings before the Subcommittee on Telecommunications, Trade, and Consumer Protection and The Subcommittee on Oversight and Investigations of The Committee on Commerce, 106th U.S. Congress. (2000). www​.govinfo​.gov/​content/​pkg/​CHRG​-106hhrg67111/​pdf/​CHRG​ -106hhrg67111​.pdf. The description of the quota and incentive system at Wells Fargo’s Community Banking Division is based on Glazer (2016); Reckard (2013); and Independent Directors of the Board of Wells Fargo & Company (2017). Between 2011 and 2016, revenues grew from $73.1 billion to $84.5 billion, the bank had a total shareholder return of more than 100 per cent, and the company’s market value grew by $111 billion. Wells Fargo & Company (NYSE:WFC) revenue 2011 to 2016, and market capitalisation and total shareholder return data January 3, 2011 to December 30, 2016, Capital IQ, Inc., a division of Standard & Poor’s, accessed June 2022.

20  Research handbook on organisational integrity 9. See, e.g., Wells Fargo & Company (2013), p. 9 (compliance programmes), p. 26 (ethical business practices), and p. 51 (long-term customer focus). 10. Wells Fargo & Company (NYSE:WFC) total shareholder return January 3, 2011 to December 30, 2016, Capital IQ, Inc., a division of Standard & Poor’s, accessed June 2022. 11. Wells Fargo & Company. (2014, March 18). Form DEF 14A. https://www.sec.gov/Archives/​ edgar/​data/​72971/​000119312514104276/​d663896ddef14a​.htm​#tx663896​_31 and Wells Fargo & Company. (2017, March 15). Form DEF 14A. SEC.gov, www​.sec​.gov/​Archives/​edgar/​data/​72971/​ 000119312517083591/​d305364ddef14a​.htm​#toc305364​_50. 12. For a description, see Srinivasan et al. (2021). 13. State of Tennessee, ex rel., Herbert H. Slatery III v. AmerisourceBergen Drug Corp. (2019, October 3). Circuit Court of Knox County, Tenn. Case No. 1-345-19. www​.tn​.gov/​content/​dam/​tn/​ attorneygeneral/​documents/​pr/​2019/​pr19​-50​-complaint​.pdf. 14. United States Sentencing Commission. (2022, August). The Organizational Sentencing Guidelines: Thirty Years of Innovation and Influence. www.ussc.gov/sites/default/files/pdf/research-and​ -publications/​research​-publications/​2022/​20220829​_Organizational​-Guidelines​.pdf. 15. See, e.g., Peters & Waterman (1982); Kotter & Heskett (1992). 16. For this and other reasons given by executives for starting these programmes, see Paine (2003). 17. See, e.g., Jensen & Meckling (1976), at pp. 310–311 (emphasising that firms are “legal fictions” and warning against falling “into the trap” of asking what their objective should be or whether they can have a social responsibility); Friedman (1970). (“Only people can have responsibilities”; corporations cannot have responsibilities because they are artificial persons.) 18. For more details, see Paine & Gant (1993). 19. See Department of Justice (DOJ) (2020). 20. DOJ (2020, pp. 13–14). 21. See Chen & Soltes (2018) (citing various sources estimating the prevalence of fraud and misconduct). See also Dyck, Morse, & Zingales (2023) (estimating that 10 per cent of large publicly traded firms commit securities fraud each year and that 41 per cent of companies commit accounting violations). 22. Wells Fargo, Annual Report 2013, p. 26 for figures on Code of Ethics and Business Conduct training. 23. Chen & Soltes (2018). 24. Wells, Horwitz, & Seetharaman (2021). See also Peters & Brandom (2021). 25. For more details, see Paine & Bettcher (2001). 26. See, e.g., Paine, Deshpandé, & Margolis (2011) (employees in emerging markets countries report larger gaps between the standards of conduct they think their company should follow and what the company actually does). 27. Paine et al. (2011). 28. See, e.g., Lorsch & MacIver (1989). See also Lorsch & Young (1990) and Lorsch (2013). 29. CalPERS General Counsel Richard Koppes, quoted in Light, Lorsch, & Sailer (1991, p. 7). In 1991, for example, CalPERS launched shareholder proposals at 12 U.S. companies. 30. See Berenbeim (1999). By 1998, the figure was 78 per cent. 31. U.S. Sentencing Commission (1991). Sentencing of Organizations (chapter 8, pp. 347–383). In United States Sentencing Commission Guidelines Manual. www​.ussc​.gov/​sites/​default/​files/​pdf/​ guidelines​-manual/​1991/​manual​-pdf/​Chapter​_8​.pdf. The original guidelines called for oversight by “high-level personnel” and defined “high-level personnel” in such a way as to include a director, but they did not require or specify any particular role for directors or the board as a whole. For discussion, see McGreal (2018). 32. The case was In re Caremark International Inc. Derivative Litigation, 698 A.2d 959 (Del. Ch. 1996). For a discussion of the history, see McGreal (2018). 33. See Stone v. Ritter, 911 A.2d 362, 370 (Del. 2006). For recent cases reaffirming the duty, see, e.g., Marchand v. Barnhill, 212 A.3d 805 (Del. 2019) and Teamsters Local 443 Health Services & Insurance Plan v. Chou, No. 2019-0816-SG (Del. Ch. Aug. 24, 2020). See also In re the Boeing Co. Derivative Litig., No. 2019-0907 (Del. Ch. Sept 7, 2021). 34. The Conference Board (2003). Commission on Public Trust and Private Enterprise, Findings and Recommendations (Part 2: Corporate Governance; Principle VI: Ethics Oversight, p. 32). www​

Managing for organisational integrity  21 .conference​-board​.org/​pdf​_free/​SR​-03​-04​.pdf. The commission was co-chaired by Blackstone Group co-founder Peter G. Peterson and CSX Chairman and CEO John W. Snow. The commission also made recommendations on executive compensation, audit and accounting, and a number of other controversial board issues such as board leadership, board self-evaluation, and shareholder engagement. 35. Sarbanes–Oxley Act of 2002 (Pub.L. 107–204, 116 Stat. 745, enacted July 30, 2002), see, e.g., §301 Public company audit committees, §407 Disclosure of audit committee financial expert, and §406 Code of ethics for senior financial officers. www​.congress​.gov/​bill/​107th​-congress/​house​ -bill/​3763/​text. Sarbanes–Oxley did not mention boards in connection with the ethics code for chief executive and financial officers, but the following year the New York Stock Exchange and Nasdaq both modified their listing standards to require companies to adopt a code of conduct for all directors, officers, and employees, and made clear that board approval was required for any waivers of the code. See Pillsbury Winthrop LLP (2004). 36. Sentencing Guidelines for United States Courts, 69 Fed. Reg. 28,994 (May 19, 2004). www​ .federalregister​.gov/​documents/​2004/​05/​19/​04​-10990/​sentencing​-guidelines​-for​-united​-states​ -courts. The U.S. Sentencing Commission held a number of public hearings prior to adopting the amendments of 2004. I participated in a Plenary Session on November 14, 2002. See Bednar et al. (2003). 37. U.S. Sentencing Commission. (2021, current as of January 2023). Sentencing of Organizations (chapter 8, pp. 509–553). In United States Sentencing Commission Guidelines Manual, stating at §8B2.1(b)(2)(A): “The organization’s [board of directors] shall be knowledgeable about the content and operation of the compliance and ethics program and shall exercise reasonable oversight with respect to the implementation and effectiveness of the compliance and ethics program”. www​.ussc​ .gov/​guidelines/​2021​-guidelines​-manual/​annotated​-2021​-chapter​-8. 38. These changes are discussed in McGreal (2018). 39. Stout & Li (2004). See also Elms & Nicholson (2013). 40. Rezaee (2005). See also The Conference Board (2003). 41. See, e.g., Dobbin & Jung (2010). 42. See, e.g., Bower & Paine (2017) (discussing the rise in shareholder power in recent decades). 43. See, e.g., Bower, Leonard, & Paine (2020) (discussing large-scale societal problems and how companies can help address them).

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3. Contemporary research into organisational integrity Carole L. Jurkiewicz

Over decades and geographic boundaries, scholars, professionals, and pundits have offered insights into how to increase integrity in organisations. Employing a wide array of methodologies, expressed with certainty and logic, one can learn the answer lies in ordering employees to have integrity, celebrating those who have not been indicted for crimes, and promoting those who include integrity in their annual self-reviews. Not noticed is the double-loop of asking why we expect organisations to act with integrity in the first place. Isn’t the primary purpose of incorporating to follow through on the promise of profits to investors? Do we require integrity as an essential element in effective organisational functioning, such as a measurable output aligned with the currency to purchase it? Given that all organisations act without integrity some or most of the time, why do many hold it in such high regard? Is it more aspirational than possible or probable, and what if they don’t have it? Kaptein (1999) details the various consequences and advantages, which range from severe damage to an organisation and its employees, to a tool used to prevent integrity breaches, while Hoekstra and Kaptein (2021) call for a normative framework. Transparency International’s most recent Corruption Perceptions Index (2022) (an institution of ubiquitous standing that advocates a holistic perspective for national integrity systems (Huberts, 2008)) assesses corruption as the opposite of integrity, both as a cause and a result, leading to increased crime and a decrease in economic stability. Their latest scores indicate that countries’ level of grand (contrasted with petty) corruption is increasing, regardless of the many ameliorative efforts that result merely in highlighting the importance of and the need for organisational integrity systems and greater institutional controls. Examined here are a few of the dominant assumptions about organisational integrity that often blind us to what really requires our attention.

IS ORGANISATIONAL INTEGRITY MERELY AN ABSTRACTION? Integrity as an attribute was first considered to be an individual trait, the formal study of which is generally attributed to both Plato and Aristotle, with writings linking integrity and corruption as far back as 2700 bc in Mesopotamia (Dobel, 2020). Integrity is still often conceptualised as an internal, individual choice and ethics as an external system often imposed on individuals. It has varied in nomenclature from an individual characteristic to one extended to disciplines including hard and soft sciences, and vocational activities to encompass terms such as virtues, character, truth, honour, principles, honesty, ethics, religion, morality, and many more. As larger organisations expanded and needed to employ individuals beyond family members and friends whose integrity was deemed well known, concerns over the integrity of strangers being employed reached critical scale and such determinations were then made assuming it was inherited from good families, absorbed through experiences with neighbours or community 24

Contemporary research into organisational integrity  25 members, and gleaned from associations with various religious congregations. When the need for growth of companies required individuals to serve as directors for groups of people and an ideal span of control, the question of integrity of those hired as managers, then termed leaders, became a greater concern, roughly in the 1950s in the U.S. But why? Were all organisations functioning on an integrity model prior to that period, or was it spurred by a belief of top executives that people are basically unethical and they wanted to protect the organisations’ assets? To predict who would be successful as a manager or leader, leadership studies evolved into a separate discipline, led by scholars studying what traits or behaviours best provided indicators of whom to hire for these roles. Questions arose around if these qualities are innate or can be learned, yet still there was no common definition of organisational integrity. This literature evolved from what is known as the Michigan and Ohio State studies, whose scholars duelled for the definitive dimensions on what was required of an effective manager or leader, on to contingency theories (meaning manager/leader effectiveness depended upon qualities of the followers and organisational situations), to what is termed contemporary theories such as leader-member exchange, charismatic, transactional and transformational leadership, to name a few of those that followed. At an individual level we can measure integrity as a subset of an ethical framework, but the conclusions of course are not 100 per cent reliable. Regardless, leaders are increasingly held accountable for the corrupt activities of others, while also being urged to articulate a multi-stakeholder approach that serves both social and financial purposes for the organisation. These organisational theories in turn revealed the importance of authenticity, ethicality, and the negative impact of the laws in the U.S. that were passed during the period of slavery (i.e., the 14th Amendment to the U.S. Constitution). As what is seen as an appeasement to those who opposed ending slavery, courts established organisations as the legal equivalent of persons, inclusive of the requisite rights (though not the responsibilities of such). Due to the desire to determine the effectiveness of leadership in a global context (Kets De Vries, 2006), the question of leader integrity became a focus of yet more scholars which, since leaders were seen as the embodiment of organisational integrity, spurred the expansion of leadership studies. This edited book is both timely and important in establishing the critical areas for future study of the key questions, such as agreement on the definition of organisational integrity, whether organisations possess virtues separate from the individuals leading them, and how the public generally determines if an organisation is or is not one of integrity and whether that attribution changes over time (Demmke, 2020; Menzel, 2012). As most research has blended the study of organisational integrity across sectors, such as public vs. private, this chapter is inclusive across boundaries as well.

INTEGRITY OF THE INDIVIDUAL SEPARATE FROM THE ORGANISATION The concept of organisational integrity was first treated as a theoretical enquiry, then attempts were directed towards empirical notions, and now as the paradigm develops, it focuses upon the dual paths of both developing the definition and potentially as something that can be measured at an organisational level. Measures at an individual level are quite different from measures in the aggregate, and at this stage inferences and assumptions are rampant (Fuerst & Luetge, 2021). There are no reported studies that measure organisational integrity directly,

26  Research handbook on organisational integrity separate from an individual, despite claims to the contrary (e.g., Six & Huberts, 2008). Philosophers have discussed integrity on an abstract individual level, but those conclusions cannot be extrapolated to organisations as a whole. What is reported by those claiming to measure integrity at an organisational level is primarily endowing an abstract structure with a single human quality. The literature largely consists of studies using a single proxy term as if the ethical rules or systems created by organisations were synonymous with individual integrity; this is incorrect as organisations are entities and don’t possess the ability to cogitate (Dasi et al., 2017). Rather than the multi-faceted concept of ethical rules and the attempts by organisations to enforce them, it is not a substitute for or synonymous with organisational integrity. The majority of these scholars claim ethics and integrity are interchangeable (e.g., Menzel, 2012; Palazzo, 2007) and that accountability for organisational integrity lies with the leaders. These concepts are necessarily separate and organisations are entities that cannot possess individual values, thoughts, or motivations; they can state goals and rules as directives of organisations, but it is not possible for them to have autonomy of thought. Dobel (2020) asserts that integrity can exist at both levels simultaneously and can also, through behaviour and policy, advocate for and support the others for the benefit of both. As individuals possess human agency, they can make commitments towards integrity and strive within their internal frameworks to keep them; organisations can align with individuals exhibiting integrity and share integrated frameworks using discursive methods, which can merge to create an individual/organisational culture that resists corruption. They together can create a relationship of dependence wherein the individual agrees to abide by and be accountable to organisational standards, and the organisation commits to transparency policies, applicable laws, and to stewardship mandates. This is not the same as organisational integrity, but rather an organisation establishing policies or rules and agreeing to abide by them. Does a lack of organisational integrity indicate leader incompetence? The literature suggests most scholars and citizens believe that to be that be factual and accurate; a few do not. A need for the leader to model individual integrity and courage in contributing to processes that build a positive culture, develop controls to combat corruption, and manage organisational communications is an essential role, but they do not automatically possess them the day they assumed the leadership roles; these are attributes that can be learned. Leaders that possess these abilities along with the character that demonstrates a facility to refuse to compromise as morally necessitated by an organisation’s mission, and consistency in reward/punishment behaviour towards integrity or lack thereof is what an effective organisation requires. Anti-corruptive missions and integrity statements are inadequate to quell such negative behaviours. Anti-integrity pursuits if not punitively addressed, tend to foster the understood agreement that the leader and subordinate are aligned on the acceptance of such behaviour and thus they will continue such behaviour. Expressed indecisiveness in addition to lack of applicable punishments increases the likelihood that such behaviours will be repeated. Rokeach’s (1968) classic empirical studies of value belief systems and whether, and if so how, they can be changed is directly relevant to encouraging individual integrity in organisations. Employees, including leaders, will not respond to organisational efforts to learn integrity-related behaviours in the same way or to the same degree. Rokeach’s studies confirm the resistance of individuals who have deeply embraced alternative values, which may not be those associated with integrity, to change their views or behaviour regardless of training; and they are generally not likely to honestly share those views with others. Inversely, an organisational priority focused only on fighting corruption is also not sufficient, and can leave employees feeling denigrated and alone. Individuals

Contemporary research into organisational integrity  27 need both paths: reinforcement of valour for demonstrating integrity and accordingly acceptance of accountability for pursuing unethical outcomes (Dobel, 2020). Leaders are also followers of course, and although a formal or informal title or authority can be conferred upon them, they are responsible for themselves as well as presumably others. Honesty; ethics; virtue; character; reputation; legality; morality; sincerity; trustworthiness; and reliability are commonly used proxy terms, along with many others that are intended to indicate integrity. Research on organisational integrity frequently includes elements that individuals may possess but not structural entities (despite the 14th Amendment), such as a moral conscience or awareness. Or include those that are so broad they encompass the opposite of what they may intend. An example is Dacin et al. (2002) who advocate adherence to self-defined values and principles, similar to Huberts (2018) who defines it as acting in accord with germane moral values and norms, but individuals are left to define what is germane for themselves, and these can apply to street gangs (Jurkiewicz, 2013; Stephenson, 2016), the Mafia, and genocidal regimes (Jurkiewicz & Grossman, 2012), as well as to religious leaders and police captains (Jurkiewicz, 2013). Defining organisational integrity in a way that allows for measures that can be generalisable and replicated is a key challenge for scholars (Kirby, 2022; Schmitt, 2022). A few of the top considerations in doing so are noted in Box 3.1, but the primary question to ask is: why do we expect organisations to act with integrity? Is it an essential question in effective organisational functioning, or do we rather mean ethical systems and policies? Given that all organisations act without integrity some or most of the time, why do most hold it in such high regard?

BOX 3.1 CHALLENGES IN AGREEING ON A DEFINITION OF ORGANISATIONAL INTEGRITY • Can organisations possess a virtue or character (integrity) separate from those individuals who may embody it, and if so does that virtue or character stay ineradicable regardless of who leads/is employed/owns/invests in it? • Is there a minimum age for possessing organisational integrity, or is it the legal age at which one can work for an organisation? Can an organisation possess integrity from its incorporation, or does it come/ebb/flow over time? • Some define it as matter of following laws, but of course laws change over time and the law is not equated with ethics or integrity. For instance, some organisations in all sectors have employed or employ child workers, slaves, pay less than legally allowed, offer dangerous products or processes, and have working conditions that are harmful to employees and the community. • Is organisational integrity the sum total of the individual employees’ integrity? Is it an absolute measure inclusive of all employees, so even if one employee lacks integrity then is the entire organisation lacking integrity? Is it a categorical measure of have/have not, or does it exist along a continuum? Do employees have to possess integrity in their personal and professional lives, or either/or to count? In hiring, what assessments are needed before they become an employee? If one demonstrates a lack of integrity, in one or numerous instances, should they be fired? • How can an organisation ensure vendors, part-time or temporary employees, and consultants have integrity? Can it be outsourced?

28  Research handbook on organisational integrity • Do definitions of integrity change or shift over time to encompass changes in the environment such a technological developments, artificial intelligence, robots, or global interconnectedness?

ARE LEADERS RESPONSIBLE FOR ORGANISATIONAL INTEGRITY? The lack of an enduring and uniform definition of organisational integrity is arguably the thorniest issue in moving this field of study forward (Ent & Baumeister, 2012). The definitions vary widely within a rather narrow range of primarily positive connotations, much like efforts to define ethicality or workplace spirituality (Porter & Norris, 2013). It may be attempts to create a consummate definition are prohibitively over-reaching, and instead a matrix of attributes and concepts may allow for more expansive and accurate measures beyond leaders’ abilities (Dobel, 2020). It has been found over a large body of research that leaders are the primary influencers of ethics in an organisation (e.g., Jurkiewicz & Giacalone, 2016), yet as first detailed by Zaleznik and Kets De Vries (1975), leaders are likely to have the most negative ethical impact on an organisation, frequently unwittingly. While many assume the leader is the one to follow in terms of modelling integrity behaviours (e.g., Palazzo, 2007), that is rarely the case (cf. Kets De Vries, 1993). Leaders and managers are not sought out because of and are not generally selected based upon their individual integrity framework or skill in implementing such policies. Their appointment to a leading role is usually a result of their impression management skills and a narcissistic desire to manipulate and influence others (Kets De Vries, 1993). While that approach can be effective in the short term, especially during times of crises, their focus is usually on amassing power and prestige and short-term projects that are politically expedient, rather than long-term goals and creating systems for structure, and processes for establishing ethicality (Babiak & Hare, 2006). As Kets De Vries (1993) explicates, leaders are usually contemptuous of others, self-righteous, arrogant, and exclude others in policy-making. They are intolerant of criticism and generally unwilling to compromise. These qualities do not inspire or create organisational ethicality or individual integrity. Yet the focus on an individual leader as responsible for organisational integrity is a prominent assertion of many scholars (e.g., Ekberg, 2017; Odrakiewicz & Odrakiewicz, 2014). After the hurdle of definition, including the belief that leaders should guide integrity systems in the organisation, is surmounted, questions of how to measure it need to be tackled, and the definition itself creates this ambivalence, lacking an underlying theory in its construct (Schmitt, 2022). As an example, Kolodinsky et al. (2003) and Hendricks and Hendricks (2003) claim organisational integrity thrives on change, although they do not define it, while Ekberg (2017) among others asserts it is harmful to organisations. Others claim change is a communal source of both resistance and conformity regarding environmental threats (e.g., Selznick, 1996). Some additional challenges to be faced in measuring organisational integrity, beyond an accurate and operative definition, are outlined in Box 3.2.

Contemporary research into organisational integrity  29  

BOX 3.2 FACTORS TO BE CONSIDERED IN MEASURING ORGANISATIONAL INTEGRITY • Is organisational integrity something that can be measured categorically, or does it exist along a continuum from a level of nominal evidence to the maximum of total integrity across all employees? • As Machiavelli established, is it more important to convincingly present an entity as having a virtue rather than them actually possessing it? In other words, does one need full confidence the measure is per se valid, or could it simply be a matter of masterful impression management abilities? • As individuals working for and on behalf of organisations that necessarily change over time, how frequently and by what methods do measurements need to be taken to ensure the computation is reliable and valid? • Is it possible to establish that the measures and integrity instruments are reliable and valid, and thus generalisable across sectors, demographics, and between cultures? As organisations and individuals associated with them change over time, how often do these measures need to be verified? • What of the 14th Amendment to the U.S. Constitution which conferred upon organisations the same rights to personhood as those of individuals (Jurkiewicz & Grossman, 2012)? Can it be concluded that research on organisational integrity should be considered the same as that for a person, at least in the U.S.? • Is organisational integrity transferable from a physical existence to a digital one, meaning if they have it in one realm, they have it in the other, or is a different measure needed? What if they have subsidiaries, mergers, or are incorporated under various names; does a determination of integrity provide blanket coverage?

GENERATING INTEGRITY IN AN ORGANISATION Overall, suggestions in the literature for creating organisational integrity appear rather overarching and aspirational and usually omit details on how to address and implement their suggestions. A notable exception is the work of Hoekstra (2022), who details the framework of the Dutch Integrity System, which is actually an ethical system, as it developed and its implications within the broader cultural context were realised. The analysis is one that can be expanded upon and perhaps adapted to further organisational needs in additional republics. A large number of scholars assert the importance of organisational integrity, generally as a solution to reports of growing corruption in all sectors (cf. Odrakiewicz & Odrakiewicz, 2014). Of course, as noted previously, integrity is often conflated with other terms that are not clearly defined and not measurable at a macro level. Box 3.3 contains just some examples representative of developing organisational integrity. For example, Chesnut (2020) in the Harvard Business Review suggests an organisation of integrity should simply require all employees to tell the truth, be open-minded and share information freely, and share credit with others, despite it not being possible to measure compliance with such organisational requirements. Perhaps what is really suggested is to encourage and educate employees on

30  Research handbook on organisational integrity how to develop individual integrity, and what is required to do so. Compliance programmes (those established from criminal and regulatory statutes) generally create animosity among employees and a reduction in ethical self-responsibility (Hough, 2017). Choi et al. (2018) also assert integrity is an individual rather than an organisational concept, and claim that integrity is when an individual demonstrates a good character and is corruption-free; while rather vague in articulation, it is an observation that is on the appropriate path. Further, they state that compliance enforcement and ethical oversight of individuals are the keys to managing integrity risks, as do Kayes et al. (2006).

BOX 3.3 DEVELOPMENTAL CONSIDERATIONS IN ORGANISATIONAL INTEGRITY LOOKING FORWARD • Self-reports are notoriously inaccurate, on a par with others’ reports of someone, as are opinion surveys; can we only measure what members or affiliates of the organisation believe integrity to be, or are there concrete and immutable variables that can be predetermined? • As power structures exist in all organisations (both formal and informal) and as individuals are or pretend to be generally obedient to authority, will individual behaviour simply align with those who have power, for good or evil, which would be a measure of influence rather than integrity? • What of the organisations in some countries that collect our data without permission and sell it and/or use it for profit? Are they acting with integrity? Should we expect those with access to the virtual content we freely give to act with integrity on how they use it? What does that mean and who do we hold accountable? Should we have to pay for privacy? • Technology has introduced another level of complexity related to integrity measures (Hosseini et al., 2022; Menzel, 2012). Questions such as integrity in the use and application of AI introduce issues such as taking and selling others’ identity; using AI recording tools similar to ChatGPT-4 and the upcoming GPT-5 version to mimic human voices and produce false content never stated by the human recorded. • As we can create multiple identities and fluid roles online, should each be equally held to account for their own integrity? How? If brains are connected directly to AI networks, they could be hacked (Anderson & Rainie, 2021) and altered without our consciousness intervening. Are hacked humans then responsible or accountable for integrity violations? Are those hacking human brains subject to integrity oversight? Again, how? By whom? • Should robotic entities, anime, and artificial humans be afforded the same sense of personhood as humans? When individuals establish multiple personae on the Internet, are those personae equally responsible for their own integrity associated with an organisation, or should organisations in the virtual world be considered as having integrity only if they prevent it? What of augmented reality, and are the organisations that produce and market such tools demonstrative of organisational integrity? • Is creation of a metaverse an act of organisational integrity? An ethical system? • If organisational integrity is a communal effort to identify and abide by moral norms, as some suggest, can simulations we cannot tell apart from actual reality be part of that

Contemporary research into organisational integrity  31 norm creation? What about the lack of Q Code Regulations? Should we be informed on what obligations we are creating for ourselves if we are required to click upon them? • Should the words created and sent using ChatGPT have any obligation towards imbuing organisational integrity? Who defines the boundaries of how they are created and shared, and is the organisation responsible for their use? • Will commerce and the profit motive replace the search for organisational integrity? Has it already? • How do we address the integrity of AI systems that can create their own code and disseminate artificial information? Who should or can we shape the evolution of integrity in conscious technologies? Nearly 70 per cent of U.S. tech experts state that principles of ethicality will not be incorporated into AI systems within the next decade (Rainie et al., 2016), so can any level of trust be established? While perhaps iconoclastically, Machiavelli (1532, yet printed posthumously with intent so as not to appear to be motivated by seeking favour from Lorenzo) offers considerable insight into integrity in organisations. It is widely believed that the name of the political scientist, as he is frequently depicted, is an adjective to describe a manipulative and ruthless individual. Empirical studies across many centuries have shown (cf. Christie & Geis, 1970) that interpretation of his work on organisational leadership is incorrect. The many instruments available, for which there are validity and reliability measures, indicate that high Machs (as they are known, as opposed to low Machs based upon test scores) are less likely to demonstrate low ethicality or integrity. High Machs are more analytical in their determinations of the right and wrong sides of an issue based upon empirical evidence, and are less likely to change their opinions to appease others or capitulate to groupthink. Given clear evidence to the contrary, they may change their opinion on a matter based upon logic and measurable evidence, but unlike low Machs do not engage in herdlike behaviour, and are not interested in agreeing to something they believe is wrong just to fit in with the majority opinion. In sum, low Machs are much more likely to accede to cheating, lying, and engaging in illegal behaviour in order to win favour with a group than are high Machs; being popular or winning a vote of congeniality among their peers is not a motivation for high Machs as it is for low Machs. Low Machs are also more likely to rationalise their lack of ethicality or integrity in a personal and empathic manner in order to justify their acclimation to wrongdoing. If high Machs do lie, their justifications are usually compellingly stated and rooted in verifiable evidence (even if the evidence is not accurate). If one is attempting to develop and instil integrity policies, providing factual evidence to high Machs and concerning oneself more with the irresolute orientations of low Machs is advisable. Given the strength and consensus of the measures on this variable, it may be a notable factor to look into further as a possible component of a reliable measure of organisational integrity.

EMBEDDING INTEGRITY IN ORGANISATIONAL CULTURE International certifications or accreditations may be viable moving forward; whether for leaders, employees, boards/advisers, or organisations as a whole is up for discussion. Is there a proxy criterion that could be used and how often should it be renewed? Should an incremental rating scale be applied or a pass/fail? What, if any, consequences should there be either way,

32  Research handbook on organisational integrity and should they be posted to the public? Perhaps an international reporting system, curriculum, and reinforcement measures may serve both to increase knowledge and effective practice and bring different cultures together on the topic. Should there be a pre-screening measure that is reliable and valid to be given to potential hires, and a registration certificate to confirm verified training? Is there an accreditation body who could be trusted to conduct such trainings and certifications? As ethics officers are widely used in many international organisations, should there be integrity officers as well to oversee compliance to whatever systems may be developed? Should those overseers be independent as are ethics officers, and to whom should they report? They would also require independence and freedom from hierarchical influence. Should organisations provide training on integrity? If so, should it be from an external or internal source and what qualifications or experience should the trainers hold? Perhaps a required course needs to be completed as part of a degree programme in higher education, or perhaps a continuing education course yearly as issues change with time? We know that codes are ineffective in influencing behaviour (Jurkiewicz, 2012). Do these individuals need to be experts in both ethics and integrity, being able to distinguish between the two, and what oversights should be in place for their qualifications? Should they be required to train on theory and practise? Should it be continual training or one-offs, in person or online, monitored, and is it best to conduct in groups or individually? Is training required of all in the hierarchy, and how is the effectiveness of the training measured, by whom, how, and how often? Scholars in various countries are attempting to address the issues noted in the boxes in this chapter, and if they are successful, a new, cohesive body of literature may emerge. As many attempts from differing areas of study and across many continents have tried for decades to create a global conception of ethics, the study of organisational integrity demonstrated by individuals may also represent an ongoing task. Ethics, integrity, religion, and other such subjective topics are difficult to integrate into an objective truth acceptable by distinct cultures, traditions, and value systems. The topic of integrity is of concern not only to scholars but to politicians and international peace groups as well, and much emphasis has been placed on the importance of understanding and tolerance. This has been the aim of many international organisations, such as the United Nations. Multicultural values are inherently controversial, and the viability of reaching a format for global interconnectedness can be daunting, but it starts by calling for complex, multi-dimensional dialogue in a moderated, mutually respectful, comprehensive, and integrated forum (Köchler, 2012). Intentionality in choosing books and media from across belief systems and organisational structures is an excellent start to a multicultural approach, as is including discussions on transnational perspectives in education, business, diplomacy, sports, politics, and tourism.

CONCLUSION Research on organisational integrity introduces more problems than answers, problems that need to be addressed before the variables can be defined and a methodology established. Integrity as a value or characteristic of an individual may be measured with some consistency depending upon how it is defined, but extending that to a group of people with varying roles and demographics, who may enter and exit the group for varying reasons at various times, and whose financial futures may depend upon others projecting integrity upon them or not, means we cannot draw a conclusion from any research proposed at the macro level to date. If

Contemporary research into organisational integrity  33 it is possible to create a measure of organisational integrity in which one can have confidence, it would necessarily possess many multi-faceted data points and be based upon accepted and valid research, and address how the elements fit together. By any gauge, it will be a very dynamic and enduring process (e.g., Engelbrekt, 2009).

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Contemporary research into organisational integrity  35 Frontiers. Cheltenham: Edward Elgar Publishing, pp. 65–82. https://​doi​.org/​10​.4337/​9781848441378​ .00013. Stephenson, S. (2016). Russian bandit gangs, their moral code and practices of violence. Mir Rossii, 25(1), 35–54. Stephenson, S. (2018). Gangs of Russia: From the streets to the corridors of power. The International Journal of Anthropology, 62(1), 140–142. Transparency International (2022). Corruption Perceptions Index 2022. https://​images​.transparencycdn​ .org/​images/​Report​_CPI2022​_English​.pdf. Zaleznik, A., & Kets De Vries, M. F. R. (1975). Power and the Corporate Mind. New York: Houghton Mifflin.

4. Concepts closely related to organisational integrity Duane Windsor

This chapter explains a set of concepts closely related to the idea of organisational integrity. The focus here is on business, for which the related concepts were developed. Organisational integrity is broader in scope in applying to all organisations. The coverage addresses business and human rights (BHR), business ethics, compliance, corporate citizenship, corporate social performance (CSP), corporate social irresponsibility (CSIR), corporate social responsibility (CSR), corporate social responsiveness, responsible management, and sustainability. Otherwise alphabetically ordered, the discussion below places compliance with responsiveness, CSR with CSIR, and responsible management with sustainability. The twin purposes of the chapter are to consider how the concepts relate to each other and to organisational integrity. The chapter proposes a conceptual framework for working out these relationships and in turn linking those relationships to organisational integrity. The framework links responsibility, responsiveness, and performance concepts to organisational integrity. This sequencing follows the literature’s developmental history. The presentation weaves other concepts into the framework. The framework thereby develops a detailed definition of organisational integrity for businesses. The 21st-century business faces a complex set of grand challenges (Ferraro, Etzion, & Gehman, 2015), wicked problems (Lönngren & van Poeck, 2021), and black swan crises (Yarovaya, Matkovskyy, & Jalan, 2022). Grand challenges require bold ideas and innovative solutions. Wicked problems are ill defined, defying solution, and proposed courses of action may turn out to be worse than the problem itself. A black swan crisis is unexpected because of low probability but has markedly bad consequences. Defining organisational integrity and closely related concepts in this set of circumstances has acquired dramatically increased importance. The set of closely related concepts is not fully synonymous with either business and society (or social issues in management) as a discipline or with an environmental, social, and governance (ESG) framework for investment assessment. The related concepts are core ideas of the discipline and help inform ESG approaches. Differences among the three subjects – integrity related concepts, business and society, and ESG – constitutes a guide for restricting the chapter’s scope of coverage. The chapter is not directly concerned with shareholder wealth maximisation or stakeholder welfare maximisation as theories of the firm’s objective. The chapter is concerned with the relationship of those theories to conceptions of responsible capitalism (Freeman, 2017).

36

Concepts closely related to organisational integrity  37

ORGANISATIONAL INTEGRITY One meaning of “integrity” is strictly technical: an object should have internal soundness or lack of corruption. For instance, a ship should have watertight integrity. Data or programming should not be corrupted: an integrity check will find validity. This technical meaning suggests planned consistency, in the sense of design and practice according with desired values. In transferring this technical meaning to a person (from an object), integrity acquires a moral conception. Individual integrity suggests strict honesty, moral uprightness, and consistency of behaviour with such moral values or virtues. An individual adheres to a code of values and practices. An individual manager in an organisation will not pay or receive bribes and should report corrupt offers to the organisation or outside public authorities. Organisational integrity suggests the adoption and implementation of such moral values or virtues for the whole organisation. Organisational codes of ethics or conduct are common today in both private and public sectors. An organisation, like an individual, should be incorruptible. Organisational integrity conveys the theory and practice of an organisation composed of virtuous executives, managers, and employees (Palazzo, 2007). Both individual and organisation embrace and practice moral responsibility in the conduct of the organisation’s activities. An organisation is a set of people. If the individuals all have and practice moral responsibility, then the organisation practices moral responsibility through its personnel. There is organisational corruption to the extent that any individuals practice corruption. Business C-suite officers associated with matters related to organisational integrity might include chief compliance officer (CCO), chief ethics officer (EO), and chief sustainability officer (CSO). One test of corporate integrity is the absence of corporate hypocrisy: “Corporate hypocrisy refers to the phenomenon of inconsistency between words and deeds of a firm in the process of fulfilling its social responsibility” (Lu, Wang, Jamali, Gao, Zhang, & Liang, 2022, p. 1). Greenwashing variants and other forms of amoral reputation management may reveal information about the want of organisational integrity.

CLOSELY RELATED CONCEPTS The discussion below occurs basically in alphabetical order, but combines compliance with responsiveness, CSR with CSIR, and responsible management with sustainability for improved integration. Business and Human Rights The UN Global Compact of ten principles voluntarily accepted by participants, including businesses, has two principles concerned with human rights: (1) supporting and respecting “internationally proclaimed human rights” and (2) avoiding complicity in “human rights abuses.” Another four principles concern labour standards: (3) freedom of association and collective bargaining; (4) elimination of “forced and compulsory” labour forms; (5) “abolition of child labour”; and (6) “elimination of discrimination in … employment and occupation.” Discussed later, three principles concern environment and Principle 10 concerns corruption. The UN Human Rights Council in June 2011 endorsed the proposed UN Guiding Principles on Business and Human Rights. There are three pillars: (1) the state has the primary duty to

38  Research handbook on organisational integrity protect human rights; (2) corporations have a responsibility to respect human rights; and (3) there should be improved access to remedy for victims in the context of a business relationship to an abuse. Germany and Switzerland adopted legislation requiring human rights due diligence by businesses (Bueno & Kaufmann, 2021; Rünz, 2021). In November 2022, the US government’s Customs and Border Protection agency issued a “withhold release order” against sugar shipments (Domino brand) by the Central Romana Corp. of the Dominican Republic. The basis for blocking the sugar imports is allegations of “forced labour” with many employees being Haitian migrants. The relationship between business and human rights (BHR) is a prominent subject of scholarly investigation (Schrempf-Stirling & Van Buren, 2020; Wettstein, Giuliani, Santangelo, & Stahl, 2019). An essential feature of this attention is an emphasis that BHR should succeed or replace CSR. Two arguments for a proposed shift are that BHR will become obligatory in place of voluntarist CSR and that BHR should become enforceable in international and domestic courts. Essentially, the BHR approach moves from a stakeholder to a rightsholder perspective in which human rights become judicially enforceable (McPhail, 2022). Business Ethics and Virtuous Managers Business ethics concerns the practical moral duties of businesses and their managers. One can identify three key dimensions: (1) avoid doing harm; (2) comply with laws and public policies; and (3) practice good citizenship (see Table 4.3). Adam Smith in The Theory of Moral Sentiments (1759; VI.ii.2, para. 11, sixth edition, 1790) distinguished between citizenship as compliance and good citizenship as a concern with welfare of others. There is a distinction between a duty not to create or exploit market failures and a duty to address justice failures such as inequality (Bluden, 2022). Normative ethics concerning prescriptively right versus wrong actions and good versus bad outcomes is complex and technical. Behavioural ethics concerns what people believe and do. Moral development of individuals towards prescribed norms links behavioural ethics to normative ethics (DeTienne, Ellertson, Ingerson, & Dudley, 2021). Modern neoclassical economics is the dominant theory of capitalist markets and firms. Classical political economy of the 18th and 19th centuries, initially expounded in Adam Smith’s The Wealth of Nations (1776), drew in part on a compound of theology, moral philosophy, and jurisprudence (Matson, 2022). Matson argues that free commerce received depiction as a form of cooperation that served the common good and cultivated specific virtues. From the late 19th century, neoclassical economics focused on the interaction of demand-and-supply forces in determining prices and volumes of goods and services. Neoclassicism tended to set ethics and virtues aside in favour of value-neutral analysis of utilitarian outcomes. While economic analysis arguably emphasises a technical decision-making framework (Reilly & Kyj, 1990), ethics and virtues did not simply disappear. Friedman (1970) states explicitly that businesses should operate within basic “rules of the game” including ethical standards and legal requirements (Mulligan, 1986). Friedman’s short list of business ethics includes honesty and absence of fraud. One can argue that neoclassicism tends to foster a kind of “moral vacuum” in market transactions (Finnegan, 1995). A result historically was a separation between neoclassical economics and business ethics (De George, 2015). However, ethics is fundamental to busi-

Concepts closely related to organisational integrity  39 Table 4.1

Three major frameworks for normative ethics

Consequences

Pluralism

(“teleology”)

(everything else)

(“deontology”)

ASSUME: self-regarding egoists

 

ASSUME: other-regarding altruists

Machiavellianism – amoral ends-means

Religion – divine commandments (rules)

calculus Utilitarianism – aggregate welfare

Moral Duties

Social contract tradition (Hobbes, Locke, Rousseau, Rawls)

Caring sentiment (other-regarding)

Kantianism – rational absolute moral rules

achieved through institutions ● market contracts

Natural law (whatever is ought to be)

● democratic voting

Virtue theory (Aristotle, Buddha,

Integrative social contracts theory (ISCT)

Confucius)

Source: Adapted and modified from Goodpaster (1984).

ness: “In fact, ethics has everything to do with management” (Paine, 1994, p. 106). The moral businessperson thinks and behaves differently, relative to amoral or immoral persons (Carroll, 1991). The moral person is other-regarding; the amoral person is self-regarding but calculating and subject to influence; the immoral person does not respond to conventional norms for conduct (Taylor & Wolfram, 1968). Table 4.1 explains three major frameworks for normative ethics based on Goodpaster (1984). There is a key distinction between consequences (or outcomes) and moral duties. One or the other is superior to the other. The main theme in consequentialism is aggregation of the interests of self-regarding egoists (Taylor & Wolfram, 1968) through either market transactions or democratic voting arrangements. Utilitarianism is the chief example of consequentialism. “Machiavellianism” is consequentialist in focusing on amoral ends-means calculus. The term is unfairly applied to Machiavelli himself, who studied rather than advocated amoral conduct. Moral duty is prescriptive for other-regarding altruists and draws on the social contract tradition. Kantianism is the chief example of a set of rational absolute moral rules for conduct independent of consequences. A modern version of social contract perspective is integrative social contracts theory (ISCT), introduced by Donaldson and Dunfee (1999). ISCT combines global hypernorms with locally developed moral contracts. The broad rubric “pluralism” captures everything else: religion, caring as a mode of moral sentiment, natural law, and virtue theories (Burton, Dunn, & Goldsby, 2006). A key instance of guidance for business managers is virtue theory (Sison & Redín, 2023). While virtue ethics and integrity are not strictly synonymous, virtue ethics at the individual level may be the indispensable foundation for organisational integrity (Fuerst & Luetge, 2023). “Organizational integrity is a company investment that translates into avoiding fines for potential violations of the law or ethical missteps, as well as an investment in the company’s reputation. In turn, organizational integrity can protect a company from disruptions that can threaten its existence” (Fuerst & Luetge, 2023, p. 1). Fuerst and Luetge (2023, p. 1) operationalise the relationship between virtue and integrity as a three-step process: (1) “morally sound corporate commitments”; (2) “transparent institutionalization within the company”; and (3) implementation through concrete actions. Organisational integrity arguably requires virtuous managers. While intrinsic virtue can serve as a criticism of instrumental market rationality and extrinsic motivation, it can be argued from classical political economy that markets foster social cooperation for aggregate welfare improvement (Bruni & Sugden, 2013). There are

40  Research handbook on organisational integrity market participant virtues, and the market is not simply virtue free (Bruni & Sugden, 2013). The connection between individual virtues and organisational virtuousness (Constantinescu & Kaptein, 2021) may operate to help develop guidelines for assigning moral responsibility and blame to individual conditions and organisational conditions. Compliance and Corporate Social Responsiveness Integrity is an internal and morally orientated behaviour; compliance is an externally and amorally orientated behaviour (Paine, 1994). The distinction is between intrinsic motivation and extrinsic motivation. Integrity may impose cost; compliance may occur to reduce cost. Relevant instances of compliance failures concern business fraud, corruption, and monopolisation. A common feature of the FTX cryptocurrency, Madoff Ponzi, and Theranos medical false claims frauds is the apparent failure of due diligence by sophisticated investors to see “ridiculously visible red flags” (Cassin, 2022). DuPont engaged for decades in intentional environmental pollution in West Virginia in connection with the production of Teflon and arguably made a calculated cost-benefit decision to continue polluting (Shapira & Zingales, 2017). The broad category within which these instances fall is organisational deviance, defined in terms of failure to comply with legal and ethical norms for a business (Vaughan, 1999), and typically resulting in wrongdoing in various forms (Greve, Palmer, & Pozner, 2010). Corruption scandals (Nichols, 2017) in violation of domestic anti-bribery laws and international anti-corruption agreements, including a near-universal UN Convention Against Corruption (UNCAC), are a persistent occurrence (Transparency International, 2019). The tenth principle of the UN Global Compact is an anti-corruption requirement. A relationship to organisational integrity is the possibility that organisational socialisation processes help to make individuals think corruption is somehow “normal” within the organisation’s logic of conducting business (Gault, 2017). Individuals wind up on a “slippery slope” that generates a corrupt logic within organisational norms. Anti-corruption efforts require going beyond a focus on individual violators and a moralistic view of corruption to determine how to “un-normalize” corruption within the organisation through changed socialisation processes (Gault, 2017). Corporate social responsiveness (Frederick, 1994/1978) is a broader conception for compliance in which the external environment includes laws and public policies, social expectations, stakeholder pressures, and stakeholder activism. A business operates within this set of requirements, expectations, and pressures. Responsiveness is not necessarily anchored in integrity or business ethics. An event study analysis of abnormal returns following crises considers how executive acceptance or denial of malfeasance affects firm value. On average, stockholders do not reward either “ethical and timely acceptance of a firm’s role in malfeasance” or “delayed acceptance of malfeasance” (TenBrink, 2019, p. 217). That is, “ethics and honesty” are irrelevant because “value is multidimensional” (TenBrink, 2019, p. 217). Corporate Citizenship and Political CSR The concept of corporate citizenship tends to combine Adam Smith’s two conditions of compliance with laws and public policies and good citizenship as genuine concern for welfare of others, and partly as a proposed substitute for CSR (Logsdon & Wood, 2002). A text mining

Concepts closely related to organisational integrity  41 analysis of 1,235 articles on CSR, ESG, and corporate citizenship concluded that corporate citizenship is the higher-level concept that encompasses CSR and ESG (Park, Park, Kwon, Kim, Noh, Kim, & Zhu, 2022). The study points to employees as the most critical stakeholder in corporate citizenship; and views the concept as broadly touching on multiple dimensions of business and society. There are two main modes of social expectations for citizenship: corporate philanthropy and corporate compliance concerning expectations about, for example, proper political participation and proper tax payment. Schwartz and Carroll (2003) explicitly excluded philanthropy from their three-domain responsibility framework restricting responsibilities to economic, ethical, and legal. A study of 55 sources (1988–2014) examines philanthropy in family enterprises (Feliu & Botero, 2016). Philanthropy is not a moral obligation or test of integrity but a social expectation (Feliu & Botero, 2016) and increasingly a strategic tool for managing relationships with stakeholders (Saiia, Carroll, & Buchholtz, 2003). Philanthropy is a use of financial resources. The Indian government introduced in 2013 an initially voluntary and then amended in 2014 to a mandatory requirement for domestic and foreign businesses, meeting certain requirements, to spend at least 2 per cent of gross revenues on philanthropic contributions of the firm’s choice. In the voluntary version, firms might opt out with an explanation (Dixit, 2020). Political capitalism or political CSR, including social issue activism in the form of brands taking stands, is about the relationship between businesses and societies. Political CSR (PCSR) as expounded by Palazzo, Scherer, and colleagues argues for an expansive role of business in two domains (Scherer, Rasche, Palazzo, & Spicer, 2016). First, businesses should provide public goods and services in instances of governmental incapacity. Second, businesses should promote democracy both within the organisation and within societies. The idea of PCSR raises afresh the problem of the political role of business in lobbying or otherwise influencing public policy (den Hond, Rehbein, de Bakker, & Kooijmans-van Lankveld, 2014; Rehbein, Leonel, den Hond, & de Bakker, 2020). Another dimension is whether it is morally proper for businesses to avoid taxes and whether a global minimum business tax is the appropriate solution for tax avoidance. Evasion is illegal failure to pay taxes; avoidance is permitted by the design of tax legislation (Wang, Xu, Sun, & Cullinan, 2020). Corporate Social Performance (CSP) Wood’s (1991) theory of corporate social performance (CSP) combines CSR principles, socially responsive organisational processes, and outcomes including social impacts. Each of the three domains has three elements. Wood (2010) discussed empirical measurement of the various elements. In Wood’s approach, CSP subsumes CSR and business ethics into individual motives. Principles of CSR include an institutional principle of legitimacy at the societal level, a principle of public responsibility at the organisational level, and a principle of managerial discretion to act rightly at the individual level. Processes of corporate social responsiveness include environmental assessment, stakeholder management, and issues management. Outcomes of corporate behaviour include social outcomes external to the organisation and social programmes and social policies internal to the organisation. Outcomes are resultants and consequences of the interaction between principles and processes. Porter and Kramer (2011) proposed “creating shared value” (CSV) as an alternative to CSR (Menghwar & Daood, 2021). The basic idea is that there are many social issues and problems

42  Research handbook on organisational integrity that can be addressed profitably by businesses. The CSV approach applies the market logic to those social issues and problems. Criticism is that CSV restricts the responsibilities of business back to the position of Friedman (1970) that business has no social responsibility beyond shareholder wealth maximisation. Some organisations may reduce performance following a positive rating from some external source. An organisation does not necessarily seek an increasing favourable rating for reputational benefits. Rather, the organisation questions the value of attempting to maintain a superior performance and thus reduces effort on the rated dimension (Lewis & Carlos, 2022). The Lewis and Carlos study, a difference-in-differences analysis, found for the early 1990s that a charitable organisation rating was followed by reduction in contributions. The reason is that the business viewed charity as incompatible with shareholder maximisation logic. A number of organisational and institutional factors moderated the relationship positively or negatively. Corporate Social Irresponsibility (CSIR) and Corporate Social Responsibility (CSR) The fundamental core of business-and-society literature historically has been CSR (Carroll, 1999; Frederick, 2008, 2018). One prominent approach is that cross-country variations in CSR results from how implicit and explicit considerations interact (Matten & Moon, 2020). A fundamental problem in CSR literature is not that the idea is undertheorised in the sense of the absence of an integrated conceptual paradigm but rather that the basics of responsibility are contested (Mitnick, Windsor, & Wood, 2021) from multiple disciplines (Gond & Moser, 2021). Several themes in the literature are critical of CSR. The earliest argument was that a publicly traded business should focus on shareholder wealth and leave CSR matters to government (Friedman, 1970). On this argument, CSR appears to be a voluntary choice of a business. The essential features of voluntary choice appear in the principles of the voluntary UN Global Compact. The subsequent argument was that corporate social responsiveness is superior to responsibility (Frederick, 1994/1978), in that business is subordinate to society. A third argument is that controlling irresponsibility is more important in impact than fostering responsibility (Windsor, 2013). A fourth theme is that environmental sustainability is more important than conventional CSR (Frederick, 1998). A fifth theme proposes a shift to business and human rights. Relative to Friedman’s (1970) narrow conception of CSR as restricted to shareholder wealth maximisation in a market economy with limited government, Carroll (1979) proposed a four-dimensional conception depicted as a “pyramid” in which economic responsibility (or performance) is the foundation and philanthropy (a use of profits) is the apex, with legal responsibility and ethical responsibility in between. Kang and Wood (1995) proposed an inversion of the Carroll pyramid to emphasise the primary role of ethical responsibility. In this inversion, ethical responsibility is the foundation, followed by legal responsibility and only then economic responsibility. Philanthropy remains the apex and is more clearly a use of profit. Carroll (1991) has been explicit that all dimensions are morally infused. Table 4.2 explicates the Carroll pyramid and the Kang and Wood inversion. Kang and Wood do not allocate dimensions since ethical responsibility is mandatory. As Figure 4.1 depicts, Schwartz and Carroll’s (2003) three-domain model eliminated philanthropy as purely discretionary. One might treat philanthropy as a subset of economic performance: a business decides between profits and donations as a strategic calculus. The firm

Concepts closely related to organisational integrity  43 Table 4.2

Carroll’s four-dimensioned CSR pyramid and Kang and Wood’s inversion Carroll (1979, 1991, 1999)

CSR Dimension

Nature

Kang and Wood (1995) Relative Weight

CSR Dimension

(Total 10, 100%)

(not allocated)

Nature

Philanthropy

desirable

1 (10%)

Philanthropy

desirable

Ethical

expected

2 (20%)

Economic

expected

Legal

mandatory

3 (30%)

Legal

mandatory

Economic

mandatory

4 (40%)

Ethical

mandatory

decides relative balance and relative positioning among responsibilities. Figure 4.1 follows Kang and Wood (1995) in positioning ethical responsibility at the centre.

Figure 4.1

Schwartz and Carroll’s (2003) three-domain model

A way of expressing Kang and Wood (1995) is that corporate moral responsibility should substitute for CSR (Hess, 2015, 2017): “moral” should replace “social” in the conception (Frederick, 1986). The rationale is that “social” tends to let corporations and individuals escape from a clear and explicit understanding that business ethics is superior to profitability or even legal compliance in instances of morally justifiable civil disobedience. There is a distinction between corporate and personal responsibility, and thus issues of corporate control and internal socialisation processes (Phillips, 1995). There can be both corporate and personal responsibility (Smith, 2014). The crucial issue is whether there can be corporate responsibility but absence of personal responsibility, or vice versa, for specific actions and outcomes. The chief debate concerning voluntary acceptance of responsibility concerns the choice between an economic logic or a moral logic (Mitnick, Windsor, & Wood, 2023). In an economic logic, the emphasis is on the financial advantage of the business whether conceived of in terms of shareholder wealth maximisation (Friedman, 1970) or CSV (Porter & Kramer, 2011). The moral logic argues that managers should recognise that responsibility rests on moral standards concerning right versus wrong actions and good versus bad consequences. Responsiveness as a proposed alternative to responsibility argues that the business should be responsive to external (or institutional) pressures whether in terms of governmental demands including legal requirements or stakeholder demands. Responsiveness suggests that social requirements and expectations are effectively mandatory, and thus a strategic logic of necessity is at work: business complies or loses legitimacy and ultimately existence. The logic of

44  Research handbook on organisational integrity moral CSR is closest to organisational integrity: ethics is ultimately superior to other considerations (Kang & Wood, 1995). Responsible Management and Sustainability Sustainable development is a goal for improving human welfare and ecological sustainability simultaneously (Brundtland, 1987). In the context of sustainable development, “‘responsible management’ has become the popular buzzword” (Maitra, 2022, para. 1; Windsor, 2008). “In simple words, it means running industries in a manner that does not endanger the Earth by adding to the climate crisis” (Maitra, 2022, para. 1). This meaning is narrow in the sense that it suggests ceasing negative impacts on climate but does not suggest positive actions to improve climate. In November 2022, Swedish environmental activists headlined by Greta Thunberg filed a lawsuit asking Stockholm District Court to determine that the government’s climate policies violate the human rights of the country’s citizens. The UN Global Compact includes three environmental principles for business: (7) supporting a precautionary approach; (8) investing in greater environmental responsibility; and (9) encouraging environmentally friendly technologies. The UN 2030 Sustainable Development Goals (SDGs) include 17 broad goals (López-Concepción, Gil-Lacruz, & Saz-Gil, 2022). Sustainability has three different meanings, which are not necessarily compatible. One meaning is business sustainability: the business continues to operate. A second meaning is economic and social development: human welfare continues to rise (Steffen et al., 2015). A third meaning is planetary development: nature continues to improve in terms of viability for human and other life (Díaz, Settele, Brondízio, Ngo et al., 2019). The triple bottom line (TBL or 3BL) framework posits the compatibility of the three meanings: profit, people, and planet all improve jointly. The most ideal version of sustainable development is that everyone’s welfare increases, while planetary sustainability becomes assured. The United Nations Sustainable Development Goals (SDGs) combine human and ecological elements. In Frederick’s (1998) conception, ecological sustainability is the essential requirement for ethics, responsibility, and responsiveness. Frederick urged a shift from the conventional framework for social issues in management defined by CSP, business ethics, and stakeholder theory to a new paradigm grounded in the natural sciences. In Frederick’s view, the conventional framework combined social science, moral philosophy, and organisational science. The natural sciences expand research horizons to cosmology, evolution, and spirituality. There are three key objections to the concept of sustainable development. One objection is whether sustainable development is even attainable: that is, someone will be left out. A second objection concerns whether markets or governments are the better pathway to the future. A third objection substitutes “ecological civilisation” for sustainable development: there must be some ill-defined fundamental transformation of economy, society, and government in order to save the planet and humanity (Gare, 2017).

Concepts closely related to organisational integrity  45

TOWARDS AN INTEGRATIVE APPROACH Two Previous Proposals: ESG and VBA ESG is a narrow and technical approach for measurement for the purpose of allocating investment capital relative to risk (Hirai & Brady, 2021). ESG may not be particularly good for purposes of business-and-society theorising. Keeley (2022), formerly an asset manager at BlackRock, argues that ESG advocates are overly optimistic about what the investment approach can achieve in sustainability and social improvements. On the one hand, threatening to divest does not influence business behaviour; on the other hand, what are identified as good companies do not provide sufficient returns. Businesses alone cannot solve sustainability and social problems; their activities must be complementary to governmental, civil society, and individual contributions. Keeley recommends allocating capital to strategies that provide verifiable benefits to environment and society through impact investing (Au-Yeung, 2022). Schwartz and Carroll (2008) proposed an approach for formulating a framework for integrating five key approaches as complementary. Their approaches include (a) CSR, (b) business ethics, (c) stakeholder management, (d) sustainability, and (e) corporate citizenship. The proposed integration (VBA) combines value (V), balance (B), and accountability (A). A business should create value for society as well as its stakeholders. The key approaches should be in balance. A business should be accountable to society for its actions and impacts. Table 4.3 below embeds this VBA approach. A Proposed Integrative Framework Table 4.3 lays out the author’s proposed integrative framework for aligning the closely related concepts with one another and with organisational integrity. For convenience of exposition, the table structures around three lettered columns (A, B, and C) and 11 numbered rows. One reads the table row by row across the three columns. The object is to explore the logic of how the various concepts can fit together. In general terms, from top to bottom, the framework begins with responsibility, moves through responsiveness to performance, and then links to organisational integrity. The framework embraces a broad conception of responsibility (Windsor, 2013) in distinction to the narrow conception found in Friedman (1970). The framework embeds VBA. Column B captures value creation. Column A concerns accountability. The framework resolves balance through defining organisational integrity in combining with judgements regarding elements of Column C. For increased distinctions, Table 4.3 draws on the terminology of Frederick (1986, 1994/1978, 1998), who separated among corporate social responsibility (CSR1), corporate social responsiveness (CSR2), corporate moral rectitude (CSR3), and environmental sustainability (CSR4) in that developmental sequence. Frederick’s terminology, identified in Table 4.3 in italics, embeds the understanding that there has been a conceptual evolution over time from a general philosophical-moral concept of responsibility (CSR1) through responsiveness (CSR2) to performance (CSP) for society and stakeholders to a strengthened emphasis on ethical analysis (CSR3) to a final resting position at environmental sustainability (CSR4). Sustainability is a moral obligation, not a strategic choice. The notation = 0, prohibited, means that the action or outcome should not occur. The notation = 1, mandatory, means that the action or outcome should occur. The notation ≥ 0

46  Research handbook on organisational integrity Table 4.3

An integrative framework for concepts closely related to organisational integrity

Rows

Columns A, B, and C Corporate Social Responsibility (CSR1) > 0

1 Negative Welfare Effects

Legitimacy = Market Actions within Positive Welfare Effects through

from Illegal or Unethical

Legal Institutions and Ethical

Actions

Norms

 

Column A

Column B

Column C

3

Corporate Social Irresponsibility

Shareholder Wealth Maximisation

Voluntary Contributions ≥ 0

2

Good Citizenship Actions

● Moral motive

(CSIR)

● Strategic motive

=0

Corporate Social Responsiveness (CSR2) > 0

4 5

Social Compliance = 1

6

Corporate Social Performance (CSP) > 0: principles, processes, and outcomes (social programmes and policies

Stakeholder Welfare Maximisation

Philanthropy ≥ 0

resulting in positive social and environmental impacts) 7

Environmental damage = 0

Planetary sustainability (CSR4) = 1

Responsible management = 1

Anti-corruption efforts ≥ 0

Corruption = 0

Human rights promotion ≥ 0

Human rights abuses = 0 8 9

Organisational Integrity = 1 Business Ethics = 1 and Legal

Corporate Hypocrisy = 0

Compliance = 1 10 11

Corporate Political Activity (CPA) is orientated to the public interest = 1

Corporate Moral Rectitude (CSR3) Civil Disobedience ≥ 0 and Political CSR1 ≥ 0

means some positive action or outcome is desirable but the specific action or outcome is not mandatory beyond the minimum threshold of 0. There is a management judgement involved. No notation < 0 is necessary in this logic since such an empirical condition would violate the prohibition standard. The various elements of Table 4.3 are requirements or standards: 0 means none, 1 means perfect, and ≥ 0 means a minimum requirement. A theoretician cannot state a prescriptive requirement beyond the minimum ≥ 0 for voluntary judgements of management: the requirement is simply that the judgement not result in negative welfare effects for society or stakeholders. A theoretician can suggest the reasonable implications of moral or strategic considerations. Where no standard is stated, the element is simply definitional, as in wealth or welfare maximisation. Shareholder and stakeholder theories are conceptions of whose goals management should serve. Dmytriyev, Freeman, and Hörisch (2021) discuss the possibilities for the relationship between stakeholder and CSR theories. One idea might be a subset of the other; the two ideas might be complementary; the two ideas might be in competition. Dmytriyev et al. argue that the two ideas are complementary, and scholars should work on collaboration. CSR1, responsibility, in Row 1 is the historically dominant idea in the business-and-society field. Windsor (2013) subdivides the general concept of CSR1 into the three domains labelled as Columns A, B, and C. Table 4.3 structures around these three domains shown in bold font in Row 2, also used for Organisational Integrity in Row 8. Each domain defines a column of the table. Windsor equates ethics with a no harm principle, compliance with the legal framework, and good citizenship with making social contributions beyond market outcomes. Column B in the centre defines “legitimacy” in terms of market actions within legal institutions and ethical norms (Friedman, 1970; Rendtorff, 2019). Regulated demand-and-supply

Concepts closely related to organisational integrity  47 interactions determine aggregate social welfare (ignoring equity of distribution) as a baseline outcome. Beyond this institutionally determined outcome, a business can affect social welfare through specific actions. From this fundamental interpretation, the table then defines relevant concepts and conditions. Column B thus shapes value creation. Column A to left of the centre column defines negative welfare effects reducing the baseline due to illegal or unethical (even if legal) actions. For instance, environmental damage, violating ethical principles and laws, reduces social welfare. Column A addresses accountability. Column B to the right of the centre column defines positive welfare effects adding to the baseline through good citizenship actions. For instance, philanthropy promotes social welfare. At Column B and Row 8, Organisational Integrity addresses defining balance among multiple considerations. Row 3 amplifies on these three domains in terms of corporate social irresponsibility (CSIR) in Column A, shareholder wealth maximisation in B, and voluntary contributions in C. Intentional or negligent failures of business ethics or compliance are irresponsible conduct (CSIR). Voluntary citizenship actions may occur out of moral motive, strategic motive, or a mix of motives. Row 3 can align with Friedman’s (1970) narrow definition of CSR as follows. The publicly traded firm focuses on shareholder wealth maximisation as its sole social responsibility, but within legal and ethical “rules of the game” captured in Column A as no CSIR. What Friedman argues against is Column C: he opposes voluntary social contribution, especially in the form of philanthropy. Friedman exempts privately owned businesses from his arguments because those businesses are the same as households free to engage in philanthropy. Row 4 shifts conception, following Frederick (1994/1978) from responsibility to CSR2, responsiveness. Row 5 amplifies on this conception in terms of social compliance (A), stakeholder welfare maximisation (B), and philanthropy (C) defined in general terms. Row 6 shifts following Wood (1991) to CSP, performance, drawing on both CSR1 and CSR2 conceptions. The essential idea of CSP is that there should be no negative social or environmental impacts and thus desirably only positive social or environmental impacts. The CSP approach tends to merge together Columns A and B, as demonstrated in Table 4.3’s Row 7. The table provides three key illustrations: environmental damage, corruption, and human rights abuses should not occur (thus = 0). Responsible management is a synonym for zero environmental damage. The positive welfare versions of these illustrations are Frederick’s (1998) CSR4, planetary sustainability, anti-corruption efforts, and human rights promotion. The logic in Column C of Row 7 is somewhat more complicated, as planetary sustainability must be 1 (mandatory and overriding) whereas anti-corruption efforts and human rights promotion are desirable but voluntary and thus ≥ 0. Row 8 shifts to organisational integrity. Examination of closely related concepts suggests that organisational integrity must include a number of elements. In Row 9, Column A, business ethics and legal compliance must equal 1: that is, a business must implement both standards rigorously. The definition or requirement in Table 4.3 is that there be no negative welfare effects from illegal or unethical actions. In Column B, there must be no corporate hypocrisy (thus = 0), such as greenwashing or variants. A business should be honest, honourable, and transparent to the extent feasible. (There are legitimate issues of socially acceptable business secrets.) Row 10 suggests that those requirements are the essential elements of Frederick’s (1986) CSR3. The concept of organisational integrity does not extend to the elements of Row 7, Column C, which are voluntary actions of good citizenship resulting in positive outcomes. Column C

48  Research handbook on organisational integrity must stand on its own, as a mix of moral and strategic motives. However, there are two likely implications of organisational integrity. First, corporate political activity (CPA), for influencing government policy, should be orientated to the public interest (and thus = 1) rather than being opportunistically self-serving. An organisation with integrity cannot be opportunistic but employ personnel who are concerned with the broader interest of society and government. Friedman (1970) argued that CPA should, when reflecting realistically the “rules of the game,” be conducted in the firm’s self-interest as all other political actors are behaving. Row 11 concerns at least two special conditions that may arise for business operations. The idea of a special condition is that linking organisational integrity to specific actions depends on the particular circumstances. In those circumstances, the condition becomes ≥ 0 rather than being generally compelling as in CSR4 = 1 or CSIR = 0. One special condition is circumstances requiring the organisation to engage in morally required civil disobedience. An example is whether Google or similar social media platforms can properly operate in China subject to censorship requirements that such platforms would oppose in democracies. A second special condition concerns the admonition to engage in political CSR1. As explicated earlier, PCSR arguably divides into two requirements. One requirement is to provide public goods and services in circumstances of governmental incapability: the requirement is stated conditionally – there must be incapability. Friedman (1970) characterised this requirement as socialism in violation of a proper separation of business and government functions. The other requirement is stated more generally: a business should foster democracy internally and externally – this requirement assumes a condition of insufficient democracy (Scherer et al., 2016). The counter-case is that there are limits to internal democracy; and how to define external democracy is a matter of political contest, in which business is simply one potentially powerful stakeholder and actor. An organisation with integrity cannot properly fail to act on matters of civil disobedience and democratisation when such actions are legitimate and feasible. Non-feasibility becomes a problem in judging moral and strategic considerations jointly. The more a business meets the conditions stated in Table 4.3, the greater organisational integrity is likely to be; and vice versa. The ideal conditions for supporting organisational integrity are now identified as follows, with some grouping for convenience: ● CSIR = 0 ● Good corporate citizenship ≥ 0, philanthropy ≥ 0 ● Social compliance = 1 (except in special conditions of civil disobedience and PCSR1 duties) ● Environmental damage = 0, Responsible management = 1, CSR4 = 1 ● Corruption = 0, Anti-corruption ≥ 0 ● Human rights abuses = 0, Human rights promotion ≥ 0 ● CSR3 = 1, Business ethics = 1, Legal compliance = 1, Corporate hypocrisy = 0 ● CPA (public interest) = 1 ● Civil disobedience ≥ 0, PCSR1 ≥ 0 These conditions are simultaneous. The notations 0 and 1 involve mandatory requirements; the notation ≥ 0 involves voluntary choices above a minimum threshold. These conditions also imply that CSR1 > 0, CSR2 > 0, and CSP > 0 simultaneously. These concepts cannot be zero

Concepts closely related to organisational integrity  49 much less negative, but they cannot be set to = 1 because some actions are voluntary; however, the concepts must be greater than 0. In contrast, organisational integrity must = 1: in principle, there cannot be deviation from perfect integrity. Organisational integrity is an internal choice, of arguably mixed moral and strategic motives, reflecting the interface between internally orientated CSR1 and externally orientated CSR2. However, integrity imposes some restrictions on choices such as binding duties for civil disobedience and PCSR1 out of moral motives that are arguably more relaxed in defining responsibility, responsiveness, and performance. Integrity more strongly reflects CSR3, moral rectitude, and CSR4, environmental sustainability, or responsible management.

CONCLUSION: CONTRIBUTIONS AND RECOMMENDATIONS The role of responsibility (Aguinis & Glavas, 2012) is to reduce the negative impacts of business on environment, society, and stakeholders and to help assess how business can produce positive solutions for grand challenges, wicked problems, and the threat of future black swan events (Reinecke & Ansari, 2016). Recent research into CSR emphasises psychological and sociological micro-foundations of how managers come to understand and implement responsibility (Gond & Moser, 2021). Two general findings emerge from this review. One finding is that organisational integrity rests on a necessary foundation of responsible and responsive managers and employees. Organisational integrity is an intrinsic matter intertwined with ethics and virtues. A second finding is that organisational integrity must translate into socially desirable and environmentally necessary actions. As indicated in the CSP theory, organisational process is the linkage between integrity (i.e., principles) and positive impacts through proper actions. The translation involves extrinsic considerations. Business ethics, CSR, and CSIR focus on the moral development of business personnel. Corporate citizenship, corporate social responsiveness, and sustainability and responsible management focus on the relationship with environment and society. ESG and CSP focus on measuring negative and positive impacts of business activities. Table 4.3 proposes a framework for putting various concepts and elements together in a logically consistent way. Broadly defined, a business should be responsible, responsive, sustainable, and a good citizen. Combination of these characteristics should help reduce negative impacts and foster positive impacts of business activities for environment, society, and stakeholders. Organisational integrity is an important element in this desirable set of outcomes.

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5. Integrity, integrity violations and integritism What they are and why they matter Leo Huberts

This Research Handbook offers many relevant and challenging contributions on ‘organisational integrity’ (OI). They are about important aspects of the topic. What is organisational integrity? Many disciplinary perspectives are addressed as well as dimensions and characteristics of the OI phenomenon, how to measure it and what to consider in the management of OI. The many contributions concern integrity in the private and the public sector and ‘organisational’ is interpreted broadly with attention to the overall organisation but also to the behaviour of involved individuals at all levels. When a scholar is asked to contribute to a handbook, normally the first idea will be to summarise the research and theorising he or she is involved in. For an emeritus professor like myself, that was the starting point. This chapter will summarise some basic ideas stemming from our research at the Vrije Universiteit Amsterdam. That research is primarily about the quality and integrity of (public) governance, with Public Administration as the discipline to start from (which is multi-disciplinary in its own ambition). The first paragraphs that follow will present that framework on the meaning of integrity and integrity violations. I will summarise and discuss this, also with the Research Handbook content and the OI concept in mind. This also brings up the question of how the integrity of an organisation could or should be interpreted. After that I will focus on a specific phenomenon that is not very well known and, in my view, underestimated in research and the literature as well as in actual organisational, societal and political debates about integrity: integritism. Integrity is about moral norms and values, about good and bad behaviour, based on what we share. So, when someone’s integrity is put in doubt, that really matters and hurts the accused. Its importance also points at the necessity to be careful in using the integrity word (I-word) (Huberts, 2014, pp. 127–128). Integritism refers to the misuse of the topic, to inappropriate accusations on violating integrity, without good reason, possibly with an opportunistic background (trying to harm the opponent) or misunderstanding of what integrity is about (moral quality of policymaking and not about the content and outcome of decisions). In the last paragraph of this chapter, I will summarise the presented framework on integrity and integritism and the importance of clarity of the integrity concept including the awareness of integritism.1

INTEGRITY OF GOVERNANCE2 Integrity is in the title of this Research Handbook as well as in (almost) all the chapters, with ‘organisational integrity’ as the central concept. That will hopefully lead to enough common ground but also give us all an idea of the diversity of interpretations and visions concern54

Integrity, integrity violations and integritism  55 ing ‘integrity’. What is integrity in my view?3 In our research we focus on the integrity of governance. Governance is nowadays a popular concept that relates to organisation, management, power, authority, politics, policy, administration, government and steering (Bevir, 2009; Fukuyama, 2016; Kettl, 2015; Rose-Ackerman, 2017). Governance can be defined as ‘authoritative policy-making on collective problems and interests and implementation of these policies’ (Huberts, 2014, p. 68). Governance is about addressing collective problems and interests, possibly by one actor but also by a network of actors. A second important element is ‘authoritative’, a term referring to the relation between the governing actor(s) and the collectivity involved. It presupposes support and legitimacy of the organisation or community whose problems and interests are addressed (the relation to Easton’s (1953) famous definition of politics as the authoritative allocation of values is of course not coincidental). This idea of governance thus includes public as well as private organisations. Public and corporate governance do of course differ, also public and corporate integrity. Acting with integrity as a (prime) minister or top civil servant differs from acting as an integritous4 Chief Executive Officer (CEO), a board member or employee in a company. Nevertheless, in both contexts integrity refers to the same characteristic of that behaviour. That does not mean (at all) that we all agree about the definition of ‘integrity’. Integrity ‘Integrity’ has become a concept with some prominence in research on public and corporate governance, as well as in actual policymaking and implementation at all levels, but what is integrity? What characterises the integrity of a person, a functionary or an organisation? In the literature on public and business ethics and integrity, many views or perspectives or definitions can be found. At least eight views or perspectives are present (Huberts, 2014). Box 5.1 lists these. These will be summarised briefly afterwards, followed by a reflection on their content and some clarification of the chosen perspective.

BOX 5.1 EIGHT VIEWS ON INTEGRITY 1. 2. 3. 4. 5. 6. 7. 8.

Integrity as wholeness Integrity as being integrated into the environment Integrity as professional responsibility Integrity as conscious and open acting based on moral reflection Integrity as a (number of) value(s) or virtue(s), e.g., incorruptibility and accountability Integrity as accordance with laws and codes Integrity as accordance with relevant moral values and norms Integrity as exemplary moral behaviour

(Huberts, 2014, p. 39.)

A dominant perspective on integrity, Montefiore and Vines (1999, p. 9) concluded, is in line with the meanings of the Latin integras: intact, whole, harmony, with integrity as ‘wholeness’ or completeness, as consistency and coherence of principles and values (in Dutch often summarised with ‘you say what you think, and you do what you say’). Another view sees integrity

56  Research handbook on organisational integrity as professional wholeness or responsibility (including a view with a focus on taking into account the environment): ‘integrity means that a professional exercises his tasks adequately, carefully and responsibly, taking into account all relevant interests’ (Karssing, 2007, p. 3). Other perspectives focus on one or more other specific values (Dobel, 1999, 2016); for example, incorruptibility, honesty, impartiality, accountability (as also in many codes of conduct). A view that fits into this category relates integrity to virtues, with integrity as acting in line with virtues such as wisdom, justice, courage and temperance (Becker & Talsma, 2016; Van Tongeren & Becker, 2009). In other views the relationship between integrity and morals is more prominent (what is right and wrong, good or bad). The first sees integrity as open reflection on morals (Carter, 1996). Other views see integrity more as an umbrella concept, one that combines sets of values that are relevant for the functionary being judged. Among these is the more legal view that seems attractive because of the clarity of laws and rules on what matters (Rosenbloom, 2011; Lee & Rosenbloom, 2005), following up on Rohr (1989) with the focus on ‘constitutional or regime values’ (pp. 4–5). The seventh perspective shown in Box 5.1 argues that a broader interpretation is necessary, also because the ‘law’ does not always offer a clear guiding principle for many aspects of actual decision-making and implementation processes in government and business, with an interpretation therefore in terms of complying with the relevant moral values and norms (see, e.g., Becker, 1998; Fijnaut & Huberts, 2002; Paine, 1994; Thompson, 1995; Uhr, 1999). This interpretation, of course, comes close to ‘a general way of acting morally’ and ‘morality’ (Brenkert, 2004, p. 5), or, as De George (1993) put it, ‘acting with integrity is the same as acting ethically or morally’ (p. 5). The last perspective sees integrity as the ‘stuff of moral courage and even heroism’ (Brenkert, 2004, p. 5), which means that it ‘stands for complying in an exemplary way with specific moral standards’ (Van Luijk, 2004, p. 39). All of the mentioned interpretations of integrity focus primarily on the behaviour of the participants in governance, in decision-making and decision implementation. That is, it does not concern everything in politics and business; integrity concerns behaviour, process and procedure (in a broad sense). It is not about the content of the output or the societal results (outcome) (Huberts, 2018). The ethics of the content of decisions, policies, goods and services should thus be distinguished from the ‘moral quality’ of the governance process. Policy ethics and business ethics concerning the output and the outcome are very important but should be distinguished from the integrity of the involved actors. To simplify: a government can decide to go to war (or not) or to limit immigration (or not) with or without a process of policy and decision-making (and implementation) in line with the valid moral values and norms for that process. And a corporation can decide to continue or to skip its oil extraction through morally correct or morally wrong decision-making and implementation. Whether going to war or winning oil is ethically okay is as important but integrity focuses on the process, not the outcome. Integrity as Moral Quality In this chapter integrity is seen as the quality of acting in accordance or harmony with relevant moral values, norms and rules. That is, of course, not an original approach. Much of the literature on integrity considers integrity to be synonymous with being moral or ethical,

Integrity, integrity violations and integritism  57 which is, to a certain extent, in line with the presented perspective. What is often missing then is a clarification. What, for example, is a value or norm, a moral value or norm, a relevant or valid moral value or norm? Defining integrity in terms of the accordance with relevant moral values, norms and rules requires understanding of what a moral value, norm or rule is; of what is meant by ethics, morals and morality. Despite agreement that both concern ‘right and wrong’ or ‘good and evil’, different interpretations of the terms abound, especially in the realm of philosophy and the study of ethics. The terms ‘ethical’ and ‘moral’ are almost always used as synonyms, both denoting the principle of right and wrong in conduct (Thompson, 1985), acknowledging that ‘ethics’ is also seen as the study of such principles (Huberts, 2014). Kaptein and Wempe (2002) distinguished six features exhibited by moral pronouncements. They concern ‘right and wrong’ (a normative judgement that expresses approval or disapproval, evokes shame or pride), but they also appeal to the general consent; are not a matter of individual taste; apply to everyone in similar circumstances and involve the interests of others (interpersonal); and the interests at stake are ‘fundamental’ (2002, p. 42). Thus, not all values and norms are relevant for ethical or moral judgements. Ethics are not, for example, concerned with what is beautiful (aesthetics), what is conventional (etiquette) or what works (science and technology; e.g., ‘ISO norms’ – worldwide proprietary, industrial and commercial standards developed by the International Organization for Standardization). Integrity is about ‘moral’ norms and values, those that refer to what is right or wrong, good or bad. The features also refer to a general consent with relevance for everyone in the same circumstances. That relates to the relevant or ‘valid’ moral values and norms. In sum, morality and ethics refer to what is right or wrong, good or bad. They concern values and norms that people feel rather strongly about, because serious interests are involved that affect the community of which they are a part. A value is a belief or quality that contributes to judgements about what is good; right; beautiful; or admirable. Values thus have weight in the choice of action by individuals and collectives. A norm is more specific. Norms tell us whether something is good or bad, right or wrong, beautiful or ugly. For types of behaviour, they answer the question ‘what is the correct thing to do?’ (De Graaf, 2003; Fijnaut & Huberts, 2002, pp. 10–11; Van der Wal, 2008, pp. 10–12). Individual, Collective, Organisational Behaviour? The integrity framework that was (and will be) presented must also lead to questions, I realise, in the context of this book about organisational integrity. Integrity as behaviour in accordance with the relevant moral values and norms primarily focuses on individuals and not on the organisation. How does the integrity of those individuals relate to ‘organisational integrity’? It of course also depends on one’s definition of organisational integrity whether there is a tension between the two concepts. Palazzo (2007, p. 113) on organisational (and corporate) integrity links both: ‘Organizational integrity refers to the ethical integrity of the individual actors, the ethical quality of their interaction as well as that of the dominating norms, activities, decision making procedures and results within a given organization.’ Palazzo continues with: Organizational integrity goes beyond managerial integrity and is more than the presence of individuals with good characters within the organization. Having ‘good’ managers is certainly a precondition for organizational integrity, but it does not prevent organizations from obtaining bad ethical results. It is possible to take the bad apples out of the barrel, but the risk of deviant organizational behaviour

58  Research handbook on organisational integrity will not be reduced to zero. The good apples might develop a bad taste and sometimes it might be a problem of the barrel itself. (2007, p. 113)

Stark’s (2019) work on organisational integrity is clear on the importance of the organisational level: We should change the focus from the individual to the organisation. Instead, the specific organizational situation of scandals must be looked into. It is not the individual actor who is less integrated and compliant, but the organization itself, the organizational integrity, and specially the possible lack of organizational integrity. Though there may be other variables explaining misconduct, this book will focus on the organizational part. (pp. vii–viii)

My idea is different. Acting in accordance with the relevant moral values and norms (and rules) is a (possible) characteristic of individual behaviour as well as of organisations but we have to be clear on what organisational integrity then is about. I’ll come back to that later in this chapter. First on the agenda is behaviour that violates the moral norms and values, integrity violations.

INTEGRITY VIOLATIONS Types of Integrity Violations5 What types of integrity violation are relevant to distinguish (Huberts & Van Montfort, 2020)? Different bodies of knowledge point to many types of behaviour that conflict with values and norms in different contexts. Corruption is often part of that literature, with the focus on ‘inappropriate private interests’ conflicting with the public or organisational interest. Additional interesting research often uses other concepts for immoral or inappropriate behaviour (Huberts & Lasthuizen, 2020), for example police deviance and misconduct (Punch, 1985), organisational misbehaviour (Vardi & Weitz, 2004), white-collar crime (Kolthoff, 2016), state crime (Peoples & Sutton, 2017; Ross, 2000) and administrative evil (Adams & Balfour, 2004; Berndsen, 2015). This broad spectrum of unethical behaviour was the starting point for researchers at the Vrije Universiteit Amsterdam to construct, step by step, a broad typology of integrity violation categories. The ambition was to present an overview of types of unethical behaviour, from the diverse literature, with relevance for almost all (semi) public organisational contexts. The types of violations are present in many contexts, though the concrete behaviour will of course vary in different times and places. Since its original formulation, the typology has been discussed and tested many times using available (quantitative and qualitative) data on integrity violations (with an operationalisation in specific behaviours depending on the context). Lasthuizen (2008) made a first successful attempt to empirically validate the typology for standardised surveys within the field of ethics and integrity and for organisational (mis)behaviour research (see also De Graaf, Huberts, & Strüwer, 2017; Huberts, Lasthuizen, & Peeters, 2006; Lasthuizen, Huberts, & Heres, 2011; Sampford, Shacklock, Connors, & Galtung, 2006). This resulted in a typology distinguishing ten categories of integrity violations. The typology is summarised in Table 5.1 with a very brief explanation.

Integrity, integrity violations and integritism  59 Table 5.1

Typology of integrity violations (Huberts & Van Montfort, 2021, pp. 8–9)

1.

Corruption: bribery

Misuse of (public) power for private gain: asking, offering, or accepting

2.

Corruption: favouritism (nepotism, cronyism,

Misuse of authority or position to favour family (nepotism), friends

patronage)

(cronyism) or party (patronage)

3.

Fraud and theft of resources

Improper private gain acquired from the organisation or from colleagues

4.

Conflict of (private and public) interest through

Interference (or potential interference) of personal interest with public

‘gifts’

or organisational interest because of gifts, services or assets accepted or

bribes

and citizens, with no involvement of an external actor

promises made 5.

Conflict of (private and public) interest through

Interference (or potential interference) of personal interest with public or

sideline activities

organisational interest because of jobs or activities practised outside the organisation

6.

Improper use of authority

Use of illegal or improper means or methods (possibly for ‘noble causes’)

7.

Misuse and manipulation of information

Intended or unintended abuse of (access to) information, such as cheating, violation of secrecy rules, breaching confidentiality of information or concealing information

8.

Waste and abuse of organisational resources

Failure to comply with organisational standards and/or improper performance or incorrect or dysfunctional internal behaviour

9.

Indecent treatment of colleagues or citizens and

Unacceptable treatment that includes not only discrimination (based on

customers

gender, race or sexual orientation), intimidation and sexual harassment but also improper behaviour like bullying, nagging and gossiping

10. Misconduct in private time

Misconduct in the private sphere that harms people’s trust in the (public) organisation

Source: Huberts and Lasthuizen (2020); Huberts & Van Montfort (2020); Lasthuizen (2008); Lasthuizen, Huberts, & Heres (2011).

In the typology corruption is of course included as the abuse of powers for private gain (Pope, 2000; also central in, for example, Transparency International’s Corruption Perception Index). Two types of corruption are distinguished: bribery and favouritism. ‘Private gain’ is clearly an element, but the three types of favouritism point at a broad interpretation of ‘private’, including favouring family (nepotism), friends (cronyism) or party (patronage). Fraud and theft also involve ‘private gain’ but there are no outside interests involved. Two other types involve (the appearance of) conflicting private interest by gifts and jobs or positions elsewhere. Sometimes these are combined and seen as one type (conflict of interest). Misuse of authority is the case in all violations, but here we focus on other misuse, including in the organisation’s interest (noble cause). Manipulation of information (including lying and leaking) and serious waste and abuse of resources are clearer. Numbers 9 and 10 are among the violations that attract much publicity and get much more attention since ‘#MeToo’. Sexual misconduct and violence are part of the violation ‘indecent treatment’ (including also discrimination, other types of intimidation). Often this misconduct is work-related but also in the private sphere (more becomes public through the social media) misconduct is discovered that leads to serious discussions about someone’s integrity (from domestic violence to alcohol abuse and so on).

60  Research handbook on organisational integrity Integrity Violations in Public and Business Contexts Is the typology of integrity violations also applicable in the business sector (Kaptein & Wempe, 1999)? Kaptein (2008) distinguished a total of 37 ‘items’ of corporate ‘unethical behaviour’ in the workplace towards financiers (10 items), customers (8), employees (5), suppliers (7) and society (7). That distinction with the ‘object’ of unethical behaviour as starting point is of course different than the focus on the types of behaviour in connection to the moral norms and values violated. Misuse of information, including leaking and lying, is, for example, possible in all of the categories. On the other hand, the types of unethical behaviour and the distinguished integrity violations are in my view considerably similar. Among the five types of unethical behaviour towards customers are, for example, discrimination, (sexual) harassment and intimidation, racism, pestering, verbal abuse and physical violence, violating workplace health and safety rules or principles, violating employee wage, overtime, benefits rules and breaching employee privacy. The same parallels are present in the items in the Global Business Ethics Survey (ECI, 2021). The most observed types of misconduct in 2020 in the United States are favouritism towards certain employees, management lying to employees, conflicts of interest, improper hiring practices, abusive behaviour and health violations (ECI, 2021, pp. 18, 21). For now, and with some hesitation, my idea would be that the proposed typology of integrity violations seems useful to apply in research and policy development in the public but also in the private and business sector. More research, comparative research in different sectors using the framework would be challenging. That would have to consider the differences (and similarities) between the moral values in both sectors (Van der Wal, 2008). Integrity Violations in (Non-)Western Contexts Ethics, integrity, integrity violations and corruption are seen as relevant topics for the theory and practice of public and corporate governance. Nevertheless, a serious question concerns the adaptability of the conceptual framework in research and policy practice all over the world. In the corruption literature, attention is given to what can be summarised as the ‘Western bias’ (De Graaf, Wagenaar, & Hoenderboom, 2010; Lawton, Huberts, & Van der Wal, 2016; Mungiu-Pippidi, 2006; Sissener, 2001). How applicable are existing corruption frameworks to non-Western societies? A similar question on possible cultural bias is also very important for the interpretations and perspectives on integrity. What are the ‘relevant’ moral values and norms, in so many different contexts, and how do they relate to the global and international ideas on integritous governance (Lawton, Huberts, & Van der Wal, 2016)? International law, international codes of conduct, international treaties etc. give an idea about the ‘global’ moral values and norms. But are they supported by the international community and by national and subnational governments (and corporations)? To mention one vulnerable and sensitive example: the United Nations System Code of Conduct on Sexual Harassment (United Nations, n.d.). That global perspective in addition suggests the possibility of a ‘non-Western bias’ in integrity research. This concerns research that only focuses on financial-economic types of violations such as corruption and fraud and ignores moral values and norms on, for example, discrimination and (sexual) intimidation (Khalid, 2016). What is seen in ‘the West’ as an integrity violation is acceptable in many other countries.

Integrity, integrity violations and integritism  61 Overall, the meaning of integrity and integrity violations suits the agenda for future research. Sometimes this is primarily semantics (the word ‘integrity’ may not be so familiar in many countries, with other words for a number of the integrity violations), but more important is more clarity about the global moral values and norms and the differences between countries concerning those norms and values.

INTEGRITISM: WHAT IT IS AND WHY IT MATTERS Integritism: What It Is When integrity is seen as important, it is almost by definition also important that it is clear what integrity and integrity violations are about (Huberts, 2018). Many things can go wrong in an organisation. There are, as Caiden (1991) convincingly argued, many bureaupathologies. But not all these 179 pathologies should be considered integrity violations. Functionaries make mistakes, even stupid mistakes, without the violation of the moral norms and values that really do matter. Yet, when this distinction becomes too blurred, an organisation loses sight of what is morally important and what is not, possibly leading to negative outcomes. For example, employees may become too afraid to risk doing anything wrong or may become paralysed, with good reason, by the idea that making a mistake might lead to an investigation of their integrity. To avoid such repercussions, organisations must clearly identify their central moral values and norms and must develop organisational ethics that clarify what type of (moral) value or norm violation is considered serious enough to warrant an investigation of integrity. Although never easy, this undertaking is crucial for any organisation that takes ethics and integrity seriously and that wants to prevent the oversimplification and/or overgeneralisation or ‘integritism’ (Huberts, 2014, pp. 127–128). Integritism refers to the misuse of the integrity topic, to inappropriate accusations that functionaries did not act with integrity, without good reason because of misunderstanding what integrity is about and/or possibly with an opportunistic background (trying to harm the opponent). Previously in this chapter I mentioned an element that is also relevant in this context. Integrity is about the moral quality of the preparation, making and implementation of decisions and not about the content and outcome of the decisions. So, when a mayor’s integrity is questioned by a member of the local council, because of their very fundamental objections against the mayor’s policy proposal, the use of the I-word is unjust and damaging, an example of integritism. The second type of integritism does concern the behaviour of functionaries. Everybody makes mistakes but when those mistakes do not concern relevant moral values and norms, accusations that they violate integrity are examples of integritism. Mentioning examples is always a bit risky, but, e.g., mistakes they made could be spending too much money, not listening to their stakeholders, deciding too late, misunderstanding policy advice etc. Mistakes for which the functionary is responsible have possible consequences. At the same time, questioning their integrity would be wrong when there are no (other) moral norms violated. The framework with the integrity violations gave an idea of those moral norms. For example, private interest involved (instead of public interest), intimidation of the staff, hiding information or lying.

62  Research handbook on organisational integrity The third type of integritism was briefly described as ‘overgeneralisation’. When somebody is accused of an integrity violation, of behaviour that is morally wrong, does that mean that person is unethical, non-integritous? In the media this very often is the supposition. I doubt that. The seriousness of the violation does matter, of course. Proof of structural domestic violence against a partner and/or children gives rise to other conclusions about one’s personality then being caught driving a car after drinking (a little) too much alcohol (or am I too soft on this?). The seriousness also varies with one’s position. For the minister that initiated a campaign against drunken driving, such behaviour justifies serious doubts about one’s integrity. However, an overall good person can get involved in bad behaviour and we should be cautious in generalising (absolutising) too easily (from the specific act to all behaviour to the person to the functionary, and so on). Integritism in Research and Theories Integritism is a concept that I introduced in 2005; it still is rather unknown, but it seems to have become more popular in particular in political debates. I have mixed feelings about that attendance. First, more in general. An indicator of how well known or popular a concept is concerns the number of hits when we google the term. Searching for ‘integritism’ and ‘integritisme’ (the Dutch term) leads to 4,080 results (April 3, 2023). In comparison, the number of hits for ‘integrity’ is 2.490 million, ‘integriteit’ (Dutch) is 127 million, ‘corruption’ is 407 million and ‘corruptie’ (Dutch) is 4.67 million. So hardly any scores for integritism. In line with that, there is only limited attention in our fields of study for integritism. I regret that but I am to blame for it as well. The topic is also lacking in the research on the integrity and quality of (public) governance at the Vrije Universiteit. So, there is not much research that explicitly focuses on integritism. Two Vrije Universiteit Master’s students in public administration chose it as a topic for their Master’s thesis. Beeke (2013) researched a directorate within the Dutch Ministry of Justice and how it dealt with reports of integrity violations. Hoffman (2013) interviewed confidential officers about their experiences with integritism. Both focused on the integrity investigations that ended with the conclusion ‘no integrity violation’. That happened regularly (38 per cent of the reports in the directory ended with ‘not found’), with the conclusion that integritism might explain those cases. In addition, information was presented about the motives of the reporters of violations that appeared to be unjustified. Most of these unjustified reports were done ‘in good faith’. These are mainly reports about industrial disputes. It is rare for a report to be made in ‘bad faith’, with malicious intent. The confidential officers indicated that they regularly speak to potential reporters that think someone violated integrity while it in fact concerns an organisational labour dispute, which should be dealt with by the human resource management office. Three respondents had experiences with improper reports from improper motives. The motive for these reports was resentment. More research would be appropriate, which is also apparent when we look at the statistics about reporting and investigating (suspicions) of integrity violations in local government in Amsterdam (more than 18,000 civil servants). The Amsterdam Integrity Office plays a central and coordinating role within the city’s integrity system (Hoekstra, Huberts, & Van Montfort, 2022). The office employed 23 full-time integrity specialists in 2021. The tasks of the office

Integrity, integrity violations and integritism  63 Table 5.2

Reporting and investigating integrity violations in Amsterdam

Reporting Integrity Violations in Amsterdam

2020

2021

Number of reports of suspicions of integrity violations

92

102

Investigation by the police

2

4

Decision to investigate by the office

13

15

Conclusion of internal integrity investigation (incl. investigations started in 2019)

 

 

● violation found/plausible

12

9

● no violation found

8

2

● still under treatment

2

4

include: serving as a reporting point for (suspected) integrity violations, conducting investigations into (suspected) integrity violations, performing integrity risk analyses, providing training and advice, screening external business partners, and coordinating the work of confidential counsellors who can be consulted by employees on all integrity issues. The Amsterdam Integrity Office annually reports about the number of integrity reports, investigations and what was found (Bureau Integriteit Amsterdam, 2021, 2022). Table 5.2 gives an idea. The number of reports, investigations and results shows that, for example, in 2020 only a limited number of the 92 reports of suspicions led to investigations and the 20 internal investigations led in 40 per cent of the cases to ‘no violation found’. Integritism might play a role in this. There is also some idea given about the motives of the reporters of which the suspected integrity violation was not found. The driving forces are sometimes malicious. ‘Guerrilla employees’ (O’Leary, 2010) do exist, but overall naivety on the concept in combination with really felt injustice is much more important. The reporter sincerely sees it as an integrity violation, also when the office or a confidential officer concludes the opposite. This will and should not lead to an integrity investigation but to further contact and possibly mediation. The importance of paying attention to integritism and a plea for research is also part of recent publications by Maesschalck, titled ‘When integrity and integrity management are taken too seriously: On integritism and the integrity industry’ (Maesschalck, 2019; also 2020). Interestingly, he thus broadens the topic, with integritism as an aspect of the dark side of ethics but also the ethics or integrity ‘industry’ (all professionals and companies with involvement and (financial) interest in integrity). The growth of this industry also creates several risks, Maesschalck adds. In particular, there are concerns about the various biases one might expect in such an industry (Maesschalck, 2020). These biases could simply be the result of interests. For example, advocates’ enthusiasm for the integrity training they offer might simply be the consequence of the money and reputation that it offers them. Yet biases could also be of a more cognitive and often more unobtrusive nature. To someone whose job focuses on integrity management, most problems will look like ethical problems that need an answer from integrity management (see also Kaptein, 2022 on ethical responsibility of business). Without a self-reflective attitude, these biases could combine with an unquestioned conviction that there never is enough integrity management (Bovens, 2006). Huberts (2014, p. 219) questions this ‘tendency of existing institutions on ethics and integrity to broaden their scope beyond the essentials of the subject, often while favouring a “the more the better” approach to policies, instruments and resources’. Maesschalck concludes: Many integrity practitioners are still working hard to raise ethical awareness and do not have the luxury of wondering about the effects of too much integrity or integrity management. Overlooking

64  Research handbook on organisational integrity these risks would be a mistake, however. Both risks are very real, and integrity practitioners should be aware of them and look for ways to avoid them. They should cultivate a degree of self-restraint (not everything is ethical) and a sensitivity to the risks of framing issues and discussions in ethical terms. And if all the well-intended initiatives are to keep their credibility, then the integrity industry should be the first guard against integritism; it is exactly because integrity is so important, that integritism can be so damaging. (Maesschalck, 2019, p. 74; quote from Huberts, 2005, p. 18)

In line with the previous arguments, I am convinced that ‘integritism’ is a phenomenon to take seriously, in order to protect and cherish behaviour in line with the relevant moral values and norms. It has recently also become more popular in discussions about in particular the integrity of politicians (in The Netherlands), with mixed feelings on my behalf. Often the term integritism is used in a doubtful and counterproductive way. Some politicians that are accused of an integrity violation by definition respond with ‘this is a clear case of integritism’ which needs no further explanation and thus I do not have to answer to the accusations. End of story. This then prevents serious attention for and discussion about the moral quality of our politicians, it hinders the integrity of politics. We might call it a new form of misusing the concept, a new form of integritism.

CONCLUSIONS AND REFLECTION This chapter in the Research Handbook addressed several different topics, I realise. On the one hand, I sketched the framework used in research on integrity and integrity violations. This hopefully is a useful contribution to our further discussion and progress in our field of study on the integrity of organisations in the public and private sector. In addition, the concept ‘integritism’ was introduced and explained. In order to protect integrity, awareness of integritism is important. I summarise below some of the ideas that were posed as elements of the framework that might be useful for our further discussions. 1.

2. 3.

4.

There are many views on integrity which makes is very important to be clear about the meaning that is central in one’s approach. Central in this chapter is integrity in accordance with the relevant moral values and norms (and rules) and integrity violations concern behaviour that violates those moral norms and values (and rules). Integrity concerns the moral quality of everybody’s behaviour and not the ethics or moral quality of the resulting decisions and outcome. Despite the differences in views, there seems to be much more agreement about the types of behaviour that are in conflict with or violating integrity. Besides corruption and fraud and conflict of interest, misuse of information, of powers and of resources, as well as indecent treatment of colleagues or citizens/customers (work-related) and private sphere misbehaviour are among the types of integrity violation. In global debates about integrity, corruption often is the dominant concept. A ‘Western bias’ in research and policymaking is often suggested. That opens the discussion about the possible content of global ethics, a global idea of the moral norms and values that are relevant for integrity. I added the possibility of a non-Western bias (when only corruption and fraud are addressed and many other integrity violations are ignored). Future research at an international and global level could bring more clarity.

Integrity, integrity violations and integritism  65 5.

6. 7. 8.

9.

Given the importance of integrity and the radicalness of accusations of violating integrity, it is crucial to limit the use of the I-word to situations in which it is justified. Integritism points at the inappropriate use of the I-word (mixing behaviour and outcome, mistakes without the moral meaning, overgeneralisation). Most of what has been said and suggested is in my view relevant and applicable in the public and private sector. More comparative research is necessary to make that more plausible. Integrity focuses on behaviour which makes it logical that public and business integrity concentrate on the integrity of individuals (politicians, civil servants, managers, employees). The concept of organisational integrity can refer to the integrity of everybody’s behaviour but also opens the discussion about the integrity of collectivities (communities, societal sectors, groups and of course organisations). Then it is again important to distinguish between collective and organisational integrity (how) and organisational and collective ethics (how/process and what/outcome). Organisational integrity also puts the question on our (research) agenda what the relevant moral values and norms are to consider for judging the integrity of the whole organisation. We should avoid ‘organisational integritism’.

NOTES 1.

In this chapter I will build on my previous publications. The sources will be clarified, as well as how the text is copied, summarised, and adjusted. 2. Building on the texts of Huberts (2014, 2018). 3. Please keep in mind that almost always ‘my view’ is referring to ‘our view’ (in particular of the research group at the Vrije Universiteit of which I was and still am a member). 4. It is difficult to choose in English the adjective for the noun ‘integrity’. Carter (1996), for example, used the adjective ‘integral’; ‘integer’ is common in French (integre), German (integer) and Dutch (integer). Because the term ‘integer’ seems inappropriate in English, and ‘integral’ refers more to integrality then integrity, in English the term ‘integritous’ is chosen. 5. Based on Huberts and Van Montfort (2021).

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PART II PERSPECTIVES ON ORGANISATIONAL INTEGRITY

6. A nature perspective on organisational integrity Craig Dunn

This chapter unfolds in two parts. The first is a descriptive story outlining the root causes of the decline in the population of southern resident orca whales in the Salish Sea – an area spanning the very north-western coast of the United States and the very south-western coast of Canada. The telling of this story reveals the current challenges facing these orcas who are struggling to survive in a highly modified ecosystem. More importantly, the telling pulls back the curtain as to how the interconnectedness of a natural system – one predating the invasion by humans largely coming from Europe and carrying with them a reductionist pre-industrial mindset – had effortlessly evolved to be well equipped to support the orcas. The second is a normative interpretation of how values embedded within a natural integrated system such as that which had historically supported the southern resident orcas can inform a more humane construct of moral integrity – and thereby organisational integrity.

CONTEXT: THE STORY There is little more majestic than the sighting of an orca breaching here in the Pacific Northwest region of the Americas. Such whale breaches emblazon an iconic image in the mind of the observer – one that for many fully represents life in this part of the world. As to orcas themselves, the raw statistics are rather straightforward: adult orcas range from 25 to 30 feet long, depending on gender, and can weigh from 8,000 to 16,000 pounds. Perhaps more interestingly, orcas are known to live long lives – with males living to be up to 60 years old and females up to 90 years of age. But before proceeding with an exploration of these behemoth mammals and the interconnected web of systems that support their well-being, it is worth reflecting on the land and sea that comprise the primary ecosystem the species occupies. It was not long ago this general area was routinely referred to as Puget Sound. Greater precision had been offered by the Washington State Legislature – yes, a public governance body – as cited in the Encyclopedia of Puget Sound: Puget Sound and related inland marine waters, including all salt waters of the state of Washington inside the international boundary line between Washington and British Columbia, and lying east of the junction of the Pacific Ocean and the Strait of Juan de Fuca, and the river sand streams draining to Puget Sound as mapped by water resource inventory areas 1–19 in WAC 173-500-040 as it exists on July 1, 2007. (RCW 90.71.010: Definitions, n.d.)1

What is striking about this definition is the veneration for international boundaries that is clearly embedded in the language. The term Puget Sound is itself a decidedly European-centric construction of reality,2 now conceived as ending abruptly at the northern border between the 70

A nature perspective on organisational integrity  71 U.S. and Canada. From a political vantage this may make sense – but nature, or topography, or geography, or biology, or chemistry does not always, or even usually, respect international political boundaries. The restrictive and partisan terminological inferences of the label Puget Sound has for over several decades given rise to a well-orchestrated undertaking to offer a more inclusive definition of the region that better embraces the interconnected structures that support the fauna and flora – and culture – of the area. The naming that has gained traction is Salish Sea. To again cite the Encyclopedia of Puget Sound: The Salish Sea extends across the U.S.-Canada border, and includes the combined waters of the Strait of Georgia, the Strait of Juan de Fuca, Puget Sound and the San Juan Islands. The name Salish Sea was proposed in 1989 to reflect the cross-border ecosystem. Both Washington State and British Columbia voted to officially recognize the name in late 2009. The name honors the Coast Salish people, who were the first to live in the region. (Salish Sea: Naming, n.d.)

It is critical to note that adoption of the Salish Sea lexicon by the two national bodies referenced herein was preceded in 2005 by collective action of “70 tribes and First nations from Washington State and British Columbia that are located on or near the Salish Sea [who] joined together … to protect and manage the resources of their Salish Sea” (Webber). In their convening – known as the CoastSalishGathering – there was explicit adoption of the Salish Sea name as the following statement of commitment was certified: We have come together to share, prioritize, develop and recommend policies and actions to ensure the protection of our shared environment and natural resources of our homeland, the Salish Sea. (Webber)

Three years later – and that would be one year prior to action taken by the governing bodies of Washington State and British Columbia – a shared mission statement by the Coast Salish Gathering offered two references using the Salish terminology: “To conserve and restore the Salish Sea ecosystem to a level that insures the sustainability of the Coast Salish People and our cultural life always” (Webber).3 So a bit of foreshadowing would be apropos here. One story throughline that is being devised should be apparent – that the logic behind adoption of the Salish Sea terminology is grounded in viewing the region as an integrated system, and furthermore that embracing integrated systems thinking as a mindset will be instructive in terms of evolving a nature-based conception of moral integrity. But now back to the orcas. It has continually been the case that reference to orcas and/ or killer whales has been terminology used interchangeably. And yet there are essential and useful distinctions between these two constructs – this is not a distinction without a difference. The first distinction to be made is between whales and dolphins. Turns out orcas are not whales at all; they are rather the largest member of the dolphin family. But there is a more fundamental point to be made: while orcas and killer whales currently are identified as a single species, there is not universal agreement that this is an accurate categorisation. Within several species there have been identified ecotypes that may eventually exhibit enough disparate characteristics that they will be reclassified as distinct species. One expert – Lance Barrett-Lennard – who has extensively studied orcas suggests there are currently at least 10 individuated ecotypes of the species.4 And he further crucially notes:

72  Research handbook on organisational integrity For now, I often refer to Orcinus orca as a species complex … a cluster of closely related, as-yet unnamed species … [w]e might eventually call them subspecies or even species, but using those terms properly means formally revising the taxonomy of Orcinus orca, which hasn’t been done yet.

Now on to the facts regarding the south resident orca population – and how this community is distinct from what are more widely known as killer whales. The foundational dissimilarity here is between transient and resident orcas. As the tags imply, the geographic range of the former is considerably more expansive than that of the latter. It is these unlocalised orcas that are often considered killer whales. Their “pods are typically comprised of two to five whales, often found skulking silently around rocky shores near the haulouts of acoustically aware seals or sea lions” – one of their chief food sources.5 The small numbers of orcas in such transient pods allows for effective – and collaborative – stealth hunting. And here is another distinction with a difference, well outlined on the David Suzuki Foundation website: Southern residents are known as “salmon whales” because of their intimate and unique connection with Chinook. More than 80 per cent of their diet is Chinook salmon – the population eats more than 1,400 Chinook a day. They share their catch with each other, indicating their social cohesion. Their fish-eating habits differentiate them from transient orcas, which eat marine mammals, and offshore orcas, which have a more general diet that includes sharks, fish and more.6

Then there is the more fundamental distinction to be made between the socialisation habits of transient and resident orca populations. Returning to the David Suzuki Foundation as a source of responsible information, “Salish Sea [resident] orcas are social and genetically isolated from other orcas found in Canadian Pacific waters, including transient and offshore orcas … [a]lthough northern and southern populations overlap in range, they do not interact or interbreed.” To now return to the opening reference in this chapter regarding orcas in the Pacific Northwest, Barrett-Lennard offers a prescient observation: “even if, on the whole, Orcinus orca has enough individuals to be considered not at risk … regional populations of killer whales can be small and highly specialized, and therefore vulnerable to exploitation, disturbance, prey reductions and habitat deterioration.” And so here is another distinction that is a difference. The Salish Sea resident orcas are an endangered species. No, perhaps not a separate species – yet. But consider the following: The southern resident community is a unique extended family, or clan [or ecotype], that is distinct and has no interactions with other orca populations. Both male and female offspring remain with their mothers throughout their lives.7

Conjoin this observation with the fact that the U.S. Environmental Protection Agency has declared “Southern Resident Killer Whales [orcas] have been listed as endangered species in both the U.S. and Canada, and their population is closely tied to the overall health of the ecosystem.” So another bit of moral integrity foreshadowing. Within integrated systems, distinctions with a difference matter. One cannot, or at least should not, treat all ostensibly similar contexts as if they are identical. There are often gradations within integrated systems that demand attention be given to these specific points of differentiation – and that correspondingly demand tailored expressions of ethical response. Think moral pluralism here.

A nature perspective on organisational integrity  73 All orca communities are not created equal. The Salish Sea resident orcas are unique, if not in their range of travel, then in both their socialisation predilections as well as their deeply rooted Chinook-eating preferences. These propensities, when conjoined, have colluded to create a perfect storm of slowly declining numbers for resident orcas – a distinction that now has these mammals officially categorised, as noted above, as an endangered species. Not all distinctions are meritorious, after all. So how are the unique resident orcas in this specific region faring today? The numeric data is abundant.8 The annual monitoring of the southern resident killer whale population has revealed variations in population size over time. The initial population census conducted in 1973 recorded the sighting of 66 whales. Subsequently, the population experienced a surge, reaching its peak at 98 individuals in 1995. However, it then underwent a decline, with a count of 80 individuals in 2001, followed by a period of moderate growth, resulting in 89 individuals by 2006. Since 2006, the population has exhibited a general downward trend, without displaying any indications of recovery, with only 74 individuals reported as of December 2020. There is deep concern that in spite of now officially holding endangered status these mammoth mammals have suffered at best a stable population over the past 60 years. And the obvious question hangs in the air: why have recent protection measures specifically crafted with the intention of expanding the number of orcas been essentially ineffective in yielding a rebound in the population of southern resident orcas? These data present an opportunity for additional insight foreshadowing a critical dimension of moral integrity. When confronted with ethical challenges, it is essential to address not only symptoms, but rather root causes. Changes in outcomes matter, but crafting solutions that are enduring necessitates consideration be paid to the underlying causes of observable harms. The consensus across data sources is striking when it comes to isolating the core reasons for the decline in numbers of orcas in the Salish Sea. One of the most egregious and impactful and well-documented origins of orca population degeneration occurred in 1970 as “[o]ne of the most infamous capture incidents saw over 80 whales from the Southern Resident population of orcas in Washington State rounded up in Penn Cove … [s]even were taken into captivity while as many as five whales died.”9 Why the captures? Entertainment. The lives of these majestic creatures were monetised as a mechanism for producing revenue for theme parks that featured the mammals as a mere means to the end of generating profit for investors. But while this single event accounts for a significant population drop at a particular point in time, it does little to explain the overall contraction in the population of orcas over the decades that followed. Thankfully, orcas are no longer being captured for their entertainment value. So why have they so consistently suffered a forfeiture in total numbers over such a prolonged period of time? There are several consistent reasons, the first having to do with a decline in the food source of this specific subspecies. While Chinook salmon have exhibited a remarkable resilience when confronted with adversity, the data tell a story that is conclusive. The total abundance of Chinook has exhibited a declining trend since 1984. According to data supplied by the Washington Department of Fish, the Chinook population was approximately 900,000 in 1984 and has gradually decreased to 400,000 in 2010.10 Resident orcas in the Pacific Northwest are starving. As a result, they are spending less and less time in the region – opting to instead range further and further from their preferred habitat to coastal regions north and south of the Salish Sea. According to the data provided by the Orca Behavior Institute,11 the Southern Resident Killer Whales were present in the Salish Sea

74  Research handbook on organisational integrity for an average of 24 days in May, 29 days in June, and 28 days in July during the period from 1995 to 2005. However, in 2019, their presence in the Salish Sea decreased significantly, with only three days observed in May, no days in June, and just two days in July. Root cause analysis demands that one continues to ask probing questions. Most enlightening here is the “5 whys” process: The method is remarkably simple: when a problem occurs, you drill down to its root cause by asking “Why?” five times. Then, when a counter-measure becomes apparent, you follow it through to prevent the issue from recurring.12

In this particular case, why is the Chinook salmon population in decline? One answer is that Chinook salmon are not spawning in the numbers they have previously. So why are the Chinook salmon not spawning as prolifically as they have in the past? One answer is they have lost the capability to follow their innate impulse to travel customary paths to their spawning grounds. So why have Chinook salmon lost the ability to travel to their historic spawning grounds? One answer is that there are dams impeding their ability to do so. And herein lies perhaps the most controversial aspect of the gradual and consistent decline in the population of the orca population in the Salish Sea. There has recently been, at the federal level, a call for removal of four dams on the Snake River, in order to restore the natural spawning opportunities for the Chinook salmon: Construction of the first dam on the lower river, Ice Harbor, began in 1955. Lower Monumental followed in 1969, Little Goose in 1970, and Lower Granite in 1975. The dams stretch from Pasco, Washington to near Pullman, Washington, and stand between migrating salmon and 5,500 miles (8,850 kilometers) of spawning habitat in central Idaho.13

It should be noted the Snake River is a tributary that feeds the Columbia River – with the latter being in part a natural border between the states of Oregon and Washington. This river system also serves as a major water passage for freight moving by barge from east to west in the region. Further, the reservoirs behind the dams offer recreational opportunities to literally thousands of local residents and visitors each year. And the reservoirs are a source of irrigation for farmers that grow crops that feed both people as well as livestock. Additionally, the dams provide an enormous amount of clean energy to the region.14 And of course the dams also provide flood control in an area that might otherwise be subject to intermittent and significant disruption from severe rainfall. But the reality for the orcas, and for the Chinook salmon on which they rely for 80 per cent of their food intake, is that the current spawning migration system is not working.15 In spite of fish ladders and/or elevators designed to allow for effective upstream passage of adult spawning salmon around dams, and in spite of downstream sluicing programmes designed to prevent juvenile salmon from being pulverised by dam turbines as they transit from their fresh-water headwaters to the Salish Sea, there remain serious obstructions to the ability of Chinook salmon to maintain their historic reproductive capabilities. Beyond this are the implications for tribal nations, for whom connections with land, water, salmon, and orcas provide the warp and woof to the tapestry of their lives. In their article in The High Country News, Hayley Austin and Anna Smith (2023) offer the following insight – which cuts to the spirit of the connection between person and planet, an essential element of moral integrity:16

A nature perspective on organisational integrity  75 The Nez Perce, Yakama Nation, Shoshone-Bannock Tribes, and the Confederated Tribes of the Warm Springs and of the Umatilla Indian Reservation have long seen the Snake as a living being, both in its ecological functions and through the relational act of fishing. The dams upset tribal relationships to the river and violate treaty rights by causing the loss of salmon and land and restricting tribal lifeways. So the tribes have vocally supported dam removal.

There are other challenges, beyond reliable food access, that confront the resident orca population in the Salish Sea. While boat strikes are rare, with a population now numbering barely over 70 the loss of even a single life – particularly given the familial nature of this ecotype of the orca species – can prove devastating. Sonar systems now in common use on seagoing vessels have additionally proven disruptive to the ability of orcas to maintain critical communication with one another. Contaminants in storm water runoff from urban areas is increasingly fouling the very water that is the literal lifeblood for these mammals. And the list goes one – with one common theme: all these challenges to the well-being of orcas are originating from the actions of humans who increasingly see themselves as disconnected from the remainder of nature. And a final bit of foreshadowing is in order here, before attention fully turns to addressing how moral integrity can be informed by a healthier understanding of natural systems. Respect nature: it has been working for millennia to create arrangements that are well-integrated and effective in terms of maintaining balanced systems. Counter to this are disruptions – human disruptions – that while having anthropocentric benefits are devastating to the perpetuation of other species and the planet more generally.

APPLICATION: BIOINTEGRITY Many will likely be familiar with the concept of biomimicry, which has been well introduced and elaborated by Janine Benyus: According to the Biomimicry Institute, biomimicry can be defined as “an approach to innovation that seeks sustainable solutions to human challenges by emulating nature’s time-tested patterns and strategies. The goal is to create products, processes, and policies – new ways of living – that are well-adapted to life on earth over the long haul.” Biomimicry is a process based on the observation of our planet and its 3.8 billion years of evolution and development. Historically, biological organisms (animals, plants, microbes) have been able to develop strategies to survive, optimize their organization and functioning, and adapt their form to their function. As noted by the American biologist Janine Benyus, a renowned specialist in biomimicry: “Nature has already solved all the challenges we face. Failures have become fossils, and what surrounds us is the key to survival”. Benyus was the first scientist to pioneer the notion of biomimicry in the late 1990s by developing the basic premise that human beings should consciously emulate nature’s ways when looking for solutions to their problems, products and policies. (Venturini, 2021)

What is universally distinct regarding the concept of biomimicry is that the focus is on finding solutions to very specific and particular problems. What can we learn about solving the challenge facing bullet trains as they transition from one medium to another, creating a sonic shock wave as they exit tunnels – from observing the shape of the kingfisher’s bill as it moves from air to water in pursuit of prey, all with barely a ripple? What can we learn about ways to reduce the turbulence and resulting strain at the wingtips of commercial aircraft – from observing the contour of the wings of birds of prey in flight? What can we learn about natural and efficient means of cooling human domiciles – from observing termite mounds? What can we learn

76  Research handbook on organisational integrity about how to reduce the drag on the blades of traditional wind turbines – from observing the structure of the leading edge of the flippers, fins and tails of whales and dolphins? The concept of biointegrity is meant to move from the micro approach of biomimicry to a more macro perspective – asking whether or not humans can find in nature examples that would serve to inform our construction of integrity, and more particularly moral integrity. Thus the essential theme throughout the second wave of this chapter is that the words integrated and integrity are and should be inextricably linked. Systems of interdependence exist naturally in nature and can serve as exemplars for human moral action – if we actively seek out connections and associated consequences. Herein lies the power of the initial story. As we observe the plight of the southern resident orcas off the west coast of North America, it is apparent there are a plethora of interrelated causes that have conspired to push this specific ecotype to the brink of extinction. The orcas are part of an integrated system that has been systemically disrupted by the only species that is more widespread globally than its own: humans.17 Such incursions have had multiple unintended yet foreseeable consequences that have imperilled this ecotype of orcas. And embedded in this observation is a lesson about moral integrity: Lesson 1: Persons of integrity actively anticipate the unintended foreseeable negative consequences of their actions, and put in place mechanisms to mitigate these impacts – or avoid the contemplated initial action altogether. The Snake River dam removal proposal is instructive here. Early on in the dam design phase and construction process key decisionmakers were well aware of the negative consequences these four dams would have on the natural migration of Chinook salmon to their traditional spawning grounds. Mitigation efforts were put in place, these involving building into the planning process fish ladders and elevators – as well as a trucking and in draconian cases an airlift system that would move juvenile salmon around or over the dams so they would not be pulverised by the blades of the turbines that were running generators that supplied electric power to thousands of local residents. Additionally, fish hatchery construction and fish-stocking practices were implemented in an attempt to offset the reduction in what had been prolific naturally-reproducing fish populations. However, these mitigation efforts have been deemed largely ineffective. The number of salmon that successfully utilise the fish ladders and elevators has never resulted in reaching the spawning levels that occurred prior to the dam construction. And now there is escalating tribal and national political momentum to simply recognise the dam construction as, in the final analysis, a failed enterprise – and to remove them. Which leads to a second dimension of integrity: Lesson 2: A critical aspect of moral integrity is admitting when you are wrong, followed by remediating past harm and preventing future harm. Attempts to modify deeply complex integrated systems is oftentimes a fool’s errand. Nature has been at work since time immemorial crafting a give-and-take that benefits the majority of the species on the planet. A balance has been found throughout this progression. Of course, there are instances of natural extinction of species. But the sheer number of species that have

A nature perspective on organisational integrity  77 been pushed to the brink since the advent of the industrial age is mind-boggling. Consider a recent report published by the United Nations:18 The average abundance of native species in most major land-based habitats has fallen by at least 20%, mostly since 1900. More than 40% of amphibian species, almost 33% of reef-forming corals and more than a third of all marine mammals are threatened. The picture is less clear for insect species, but available evidence supports a tentative estimate of 10% being threatened. At least 680 vertebrate species had been driven to extinction since the 16th century and more than 9% of all domesticated breeds of mammals used for food and agriculture had become extinct by 2016, with at least 1,000 more breeds still threatened.

What is here referenced are predictable outcomes of critical choices that have now become manifest – many in the economic sphere by dominant individuals with a vested self-interest in disregarding unintended consequences and little if any interest in remedying harms their very actions have generated: in short, by people who do not exhibit integrity as defined to this point. Thankfully this same report drafted by the United Nations does not limit itself to cataloguing the degree of harm done over the past century; rather it begins with advocating for an ecosystem perspective that embraces the integrated nature of wealth, health, quality of life, and the well-being of “all other species”: “The overwhelming evidence of the IPBES Global Assessment, from a wide range of different fields of knowledge, presents an ominous picture,” said IPBES Chair, Sir Robert Watson. “The health of ecosystems on which we and all other species depend is deteriorating more rapidly than ever. We are eroding the very foundations of our economies, livelihoods, food security, health and quality of life worldwide.” “The Report also tells us that it is not too late to make a difference, but only if we start now at every level from local to global,” he said. “Through ‘transformative change’, nature can still be conserved, restored and used sustainably – this is also key to meeting most other global goals. By transformative change, we mean a fundamental, system-wide reorganization across technological, economic and social factors, including paradigms, goals and values.”

The sentiment suggested in this preamble to the full IPBES report is a clear reflection of Lesson 2 outlined above. There is another integrity lesson embedded in both the initial story as well as the implicit decision model that is (over)used in a business as well as a public policy context. Oftentimes decision models are structured in such a way that these privilege cost–benefit analysis above alternative but equally legitimate ways of thinking about how to best determine right versus wrong. So, for example, when it comes to dam construction the costs in terms of both financial investment and reduction in Chinook salmon spawning migration is suggested as overshadowed by the benefits in terms of clean energy production and shipping efficiencies and enhanced recreational opportunities and farmland irrigation and flood control. However, those advocating for moral pluralism promote finding a balance between principles, and outcomes, and fairness, and caring, and liberty, and virtue, and the planet (see, e.g., Burton, Dunn, & Goldsby, 2006). Embracing this polymorphist perspective supports a third qualification for being a person of integrity: Lesson 3: Moral integrity necessitates the ability to accurately differentiate among alternative ethical perspectives, select those that are most relevant to the situation at hand, and structure decisions accordingly.

78  Research handbook on organisational integrity Again, the importance of storytelling. The tension in the dam removal decision – and if an accurate and comprehensive unintended consequence analysis had initially been completed then perhaps such removal would not have to be contemplated, as the dams would never have been built in the first instance – is in some ways the stress that exists between principles and outcomes. Members of the first nations in the region have legitimate, guaranteed, legal, deontological rights to continue fishing practices they have practised for generations – which are not only financially beneficial but more importantly reinforce their connection with the land and sea. Construction of the dams has proven to be an incursion on these rights, which are now being leveraged to overturn the utilitarian benefits related to energy, shipping, recreation, irrigation, and flood control. The argument here is that a person of integrity should be deeply familiar with a range of ethical perspectives and theories, be able to identify which are most applicable to a particular circumstance, and be adept at both exploring and resolving any dilemmas that are presented by competing conceptions of morality. Integrity is in part about impartiality in the application of alternative moral models – but further requires rigor in the selection and implementation of those frameworks that are most relevant to the circumstance at hand. No time like the present to revisit a foregoing work of mine (Dunn, 2009) that defined integrity as necessitating internal coherence, external consistency, value–behaviour congruence, temporal stability, and permanence across roles. The abstract for this article follows: Integrity is a concept oftentimes referenced in organizational studies, but not well understood as a theoretical construct. This paper aims to remedy this shortcoming by honing in on a conception of integrity grounded in the writings of moral philosophy. In order to accomplish this, competing definitions of integrity will be vetted. The concept of integrity will be critically distinguished from those of virtue, character and honesty. Integrity will next be explored as consistency across contexts, coherence between values and action, stability over time, permanence across roles, and union of ethical perspectives. Finally, the notion of organizational integrity will be assessed and suggestions for operationalization of the integrity construct offered. (Dunn, 2009: 102)

What a huge opportunity it is to now let you know how my thinking has evolved over the past 15 years. Upon first writing I viewed this standpoint on integrity as a quite linear model – with my left brain at that time taking prominence. More particularly, I imagined that personal moral perspectives would always have to yield to social norms, should there be a conflict between the two. But my right brain having now finally gained some eminence I see in great particularity the ways in which one’s personal ethical perspectives can be instrumental in shaping cultural norms over time – if one has the moral courage to advocate for critical social change. Thus – Lesson 4: When social norms conflict with well-thought-through core moral values, embedded within a person of integrity is the resolve to spend political and social capital to the end of favourably shifting the perspective of society writ large. So what is moral courage, and why does it matter? Osswald et al. (2010: 393) offer the following description: Moral courage is a prosocial behavior with high social costs and no (or rare) direct rewards for the actor … In situations which demand a moral courageous intervention, instances of injustice happen, human rights are violated, persons are treated unfairly and degrading, or nature and cultural assets are in danger; these situations are about discrimination against foreigners or other minorities, violence

A nature perspective on organisational integrity  79 and aggression against weaker individuals, sexual harassment or abuse, mobbing, or illegal business practices.

It is not at all difficult to find examples of moral courage; these tend to be legendary, unfortunately due to their rarity – but are at the same time memorable. Sometimes it is the pen, or the person behind the pen, that is the instrument for social change. Consider what it took, in 1863 and in the midst of a deep fissure in the very fabric of society in the United States, to suggest “[f]our score and seven years ago our fathers brought forth on this continent a new nation, conceived in liberty, and dedicated to the proposition that all men are created equal … [n]ow we are engaged in a great civil war, testing whether that nation, or any nation so conceived and so dedicated, can long endure.” The speech was less than two minutes long and fewer than 275 words. What was most impactful was that over the 87 years since the founding of the country the language “all men are created equal” had taken on new meaning in the minds of many. Social norms were shifting, and the language no longer referred exclusively to white men who owned property. The phrase now, Abraham Lincoln was denoting, included black men as well. Yes, still only men – women were not allowed to vote in the country until 1920, and it took an amendment to the Constitution of the country to memorialise this right. And in both cases – that of extending rights to black citizens and women citizens – it was the voices of courageous individuals speaking their truth to the power of the time who bent the long moral arc of history towards justice.19 Another example. Several years ago now a great controversy was unfolding in the Pacific Northwest. A Seattle-based company, SSA Marine, proposed constructing and operating what would have been the largest bulk goods shipping terminal on the west coast of North America. The site would have been at Cherry Point (or Xwe’chieXen as the Lummi Nation for whom the area is traditional territory reference the land), a natural deep-water terminal on the coast of Washington State that is 8.7 miles from the Canadian border. Cherry Point currently houses the largest refinery in the state. It was well known that the term “bulk goods” in the SSA Marine proposal was a euphemism for coal – coal that would be mined in the states of Montana and Wyoming, transferred by rail roughly 1,000 miles to Washington, and then transported roughly 6,000 miles by ship to China. As the proposal went through the public hearing process, there was clearly no consensus among all key stakeholders as to whether this was a good or a bad idea; the environmental impact study similarly offered no clear conclusions on this matter, in spite of the depth of the utilitarian analysis contained therein. But then, decisions are not all about cost–benefit analysis (see Lesson 3 above). It so happened that the ships that would be retrieving the coal from Cherry Point would have had to round the southern tip of Vancouver Island in Canada in order to proceed through the Salish Sea to the west coast of Washington. In so doing, they would have had to traverse an area of water to which the local Lummi held fishing rights. It was the U.S. Army Corps of Engineers that held the final decision authority to issue the permit for what would have been known as the Gateway Pacific Terminal. In their statement of findings is the following language:20

80  Research handbook on organisational integrity After careful consideration of all the information available to him, Seattle District Commander Col. John Buck has determined the potential impacts to the Lummi Nation’s usual and accustomed (U&A) fishing rights from the proposed Gateway Pacific Terminal are greater than de minimis. Because the district has determined the effects to the Lummi’s rights are more than de minimis and because the Lummi maintain their objections to this proposal, the project cannot be permitted by the Corps.

The term de minimis has come to hold a fairly precise legal meaning; according to the Cornell law school, “[d]i minimis is something that is very trifling or of little importance … [u]sually refers to something so small, whether in dollar terms, importance, or severity, that the law will not consider it.”21 The Army Corps of Engineers unequivocally determined the impact of the terminal construction and operations on the treaty rights of the Lummi Nation would not be “trifling or of little importance.” The response of the then-Lummi Nation Chairman Tim Ballew affirmed the Corp’s decision: This is a historic victory for treaty rights and the constitution. It is a historic victory for the Lummi Nation and our entire region. We are pleased to see that the Corps has honored the treaty and the constitution by providing a decision that recognizes the terminal’s impacts to our fishing rights. This decision is a win for the treaty and protects our sacred site. Our ancient ones at Xwe’chieXen, Cherry Point, will rest protected. Because of this decision, the water we rely on to feed our families, for our ceremonies and for commercial purposes remains protected. But this is more than a victory for our people; it’s a victory for treaty rights. Treaty rights shape our region and nation. As tribes across the United States face pressures from development and resource extraction, we’ll continue to see tribes lead the fight to defend their treaty rights and protect and manage their lands and waters for future generations. The impact of a coal terminal on our treaty fishing rights would be severe, irreparable and impossible to mitigate. Today’s victory is monumental and the Corps followed a fair process defined by law to make the right decision. The Corps has honored the treaty between Lummi and the United States. We will always fight to protect Xwe’chieXen.

Integrity in action, consistent with the four lessons outlined in this latter part of the chapter.

CONCLUSION Nature is comprised of complex, interconnected, interdependent structures that throughout time immemorial have evolved to be fully integrated systems. They are metaphors for integrity. The initial story providing the grounding for this chapter was meant to illustrate the variety of ways in which hubris has served to disrupt the natural order of nature in ways that are disruptive to other species – and ultimately to our own species as well. The application was meant to provide specific lessons that illustrate integrity in action in ways that will inspire us to do better. If I could offer a charge – and I won’t presume to have any authority to do so – let us pay attention to and respect natural systems, identify the characteristics of these systems that lead to their smooth functioning, and then apply these learnings to our individual moral choices. In so doing, we will evolve into persons of integrity. And then the matter of humility. More than anything else, my observations of natural systems has led me to the conclusion that we are part of nature, not dominators of nature. That

A nature perspective on organisational integrity  81 is a normative, not a descriptive, claim. Our efforts throughout time to reform nature for our own self-regarding purposes have never led to good outcomes. Nature has got it right – and if we are to get it right, we need to set aside any notion of dominion we might hold to. We need to simply listen to nature, with not a mind attuned to reformation of “the other” – but with a mind attuned to self-renewal. Finally, a note regarding organisational integrity. Organisations are fully social constructions of reality, and as such cannot be considered moral or immoral (Dunn, 1991). They have no agency, nor any ability, to act on their own behalf. So they therefore have no capacity to exhibit integrity, which is a characteristic unique to the human animal. This having been said, it can legitimately be claimed that leaders and managers of organisations have the obligation to structure organisations in such a way that those who work on behalf of the institution manifest the characteristics of moral integrity in their everyday work. Practically, this means positive exemplars of integrity on the part of employees should be celebrated, and at the margin performance evaluation systems should be structured in such a way that worker integrity is routinely assessed – with accompanying rewards and sanctions. It is only by so doing that the concept of moral integrity can become reality within organisations.

NOTES 1. WAC refers to “Washington Administrative Code,” while RCW refers to “Revised Code of Washington.” 2. The sound, called Whulge by the Salish Indians, was explored in 1792 by British navigator George Vancouver and named by him for Peter Puget, a second lieutenant in his expedition, who probed the main channel. 3. It is worth noting there is not full consensus as to the advisability of using the term Salish Sea; Buerge (2021) has argued that “It has been convenient regionally to identify all these languages as Salish or Coast Salish but the old practice does not reflect the renewal of identity that native groups have labored for over a century to achieve … [t]hat goal is to be called by their own names and not some bastardized white term.” 4. https://​baleinesendirect​.org/​en/​are​_there​_actually​_several​_species​_of​_killer​_whales. 5. www​.orcanetwork​.org/​orca​-resource​-center/​orcas​-of​-the​-salish​-sea. 6. https://​davidsuzuki​.org/​what​-you​-can​-do/​get​-to​-know​-the​-salish​-sea​-orcas/​. 7. www​.orcanetwork​.org/​orca​-resource​-center/​orcas​-of​-the​-salish​-sea. 8. www​.epa​.gov/​salish​-sea/​southern​-resident​-killer​-whales. 9. https://​uk​.whales​.org/​our​-4​-goals/​end​-captivity/​orca​-captivity. 10. www​.thesalishseaschool​.org/​orcas. 11. www​.thesalishseaschool​.org/​orcas. 12. www​.mindtools​.com/​a3mi00v/​5​-whys. 13. https://apnews.com/article/dams-spokane-salmon-climate-and-environment-9ae99854d619​ 87e42da9a9​24df286142​#:​~:​text​=​SPOKANE​%2C​%20Wash​.​,​%2411​%20billion​%20to​%20​%2419​ %20billion. 14. One estimate from July 2022 is that “the cost of replacing the output would range from $425 million to $860 million per year through 2045, and that the reliability of the regional power system could depend on technologies such as hydrogen-fueled combustion turbines that are not yet readily available” (www​.nwcouncil​.org/​news/​2022/​07/​20/​lower​-snake​-river​-dams​-replacement​-power​-study​-by​ -e3). 15. For a dissenting point of view, see McKern (2016). 16. www​.hcn​.org/​issues/​55​.1/​indigenous​-affairs​-dams​-can​-dam​-removal​-save​-the​-snake​-river. 17. “As a species, orcas have the widest global range of any mammal except humans and may be seen in all types of marine ecosystems” (www​.orcanetwork​.org/​orca​-resource​-center/​orcas​-of​-the​-salish​

82  Research handbook on organisational integrity

18.

19. 20. 21.

-sea​#:​~:​text​=​The​%20three​%20Southern​%20resident​%20pods​,about​%2080​%25​%20of​%20their​ %20diet). The report, published in 2019, was drafted by the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES). “The Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES) is an independent intergovernmental body which provides policymakers with objective scientific assessments about the state of knowledge regarding the planet’s biodiversity, ecosystems and the benefits they provide to people, as well as the tools and methods to protect and sustainably use these vital natural assets.” (www​.cbd​.int/​cop/​cop​-14/​media/​ briefs/​en/​cop14​-press​-brief​-ipbes​.pdf). “We shall overcome because the arc of the moral universe is long but it bends toward justice.” Dr. Martin Luther King Jr., “Remaining Awake Through a Great Revolution.” Speech given at the National Cathedral, March 31, 1968. https://​nwtreatytribes​.org/​army​-corps​-denies​-coal​-terminal​-permit​-cherry​-point. www​.law​.cornell​.edu/​wex/​de​_minimis​#:​~:​text​=​Di​%20minimis​%20is​%20something​%20that​,on​ %20di​%20minimis​%20fringe​%20benefits.

REFERENCES Austin, H. & A. Smith (2023). Can dam removal save the Snake River? High Country News. www​.hcn​ .org/​issues/​55​.1/​indigenous​-affairs​-dams​-can​-dam​-removal​-save​-the​-snake​-river. Buerge, D. 2021. Why We Should Stop Calling it the Salish Sea. Post Alley: Seattle. 04/20/2021. www​ .postalley​.org/​2021/​04/​20/​why​-we​-should​-stop​-calling​-it​-the​-salish​-sea. Burton, B. K., C. P. Dunn, & M. Goldsby (2006). Moral pluralism in business ethics education: It is about time. Journal of Management Education, 30(1): 1–16. Dunn, C. P. (1991). Are corporations inherently wicked? Business Horizons, 34(4), 3–8. Dunn, C. P. (2009). Integrity matters. International Journal of Leadership Studies, 5(2), 102–125. McKern, J. (2016). The case against breaching the four lower Snake River dams to recover wild Snake River salmon. Fish Passage Solutions LLC, 1–14. Osswald, S., T. Greitemeyer, P. Fischer, & D. Frey (2010). What is moral courage? Definition, explication, and classification of a complex construct. In: C. L. Pury, & S. J. Lopez (Eds.), The Psychology of Courage: Modern Research on an Ancient Virtue. Washington, DC: American Psychological Association, pp.  149–164. www​.jstor​.org/​stable/​j​.ctv1chs3w5​.14. United States Environmental Protection Agency (2021). Southern Resident Killer Whales. 06/2021. www​.epa​.gov/​salish​-sea/​southern​-resident​-killer​-whales​#:​~:​text​=​Southern​%20Resident​%20Killer​ %20Whales​%20have​,overall​%20health​%20of​%20the​%20ecosystem. University of Washington: Puget Sound Institute. Geographic boundaries of Puget Sound and the Salish Sea. Encyclopedia of Puget Sound. www​.eopugetsound​.org/​articles/​geographic​-boundaries​-puget​ -sound​-and​-salish​-sea​#:​~:​text​=​The​%20Salish​%20Sea​%20extends​%20across​,the​%20entire​%20cross​ %2Dborder​%20ecosystem. Venturini (2021). What is biomimicry? EHL Insights. https://​hospitalityinsights​.ehl​.edu/​what​ -biomimicry. Webber, B. How the Salish Sea got its name. The SeaDoc Society. www​.seadocsociety​.org/​how​-the​ -salish​-sea​-got​-its​-name​#:​~:​text​=​As​%20well​%2C​%20the​%20indigenous​%20people​,shores​%20of​ %20our​%20inland​%20sea. Western Washington University: College of the Environment. Salish Sea Naming Project. https://​cenv​ .wwu​.edu/​si/​salish​-sea​-naming​-project.

7. An evolutionary perspective on individual integrity in organisations Marc Orlitzky

In two seminal articles, Becker (1998) and Locke and Becker (1998) theorised managerial integrity from an objectivist perspective. Rejecting relativistic, subjectivist, and intersubjectivist conceptualisations of integrity, Thomas Becker and Ed Locke persuasively presented the construct as based on Ayn Rand’s (1964) individualist philosophy (Peikoff, 1991). In an enormous service to the field, integrity was clearly distinguished from honesty and conscientiousness and defined as “loyalty, in action, to rational principles (general truths) and values” (Becker, 1998, p. 157; italics mine). Like that important conceptualisation of 1998, the evolutionary analysis of integrity in this chapter focuses on the individual level and does not refer to any higher units of analysis (e.g., the group or organisational level). Thus, I consistently refer to (individual) integrity in organisations (and other social entities) rather than the integrity of organisations. In fact, as already argued elsewhere (Orlitzky, 2018), methodological individualism (Homans, 1967) is, in my view, the most promising path forward in this area of research, as it is in economics (e.g., Hayek, 1980; Hoppe, 2007; Mises, 1963) and probably most other fields of inquiry in the social sciences. In general, this type of individualist theorising also seems most consistent with biological explanations (Dawkins, 1989; Nozick, 1977; Pinker, 2016). This chapter addresses an oversight in previous accounts of integrity in organisations: it describes the possible evolutionary origins of individual-level integrity, as defined above by Locke and Becker (1998), and presents the argument that integrity, like all other individual cognitive or psychological features (Barkow, Cosmides, & Tooby, 1992; Tooby, 2020), must ultimately be explained in terms of human evolutionary history (Lawrence & Nohria, 2002; Nicholson, 2000; Nicholson & White, 2006). Aided by such a correct biological description of human nature, an even more solid foundation of integrity can be offered than that of Locke and Becker (1998), especially as it relates to morality and ethics. The chapter starts with the premise that a rational metacognitive process is necessary to steer and control one’s emotions – moral and otherwise. So, the functions of morality will be clearly distinguished from those of integrity. After offering a modified definition, I explore the role of integrity (as defined herein) in the context of contemporary developments, pointing out the emergent complexities because of virtue signalling, mismatch, and possible dysfunctions.

RATIONALITY AS THE CENTRAL FEATURE OF INTEGRITY Today, the concept of integrity has become even more ambiguous than the vagueness noted by Becker (1998) as a key weakness of the construct. Unfortunately, the conceptual fragmentation and cacophony have only increased, not declined, since 1998 (Monga & Orlitzky, 2018). Integrity has variously been defined as (a) behavioural consistency, (b) steadfastness 83

84  Research handbook on organisational integrity in adversity, (c) moral or ethical behaviour, (d) authenticity, and (e) wholeness (Palanski & Yammarino, 2007). Even within only one of those dimensions, namely (c), it can be shown that explanations of moral behaviour are an intellectual morass (Locke, 2006). Because overly broad constructs run the risk of becoming meaningless (“Can you tell me what ‘integrity’ is not?”), a conceptualisation of integrity that is distinct from, and more precise than, morality and ethics would be helpful. Moral judgements are driven not only by altruism and the consideration of consequential harm but a wide variety of moral emotions, as the literature in moral psychology has pointed out (Casebeer, 2008; Haidt, 2013; Moll, de Oliveira-Souza, Zahn, & Grafmann, 2008; Tangney, Stuewig, & Mashek, 2007). According to Haidt’s (2007, 2008, 2012) cross-cultural theory, the moral foundations of harm, fairness, loyalty, authority, and sanctity have evolved in response to different adaptive problems centred on parental care, reciprocity, coalitions, hierarchies, and contamination, respectively (Kurzban & DeScioli, 2016). Influential research by de Waal (2006) suggests that moral emotions are, in the final analysis, grounded in human genetic inclinations, thus in turn rooted in hundreds of thousands of years of evolutionary history (see also Barkow et al., 1992; Plomin, 2018). However, because of numerous gene–environment interactions, it would be mistaken to postulate genetic determinism as a consequence (see also Hinde, 2002; Sapolsky, 2017). Morality as a Natural Coordination and Conflict Resolution Mechanism From an evolutionary perspective, moral emotions seem to be functional (Ariew, Cummins, & Perlman, 2002; Perlman, 2004; Wright, 1973) as a conflict resolution mechanism (Flack & de Waal, 2000) and coordination mechanism (Kurzban & DeScioli, 2016; Nozick, 2001). Social and territorial species like humans face constant conflict over resources, mates, and status. To resolve such conflict, at least three mechanisms can be deployed: dominance (bandwagon strategy), alliances, and moral judgements (Kurzban & DeScioli, 2016). When sides in conflict situations are chosen based on hierarchical control (bandwagon strategy), dominant individuals always win. When sides are chosen based on prior alliances, conflict escalation is likely (Snyder, 1984). Hence, in many social situations, the most effective way to resolve conflict is by relying on moral beliefs and representations as public signals (analogous to traffic lights) guiding individuals on how sides should be chosen (DeScioli & Kurzban, 2013). If morality is conceptualised as such a coordination mechanism, the requisite emphasis of moral systems on impartiality, non-consequentialism, and punishment for moral infractions is more easily understood (Kurzban & DeScioli, 2016). Overall, de Waal’s research on primates suggests that humans and their closest biological relatives do not inhabit a Hobbesian world where brutish power and selfishness rule, but are endowed with moral emotions that – at least sometimes – naturally predispose them toward pro-social behaviours (de Waal, 2006, 2013, 2019). Because some elements of human morality are observable in our closest biological relatives, morality is only in (small) part a cultural invention; instead, it is part of our evolutionary heritage (Barkow et al., 1992; de Waal, 2019; Flack & de Waal, 2000). Many sentiments like sympathy or guilt and (typically unspoken) norms of reciprocity serve the function of conflict resolution. Other moral emotions that signify moral condemnation are, for example, anger, impelling us to punish the violator of a moral rule (DeScioli & Kurzban, 2009; Haidt, 2012), and disgust, predisposing us to the avoidance of cheaters and other immoral operators in future (Hutcherson & Gross, 2011;

An evolutionary perspective on individual integrity in organisations  85 Schnall, Haidt, Clore, & Jordan, 2008). Moral judgements exhibit a considerable extent of emotive automaticity – without the involvement of reason as substantiated in the dorsolateral prefrontal cortex (dlPFC) of the human brain (Greene & Haidt, 2002; Haidt, 2001; Orlitzky, 2017; Sapolsky, 2017). Of course, in following their moral emotions, few individuals are expected to be as pro-social and self-sacrificial as Zell Kravinsky (Parker, 2004) because our biological drive of self-preservation sets a natural limit on the behavioural manifestation of these pro-social sentiments. However, to guide moral judgements in specific situations, humans need to rely on another control mechanism – something we may call integrity. Need for an Evolved Metacognitive Control Mechanism When individuals ponder the full range of implications of specific decisions regarding ethics, such as whether to blow the whistle on specific instances of organisational corruption (Bowden, 2014), the biological drive towards self-preservation, which counterbalances our moral impulses, will be useless as a decision aid because it does not allow for the detailed, situation-specific accounting of the inevitable trade-offs necessary for moral decision-making. Instead, for such a complex and contingent task an overarching metacognitive process is needed, exploring information about the problem in an objective and impartial way, considering all angles of any given decision, and assigning, at least implicitly, weights to different outcomes. This cognitive process requires fairly sophisticated processing of one’s intuitions and updating of one’s current understanding of the situation. In short, it involves thinking about one’s perceptions, information processing, emotions, and intuition and is, therefore, a metacognitive effort. Ultimately, this metacognitive effort is necessary to perceive reality accurately and consciously (Ghate, 2003) for making fully informed decisions. Objective reality exists independent of our perceptions and volitions (Peikoff, 1991; Popper, 1983). Because reason is fallible (Locke, 2006) it must be firmly entrenched in empirical, sensory information (see also Hayek, 1952). Thus, human reason is, when properly understood, non-Kantian (Hauser, 2006; Locke, 2006; Locke & Becker, 1998) – probably closer to Hume’s (1969) conceptualisation (see also Muller, 1997). That is, effective decision-making is not merely a process of introspection, but requires considerable inductive effort (Locke, 2006, 2007; Orlitzky, 2012). It demands careful observation of circumstances and makes logical predictions based on this knowledge. Good judgement requires regular testing and re-testing of assumptions, perceptions, and interpretations. As part of this information-processing task, all cognitive elements must be integrated without contradiction (Locke, 2006). The needed metacognitive control mechanism avoids the pitfalls of pro-social emotiveness and reality denial. First, moral decision-making can go wrong when it prioritises self-sacrifice and altruism (Locke, 2006; Rand, 1964). For example, Harman’s (2009) biography The Price of Altruism describes the psychopathology that could be triggered by excess altruism. Pathological altruists may harm themselves because self-interest is not properly integrated consciously; thus, seemingly altruistic acts are performed defensively, blindly, or irrationally (Sun, 2018). Unaided by proper cognitive integration (metacognition), pathological altruism may even harm the object of the focal actor’s altruism or third parties (Oakley, Knafo, Madhavan, & Wilson, 2012). Furthermore, wishful thinking that is divorced from facts and reality is also deleterious to good managerial decisions (Locke, 2006). Objective, impartial, conscientious attention to

86  Research handbook on organisational integrity data – and detail – is vital. Therefore, the overarching control mechanism of integrity sidesteps the partiality of a feminist ethics of care (Gilligan, 1982; Orlitzky, Swanson, & Quartermaine, 2006). Without integrity as an integrative control mechanism, individuals would often be at the whim and behest of external pressures and/or their inner emotions. In other words, to avoid being adrift cognitively, reason is an essential element in all judgement and decision-making for maintaining Aristotelian centredness and balance (Aristotle, 1975; Hartman, 2006). Although the conceptual and empirical analysis of morality may be focused on beliefs, attitudes, and judgements only (Kurzban & DeScioli, 2016) rather than action, integrity always has a behavioural component (Locke, 2006). So, if employee actions are inconsistent with their virtue-signalling pro-social rhetoric, which seems to be an occurrence as widespread today (Berthon, Ferguson, Pitt, & Wang, 2021; Orlitzky, 2018) as it was yesterday (Jackall, 1983), any observer’s attribution to, or conclusion of, the actor’s high integrity would be mistaken, even if the actor repeatedly insisted, in words, on the integrity of his/her motivations. Indeed, the actor’s lack of integrity in this case would not only be the result of a word–action gap, but also reflect only a superficial application of rational principles and values. Biological Function and Brain Structure How could the different cognitive processes described so far fulfil biological functions from an evolutionary-historical perspective? One answer is straightforward: relying on intuitions and emotions, while appropriate in some situations, is disadvantageous from the viewpoint of individual survival and prosperity because such decision-making automaticity, especially when it becomes excessive, misses the deliberative element of slow thinking (Gilovich, Griffin, & Kahneman, 2002; Kahneman, 2011). Emotive automaticity can be especially harmful in situations of direct Us/Them group conflict (Sapolsky, 2017), for example when emotional arousal is more pronounced in response to faces than words (Rellecke, Palazova, Sommer, & Schacht, 2011). The positive fitness value of rational and deliberative cognition (Plotkin, 2010) was the emphasis in the previous section. At the same time, reason without an emotive foundation is not only epistemologically naïve (Jacobs, 2004, 2018; Orlitzky & Jacobs, 1998) but is also likely to impede moral behaviour because it lacks its motivational drive (Sapolsky, 2017). It may, for example, lead to paralysis by analysis (Langley, 1995; Lenz & Lyles, 1985). In other words, moral emotions are vital behavioural anchors and drivers (de Waal, 2006, 2019; Thomas, Croft, & Tranel, 2011). Of course, the obvious fact of moral emotions and automaticity facilitating pro-social behaviours and, thus, strengthening group bonds may or may not be a persuasive functional explanation of their existence. Group selection remains one of the most controversial topics in evolutionary theory. Although some prominent evolutionary biologists (e.g., Gould, 2002; D. S. Wilson & Wilson, 2007; E. O. Wilson, 2012) defend the validity of group selection processes, group selection is, ultimately, an implausible explanation of most human behaviour (Pinker, 2016). Therefore, it will not be pursued in any further detail here; nonetheless, this topic remains a legitimate concern, even in the context of individual integrity. What needs to be emphasised here is that, from the viewpoint of sexual selection, a well-balanced application of emotion and reason may be considered most desirable, especially in the context of long-term mating. Long-term romantic partners are likely to reject individuals that are either unpredictable in their emotiveness or unemotional/emotionally stunted in deciding whom to help, how to cooperate, and so on (Buss, 2016). This goal ori-

An evolutionary perspective on individual integrity in organisations  87 entation of the required balanced interaction between a deliberative control mechanism and the emotional-intuitive substrate of sentiments would constitute naturalistic functionality in Godfrey-Smith’s (1994) analytic framework – reinforced by the perceiver (Millikan, 1986; Perlman, 2004). Somewhat speculatively from observations in comparative evolutionary psychology (i.e., across species), the long-term sexual partner’s preference for stable individuals with predictable behavioural patterns may be important signals in individuals with stable pair bonds and high paternal involvement in child-rearing; that is, in humans behavioural predictability and non-impulsiveness are cues signalling dependable parenting, analogous to males’ demonstration of parenting skills in several pair-bonded bird species during courtship rituals (Sapolsky, 2017). Notably, the structure of the human brain seems to reflect this differentiated (deliberative control) function of integrity in relation to moral emotions and the environment (objective reality) – at least to some extent. In general, different areas of the prefrontal cortex (PFC) seem to correspond to different types of cognitive processing discussed so far, although it must be emphasised that insistence on a stark dichotomy between reason and emotion would be misleading (Damasio, 2000; de Waal, 2013; Sapolsky, 2017). While the ventromedial PFC (vmPFC) tends to perform processes aligned with emotive automaticity, the dorsolateral PFC (dlPFC) reflects the kind of deliberative (meta)cognitive processing necessary for individual integrity (Greene, Nystrom, Engell, Darley, & Cohen, 2004; Greene, Sommerville, Nystrom, Darley, & Cohen, 2001). Generally, neurological studies support this proposition of the executive control function of the dlPFC in avoiding the siren calls of temptation (Greene et al., 2004; McClure, Laibson, Loewenstein, & Cohen, 2004). In short, this deliberative part of the brain helps individuals perform the “harder thing” (Sapolsky, 2017). Moreover, the anterior cingulate cortex (ACC) and other regions in close proximity to the dlPFC are involved in navigating conflict between two or more temptations (Volz, Vogeley, Tittgemeyer, von Cramon, & Sutter, 2015). At the same time, a well-developed dlPFC is a double-edged sword because the dlPFC has also been shown to be instrumental for effective lying (Yang et al., 2005; Yang et al., 2007). More specifically, pathological liars apparently have increased white matter (i.e., axons connecting neurons), but decreased grey matter (i.e., cell bodies of neurons). What makes matters about brain structure particularly interesting and complex is the fact that, in individuals that are honest to a fault, the dlPFC (and proximate regions) seem to be dormant during such cognitive processing (Greene & Paxton, 2009). Given this finding, to capture Cummins’s (2010) functional analysis and full complexity of moral cognitions, much more detailed causal and materialist mapping of neural processes and activation is needed in future empirical research (see also Orlitzky, 2017). In this preliminary development, I can only briefly allude to potential alignments of biological function and structure. Note that the evolutionary theorising presented herein also suggests a reason why the rational control mechanism is not typically focused on utilitarian principles. The abnegation of individual/personal enjoyment of life, as promoted by the architect of utilitarianism, John Stuart Mill, in favour of others’ happiness represents a deeply problematic ethic – a curious marriage of Christianity and hedonism (Locke, 2006; Peikoff, 1991). However, this normative problem by itself would not explain why the utilitarian calculus is not second nature to the cognitive processing for most of us. Rather, there is simply no compelling evolutionary reason for instilling a natural sense of maximising collective overall happiness in any part of the human brain (Greene, 2013; Sapolsky, 2017). The highest cognitive level that humans and

88  Research handbook on organisational integrity many other mammals probably go in assessing conspecifics’ happiness is through kin selection (also known as inclusive fitness theory) and reciprocal altruism – in other words, with respect to individuals genetically related to the decision-maker (Dugatkin, 2006; Smith, 1964) and other individuals that can reasonably be expected to reciprocate favours (de Waal, 2006), perhaps indirectly in species capable of higher reasoning and language (Nowak & Sigmund, 2005). If the aforementioned group selection had shaped human behaviour to a larger extent, a utilitarian calculus would, arguably, have been programmed to be as “automatic” as the more visceral emotive-cognitive processes that are, in the final analysis, more in line with virtue ethics (Sapolsky, 2017; Solomon, 2003). Definition of Integrity So, from an evolutionary perspective, the conceptualisation of individual integrity requires only a minor adjustment relative to the objectivist definition. First, it concedes the insight from evolutionary psychology that reason is not the only element in morally attuned decision-making; rather, emotions play a key role in determining morally appropriate action (de Waal, 2006, 2013, 2019; Flack & de Waal, 2000). At the same time, it preserves an important function of reason as part of a metacognitive control mechanism that guides and directs human moral emotions to optimise long-term outcomes for the individual decision-maker. Integrity, properly understood, reins in affective impulses and intuitions and cross-checks them against various rational principles and values – most important, their coherence with the individual’s long-term self-interest (Rand, 1964). So, a proper definition of integrity could be proposed as follows (see also Becker, 1998; Locke, 2006): metacognitive adherence, manifested in action, to rational principles (general truths) in directing moral emotions.

The term adherence is, in my view, preferable to loyalty because the latter may be misinterpreted as having an affective component; one is typically loyal to people rather than abstract principles. So, integrity is metacognitive, impartial, and objective to the greatest extent possible. From an evolutionary perspective, integrity is not – and cannot be – the outcome of an affective commitment to a particular ideology, dogma, or epistemological framework, which are cultural artefacts. From this definition it follows that, to demonstrate high integrity, an individual must exhibit a correct understanding of objective reality and act accordingly. In a way, integrity works as an intermediary between the external environment (objective reality) and one’s moral emotions. It keeps in check wishful thinking (Locke, 2006) and intuitive moral predispositions (Sapolsky, 2017), both of which are likely to lead to suboptimal decisions and actions, especially in the long run. Figure 7.1 provides an abstract overview summarising the evolutionary theorising of the previous sections.

An evolutionary perspective on individual integrity in organisations  89

Figure 7.1

Integrity as metacognitive control mechanism of moral emotions

COMPLICATIONS PRESENTED BY CONTEMPORARY CONTEXT Dishonest Signalling Because reputation for high integrity still holds value for climbing status hierarchies (Barclay, 2016), especially in organisations that follow seemingly “rational decision-making processes,” the contemporary context presents remarkable incentives for false signalling about one’s integrity (Orlitzky, 2018; Solomon, 1999). Dishonest signalling, brought about by natural selection, is certainly widespread in the animal realm. For example, harmless butterflies that mimic toxic butterflies in appearance are more likely to escape predators (Dawkins, 1989; Orlitzky, 2018). In higher animals like vervet monkeys, males exhibit behavioural impression management in the presence of females: when an infant’s mother observes their interaction with her infant, males exhibit more careful handling (Matos & Schlupp, 2005). From an evolutionary perspective, signals are deployed to manipulate receivers’ attitudes and behaviour (Dawkins & Krebs, 1978; Krebs & Dawkins, 1984). For impression management to work, though, the signal must be credible, typically related to the costliness of the signal for the signaller (e.g., a peacock’s tail or the Irish elk’s antlers) (see also Fu, Boehe, & Orlitzky, 2022; Gould, 2002). Thus, when signals of “integrity” are not costly to the signaller observers ought to be suspicious about any such self-acclamations. A brief anecdotal survey of the deployment of “integrity” in contemporary usage certainly suggests talk about “integrity” may have turned into compliance rituals with certain fashionable social mores and values so that such talk has in fact become largely meaningless; notably, signals that are merely self-serving rituals tend to diminish in their credibility. For example, public health officials and organisations may invoke “integrity” when marketing – sometimes even mandating – new mRNA vaccines with unknown long-term effects to an unsuspecting

90  Research handbook on organisational integrity public – and accusing actors whose own conscience and integrity might have prescribed acts of civil disobedience to be criminals that “lack integrity.” Similarly, violating a core principle of ethics, the duty not to interfere in a person’s domain of choice (Nozick, 2001; Riggenbach, 2010), several corporations seem to have collaborated with governments to prevent open discussion of matters that relate, for example, to elections and vaccines – all in the name of collectivist conformity, or systemic “integrity.” Or so-called “integrity pacts” accelerate private–public partnerships and, thus, the influence of members of unelected nongovernmental organisations over governmental policy decisions, which might be highly problematic from the perspective of genuine democracy and liberty (DiLorenzo, 1994; Elliott & Freeman, 2004), as anyone with a high level of integrity (as defined herein) would quickly realise. Especially if dishonest signals with low credibility are repeated frequently, their credibility and, thus, intended impact may not only suffer, but even backfire among species with a well-developed Theory of Mind; that is, an astute ability to read other people’s minds (Bzdok et al., 2012). Communication facilitates our ability to make inferences about the sincerity of repetitive insistence on some abstract, typically ambiguous concept. In those cases, receivers may make attributions to inverted language: the repeated signal of a low-credibility signaller will be taken to denote the opposite of what is communicated. Once such attributions of linguistic inversion are made, they may even carry over to other domains. Even though credibility, like reputation (Barclay, 2016), is receiver-specific or perhaps group-specific, a postmodern societal environment, which decentred genuine virtue (MacIntyre, 2007) in favour of oversocialised virtue signalling (Orlitzky, 2018), may present a wide array of challenges for the maintenance and functionality of deliberative reason, as discussed next. Dysfunction and Mismatch Given contemporary developments and trends, can a lack of authentic integrity (as defined herein) still be described as dysfunctional? From a biological-evolutionary perspective, integrity fulfils a dual function (Figure 7.1), selected in the distant past of human evolution: (1) controlling impulsiveness in moral decision-making/limiting the influence of intuition and (2) ensuring that specific moral judgements are aligned with objective reality. In the distant evolutionary past, individuals would be unappealing co-operators (including long-term partners) if they were prone to emotional outbursts and unpredictable decision-making. For example, if individuals had lacked reason as a self-control mechanism, they might have been killed by other members of the tribe. Thus, the deliberative aspect of integrity could be considered functional in that (a) integrity was reinforced because it reduced impulsiveness in moral decisions and (b) impulse control was a consequence of integrity (Wakefield, 2016; Wright, 1973, 1976). Likewise, in the distant past, being out of touch with objective reality could quickly result in the loss of one’s life or at least an inability to find a long-term sexual partner and, thus, a lost opportunity to spread one’s genes. Insofar as circumstances do not change over evolutionary time (from the distant to recent past), functions are maintained. In analyses of biological functions from a “modern history” etiological perspective, goal-directedness is a central aspect (Godfrey-Smith, 1994). This requires the assumption of sufficient mental capacity to develop intentions and make plans and attributions about others’ behaviours (Perlman, 2004). Clearly, humans qualify for such a “modern history” view, which would also allow for goals other than biological survival

An evolutionary perspective on individual integrity in organisations  91 and reproduction, though. Hence, some theorists question such a “modern history” view as a proper evolutionary explanation (e.g., Millikan, 1986). In contemporary societal and organisational settings, various changes in technology, life-style, and social processes may have allowed integrity (as defined herein) to atrophy. First, technological advances allow modern humans to lead more sheltered lives, which are more independent and solitary than our ancestors. This means that, in general, feedback loops from objective reality to punishment for poor judgement (because of institutional protections) have become more tenuous or delayed. This may over time (over many generations) lead to the degeneration of the externally directed arrows as functions of integrity in Figure 7.1, unless a new goal, facilitated by reason, takes their place. In addition, social media may impede that rational goal-orientated substitution, impair mental health more generally (Haltigan, Pringsheim, & Rajkumar, 2023), and prioritise emotive demonstrations of tribal belonging over balanced independent judgement. Overall, contemporary social developments – sometimes reinforced by new technology – accelerate the trend towards moral beliefs and attitudes as tribal signals (Greene, 2013; Haidt, 2012; Lukianoff & Haidt, 2018). For example, rather than applying reason to decisions about climate change, infectious diseases, or war and peace, what now seems to matter most is the emotive appeal to the in-group and moral condemnation or even vilification of the out-group (see also Orlitzky, 2017). That is, the inner core of Figure 7.1 may, arguably, be reinforced and rewarded rather than the deliberative metacognitive control mechanism with its counterbalancing characteristics (Haltigan, 2022). In such an educational environment, which seems to denigrate reason (Nola, 2003), wishful thinking and the maintenance of coalitions become individuals’ cognitive guides rather than integrity. In turn, these societal trends are likely to increase patterns of pathological altruism (Oakley et al., 2012; Sun, 2018). Yet, the observation that current trends may de-emphasise metacognitive rationality in moral judgement does not imply that the function of integrity has become irrelevant in decision-making. Rationality and deliberation will always remain important factors for optimal decision-making, human survival, prosperity, and reproduction (Kahneman, 2003, 2011; Kahneman, Slovic, & Tversky, 1982), including in moral judgements (Becker, 1998; Locke, 2006; Sapolsky, 2017), even though sometimes commitment to reason may contradict the zeitgeist of the Western intelligentsia (Nola, 2003). What needs to be noted here is that an individual possessing a high level of integrity (as defined herein) may be in mismatch with the societal context described in the previous paragraph. Researchers, however, should not confuse (a possibly temporary) mismatch with cultural settings and dysfunction: dysfunctions are “failures of organismic mechanisms to perform their biologically designed functions” (Wakefield, 2016, p. 1000). In the case of insufficient rational control of moral emotions and insufficient attention to objective reality, the mismatched individual, who does not comply with the zeitgeist, could be the one where integrity (as defined herein) indeed operates at its functional best. As Kurt Vonnegut (1968, p. 33) noted, “A sane person to an insane society must appear insane.” In other words, the assessment of functionality depends on normal conditions, that is, the conditions (in the distant past) that exerted selection pressure on the majority of humans in the first place (Millikan, 1986; Perlman, 2004). Conversely, individuals in high congruence with contemporary social mores may be the most likely to be diagnosed with a deficiency of integrity, the actual dysfunction (Orlitzky, 2018). Compassion is one of the most highly praised moral emotions in today’s social context, which insists on unqualified agreeableness and self-sacrifice for the common good.

92  Research handbook on organisational integrity Worryingly, disagreeable heretics that reject emotive dogma are vilified in this crisis of identity-based compassion, which in the long run will only exacerbate emotive tribalism and undermine Western civilisation. So, what are the traits of the individuals surviving this remarkable historical moment? The expectation that the genes of high-integrity individuals will be the ones that survive is perfectly reasonable; but so is the expectation of the opposite.

CONCLUSION This chapter covered largely uncharted territory. Thus, its theorising must be considered speculative, preliminary, and provisional. Although the latter two characteristics are true of all science, it ought to be stressed here and was emphasised especially in the previous section. Developing an evolutionary account of individual integrity, I aimed to pose new questions about its role as metacognitive arbiter, ultimately manifested in action, between the moral emotions, impulses, and intuitions on the one hand and objective reality on the other. Ultimately, the function of integrity was stipulated to be about contingent deliberative and behavioural integration of moral and other inclinations, which harkens back to its Latin etymological root – “wholeness” (Orlitzky & Monga, 2018) – and highlights its positive behavioural core (Erhard, Jensen, & Zaffron, 2018). My evolutionary-biological characterisation also underscores its role in contributing to an individual’s mental health because integrity seems to help individuals circumnavigate the Scylla of excessive emotiveness (whether based on one’s own inner emotions or preoccupation with others’ feelings) and Charybdis of excess “cold” rationality. Not only did I differentiate integrity from morality in this chapter, but I also reviewed some research suggesting that the functions of rational-deliberative versus emotional processes may be reflected in distinct brain structures. To understand integrity in its full complexity, researchers need to be cognisant of its possible selection in humans’ distant past and the aetiology of its deficiency (and corresponding impression management) in the recent past and present.

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8. A spiritual perspective on organisational integrity Tracy H. Porter, Kelly Gillerlain, and Nicholas Messina

Since 2020, business environments have struggled to adjust to the changes stemming from the Covid-19 pandemic. Prior to the pandemic, organisations utilised a variety of employee development mechanisms to support the retention of their very best employees, but the pandemic has caused the foundation of previous initiatives to shift. Contemporary workers are more focused than ever on their own health, ways to preserve their psychological wellbeing and finding organisations which support these desires (Hisam & Sanyal, 2021). Post-pandemic, many organisations are dealing with what some have coined the Great Resignation where employees are leaving to find better positions which align with their needs and desires (i.e., values). This has led many employers to self-reflect on their true ambitions, missions, and vision and to reimagine how those tenets might intersect with employee goals. In recent years, many employees have begun to feel that their workplaces had become impersonal entities which were highly out of touch to the needs of their workers. Such feelings expedited a trend in workers to become increasingly disenfranchised with their employers’ constant drive for profitability and productivity (Porter & Norris, 2013). For many years, employees often felt demoralised and undervalued because of downsizing, layoffs, and job reengineering, which often left employees struggling to understand the loyalty of their employers (Brandt, 1996). Other scholars have shown employees often feel their work environments have become increasingly unfriendly, cold, and unsupportive of their needs (Fry & Cohen, 2009). However, more progressive organisations are beginning to recognise the importance of their employee’s perspective as being equally important to their long-term viability as is their financial foundation. Today’s employees are striving to work for organisations which are reflective of their need for a balance between their work and personal lives (Hisam & Sanyal, 2021). This means working for organisations which treat them with integrity, respect, and also wanting to understand how best to make their employees happy (Hisam & Sanyal, 2021). Organisational integrity has been shown to offer several benefits to both organisations themselves and their employees. Integrity is described as one having the quality of being honest, demonstrating strong moral principles, and being morally upright. Specifically, organisations which act with integrity have been shown to increase employee creativity (Peng & Wei, 2018), have increased levels of organisational citizenship behaviours (Vigoda, 2000), and increased levels of job engagement (Hassan, 2015) just to note a few benefits. Therefore, establishing an effective organisational culture which might act as a mechanism to create, enhance, and maintain organisational integrity is an important area of applied research and for some scholars, the key might lie in the literature focused on workplace spirituality. The concept of spirituality in business began to surface a few decades ago when several management scholars noted a shift from a highly transactional approach between employees and employers (i.e., focused solely on pay for work) to a more collaborative approach 97

98  Research handbook on organisational integrity where employers have more of a transformational employer perspective (i.e., focused on the development of employees) (Capra, 1996; Fox, 1994; House & Shamir, 1993). Such collaborative research began to demonstrate the numerous benefits of building trusting relationships with employees where employees might be empowered to work at higher levels (Conger & Kanungo, 1988). Also, in recent years scholars noted the importance of an employee’s spiritual aspirations in both their personal and professional lives (Beehner & Beehner, 2019). Within this chapter we first define workplace spirituality, explore the numerous benefits associated with this type of organisational culture, highlight the connection between spirituality and organ­isational integrity, and offer a roadmap for employers to build a spiritual work context.

WORKPLACE SPIRITUALITY Historically, the inner life of individuals has been referred to as their spirit from the Latin word spiritus, meaning the force that gives one energy and life (Howard, 2002). There are over 70 definitions of workplace spirituality in the literature, and some encompass a religious focus where others focus more on a meaningful perspective (Karakas, 2010). For example, Khatri and Gupta (2017) define organisational spirituality as “an employee’s perceived relationship with their organisation with respect to the extent of their alignment with the organization’s goals and values” (p. 286). This definition aligns with Gibbons (2000) definition of spirit at work which is described as an employee’s “journey toward integration of work and spirituality, for individuals and organizations, which provides direction, wholeness and connectedness at work” (p. 111). Khatri and Gupta (2017) describe workplace spirituality as, “the amalgamation of humanistic principles, practices and behaviours with business performance” (p. 286). Although the definitions vary slightly within the literature, each clearly notes the importance of an individual’s inner self, how this manifests within their work environment, and how an employee’s inner self might align with the organisation. Therefore, within this chapter we focus on the work of Giacalone and Jurkiewicz (2010) who define workplace spirituality as: A framework of organizational values evidenced in the culture that promotes employees’ experience of transcendence through the work process, facilitating their sense of being connected to others in a way that provides feelings of completeness and joy. (p. 129)

A spiritual workplace recognises their employee’s contributions (i.e., tangible, and intangible), encourages their employee’s spiritual wellbeing through a variety of initiatives, and offers development opportunities to feed the employee’s needs (Ashmos & Duchon, 2000; Guillory, 2000; Mitroff & Denton, 1999a).

WORKPLACE SPIRITUALITY AND VALUES Holistically, a spiritual workplace is an organisational culture which is socially responsible and grounded in a strong value system. Such values should drive their employers’ principles, business practices, and mission and vision statements. Giacalone and Jurkiewicz (2010) note the importance of not only the organisation’s value systems but also the alignment of these values between three important levels of an organisational structure. Specifically, these three

A spiritual perspective on organisational integrity  99 levels include: The individual employee’s own value system, their immediate work group’s value system, and the organisation’s value system. The personal connection between the employee and organisational values has become increasingly important over the years since traditional support systems such as cohesive family units, supportive worship communities, and close neighbourhoods have been declining in importance to individuals (Conger, 1994). Time spent at work has also increased for many individuals and therefore an individual’s time at work has become a focal point for an employee’s personal growth (Jaffe, 1995). With the increased merging of personal and professional lives, employees are now seeking to achieve personal fulfilment often through the lens of their workplace (Block, 1993). This is a dramatic change from a more traditional perspective in the mid-nineteenth century. Previous research has also demonstrated that organisational culture can be shaped by how its values are exhibited in work processes, policies, and daily practice (Ashmos & Duchon, 2000). Organisations which adopt a values-centred culture strive to infuse values into their organisational strategy and have found such approaches to increase organisational performance (Ashmos & Duchon, 2000; Mitroff & Denton, 1999b). Pfeffer (2003) notes that the power of values lies in four fundamental dimensions contemporary employees pursue in their workplace: 1. 2. 3. 4.

interesting work that permits them to learn, develop, and have a sense of competence and mastery; meaningful work that provides some feeling of purpose; a sense of connection and positive social relations with their coworkers; and the ability to live an integrated life, so that one’s work role and other roles are not inherently in conflict and so that a person’s work role does not conflict with his or her essential nature and who the person is as a human being.

Organisations are recognising numerous benefits associated with value-based cultures and are seeking the best ways to build them into their structures (Bolman & Deal, 1995; Graham et al., 2022; Vaill, 1998). Jurkiewicz and Giacalone (2004) empirically evaluated a variety of individual and organisational values and found the following to be the most impactful to workplace spirituality: Benevolence, generativity, humanism, integrity, justice, mutuality, receptivity, respect, responsibility, and trust. Also, previous research has demonstrated the importance of these values to organisations. For example, benevolence (through the promotion of hope and happiness), better equips employees to deal with workplace stress (Adams et al., 2003). Generativity tasks (i.e., mentoring, or environmental concern) are positively correlated with role clarity, job satisfaction and career outcomes (Altman, 2001). Humanism, which impacts self-esteem and work satisfaction, is “a worldview that affirms the ability and responsibility of each individual to live in a manner which seeks to bring about the greater good of humanity” (Jurkiewicz & Giacalone, 2004, p. 132). Employers who view their organisation as a conduit to advance workplace spirituality, instil a sense of integrity, and lead employees to a higher level of performance (Himmelfarb, 1994). Justice (i.e., perceived fairness) has been equated with a more productive and happier employee and a more productive organisation (Lazarus, 2000). Mutuality (i.e., perceptions of social support) increases work group cohesiveness (Friedman et al., 1998). Receptivity (i.e., supportive and open relationships) promotes creativity and productivity (Karasek & Theorell, 1990). Organisations which value mutual respect report decreased

100  Research handbook on organisational integrity burnout, stress, and employee loss (Adams et al., 2003; Snyder, 1994). Organisations which value responsibility experience less conflict and deal with challenges more efficiently (Adams et al., 2003). Organisations which create a trusting environment have employees who exhibit less political behaviours, are collaborative, supportive, and exhibit greater commitment (Anderson, 2000). Individual Level As previously noted, under the tenets of workplace spirituality, values are important to understand at a variety of levels. Specifically, at the individual level, workplace spirituality has been described as a personal experience related to one’s personal growth, feelings of interconnectedness with those around you, and transcendence (Jurkiewicz & Giacalone, 2004; Marques et al., 2007; Mitroff & Denton, 1999a). The concept of transcendence has been described through various means but, for the purposes of this chapter, we focus on an individual’s inner life. An inner life is manifested through an individual’s self-identity and how one’s self-identity is viewed in their social identity (Marques et al., 2007). Therefore, an employee’s work will be motivating and fulfilling to the individual if it is compatible with their perceived self-identity (i.e., does the work align and reflect who the individuals is). This also acknowledges the importance of one’s social identity within the larger social and organisational context (Pirkola et al., 2016). Existentially, spirituality in the workplace is a search for meaning (Krishnakumar & Neck, 2002) and when an employee feels nourished by their work, they are more likely to believe their work is meaningful. Marques and colleagues note that spiritual transformation at the individual level begins with the recognition of one’s inner power (2005). This can be viewed as an understanding of the source of one’s inner nourishment or the meaning that work provides on a personal basis. Previous research has demonstrated there are two types of workplace spirituality at the individual level, specifically pure spirituality and applied spirituality (Heaton et al., 2004). Pure spirituality is described as the silent, inner experience of awareness that one might have with regard to the level of meaning one derives from work. Applied spirituality is described through the practical outcomes one exhibits stemming from the inner awareness (Heaton et al., 2004). Examples might include an individual who recognises their inner strengths (pure spirituality) and then utilises their applied spirituality to improve their personal functioning (i.e., interpersonal skills, greater interdepartmental understanding). It is also important to note the connection between the individual level and the organisational level (Smith, 2008; Thakur & Singh, 2016). Employees may carry with them a sense of inner poverty when they feel as though their work does not matter or provide meaning to their lives. This inner poverty can be at times more burdensome than financial strains (Porter & Norris, 2013). Employers should strive to understand how to provide support to their subordinates and must also work to create a system where peers and colleagues can easily support each other. Employers should also work to create a workplace culture where respect and dignity for each employee is held in high esteem. An individual’s spirituality should be viewed from the individual’s (micro) perspective through an organisational (macro) lens (Giacalone & Jurkiewicz, 2010) to fully gain the benefits. However, such an approach requires organisations to create environments where employees can share their spiritual goals with others in their organisation (Sapta et al., 2021).

A spiritual perspective on organisational integrity  101 Group and Organisational Levels Both the group and the organisational levels of workplace spirituality refer to the internal organisational culture (Pirkola et al., 2016). This culture might apply to one’s direct work group, those they interact with on a day-to-day basis, or this might refer to the larger organisation. An effective organisational culture can assist in community building and lead to high quality connections between employees (Dutton, 2003). Also, a truly effective culture builds a community which transcends any inherent differences amongst members (Mirvis, 1997; Pawar, 2009). Groups which lack a sense of connectedness might be fraught with infighting, rivalries, distrust, and dislike amongst members (Neal, 1998). Contrarily, when group members feel connected to one another they will often describe one another as being caring, compassionate, honest, and acting with integrity (Neal, 1998). A sense of connection and community has been found to benefit both employers and employees who might cope with the hardships of work, such as loneliness, disappointment, and other pains of belonging to a modern organisation (Vaill, 1998). Some scholars have described the power associated with social connectedness at work as being spiritual capital. This has been described as a term to reflect the shared outlooks, ideals, and beliefs amongst organisational members (Marsh, 2007). For the organisation itself spiritual capital might refer to its reason for existence, who they aspire to be, and what responsibility the organisation believes it has to the greater good (Zohar & Marshall, 2004). Since workplace spirituality involves an alignment of values between employees and their organisation, spiritual capital can be linked to workplace spirituality (Porter & Norris, 2013). Though there are clearly benefits to workplace spirituality, not all organisations might be encouraging such a cultural approach. For example, workplace spirituality could potentially be limited within organisations whose structures are authoritarian and that take a command-and-control approach to daily operation. Workplace spirituality is most enhanced by organisations where structures are highly participative and allow individuals to work harmoniously and encourage one another to thrive (Porter & Norris, 2013). Such relationships, covenantal relationships, are described as those which fill deep personal needs and enable work to have meaning and to be fulfilling (Cavanaugh & Bandsuch, 2002). These types of understandings amongst organisational members can act as a covenant (i.e., promise). The following quotation offers a bit more detail on covenantal relationships. In covenantal relationships there is reciprocity, interdependency, and respect amongst members, regardless of their position in the organization’s hierarchy. Even when interactions involve challenging issues and problems, members of covenantal relationships remain kind and considerate and engage without deceit or manipulation. These relationships are built with intentionality and sacrificed and are developed and maintained through employers who focus on fostering workplace spirituality. (Porter & Norris, 2013, p. 427)

SPIRITUALITY AND ORGANISATIONAL INTEGRITY Integrity is critical in organisations because it drives the workability in the workplace. “Integrity is a concept which consists of actions, values, methods, measures, principles, expectations and outcomes that connotes a deep commitment to do the right thing for the right

102  Research handbook on organisational integrity reason, regardless of the circumstances” (Hanapiya et al., 2019, p. 39). An individual’s integrity impacts their perception of what they believe is true and important to themselves. From an organisational standpoint, there are at least eight different viewpoints on the relationship between the fundamental aspects of integrity and the way employees view ethics, corruption, and good corporate governance (Huberts, 2014). Integrity is sometimes called the substance in decisions regarding the policies which should be in effect in organisations (Huberts, 2018). Thus, the absences of integrity, in organisations, can negatively change daily behaviours and ultimately the culture of the organisation (Hanapiya et al., 2019). Hanapiya et al. (2019) conducted research examining the effect of spirituality on an employee’s integrity and found it positively impacted integrity. This research noted the importance of hiring employees with strong value systems as a way to encourage integrity and such building mechanisms could be achieved through spiritual means. Milton (2015) also found that integrity had a direct relationship to the concept of morality (i.e., values) and organisations with integrity saw a reduction in needed external regulation (Najib, 2009; Sidek, 2009). At the organisational level, integrity begins with the employer, the organisation’s policies, stakeholders, and employers (Hanapiya et al., 2019). Finally, Somera and Holt (2015) demonstrated the importance of organisational integrity when addressing various organisational needs (i.e., hiring, promotion, resource allocation). These findings were supported by other scholars who demonstrated integrity having a primary role in an employee’s job alignment, moral and ethical principles, and ultimate productivity (Cleary et al., 2013). Therefore, integrity should not be simply one component of an organisation but should be purposefully interwoven throughout all aspects of the operations of the organisation. Religiosity has often been layered with topics such as integrity, spirituality, and morality. Religiosity refers to an individual possessing strong religious feelings or beliefs but does not necessarily need to fall within the parameters of an established formal religion. However, all religions (e.g., established or not) have documented guidelines for acceptable behaviour of their members or believers which are used to determine good citizenship. Bouarif (2015) noted that religiosity was a symbol of an individual’s relationship with God as a creator and the obligations concerning a religion’s qualities and standards. Additionally, in 2012, Koenig et al. (2012) viewed values as well-organised religious beliefs and practices that were designed (a) to facilitate the proximity of the sacred or transcendent God and (b) to promote an understanding of a person's relationships and responsibilities to others and the community. Religiosity espouses qualities such as duty, dedication, and a sense of obligation as those that help people focus on work and become better employees (Bouarif, 2015). Research has shown that religious values have a significant impact on employee performance (Zahrah et al., 2016). Religion and spirituality have been shown to significantly influence people’s values, attitudes, and behaviours, and “contributes to increasing the positive consensus towards the integrity of employees in the organization” (Hanapiya et al., 2019, p. 43). Workplace spirituality improves an individual’s sense of responsibility that directly affects overall work and productivity and organisational growth (Islam et al., 2019). Research has demonstrated that organisations with a more positive and supportive work environment have a higher percentage of employees who highly value workplace spirituality (Caza et al., 2004). In the workplace, spirituality can be viewed from different viewpoints, including from a religious, spiritual, or integrity focus. Some view spirituality as the ability to incorporate personal values of integrity, truthfulness and morality into quality work (McLaughlin, 2005). For others, it can be participating in spiritual practices or treating colleagues in a collegial and

A spiritual perspective on organisational integrity  103 responsible manner which demonstrates spirituality (Gocer & Özgan, 2018). Religiosity and spirituality contribute to growing a positive organisational environment and the promotion of employee integrity (Hanapiya et al., 2019). To fully achieve organisational integrity from a spiritual perspective, employers must first offer an environment where employees can reflect their true self (i.e., share their values) and adequately communicate the organisation’s stated values (Lennick & Kiel, 2011). Understanding how to foster a spiritual workplace will help employers and organisations achieve organisational integrity.

ORGANISATIONAL BENEFITS OF SPIRITUALITY In 2016, Crossman found that interest in spirituality was growing within organisations. This change is said to be based on the realisation that employees are seeking to work for organisations which have the capacity to generate social good and have the means to offer value to society (Karakas, 2010; Poole, 2009). Research has demonstrated that spirituality in the work environment offers employees and the larger organisation a variety of benefits (Lips-Wiersman et al., 2009). These benefits are derived from daily organisational life which reflects the personal and cultural values of the employees through organisational initiatives (Giacalone & Jurkiewicz, 2010). Some have referred to these daily acts as reflections of their organisational integrity (Porter & Norris, 2013). However, it is important to also note that not all organisations or their employees act with integrity. It is the alignment of values (i.e., the employee and the organisation) which acts as a catalyst to reflect the values of the whole. Research has also demonstrated several benefits of workplace spirituality for organisations (Gotsis & Kortezi, 2008; Parboteeah & Cullen, 2010). Specifically, these benefits include increased honesty and trust amongst employees (Krishnakumar & Neck, 2002; Wagner-Marsh & Conley, 1999), increased profits and morale (Benefeil, 1999), higher productivity (Sass, 2000), increased commitment to organisational goals (Fry, 2003), increased retention and higher organisational commitment (Fry, 2003; Porter, 2011), and more productive cultures (Giacalone & Jurkiewicz, 2010). Organisations which seek to align their fundamental values have been shown to outperform those companies that are simply focused on the bottom line (Collins & Porras, 1994). Therefore, spirituality is considered to be the ultimate competitive advantage to some scholars (Mitroff & Denton, 1999b).

EMPLOYEE BENEFITS OF WORKPLACE SPIRITUALITY An organisational culture grounded in workplace spirituality has also demonstrated several benefits to employees. These benefits range from enhanced individual creativity (Freshman, 1999; Krishnakumar & Neck, 2002), improved sense of personal fulfilment (Burack, 1999; Krishnakumar & Neck, 2002), better individual work success (Tischler et al., 2002), and an expanded sense of joy, peace, serenity, and job satisfaction (Giacalone & Jurkiewicz, 2010). Employees that perceive their organisations as more spiritual also found the decision-making processes more participative, inclu­sive, and transparent (Kolodinsky et al., 2003). This reduction in friction and frustration at work aligns with subsequent research which demonstrated workplace spirituality could reduce overall organ­isational frustration (Kolodinsky et al., 2008).

104  Research handbook on organisational integrity Within spiritual environments, employees have been shown to be more creative and have higher moral standards for their work (Garcia-Zamor, 2003). Research has also shown that organisations which adopt an ethical framework within their structures to be more associated with respectful treatment of all members of the organisation and subsequently optimise organisational performance (Graham et al., 2022). In addition, spiritual organisations have been linked to companies being considered as “best places to work” and have often demonstrated higher long-term profit (Burack, 1999; Burack & Mathys, 1998). Spiritual employees live in the present but welcome learning new things about themselves and others while they learn from the past. (Marques et al., 2007). Spir­itual employees experience greater contentment with their lives and bring positivity to others and the workplaces (Marques et al., 2007). Ultimately, spirituality at work increases an employee’s goal commitment, thus contributing to higher levels of performance, a decrease in absenteeism, an increase in morale, job satisfaction, and intrinsic motivation, and an increased sense of community in the workplace (Gotsis & Kortezi, 2008).

HOW TO BUILD A SPIRITUAL WORKPLACE CULTURE Employers must act intentionally to create an organisational culture based in workplace spirituality (Porter & Norris, 2013). We offer three areas of consideration for employers to focus on when striving to create a spiritual workplace culture and encourage a workplace based on strong values and integrity. First, since a company’s mission and values guide its plans and operations, these can be a starting point to creating workplace spirituality. Employers should carefully assess how their mission and values statements might guide the daily operations, how they might be utilised to promote positive values (e.g., fairness, inspiration, learning, respect, and trust), and consequently how the mission/values can bring integrity into the organisation at all levels (Porter & Norris, 2013). Adjustments should be made to clearly define the organisational expectations, and this is also a good point in the process to examine the organisation’s ethical guidelines. Changes should be made to all documents, and it is often beneficial to include key organisational stakeholders in such decisions. Second, it is also important to carefully consider the organisation’s hiring practices. Are the right individuals being hired who possess the values which are important to the organisation or is the organisation hoping to change their current employees to suit their needs? There are numerous human resource tools available to assess the values of potential and current employees. If the shift to a spiritual culture is dramatic for the organisation this may mean some current employees may no longer be a good fit and they may leave. Change can be difficult but this is an important step towards a spiritual culture.Third, the organisation should also work to create a working environment which encourages community. In attempting to create a sense of community and connectedness, employers should strive to develop an environment which is respectful of differences, promotes inclusivity, and offers employees tools to proactively deal with any problems before they manifest (Mirvis, 1997). Such an environment should also allow employees to feel purpose and meaning in work, find connection with one another towards positive relationships, and find alignment between organisational and personal values

A spiritual perspective on organisational integrity  105 (Milliman et al., 2003). To accomplish this goal employers should encourage the following be applied to any organisational context which seeks to develop a spiritual (connected) culture: ● Consciousness of the self or consciousness of others and being in harmony with the unseen order of things. ● Creation of group/team/departmental systems which allow individuals to become conscious of others and conscious of the group. Another way for employers to accomplish these types of relationships is to adopt management practices that enrich the human spirit by building upon organisational values (Pfeffer, 2003). Tangible recommendations might include: 1. 2. 3. 4. 5. 6. 7.

Striving to develop employee-orientated values, Allowing employees autonomy and decision-making ability, Developing self-managed teams, Developing collective forms of recognitions and rewards, Allowing employees to use and develop their skills, Allowing employees the flexibility to address their social and family obligations. Removing fear and abuse from the workplace (Pfeffer, 2003).

SPIRITUAL LEADERSHIP Finally, it is also important for the employers to examine their own approach and to determine if that approach might be supportive of a spiritual workplace. Research consistently supports that good employers are an essential element in determining organisational success (Hughes et al., 2018). Spiritual leadership (Fry, 2003) is rooted in workplace spirituality and is focused on creating a vision that allows employees to “experience a sense of calling so that their lives have meaning and make a difference” (Fry & Slocum, 2008, p. 90). Spiritual leaders cultivate workplace cultures which are: Based on the values of altruistic love whereby leaders and followers have a sense of membership, feel understood and appreciated, and have genuine care, concerns and appreciation for BOTH self and others. (Fry & Slocum, 2008, p. 90)

Employers can work to foster a spiritual workplace by focusing on two aspects of a spiritual workplace which are calling (vocation) and membership (Fry, 2003). Vocation refers to the sense of meaning and purpose employees might find in their work. Membership refers to the sense of social connectedness employees seek in the workplace. When all these elements work in tandem employees are truly able to feel fulfilled by their work (Fry, 2003; Pawar, 2009). Employers can work to create organisational changes and processes that work to promote spiritual changes in employees at the individual level, and this will eventually translate to spiritual change at the group and organisational level (Pawar, 2009).

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FUTURE RESEARCH While current research touches on workplace spirituality at the individual and organisation levels, further research is needed to determine the overarching benefit of organisations embracing spirituality in practice. Specifically, how would such an approach be integrated into established mission, vision, and policy statements? Shifting an organisation’s culture can be one of the most challenging tasks for an employer. Therefore, examining the barriers and challenges of moving to a spiritual culture would be of value to the literature. Another area in need of empirical research would be how best to allow employees to share their spiritual preferences and value systems in the workplace. Such conversations can be challenging from a human resource perspective and can present hurdles in policy development. Another area of research might examine the overall impact on the financial health of organisations or how a spiritual culture might affect the organisational structure. Finally, research is also needed on how the adoption of workplace spirituality affects an organisation’s external stakeholders. Implementing spirituality in the workplace has been shown to bring positive outcomes when incorporated into organisational outcomes in the workplace. Research has shown that workplace spirituality can play a useful role in improving organisational health by influencing all aspects of employee wellbeing. Spirituality is now viewed as an instrument of change based on the assumption that employees seek to achieve more than just material gains in the workplace. Individuals now seek mental satisfaction and a sense of harmony in their work environment and want an alignment of their individual values with the organisation’s goals and objectives. Since all types of spirituality encourage their followers to become “good” individuals, it can be surmised that spirituality contributes to increasing the positive consensus towards the integrity of employees in the organisation.

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9. A criminological perspective on organisational integrity Nina Tobsch, Benjamin van Rooij, and Marieke Kluin

Organisational integrity can be defined as ‘the ethical integrity of the individual actors, the ethical quality of their interaction as well as that of the dominating norms, activities, decision making procedures and results within a given organization’ (Palazzo, 2007, p. 113). It focuses on the ethicality of individuals, the motivations for their actions, and the outcomes thereof. One of the core aspects of organisational integrity is whether members follow or violate organisational and societal ethical and legal norms. As such, a core question in the field is to understand compliance and violation of rules. In this respect, criminology has a wealth of knowledge to offer. At its core, the criminological literature is concerned with the sociology of deviance, centring theories and explanations around the fundamental question: ‘Why do individuals and corporations engage in rule-breaking behaviour?’ Criminology has developed several theoretical approaches to understand the root causes and mechanisms behind deviant and illegal behaviour generally, explaining rule-violating behaviour from three levels. The macro level places its focus on large-scale forms of behaviour across countries, states, or cities. The meso-level perspective focuses on group-level patterns of behaviour within for example organisations, occupational groups, and industries. Finally, the micro level focuses on individual-level patterns of behaviour within or across people. In this chapter, we will focus on micro- and meso-level theories, since macro-level theories address factors that exist beyond the level of the organisation, whereas micro- and meso-level approaches offer explanations for both individual differences in behaviour as well as influences the organisational setting might have. Criminologists have sought to understand deviant and illegal behaviour as it occurs in organisations and by people in positions of power, developing two interrelated fields: organisational crime and white-collar crime. These two fields have drawn on theories and empirical insights from general criminology and organisational science to understand to what extent deviance in organisations and involving people in positions of power (‘in the suite’) has similar origins as crimes committed ‘on the street’. While the notion of crime specific to the workplace has been around for a longer time, Edwin Sutherland was the first to introduce the formal concept of white-collar crime in 1939. He called attention to crimes which are not ordinarily included within the scope of criminology by studying ‘a crime committed by a person of respectability and high social status in the course of his occupation’ (1949, p. 7). More than eight decades have passed since Sutherland’s introduction of the term, and studying rule violation of corporations has resulted in a dispersed body of criminological work that seeks to understand both individual and organisational aspects of illegal behaviour committed in and by organisations. Important to highlight is that traditional crimes do not differ between acts committed for individuals themselves and rule-violating acts committed for others. However, according to Kennedy (2019, p. 178), ‘corporate crime, as a form of white-collar crime, makes an important difference about the entity to which the benefits of the crime accrue’. Clinard and Quinney 111

112  Research handbook on organisational integrity Table 9.1 Opportunity

Overview of theories Routine activities

Deviance occurs when a motivated offender and suitable target come together in a situation where there is no capable guardian present

Situational crime prevention

Strategic adaptations in situations and environments can prevent criminal

Deterrence

Perpetrators and/or other members of the public can be deterred from

offending Motivation

future offending by imposing punishments Strain

Negative stressors and pressures can lead to deviance when an individual does not have legitimate means to relieve these

Social learning

Individuals have no natural tendency towards deviance; this behaviour is learned through social processes

Neutralisation

In order to rationalise their misconduct and guilt resulting from this behaviour, offenders use neutralising techniques

Social control

Individuals can have a natural tendency towards deviance; this behaviour is controlled through social processes

(1973) discussed that white-collar crime can be divided into two types (1) corporate crime: offences committed by corporate officials for their corporation and the offences of the corporation itself, and (2) occupational crime: offences committed by individuals in the course of their occupations and the offences of employees against their employers. This distinction made it possible to study individual and organisational dispositions for white-collar crime (Huisman, 2016). Criminological thinking about deviant behaviour, and particularly about organisational deviance, concerns two root causes of such deviance: opportunity to commit a criminal act, and the motivation to do so (Coleman, 1987). The term opportunity refers to a particular act that has been made possible by social conditions and is seen by an individual as a possible course of action (Coleman, 1987). Within an organisational context, opportunity emerges as an institutional opportunity structure (Van Baar, 2019). Motivation is seen here as ‘a set of symbolic constructions defining certain kinds of goals and activities as appropriate and desirable and others as lacking those qualities’ (Coleman, 1987, p. 409). While the present chapter does not contain an exhaustive discussion of all criminological theories, it will provide a concise overview of those most relevant to understand organisational deviance. It will highlight both criminological theories and general empirical findings as well as studies focusing on organisational and white-collar crime (for a brief overview of theories to be discussed in this chapter, see Table 9.1). It will first look at opportunity approaches to crime and assess theories and empirics that originate deviance in factual opportunities to break rules. Second, it will look at deterrence theory and assess to what extent punishing deviant behaviour will deter illegal conduct amongst those punished and others who learn of such punishment. Third, it will look into strain theories of crime and look at how a mismatch between individual and organisational goals and means to attain such goals can result in negative emotions that stimulate deviancy. Fourth, it will look at the social learning and neutralisation theories and assess what influence the mechanisms that people and organisations use to neutralise shame and guilt of deviance have in enabling illegal behaviour. Fifth, it will look at control theories of crime, and look at how people’s ability to control their impulses plays a role in acts of deviance. This chapter concludes with some general thoughts on the use and implications of criminological insights in the field of ethical and organisational studies.

A criminological perspective on organisational integrity  113

OPPORTUNITY The first core line of thinking about root causes of deviance and illegal behaviour is opportunity (Coleman, 1987). The essence of opportunity theories is that motivation alone is not sufficient to explain why individuals turn to crime: to engage in deviant behaviour, people must also have the opportunity to do so. There are several criminological theories within this approach, but at their core is the idea of rational choice (Cornish & Clarke, 1989), which presumes that violating rules is a choice and the product of a rational process that considers the costs and benefits of crime versus legitimate alternatives. A key assumption is that persons can be highly rational actors and can accurately predict an action’s outcome. Paternoster and Simpson’s (1996) modified version of rational choice theory showed systematically that intentions to commit white-collar offences were influenced by the perceived costs and benefits. Important to highlight here is that they noticed that when the corporate climate was perceived to advance (or at least permit) offending, this increased the reported intent to violate the rules. This has also been found in the studies by Sims and Keon (1999) and Appelbaum and colleagues (2005). Assuming that individuals are rational actors with a free will, routine activities theory proposes that changes in the daily activities of individuals has an important influence on the levels of crime; criminal activity will ensue when the opportunity for it comes up in an individual’s daily routine (Cohen & Felson, 1979). According to this theory, the opportunity for crime arises when three elements come together in time and space: a motivated offender, a suitable target, and the absence of an adequate guardian (Cohen & Felson, 1979; Miró, 2014). Regarding the first element, the theory does not give much information on why some people would be motivated offenders and not others; they just base their decision on a rational cost-benefit analysis. Suitable targets can be anything that is left relatively open to the offender, like an unlocked bike, or an elderly lady alone on the streets. The absence of an adequate guardian entails things in the environmental location, like lighting and cameras, but also human guardians, like a bouncer at a dance club, or a police-officer (Tibbetts, 2018); in other words, a place where the offender can interact with the target undisturbed. Empirical studies have shown that there are certain locations within larger areas where these three elements seem to come together more prevalently; these are called hot spots (Deryol et al., 2016). Expanding on this original framework, studies have also included a person’s lifestyle choice, making some (both potential offenders and potential victims) more exposed to these three core elements than others (Van Rooij & Fine, 2021b). Building on the routine activities framework, situational crime prevention asserts that motivated offenders who encounter potential targets in a suitable environment choose to engage in criminal activity on the basis of five characteristics of the presented opportunity: the effort it takes to undertake the criminal activity, the risk of getting caught while committing the crime, the rewards resulting from the crime, any situational factors that might provoke the criminal behaviour, and the offender’s ability to neutralise and rationalise their behaviour (Clarke, 1980). The theory proposes twenty-five different techniques for increasing effort, increasing the risks, reducing the rewards, reducing provocations, and removing excuses. Routine activities theory has been studied much more frequently in empirical studies than situational crime prevention. The best reviews we have for the opportunity approach thus also focus on routine activities theory. These reviews have found that there is support for the theory. Spano and Freilich (2009), conducting a meta-analysis of twenty-two studies published between 1995

114  Research handbook on organisational integrity and 2003, conclude that the results show a clear pattern consistent with the theory. McNeeley (2015), who has conducted a review of forty-seven studies published between 1986 and 2012, comes to a similar conclusion. Several studies have sought to apply opportunity theory to organisational and white-collar crime settings. One study looked at how routine activities play a role in medical fraud, finding that in this particular setting the offender’s (the hospital) access to the target (the insurance company) was inevitable, but that the lack of proper guardianship of such target created a higher risk of fraud (Benson et al., 2009). Another study sought to understand how routine activities played a role in fraud within the European Emissions Trading System, analysing how offenders could get access to targets without effective guardianship within the market for carbon trading (Gibbs et al., 2013). The study found that the routine activities framework was applicable here and helped to account for rule-breaking practices. Opportunity approaches to deal with unwanted behaviour do not seek to sway motivations for deviance, but rather they seek to make such unwanted behaviour more difficult or impossible. This entails an analysis of how unwanted behaviour occurs and looking at practical interventions that may affect the ability to engage in (parts of) what enables such misconduct. The opportunity approach can be highly effective in reducing bad organisational behaviour. However, it should be noted that it does come with several risks. A first problem is that a focus on protecting targets may lead to victim blaming, as the routine activities approach may lead to extra pressure on potential victims to reduce their own attractiveness or accessibility as targets. A second problem is that opportunity approaches may not always be desirable or even ethical as they inherently entail a limiting of freedom of choice by disabling pathways to unwanted behaviour. A third problem is that these approaches may result in a displacement effect, where closing off one opportunity will spread it towards others (Guerette & Bowers, 2009). Important for organisational integrity and opportunity theories is that one’s weighing of the costs and benefits to violate the rules depends on the employees’ work environment.

DETERRENCE In addition to the opportunity for crime, Coleman’s model (1987) prescribes that an individual needs the motivation to offend. One of the most influential and well-known motivational frameworks in criminology is the deterrence theory (Pratt et al., 2008). Deterrence theory also assumes that individuals are rational actors that carefully weigh the costs and benefits of their actions, and proposes that people obey the rules out of fear of the punishment that will ensue if they get caught breaking them. If an individual does not fear punishment, or if the advantages of breaking the law outweigh this fear, deterrence theory prescribes that people will subsequently engage in rule-breaking behaviour. For formal punishments to be perceived as a cost, and therefore to deter unwanted behaviour, they need to be based on three characteristics. The first characteristic is referred to as the swiftness of the punishment, important for both its justness and deterrent effect. The second characteristic is severity; in order for punishment to be effective in deterring criminals, it should outweigh the potential benefits of the crime. The last characteristic is the certainty that any criminal offence will not go unpunished (Beccaria, 1764; Tibbetts & Piquero, 2021). According to the theory, deterrence can prevent deviant behaviour in two ways. First, the theory assumes that the unpleasant experience of the punishment alone will have such an

A criminological perspective on organisational integrity  115 impact on the punished individual that he or she will refrain from committing future deviant acts (Van Rooij & Fine, 2021a). Furthermore, getting caught and receiving punishment might also increase an offender’s estimation of the costs of crime (Nagin, 2013b). This is referred to as specific deterrence. However, according to this theory, imposing punitive measures on one individual will also scare other potential offenders, therefore discouraging them from committing criminal acts; this is referred to as general deterrence (Nagin, 2013a, 2013b). The concept of deterrence has been extensively studied (Nagin, 1998), with the overall conclusion that there is limited evidence that supports the theory. In the largest meta-analysis we have of the existing body of empirical work, covering 700 criminal statistics with 7,822 effect estimates across a range of types of punishments, offenders, offences, jurisdictions, and research approaches, including both survey and experimental studies, Dölling and colleagues (2009) set out to answer the question whether the threat of punishment prevents crime like the deterrence theory claims. It finds that with the exception of capital punishment studies, the number of studies that support the deterrence hypothesis exceeds those that falsify it. However, this review finds that the deterrent effect of punishment is most often rather small, and dependent on the type of offence (Dölling et al., 2009). It finds that there is less evidence for deterrence for more serious forms of delinquency: significant findings for deterrence concern relatively minor offences such as property crimes, tax evasion, and environmental offences (Dölling et al., 2009). Criminologists have further found that punishment may have negative effects on offending behaviour, including criminogenic effects of imprisonment (Petrich et al., 2021), obstruction of socio-economic opportunities that allow offenders to desist from crime (Kirk, 2018; Kirk & Sampson, 2013; Kirk & Wakefield, 2018), and adaptation effects where punishment leads to more evasion (Dupuis et al., 2021; Gornall, 2010; Ryder, 2008) or replacement by other offenders (Kleiman, 1997; Miles & Ludwig, 2007). While evidence for deterrence for general crime is mixed, the theory might hold up more consistently for corporate deviance, because most corporations are designed to be focused on seeking the highest possible profits while maintaining the lowest costs (Yeager, 2007, 2016). Assessing this empirical relationship, the unit of analysis of some studies focused on the corporate entity as the subject of sanctions (Buell, 2006; Cohen, 2000; Simpson et al., 2007), while other studies focused on how management and/or executives of corporations responded to received sanctions (Simpson et al., 2013; Yiu et al., 2014). Evaluating the overall impact of deterrence on corporate crime, a review by Schell-Busey and colleagues (2016) shows, again, that most forms of punishment do not seem to have significant deterrent impacts. Assessing effect sizes from fifty-eight studies (assessing deterrent effects of legal sanctions, punitive sanctions, as well as of legal rules), they found no significant evidence that legal sanctions deter corporate offending. Furthermore, the overall conclusion of their meta-analysis is that there were not enough methodologically rigorous studies to draw strong conclusions regarding existing corporate crime interventions. When looking at the effectiveness of the individual elements of punishment, namely the swiftness, certainty and severity, research shows that the certainty of punishment is most important for deterrence’s success (Nagin, 2013a). A core issue here is that there seems to be a threshold level of certainty below which more severe punishment will not be effective (Brown, 1978). A second issue is that deterrence is subjective and norm addressees have limited knowledge of what the certainty and severity of punishment actually is, over or underestimating both (Apel, 2013; Thornton et al., 2005; Van Rooij, 2016). For corporate offending the disconnect between objective punishment and subjective understanding of deterrence of

116  Research handbook on organisational integrity such punishment was most clearly evidenced in a study on the chemical industry, finding that environmental managers did not have a proper understanding of key (so-called ‘signal’) cases of enforcement against violators, nor did they understand the certainty or severity of punishment. The study therefore could not establish a direct causal link between environmental sanctions, perceptions of deterrence of such sanctions, and compliance with environmental standards (Thornton et al., 2005). A third issue is that the deterrent effect of formal punishment is moderated through informal norms (Pogarsky, 2002). One of the most important factors that people consider are the internal feelings of shame and guilt that might follow the offending. The perception and judgement of the social surroundings – like family members, friends or colleagues – is also shown to be an important consideration for someone to either engage in criminal activity or refrain from it (Pogarsky, 2002). These results call into question the impact formal punishments can have on a person’s willingness to engage in crime. What implications can we draw from this unclarity of deterrent effects in regard to the internal and external oversight of organisational deviance? First, those interested in enhancing integrity and compliance should not assume that instituting punishment for rule violations will do so automatically. As empirical studies show, there does not seem to be a clear-cut solution, where simply instituting a form of punishment will lead to more desired behaviour. Sanctions that are in place should ideally focus on all three characteristics previously discussed, as well as consider any social or personal perceptions of unwanted behaviour an offender could have within the organisational setting. A second core implication is that punishment will only deter if it is certain enough, and thus the focus should be on the detection of violations. This can be extra difficult in larger companies with complex hierarchies, in which many corporate forms of deviance do not have direct (visible) victims, nor occur in easily detectable settings. In this respect, focusing efforts on certain high-risk situations and people can be helpful. Lastly, to overcome the gap between subjective and objective deterrence, communication is key to ensure that organisational members have sound knowledge and understanding of the certainty and severity of punishment, should they break the rules. Furthermore, the organisation should take care in communicating the rules as part of both the formal and informal system of norms and values within the company. In sum, to make interventions based on deterrence as effective as possible, compliance and integrity officers should aim to make both the rules and subsequent sanctions transparent, consistent and visible.

STRAIN Deterrence theory views criminal behaviour as a rational choice made by the individual. However, the framework of strain sees deviance not merely as a matter of individual choice, but one that is embedded in a broader social fabric. Criminologists have theorised that social pressures to achieve social and cultural goals, like financial success, can lead to criminal activity (Agnew, 1985, 1992; Agnew et al., 2002; Bernard, 1987; Wang & Holtfreter, 2012). Due to various forms of inequality, some groups experience a discrepancy between the goals society tells them they should strive for and the legitimate means available to them to achieve these. This leads to tensions and feelings of frustration – referred to here as strain (Tibbetts, 2018). Robert Agnew, who proposed the most dominant strain theory to date, argues that, additional to inequality, people can experience strain from two other types of events. The second category is when someone experiences

A criminological perspective on organisational integrity  117 so-called ‘noxious stimuli’: major negative events or shocks in their personal or professional lives (Agnew, 1985, 1992, 2017). Examples of this are abusive relationships, criminal victimisation and economic problems (Agnew, 2017). Agnew further finds that the loss of positively valued stimuli can be a third cause for strain; for example, when someone gets fired from their job. According to Agnew, the feelings of strain from these three categories (lack of means to achieve goals, negative stimuli and loss of positive stimuli) can lead to feelings of anger and frustration. If a person is not able to cope with these negative feelings in a positive manner, this then can lead to crime (Agnew, 1985, 2001; Agnew & White, 1992). Initially, strain theory was mostly developed for and applied to juvenile delinquency (Agnew, 1992; Agnew & White, 1992; Aseltine Jr et al., 2000; Baron, 2004; Froggio, 2007; Mazerolle et al., 2003). However, following empirical support for the theoretical model, strain theory was used to explain a wider variety of criminal offences, like terrorism and inter-relational violence (Agnew, 2010, 2016; Eriksson & Mazerolle, 2013). Overall, support for strain theory is mixed; while some forms of strain do consistently seem to be related to negative feelings, these negative feelings do not automatically lead to criminal behaviour (Agnew et al., 2002; Aseltine Jr et al., 2000; Mazerolle & Piquero, 1998). Furthermore, strain seems to be most consistently and strongly related to violent offences (Langton & Piquero, 2007). In the organisational context, financial success is often heavily stressed and sought after, making the theoretical framework of strain seem eminently applicable (Agnew et al., 2009; Schell-Busey et al., 2016; Wang & Holtfreter, 2012). Since the achievement of economic goals is such an essential element within most organisational contexts, Agnew argued that the obstruction thereof is relevant in (a) particular white-collar offences, such as fraud and embezzlement; (b) occupational offending by higher class individuals; and (c) corporate crime (Agnew et al., 2009, p. 41). As most corporations are in some way expected to keep growing, to maximise profits and be able to compete within their industry, those that cannot fulfil this expectation are, according to the strain framework, expected to resort to illegitimate ways (Wang & Holtfreter, 2012). Furthermore, individuals can experience strain in the workplace due to the inability to achieve status goals and work-related stress (Agnew et al., 2009). Indeed, case study analysis of organisations have shown that the blocking of goals, pressures to grow and the accessibility of resources contribute to the likelihood of organisational crime (Simpson & Koper, 1997; Van Rooij & Fine, 2018; Vaughan, 1983). Besides the financial state of the organisation itself, Wang and Holtfreter (2012, p. 155) argue that strain can also operate at the industry level, asserting that financial goals may be more heavily implied in certain industries, while legitimate means may be constricted in these particular industries also. This is seen in earlier empirical studies as well (Baucus & Near, 1991; Sutherland, 1949). These various types of strains are more likely to result in corporate crime if they are ‘high in magnitude and perceived as unjust’ (Agnew et al., 2009, p. 48) Several studies have tested the applicability of the strain theory on forms of white-collar and organisational crime. Langton and Piquero (2007) studied the relationships between feelings of strain and eight different offence types, including antitrust, bribery, false claims, embezzlement, mail and wire fraud, securities violations, and lending and credit institution fraud. They found that strain, operationalised as a count of six strainful events, was not significantly related to negative emotions. However, strain was significantly related to financial motivations to commit crime. Their results did seem to find support for the strain theory framework for some offences, like embezzlement and credit fraud, but not for all, concluding that strain theory seems to be a promising framework to explain offences within the workplace, as long as some

118  Research handbook on organisational integrity adaptations would be made in relation to differences in social status (p. 14). Other scholars studying white-collar criminals have noted that these individuals were often motivated by the fear of losing what they had (Van Erp, 2013), therefore resorting to illegitimate means to be able to maintain their status within the organisation (Langton & Piquero, 2007; Weisburd et al., 1991). Furthermore, research shows that corporate crime is generally more prevalent in for-profit organisations experiencing financial troubles like profit losses than in organisations that do not experience those struggles (see Agnew et al., 2009). Further studies have reported mixed findings; some found support for the relationship between organisational strain and white-collar crime (Simpson & Koper, 1997; Van Wyk et al., 2000), while others did not find a definitive link between the two (Wang & Holtfreter, 2012). Strain theories generally show us that organisations that have high financial targets may well develop strain that enhances negative emotions, which in turn can lead to deviance. Further, those exposed to a high prevalence of other stressful situations at work might also be more at risk of developing strain. It is possible that the occurrence of individual and corporate strain can be combined when individual concerns are connected with corporate goals (Huisman, 2016), creating a higher risk for corporate offending. Besides the individual and organisational context, the industry an organisation operates in can also put them at higher risk of strain in situations of high competition and little resources. However, the empirics for the full causal pathway between strain and corporate deviance are not so clear cut, specifically when it comes to the relationship between the experience of negative emotions and engaging in deviant and criminal behaviour (for a discussion about the impact of high targets on the development of a toxic work environment, and other factors that might play a role, see Van Rooij & Fine, 2018). The claim that strain theory would be universally applicable to explain any form of (white-collar) offences has not been fully empirically supported. Scholars have proposed several contributing factors in the relationship between strain and corporate deviance, including conventional and criminal coping mechanisms and resources, social support and control, internal beliefs, costs and benefits of offending, and opportunity; these factors could enhance or decrease the likelihood of offending based on experienced strains (Agnew et al., 2009). Those interested in compliance and integrity should ideally take all these factors into account to assess to what extent members of their organisation experience strain, and whether they have the formal resources and social means to cope with these strains in a legitimate way.

SOCIAL LEARNING AND NEUTRALISATION TECHNIQUES Another strand of theories that incorporate the social environment in their explanatory frameworks are the social learning theories. Social learning theories view an individual as having no natural tendencies towards criminal or deviant behaviour (Tibbetts, 2018). Within this framework, such behaviour is learned on the basis of the way that significant others within the individual’s network, like family, friends, and colleagues, act and communicate. Where strain theory focuses on the social events and experiences creating tendencies towards deviant behaviours, learning theory centres around social interactions. The theory of differential association states that people will have a higher likelihood of criminal activity if others in their immediate surroundings are positive towards this kind of behaviour (Matsueda, 2001; Sutherland, 1939, 1947). As individuals interact with those close to them, they learn about the methods and motives of criminal behaviour, which are reinforced

A criminological perspective on organisational integrity  119 through certain social interactions. At the core of the theory lies the assumption that when the favourable definitions and techniques of criminal behaviour available to an individual are stronger than the unfavourable definitions and techniques, crime will ensue. In an organisational setting where deviant behaviour is the norm, colleagues learn the abilities to participate in white-collar crime and the predispositions towards rule-violating behaviour (Sutherland, 1941). Scholars have criticised the vagueness of the theoretical framework and have argued that associations with delinquent others may be formed after engaging in criminal activity, instead of before. In response to the limitations of Sutherland’s model, Burgess and Akers (1966) conceptually expanded on the way in which relationships with others can shape individual behaviour, formulating the differential reinforcement theory (Akers & Jennings, 2019). This model is based on the ideas of operant conditioning and overlaps with ideas used in the deterrence model, in that it states that individuals learn to behave in a certain way based on punishments and rewards. Furthermore, the model of differential reinforcement puts forward the concept of imitation as a way people learn from their social network; that is, through the modelling of other people’s behaviour, one can learn new ways to behave (Akers, 1973). In both the differential association and differential enforcement theories, definitions refer to a person’s attitudes and perceptions for deviant and non-deviant behaviour (Severson et al., 2019). Techniques here include both the means on how to carry out the crime and the intellectual justifications, like the motives and rationales, for committing the crime (Piquero et al., 2005; Sutherland, 1947). Whereas traditional criminologists have focused mostly on the impact of an individual’s primary relationships with their significant others, like spouses, direct family and close friends (Akers & Jensen, 2006; Matsueda, 2001), organisational scholars have argued that the associations within the workplace are equally important, seeing as people spend a considerable amount of time with their colleagues and the workplace is an important factor in most people’s lives (Piquero et al., 2005, p. 162). Indeed, while conceptualising his theory, Sutherland (1983) specifically put forward the argument that white-collar crime results from the learned attitudes and definitions in the workplace. In his qualitative assessment of the motives of a professional thief, he concluded that people learn both the ways to steal and favourable definitions regarding this behaviour from their social networks (Sutherland, 1937). Studying the applicability of social learning theories on white-collar offending, scholars have found modest support for the hypothesis that the attitudes of work associations can lead to corporate crime (Piquero et al., 2005; Steffensmeier et al., 2013). Focusing on the learned intellectual techniques, motives and rationales that play a central role in social learning theories, another concept that is widely used to explain corporate crime is that of neutralisation. In his explanation of white-collar crime, Sutherland (1941) argued that different forms of rationalisations are the most important way for managers to be able to justify their deviant behaviour. This so-called neutralisation framework was further developed by Sykes and Matza (1957) and, in short, suggests that most individuals do not have favourable attitudes or values when it comes to deviant behaviour. Rather, they learn to rationalise and neutralise deviant behaviour when presented with an opportunity to commit crime that, for whatever reason, they feel like they want to pursue (Piquero et al., 2005; Sykes & Matza, 1957). As mentioned before in the discussion of the deterrence theory, individuals often refrain from crime out of fear that the social surroundings will negatively respond to their behaviour, and internal feelings of shame and guilt that will follow their actions (Pogarsky,

120  Research handbook on organisational integrity 2002). However, these fears can be overcome by utilising techniques of neutralisation, thereby preserving self-image (Cardwell & Copes, 2021). These neutralisation techniques can be used both before and after committing an offence (Van Baar, 2019). In their original framework, Sykes and Matza (1957) offer five forms of neutralisation. The first technique is referred to as denial of responsibility, in which the individual does not hold themselves accountable for the deviant act, instead claiming it as something outside of their control. In the organisational context, one can easily theorise how the hierarchical structure of a corporation can lead to individuals ‘pointing the finger’, or claiming that the order for illegitimate behaviour came from higher up (Heath, 2008; Severson et al., 2019). Thus, it becomes easier for offenders to deflect blame and assume anonymity as a ‘small cog’ in the system. The second technique is denial of injury, which denies the harm caused by the deviant behaviour. Injury or harm caused by white-collar offending is seldom as evident as is the case in ‘ordinary’ street crime (Michel, 2016). Furthermore, it is harder to identify one single victim, since white-collar offending usually impacts many at once in varying degrees of seriousness, therefore making it easier for the offender to disregard its harm (Severson et al., 2019). By using the denying victims technique, an individual rationalises their behaviour by claiming that the victims are deserving of the consequences. In the organisational context, scholars have argued that many offenders do not see their actions as seriously harming others (Heath, 2008). The condemnation of the condemners technique pertains to the rationale that the ones who condemn the deviant behaviour have their own hypocritical motives. In this sense, corporations can put blame on their regulators, claiming for example that there are ‘too many’ or contradicting rules and laws in place (Parker & Nielsen, 2009). Finally, the technique of the appeal to higher loyalties is applied in order to argue that the individual acted according to norms and values of a specific subgroup; in the organisational context, these loyalties could lie with for example colleagues, managers and customers (Heath, 2008; Severson et al., 2019). In addition to these five original techniques, countless others have been proposed (Cardwell & Copes, 2021), of which some are specifically in the realm of corporate crime (Severson et al., 2019). These include the claim of normality, in which organisational members can rationalise their behaviour by claiming that many others in their organisation, profession or industry resolve to the same illegitimate ways; sense of entitlement, in which the corporate offender feels he is simply taking ‘what is owed’; and defence of necessity, in which offenders feel that they have no other choice but to commit a crime in order to keep their job, or to maintain their organisation’s place within the market or industry (Benson, 1985; Clinard & Yeager, 2011; Heath, 2018; Klenowski et al., 2011; Maruna & Copes, 2005). Furthermore, following an extensive literature study of neutralisation techniques identified in a broad range of disciplines, Kaptein and Van Helvoort (2019) developed a detailed neutralisation model, in which the authors identify an array of overarching categories, neutralisation techniques and sub-techniques. As with most theories discussed in this chapter, empirical support for the concept of neutralisation techniques is mixed. In their review of the literature on neutralisation, Maruna and Copes (2005) mentioned that the theoretical framework is used in a wide variety of disciplines, finding strong support in some, but not in others. In the realm of white-collar crime research, evidence has been found for the idea that white-collar criminals, like fraudsters, embezzlers and even (representatives of) corporations, commonly use neutralisation techniques (Benson, 1985; Cressey, 1953; Jordanoska, 2018; Klenowski, 2012; Van Baar, 2019; Willott et al., 2001).

A criminological perspective on organisational integrity  121 What can we learn from these social learning perspectives when it comes to deviant organisational behaviour? First and foremost, these theories and empirical studies point to the notion that the environment in which the individual operates matters; if you have one bad apple, you might soon end up with a bad barrel, due to learning processes within divisions and departments. Furthermore, individuals employ various rationalisation tactics that allow them to neutralise behaviour otherwise seen as deviant or criminal. In this respect, another criminological concept can be relevant, namely that of normalisation of deviance: this is more of a concept than a theory, and describes how deviance from the correct behaviour can become normalised, specifically within organisations, over time (Le Coze, 2008; Vaughan, 1996). Diane Vaughan’s (1996) case study on the NASA Challenger space shuttle showed that certain activities can lose their deviant nature when normal occurrences in the workplace are part of otherwise legitimate organisational behaviour. Moreover, it allows well-intentioned people to engage in activities that otherwise would be labelled as deviant. This creates risk for employees who recognise these patterns of deviance, but are afraid to speak up against their colleagues (Maxfield et al., 2011). When organisational members normalise deviant behaviours that subvert processes designed to safeguard others that rely on the organisation for essential products or services, this creates a prominent risk (Banja, 2010). Pinto (2014) suggests that the normalisation of deviance can affect how an organisation interacts with strategic partners during the course of business relationships. Important to note here is that normalisation of deviance does not always reflect creative ways around regulations, but that these deviant behaviours reflect alternative processes that are normalised which in the end replace the ineffective or inefficient organisation’s ability to achieve its goals (Price & Williams, 2018).

CONTROL In contrast to the social learning theories, control theories assume that all human beings have a natural tendency towards crime due to their selfish nature (Britt & Gottfredson, 2003). If these tendencies are not controlled adequately, all people would exhibit antisocial and criminal behaviour. The question here differs from the question that is usually asked in criminological research: instead of asking ‘Why do people commit crime?’, the control theories debate why people do not commit crime. One of the most influential and empirically valid theories in the criminological literature is the theory of low self-control established by Gottfredson and Hirschi (1990). In short, this theory assumes that the psychological trait of low self-control, which develops early in a child’s life and stays consistent over the life course, causes criminal behaviour. Empirical research has shown that individuals with low self-control are more focused on the acquirement of short-term pleasure and the avoidance of negative feelings (Gottfredson & Hirschi, 1990; Hirschi & Gottfredson, 1993). Although Gottfredson and Hirschi contend that their theory is universally applicable to all forms of crime, many scholars have critiqued this claim when it comes to white-collar crime (Piquero et al., 2010). Empirical work studying the link between self-control and forms of white-collar crime has not been able to establish support for the theory (Benson, 1985; Piquero et al., 2010; Simpson & Piquero, 2002). Benson and Moore’s study (1992) even showed that white-collar offenders contradict the self-control theory, since careers of white-collar offenders differ from street criminals.

122  Research handbook on organisational integrity While the theory of self-control presently does not seem to be an adequate model to predict white-collar crime, a related concept has begun to take shape in the last couple of years: the desire to be in control (Craig & Piquero, 2016; Piquero et al., 2010; Schoepfer et al., 2014). Desire for control, as defined by psychologists Burger and Cooper (1979), is the need to be in control over one’s life. Like self-control, it is seen as a personality trait, but whereas the former focuses on the influence of self-control on here-and-now behaviour, desire for control includes both current and future situations (Schoepfer et al., 2014). Individuals with high desire for control are generally seen to be active, assertive and decisive, assert influence over others when needed, and want to avoid failure as much as possible (Piquero et al., 2010, p. 631). While desire for control can be related to the successful achievement of legitimate goals, scholars also note that the trait can have counter-productive outcomes (Schoepfer et al., 2014). In contrast to self-control, the desire for control trait does seem to be significantly linked to white-collar offending, showing that this control personality trait seems to be better suited to predicting white-collar crime (Craig & Piquero, 2016; Piquero et al., 2010; Schoepfer et al., 2014). On the one hand, this short overview of the control theories of crime shows us, again, how important the social environment is in promoting or discouraging deviant behaviour, even from an early age. Moreover, self-control implies an individual characteristic that is hard to predict. It is not easy to assess every personal characteristic, or to control for these. However, one should be aware that there can be personal differences here, and that there can be organisational members with lower self-control, which in itself is hard to combat. Furthermore, it shows us the broader issue that, for some people, complying with rules may be harder, and therefore additional organisational support may be needed. There are ways to assess a person’s level of self-control, for example by looking out for risk factors associated with the trait, including antisocial behaviours and substance abuse. Within the organisational context, assessing these factors might not always be possible or realistic due to a range of privacy reasons, and there will still be a large number of people and individual factors that lay outside the scope of organisational interventions. Therefore, while it is important to recognise that individual differences can play a role in corporate offending, an approach focused on a wide variety of factors, like minimising opportunities for crime within the organisation, might be more efficient to combat individual influences.

CONCLUSION There is a wide range of explanations for deviant behaviour in the criminological literature that can be applied to the study and regulation of corporate integrity and compliance. As this chapter has shown, explanations of crime can focus on motivation, debating the question of why people engage in criminal conduct, and opportunity, relating to how people engage in criminal conduct. For an intervention to be effective in changing undesired behaviour within the organisation, it should focus on both these aspects, altering an organisational member’s impulse for crime as well as the opportunity for offending. Both the individuals themselves as well as the organisational context they operate in can have an impact on their behaviour. In this chapter, we have focused on both micro- and meso-level explanations of deviant behaviour and crime. When the organisation fosters a climate based on integrity, prioritising rules and regulations, and providing organisational members with the

A criminological perspective on organisational integrity  123 instrumental and social resources to follow these, it might well inspire compliance. Reversely, when individuals operate in stressful situations where support is scarce and deviant behaviour is the norm, the chances of offending increase. In addition, those interested in enhancing compliance and integrity within their organisation should be aware of personal differences that can occur amongst organisational members – in this regard, lowering opportunity for deviance can be an effective way to minimise these micro-level risks and stimulate compliant behaviour. Focusing on the protection of potential targets, improving their guardianship, and limiting chances in the organisational environment to engage in corporate crime, restricts an individual’s possibilities for illegal behaviour. Reaching a full understanding of corporate and white-collar crime is no easy feat due to both definitional problems as well as issues surrounding access to reliable data (Severson et al., 2019), and empirical support remains scant for the application of all theories discussed in this chapter to the organisational context. However, as previously highlighted, criminological theories can offer valuable insights and tools to combat deviant behaviour and stimulate organisational integrity.

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10. A positive behavioural ethics perspective on organisational integrity Linda Klebe Treviño, Niki A. den Nieuwenboer, and Jennifer Kish-Gephart

When considering how to orientate our chapter, we chose to take a decidedly positive tack to highlight what we know about ethically positive individual differences, emotions, cognitions, behaviours, and structures. We wanted to orientate our chapter in this way as a complement to much behavioural ethics research that has focused on understanding the causes and prevention of unethical behaviour in the workplace, such as lying, stealing, and cheating. Extant research has also emphasised negative emotions such as guilt and shame, negative cognitive processes such as moral licensing (Merritt et al., 2010) and negative individual differences such as Machiavellianism and (external) locus of control (Nelson & Gilbertson, 1991; Treviño & Youngblood, 1990). Further, as we noted in our 2014 behavioural ethics literature review (Treviño et al., 2014a), beyond the negative, prior research has focused on “routine ethical behaviour that meets the minimum moral standards of society” (e.g., following rules) rather than more positive extra-role behaviours such as voice. Therefore, rather than focus on either the neutral or the negative as much prior research has done, in this chapter we aim to emphasise more positive concepts in behavioural ethics— individual differences such as moral attentiveness and moral efficacy, cognitive factors such as ethical frames and cognitive resources, moral emotions such as compassion and moral elevation, extraordinary behaviours such as ethical leadership and ethical voice, and ethical infrastructure elements such as ethical climate and culture (see Figure 10.1). In that way, we wish to align this review with positive organisational scholarship as it relates to behavioural ethics in organisations and hope to spur more positively orientated research in the future. The only previous attempt to explicitly link positive psychology to business ethics that we could find was a nearly twenty-year-old edited volume by Giacalone and colleagues (2005) that put forward some interesting ideas but that appears to have spawned little empirical research. So, in the discussion we propose consideration of even more positive research that would help us to understand what might contribute to ethically positive behaviours in organisations (i.e., flourishing, resilience, and/or wisdom). Having stated our mission to orientate our review in a positive direction, we want to note that this goal was sometimes difficult to accomplish. Therefore, readers will find, in some sections, references to “less negative” or “less unethical” behaviours as outcomes rather than the hoped-for references to the positives we were seeking. We also note that readers interested in a review that takes a broader perspective on behavioural ethics in organisations can turn to multiple existing literature reviews (e.g., De Cremer & Moore, 2020; Moore & Gino, 2013; Tenbrunsel & Chugh, 2015; Tenbrunsel & Smith-Crowe, 2008) in addition to the one we published in 2014 (Treviño et al., 2014a). We begin by focusing on topics that look inside the individual such as individual differences, cognitions, and emotions. We follow that by ethical actions such as ethical leadership, 129

130  Research handbook on organisational integrity

Figure 10.1

A positive behavioural ethics literature review

behavioural integrity, ethical voice, and courage. Finally, we consider organisational issues that influence individuals and groups such as ethical infrastructures.

INDIVIDUAL DIFFERENCES In this section, we review recent work on individual differences that may help contribute to our understanding of positive behaviours in organisations. Moral Attentiveness Introduced by Reynolds (2008), moral attentiveness can be defined as “the extent to which an individual chronically perceives and considers morality and moral elements in his or her experiences” (p. 1028). This “innate tendency to perceive issues as moral issues” (Reynolds & Miller, 2015, p. 114) is distinct from moral awareness (Rest, 1986) and moral sensitivity (Jordan, 2007), which focus on recognising the moral issues present in a specific event or one’s skill at recognising moral issues across moral events, respectively (Reynolds & Miller, 2015). Since our last review (Treviño et al., 2014a), organisational scholars have pointed to ethical leadership (Zhu et al., 2016), meaningful work (Dawson, 2018), and ethics education (Wurthmann, 2013) as predictors of moral attentiveness. Moral attentiveness has also been linked to moral imagination (Whitaker & Godwin, 2013) and moral awareness (Sturm, 2017). In a series of studies, Babaloa and colleagues (2022) found that group ethical voice was related to less abusive supervision through its effect on leaders’ moral attentiveness. Moral attentiveness has also been found to moderate the relationship between ethical climate and employees’ ethical behaviour (Al Halbusi et al., 2021); and the relationship between ethical leadership and follower unethical behaviour (Van Gils et al., 2015); such that employees who have higher levels of moral attentiveness will engage in more ethically positive behaviour. Despite this increased attention, much yet remains to be understood about this construct, including further consideration of its outcomes and boundary conditions (Reynolds & Miller, 2015).

A positive behavioural ethics perspective on organisational integrity  131 Humility-Honesty (H-H) In contrast to the widely known five-factor model of personality, the HEXACO model includes an additional factor, honesty-humility or H-H (Ashton et al., 2014). This personality dimension refers to “one’s tendency to cooperate with others even when one could be exploited by them” (Lee et al., 2019, p. 1536) and consists of four facets: sincerity, fairness, greed avoidance, and modesty (Ashton et al., 2014). Individuals with high levels of H-H are theorised to have a strong moral conscience (Marcus et al., 2007) and thus are more likely to engage in prosocial behaviours (Hilbig & Zettler, 2009). Support for this relationship has been borne out in empirical research, with the honesty-humility personality trait being linked to cooperative behaviour (e.g., Hilbig et al., 2012; Zettler et al., 2013; see Hilbig et al., 2013 for a meta-analysis), generosity (Exline & Hill, 2012), prosociality (e.g., Aghababaei et al., 2014; Zhao & Smillie, 2015), and willingness to apologise for transgressions (Dunlop et al., 2015). Research has also linked the H-H disposition to ethical leadership (e.g., De Vries, 2012; Sosik et al., 2019) and follower self-efficacy (Owens et al., 2019), as well as preferences for certain types of organisations (e.g., benevolent organisations, Lukacik & Bourdage, 2020) and leadership styles (e.g., charismatic leadership, Breevaart & De Vries, 2021). Despite consistent findings linking H-H to prosocial behaviour, a recent meta-analysis found only a weak significant correlation (.13) between H-H and organisational citizenship behaviours (OCBs include discretionary behaviours beyond task performance that help the organisation but that are not formally required by the job description or reward system and not punished if not performed; Organ, 1988) and a wide credibility interval, suggesting the potential for moderating factors and future research opportunities (Lee et al., 2019). Moreover, the proliferation of new constructs related to humility, such as humble leadership (see Kelemen et al., 2022 for a review), suggests opportunities for construct clarity and exploration of its nomological network of related constructs. Moral Efficacy Drawing primarily on Bandura‘s (1997) theorising, organisational scholars have suggested that a critical component of motivating ethical action is individuals’ “confidence in their ability to behave ethically when faced with a moral challenge” (Mitchell & Palmer, 2010, p. 90). This has been referred to as ethical (Mitchell & Palmer, 2010) or moral efficacy (Hannah et al., 2011a), and can be defined as an “individual’s belief in his/her capabilities to organize and mobilize the motivation, cognitive resources, means, and courses of action needed to attain moral performance” (Hannah et al., 2011a, p. 675).1 Much of this work has focused on the role of moral efficacy in leadership and followership. For example, ethical leadership has been linked to followers’ ethical voice and OCBs via the mediating mechanism of moral efficacy (e.g., Kim & Vandenberghe, 2020; Lee et al., 2019). In a recent study, Owens and colleagues (2019) drew on social-cognitive theory (Bandura, 1986) to suggest that leader moral humility will increase followers’ moral efficacy through leader role modelling, expectations, and verbal persuasion. Across two studies, the authors found support for their moderated-mediation model, ultimately linking leader moral humility and followers’ moral efficacy to increased follower ethical behaviour. Similarly, Wang and colleagues (2018) found evidence that moral efficacy helps to explain the trickle-down effect

132  Research handbook on organisational integrity of high-level managers on middle-level managers. In a study looking at the broader ethical context in organisations, collective ethical efficacy and collective moral emotions strengthened the relationship between ethical climate and ethical behaviour (Arnaud & Schminke, 2012). Additional work is necessary to fully understand the effect of moral efficacy on positive workplace outcomes. Moreover, earlier work has led the way in considering interventions aimed at improving individuals’ ethical or moral efficacy, including inclusion of an ethical decision-making course in business (May et al., 2014) and use of graphic novels (Fischbach, 2015). To the extent that moral efficacy is beneficial in the workplace, future organisational scholarship should further investigate when and how it can be enhanced. Moral Conation Introduced by Hannah and colleagues (2011a), moral conation represents “the capacity to generate responsibility and motivation to take moral action in the face of adversity and persevere through challenges” (p. 644). According to the authors, moral conation—consisting of three components: moral courage, moral efficacy (see above), and moral ownership—is necessary for ethical decision-making. While conceptualised by the authors as an individual difference, moral conation can also be developed via social learning, training, and ethical role models. Consistent with our conclusions in our prior review, little additional work has focused on moral conation overall (see Pohling et al., 2016 for an exception). Instead, scholars have tended to focus on one or more of the three components. For example, Liao and colleagues (2018) focused on how leaders respond after engaging in abusive behaviours. Across two field studies using experience sampling methodology (ESM), the authors found support for their moderated-mediation model, such that leaders perceived loss of moral credits and guilt after they engaged in abusive supervision, which motivated reparative actions when the leader was morally courageous. In another study, Ogunfowora and colleagues (2021) found that employee moral ownership—“a sense of responsibility over one’s ethical conduct and those of one’s social group” (p. 484)—mediated the relationship between a leader’s ethical role modelling and an employee’s morally courageous behaviours. Moral Identity While the concept of moral identity was originally introduced in the 1980s by Blasi (1984), the most well-known approach to moral identity in the behavioural ethics literature is that of Aquino and Reed (2002), who define moral identity as “a self-conception organized around a set of moral traits” (p. 1424), or “a network of moral trait associations that collectively define a person’s moral character” (Boegershausen et al., 2015, p. 162). Moral identity has long been promoted as one of the most important predictors of ethical behaviour (Lefebvre & Krettenauer, 2019). According to Hertz and Krettenauer (2016), most research on moral identity (65.3 per cent of the studies included in their meta-analysis) uses the Self-Importance of Moral Identity Questionnaire developed by Aquino and Reed (2002). It includes two dimensions—internalisation and symbolisation, the former being a private dimension, and the latter a public one (Aquino & Reed, 2002; Boegershausen et al., 2015). The internalisation dimension refers to the extent to which a person believes that moral traits are an essential part of their self-concept (Aquino & Reed, 2002). The symbolisation dimension refers to

A positive behavioural ethics perspective on organisational integrity  133 the importance that a person places on affirming one’s moral self by exhibiting it in public. Research finds, though, that the internalisation dimension is the more reliable predictor, and that it predicts a whole host of ethics-related outcomes. The meta-analysis by Boegershausen and colleagues (2015) finds that moral identity also influences volunteering (both the intention to and the act itself). Higher moral identity internalisers also have a wider circle of moral regard (i.e., they feel more obliged to show moral concern for distant others), which increases their giving of time, and to some extent money. They are also less likely to engage in antisocial or unfair acts against others. Furthermore, high internalisers are more likely to engage in compensatory moral behaviour to make up for previous unethical behaviour as well as to combat threats to their moral identities. They appear to have a greater stock of moral resources to help restrain themselves from their desires to act selfishly or unethically as well, even when their self-control is depleted. Importantly, the meta-analysis by Hertz and Krettenauer (2016), which included 111 studies from a broad range of academic fields, found that while moral identity positively predicted moral behaviour in people from Western countries, the effect of moral identity is not much stronger than that of moral judgment or moral emotions. These authors therefore encourage researchers to use a broader conceptual framework that includes situational and personological factors beyond just moral identity to study how moral action comes about. Another meta-analysis that drew on 57 independent studies (Lefebvre & Krettenauer, 2019) supported the idea that there is a robust empirical connection between moral identity and moral emotions. Specifically, moral identity is apt to amplify emotions such as shame, guilt, pride and empathy, though this relationship is not as strong for the more negatively charged other-evaluative emotions such as moral outrage or disgust. On the whole, then, moral identity appears to play a multifaceted role in moral functioning, having an impact on moral behaviour, but an even greater impact on moral emotions, especially other-regarding ones (Lefebvre & Krettenauer, 2019). Studying the influence of moral identity on moral behaviour by itself, without including factors such as moral emotions, might therefore underestimate the role that moral identity plays in determining moral behaviour. Finally, a more recent meta-analysis focuses on the antecedents of moral identity (Xu et al., working paper). These authors find that agreeableness, extraversion, conscientiousness, openness, moral personality, honesty-humility, integrity, guilt proneness, shame proneness, and proactive personality were all positively and significantly related to moral identity, while neuroticism was negatively related. No relationship was found with Machiavellianism, narcissism, trait aggression or social desirability. Ethical leadership, servant leadership, authentic leadership, transformational leadership, and transactional leadership also had positive significant relationships with moral identity. The relationships between leader narcissism and abusive supervision and moral identity were, however, nonsignificant. Ethical climate on the other hand was positively and significantly related to moral identity. Finally, this meta-analysis found that gender had a positive and significant relationship with moral identity, with women more likely to express a moral self-concept. The meta-analyses find inconsistent results regarding the effect that a collectivistic versus individualistic country culture can have on moral identity. That is, Lefebvre and Krettenauer (2019) did not find a culture effect, but Hertz and Krettenauer (2016) and Xu and colleagues (working paper) did. Specifically, Hertz and Krettenauer (2016) found that studies conducted in more collectivistic cultures had lower effect sizes than studies conducted in individualistic cultures. Xu and colleagues (working paper), found that narcissism and leader narcissism had

134  Research handbook on organisational integrity a stronger relationship with follower moral identity in collectivistic cultures than they did in individualistic countries. Conversely, education and gender had a stronger relationship with moral identity in individualistic cultures than they did in collectivistic cultures. Clearly, more work will be needed to sort out these differences and the theoretical reasons for them. In all, research on moral identity is thriving and it remains an important predictor of ethical behaviour. We encourage authors to consider moral identity to be just one of various antecedents of moral behaviour and the inclusion of moral emotions should be considered as a motivating factor to help translate intent into action.

INDIVIDUALS AND COGNITION Much behavioural ethics research has focused on cognition, or on how people “think” about ethics at work. In this section, we review recent research on decision frames and cognitive resource depletion and replenishment. Decision Frames Decision frames are “the mental narratives that help shape meaning and understanding in daily events” (Rees et al., 2022, p. 430). Within an ethics context they are important for helping individuals to “see the ethics” in a situation—or not (Rees et al., 2022, p. 431). Tenbrunsel and Messick (1999) proposed that ethical frames generally prioritise considerations about what is acceptable for a particular group or about adhering to some set of collective and agreed upon standards, while business frames are more orientated towards considering economic questions such as costs and benefits (Rees et al., 2022). Research finds that when people use business frames, they tend to engage in more unethical behaviour while ethical frames are associated with more ethical behaviour (Chen et al., 2020). Rees and colleagues (2022) set out to examine whether there are ways to mitigate the negative effect of business framing on misrepresentation in addition to examining what might discourage the more positive effects of ethical frames. They found that when people in an ethical frame are encouraged to think in terms of cost-benefit analyses, they engage in more misrepresentation. But, importantly, when people in a business frame are prompted to think about others (and not just themselves), they are more honest. Rees and colleagues (2022) also examined construal level, which refers to the level at which information is represented. This can be very abstract (a higher level of construal) and is associated more with an ethical frame. But it can also be very concrete, where people’s focus is more on details that are useful for immediate goal attainment, and not on values or identity. This is a lower level of construal that is related more to a business than an ethical frame. The authors found that when issues are presented at a high level of construal (versus a low level), those who use a business frame engage in less misrepresentation (than those in the low-level construal condition). These are important findings because the use of business frames seems quite prevalent in companies, and it can be challenging to get people to consistently focus on the ethical aspects of situations. Future research that wishes to advance a positive perspective should focus on how to shift people in business settings from business frames to ethical frames. Using ethical frames in a group decision context can also persuade others in the group to engage in more ethical behaviour. For instance, Chen and colleagues’ (2020) work on ethical

A positive behavioural ethics perspective on organisational integrity  135 voice (reviewed under ethical voice below), showed that ethical champions’ use of ethical frames increased group members’ moral awareness and reduced team moral disengagement, which resulted in more ethical team decisions. Desai and Kouchaki’s (2017) work examined a similar idea of trying to increase others’ concern for ethics by activating the concept of morality, specifically by focusing on how subordinates can discourage their superiors from giving them unethical directives. Anecdotally, we certainly know about situations where managers pressure subordinates to engage in unethical acts by using the reward and punishment system. For example, in the Wells Fargo scandal, evidence suggests that some managers pressured subordinates to open fraudulent customer accounts. Desai and Kouchaki (2017) focused on whether workers can use moral symbols to increase moral awareness and thereby discourage such behaviour. Moral symbols might be words, images or even actual physical objects that carry moral meaning—such as quotations that exhort people to act ethically, pictures of people who are “moral exemplars,” or religious objects, among others. The authors theorised and found that by displaying such symbols at work, people can increase others’ moral awareness. Moral awareness refers to the recognition that a situation has “moral content and legitimately can be considered from a moral point of view” (Reynolds, 2006, p. 233), an important first step in ethical decision-making. Increased moral awareness leads to more ethical and less unethical behaviour. Desai and Kouchaki (2017) also found that the display of moral symbols leads to fewer unethical directives being given to those who are displaying such symbols in conditions where unethical gains could be had. Importantly, their work also suggested that this decrease is due to those individuals being seen as having higher moral character. Hardin and colleagues (2020) built on this idea of using symbols or environmental cues to reduce people’s propensity for unethical conduct. In their case, they examined and found through one field study and three experiments, that the presence of photographs of close others reduces people’s unethical behaviour (specifically, financial transgressions). They also found that this effect is driven by a decrease in the salience of the economic schema in people’s minds, which resembles the idea of the business frame that was discussed above. Thus, much research takes this “ethical” versus “business” frame perspective, and it generally finds that cuing, priming or simply thinking in ethics terms is associated with more ethical behaviour. This therefore seems like an extraordinary—and relatively cost-effective—way for organisations to encourage more employee ethical behaviour. We encourage future research to dive deeper into what symbols or cues are more or less effective and who can best employ them to ensure more ethical behaviour in organisations. We wonder, for example, whether in organisations that have experienced scandals, cues or symbols that commemorate those scandals (in a moral way, perhaps learning-orientated way) can help moral awareness and encourage more ethical behaviour. We also wonder whether the effects of such symbols or cues wear off over time or can be sustained. And, if they can be sustained, how? Finding the answer to the latter question requires longitudinal research, a methodological approach that has rarely been used in the behavioural ethics literature but is needed. Cognitive Resource Depletion and Replenishment Empirical evidence is accumulating about how cognitive resource depletion leads to an increase in the likelihood of engaging in unethical behaviour (cf. Barnes et al., 2011; Kouchaki & Smith, 2014; Welsh & Ordóñez, 2014). Self-regulatory resources are thought to aid in self-control. So, an important question is: how can self-regulatory resources be protected

136  Research handbook on organisational integrity from depletion, or even be replenished? Liang and colleagues (2018) examined whether mindfulness, considered to be part of the self-control process, can be used to curb aggression. Mindfulness is defined as “a state of consciousness that is characterized by present-moment awareness and nonjudgmental acceptance of moment-to-moment experiences” (Liang et al., 2018, p. 283). A mindfulness technique can be used to enhance the self-regulation of behaviour. Previous studies have shown that mindful individuals are less likely to engage in abusive supervision or retaliate when provoked. But Liang and colleagues (2018) argued that it’s not clear what mindfulness is exactly, how it works, or why it is beneficial to self-control. In the end, the authors found that mindful awareness does play a critical role in regulating aggression, and that it does so by reducing the degree to which the person relies on or uses maladaptive emotional regulation. Thus, giving undivided attention to “moment-to-moment experiences, emotions, and desires without preoccupation with past or future events (Roemer & Orsillo, 2006)” (Liang et al., 2018, p. 283) appears to be helpful in maintaining self-control and not losing the self-regulatory capacity needed to ensure responsible behaviour. While Liang and colleagues’ (2018) work focuses on reducing a very specific form of unethical behaviour (aggression), other work has focused on how mindfulness can increase a specific form of ethical behaviour, specifically prosocial behaviour. That is, Hafenbrack and colleagues (Hafenbrack et al., 2020) examined the influence of two different types of mindfulness practices (focused breathing and loving kindness meditation) on different types of prosocial behaviour (e.g., helping behaviour, financial generosity, and compassionate responding to show support for others). These authors found that state mindfulness indeed enhanced prosocial behaviour, and that this effect was mediated by increased empathy and perspective taking. Future work should examine whether mindful awareness can also increase other types of ethical behaviour beyond prosocial behaviour and decrease other forms of unethical behaviour besides aggression. Further, if we consider how self-control resources can be replenished, we can look to a chapter by Gailliot and Baumeister (2005) who report on previous research findings that show that these resources can be replenished with rest and with positive affect. This suggests that ethics in organisations can benefit if employees are not overly stressed and are well rested and feeling positive about their work and organisation.

INDIVIDUALS AND DISCRETE EMOTIONS In our 2014 review (Treviño et al., 2014a), we noted that few studies within behavioural ethics had explicitly considered discrete emotions, with most of the newer work focused on envy, a negative emotion (e.g., Duffy et al., 2012). Here, we explicitly consider positive discrete emotions, including compassion, empathy, gratitude, forgiveness, and moral elevation. As we describe below, much of the work on positive discrete emotions has been conducted outside of organisation studies (e.g., in psychology) and even less work is specific to the field of behavioural ethics. Still, we provide a brief description of each discrete emotion, noting findings relevant to behavioural ethics scholars, with the hope of encouraging future work in this area. Compassion According to a review by Dutton and colleagues (2014), “compassion is a normal and pervasive way of interrelating at work (and beyond) and thus central rather than peripheral to

A positive behavioural ethics perspective on organisational integrity  137 understanding human experience” (p. 278). The authors conceptualised compassion as an interpersonal process, involving two actors (a sufferer and a focal actor), and point to the many benefits of experiencing compassion at work, including reduced anxiety, increased organisational commitment, a sense of dignity (from being valued), a more positive outlook, prosocial behaviour, and better relationships (Dutton et al., 2014). Since their review, research related to behavioural ethics suggests that ethical climate may elicit compassion (Zoghbi-Manrique-de-Lara & Guerra-Baez, 2016) and that compassion mediates the relationship between perceptions of an organisation’s corporate social responsibility (CSR) activities and employee creativity (Hur et al., 2018). In a recent study, Wee and Fehr (2021) found that a team’s compassion behaviour reduced the negative impact of the COVID pandemic on employees’ suffering and increased their willingness to engage in voice behaviour. Recent work has also considered self-compassion, a form of self-directed (versus other-directed) compassion (see Dodson & Heng, 2022 for a review). In an experience sampling study, for example, Jennings and colleagues (2023) found that having a self-compassionate mindset (characterised by “kindness, gentleness, and care toward oneself as an employee”) reduced cognitive depletion, increased self-esteem, and improved daily resilience and work engagement (p. 1). Schabram and Heng (2022) suggest that the type of compassion (self-directed or other-directed) may be more or less effective depending on the type of burnout an employee is experiencing (e.g., cynicism may be reduced with other-directed compassion while exhaustion may be helped with self-directed compassion). Empathy Empathy has been the subject of study for philosophers and scientists across disciplines for more than a century (Clark et al., 2019). It arises when “the observation or imagination of affective states in another induces shared states in the observer” (Bernhardt & Singer, 2012, p. 3). For example, research in neuroscience demonstrates that when observing a friend experiencing pain (e.g., via an electric shock), a subject’s brain response is similar to directly experiencing pain oneself; and this finding has been reproduced with vicarious experiences of anxiety, disgust, and social exclusion (see Bernhardt & Singer, 2012 for a review). Such experiences can motivate adaptive responses to the vicariously experienced emotions, including engaging in behaviours intended to help others (Klimecki & Singer, 2012). In this way, empathy represents “feeling as” another person rather than “feeling for the other” (Hein & Singer, 2008, p. 157; italics original). In addition, state empathy involves both cognitive and affective components: state affective empathy captures “feeling the same state as another person” (p. 167) while state cognitive empathy refers to the “tendency to understand … others’ internal states” (Clark et al., 2019, p. 168). Within the field of organisation studies, empathy has been linked to a variety of positive behaviours at work. According to a recent review by Clark and colleagues (2019), extant research suggests that empathy is positively related to organisational citizenship behaviours (OCBs) and helping behaviours (e.g., Joireman et al., 2006; Kamdar et al., 2006; Lindsey et al., 2015). Similarly, in a meta-analysis of 304 independent samples, perspective taking and empathetic concern were found to be positively related to supportive behaviours towards others (e.g., helping, sharing information or resources, cooperating) (Longmire & Harrison, 2018). Other studies have linked empathy to positive interpersonal experiences in the workplace, including higher quality communication between peers (e.g., Patient & Skarlicki, 2010)

138  Research handbook on organisational integrity and positive perceptions of leaders (e.g., leaders’ likeability, Meinecke & Kauffeld, 2019). While the aforementioned evidence suggests that empathy has many positive benefits for employees and organisations, scholars have noted the conceptual confusion around empathy and called for clarity and future research in this area (see Clark et al., 2019 and Cuff et al., 2016 for reviews). Clark and colleagues (2019), for example, concluded that in many studies, scholars either failed to provide a definition or failed to consider empathy’s multidimensional nature (e.g., state vs. trait, cognitive and affective components). We encourage scholars interested in examining the positive impacts of empathy to carefully consider how they define and operationalise this construct. Furthermore, additional research is warranted to understand the boundary conditions around the positive effects of empathy (e.g., see Longmire & Harrison, 2018). Lastly, insofar as empathy motivates positive outcomes, scholars might consider possible interventions within organisations and business schools (e.g., see Baker, 2017). Gratitude Gratitude represents a moral emotion (McCullough et al., 2001) and can be defined as “a feeling of appreciation in response to an experience that is beneficial to, but not attributable to, the self” (Fehr et al., 2017, p. 363). Whereas empathy is triggered in response to the needs or suffering of another person, gratitude “operates typically when people are the recipient of prosocial behavior” (McCullough et al., 2001, p. 252). Although gratitude has been studied extensively in psychology, it has received less attention in the organisation sciences (Fehr et al., 2017; Locklear et al., 2022). This is surprising given that gratitude has been linked to a host of positive outcomes, including improved well-being, higher life and job satisfaction, reduced burnout, and increased prosocial behaviours (see Greenbaum et al., 2020 and Locklear et al., 2022 for reviews; Ma et al., 2017). Within organisation studies, recent work has identified the benefits of gratitude for individuals and teams. For example, engaging in daily gratitude journaling reduced negative behaviours, such as gossiping and incivility (Locklear et al., 2022) while state mindfulness was found to be related to higher levels of gratitude and concomitant helping behaviour at work (Sawyer et al., 2022). At the team level, higher levels of gratitude within teams were linked to team creativity via greater information sharing and integration (Pillay et al., 2020), and teams with a leader characterised by high trait gratitude were found to be more innovative (Li et al., 2022). More specific to behavioural ethics, gratitude has been linked to a higher sense of responsibility towards employees and societal issues (Andersson et al., 2007). Forgiveness Forgiveness can be defined as an “intraindividual process involving a prosocial change toward a perceived transgressor” (Brady et al., 2022, p. 2). As such, the construct represents a within-individual phenomenon that excludes intention or behaviour (such as reconciliation behaviours). Within organisation studies, research on forgiveness was scant before it began to receive increased attention in the early 2010s (see Fehr & Gelfand, 2019 for a review). Extant work within and outside of organisation sciences points to the potential for forgiveness to yield positive outcomes for employees, including better physical and mental health; lower absenteeism and turnover; improved job satisfaction and organisational commitment; and higher quality work relationships (Brady et al., 2022; Palanski, 2012).

A positive behavioural ethics perspective on organisational integrity  139 Forgiveness is influenced by characteristics of the offender as well as characteristics of the offense, including status of the transgressor and severity of the offense (e.g., Aquino et al., 2006; Beattie & Griffin, 2014; Berndsen et al., 2018; Booth et al., 2018; Bradfield & Aquino, 1999). For example, in a recent study, Van Houwelingen and colleagues (2022) found that organisational leaders were more likely to forgive (versus punish) an offending follower when the infraction was viewed as unintentional (versus intentional). This relationship was strengthened in the case of high moral identity centrality presumably because a leader with high moral identity centrality is more motivated to restore moral order. Other recent work has considered the effect of various forms of amends on forgiveness, including apologies (e.g., Zheng et al., 2016) and restitution (e.g., DiFonzo et al., 2020; Grover et al., 2019; Haesevoets et al., 2018). To the extent that forgiveness is a valuable response in organisations, a recent study found that engaging in an expressive writing intervention (e.g., writing about an unfair workplace situation) can positively influence forgiveness (Barclay & Saldanha, 2016). At the organisational level, early work suggests that a forgiveness climate, “shared perception that empathic, benevolent responses to conflict from victims and offenders are rewarded, supported, and expected in the organisation” (Fehr & Gelfand, 2012, p. 665) increases the likelihood of employee forgiveness (e.g., Cox, 2011), though little empirical work exists in this area (Fehr & Gelfand, 2019). Moral Elevation Introduced by Haidt (2000), moral elevation represents a generally positive emotion that is elicited by witnessing “unexpected acts of human goodness, kindness, and compassion” (Haidt, 2000, p. 1) or “moral beauty” (Pohling & Diessner, 2016, p. 413). He theorised that individuals who witnessed moral excellence will be motivated to become better people and to help others (Haidt, 2000). Empirical work outside of organisation studies supports a relationship between elevation and prosocial behaviours (see Pohling & Diessner, 2016; Thomson & Siegel, 2017 for reviews), which is “at least partially explained by feelings of inspiration and upliftment, more favorable views toward others and humanity in general, and a desire to be a better person” (Thomson & Siegel, 2017, p. 634). Within organisation studies, few published studies exist on this topic (for exceptions, see Aquino et al., 2011; Chen & Treviño, 2022; Deng et al., 2022). For example, across three studies, Chen and Treviño (2022) found evidence that witnessing ethical voice by a coworker elicited moral elevation and the willingness to help that coworker. In another study, Deng and colleagues (2022) found that moral elevation partially mediated the relationship between ethical leadership and peer monitoring. Finally, extant work suggests that organisations can motivate a perceiver’s sense of elevation and charitable behaviour via the organisation’s CSR initiatives (e.g., Romani & Grappi, 2014; Romani et al., 2016).

INDIVIDUALS AND ETHICAL ACTION Positive behavioural ethics also encompasses individual ethical behaviour or action in the organisation. This ranges from leadership styles such as ethical leadership, behavioural integrity or servant leadership to ethical voice and other courageous action. We review that work here.

140  Research handbook on organisational integrity Ethical Leadership Treviño and colleagues developed the ethical leadership construct in the early 2000s (Treviño et al., 2000, 2003). Based upon qualitative research—interviews with senior executives and ethics and compliance officers—the authors surfaced a “moral person” and a “moral manager” dimension of ethical leadership, which suggested that leaders who are perceived by their subordinates to be ethical leaders often have ethical personal characteristics such as caring, fairness, trustworthiness, and principled decision-making. These leaders also make ethics a part of their leadership agenda by clearly role modelling ethical conduct, explicitly stating their ethical conduct standards, and holding everyone accountable to those standards. Brown and colleagues (2005) subsequently defined ethical leadership as “the demonstration of personal actions and interpersonal relationships and the promotion of such conduct to followers through two-way communication, reinforcement, and decision making” (p. 120) and developed a reliable measure. Since 2005, many ethical leadership empirical studies have been conducted. Multiple conceptual reviews (e.g., Brown & Treviño, 2006; Brown & Mitchell, 2010) and meta-analyses—discussed below—on ethical leadership have been published, which have helped us to understand the power of ethical leadership to influence followers’ ethics-related attitudes and behaviours. In what follows, we will focus on selected meta-analyses because they are best able to tell us how the ethical leadership construct has fared empirically. Ng and Feldman’s (2015) meta-analysis evaluated ethical leadership‘s ability to explain follower job attitudes, leader evaluations, as well as task performance, organisational citizenship behaviours (OCBs), and employee deviance. Robinson and Bennett (1995) defined employee deviance as “voluntary behaviour that violates significant organisational norms and … threatens the well-being of an organisation, its members, or both” (p. 556). The meta-analysis found that trust in the leader was a significant mediator of the relationships between ethical leadership and outcomes. In this meta-analysis, ethical leadership explained variance in outcomes as expected (e.g., improved attitudes, increased OCBs, reduced deviance) even when leadership styles such as transformational leadership and destructive leadership were controlled. The authors proposed that the incremental validity of ethical leadership could be strengthened by focusing on the “moral manager” aspect because the ethical leadership construct is unique in focusing on this type of ethical influence on followers—not just being an ethical person but making ethics an explicit part of the leadership agenda. Peng and Kim’s (2020) meta-analysis focused on understanding the mechanisms that explain the relationships between ethical leadership and outcomes. They found that three mediators (leader-member exchange, ethical culture, and identification with the organisation) helped to explain the positive relationship between ethical leadership and organisational citizenship behaviour. The takeaway from this meta-analysis was that ethical leaders influence followers by creating social exchange relationships of trust, by creating an ethical culture and by increasing followers’ organisational identification. Finally, a meta-analysis by Hoch and colleagues (2018) explored the effects of ethical leadership on outcomes while also investigating whether ethical leadership explains variance in these outcomes when compared with three other positive leadership styles: transformational leadership, servant leadership, and authentic leadership. When examined on its own, ethical leadership was found to be related in expected ways with a large number of attitudinal (e.g., job satisfaction, organisational commitment, trust in manager) and behavioural (OCBs, reduced employee deviance) outcomes. But when asked to explain a significant amount of additional

A positive behavioural ethics perspective on organisational integrity  141 variance beyond transformational leadership, it did so only for increasing job satisfaction and reducing employee deviance. This finding is different from the Ng and Feldman (2015) findings likely because Hoch and colleagues used a different analytic approach (i.e., relative weights analysis) which may be more appropriate when predictors are highly correlated. Thus, we can conclude that ethical leadership is particularly useful when researchers are studying leadership effects on employee deviance and job satisfaction, two very important outcomes. In addition to these meta-analyses that focused mostly on consequences of ethical leadership, the antecedents of ethical leadership have also been studied, although not meta-analysed. In their conceptual review of the literature, Ko and colleagues (2017) reported that of the Big 5 personality characteristics, leader agreeableness and conscientiousness were likely the most strongly associated with perceived ethical leadership. Further, moral identity (both the internalisation and symbolisation dimensions, Aquino & Reed, 2002) has been positively associated, and moral disengagement (Bandura, 1999) has been negatively associated, with ethical leadership. For situational antecedents, they found evidence for the effect of role models including senior leaders in a trickle-down effect. Beyond what was covered in the review, there is evidence that a leader who is comparatively higher in cognitive moral development than a follower, is more likely to be perceived to be an ethical leader by that follower (Jordan et al., 2013). Behavioural Integrity Around the same time that ethical leadership was introduced, Simons (2002) introduced behavioural integrity, a construct that is related to, though narrower than, ethical leadership. Behavioural integrity is defined as “an observer’s perception of the extent to which an actor’s words and actions do or do not align,” essentially answering the question “do they keep their promises?” (Simons et al., 2022, p. 366). While it is a more general construct that can apply beyond leaders, behavioural integrity’s effects have been studied mostly in relation to the consequences of employees’ perceptions of their leaders. Simons and colleagues’ (2015) meta-analysis of 35 samples found strong support for the originally proposed relationships between perceived behavioural integrity and trust, affective commitment, employee citizenship behaviour as well as in-role performance. Trust had been proposed to be the mediating mechanism between behavioural integrity and outcomes but was found to only partially mediate these relationships. In their 2022 conceptual review, Simons and colleagues concluded that behavioural integrity is associated with a variety of positive outcomes including citizenship, task performance, and reduced turnover. More recently, it has also been associated with voice and creativity, and the cognitive dimension of trust (McAllister, 1995) is now thought to be the likely mediator. It would be interesting to learn whether perceptions of the leader’s behavioural integrity are enough to reduce employee unethical conduct as well. Servant Leadership Servant leadership has had many definitions. Eva and colleagues (2019) reviewed the literature and offered the following definition: “Servant leadership is an (1) other-oriented approach to leadership (2) manifested through one-on-one prioritizing of follower individual needs and interests, (3) and outward reorienting of their concern for self towards concern for others within the organization and the larger community” (p. 114). The primary focus of the servant leader

142  Research handbook on organisational integrity is care for others over the self. The research review reported many study results showing that servant leadership is associated with a host of positive outcomes including positive employee attitudes (including towards the leader and organisation) and psychological well-being (e.g., flourishing). It also found that servant leadership has been negatively associated with ego depletion, cynicism, and turnover intentions. Servant leadership has also been associated with higher team-level psychological safety, innovation, organisational citizenship behaviour, voice and reduced employee deviance. Mediators have included such constructs as trust and team psychological safety. Moderators of these relationships have also included trust in the supervisor and a caring ethical climate. Hoch and colleagues’ (2018) meta-analysis found that (relative to transformational leadership) ethical leadership was consequential in explaining reduced deviance while servant leadership was consequential in explaining increased OCBs. Readers are encouraged to read the reviews if they are interested in learning more. Ethical Voice In our consideration of the ethical voice literature, we relied heavily on a recent review of ethical voice and its consequences by Chen and Treviño (in press). In their review, they included related literatures from outside behavioural ethics such as the research on moral rebels (e.g., Monin et al., 2008). The authors began by differentiating ethical voice from the more traditional voice literature. Although voice was originally defined broadly as prosocial behaviour that could include speaking up about ethical issues (Morrison, 2014), traditional voice studies have focused almost exclusively on employees speaking up to their supervisor about operational or efficiency issues in the interest of helping the organisation. By contrast, Chen and Treviño defined ethical voice as “employees communicating concerns about violations of societal ethical standards (e.g., honesty, fairness, care, respect) and/or suggestions about ethical standards, to people who might be able to effect changes (e.g., managers or co-workers).” Thus, ethical voice includes behaviours such as issue selling, moral objection, speaking up about ethical issues to co-workers or managers, and reporting ethical problems internally. A key difference between ethical voice and traditional voice, then, is the emphasis in ethical voice on speaking up about violations of societal ethical standards or the desire to advance societal ethical standards rather than a focus on what is good operationally for the organisation. Morrison (2022) further explained that ethical voice is likely to be perceived as more risky than traditional voice, and it should be studied separately if we are to better understand its unique antecedents and consequences. Traditional voice researchers have noted that silence is a notable problem and may be the default in organisations (see Detert & Edmondson, 2011; Kish-Gephart et al., 2009; Morrison, 2014). But the tendency towards silence is likely even more problematic with ethical voice because employees have long been known to suffer from “moral muteness” (Bird & Waters, 1989) and often perceive speaking up about ethical issues to be inappropriate or unwelcome, this despite the many calls in organisations to “speak up” or “if you see something, say something.” Yet, Chen and Treviño (in press) document a number of studies showing that ethical voice can also have positive consequences. These include reducing unethical behaviour, moving a group’s decision in an ethical direction, and increasing observer support for the voice and voicer (Chen et al., 2020; Czopp et al., 2006; Martinez et al., 2017). However, even with these positive outcomes, ethical voice observers may respond to ethical voice with negative attitudes towards the voicer because they may feel threatened by the ethical voice while simultaneously feeling elevated by it (i.e., admiring the

A positive behavioural ethics perspective on organisational integrity  143 voicer for doing it). This suggests the possibility of ambivalent responses to ethical voice that can result in paralysis or, alternatively, can spur divergent thinking. Additional research will be necessary to better understand these complexities. Regarding the antecedents of ethical voice, findings thus far have favoured mainly contextual antecedents. Ko and colleagues (2017), for instance, noted studies that have found a positive relationship between ethical leadership and increased ethical voice. In addition, Mayer and colleagues (2013) found that the ethical leadership effect on employees reporting ethical problems was enhanced when co-workers were also ethical. Ashford and colleagues (1998), in a study on issue selling, found that women’s willingness to raise gender equity issues depended, not on individual differences, but rather a supportive organisational context and a close relationship with those in a position to make decisions. More research is surely needed to understand the antecedents of ethical voice. For example, a number of individual differences that we know play a role in ethical behaviour, such as moral identity (Aquino & Reed, 2002), moral attentiveness (Reynolds, 2008), moral efficacy (Hannah et al., 2011a), and values (Schwartz, 1992) are likely to be ethical voice antecedent candidates. It is important to note that the related whistleblowing literature has a longstanding history (see Miceli et al., 2008 for a review). It has focused on speaking up within and/or outside the organisation about issues of concern to someone with the power to make change. So, most whistleblowing studies include those who report issues of ethical concern to outsiders such as journalists or the government, often after their efforts to address management internally have failed. Like Chen and Treviño (in press), and in accordance with recommendations from Jubb (1999), we constrain our focus here to ethical voice behaviour inside the organisation, meaning that we are excluding the majority of the whistleblowing literature. Although we see whistleblowing as positive ethical behaviour, the research that focuses on it emphasises predominantly negative outcomes such as retaliation. That may be because whistleblowing studies typically include both internal and external reporting, making it difficult to disentangle the results. It would be helpful if future researchers would make it easier to differentiate between internal voice and reporting to external audiences. Courage Courage overlaps with ethical voice in that it includes speaking truth to authority figures or to co-workers. However, it includes much more. In their review of the workplace courage literature, Detert and Bruno (2017) defined workplace courage as “a work domain-relevant act done for a worthy cause despite significant risks perceivable in the moment to the actor” (p. 594). They referred to workplace courage as an umbrella construct that includes a variety of types of behaviour and see it as a social construction. They delved particularly into the riskiness and worthiness parts of the definition. For example, according to the authors, much workplace courage risks one’s financial well-being, professional standing, and social acceptance rather than physical risk (although that is also possible in some work environments). Regarding the worthiness part of the definition, the authors do not restrict workplace courage to “morally” worthy acts because assessing worthiness is complex and, in the workplace, may require consideration of both hypernorms and local norms. Donaldson and Dunfee (1999) defined hypernorms as representing “norms sufficiently fundamental to serve as a source of evaluation and criticism of community-generated norms” (p. 50).

144  Research handbook on organisational integrity After reviewing work on courage more generally, Detert and Bruno (2017) noted that research on workplace courage remains rather scant. Some exceptions include research on the antecedents of workplace courage such as identity tensions (Koerner, 2014), training (e.g., Rachman, 2010), and felt responsibility and perceived autonomy (Schilpzand et al., 2015). In a study of courage’s consequences conducted in the U.S. military, Hannah and colleagues (2011b) found moral courage to be positively related to reducing unethical behaviour and increasing prosocial behaviour. Finally, Detert and Bruno (2017) concluded that “numerous antecedents and outcomes of courage have been proposed, but few could be said to have been demonstrated in valid and reliable ways across multiple studies” (p. 602). Thus, much more research is needed in this nascent research domain and Detert and Bruno (2017) outline a useful agenda to guide this future research.

ETHICAL INFRASTRUCTURE Ethical infrastructures (Tenbrunsel et al., 2003) consist of both formal and informal organisational elements or tools that can be used to manage ethical and legally compliant behaviour in the workplace. The primary constructs that have been studied are ethical climate and ethical culture. Ethical Climates Ethical climate is the oldest ethical infrastructure construct to have received attention in the literature. Victor and Cullen (1988) defined an ethical work climate as the “perception of what constitutes right behavior” that is shared by employees within an organisation or within a part of an organisation (Martin & Cullen, 2006, p. 177), and that therefore influences individuals’ ethical decision-making and behaviour. Building on an earlier meta-analysis (Martin & Cullen, 2006), a more recent meta-analysis by Newman and colleagues (2017) focused on the antecedents and outcomes of ethical climate dimensions, with outcomes receiving most attention. Relevant for our review are outcomes such as increased moral awareness, personal justice norms, ethical intentions, reduced (un-)ethical behaviour, and psychological states such as increased mindfulness and empathetic concern and reduced moral distress. More specifically, Newman and colleagues (2017) reported that benevolent and principled climates reduce employees’ intention to commit unethical acts and increase their moral awareness, whereas egoistic climates positively predict unethical intentions and reduce moral awareness. Newman and colleagues (2017) further reported that research has found that ethical climate dimensions like norms of empathetic concern, collective moral motivation, and collective moral character are negatively related to different forms of misconduct or deviance and positively related to ethical behaviour. Relatively little research has examined the relationship between ethical climates and psychological states. The little that does exist, however, has found that in climates that stress adherence to ethical norms, workers experience more mindfulness, and that rules and codes and efficiency climates lead to more empathetic concern and increased mindfulness. Rules and codes and social responsibility climates lead workers to be more understanding of others as well. Other outcomes of ethical climates are not immediately ethics relevant, including work attitudes, with research generally finding that caring climates are positively related to organi-

A positive behavioural ethics perspective on organisational integrity  145 sational commitment and job satisfaction, while instrumental climates are negatively related to job satisfaction and organisational commitment, yet positively related to turnover intentions. Some research reported by Newman and colleagues (2017) has also explored the relationship between ethical climates and employee performance, which generally finds a positive relationship between performance and ethical climates that emphasise adherence to rules and codes. Law and code and caring climates are also associated with more organisational citizenship behaviour. Based upon these meta-analytic results, we can say that ethical climates as defined by Victor and Cullen have a positive ethical impact on employees. According to Newman and colleagues (2017), less attention has been given to the antecedents of ethical climates. However, they include (ethical) leadership, an organisation’s human resource management practices, its justice climate, and the organisation’s industry or the type of organisation (family/non-family business, government entity or non-profits, public and private sector businesses). In a more recent study, Kuenzi and colleagues (2019) criticised previous approaches to ethical climate research and developed an alternative measure for ethical organisational climate. Specifically, Kuenzi and colleagues (2019) argued that Victor and Cullen’s (1988) climate measure captures individuals’ perceptions of the organisational principles that are used in ethical decision-making, and that this is not in line with how the organisational behaviour literature defines and operationalises climates. Instead, Kuenzi and colleagues (2019) proposed that climate research should focus on organisational practices, which are referred to as “actions or activities that are repeated and recognizable in organizations” (p. 47). Their measure of ethical organisational climate therefore includes perceptions of formal organisational systems or formal ethical infrastructure (Treviño, 1990; Treviño & Nelson, 2017), such as recruitment practices and reward and punishment practices. Importantly, their measure is designed to be a unit-level measure representing a unit-level construct—not an individual level one that measures psychological climate or the individual’s perception of the organisational environment. In their study, Kuenzi and colleagues (2019) found that ethical leadership is positively related to the organisation’s ethical climate, and that this results in less unethical behaviour, such that the ethical organisational climate mediates the relationship between ethical leadership and reduced unethical behaviour. Moreover, they found that collective moral identity (for which they developed a measure) moderates the relationship between ethical organisational climate and unethical behaviour, such that those collectives with higher moral identity pay more attention to the ethical organisational climate, resulting in even less unethical behaviours (measured as organisational deviance using Bennett and Robinson’s (2000) scale). Because this measure is so new, future research will need to investigate whether ethical organisational climate using the measure developed by Kuenzi and colleagues (2019) will have the same positive effects as found with the earlier measure. In all, the ethical climate literature is thriving and research has found many positive effects of ethical climate dimensions on employees’ ethical behaviour. Given their positive effects, we especially encourage future research to focus on the antecedents of ethical organisational climates, and perhaps on the role that managers and ethics and compliance officers can play in enhancing those climates.

146  Research handbook on organisational integrity Ethical Culture The voluminous literature on ethical climate notwithstanding, a recent review on ethical culture argued that ethical culture is a better predictor of (un)ethical outcomes in organisations and that more research on the topic is needed (Roy et al., forthcoming). Treviño (1990) introduced the ethical culture construct around the same time that Victor and Cullen introduced ethical climate. Since then, Treviño and colleagues (1998) studied how the two constructs (ethical climate and culture) were similar yet also different, finding that an ethical climate is more strongly related with (less) observed unethical behaviour in organisations without an ethical code, while culture was more strongly related in organisations with an ethical code. And Kish-Gephart and colleagues (2010) found that ethical climate—as measured by Victor and Cullen—was a better predictor of ethical choice. More recently, Kaptein (2011) introduced a more complex conceptualisation and multidimensional measure of ethical culture, which Roy and colleagues draw heavily upon in their review. Roy and colleagues (forthcoming) define ethical culture as “a subset of organisational culture, which reflects the shared values, norms, and beliefs about what constitutes appropriate behaviour shaping ethical or unethical decision-making in an organizational context” (p. 6). Citing Kaptein (2011), Roy and colleagues (forthcoming), explain the difference between ethical culture and ethical climate as follows: “climate refers to employees’ perceptions about what is the right thing to do in the organization, while ethical culture is procedural in that it relates to whether employees believe the conditions are in place within the organization to influence ethical behavior” (p. 9). Note that these definitions differ from those offered by others (discussed above), adding to the confusion that remains in the ethical climate/culture space. Conceptualised as virtues, Kaptein (2008) identified eight dimensions of ethical culture: clarity, congruency of management, congruency of supervisors, feasibility, supportability, transparency, discussability, and sanctionability. The following discussion of a review of research findings often focuses on only some of these dimensions. Therefore, we encourage interested readers to seek out the review by Roy and colleagues in order to better understand the findings. Roy and colleagues (forthcoming) review the research on ethical culture, finding research that supports antecedents of ethical culture, such as ethical or authentic leadership as well as employees’ awareness of the different components of an ethics programme (e.g., ethical training, codes of ethics, ethics hotline, ethical communication, incentives and rewards for ethical conduct). The literature reviewed by Roy and colleagues has also examined many positive outcomes of ethical culture, including positive work attitudes, employee motivation, engagement and well-being, as well as ethical decision-making and intentions and employee behaviours. One somewhat surprising outcome associated with ethical culture was enhanced innovation on both the organisational as well as workgroup levels, as well as organisational performance. In terms of employee outcomes, research reviewed by Roy and colleagues generally finds a positive effect of organisational ethical culture on ethical decision-making as well as ethical intentions (such as to report others’ unethical behaviour to managers or to use the ethics hotline). Ethical culture also appears to have a positive effect on employees’ job satisfaction, commitment, and trust in the organisation, and to positively influence employee motivation and work engagement. In terms of behaviour, ethical culture has been found to be positively related to behaviours such as organisational citizenship and (regular) voice. Some limited research has also examined ethical culture as a mediator. For example, ethical culture

A positive behavioural ethics perspective on organisational integrity  147 has been found to mediate the relationship between ethical leadership and follower ethical and voice behaviour, and the relationship between CSR practices and sustainable organisational performance. Roy and colleagues end with a lengthy discussion of directions for future research, which we encourage interested readers to look into. We might add, however, that significant confusion remains in the research around ethical environments or infrastructures (e.g., exactly what they are, how they are defined and measured, and what they should be called) that is problematic for our understanding. Additional research will be required to sort this out. Rules and Policies Rules and policies are key to the formal ethical infrastructure, and behavioural ethics scholars have long been interested in rule-breaking (and rule-following) behaviour. Derfler-Rozin and colleagues (2016) examined whether managers can use tools to mitigate rule breaking, specifically focusing on task variety. In a field study, the authors established that workers who have a higher daily variety of tasks engage in less rule breaking. In three lab studies, the authors also found that increased deliberative thinking (and less intuitive/automatic thinking) explains the relationship between task variety and rule breaking, such that those who have a greater variety of tasks engage in more deliberative thinking, and subsequently less rule breaking. According to the authors, deliberative thinking results in less rule-breaking behaviour because with automatic thinking people are more likely to act in their own immediate self-interest. Research has previously found that an increase in self-interestedness makes people less likely to see how their own behaviour negatively impacts others, and more likely to see their own choices, even unethical ones, as legitimate and fair. Thus, when managers design tasks with enough variety, their subordinates are less likely to lapse into self-serving behaviour and subsequent unethical behaviour. This is an interesting contrast to the recent research on cognitive resource depletion—where more deliberative thinking can arguably drain one’s cognitive resources because one remains more “cognitively alert” (Derfler-Rozin et al., 2016, p. 1362), and research has found that such depletion results in more unethical behaviour (e.g., Gino et al., 2011; Mead et al., 2009; Welsh & Ordóñez, 2014). Future research may want to investigate when deliberative thinking is desirable and replenishing and when it is draining. While behavioural ethics researchers have been interested in examining why people might break rules, it is interesting to note that less research exists on whether and how the rules or policies can be shaped in a way that encourages more ethical behaviour. Researchers seem to take the existence of rules or policies at face value, and do not consider whether different types of rules may affect employees differently. This is also an area in need of future research. One of the things that organisations do to ensure rule following is monitoring. Taking an agency-theory perspective, Burbano and Chiles (2022) examined the idea of monitoring in the context of (remote) gig work, i.e., a principal’s credible efforts to reduce the problem of information asymmetry by observing the worker as they engage in work, thus decreasing the opportunities for the agent to deceive the principal. Additionally, they examined the role of communicating organisational values in reducing misconduct. The idea here is that to the extent that employees share the organisation’s values, communicating those values should increase workers’ perceived value congruence and enhance workers’ person–organisation fit. This, according to the authors, should in turn be positively related to such outcomes as favourable work attitudes (e.g., higher job satisfaction, commitment to the organisation), and lower

148  Research handbook on organisational integrity turnover intentions, as well as increased citizenship behaviours and support for the organisation’s goals and objectives. Misconduct should therefore be less likely to occur in these workers. The values can be internal facing values such as expectations towards employees that they adhere to ethical norms or values like honesty, but they can also be external facing values such as CSR or environmental initiatives. While the authors found that these managerial practices do reduce misconduct when studied individually, when they were combined the threat of monitoring cancelled out any positive effect of values communication. The authors argued that is likely caused by an erosion of trust that is thought to happen as a consequence of monitoring, but that is needed to develop a sense of shared values. Related to monitoring are the sanctioning systems that organisations use not just to detect and punish misconduct, but also to communicate ethical norms or signal moral values (Chui & Grieder, 2020; Fehr & Fischbacher, 2004). Interestingly, sanctioning systems played a role in early work on ethical frames (cf. Tenbrunsel & Messick, 1999—whereby the presence of a sanctioning system put people in a business frame mindset while they more likely used an ethical frame when no such system was present). But the effectiveness of sanctioning systems in encouraging ethical behaviour has remained somewhat understudied ever since, this despite the fact that for many organisations it is an obvious go-to in their ethics management toolkit (Chui & Grieder, 2020). In their work, Chui and Grieder (2020) focused specifically on the detection characteristic of sanctioning systems, or, on the probability of getting caught when engaging in unethical behaviour. While some of their work focuses on more negative outcomes (e.g., the prevalence of unethical behaviour), Chui and Grieder (2020) also found that stronger sanctioning systems inspire third party observers to engage in more rule-supporting behaviour (e.g., to support those who report wrongdoing)—which these authors consider helping behaviours. And workers do so even if it comes at their own expense. Therefore, it seems that monitoring and control is an area with much room for future research. Specifically, the recognition and rewarding of ethical behaviour is understudied— whether or how that might result in more ethical behaviour.

DISCUSSION We are pleased to have chosen a more “positive” behavioural ethics path in this chapter, despite our felt need to sometimes include research that focused on more neutral (rule-following) or just less negative (reduced deviant or unethical) behaviours rather than the positive behaviours we preferred to discuss. Although reducing unethical behaviour is, admittedly, a “good” thing, we were hoping to be able to focus more on truly positive consequences that go beyond just reducing the negative. Nevertheless, our choice allowed us to search narrowly for material related to “ethics” and ethical processes and outcomes rather than just research related to reducing unethical behaviour or advancing routine behaviour. In the end, we were pleased by how much research was available to discuss. Had we written the more traditional review, these topics may have been buried among the many other topics that are more prominent in the behavioural ethics literature. So, our approach allowed us to discover what the literature currently offers but, perhaps just as importantly, what it lacks, opening the door to future research. Along the way, we recognised that the current literature often treats reducing unethical conduct or deviance as the “good” or maybe even the “best” outcome. We think we (and organisations) can do better and behavioural ethics researchers can contribute to understanding

A positive behavioural ethics perspective on organisational integrity  149 what that will take. Recognising that positive organisational psychology includes such topics as flourishing, wisdom, thriving, and resilience, we believe that many opportunities exist to contribute to a more positive behavioural ethics. We hope that future researchers will ask what it takes to create ethical flourishing, wisdom, thriving, and resilience in organisations. In earlier sections of the chapter, we identified multiple opportunities for future research. But we add a few here that did not get unique attention above. By proposing ideas for what’s possible, we hope to inspire more positive behavioural ethics research. One area that behavioural ethics researchers have become more interested in is the intersection between behavioural ethics and research on diversity, equity, and inclusion (DEI). There has been enough interest among behavioural ethics researchers to spawn a proposed Professional Development Workshop on this intersection at the 2023 annual Academy of Management meeting. Clearly, there is overlap between DEI topics and the topics related to fair treatment (of employees, customers, etc.) with dignity and respect, and without bias. Gen Z workers have been found to care a great deal about DEI, with 91 per cent reported to believe that everyone should be treated equally (Barnes & Noble College Insights, 2018). So, researchers and organisations should attend to how organisations can satisfy Gen Z workers who are thirsty for a more equitable workplace. Respect and diversity are often touted in organisations’ values statements but living up to these espoused values can pose challenges for managers and organisations. We suspect that employees who feel respected and valued as fully contributing members of the organisation are more likely to feel free to speak up, to be creative, and to grow both inside and outside the organisation. Research also tells us that ethical climates and cultures matter for reducing employees’ unethical choices (Kish-Gephart et al., 2010). Future research could also investigate the more positive questions of whether these cultures can create ethical behaviour such as ethical voice and, if so, how they do so. We wonder how new forms of work such as work from home and contingent work (e.g., independent contractors, gig workers who are not officially considered “employees”) will affect the development and sustenance of ethical culture (or climate) and the effect on employees. We also know little about whether and, if so, how different aspects of ethical infrastructure support ethics in the workplace, particularly leaders and employees going above and beyond to hold each other to the highest ethical standards. For example, today’s work organisations, especially the large ones, invest heavily in annual (or sometimes more frequent) ethics “training.” But we know very little about how much (if any) learning or growth actually occurs in these sessions. We know from research on cognitive moral development (Kohlberg, 1969) that adults can continue to grow in their ability to reason about ethical issues and that people in certain professions who face regular ethical dilemmas (e.g., medicine) are more likely to continue this growth than others. What would happen if organisations encouraged their employees to grow ethically and then re-orientated their programmes and trainings away from rote memorisation of policies and standard scenarios, to support ethical growth instead? We encourage researchers to do more to try to understand what kinds of experiences or training could contribute to ethical growth for employees. In a related vein, Chugh and Kern (2016) proposed that people can work towards narrowing the existing gap between the ethical beings they believe they are and the (less flattering) reality of their behaviour. They argue that this is more likely to occur for individuals who have a strong central moral identity (Aquino & Reed, 2002), those who recognise that the gap exists in the first place (what they refer to as psychological literacy—or what we propose might be referred to as ethical self-awareness) and, finally who believe that, with effort, they

150  Research handbook on organisational integrity can become more ethical (what the authors liken to having a growth mindset, Dweck, 2006). Chugh and Kern (2016) then propose that this ethical learning can be translated to more ethical behaviour by reducing the possibility of self-threat via psychological safety in the team (Edmondson, 1999) and an organisation that values learning and reduces the possibility of self-threat in its employees through its formal and informal systems (its infrastructure). That is a tall order because organisations also suffer from the gap between who they believe or say they are (i.e., their espoused values) and their actual behaviour. But organisations can also model learning and growth by showing how one can learn from mistakes, for example. We can imagine interesting research questions related to how individuals and organisations respond to ethical challenges and even crises and scandals. For example, are organisations inclined to close ranks and go on defence after a scandal breaks rather than using the opportunity provided by the scandal to promote learning and growth both for employees and the organisation itself? Clair and Dufresne (2005) addressed the possibility of positive consequences of organisational crises. For example, they noted that, post crisis, organisations may heighten their attention to important stakeholder relationships, clarify the organisation’s identity resulting in higher employee organisational identification, increase awareness of the organisation’s vulnerability, become an altruistic leader in their industry regarding the issue of concern, and/or become better prepared to deal with members’ emotions, spiritual needs, and search for meaning. However, we know of no empirical work that has studied this ethical learning phenomenon. Although we did not fully cover it in our review, organisational behaviour researchers have shown significant interest in mindfulness and mindfulness (and similar) interventions (e.g., meditation) in organisations (see Sutcliffe et al., 2016 for a review). Such interventions can have a positive impact on employees’ well-being and prosocial behaviour. We see an opportunity here for behavioural ethics research that looks more explicitly at the potential relationship between mindfulness and mindfulness interventions and ethical conduct that goes above and beyond just rule following. Along similar lines, interest in self-reflection is growing (see Kross et al., 2023, for a review). Although self-reflection (accomplished through journaling or other means), done individually or in groups, is sometimes associated with negative outcomes in organisational behaviour research (e.g., rumination), it has also been associated with measures of well-being, positive mood, and helping behaviour. Although we know of no explicit connection to research on ethical behaviour, we do see an opportunity here. For example, reflection on one’s less than ethical behaviours might lead to feelings of guilt or shame, but perhaps in the right organisational context, it could also lead to learning and positive behaviour change. By contrast, reflection on things one has done right, on one’s values, could contribute to feelings of empowerment, pride, and moral self-efficacy, especially if those are valued in the organisation. Particularly relevant to behavioural ethics, the review cited above suggests that self-reflection may contribute to perspective taking which should increase moral awareness, especially about potential harm to others and that should increase ethical decision-making. There is much for behavioural ethics researchers to explore here. In the context of emotions, opportunities exist to further study positive moral emotions and their potential effects on employees. Beyond the research thus far, opportunities exist to study the role of moral elevation and other positive moral emotions in the workplace. We need to learn what other types of actions by leaders or co-workers lead to moral elevation and with what outcomes. For example, can celebrating an individual’s ethical behaviour at the unit or organisational level contribute to the unit’s or organisation’s level of moral awareness, values congruence, and ethical voice? Further, how might emotional intelligence inform ethical

A positive behavioural ethics perspective on organisational integrity  151 decision-making? Rubin and Riggio (2005) offer multiple ways that being high on emotional intelligence could be useful for making good ethical decisions because it may lead to more authentic discussions and more informed decisions. They also propose that leaders with high emotional intelligence can be more effective in their (emotional) appeals to others about ethical issues. Emotionally intelligent people are also more likely to be empathetic and able to take others’ perspectives which is essential for good ethical decision-making. Finally, they argue that those who are good at regulating their own emotions are more likely to make good decisions. We would agree so long as regulating one’s emotions is not used to silence them when they are needed to raise moral awareness. We suspect that the relationship between emotional intelligence and ethical outcomes may be complex but it offers yet another opportunity for research. Another potential research area that interests us involves questions about the effects of the language used in organisations to talk about ethics. Ethics officers have suggested that the “ethics and compliance” words are problematic from a perceived legitimacy perspective and that they therefore search for other words to describe themselves and what they do such as integrity, business conduct standards, or values so that employees don’t put up a self-protective shield for fear that the “ethics” sheriff is coming to town (Treviño et al., 2014b). More systematic research could be conducted on the language that works best if the goal is to raise ethical awareness and reduce ethical threat. Interestingly, the use of values in ethics management is also relatively understudied despite virtually all organisations espousing values and claiming that they are important to their organisational identities. Yet, values have rarely been studied in behavioural ethics, at least not taking into account explicit values content. In organisational behaviour more generally, values are typically discussed in broad terms. For example, they are thought to be crucial for both individual and organisational identity (Ashforth et al., 2008; Turner, 1968). We have also long known the benefits of perceived values congruence with one’s leader and we know that transformational leaders who convey a values message produce positive outcomes (attitudes, performance) in followers (Jung & Avolio, 2000). But if we are going to think in behavioural ethics terms, arguably we need to think about the content of the values being conveyed. Does the content matter and, if so, how and how much? Schwartz (1992) defines values as “trans-situational goals, varying in importance, that serve as guiding principles in the life of a person or group” (p. 21). Schwartz’s (1992) circumplex values model is designed to apply at the individual or organisation (and even national levels). So, it could be very helpful in future behavioural ethics research focused on understanding how specific values content might matter for understanding ethical behaviour in organisational contexts.

CONCLUSION In this review, we have offered insight into what we know from the behavioural ethics literature about a more positive behavioural ethics. Our review has covered individual differences, cognitions, emotions, actions, and organisational infrastructures that are associated with ethical behaviour rather than just rule following or the reduction of unethical behaviour. We have also made suggestions for future research that would push the boundaries of a positive behavioural ethics. We hope that our efforts at gathering this material and our suggestions for

152  Research handbook on organisational integrity the future will inspire behavioural ethics researchers to delve into this positive behavioural ethics arena so that, next time, we will have even more research to review.

NOTE 1. Given their similarities, we use the terms ethical and moral efficacy interchangeably. When referring to specific studies, however, we stick with the terminology used by the author(s).

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11. An intersubjective perspective on organisational integrity Wim Vandekerckhove

This chapter offers a discussion of organisational integrity through an intersubjective lens. The perspective put forward in this chapter resonates with the common notion of integrity as wholeness or consistency of action and values. Specific to the intersubjectivist perspective, however, is that this wholeness is not merely something the individual needs to achieve on their own, but instead can only be achieved with others, between subjects or intersubjectively. Intersubjective organisational integrity – which I will abbreviate as IOI – involves the organisational efforts to allow this between-subjects exploration and alignment. The chapter is structured as follows. I first explain what an intersubjectivist account of integrity entails, and do this by contrasting it to objectivist and subjectivist notions of integrity. The emphasis in intersubjective integrity is on the process and locus of aligning discernments of values and actions. I discuss the corresponding meta-ethical propositions. In the section after that, I explain what makes an intersubjectivist account of integrity so appealing to think about integrity in an organisational context. I explain this has to do with how the personal and organisational level of intersubjectivist integrity can be distinguished without getting stuck into the debate of whether or not organisations have personhood. Thus, IOI does not rely on an analogy with intersubjective integrity at the personal level. After all the good news follows a section in which I caution against over-ontologising moral norms as social constructionist. I suggest a critical realist position, which acknowledges a realist ontology to moral norms whilst requiring social constructionism to gain knowledge of these norms. This cautioning is not only philosophically intriguing. I argue in a subsequent section that this position has concrete implications for the practice of IOI. More precisely, since we cannot assume that moral norms are always clearly articulated and well delineated, organisations must put effort in making speaking and listening happen through a range of means: whistleblowing channels, open conversations, and listeners’ negative capabilities. A brief conclusion summarising these discussion points closes the chapter.

WHAT IS THE INTERSUBJECTIVE ACCOUNT OF INTEGRITY? Different accounts of integrity rest on different meta-ethical propositions about what exactly integrity is a wholeness of. As I will explain in this section, meta-ethical propositions have implications for the ‘locus of integrity’ (Vandekerckhove, 2010), by which I mean the following. A common notion of integrity is that of wholeness. But a wholeness of what? Action and values, of course. But that wholeness is also situated somewhere. I will argue that what distinguishes intersubjective integrity from other accounts of integrity is that in the intersubjective account the locus of integrity lies within the interaction between people. That what needs to be whole is situated in the interaction itself. And in this sense intersubjective integrity can 162

An intersubjective perspective on organisational integrity  163 be contrasted to both subjectivist as well as objectivist accounts of integrity, since both these accounts have the locus of integrity outside of the interaction. In this section I first discuss why the objectivist and subjectivist meta-ethical propositions are problematic, then explain how intersubjective integrity overcomes these problems. A proposition of meta-ethical objectivism is that ‘the fact that we don’t know the correct answers does not mean there are no correct answers’ (Double, 2006, p. 4). Thus, objectivist integrity implies that it is possible that I act with integrity even when everyone else (including me) is convinced that I am not. Whilst I believe we cannot fully dismiss the objectivist meta-ethical proposition – something I will come back to in section three – it is clear that an objectivist integrity tends to underplay the epistemological or ontological importance of the social dimension of an organisation. Within business ethics, objectivist positions often draw on the work of Ayn Rand, and are positions of moral egoism. Becker (1998), for example, argues that long-term survival and well-being of individuals as rational beings is suitable as a foundation of integrity, precisely because life and survival are not subjective opinions. Rationality is key for one’s survival and therefore the purpose of one’s moral code is to further and protect one’s life (Locke & Becker, 1998). Egoism in objectivism refers to the individual being the beneficiary of one’s moral code, and regards altruism as a contradiction because someone else is the beneficiary of one’s moral code to further life. In other words, it’s about your own survival and well-being, not that of others. Barry and Stephens (1998) object to Becker’s account, arguing that Becker’s egoist objectivism seems to ignore the rational basis of altruism and hence dismisses too easily the role of social ties in the lives of individuals. Svanberg and Svanberg (2022) argue that rational egoism does not imply we can simply disregard others, or that we don’t owe others any kindness. It is indeed possible that within the field of business ethics, rational egoism is too quickly caricaturised. However, what is relevant for our discussion here is that, in any case, for rational egoism in business ethics and objectivism in general, the locus of integrity or what needs to be kept whole is not situated in the interaction between people. Objectivist integrity does imply prescriptions for good interactions with other people, but the wholeness in rational egoism is that of an individual’s actions with rational principles of which the purpose is the furthering of that individual’s life. These rational principles exist regardless of anyone. In that sense, in objectivism the locus of integrity is external to the human being. The subjectivist account of integrity also requires a wholeness, but one which lies firmly within an individual: consistency of commitments and upholding these commitments in speaking and acting. Hence the locus of subjectivist integrity also lies outside of the interactions between people. That does not mean interactions are not relevant. McFall (1987) for example, argues that two more conditions need to be met with regard to the content of those commitments. One is that commitments need to be upheld when facing a challenge, for example situations in which some of our commitments are in conflict. McFall argues that in the absence of such challenges the ascription of integrity is not appropriate. The other condition is that conflicting commitments must be identity conferring, which means that integrity only applies to situations in which someone not only upholds conflicting commitments, but also that acting in a way that does not uphold these commitments would make that person no longer who she was before those actions. Hence, whilst subjectivism also implies prescriptions for human interaction, the meta-ethical proposition of subjectivist integrity situates the wholeness that matters internal to the individual rather than within the interaction between people.

164  Research handbook on organisational integrity The meta-ethical proposition of the intersubjectivist account of integrity, then, situates the wholeness within the interaction. More precisely, it is within that interaction that the wholeness that matters to integrity can be achieved. Let me explain this further through the work of Calhoun (1995) and Carter (1997), both of whom posit an intersubjectivist account of integrity. Carter defines integrity as the wholeness of: discerning what is right and what is wrong, acting on that discernment, and openly stating the connection between action and discernment. The first two elements in Carter’s depiction of integrity imply that we make sense of a situation based on beliefs and attitudes we happen to have, and that we act upon that sense-making. The third element acknowledges that we share a situation with others. Thus, other people are a necessary aspect of integrity. Objectivist as well as subjectivist accounts of integrity mention interactions with others and have implication for human interaction, but these approaches do not stipulate it as a crucial condition for the ascription of integrity. Carter’s ‘openly stating’ our actions and discernment makes integrity intersubjective. We cannot speak of integrity unless that interaction is there; only in speaking to others about my discernments and action can I show integrity. It is in this way that an intersubjective account of integrity is based on specific attitudes towards others, more precisely a willingness to discuss, explain, and justify one’s actions and discernment. Now, if we share a situation with others, then these others will influence the belief and attitudes with which we make sense of our experiences and discern what is right and wrong. Hence, Carter’s three elements to integrity need to be seen in a cyclical way. No situation is a one-off event. Rather, life is a continuous flex, stretch, drip, flow of situations, not necessarily a sequence of clearly delineated events. The human interaction required for integrity is a two-way interaction. Perhaps Carter’s depiction of a uni-directional sequence – discernment, action, communication – does not convey that well enough. The interaction is what seals the wholeness of integrity. However, any communication is a new situation that will impact discernment. In this way, I posit that human interaction is not just an add-on condition to objectivist or subjectivist accounts of integrity. There is a distinct intersubjective account of integrity, in which human interaction is the pivot of the wholeness that matters to integrity. Intersubjective integrity entails an aligning of the personal discernment with the social discernment, and back. This is an ongoing activity – hence aligning. Calhoun (1995) can help to explain this further. Calhoun asserts that integrity is a social virtue. All of us are faced with the question ‘What is worth doing?’ Yet, we can only answer that question from within our own deliberative points of view. This subjectivist position, argues Calhoun, is just that: just my judgement. The only way in which someone’s judgement can gain some gravity is to acknowledge the individual as ‘one among many deliberators who may themselves go astray’ (Calhoun, 1995, p. 257), and in that sense ‘one’s own judgment serves a common interest of co-deliberators’ (p. 258). Integrity requires that we treat our own endorsements as ones that matter to others in making endorsements themselves, which in turn matter to us for own endorsements. Hence, integrity cannot be ‘a matter of sticking one’s guns’ and shouting that from rooftops. Inherent to integrity as a social virtue is the willingness and ability to at the same time ‘stand behind our convictions and to take seriously others’ doubts about them’ (Calhoun, 1995, p. 260). Getting that ambiguity right is the wholeness that is implied with intersubjective integrity. Its meta-ethical proposition situates that wholeness in the interaction itself. The implication is that ambivalence and compromise might very well be what intersubjective integrity requires of us. At least, argues Calhoun (1995), it demands due care from us in how we act

An intersubjective perspective on organisational integrity  165 out our discernment. Proponents of integrity as a personal virtue – be that the objectivist or the subjectivist version – put forward the image of a person with integrity as someone who is loyal to commitments, autonomous, uncontaminated, and with enough courage to ‘not cave in’. Intersubjective integrity brings forward another kind of exemplar, as Calhoun notes that ‘[h]owever admirable those with the confrontational courage of their convictions may be, even protesters risk losing their integrity to arrogance’ (Calhoun, 1995, p. 260). What kind of exemplar behaviour intersubjective integrity implies in an organisational context, will become clear further on in this chapter. But let me first suggest why intersubjective integrity suits an organisational context. I turn to that in the next section.

WHAT MAKES THE INTERSUBJECTIVE ACCOUNT OF INTEGRITY SO APPEALING TO THE ORGANISATIONAL CONTEXT? In the previous section I have relied on the work of philosophers who discuss notions of personal integrity. However, this Research Handbook concerns itself with organisational integrity. These levels of integrity are often confused, or perhaps it is more correct to say that the difference is often ignored. Indeed, organisations are often discussed in an anthropomorphic way. Take, for example, the notion of corporate citizenship that resonated within the field of business ethics in the first decade of the 21st century (De George, 2008). Whether or not an organisation can be regarded as having moral agency is an ongoing debate within the business ethics literature. Yet, even proponents of the assertion that organisations as non-human actors have moral agency do not stick to the organisation-as-person metaphor in a very strict way. Their position is somewhat more moderate, referring to ‘person-like characteristics’. Kaptein and Wempe (2002) provide a useful overview of the numerous positions. The distinction between personal and organisational levels of agency – hence also of integrity – is relevant with regard to liabilities, or how we attribute blame to organisations. In the middle of the 20th century, English courts adopted alter ego or identification theory, which stipulates that a layer of senior officers within the organisation are identified as its ‘brains’. The organisation is then only liable for their wrongdoing, not for that of its other workers (Wells, 2008). More recently and in other jurisdictions, different notions of organisation are used to attribute blame to organisations when wrongdoing occurs. One of these is the agency model, according to which the organisation as a legal person is liable for the wrongdoing of all its workers. Wells (2008) argues that both identification theory as well as the agency model underlie versions of vicarious liability that fail to acknowledge effects triggered at the organisational level per se. This makes it difficult to establish corporate criminal liability – something that is needed especially in cases of serious wrongdoing such as corporate manslaughter or corruption. According to Wells (2008), a more holistic approach has been gaining popularity. This approach locates blame in the procedures, operating systems or culture of an organisation, thereby acknowledging ‘the “corporateness” of corporate conduct’ (Wells, 2008, p. 153). The intersubjective notion of organisational integrity is compatible with acknowledging the organisational level as an appropriate location for the attribution of blame, whilst at the same time appreciating integrity at the personal level. In my previous work (Vandekerckhove, 2007, 2010) I have emphasised organisations as communicative regimes, i.e. structural and

166  Research handbook on organisational integrity situational interventions that facilitate forms of communication between people. I argued that an intersubjectivist account of personal integrity is appealing to organisations, and that organisational integrity denotes organisational efforts and policies to support and enhance personal intersubjective integrity. In what follows, I briefly recap the reasons for the appeal of personal intersubjectivist integrity, and then point at what that implies for organisational integrity. Solomon argues that one reason why the term ‘integrity’ is so popular in organisational contexts has to do ‘with the expectation that [employees] will (on the basis of past experience and accumulated confidence) resist and perhaps straighten out structural distortions in the organization’ (Solomon, 1993, pp. 81–82). Organisations do not have fool proof policies or structures, and thus remain always vulnerable to fraud and moral disengagement. Because there is no way to fully avoid these risks, organisations have to rely on the integrity of the members to compensate for the imperfection of policies and structures. It is in that sense that Solomon writes that in an organisational context we use the term integrity to denote an expectation. Note, however, that for Solomon workers’ attempts to meet that expectation will be based on ‘past experience and accumulated confidence’, part of which occurs in life in general but part of that is also specific to the organisation of which one is a member. Thus, the manifestation of personal integrity is based on one’s experience of and confidence about the organisational integrity. I posited that interaction between people is the pivot of the wholeness that matters to intersubjective integrity. Hence, it is the interaction between people within the organisation that renders people the experience and confidence to meet the expectation of resisting opportunism that results from organisational imperfection. The sort of organisational imperfections that call for intersubjectivist account of personal integrity relate to functional and temporal flexibility. An organisation is a coordinated division of labour. This means that different functions comprise any organisation, each function with its own roles and mandates. It is quite usual for us to act within different roles throughout one day. And if that is not the case during our work time, we do assume different roles between work and home. Consider some of the different roles you take during a single day: friend, partner, customer, child, parent, manager, team member, advisor, etc. Which values apply, and to what extent do these roles conflict or at least cause unease? Many of our discernments will not hold across our different roles. The interactive pivot of intersubjective integrity foresees this functional flexibility as something that needs to be dealt with for integrity to exist. In other words, it is not a threat to integrity, but rather how integrity might be achieved at all. Temporal flexibility refers to aligning personal and social discernments over a time period. We cannot keep that alignment constant over time. First, because we cannot rule out that we will change our minds, and second, because sometimes we face new situations. Change is unpredictable and brings both new opportunities and challenges. Dealing with new situations implies approaching the newness of the situation with already acquired discernments. Yet dealing with those new situations also implies that we question the appropriateness and sustainability of those discernments. We may very well alter these. Even if I were not to change my discernments, all or some of the relevant others might change theirs. They might do so in such a way that it shifts the social value appraisal. Hence, aligning the personal and social discernments involved a continued questioning of both my personal as well as the social discernments. This is not a problem to intersubjective integrity. Rather, the aligning of personal and social discernments is what intersubjective integrity is all about. The continued aligning occurs through interaction between people. This interaction is not something in abstracto. It actually needs to happen. I need to actually speak about my discern-

An intersubjective perspective on organisational integrity  167 ments, also in contexts that are not designed to carry such voice, and perhaps also at moments where I am less convinced of my voice. To whom must we speak? Anyone who questions our actions is a relevant other for an intersubjective account of integrity. This could be any stakeholder of the organisation. However, integrity also includes a proactive speaking. The relevant others of our speaking are those with whom we make up community. In an organisational context that is the workplace community: our team members, colleagues, management. The relationships between these individuals are constitutive of that community. Therefore, speaking about our discernment and actions to those with whom we form a community reemphasises not only that community but also us being part of it. If I do not speak with those others, I fail to acknowledge my relationships within that particular community. Of course, if the organisation is big – say, a hundred or a thousand workers across various sites – then I will have to rely on organisational structures, policies, and processes to speak with relevant others. IOI denotes interventions in organisational structures, policies, and processes, to encourage communication between relevant others about their discernments.

SOME POINTS FOR CAUTION In the previous sections I have casted the intersubjectivist account of integrity as a dynamic conceptualisation of integrity. Intersubjective integrity seeks to align personal and social discernments through speaking to relevant others about those discernment. Hence, wholeness is not something that has to be preserved, but rather something that has to be attained. It is in the speaking that individuals put their moral agency under the scrutiny of others and thereby examine social values’ applicability to new situations. From this emerges a collective reinterpretation of social values, and an aligning of personal values is possible. This collective examination, reinterpretation and aligning form an ongoing process. Wholeness, in this sense, is something that is socially constructed time and time again. Within the field of business ethics, at least two of the main approaches are intersubjectivist and rest on a social constructionist ontology of moral norms. Stakeholder theories depict ways in which we can consider different positions to find or construct a common ground (Freeman et al., 2020); the political corporate social responsibility (CSR) approach advocates the lens of deliberative democracy to analyse moral legitimacy of corporate actors’ role in society (Scherer & Palazzo, 2011). Both these approaches imply a social constructionist ontology in how they assume the validity of moral norms, namely that what makes a norm valid is how the consensus was achieved around the moral norm. Stakeholder theories can be used to devise processes to consider different stakes and voices; political CSR provides the critical lens to find faults and cracks in that process. The tandem works well to produce scholarship that is relevant to practice and impactful. However, when we take a closer look at how ethical problems become salient issues, we can see that social constructionism as ontological basis for moral norms runs into a problem. On the one hand, acknowledging there is an ethical problem implies that a moral norm has been breached. Yet, if moral norms are social constructs, then we do not have an ethical problem until there is some alignment, some consensus around the moral norm that the ethical problem is a breach of. But, on the other hand, we experience ethical problems as problems even before we have constructed a norm.

168  Research handbook on organisational integrity Let me give an example. In October 2017 #MeToo went viral, triggering what would be the downfall of Harvey Weinstein. It also led other people to use #MeToo to make public statements – on social media and later on all kinds of media – about experiences of sexual harassment. Among them were also people alleging sexual harassment that occurred decades earlier. Dr Christine Blasey Ford testified in September 2018 about Brett Kavanaugh’s (who was then US Supreme Court nominee) sexual assault of her in the 1980s when they were teenagers. Also, about 40 former cheerleaders and other employees of the Washington Football Team alleged an abusive work environment going back two decades. Why did they not come forward earlier? Was the moral norm about sexual behaviour different in the 1980s than it was in 2017? Or at the end of the 1990s? Does it mean that the behaviour decades ago was unremarkable? Or that the people who spoke out after 2017 did not find the experience problematic two or three decades earlier? Or did people not speak out because there was no platform? So how did moral norms come about before social media? In 2006 Tarana Burke started the non-profit organisation Just Be to assist survivors of sexual violence. She named the campaign ‘Me Too’, remembering a youth camp in 1997 at which she heard a 13-year-old sexual abuse survivor share her story. Burke had found it hard to show solidarity with the survivor because there was no way to simply say ‘me too’. Burke (2022) was seven years old when she was first sexually assaulted. Indeed, vocabulary and imagery to articulate notions and meanings are an important part of socially constructing. But the wrongness of an experience seems to occur even before there is the means of articulation and shared understanding. Hence, important elements in the social constructing here are the 2006 ‘Me Too’ turned into a #hashtag in 2017, which allowed people to indicate that they recognise an experience and offer their alliance. Before that occurs, there has to be an understanding that sexual harassment includes a range of behaviours. The vocabulary to articulate the wrongdoing must be developed. These are social constructs but it is already wrong before the construct is there. A seven-year-old does not have the vocabulary and would not know how to articulate the experience, but still experiences the situation as wrong. What I am suggesting is that moral norms have a reality outside the construct or even the process of socially constructing articulations. That is the caution for intersubjective integrity: the ontology of moral norms cannot be fully reduced to social constructionism. There is a realist element to ethics. An event does not become a scandal because there is a consensus. Rather, events build up to a scandal, which galvanises a consensus. A useful position to cope with this, is critical realism. Towards the end of the 1970s, Roy Bhaskar asked, ‘What must the world be like for science to be possible?’ (Bhaskar, 2008 [1975], p. 57). At the core of Bhaskar’s critical realism is a distinction between three levels of reality: the real, the actual, and the empirical. Mechanisms that cause things to happen are real. They exist independent of any mind, although they are not at work in every situation. Hence, they can be real without being actual. If a mechanism is at work, then it is both real and actual. If we also experience the mechanism, then it is real, actual, and empirical. Science is a social activity for Bhaskar, and brings the three levels ‘in phase’, i.e. we produce knowledge about what is actual and real. What I propose is to assume these three levels for moral norms too. What is relevant to us here, then, is to consider how a norm that is actual-but-not-empirical becomes actual-and-empirical. We do not immediately reach a consensus. Social constructionists have no problem with the idea that we never reach full consensus, and that we are always at work

An intersubjective perspective on organisational integrity  169 socially constructing understanding and meaning, through contestation. This is also where intersubjective integrity is unproblematic. But contestation already supposes an ability to articulate and voice an understanding. And that might very well be quite a long way into that transition from actual-but-not-empirical to actual-and-empirical. What about earlier on in that transition? What about situations perhaps best described as you sense something is wrong but you cannot put your finger on it, when you don’t have the right words to say what is wrong, to express an experience as wrong? These too are situations in which intersubjective integrity must work. In the next section I set out the implications for putting intersubjective organisational integrity into practice.

ORGANISATIONAL INTEGRITY AS INTERSUBJECTIVE PRACTICES I noted earlier that IOI denotes interventions in organisational structures, policies, and processes that encourage the communication between members about their discernments, and thus enhances an alignment of personal with social discernments. The philosophical sidestep in the previous section indicates that IOI needs to cater for a range of situations, with on the one hand norms that are well articulated and on the other norms that are sensed but not well articulated yet. What sort of interventions can constitute organisational integrity across that range? What the organisational efforts of intersubjective organisational integrity need to bring about resonates well with what Kaptein (2008) has called the organisational virtue of discussability, as part of his corporate ethical virtues model. Kaptein defines discussability as the organisational virtue that ‘concerns the opportunity employees have to raise and discuss ethical issues’ (p. 926). This opportunity is the perceived scope employees have to ‘exchange, analyze, and discuss their experiences’ (p. 927), so that they can ‘learn from others’ (near) mistakes, transgressions, and dilemmas’ (p. 927). Whistleblowing, peer-reporting, and the organisational responsibilities to provide safe channels for that are mentioned as examples, but equally that organisations should facilitate discussion about unclear moral expectations and moral dilemmas (Kaptein, 2008). The items in the scale Kaptein (2008) develops are consistent with the broad scope used to conceptually describe ‘discussability’ as an organisational virtue. On the one hand are items related to the perceived ability to report unethical behaviour, escalate a report elsewhere in the organisation, feel assured that reports are taken seriously, etc. (cf. items 7.1, 7.4, 7.6, 7.8, 7.9, and 7.10). On the other hand, we can see items that denote a perceived ability to discuss less clearcut wrongdoing, rather than report unethical behaviour. These ask about discussing moral dilemmas, personal dilemmas, asking questions, etc. (cf. items 7.2, 7.3, 7.5, 7.7). Hence, I believe we can distinguish two forms of ‘discussability’ within Kaptein’s construct, which require, in my view, two different types of organisational interventions and processes. I will comment on these further in this section. The first concerns situations in which the wrongdoing is carried by a strong consensus, both that it is wrongdoing as well as how it is articulated and delineated. This is where speak-up or internal whistleblowing channels work best. In Kaptein’s construct it is the reporting part of discussability. The second type of organisational interventions and processes are needed for discussions and conversations where the consensus around a moral norm is not that strong. These include conversations about

170  Research handbook on organisational integrity whether certain behaviour constitutes wrongdoing at all, or to what extent, and what words to use. This is not the upward or lateral control implied by whistleblowing channels. Rather, it suggests that organisations have integrity to the extent that they manage to create situations in which people feel comfortable to have a direct and exploring conversation with each other. In Kaptein’s construct it is the discussing dilemmas part of discussability. In addition, I will also distinguish a third form of organisational efforts for intersubjective integrity, which can be situated even more towards the inarticulate pole of moral norms. Whistleblowing Channels People blow the whistle. Not everyone, but many do. To give you some idea, a survey conducted in 2020 in 10 countries found that 33 per cent of respondents said they had observed misconduct at work during the preceding year (GBES, 2021). This is of course a global median and countries differ substantially on this measure. Of those who observe misconduct, the 2020 survey found that 81 per cent reported the unethical behaviour. That is a huge jump, up from 63 per cent in 2018 and 58 per cent in 2014. The GBES (2021) survey also has findings that suggest people are more willing to report if they believe the report will be handled effectively. It confirms earlier research that indicates there are two reasons why people will not report wrongdoing. One is because they are afraid, the other is because they believe it would be futile (Olsen, 2014). Hence, for intersubjective integrity, three things are closely connected: people need to speak, they must feel safe, and they must believe their speaking will make a difference. Intersubjective organisational integrity thus focuses on making the speaking safe and effective, or in other words, making whistleblowing successful (Vandekerckhove et al., 2014). This proves to be more difficult than it sounds for organisations. Whistleblowing legislation increasingly makes it mandatory for organisations to have channels for internal whistleblowing (e.g. first in the US and now also in the EU). But having a channel doesn’t mean the organisation is good at operating it. There have been important changes in what whistleblowing channels look like. The physical box for handwritten notes still exists, as does the telephone hotline. The innovation, however, consists of online and smartphone applications that allow two-way anonymous communication. People tend to see anonymous reporting as safer. Yet they often do not include enough information to start an investigation. Being able to go back to the whistleblower to ask further information can increase the effectiveness of reporting misconduct. Advances are not merely of a technical nature. An international multistakeholder initiative on good practice in handling whistleblowing reports developed ISO37002 (2021), the first international standard on whistleblowing management systems. It is packed with guidelines on how to increase an organisation’s effectiveness at receiving reports, doing the initial triage, investigating and other ways of addressing the reports, and what to do when closing a case. A whistleblowing channel is understood as a management system. Hence, the standard stipulates how handling reports needs to be supported by training, roles and mandates, documentation, and a review process. The ISO37002 standard also looks at making whistleblowing safe. It includes a number of sections on protection, giving examples of what protection might consist of, and considers protection for the whistleblower as well as for those associated with the whistleblower and with the reported wrongdoing. But overall, the standard urges organisations to concretely think through and plan the kind of protections they can offer and what

An intersubjective perspective on organisational integrity  171 the limitations are, given their structure, size, and work relationships. In general, organisations tend to overestimate themselves in what they actually do to make whistleblowing safe (Olsen & Brown, 2018). Open Conversations Reporting unethical behaviour through a whistleblowing channel is not all there is to IOI. If IOI denotes the organisational efforts that facilitate people to align personal and social discernments, then whistleblowing channels are perhaps not even the most important aspect to it. Whistleblowing channels are an upwards or lateral control mechanism (Kaptein, 2008). Thus, they work best when the moral norm is socially well delineated and articulated, but work less well to socially construct that consensus. At least, I believe that is what research in Australia and New Zealand suggests, in which 3,604 managers and governance professionals who handle whistleblowing reports responded to a survey (Brown et al., 2019). Analysis of that data suggests that not all reports can be classified neatly as reports of unethical behaviour breaching a clear norm. Only 28 per cent of reports fall within that. There are a number of personal grievances coming through those whistleblowing channels too. About 30 per cent can be neatly classified as such. The rest, a staggering 42 per cent, is what we might call ‘a mixed bag’. It turns out that it is precisely the ones that are hard to categorise – the mixed bag – which organisations find it most difficult to handle well. They lead significantly more to retaliation and inaction than either the clear ethics violation reports or the purely disgruntled employee complaints (Brown et al., 2019). It occurs to me that perhaps direct conversation could bring about some clarity, more so than a reporting channel. The direct conversation is also what the items in Kaptein’s (2008) discussability scale about discussing moral and personal dilemmas seem to suggest. There is indeed scope to believe people really want these conversations within their workplace, and that they only escalate higher up in the organisation or through a whistleblowing channel if their attempt to have a conversation is not welcomed. Vandekerckhove and Phillips (2019) analysed more than 800 whistleblowing cases to see to whom people blow the whistle. The finding is that whistleblowing is best perceived as a protracted process rather than a one-off event. The point is that whistleblowing does not start as whistleblowing. People either raise their concern directly with the person whose behaviour they question (7 per cent), or they talk to their line manager (52 per cent). The most popular person to talk to in a second attempt to raise a concern is higher management (33 per cent). Specialist channels, like HR, audit, or whistleblowing channels, peak at the third attempt, but even then only 14 per cent. IOI requires that organisations facilitate conversations in which organisational members can explore the alignment of personal and social discernment. We can call this ‘open conversations’ in the sense that the conversation is held ‘in the open’ rather than hidden and mediated through anonymous channels. But it is also ‘open’ in the sense that there does not need to be a specific agenda or predetermined end for these conversations. One must simply feel uninhibited to start such a conversation in the workplace. A relevant concept for this ‘inhibitedness’ is psychological safety. This concept has gained attention from human resource management scholars (for a review see Newman et al., 2017). Underpinning this scholarship is the work of Amy Edmondson (1999) on organisational learning. Her idea was to not focus on the direct learning activities and structures but rather see organisational learning ‘as an ongoing process of reflection and action, characterized by asking questions, seeking feedback, experimenting,

172  Research handbook on organisational integrity reflecting on results, and discussing errors or unexpected outcomes of actions’ (p. 353). This can only happen when people believe others will not reject them for saying what they think, that it is safe to experiment, and that others are interested in people as people. This leads people to voice their concerns and seek feedback. Thus, IOI is the extent to which organisations can establish psychological safety. However, just like Kaptein’s (2008) discussability, psychological safety is a cultural feature of an organisation. The question for IOI is: what kind of structures or interventions bring it about? I would like to mention what I believe are two candidates. The first is Mary Gentile’s Giving Voice to Values curriculum (Gentile, 2010). Gentile starts from the observation that people notice something is wrong – that there is an ethical lapse in the organisation – and would want to step in based on their personal value but lack the courage to do so. Gentile’s approach can teach people how to make that step and engage to express their intuition within an organisational setting. The second candidate to help organisations create psychological safety or generate discussability is, I believe, the work of Wendy Addison (n.d.). Based on insights from behavioural science, Addison runs workshops on what she calls ‘courageous conversations’. How do you get people to allow themselves to ask that difficult question or concern about conduct, products, decisions, communications, etc.? And, equally, how do you get people like managers to have the courage to hear that difficult question without avoiding it or without making the speaker shut up? These are the conversations that, to me, seem to be the gist of IOI. Negative Capabilities I want to distinguish a third type of speaking and listening that is part of IOI. It involves moments in which people sense something isn’t quite right but cannot put their finger on it. Except that is not what they say but it is what you as a listener need to sense. Indeed, quite the other side of the spectrum than the whistleblowing channel with its clearly delineated reports. Nevertheless, the importance of these instances of IOI daunted me when I was doing research on handling whistleblowing reports, together with a colleague. We had interviewed a human resources manager who had really impressed us with how he engaged with any signal from the work floor. We had interviewed plenty of managers who thought people claiming to be whistleblowers were mainly out to abuse the policy and always twisted reality anyway. But not this manager. He did not find it easy to handle whistleblowing reports, and part of that was because of what had led these people to use the whistleblowing channel. His view was that sometimes people didn’t get heard and then tried to reformulate as well as add things hoping their cry would have more gravitas and someone would pay attention to their initial point. But it was difficult to decipher that because they came with ‘a mixed bag’. He extrapolated that to the ‘silly’ reports, like someone saying the lights were on in the parking lot. His view was that sometimes people say one thing by saying another. His strategy had therefore become one of engaging with people, regardless of what they come with or how they phrase it. What this instance made us aware of, and what is relevant to our discussion here of IOI, is that whilst most attention goes to enhancing speaker skills and avenues, it is perhaps more important to enhance listener skills. In this regard, I believe the concept of ‘negative capabilities’ can be helpful. Simpson et al. (2002) introduced this notion to the management literature to discuss change leadership in the context of mergers. Negative capability is conceptualised by psychoanalysts Bion and Eisold, who define it as ‘the ability to tolerate anxiety and fear, to stay in the place of uncertainty in order to allow for the emergence of new thoughts or

An intersubjective perspective on organisational integrity  173 perceptions’ (Eisold, 2000, p. 65). Hence, the ‘negative’ is not a bad thing. Rather, it indicates ‘empty’ or not filled. So, it is the ability to keep a space empty and not immediately fill it with what we already believe to know about a situation. The notion resonates with deep-listening skills of consultants, who listen for the hidden story to emerge. For IOI, what is at stake is the listener’s ability to ‘hear the meanings that are often obscured as much as revealed by words’ (Simpson et al., 2002, p. 1217). This requires very different organisational efforts than the technology for handling whistleblower reports through two-way anonymous channels. Instead, it implies enhancing listening skills and emotional intelligence of team managers.

CONCLUSION This chapter discussed organisational integrity from an intersubjective lens. I have argued that intersubjective integrity involves a wholeness or alignment of personal and social discernments about what values matter and what actions and behaviours are consistent with those values. IOI, then, denotes interventions in organisational structures, policies, and processes that encourage the communication between members about their discernments, and thus enhances an alignment of personal with social discernments. I have suggested that intersubjective integrity entails a meta-ethical social constructionism, but have also cautioned that it is more plausible to take a critical realist view, thus acknowledging a realist ontology of moral norms, which are only accessible and knowable through social constructionist practices. This led me to present a range of concrete requirements for IOI, along a continuum of socially constructed consensus of moral norms: whistleblowing channels, open conversations, and listeners’ negative capabilities. Each of these could be further expanded upon. Whilst that would take us into three distinct streams of scholarly literature – which is beyond the scope of this chapter – the practice of IOI needs to connect these streams and pursue IOI in its entire spectrum.

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12. A practical reasoning perspective on corporate integrity Thomas Donaldson

Eyes roll when talk turns to “corporate integrity.” Corporate integrity? Seriously? A common assumption is that top management’s pitch for corporate integrity will die on its first encounter with hard facts. Yet the future of successful capitalism may lie with the unfulfilled promise that corporations take integrity seriously. High-minded talk about integrity should either be backed up or abandoned. Dealing seriously with integrity, however, means examining the idea from two distinct epistemic angles: knowing and doing. The language of deep values, home to the value of “integrity,” applies to acting, the domain of practical reason. The language of understanding, in contrast, applies to knowing, the domain of theoretical reason. Laying one on top of the other prompts an illusion, one that is wicked for corporate social responsibility. In corporate discourse, this illusion is animated by two specialised languages. One is the language of efficiency, whose terminology is centred on concepts of profit and optimisation, while the other is the language of deep values, whose terminology is centred on concepts of integrity, environmental sustainability, non-discrimination, and others. These two specialised languages are not inter-translatable. When juxtaposed, they are meant to depict the same phenomenon from different angles. This sameness is an illusion. Dispelling this illusion requires a shift in our conceptual vision from an object-centred to an agent-centred perspective. It requires moving from a perspective that is dominated by theoretical reasoning to one that is practical while at the same time integrating theoretical insights into practical guidance. As will be shown, accomplishing this shift can achieve integration between the languages of efficiency and values without straining for the impossible goal of full inter-translatability. The shift and the rationale for making it is spelled out below. By establishing practical reasoning as a rational substructure, the shift allows the language of corporate efficiency to retain its dominant role in corporate decision making, even as corporate choices are interpreted through deep values. Throughout the following discussion, the importance of practically wise decisions, of all-things-considered good choices, is emphasised. The discussion below breaks into three parts: the first shows why corporate executives faced with quandaries whose solutions require both the language of values and the language of efficiency encounter predictable confusion; the second describes the three major attempts at dispelling this confusion and explains why each falls short; the third describes the way in which the practical inference process can integrate the languages of efficiency with values into a single-flow model without requiring inter-translatability.

THE PRACTITIONER CONTEXT The financial backdrop for corporate claims about integrity, fairness, and sustainability is rapidly morphing. The rise of human capital-intensive firms has redrawn the corporate gov175

176  Research handbook on organisational integrity ernance map; it has reworked financing and governance choices for a firm by resetting the very boundaries of firms (Hansmann, 2013; Zingales, 2000). Values, not merely optimisation metrics, now motivate or demotivate firm stakeholders in unprecedented ways. Yet in order for deep values such as integrity to successfully motivate corporate activity, stakeholders must believe that the firm means what it says; they must believe that the language of values spoken by corporate leaders goes beyond rent-seeking camouflage. To illustrate the challenge of language and values, consider a hypothetical decision confronting an investment banker. Imagine that in 2005 prior to the financial crisis a banker plans to sell a package of the bank’s highly leveraged derivatives to a Greek municipality. Assume that the banker believes that the treasurer of the Greek municipality is insufficiently aware of the complex risks of the derivatives package. Moreover, assume that the banker and other top executives at the bank have recently discussed how systemic risks, ones that might trigger a financial crisis, could arise from ongoing patterns of highly leveraged derivative transactions in the banking industry. Under such circumstances, should the banker be given pause about selling the derivatives because doing so could compromise integrity? Should integrity considerations be allowed to block what otherwise would be a long-term financial gain for the bank? This challenge displays two aspects. The first is about integrity when disclosing risks to clients, the second is about whether the bank should participate in a pattern of behaviour that might damage the integrity of the global financial system. The crisis of 2007 taught painful lessons about the latter. Language fuels the banker’s dilemma. Assume that “integrity” is identified as a core value for the bank, one heralded in its credo or mission statement along, say, with “trust,” “respect for individuals,” “teamwork,” and “inclusiveness.” So far, so good. But the banker will certainly also call to mind a different set of concepts from the language of finance and accounting, e.g., “NPV,” “net profit,” and “return on equity.” The terms here are from the languages of “efficiency.” The banker is befuddled. The language of one set of concepts refuses translation into the other. “Integrity” and “respect” are drawn from the lexicon of basic values that identifies high standards of human behaviour, while terms such as “NPV” and “net profit” are drawn from the lexicon of finance and accounting. The problem is wicked because unlike translating a piece of language from Chinese into English, the problem is like translating Chinese into the language of mathematics. The firm has burdened the banker with a mission-impossible, and the banker knows it. Similar befuddlement now pervades the business world. Still worse, academics have been conspicuously unhelpful in attempts to resolve it. Language limits thought and action. Ludwig Wittgenstein (1953) and Alfred North Whitehead (1929, p. 9) are among those measuring the reach of language, especially the reach of specialised languages. Whitehead notes that “The field of a special science is confined to one genus of facts, in the sense that no statements are made respecting facts which lie outside that genus” (1929, chapter 1: Speculative philosophy). Theories themselves are language systems, whether cultural, mathematical, topological, biological, or other. “Our language can be seen as an ancient city,” writes Wittgenstein, “a maze of little streets and squares, of old and new houses, and of houses with additions from various periods; and this surrounded by a multitude of new boroughs with straight regular streets and uniform houses” (1953, Aphorism #18). Theories of organisation are also language systems. Theoretical languages utilising concepts of “efficiency” may be compared to new suburbs in the game of language, ones with attractions albeit limitations. Knowing one suburb of a large modern city does not imply knowing its downtown.

A practical reasoning perspective on corporate integrity  177 The language of “integrity” is pedestrian in one sense and sophisticated in another. It is pedestrian in the sense of being drawn from ordinary language and possessing relevance for many kinds of actors. People, nations, and corporations may be said to act with, or without, integrity. Further, “integrity” stands as a form of deep or “intrinsic” value, one lodged among other deep values such as fairness, health, and human dignity (Donaldson & Walsh, 2015; Dorsey, 2012). These top-drawer values are common subjects of sociological and psychological research (Dahlsgaard, Peterson, & Seligman, 2005; Rokeach, 1973). However, value terminology also displays an unusual property whose analysis has fallen traditionally to moral philosophers. Unlike standard nouns, e.g., “brick,” “house,” and “bird,” the nouns of deep values do not denote facts, per se. Rather, they are meant to play the role of idealised behaviour, behaviour meant to guide or prescribe. The terminology of deep values is meant to guide human reasoning towards better decisions. Perfect integrity is impossible, but “integrity’s prime role is ‘prescriptive’ not descriptive; it is ‘action-guiding,’ or, to use the more formal expression, ‘normative’” (Sunstein, 1994). T. M. Scanlon’s view echoes the dominant theme found in modern moral philosophy that “to call something valuable is to say that it has other properties that provide reasons for behaving in certain ways with respect to it” (Scanlon, 1998, p. 96). The concept of the deepest sort of value, thus, is the concept of a non-derivative, valid reason for acting. Such values are referred to as “intrinsic.” The ensuing value puzzle for corporate life is severe. Current attempts by corporate organisations to manage integrity dilemmas are riddled with conceptual contradictions that flow from the limitations of the bifurcated languages they use. Most large corporations utilise the language of deep values in their credo or mission statements and the language of efficiency in their measurement and financial reporting. Corporate credo or mission statements often call deep values “core values” or “basic beliefs.” One of the first and most famous of these is found in the US company J&J’s “Our Credo,” created by Robert Wood Johnson in 1943. Deep values in companies’ mission and credo statements are invariably accompanied by a more detailed list of “do’s” and “don’ts” found in the firm’s code of conduct, and these two elements of corporate governance unite to undergird the firm’s overall ethics and compliance programme. Notably, corporations understand the deep values with which they identify as independently powerful; that is, a firm’s deep values are meant to guide by themselves, without being fully reducible to black letter rules written in their codes of conduct. This is where the confusion begins. Which of two languages, the language of deep values or the language of efficiency, should a manager use when confronting an especially difficult dilemma? Which language should the investment banker in the above example apply to the possible sale of highly leveraged derivative products to a Greek municipality in the year, 2005? The answer, of course, is that she must use both. And this is the rub. The two languages themselves offer no clue about translatability between themselves. Still worse, they lack a second-order scheme for prioritisation. Befuddlement ensues. The puzzle is made yet more frustrating because of an auxiliary feature of the normative nature of values. “Agent-centeredness” is relevant for normative concepts in a way that it is not for denotative concepts. A deep value such as “integrity” is intended to guide, not denote, and it does its work by serving as the focus, i.e., the intentional purpose, of a particular agent. To echo Scanlon’s definition above, integrity and other deep or “intrinsic” values provide a “reason” for a particular agent behaving in a particular way. Reasons, in turn, require the rational agent’s active understanding insofar as the reason being appealed to serves both as the goal and the justification for the action. Such “agent-centeredness” is part and parcel of

178  Research handbook on organisational integrity the nature of practical reason, a topic discussed more fully below. In contrast, concepts such as NPV (Net Present Value), net profit, or even “optimised return on investment,” denote relationships that may exist with or without involving a particular agent’s intention. Hence, in light of this linguistic befuddlement, the need arises for an approach whose elements are conceptually synchronised with deep values and whose elements include the intentional focus of the acting agent.

CURRENT ATTEMPTS AT INTER-TRANSLATABILITY The puzzle remains unsolved, but not for want of trying. Worthy attempts at inter-translatability can be ordered into three tactical approaches: 1. Multilingual approaches; 2. Values-as-preferences approaches; and 3. Surrogacy approaches. Multilingual Approaches Multilingual approaches invite decisionmakers to juggle more than one linguistic ball. Corporate decisionmakers are asked to utilise both deep value languages and languages of efficiency. This attempt to use both languages simultaneously is the dominant strategy for modern corporations, and most managers are expected to juxtapose credo/mission language with the language of accounting and financial success. However, as we saw in the case of the investment banker servicing a Greek municipality, the application of two languages to one task can create wicked confusion. Mission and credo values are meant to add flavour and direction to financial measurement, and vice versa. But in this instance, the two languages offer separate games, not separate rules, with each of the two language games possessing its own rules. The rules for Tic-Tac-Toe do not translate to the game of cricket. This same problem is the Achilles heel of the popular, management-friendly “Creating Shared Value” (CSV) model offered by Porter and Kramer (2011). The promise of CSV is to season “social value” with “competitive ends” in order to serve up a mixed dish, yet the promise is debunked by the authors’ admission that in instances where tradeoffs are necessary, social values must be subordinated to competitive ends (Crane, Palazzo, Spence, & Matten, 2014). Thus, Porter and Kramer’s “shared values,” become lost in translation (Donaldson, 2014) because the corporate decision making needed in challenging cases—the cases that matter—is reduced to the language of optimised financial returns. For decisions that matter, there can be no sharing in Porter and Kramer’s model of “shared value.” A more sophisticated version of the multilingual approach is offered in Freeman, Martin, and Parmar’s book, The Power of And: Responsible Business without Trade-Offs (2020). Boldly multilingual, the book’s aim is to tell a new story of business, one that resists single narratives. The single narrative of profits and shareholders, they argue, must be retold to include profits AND purpose, shareholders AND stakeholders, markets AND society, economics AND humanity, and business AND ethics. The book represents a compelling endorsement of the importance of intermixing deep values with traditional concepts of financial measurement. For this reason it marks a big step forward. But as Naude (2022) and others (Donaldson, 2023) have observed, the model is additive, not integrative, and for this reason is less attractive than a model that might integrate relevant considerations into a single framework.1 The deep value language games of purpose, stakeholders, society, humanity, and ethics are not inter-translata-

A practical reasoning perspective on corporate integrity  179 ble with the efficiency languages used to measure profits, shareholders, markets, economics, and business. Values-as-Preferences Approaches A solution to these problems might lie in a third, more fundamental language that could be used to bridge values with efficiency concepts. Such a Rosetta Stone approach would translate values into “preferences” which, in turn, could be counted, optimised, and set as a guide for corporate action. The languages of efficiency and of deep values thus might become a single system interpreted through the common denominator of people’s preferences. Such a “values-as-preferences” approach is adopted in two current areas of research, corporate governance and stakeholder theory. In the field of corporate governance, articles written in 2017 by the economist, Oliver Hart, and the finance theorist, Luigi Zingales, offer a revision of the shareholder primacy model of corporate governance that emphasises the varied preferences of shareholders (2017a, 2017b). Shareholders may care most of all about financial returns, but they frequently also care about non-financial impacts. In instances where shareholders possess such “prosocial preferences” and where externalities are not perfectly separable from production decisions, Hart and Zingales write that “the maximization of shareholder welfare is not the same as maximization of market value” (2017a, p. 247). Many shareholders pay more for fair-trade coffee, or buy electric cars rather than cheaper gas guzzlers, because, using the current economic lingo, they are prosocial. They care, at least to some degree, about the health of society at large. Why would they not want the companies they invest in to behave similarly? (Hart & Zingales, 2017b, p. 1)

Hart and Zingales’ expansion of the shareholder primacy model to shareholder preferences about values stands as an insightful advance on Friedman’s simplistic assumption (1970) that owners’ preferences are always financial in nature. The advance on Friedman is well tuned to an age in which many powerful shareholders, such as the Norwegian Sovereign Wealth Fund, display strong prosocial preferences. But correcting Friedman’s omission cannot achieve the conceptual alchemy needed to translate owners’ preferences into deep values. In two notable papers, the theorist Santiago Mejia, explains why managers should manage more than financial shareholder preferences, but only ones that are ethically permissible. A tobacco corporation should disregard its shareholder preferences if shareholders happen to prefer to sell cigarettes to children (Mejia, 2019, 2021). Another notable “values-as-preferences” strategy is taken by stakeholder theorists who advance a new and promising concept of “value creation.” In 2010 Freeman briefly introduced the possibility of reconstruing the traditional model of value creation in a way attentive to the interests of all stakeholders who participate in the collaborative effort of value creation. A decade later, this insight was refined by Freeman, Phillips, and Sisodia (2020) to yield the formula: Total Value Created (TVC) = ​ f (Customer TVC, Employee TVC, Supplier TVC, Community TVC, Financier TVC)2

Just as Hart and Zingales make a significant advance on the shareholder primacy model, Freeman and colleagues advance the traditional notion of value creation beyond the con-

180  Research handbook on organisational integrity fusing array of current value creation attempts, most versions of which use a simplistic, exchange-based model referencing only two actors, the firm and the customer, in which “value” is denominated entirely in terms of financial benefit to the firm (Zott, Amit, & Massa, 2011). Freeman and colleagues’ promising strategy is also explored elsewhere (Donaldson, 2021, 2023). But just as in Hart and Zingales’ account, the TVC model utilises stakeholder preferences, and preferences defy reduction to deep values. As Freudenreich and others have noted, because different individuals have different needs and have different values, each recipient in the final distribution of benefits by the firm will have a different understanding of what constitutes value (Freudenreich, Lüdeke-Freund, & Schaltegger, 2020). Stakeholder preferences can contradict basic values and can even controvert financial commonsense. We only need recall the famous example described in Klein, Crawford, and Alchian (1978) in which Fisher Body held up General Motors when surging demand for cars forced GM to buy its car bodies from Fisher Body (Zingales, 2000, p. 1637). The difficulties of the above two “values-as-preferences” models lie deeper, buried under the complex mechanics of economic reasoning. We recall that even the basic axiom of economic welfare, Pareto optimality (Sen, 1985), cannot reach all the way to deep values such as “fairness.” Relying as it does on the aggregate efficiency of multi-party transactions, the values-as-preferences approach is stymied by the theoretical impossibility of converting preferences to true values without remainder. A situation in which nobody can be made better off without someone being made worse off (Pareto optimality) is an attractive state of affairs. Yet if a single person is the complete owner of an entire island upon which ninety-nine other people live, then that island economy may be Pareto optimal while being little better than a slave state (Donaldson, 2021, p. 14). Such a state is hardly fair. Nor can the values-as-preferences model accommodate an individual agent’s meaningful commitment to a deep value. As Sen has noted, “commitment,” the very essence of a person’s relation to a deep value such as fairness, destroys the crucial assumption in a Pareto optimum “that a chosen alternative must be better than (or at least as good as) the others for the person choosing it” (Sen, 1977, p. 328). Real commitment functions as a trump card. Commitment is more than a ranked preference. The same holds true for another key component in modern economics, namely, rational choice theory. Rational choice theory remains the favourite option for sophisticated normative guidance in economic theory, and has proven powerful in solving hard to resolve tradeoffs in decision making (Bernoulli, 1954 [1738]; von Neumann & Morgenstern, 1944). But its drawbacks extend beyond the obvious biases recounted by behavioural economics. The driving element of rational choice is preference. If an individual prefers A to B, then she values A more than B (Hausman, 2013). But one’s preference may easily be an immoral one; my preferring a thing doesn’t make it valuable in itself (Donaldson, 2021). It is worth recalling the succinct denunciation of the preferences-as-values claim by Charles Taylor, who writes, “in instances where we are moved by a higher good, we sense that we are moved to value it because of what is good in it, rather than its being valuable because of our reaction” (Taylor, 1989, p. 74). Real-world difficulties follow from confusing preferences with deep values in rational choice theory, difficulties precisely similar to those encountered by the Hart-Zingales model discussed above. A preference by a company’s shareholders that the company should sell cigarettes to children cannot warrant the correctness of selling cigarettes to children. The language of preferences and the language of deep values referee separate language games.

A practical reasoning perspective on corporate integrity  181 Surrogacy Approaches Surrogacy approaches might remedy these problems. Such approaches put the value dimension of corporate decision making on autopilot. They grant what was shown above, the non-inter-translatability of the two languages of values and efficiency, but propose that an enlightened version of one language might serve as a surrogate for the other. To be specific, they hold that an adapted efficiency language can serve as a surrogate for a value language. A key assumption is that the two languages of efficiency and values recommend equally valuable outcomes so long as the decision time horizon is sufficiently long. Surrogacy approaches, thus, rely on a convergence in practice between what the language of values demands and what the language of efficiency promotes. Thoughtful executives and MBA students tend to be mesmerised by this idea: how tempting it is to suppose that what follows from optimising profits over the long term converges with ethical behaviour. Ethics can fly on economic autopilot. Little wonder that executives are attracted to the surrogacy approach: it offers a rationale for allowing efficiency languages to dominate corporate decision making while at the same time anesthetising unpopular decisions. There is something to be said for this idea. Before concluding that surrogacy is merely a handy crutch, consider the idea’s strengths. The pursuit of long-term profits falls in remarkable alignment with real-world ethics, and substantial convergence between ethics and profit is well-documented. The well-trampled area of research asking whether better ethics make for better profits shows significant convergence between ethics and profits. At a minimum, existing research forces sceptics to abandon the assumption that stockholders and other stakeholders engage in zero-sum games, in which shareholders benefit only at the expense of other stakeholders. Researchers have shown that the fortunes of the three major classes of stakeholders, i.e., shareholders, employees and customers mostly rise and fall together (Preston & Sapienza, 1990). Most, but not all, studies-of-studies in the area of ethics and profit indicate a significant positive correlation between ethics and profits, despite the fact that the correlation is weak (Margolis & Walsh, 2001; Roman, Hayibor, & Agle, 1999). The inherent difficulties of measuring ethics alongside profit, i.e., difficulties in finding a reliable measurement of “ethics” and of ensuring a proper lag time to clarify the direction of the causal arrow (ethics should fuel profits, not vice versa), mean that one cannot say with confidence that higher ethics on average yields increased profits. Perhaps it does and perhaps not. Maybe even the reverse is true. But one thing is clear: a meaningful convergence exists between long-term profitability and ethics, and it is no surprise that a high percentage of unethical behaviours turn out to be unprofitable behaviours in the long run. In short, the surrogacy approach contains more than a grain of truth, a fact that should be taken seriously as we contemplate solutions to the linguistic puzzle. To the extent they profess to accommodate deep values, the prevailing models of agency theory (Jensen & Meckling, 1976) and transaction cost economic theory (O. Williamson, 1996; O. E. Williamson, 1985) can be seen as surrogacy approaches. Agency theory searches for corporate governance mechanisms that can govern interactions where principals and agents have conflicting goals and seeks to limit the agents’ self-serving behaviour (Eisenhardt, 1989). Corporate executives who love luxurious jets buy them at the expense of the firm’s overall profitability; they engage not only in inefficient behaviour but also unethical behaviour (Hillman & Dalziel, 2003). This addresses the classic moral problem of conflict of interest. In the same vein, agency relationships may need to be reconstituted in the face of “moral hazard,”

182  Research handbook on organisational integrity where recklessness ensues. The “moral” in the concept of moral hazard is not accidental. In instances of moral hazard, the “efficient” and the “moral” are well aligned. In a related vein, transaction cost economics serves as solicitor to the deep value of fairness by lowering the transaction costs of self-interested contractors (Donaldson, 2012a). Fairness to shareholders may mean reducing transaction costs by outsourcing a product even when employees prefer vertical integration. It is possible to extend the ethical power of transaction cost economics and its collective action framework directly to the realm of values, a move successfully undertaken by Blair and Stout in their well-known “Team Production” model of stakeholder theory. In the Team Production model, a critical element of corporate governance, the firm’s board of directors, plays an important role expanding fairness by resolving firm-specific resource quandaries (Blair, 1995; Blair & Stout, 1999). The board of directors can achieve both more fairness and more efficiency by ensuring special rewards to employees who make firm-specific investments and hone firm-specific skills. These and other issues of fairness in collective action contexts have been skilfully addressed by Mahoney and others (Asher, Mahoney, & Mahoney, 2005; Kim & Mahoney, 2010). However, closer inspection reveals fatal weaknesses in all surrogacy approaches. The convergence between ethics and efficiency is powerful but not perfect. A case in point is Merck & Co’s decision in the 1980s to develop the drug Ivermectin for application to humans suffering from the tragic disease of River Blindness, one of many corporate instances where efficiency in the long run may not be able to justify a value-driven decision. In 1978, Dr P. Roy Vagelos, then head of the Merck research labs, decided to move ahead with the development of Ivermectin even though he anticipated losing money in the long run. His brilliant decision resulted in the near-eradication of one of the planet’s worst diseases (Merck & Co., Inc. (A) and (B), [BET 9-991-021 and 9-991-022, 1991], 1991). Here values were needed to trump long-run financial optimisation. Another instance occurred during the Covid-19 crisis when Moderna and Pfizer both committed unconditionally to enhancing the availability of the vaccines to patients in developing countries (Donaldson, 2022) (“Moderna’s Updated Patent Pledge,” 2022; Pfizer, 2022). Not only outside observers but the companies themselves agreed that making this commitment to the planet’s health was the right thing to do (Donaldson, 2022; Santoro & Shanklin, 2020). (Even if disingenuous and poorly executed, the commitment seems the right one to make.) Still another case, this time tragic rather than heroic, involved the Japanese Chemical Company, Chiso. Since the early 1950s Chiso dumped mercury into the bay at Minamata, Japan. The mercury triggered a series of bizarre and crippling birth defects on a tragic scale. While the true cause of the epidemic, the mercury effluent, was well known to the company by 1959, the government did not act to prevent chemical dumping until 1968 (“Japan’s Minamata Bay Called Mercury Free,” 1997). Nonetheless, no reasonable executive can doubt that Chiso had the moral obligation to not dump mercury during the intervening years and to defend the deep value of health, even if it meant lowering long-run profits. (Chiso’s mercury emissions fell within Japanese government guidelines at the time of the dumping.) To be sure, law has an important role to play in defending deep values. But law cannot enforce imperfect duties in cases like those of Merck, or of Pfizer and Moderna, to reach above the threshold of minimum moral behaviour. Nor can it enforce moral minimums in instances such as Chiso. When legal institutions are weak, as happens especially in developing countries, or where technology races ahead of the law’s ability to regulate (as when the

A practical reasoning perspective on corporate integrity  183 dangers of asbestos or mercury poisoning are known by insiders before regulators), then only value-driven corporate decisions provide a remedy (Donaldson, 2012b). For these reasons the remarkable convergence between ethics and profits merits our attention. Perhaps the convergence can play a role in some final, workable solution to the values/ efficiency language problem. But, as shown above, surrogacy by itself is not a solution. Surrogacy relies upon an illusion that misinterprets the reach and limits of two kinds of language.

THE SHAPE OF A SOLUTION A full solution to the language problem exceeds the reach of the present analysis. However, the solution’s shape can be sketched. It is to integrate values and efficiency into a single-flow model that stops short of requiring inter-translatability between the two languages. This represents a meta-approach for achieving synchronicity but not full translatability between deep values and efficiency, which is the unfulfilled promise of the surrogacy approach. Such a meta-approach is agent-centred and action-guiding (i.e., prescriptive), and guides action by marshalling facts and deep values into a corporation’s choice of actions. Because it must be prescriptive, such an approach cannot be one that simply uses theoretical reason to reach conclusions expressed solely in the form of mathematical relations or states of affairs in the world (such as correlations, causes, desires, probabilities, dispositions, wants, preferences, past facts, i.e., historical claims, and future facts, i.e., predictions, and counterfactual conditionals). All such staples of theoretical reason lack the prescriptive power required of genuine values; they lack the imperatival “do this action because it is the right thing to do” prescriptive power that moral action requires. Theoretical reasoning is a powerful tool for rational decision making but stops short of providing an all-things-considered guide for action. Hence it is practical, not theoretical, reasoning that is needed. The topic of practical reason is gaining traction in management theory (Feldman & Orlikowski, 2011; Flyvbjerg, 2006; Nonaka & Toyama, 2007; Reinecke & Ansari, 2015; Sandberg & Tsoukas, 2011; Young, 2001) and has always been a staple in moral theory (Aristotle & Apostle, 1981; Neiman, 1999; O’Neill, 1998; Raz, 1999; Wallace, 1990). In a practical syllogism (Schreck, van Aaken, & Donaldson, 2013) the logical process moves from goals and facts to actions. The conclusion of a piece of practical reasoning is, surprisingly, not a proposition, but an action. Consider a hypothetical case: Firm Y’s act of creating diverse hiring pools. Why did Firm Y do so? Let us suppose that it is because Firm Y values fairness and believes that creating diverse hiring pools is the most efficient means to achieve the value of fairness. This simple piece of practical reasoning exemplifies how an action is inferred by facts that are in turn connected to an agent’s value. The inference, notably, is not a proposition, but an action justified by facts working in tandem with values. The agent (in this case the firm) reasons from an agent-centred perspective in a way that marshals both facts and values to produce diverse hiring pools (Donaldson, 2021). For our purposes, a simple, generic formula expressing practical inference will suffice: Focal value  +   Facts → Justified action

An “ideal” practical inference must meet special conditions. Ideal action entails ideal practical reasoning. An ideal inference means a fully justified action, one not only justified in light of

184  Research handbook on organisational integrity facts and a particular deep value, but by the full panoply of deep values. This flows from what has been called the “synoptic” character of deep values (Donaldson, 2023). The moral authority of a deep value must be compatible with other deep values in the specific context of the action. For example, the moral authority of the right to free speech must be adjusted sometimes for its compatibility with the right to physical security. The act of yelling “Fire!” in a crowded theatre is famously unwise. An ideal corporate leader engaged in making a practical inference under ideal conditions would need to possess not only omniscience about the full consequences of a given action for profit, shareholder financial gain, return on investment, etc., but about the compatibility of the action with the entire panoply of deep values. The ideal act is, as it were, the “all-things-considered” best action. It signifies the singular right thing to do under those particular circumstances after accounting for all relevant facts and deep values.3 In short, it is a perfectly wise piece of practical reasoning. Greeks referred to the ability to make all-things-considered wise decisions as “phronesis,” or “practical wisdom” (Aristotle, 1962). The perfectly wise action stands as a pure ideal, one impossible to achieve in actual practice. But knowledge often benefits from the guidance of ideals: frictionless planes in physics and perfect markets in economics are two well-known examples. In analysing the problem of value-based decision making, the concept of ideal practical inference proves to be especially helpful because of its synoptic condition, which implies that the aim of ideal action is not merely the satisfaction of a value, nor even the satisfaction of a deep value, but the satisfaction of the full panoply of values. If for example, the creation of diverse hiring pools in the service of the deep value of fairness involves search strategies that violate the right to privacy, the practical inference that led to their creation would not be “ideal.” This offers an important clue. The need to integrate all deep values into a single whole draws attention to the unique capacity of practical inference to integrate genuine deep values with that of efficiency. Surprisingly, in both their structural axioms and real-world consequences, efficiency languages ultimately rely upon deep values. This holds for all pedigreed efficiency languages, including economics, finance, and corporate governance. The validity of these languages rests ultimately upon a selective set of deep values. Hidden away and seldom mentioned is the truism that the act of contracting, for example, implies the value of keeping contracts. The implicit or explicit commitments that managers make to shareowners, for example, imply that breaking those commitments is normatively wrong. We saw above how agency theory pursues efficiency through ensuring that the commitments of agents are honoured for principals. Our disgust at C-suite managers who loot their corporations for self-interested reasons, using sweetheart relationships with outside remuneration consultants who build lavish pay packages, is a case in point. Whatever its failings, the principal-agent model of corporate governance gets one thing right about values: almost all shareholders invest in a company on the assumption that an implied contract or commitment exists between them and the company to advance the financial value of their shares. Conflicts of interest are akin to broken promises to shareholders. A company that fails to honour this key implicit promise to enhance shareholder welfare violates the deep value of contract and promise-keeping. We recall that the board of directors’ traditional role in governance is that of oversight, an oversight that guards shareholder financial interests (Hillman & Dalziel, 2003). Another bedrock value informing efficiency languages is property. If people lack the right to control and benefit from property (although property’s control rights are limited by law), the market economic system is meaningless. Markets, indeed, capitalism itself, assumes the right to own property, a right that is a deep value enshrined in global agreements such as the United

A practical reasoning perspective on corporate integrity  185 Nations’ Universal Declaration of Human Rights (United Nations, 1948). The same essential role is played by the right to freedom, especially that of exchange. Without the right to freely buy, sell, contract, and so on, markets dissolve. Without such deep values, the extrapolation from perfect markets to the goal of efficiency becomes impossible, as does the welfare concept of Pareto optimality itself. Social welfare is a deep value, whether expressed as Pareto optimality or some other measure such as Rawlsian justice (Rawls, 1999 [1971]), Sen’s capabilities approach (1997), or utilitarianism (Mill & Sher, 2001). Efficient markets bountifully lead directly to aggregate economic welfare, itself a deep value. While aggregate economic welfare may require synoptic adjustment alongside the values of justice or capabilities or happiness, few deny that it stands as a good in itself. Efficiency languages, then, entail deep value assumptions that are both axiomatic and consequential. Deep values such as property and freedom axiomatically underpin their meaning, while the value of aggregate economic welfare justifies their usage. The problem lies in the unfortunate size of the package of values underpinning efficiency languages, which is pitifully small. The deep values of property, contract, and free choice will not add up to the full panoply of human values; such a pittance of values will not add up to the expansive collection necessary for synopticity and, in turn, practically ideal decisions. The deep values of environmental sustainability, fairness, health, and integrity are missing from the selective set of deep values that are axiomatic and consequential for markets. These additional values are dead weight when animating efficient markets. Indeed, they are worse than dead weight; their inclusion is conceptually impossible. Yet these considerations suggest a solution. Because deep values underpin efficiency languages, the broader language of deep values might serve as a linguistic bridge between efficiency languages on the one hand, and the broader languages of deep values. Again, even efficiency languages require deep values and those deep values, however sparse, can serve as a common denominator for practical reasoning. Such a bridging approach would mean that comparing efficiency with deep values is no longer like comparing apples to oranges, but is more like comparing oranges to oranges. No longer like translating Chinese into mathematics, but more like translating Chinese into English. The deep value language for all choice is that of practical reason, instantiated by the model of ideal practical inference above. Practical reason is a bridging language that allows the full panoply of values to justify action. Adjusting the earlier flow diagram for practical inference by including the synoptic feature of value justification for wise practical reasoning can be expressed as in Table 12.1. Table 12.1

Synoptic feature of value justification for wise practical reasoning

Deep Values

↔

(Assumed synopticity)

Facts

↔

Action

In this expanded model of ideal practical inference, the output of an efficiency language can be assigned a deep value language designation, a move which allows the efficiency language to play an embedded role in the value-oriented process of practical reasoning. The deep values essential for efficiency in a for-profit corporation, those, for example, of contract keeping (honouring the implied contract of the firm to enhance its owners’ welfare) as well as the firm’s contribution to aggregate economic welfare, can now be integrated into the full panoply of values.

186  Research handbook on organisational integrity Consider an instance where Firm Y must decide about implementing a cost-reduction initiative. Again, to achieve a practically wise or “ideal” action using practical inference, Y should first possess as complete and accurate a factual picture as possible, and, next, incorporate a bundle of synoptically compatible deep values in order to act. Many facts could play a role in an ideal cost-reduction act, including historical costs encountered by similar initiatives at other firms, anticipated savings from staffing reductions, the initiative’s impact on product margins, the expected opportunity cost of management time spent on the initiative, relevant implications of competitive strategy theories, and so on. The wisdom of the action will be heavily determined by the accuracy of the corporation’s facts and how those facts affect long-term costs. But ideal action requires more than facts. Higher levels of justification are needed to secure the final justification of the cost-reduction initiative. Here is where deep values come in. Presumably, the net result of the initiative is to enhance shareholder welfare. If the initiative fails on this aim, the firm will concurrently fail to satisfy the higher-level deep value of keeping its promise to owners. Moreover, from a broader societal perspective, a firm’s action is only fully justified if it adds directly or indirectly to the aggregate economic welfare of society (Donaldson & Walsh, 2015). Finally, the action is fully justified only if it does not violate another deep value such as environmental sustainability, non-discrimination, or health. For example, if the firm’s cost-reduction strategy means using a cheaper industrial solvent in the production process, one that has deadly carcinogenic effects, then it could not qualify as an “ideal action.” This is true regardless of whether or not the solvent is banned by regulations. Consider, as shown in Table 12.2, the flow of practical reasoning for such a sample cost-reduction initiative at Firm Y. Table 12.2

Flow of practical reasoning for a sample cost-reduction initiative at Firm Y

Practical reasoning for a cost-reduction initiative at Firm Y Deep Values For example: ● Duty to owners. ● Aggregate economic welfare. ● Health, safety, environmental

 

↔

Facts For example: ● Anticipated profit. ● Effect on margins, revenues, and other

 

↔

Action ● Cost-reduction initiative.

financial measures.

sustainability, non-discrimina-

● Strategic insights.

tion, etc.

● Opportunity costs of initiative. ● Take-aways from other firms’ cost-reduction initiatives.

The hypothetical case illustrates the possibility of integrating efficiency languages with deep value languages in corporate practical reasoning. Of course, the practical inference above oversimplifies real-world decision making. But it demonstrates how facts can be bridged with deep societal values within a single-flow model. As noted at the beginning, business is at a crossroads. It must either become serious about corporate integrity and other deep values or abandon its high-minded pretence. As the above analysis shows, a serious answer to questions about values means first facing the stubborn problem of conflicting languages, languages with a vocabulary of deep values on the one hand, and languages with a vocabulary of efficiency on the other. For both practitioners and academics, the current approaches are ensnared by a language trap. The trap takes the form

A practical reasoning perspective on corporate integrity  187 of a language illusion. Attempts to escape the trap are themselves foiled by the very same illusion. A better approach involves shifting the locus of the problem to the acting agent, whose agency is subject to the constraints of practical reason idealised as practical wisdom. The practical inference process, as explained, can integrate the languages of efficiency and values into a single-flow model while at the same time avoiding the steep requirement of inter-translatability.

NOTES 1.

Freeman, Phillips, and Sisodia sketch a promising and more integrative model of stakeholder “value creation” that might resolve some of the multilingual difficulties (Freeman, Phillips, & Sisodia, 2020). This “value creation” approach, however, stands in need of further refinement owing to its reliance on stakeholder preferences, as discussed in this chapter. 2. Where the terms of “f” refer to the total value created for those stakeholders. 3. Left aside is the question of whether equifinalty is possible, i.e., whether alternative ideal decisions are possible under the same conditions.

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A practical reasoning perspective on corporate integrity  189 Pfizer. (2022). Pfizer to supply UNICEF up to 4 million treatment courses of novel COVID-19 oral treatment for low- and middle-income countries. Retrieved from www​.pfizer​.com/​news/​press​-release/​ press​-release​-detail/​pfizer​-supply​-unicef​-4​-million​-treatment​-courses​-novel. Porter, M. E., & Kramer, M. R. (2011). Creating shared value. Harvard Business Review, 89(1/2), 62–77. Preston, L., & Sapienza, J. (1990). Stakeholder management and corporate performance. Journal of Behavioral Economics, 19(4), 361–375. Rawls, J. (1999 [1971]). A Theory of Justice (revised ed.). Cambridge, MA: Harvard University Press. Raz, J. (1999). Practical Reason and Norms. Oxford: Oxford University Press. Reinecke, J., & Ansari, S. (2015). What is a “fair” price? ethics as sensemaking. Organization Science, 26(3), 867–888. doi: 10.1287/orsc.2015.0968. Rokeach, M. (1973). The Nature of Human Values. New York: The Free Press. Roman, R. M., Hayibor, S., & Agle, B. R. (1999). The relationship between social and financial performance. Business & Society, 38(1), 109–125. Sandberg, J., & Tsoukas, H. (2011). Grasping the logic of practice: Theorizing through practical rationality. Academy of Management Review, 36(2), 338–360. Santoro, M., & Shanklin, R. (2020). Human rights obligations of drug companies. Journal of Human Rights, 19(5), 557–567. doi: 10.1080/14754835.2020.1820315. Scanlon, T. M. (1998). What We Owe to Each Other. Cambridge, MA: Harvard University Press. Schreck, P., van Aaken, D., & Donaldson, T. (2013). Positive economics and the normativistic fallacy: Bridging the two sides of CSR. Business Ethics Quarterly, 23(2), 297–329. doi: 10.5840/ beq201323218. Sen, A. K. (1977). Rational fools: A critique of the behavioral foundations of economic theory. Philosophy and Public Affairs, 6, 317–344. Sen, A. K. (1985). The moral standing of the market. Social Philosophy & Policy, 1985(3), 1–19. Sen, A. K. (1997). Choice, Welfare, and Measurement. Cambridge, MA: Harvard University Press. Sunstein, C. R. (1994). Incommensurability and valuation in law. Michigan Law Review, 92(4), 779–861. Taylor, C. (1989). Sources of the Self: The Making of the Modern Identity. Cambridge, MA: Harvard University Press. United Nations. (1948). Universal Declaration of Human Rights. Von Neumann, J., & Morgenstern, O. (1944). Theory of Games and Economic Behavior. Princeton, NJ: Princeton University Press. Wallace, R. J. (1990). How to argue about practical reason. Mind, 99, 355–385. Whitehead, A. N. (1929). Process and Reality: An Essay in Cosmology. Cambridge: Cambridge University Press. Williamson, O. (1996). The Mechanisms of Governance. New York: Oxford University Press. Williamson, O. E. (1985). The Economic Institutions of Capitalism: Firms, Markets, Relational Contracting. New York: Free Press. Wittgenstein, L. (1953). Philosophical Investigations. Oxford: Basil Blackwell. Young, M. A. (2001). Rational Games: A Philosophy of Business Negotiation from Practical Reason. Westport, CT: Quorum Books. Zingales, L. (2000). In search of new foundations. The Journal of Finance, 55(4), 1623–1653. Zott, C., Amit, R., & Massa, L. (2011). The business model: Recent developments and future research. Journal of Management, 37(4), 1019–1042.

13. A discursive justification perspective on organisational integrity Dirk Ulrich Gilbert, Michael Behnam, and Maximilian J. L. Schormair

Designing business models and value chain activities to achieve organisational integrity (OI) is a key challenge for every organisation. In this context, OI refers to the ethical quality of the decision-making processes in an organisation; it depends on the structures, processes, and culture in which managers are embedded while making decisions and taking actions. Multinational corporations (MNCs) in particular must ensure their decisions sufficiently address urgent problems like climate change, corruption, child labour, and poor safety standards in global supply chains (Ballor & Yildirim, 2020; Gereffi, 2018; Gilbert & Huber, 2017) in ways that protect their license to operate and their legitimacy (Mena & Palazzo, 2012; Palazzo & Scherer, 2006; Suchman, 1995). Recent developments, including the war in Ukraine, protectionism, trade conflicts between the United States and China, and the COVID-19 pandemic, have intensified these challenges by imposing unprecedented burdens on the world economy, MNCs, and the ethical integrity of decisions with potentially global impacts (Contractor, 2022; Gereffi, 2020; Gok & Mehmetcik, 2021; Kano et al., 2020). In these fraught conditions, MNCs are critical to world trade: They control the vast majority of global production networks and are responsible for most foreign direct investment (Cohen, 2007). Through their political behaviours and connections with international policymakers and national governments, they also influence transnational governance frameworks (Ballor & Yildirim, 2020). We argue that such ever-increasing economic and political power of MNCs correlates with an increase of their ethical responsibilities for the consequences and side effects of their global operations. Unless MNCs increase their involvement in ethics management and pursue the utmost integrity, environmental and social problems and human rights violations appear likely to increase in severity (Buller & McEvoy, 1999; Donaldson, 2003; Sen, 1993; Ullah et al., 2021). In many cases, MNCs are becoming more transparent, due to a combination of trends. Digitalisation supports international expansions and sophisticated business models, while at the same time enabling corporate stakeholders to monitor corporate behaviour (Banalieva & Dhanaraj, 2019; Paine, 2003). In addition, MNCs like Nike, Exxon, Facebook, Volkswagen, and Deutsche Bank have discovered painfully how corporate misconduct and a failure to take stakeholder expectations seriously can undermine their legitimacy and customer acceptance of their products, services, and business models (Coglianese & Nash, 2021; Enrich, 2020; Ferrell & Ferrell, 2014; Gereffi, 2020; Unerman & Bennett, 2004). In this broader environment, OI offers a promising solution, because it can help firms avoid penalties for ethical failures and violations of the law, as well as protect MNCs from conflicts with stakeholders that may threaten their license to operate (Ete et al., 2022; Fuerst & Luetge, 2021; Schwartz, 2014). An integrity-oriented corporate environment also may encourage employees to adhere to espoused organisational values, increase their awareness of misconduct, and stimulate them to make better decisions (Tullberg, 2012). 190

A discursive justification perspective on organisational integrity  191 Researchers already have introduced several theoretical frameworks pertaining to business ethics that suggest ways to foster OI in international contexts (De George, 1993; Donaldson & Dunfee, 1999; Enderle, 2000; Gilbert & Behnam, 2006; Hoekstra & Kaptein, 2021; Timmermans, 2022; Watson & Weaver, 2003). At a more practical level, MNCs have implemented ethics management programmes that aim to create a culture of integrity, foster integrity behaviour, and discourage integrity violations (Hoekstra & Kaptein, 2021). Such programmes typically rely on compliance management systems to detect and prevent criminal misconduct, in line with existing laws and regulations, which are externally imposed rather than self-directed (Gilbert & Behnam, 2006). Substantial and recent research addresses the content, quality, and outcomes of ethics management programmes (Kaptein, 2009, 2015; Singh, 2011); rather than evaluate varied theoretical and practical approaches to business ethics, integrity, and compliance, in this chapter we accept an assumption underlying all these concepts, namely that no simple answer exists to determine whether any particular behaviour is ethical or unethical in international decision-making contexts, and no simple rule exists for how to achieve OI (Gilbert & Behnam, 2009; Gilbert & Rasche, 2007). Therefore, we seek to develop an adequate framework that can reveal the ethical integrity of decision-making procedures and their results for a given MNC. A key challenge in creating such a framework stems from the tension between relativism and universalism. A universalistic perspective implies that certain norms and values are universally correct and applicable to all societies (Donaldson & Dunfee, 1994). A relativistic perspective instead starts from the assumption that there are no universal moral principles or possible judgements of what is right or wrong; such decisions only can be made according to the context of the judgement. Because the lack of shared norms and values across MNCs and cultures increases the complexity of ethical decision-making and threatens OI, we attempt to devise a framework that can bridge the gap between universalism and relativism. Citing the concepts of discourse ethics, as developed by Jürgen Habermas, we present a discursive justification of OI, which we believe can handle the tension between a relativistic and a universalistic perspective (Gilbert & Behnam, 2006; Gilbert & Rasche, 2007; Schormair & Gilbert, 2021). Although we study MNCs herein, the proposed approach to OI also might be applied effectively to other organisations that operate across borders. This chapter starts with a definition of OI, before outlining differences between compliance and integrity as two key elements of every ethics management system. We propose that only a discursive understanding of OI can overcome the deficits of compliance strategies, which often dominate MNCs’ practices. That is, many MNCs adopt institutionalised ethics programmes, based on a culture of compliance, to detect and reduce unethical behaviour. But, as we show, more compliance and more regulations in MNCs do not automatically generate “better” decisions, nor do they motivate people to become “better” managers. What is needed instead is a culture of integrity, which can foster both compliance and a trusting environment within the organisation, allowing managers to reflect critically on what is right or wrong. Then, we offer preliminary suggestions for integrating discourse ethics into OI concepts. We also present a Habermasian approach to OI in MNCs, based on discursive justification, and describe some potential implementations in practice before drawing conclusions based on these insights.

192  Research handbook on organisational integrity

DEFINING ORGANISATIONAL INTEGRITY Integrity in organisations has been widely discussed, yet despite more than 70 years of research, the concept remains vague and ill-defined (Becker, 1998; Cox et al., 2021; Dodd & Dodd, 2014; Paine, 1994; Trevinyo-Rodriguez, 2007). Disagreement exists about the nature of integrity, its meaning, and its role in organisations (Barry & Stephens, 1998; Dodd & Dodd, 2014; Jacobs, 2004; Tullberg, 2012). We do not attempt to review existing literature on integrity; instead, we leverage prior studies to propose a definition of OI that aligns with a discursive justification perspective. Notably, an important distinction arises between integrity at the personal versus the organisational level. At the personal level, integrity refers to the quality of a person’s character; for example, a manager’s behaviour should be consistent with espoused values, and a person should be honest and trustworthy (Cox et al., 2021). A manager with integrity acts in accordance with a morally justifiable value system and is willing to change his or her opinion for good and well-justified reasons (Becker, 1998). Personal integrity also reflects moral courage and the ability to balance organisational loyalty with moral autonomy (Barry & Stephens, 1998). Empirical research affirms that personal integrity relates positively to trust in managers and a leader’s effectiveness (Ete et al., 2022; Palanski et al., 2015). In this chapter, though, our focus is on integrity at the organisational level. In this sense, OI goes well beyond integrity at a personal level; it requires much more than managers with good characters who display fairness and respect. “Good” managers with integrity may be a precondition of OI, but their decisions do not prevent organisations as a whole from producing unethical results (Palazzo, 2007). Individual decisions always are embedded in networks of cooperation at intra- and/or inter-organisational levels. Even individual decisions and activities that seem harmless might lead, in combination, to very negative results. Furthermore, good people can do evil things if they function in an evil context (Zimbardo, 2004). Being a person of integrity does not guarantee that a manager automatically behaves ethically when under pressure from the organisation (Verhezen, 2008). And as Kaptein (2022) shows, sometimes even good organisations can lead to unethical behaviour of employees. Therefore, OI depends on the structures, processes, and culture of the organisation in which the managers are embedded when making decisions and taking actions. In addition to being based on a concept of self-governance, such that it demands a critical reflection on the normative foundations of the organisation’s economic approaches, OI aims to create the structural preconditions for making decisions that will accord with ethically sound guiding principles (Paine, 1994; Ulrich, 2000). As a social phenomenon, OI also calls for adherence to certain ethical standards at both individual and organisational levels, and it facilitates moral reasoning and ethical conduct at both levels (Timmermans, 2022). In contrast with personal integrity, which largely reflects the ethos of the manager, OI establishes principles and values at the organisational level, which then function as both ideal goals and constraints on managers’ behaviours (Verhezen, 2008). To avoid subverting such principles and organisational values, OI requires their symbolic embrace and deep integration into the structures and processes of the organisation, such as in the form of ethics and compliance programmes, non-monetary reward systems, monitoring and risk management systems (Kaptein, 2009, 2015; Palazzo, 2007). With these distinctions in mind, a key question pertains to how firms can develop a comprehensive OI that includes normative, cultural, and structural preconditions of legitimacy and that also can serve as a moral grounding for the organisation. We propose that one way to develop a comprehensive view of OI is by drawing on Habermasian discourse ethics. This

A discursive justification perspective on organisational integrity  193 approach uses discursive justification to reflect critically on the normative foundations of an economic way of thinking to derive consensually validated moral standards about what is fair and just in an organisation. Such a discursively justified approach to OI may lead to consistency in organisations. It also implies that similar moral dilemmas get treated similarly, because all members adhere to generally accepted ethical standards, which are socially derived and consensually validated (Trevinyo-Rodriguez, 2007). Before we outline the Habermasian approach to OI though, we briefly discuss compliance and integrity as two key dimensions of every approach to OI. We do not accept the dramatic “compliance versus integrity” distinction, originally proposed by Paine (1994), and instead anticipate that compliance and integrity are not mutually exclusive. Still, their separate assessment can provide valuable insights for developing a comprehensive understanding of OI.

COMPLIANCE AND INTEGRITY IN ORGANISATIONS Compliance Rich conceptual and empirical research addresses compliance (Beeres et al., 2022; Driscoll et al., 1998; Eliason, 1999; McKendall et al., 2002; van Rooij & Sokol, 2021), and though we still lack full consensus, most authors agree that the goal of a compliance system in an organisation is to detect and prevent misconduct before harm occurs, by imposing a written set of standards formulated by a third party (Coglianese & Nash, 2021; Driscoll et al., 1998). The basic principle of compliance thus is reactive (Treviño et al., 1999). To prevent (criminal) misconduct, compliance efforts target meeting the demands of existing laws and regulations, which are externally imposed but also might be either soft or hard. They function as guidelines, though compliance standards also need to be company-specific and account for the work content, scale, and operational scope. Some standards focus exclusively on special content areas (e.g., insider trading, environmental protection, safety standards). Different stakeholders can function as norm-developing institutions that create compliance standards. Highly important stakeholders in this respect include legislative bodies, multi-stakeholder initiatives, management and other external institutions. For example, the Federal Sentencing Guidelines (FSG) that were compiled by the U.S. Sentencing Commission and came into effect in 1991 (Nagel & Swenson, 1993; Schwartz, 2014; Treviño & Brown, 2004) pioneered the creation of a legal framework for sentencing U.S. firms engaged in criminal activities. To encourage corporations to behave in a legally responsible way, the FSG significantly increased the costs of corporate misconduct while also providing monetary incentives for meeting compliance standards (Harrison & Freeman, 1999; Weaver et al., 1999). A compliance system also implies a zero-tolerance policy towards violations of principles. In turn, many managers try to avoid the burdens of decision-making, such as needing to reassess every single situation anew. Furthermore, it is not primarily the organisation itself that is supposed to stay out of trouble; most compliance programmes are designed to protect top management from blame and legal consequences (Rorie & Schell-Busey, 2021; Treviño et al., 1999). Different national legal incentives and duties for organisations have prompted MNCs to implement a wide range of compliance measures too, such as codes of conduct, compliance officers, ethics hotlines, information technology designs, whistle-blower protections, and training programmes (Coglianese & Nash, 2021; van Rooij & Sokol, 2021). Without any

194  Research handbook on organisational integrity “one-size-fits-all” approach to compliance, compliance programmes clearly must be customised to match the respective legal and cultural environments. Limits of Compliance Compliance regulations provide guidelines for economic action by MNCs and legal behaviour within organisational processes. But from a modern business ethics perspective, compliance strategies are limited endeavours that do not support real reflection on ethical norms (Gilbert & Behnam, 2006; Jacobs, 2004; Paine, 1994). Instead, they deprive people of the ability or right to clarify, intersubjectively, what they perceive as right or wrong. Compliance cannot inspire, because it focuses exclusively on what should not be done, rather than communicating values or rewarding moral self-governance. Moral self-governance in particular requires the absence of monitoring and sanctioning mechanisms, so that individual members can achieve moral autonomy in a trust-enhancing environment. Such a holistic orientation is unattainable with a compliance strategy, because no set of regulations is broad enough to encompass all relevant issues. Still, empirical evidence indicates that organisations with certain types of compliance programmes experience fewer compliance violations (Coglianese & Nash, 2021). The effects appear rather modest (Weaver, 2014). Top-level managers express scepticism about implementing international compliance procedures as a way to resolve or avoid ethical problems (Watson & Weaver, 2003). Other research also indicates that true compliance requires more than just a compliance system; it also demands a change in the organisational culture and managerial attitudes (Coglianese & Nash, 2021). Even if the norms created by a compliance programme are substantive, a key problem remains: The approach itself is non-discursive. It does not integrate stakeholders other than the norm-developing institution into norm-definition processes. As a result, the affected parties often view compliance programmes as window-dressing, implemented in response to external pressures (Weaver et al., 1999). As long as decision-making processes in the organisation remain unchanged and are not values-based, concerned stakeholders are unlikely to follow compliance standards willingly (Treviño et al., 1999). Instead, factors such as an organisational ethical culture are more important for ensuring ethical decision-making and reducing unethical conduct (Craft, 2013; Schwartz, 2014). Taking all these arguments into account, we predict that a compliance programme is of no value if it is not accompanied by personal commitment and a discourse-oriented integrity culture, which guides MNCs towards more socio-economically based value creation (Gilbert & Behnam, 2006; Weaver, 2014). Integrity Integrity, derived from the Latin term integer, implies a complete entity or wholeness. In an organisational context, wholeness can be understood as internal consistency among beliefs, words, and actions (Tullberg, 2012). A management system based on integrity follows a corporate value orientation as a guiding ideal and fosters consistency across the espoused values of an organisation and individual moral acts (Becker, 1998; Solomon, 1992; Tullberg, 2012). A basic principle of an integrity approach is reflected by changes to ethical governance mechanisms. That is, compliance assumes third-party governance; integrity instead defines a true ethical orientation based on self-commitment, self-governance, and careful reflections

A discursive justification perspective on organisational integrity  195 on business models (Gilbert & Behnam, 2006; Jacobs, 2004; Paine, 1994). The organisation embraces a voluntary orientation to higher principles, such as honesty, fairness, respect for the rights of others, and obedience to the law, which must align with and create an organisational environment that supports ethically sound behaviour (Ulrich, 2010). With regard to a discursive approach to OI by MNCs, as described in this chapter, the reference point for a justification of values must be a universal moral point of view that can bridge cultural differences (Donaldson, 1989; Donaldson & Dunfee, 1994; Gilbert & Behnam, 2009). But MNCs operate in multicultural environments, where different norms and values often lead to conflicts and no overarching moral authority exists. Disagreement in moral values is possible, and conflicting moral positions in different cultures can be equally valid (Donaldson & Dunfee, 1999). Thus, creating shared norms and values is necessary to establish foundational standards for desirable interactions with internal and external stakeholders (Gilbert & Rasche, 2007; Watson & Weaver, 2003). A strong integrity culture that fosters freedom of expression and open communication can provide opportunities for discourse among relevant stakeholders and facilitate the consistent development of values. The most important aspect in this context is to let management “walk its talk” and demonstrate that the advocated values are taken seriously throughout the organisation (Paine, 1994). Managers must show that they care about ethics, such that true ethical leadership provides consistency between organisational values and actions (Treviño et al., 1999). Therefore, the norm-definition process should support respective structures and systems in the organisation that allow for dialogical clarification and justification of norms and values. Whereas decisions based on responsibility are made for affected people, responsiveness supposes that these interested parties already have been included in the decision process (Ulrich, 2010). Thus, integrity-based concepts can define norms with affected stakeholders, not for them. Limits of Integrity An integrity approach is broader and more demanding than a simple compliance orientation (Gilbert & Behnam, 2006; Paine, 1994). Its holistic view on business ethics makes it both valuable and problematic at the same time. The depth and integrated nature of the integrity approach may hinder its applicability (Lozano, 2001; Ulrich, 2010). In addition, managing for integrity entails processes of cultural change within organisations, but culture is a “fuzzy” phenomenon, so discussions of managing culture tend to be generalising and based on unrealistic assumptions. In many cases, companies lack any practical ideas of how to initiate cultural change processes to implement guiding values in their organisation (Bussmann & Niemeczek, 2019; MacLean et al., 2015). Another obstacle arises due to the discourse-oriented character of an integrity strategy. It demands the inclusion of all relevant stakeholders in decision-making and communication processes, but organisations have far too many stakeholders to consult them all directly—and often only limited experience in designing stakeholder dialogues (Mitchell et al., 1997; Ulrich, 2010). The Need to Integrate Compliance and Integrity in Organisations The preceding analysis of both strategies suggests that limiting individuals with a compliance programme is just as risky as imposing exaggerated moral expectations on people by

196  Research handbook on organisational integrity embracing an integrity strategy. The latter leaves the moral reasoning process entirely up to the good character and intentions of the individual; the former can never define all areas of (mis)conduct. These shortcomings allow for opportunistic behaviour in response to both strategies. But a well-balanced combination of compliance and integrity measures might forestall such behaviour and shape awareness through complementary elements (Eliason, 1999; Jacobs, 2004; Treviño et al., 1999). A mediation between the abstract ethical principles of an integrity approach and the narrowness of compliance standards also requires a comprehensive concept of OI. From our perspective, this comprehensive concept should provide MNCs with opportunities to implement integrity and compliance simultaneously, such that they create both “discourse-opening” and “option-excluding” moments. That is, in its discourse-opening role, the concept should outline a framework for communication processes, in which MNCs and their stakeholders can discursively justify conflicting norms and values and further develop a normative basis of action within the company network (integrity). Then, with regard to the individual behaviours of economic actors, option-excluding moments must ensure that immoral opportunities are not taken into consideration by headquarters or subsidiaries (compliance). To merge such compliance and integrity notions, we introduce a Habermasian approach to organisational integrity in MNCs in detail next.

MERGING COMPLIANCE AND INTEGRITY: A HABERMASIAN APPROACH TO OI IN MNCs The Integration of Discourse Ethics Because MNCs operate across borders by definition, their pursuit of business regularly creates conflicts due to different cultural norms and values. In response, MNCs must constantly consider whether the norms and values promoted by headquarters, host countries, or both should act as the primary frame of reference for managing conflicts (Donaldson & Dunfee, 1999; Hendry, 1999; Kano et al., 2020). A classical problem involves whether to choose a relativistic or a universalistic perspective. Following lines of thought offered by most contemporary scholars (Donaldson & Dunfee, 1994; Habermas, 1990; Ulrich, 2010), we posit that if one deduces a normative ethical conclusion from an empirical “is” of norms and values (relativism), that person would be committing a logical mistake, called a “naturalistic fallacy” (Moore, 1903/1951). To avoid such relativism, the approach to OI we propose in this chapter reflects a universalistic perspective. For MNCs to be coherent and adaptable, it is categorically important for them to base their OI on universally valid convictions that can define a basis for a “moral point of view”. These principles would need no further discussion, because they meet the criteria for universal validity and thus must be reasonably accepted by all stakeholders. There are three approaches to derive such principles. First, we can find a number of (more or less) universally accepted norm catalogues, like the Universal Declaration of Human Rights by the UN, conventions published by the International Labour Organisation, the OECD Guidelines for Multinational Enterprises, or the UN’s Global Compact (Gilbert, 2010; Kell, 2005; Kell & Levin, 2003). Second, Donaldson and Dunfee (1994, 1999) propose integrated social contracts theory (ISCT) to conceptualise business ethics in an international context (Barry & Stephens, 1998; Boatright, 2000; Gilbert & Behnam, 2009). In their approach, Donaldson and Dunfee (1994,

A discursive justification perspective on organisational integrity  197 p. 254) follow the contract tradition of Locke (1690/1948) and Rawls (1971), such that they draw a distinction between two types of contracts: “The first is a normative and hypothetical [macro] contract among economic participants [which] defines the normative ground rules for creating the second kind of contract. The second is an existing [micro] contract that can occur among members of specific communities, including firms, departments within firms, national economic organizations … and so on”. In line with other authors (Buller & McEvoy, 1999; De George, 1993), Donaldson and Dunfee emphasise several universal hypernorms (e.g., human rights, respect for human dignity, good citizenship) that are ethical principles fundamental to human existence. These hypernorms then constitute the basis of macro contracts and act as overarching principles to limit the design and interpretation of micro contracts in specific local communities (e.g., local codes of conduct for subsidiaries of MNCs). Interesting and relevant for our approach to OI is that Donaldson and Dunfee (1999, p. 52) deliberately decline to provide a justification for hypernorms in ISCT. They admit hypernorms may be justified in different ways, but the particulars of these justifications are not relevant to their theory (Boatright, 2000). As a consequence, Donaldson and Dunfee (1999, p. 23) present ISCT as “independent from the truth of any particularly traditional ethical theory”. However, as Boatright (2000, pp. 454–456) asserts, this lack of moral justification represents a major deficit of ISCT. From our perspective, it must have a significant role in how hypernorms ultimately are justified. To develop a framework of OI in MNCs, we need particular ethical theories to provide justifications; it is not possible to make ethical judgements about the right or wrong of norms and values in MNCs without having some justifying ground on which to legitimise them. Third, we might adopt formalistic ethical theories, like Kantian moral philosophy (Kant, 1788) or the discourse ethics developed by the German philosopher Jürgen Habermas (1990, 1992, 1993, 1999). In this chapter, we draw on the central ideas of Habermasian discourse ethics and their adaptation to economic theory (Gilbert & Behnam, 2009; Gilbert & Rasche, 2008a; Schnebel & Bienert, 2004; Ulrich, 2010) for three reasons: (1)

This formalistic ethical approach refers to pluralistic societies that can no longer draw on a single moral authority. Discourse ethics proposes not predefined norm catalogues but rather a procedure of moral argumentation for arriving at a universally accepted consensus (Habermas, 1990). The discursive approach is universally valid, because reflexive justification facilitates self-contradictions of argumentative contestation, or so-called performative contradiction. This contradiction cannot be resolved without confronting the problem once again (Finlayson, 2000; Habermas, 1990). For our approach to OI, the clarification that discourse ethics does not claim to provide an ultimate justification for norms and values is critical. That is, it describes practically existing possibilities and prerequisites to achieve an argumentative understanding among human beings. In this sense, discourse ethics can avoid the naturalistic fallacy while also providing a necessary justification of norms and values in MNCs to bridge the gap between a relativistic and a universalistic perspective. (2) Habermas attempts to bring moral philosophy into the realm of political and social science, which in turn can be applied easily to organisations and MNCs. His approach seeks to develop a system of morally justified procedures to validate moral choices, particularly related to how society and institutions should be organised (e.g., companies, social standards). In this context, the theory comprises both a well-founded basis for

198  Research handbook on organisational integrity justifying norms and facilitating voluntary self-governance (integrity) and a conceptual example of how to critically examine and implement everyday norms (compliance). (3) Discourse ethics is a well-developed philosophical approach that can apply to business ethics in general and OI in particular (Atif, 2019; Ruebottom, 2018; Schultz & Seele, 2020). Habermas (1984, 2007) outlines a normative theory of communication, which suggests how people (stakeholders) should interact and communicate to coordinate their actions. As we show, discourse ethics provides concrete guidelines for firms to create pluralistic stakeholder value through the discursive justification of diverging stakeholder perspectives, particularly in situations in which value pluralism leads to conflicts among them (Schormair & Gilbert, 2021). In this regard, discourse ethics can provide a solid theoretical framework for critically analysing business-related problems (e.g., stakeholder management, international accountability standards, political corporate social responsibility, designs of OI approaches) (Atif, 2019; Gilbert et al., 2011; Gilbert & Behnam, 2009; Gilbert & Rasche, 2007; Scherer et al., 2016; Scherer & Palazzo, 2007; Unerman & Bennett, 2004). In the following, we briefly outline the basic principles of discourse ethics necessary to develop a comprehensive approach to OI from a discursive justification perspective. Habermasian Discourse Ethics With discourse ethics, Habermas (1990, pp. 196–198) extends Kant’s categorical imperative beyond its “monological” reflection and introduces a moral argumentation procedure that is based on intersubjectivity. Habermas argues that only norms that meet with the consent of all stakeholders, in their role as participants in a practical discourse, can be considered valid. In its simplest form, discourse ethics provides MNCs with a “principle of universalisation”, which constitutes a fundamental guideline for moral reasoning. The principle states: “For a norm to be valid, the consequences and side-effects that its general observance can be expected to have for the satisfaction of the particular interests of each person affected must be such that all affected can accept them freely” (Habermas, 1990, p. 120). Notably, discourse ethics takes the consequences of actions seriously into account; they represent the core of the validity of moral norms. The principle of universalisation also enables consensus on generalisable norms, while rejecting the basic assumption of ethical relativism (Habermas, 1990). Discourse ethics is universalistic in this sense, and applicable to MNCs, in that Habermas (1990) avoids proposing substantive normative guidelines for actions and instead refers exclusively to a procedure that allows for the redemption of normative claims to occur. An ethics approach can be termed “universalistic” only if it proposes a moral principle that does not reflect the norms or values of a particular culture, group, or epoch. In every discourse, participants must prove that their moral principles are not just reflections of their own mental attitudes, prejudices, and values but instead reflect the group as a whole. In turn, Habermas (1990, p. 121) proposes the principle of discourse ethics, which establishes the procedure for testing the universal validity of norms and values. This principle states: “Only those norms can claim to be valid that meet (or could meet) with the approval of all affected in their capacity as participants in a practical discourse” (Habermas, 1990, p. 66). It is precisely this proceduralism that sets discourse ethics in opposition with the fundamental assumptions of concepts like ISCT and also highlights the need to distinguish the procedure

A discursive justification perspective on organisational integrity  199 of discourse from the substantive content of argumentation. Habermas (1990, p. 122) states further that “Any content, no matter how fundamental the action norms in question may be, must be made subject to real discourse (or advocatory discourse undertaken in their place)”. For norms to gain acceptance, all people need to question their own subjective opinions and freely consent to the discussed issues. The group also must verify that the principles are reciprocal. Accordingly, the parties involved should acknowledge that their positions remain valid when reversed (Forst, 2014; Habermas, 1990; Hendry, 1999; Schormair & Gilbert, 2021). Norms are applicable universally only if they are approved within a process of argumentation. In other words, norms are not deduced from existing guidelines but rather are brought into being through consensus in a practical discourse. Drawing on the principle of discourse ethics, Habermas (1990, pp. 86–94) also derives discourse guidelines, collectively termed the “ideal speech situation”, to meet demands for a more advanced concept of communication, which is a prerequisite for both a critical reflection (integrity) and an implementation of norms and values (compliance). Habermas claims that anyone who tries to participate in argumentation, by that very undertaking, implicitly accepts general pragmatic presuppositions, which have a certain normative content. In brief, the argumentation carried out in a discourse ensures that all those concerned in principle take part, are treated equally, and search for truth in a cooperative way. Discourses should be free from both constraint and structural forms of power. In a discourse, nothing coerces anyone, except the force of the better argument. Finally, Habermas introduces the postulate of seriousness or authenticity. A discourse must be free of deception or even illusion when expressing intentions and performing speech acts. We presume these principles counterfactually, even if people do not usually act that way (Habermas, 1993, pp. 54–60). Criticisms assert that Habermas has not been able to provide a sufficient justification for discourse ethics, and in particular the principle of universalisation (Finlayson, 2000; Spaemann, 2000). Finlayson (2000) even proposes that neither Habermas nor his followers have succeeded in providing a formal derivation. However, as a crucial point, Habermas (1999, p. 42) does not claim to provide a formal or ultimate derivation of the principle of universalisation. The concept instead outlines existing, practical possibilities and prerequisites to achieve an argumentative understanding among human beings by abduction (Habermas, 1999, pp. 41–43). In this context, abduction describes an informal process by which researchers come up with “an inference to the best explanation in which a range of different pragmatic criteria fill out the relevant superlative” (Finlayson, 2000, p. 331). The recent advancements of Habermasian ethics by Forst (2012, 2014), as well as current developments in deliberative democracy by Habermas (1996) and authors like Dryzek (2000), shift focus towards macro-level institutional actors, such as governments, firms, and non-governmental organisations. The guiding idea remains intact, though: free, independent participants in a process of discursive justification, guided by several criteria, exchange reasons and defend their points of view in accordance with what Habermas (1996) calls “the force of the better argument”. Outlining a Habermasian Approach to OI in MNCs We have argued that OI aims to create normative, cultural, and structural preconditions for making decisions in accordance with a set of ethically sound guiding principles. Our approach to OI takes this claim seriously and relies on the conscious integration of compliance and integrity through discourse ethics and its basic moral principles. The approach to OI assumes

200  Research handbook on organisational integrity a reasonable, analytical decision-making process at the organisational level and draws on the principles of discourse ethics that function as ideal goals, as well as a constraint on managers’ behaviour. Our approach to OI takes the universal moral point of view of an integrity strategy as a basis for giving instructions for individual compliance programmes and local adaptations of specific guidelines in MNCs. In the tradition of classical and social contracts theory (Gauthier, 1986; Keeley, 1988; Locke, 1690/1948; Rawls, 1971), and analogous to ISCT (Donaldson & Dunfee, 1999), we propose designing a decision-making process for the justification and implementation of norms and values in MNCs in a two-stage manner, comprising the macro and micro level. As we have outlined elsewhere (Gilbert & Behnam, 2006), the two stages represent distinct, closely related types of contracts: a theoretical macro-contract that defines the normative basis to appeal to all MNC stakeholders and a micro-contract that assigns practical ethical obligations to members in particular host countries. Both stages are based on Habermas’s discourse ethics, so we call this concept a Habermasian approach to OI in MNCs (Figure 13.1).

Figure 13.1

A Habermasian approach to organisational integrity in MNCs

At the macro level, the principle of universalisation, the principle of discourse ethics, and discourse guidelines together define the normative basis of the Habermasian approach to OI in MNCs, communicated to and shared among different stakeholders within the organisation. These principles are complemented by existing norm catalogues (e.g., codes of ethics) and compliance programmes. Whereas ISCT and other deductive approaches in business ethics directly derive norms, the Habermasian approach only prescribes how discourses for norm justification should be designed, without imposing specific norms in terms of content. A practical discourse thus is a process that follows the discourse guidelines, according to

A discursive justification perspective on organisational integrity  201 which a rationally motivated agreement about conflicting norms is achieved by creating an intersubjective understanding among, and thus approval from, all affected parties. (Habermas, 1990). Assuming such consent, the integrity approach becomes operational, simply because existing norm catalogues and existing compliance programmes with MNC-wide validity, both located at the macro level, are not simply imposed on affected stakeholders but can be subject to discursive verification. To ensure the legitimacy of norms, all stakeholder groups also must have the right to participate in practical discourses at the micro level, where the discourse guidelines outline a certain procedure of argumentation. Affected stakeholders at the micro level then introduce conflicting contents of norms into the process of justification. During this process, the norms get tested in terms of their universal applicability, whether they are intersubjectively accepted as consensus-capable or rejected as not acceptable for consensus (Habermas, 1990, p. 103). The outcomes of practical discourses then may range from consensus to dissensus between stakeholders (Schormair & Gilbert, 2021). If a successful agreement on a norm is not easy to achieve or not an immediate option, an OI based on the idea of discursive justification offers three options for stakeholders, who might (1) foster discourse and promote institutions and structural preconditions in an organisation to support deliberation; (2) enter into bargaining processes and try to find a compromise; and (3) accept dissent but at least agree to disagree after a process of discursive justification (Gilbert & Behnam, 2009; Habermas, 1999). A Habermasian approach to OI requires that managers of headquarters and host countries, as well as all employees, create a mutual understanding of the content and meaning of norms, values, and compliance regulations through argumentation to identify the correct course of action in any specific situation. Such a procedure is critical; no general guidelines proposed at the macro level can provide guidance for every possible individual act. The opportunity to specify, adapt, and reject norms ensures that there are not only option-excluding but also discourse-opening moments in the decision-making process of the MNC. The willingness to engage in practical discourses at the micro level is an expression of a basic attitude to reach an understanding of, and thus meaningfully justify, the legitimacy of corporate decisions. Consequently, norms and compliance programmes not accepted in an unconstrained manner need to be reformulated or eliminated at the macro level. Practical discourses lead to continuous assessments and improvements of the normative contract proposed at the macro level, and they also provide affected stakeholders at the micro level with guidance in their specific actions. The implementation of the Habermasian approach to OI in MNCs clearly is challenging. Practical discourse in MNCs is never free of domination and constraints (Spaemann, 2000), and the ideal speech situation that Habermas proposes relies on idealised assumptions. Real-world discourses differ substantially from this ideal. But, in line with other scholars (Power & Laughlin, 1996; Ruebottom, 2018; Schnebel, 2000; Ulrich, 2010; Unerman & Bennett, 2004), we believe in the counterfactual potential of discourse ethics to be (at least) partially achieved in MNCs. A debate based only on a simple dichotomy between fully implementing the theoretical ideal of discourse ethics in organisations and implementing no elements of the concept is nonsensical. As Unerman and Bennett (2004, 688, 692) conclude, “there is a continuum of possible positions between these two extremes, with the counterfactual potential of the ideal speech situation [which] might have the potential to introduce a greater degree of equity into the determination of corporate responsibilities, and the morality of corporate behaviour, than would be the case in the absence of debate informed by these procedures”. With this

202  Research handbook on organisational integrity background, our approach to OI can enable MNCs to deal with values-based conflicts, as well as gain and maintain legitimacy, through a process of rational discourse. By drawing on Habermasian discourse ethics, MNCs have a normative point of reference to overcome the dualism between compliance and integrity and increase their chances to cope with the tension between universalism and relativism.

ORGANISATIONAL INTEGRITY IN PRACTICE: A DUALITY OF COMPLIANCE AND INTEGRITY IN MNCs Drawing on our findings, and the proposed Habermasian approach to OI in MNCs (Figure 13.1), we can describe how the dualism between compliance and integrity might be overcome in practice and a duality between compliance and integrity can be achieved. As described by Giddens (1984), duality in this context means that the structural properties of OI are both the medium and the outcome of on-going compliance and integrity practices that constitute the system of OI. The Habermasian approach to OI in MNCs describes a recursive relationship between compliance and integrity. Its compliance character entails written sets of principles (e.g., child labour standards), implemented at the macro level, to provide employees in headquarters and host countries at the micro level with a framework of option-excluding regulations. At the same time, it features integrity, because the initiative exposes MNCs to value orientation and discursive clarification of the normative bases for moral reasoning. Managers and employees in headquarters and host countries become actively involved in practical discourses with affected stakeholders, the organisation opens itself for self-governance and a thorough dialogical implementation of predefined standards may be possible. The underlying culture involved in the Habermasian approach to OI in MNCs also ensures that the concept fosters discourse-opening moments, through the freedom of expression it provides in practical discourses in headquarters and host countries. It allows for option-excluding moments, because stakeholders at the micro level are limited in their actions by the macro-contract. To ensure economic efficiency in management and production processes at the micro level, affected stakeholders can be exempt from time-consuming discourses, as long as macro regulations are based on a consensus. It is important to emphasise that practical discourses only take place when one or more stakeholder groups questions the validity of certain norms and values. As a consequence, the most critical points in establishing an integrity culture in MNCs for high-level management are to demonstrate that they really care about local needs and circumstances and that they show consistency between the norms and values derived out of the discourses and their actions at the macro level. When managers keep promises, inspire trust, and exhibit a heightened sense of ethical awareness, firm misconduct is much lower than when employees perceive that managers behave unethically (Craft, 2013; Palanski et al., 2015; Treviño & Brown, 2004). The Habermasian approach to OI in MNCs also demands compliance with (consensus-based) predefined requirements at the macro level. Headquarters communicates the MNC’s policies for moral behaviour (e.g., codes of conduct, selected International Labour Organization principles) and compliance to local units, though they still must be adapted to local economic practices. The possibility of applying guidelines to the geographic location, industry sector, and size of production facilities in host countries represents a discourse-opening moment if the MNC clarifies the points of modification with stakeholders. Affected stakeholders need to

A discursive justification perspective on organisational integrity  203 be involved actively in the justification of company-specific regulations instead of just reproducing them. The dialogical justification of norms, not just their plain application, therefore is central to the Habermasian approach to OI discussed in this chapter. We argue that sustainable ethical reasoning at a local level can be accentuated through discursive justification. It is not enough to apply predefined standards; rather, it is necessary to justify actions by arguments, where they occur in the first place, in the local context. Only by referring to the local economic context can stakeholders gain reasons for or against certain regulations within discourses. In line with the idea of responsiveness, local discourses at the micro level offer a means to maintain affected stakeholders’ freedom to issue specific interpretations of what they consider morally correct or not in a particular conflict situation. Norms that are dialogically justified and locally specified in such a way lead to a higher degree of stakeholder acceptance; the integrity approach thus is taken fully into consideration (Ulrich, 2010). With a comprehensive approach to OI, the development of an integrity culture is equally as important as the enforcement of requirements proposed at the macro level by existing monitoring and sanctioning systems (e.g., reporting, reward systems). Managers in home and host countries take a leading role in installing and implementing these mechanisms. However, option-excluding moments (compliance) need to be limited to a certain extent. According to a Habermasian approach to OI, employees, suppliers, and other stakeholders have the power to question norms and compliance regulations, as well as to monitor and sanction systems in practical discourses. The discourse-opening nature of the Habermasian model also explicitly does not ignore the pragmatic restrictions that exist within decision-making processes (e.g., limited time for discourse, the need to monitor employees), which can limit opportunities to reflect on conflicting norms and values. However, from a business ethics perspective, economic reasons are not superior to moral reasons per se (Ulrich, 2010). Implementing the Habermasian approach to OI should make decision-making processes fairer and alter the existing situation in many MNCs, which continues to be characterised by a hierarchical structure and a traditional assignment of roles between headquarters and stakeholders in host countries. Stakeholder engagement is at the core of our Habermasian approach to OI. By drawing on the previously outlined discourse guidelines, we offer precise procedures for how to design and maintain dialogues among people from different cultural backgrounds. Nevertheless, the identification of relevant stakeholders and their integration into decision-making processes remains one of the key challenges of MNCs when trying to foster OI. The Habermasian approach to OI presented in this chapter may benefit from recent findings related to how to design comprehensive procedural frameworks to manage stakeholder value conflicts (Schormair & Gilbert, 2021). Such frameworks provide step-by-step guidance for organisations, such as how to determine which stakeholders are affected by a conflict, what they want to change and how mutual learning about compliance and integrity can be fostered. A key measure to solve stakeholder conflicts and push OI, often mentioned in these procedural frameworks, is the participation of MNCs in international accountability standards (IAS) such as the UN Global Compact, SA 8000, or Global Reporting Initiative (Gilbert & Rasche, 2008b). Such IAS “are voluntary predefined rules, procedures, and methods to systematically assess, measure, audit, and/or communicate the social and environmental behavior and/or performance of firms” (Gilbert et al., 2011, p. 24). These standards may help MNCs foster OI in practice because they provide a normative basis for socially responsible actions and are designed according to deliberative criteria to bring together a variety of stakeholders (de Bakker et al., 2019).

204  Research handbook on organisational integrity

CONCLUSION It was the objective of this chapter to advance an approach to OI from a discursive justification perspective. We cite compliance and integrity as different strategies for ethics management in MNCs and introduce an integrated approach to OI, combining both approaches. Because it draws on Habermas’s discourse ethics, the presented approach to OI cannot be dismissed as cultural imperialism; it provides a sound theoretical justification of norms and values in an international context. Against this background, a Habermasian approach can contribute to advancing the field of OI and better managing the tension between a relativistic and a universalistic perspective. Although there is some criticism of the idealistic orientation of discourse ethics, it is widely accepted that discourse guidelines can be applied successfully to the business environment of MNCs (Atif, 2019; Froomkin, 2003; Gilbert & Behnam, 2009; Gilbert & Rasche, 2007; Lozano, 2001; Ruebottom, 2018; Schnebel & Bienert, 2004). The principle of universalisation, the principle of discourse ethics, and the discourse guidelines provide MNCs and their stakeholders with a communicative framework in which moral conflicts can be solved. The conditions of real-world communication might be affected by unequal power distributions between MNCs and fringe stakeholders, which weakens the applicability of basic discourse principles (Schormair & Gilbert, 2021). However, the regulative idea of discourse ethics does not demand compliance with all aspects at each point in time. Rather, the idea is to take institutional precautions to neutralise the restrictions placed on practical discourses. Within empirical conditions, the goal of a discursively oriented approach to OI is to realise the principles to the extent possible. To address this criticism and provide scholars and managers with more applicable knowledge about how to implement the presented approach to OI, we also suggest some research extensions. First, the Habermasian approach to OI is thus far a normative theory; it would benefit from empirical investigations into the practicality of the concept. Empirical insights would be especially helpful for learning about how to apply discourse guidelines to local contexts and how to integrate fringe stakeholders into practical discourses. Second, more research seems necessary to address cultural differences in compliance and integrity approaches. Compliance procedures in particular differ strongly across countries, which can exert an impact on MNCs’ business ethics approaches (Coglianese & Nash, 2021). Third, every effort in management theory to avoid relativism must take care to avoid falling into ethnocentrism. Each theoretical concept is inevitably influenced by the author’s own cultural background; we welcome critical discussions of whether the presented concept is universalistic. Although a broad research agenda is opening up, we consider our Habermasian approach to OI a useful, pragmatic theoretical framework to provide managers with a normative guidance for their organisational decision-making processes.

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14. A virtue ethics perspective on organisational integrity Ignacio Ferrero, Maria Clara Ames, and Mauricio C. Serafim

Integrity is essential in organisations. Organisations with a strong reputation of integrity can more easily attract customers, employees, and investors, thereby maintaining lasting relationships. Since integrity is often described as external coherence between words and actions and internal coherence to maintain deeper commitments (Kristjánsson, 2017), for organisations to maintain integrity, they must fulfil promises and commitments to stakeholders while maintaining consistency between values and purpose (Moore, 2015). In the organisational context, integrity is visible both in human actions and in governance structures and practices (Fuerst & Luetge, 2021). Therefore, integrity can be seen as a human attribute (MacIntyre, 1999; Moore, 2005a; Nguyen & Crossan, 2022; Robson, 2015; Sison & Ferrero, 2015; Solomon, 1992); as an organisational attribute (Cameron et al., 2004; Fuerst & Luetge, 2021; Moore, 2005a); or even as a team capability (Palanski et al., 2011; Rego et al., 2015). At this point, the moral agency of individuals and the organisation differs. While integrity in the individual sphere refers to the realm of managers, employees, or leaders, integrity in the organisational sphere refers to collective decision-making and deliberation in groups, committees, and boards. Given this, how can an organisation be led with integrity? We believe that virtue ethics can make a valuable contribution in this regard. It allows us to comprehend how integrity can be implemented, both at the individual and organisational levels. The purpose of this chapter is two-fold. Firstly, we aim to introduce the fundamental concepts of individual and organisational integrity from a virtue ethics perspective. To achieve this, we will explore key assumptions of virtue ethics, such as the teleological notion of flourishing and the role of practical wisdom in cultivating integrity. Secondly, we will examine the evolution of the concept of integrity by conducting a literature review that analyses the citation context (Anderson & Lemken, 2023) of articles on integrity from a virtue ethics standpoint. This review will enable us to present the various approaches to studying integrity, the key themes that emerge, and the categories attributed to this concept. Although some authors do not explicitly discuss the ethical role of integrity and instead associate organisational integrity with corporate citizenship (Maak, 2008; Rendtorff, 2011) or organisational strategy, structure, and culture (Kaptein, 2017), virtue ethics suggests that organisational integrity may be an ethical aspect of the common good that people in organisations can only achieve through collaborative efforts.

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A virtue ethics perspective on organisational integrity  211

INDIVIDUAL AND ORGANISATIONAL INTEGRITY IN VIRTUE ETHICS In the neo-Aristotelian virtue ethics perspective, integrity is an attribute of character, which provides enough stability to human beings to allow them to be consistent in their lifestyle, and to avoid compartmentalisation, giving unity and coherence to their lives. When the organisation also lives integrity, it facilitates individual integrity, contributing to their flourishing. We contend that, in virtue ethics, organisational integrity necessitates the development of the moral character of organisations over time. Furthermore, it requires the application of practical wisdom in management. With the aid of practical wisdom, managers and employees can learn how to be virtuous and act with integrity in their work while simultaneously striving towards the common good of their organisation. Virtue ethics is an agent-centred ethical approach that emphasises the relationship between an individual’s actions and the development of their character through the cultivation of virtues (Ferrero et al., 2021). In this tradition, virtue can be defined as a “freely acquired habitual disposition or character trait that enables individuals to perceive, experience emotions, deliberate, decide, and act in a proper way. It is also the controlling factor for eudaimonia or flourishing, which is considered the ultimate goal of human life” (Ferrero & Sison, 2014: 386). This definition of virtue and its relation to flourishing can be traced back to the ancient Greek philosophers Plato and Aristotle. Later, Thomas Aquinas integrated Aristotelian teachings into the Christian worldview, and more recently, MacIntyre revisited the Aristotelian-Thomistic tradition, emphasising the social and historical conditions of the political community in which the virtues and flourishing are realised (Ferrero & Sison, 2014). The role of organisations in virtue ethics is important since organisations are social contexts where individuals can cultivate virtues. As mentioned above, to Aristotle, the supreme good of the human being is happiness (eudaimonia), but this flourishing must be reached within the political community (Aristotle, 1985: 1095a), and in collaboration with others. For that reason, the political community represents the fully developed stage of human existence (Aristotle, 1990: 1252b). This stresses the need for community, with its relationships in a variety of spheres (familial, educational, religious, economic, civic, political, and so forth). Recovering main assumptions from Aristotelian and Thomistic traditions, MacIntyre gives an important role to integrity for individuals and organisations to flourish. Organisations are communities composed of two levels of integrity: that of the individual and that of the organisation as a whole. It is important that organisations when acting as morally and socially responsible agents do not compromise the ultimate importance of the responsibility and integrity of the individuals who work within it (Solomon, 2004). MacIntyre (1999) emphasises the importance of integrity as a triple prerequisite for moral agency. Firstly, individuals must acknowledge themselves as moral agents with unique identities and personal dispositions shaped by their life history, independent of their social roles. Secondly, they must possess the confidence to rationally defend their judgements and propose actions that differ from social norms. Lastly, individuals must recognise their accountability not only for their roles but also as rational human beings. These three requirements are directly related to character since they speak of autonomy, coherence, and responsibility in decisions and actions in the different scenarios that individuals face in their daily life. From a virtue ethics perspective, character is the proper locus of individual integrity, understood as a stable disposition that is harder to change than habits

212  Research handbook on organisational integrity and reflects an individual’s way of being in terms of virtue, encompassing the whole person (MacIntyre, 1999; Solomon, 1992). The relation between virtues and character and individual integrity can be described as follows. Virtues are multi-track dispositions (Hursthouse & Pettigrove, 2022), including actions, habits, character, and lifestyle (Sison & Ferrero, 2015). Voluntary actions, when repeated and reiterated, become habits; every action leaves a trace or mark. This by-product is called “habit”: a stable disposition or manner of being, doing, acting, or behaving. Habits, as reiterated actions, are exercised frequently until they become consolidated, and this process of “becoming good through consistent practice” (Kaptein, 2017: 2) is crucial to developing virtuous character. Character is constituted by various habits, displaying greater permanence than habits and providing a more accurate and complete picture of an individual. To have a steady and reliable character, integrity and constancy are essential prerequisites (MacIntyre, 1999). Integrity is the virtue that sets limits to the agents’ adaptation to their social roles, while constancy sets limits to the character’s flexibility over time. In this context, integrity is essential for individuals to be internally consistent to manifest the same self, regardless of their roles or social spheres, and to reflect on their engagement with established roles and structures. Integrity and constancy are interdependent virtues that allow individuals to pursue their goals and values while remaining true to their character. Integrity requires individuals to manifest the same character in different social contexts, while constancy requires individuals to pursue the same goods over extended periods without allowing the demands of the social context to distract them from their commitments (Akgün et al., 2022). These virtues compose a narrative unity of life or lifestyle, enabling individuals to perform practices that lead to the acquisition of virtues or internal goods regardless of the roles they assume (MacIntyre, 1999; Robson, 2015). A person’s lifestyle gives unity and texture to everything, including feelings, actions, habits, and character, lending structure and meaning to existence. The ultimate goal that human beings pursue is expressed best in their lifestyles (Sison & Ferrero, 2015). However, social structures can compromise integrity, creating tension or conflict, promoting the compartmentalisation of life into different spheres with distinct requirements and roles. Individuals must deliberate and judge how far they can adapt or flex their actions while maintaining their character, considering their biographies and experiences, and maintaining their narratives or unitary vision of their own life (MacIntyre, 1999). In his analysis of moral agency in the context of social structures and order, MacIntyre’s framework rests on the relationship between practices and institutions, i.e., organisations. Practices are “any coherent and complex form of socially established cooperative human activity” (MacIntyre, 2007: 187) whose development allows the achievement of external goods such as money, power, and status. Simultaneously, agents can perfect themselves achieving internal goods while enhancing the standards of excellence by which the performance of the activity can be judged and thereby improving the traditions (Ferrero et al., 2021). Internal goods, such as flourishing, loving relationships, and knowledge, are inherently valuable and neither rival nor excludable. Institutions host practices, putting in place the structure for the practice to develop, but they can also constitute a risk insofar as they can privilege the achievement of external goods over internal goods. If the practice-institution relationship develops in a way that the institution

A virtue ethics perspective on organisational integrity  213 actually protects the practice, agents can live a virtuous life more easily than in an environment where the logic of the institution prevails over the original spirit of the practice. While institutions are necessary for the sustenance of practices and their internal goods, they can foster individuals to seek external goods for their own sake, then practices are distorted, and institutions invade rather than support them (MacIntyre, 1994). This distortion results in the loss of integrity or the corruption of practices, which can lead to a context that is not conducive to virtues, and provokes compartmentalisation, a chameleon-like self, passivity, or even inter-agency conflict (MacIntyre, 1999). Therefore, individuals must exercise judgement in determining how far they can adapt or flex their actions while maintaining their character. In the same vein, Solomon (1992: 328) considers integrity “as the linchpin of all of the virtues, the key to their unity or, in conflict and disunity, an anchor against personal disintegration”. He defines integrity as the integration of one’s roles and responsibilities, along with the virtues defined by them. In situations where there may be conflicting interests or values, integrity, like every virtue, seeks a balance between two extremes, or the “golden mean”, which is defined in relation to the individual’s subjective condition and established through practical wisdom or prudence (Solomon, 1992). This requires agents to deliberate and judge the extent to which they can act while considering their biographies, experiences, and maintaining their narratives or unitary vision of their own life (MacIntyre, 1999). Integrity is not just about applying principles in practical matters (Hartman, 2020), but about judging and deliberating about the means of action according to the particular context in which the agent acts to behave coherently. Since practical wisdom is the ability to make rational choices applying general ethical principles and theoretical knowledge to specific situations in a manner that leads to the best possible outcome, considering the context, motivations, and emotions involved (Sison & Ferrero, 2015), this virtue turns into a necessary element to act with integrity in a personal level. Prudence or practical wisdom is typically developed through age and experience, enabling individuals to perceive what is most significant in different contexts (Hursthouse & Pettigrove, 2022). Virtuous actions consist of doing what is right, for the right reasons, and in the right way, towards the right people, and at the right time and duration. Similarly, Arjoon et al. (2018: 149) states that integrity of character implies “conformity of right thinking (promoted by intellectual virtues), and right willing and feeling (promoted by the moral virtues)”. However, it is crucial that one’s intention is oriented toward the good. For example, a person may strive to exhibit integrity in their conduct because it is the right thing to do and because it contributes to their growth in virtue, thereby strengthening their character. On the other hand, if someone seeks integrity solely for the sake of social acceptance or reputation, their motivations do not stem from integrity but rather from a desire to fit in or conform to external pressures, which does not directly contribute to their flourishing as a human being. In this context, the virtue of practical wisdom appears to be a crucial virtue in promoting integrity, as it operates based on reasons for action that surpass the obligations of a given social role. The possession of practical wisdom enables individuals to engage in actions that are consistent with their values, thereby aligning their conduct with notions of right and wrong that are pertinent to the particulars of a given situation. In essence, practical wisdom serves as a means of reflection for individuals to contemplate the demands of their roles and life circumstances and determine appropriate courses of action that are in keeping with their character, thereby promoting integrity.

214  Research handbook on organisational integrity Aristotle, and the authors in the tradition of virtue ethics, identified the supreme good of the human being, what we ultimately seek in our life, as “eudaimonia”, which means happiness or flourishing (Aristotle, 1985). Eudaimonia coincides with a life of virtues, lived and shared with others in the community. Flourishing involves “living well and doing well” (Aristotle, 1990), and since “flourishing represents the definitive form of virtue or moral excellence, it is human nature in its perfect state” (Sison et al., 2018: 6). Hence, virtues are necessary for and partially constitutive of flourishing, but they have to be lived in community. A flourishing and virtuous life shared in the community can be seen as the subjective dimension of the common good. Common good also involves external goods, but they are complementary to those internal. For Aristotle, eudaimonia is the common good of the polis (Arjoon et al., 2018), because it is the sharing of what is beneficial for all citizens of a given political community (Albareda & Sison, 2020). Moreover, the common good is not the sum of individual goods, but the conditions for and a result of a eudaemonist life (O’Brien, 2009). In this sense, the purpose of an organisation as a social system is a common good, which “could only be achieved insofar as everyone else achieves his or her own good in harmony with others” (Sison et al., 2018: xxiii). The common good keeps a teleological dimension representing the human ongoing process of striving to achieve its telos or final end (Albareda & Sison, 2020). Common good may involve some broader conditions such as sociocultural values and economic, organisational, and environmental conditions (Arjoon et al., 2018; Melé, 2009). The “common” implies dialogue, deliberation, and participation for reaching a flourishing community life. Moral agents and communities reciprocally interact while learning and sharing moral goods. If this social system supports manifestations of integrity, it can offer a supportive moral environment for building trust, which may intensify social cohesion, for example. Otherwise, if it legitimates vicious or corruptive practices, it can trigger a process of reinforcement of unethical practices (Moore, 2015). Since we are considering the organisational integrity of a social community – the organisation – we can consider organisational integrity as part of the moral good (common good) of that community. As previously mentioned, the neo-Aristotelian and Thomistic traditions define integrity as a disposition of human character. However, other perspectives, such as Positive Organisational Scholarship, have adopted different theoretical and methodological frameworks to investigate organisational integrity and which dimensions or components of organisational integrity are the most important ones (Kaptein, 2008). To explore these issues, we reviewed recent literature on virtue ethics in business and management journals to provide updated definitions and findings related to organisational integrity.

A LITERATURE REVIEW ON INTEGRITY IN VIRTUE ETHICS The field of virtue ethics comprises various perspectives that offer diverse frameworks to comprehend integrity. This literature review aims to examine the most recent studies on virtue ethics and their conceptions of individual and organisational integrity. The method used for the selection and analysis of the articles is explained in Table 14.1. After the analysis, we collected the articles in the following categories: (1) virtue ethics traditions, including Aristotelian, Eclectic Virtue Ethics, Empirical Organisational Psychology, and MacIntyrean; (2) article type, distinguishing between theoretical and empirical articles;

A virtue ethics perspective on organisational integrity  215 Table 14.1

Method of selection and analysis of the articles

Step

Description

#articles

Research

● Research question: how has the concept of integrity evolved in virtue ethics perspectives in

 

design

business and management? ● Information sources: three internal databases of EBSCO: Academic Search Premier, Business Source Complete, and MLA International Bibliography research database. ● Status of the references: only peer-reviewed articles published in business ethics and management journals listed in the Journal Citation Report (JCR®).

Search strategy 1.

Articles on virtue ethics reviewed by Ferrero and Sison (2014) from 1980 to November

132

2011; 2.

Query: TITLE-ABS-KEY (“virtue ethics” OR “virtue theory” or “virtuousness”) AND

135

ALL (“business*” OR “management”), from December 2011 until December 2022; 3.

Total of articles (1+2).

267

Eligibility

a.

Peer-reviewed articles published in journals listed at JCR.

 

criteria

b.

Language: English.

c.

Articles characteristics: virtue ethics articles related to business or management.

d.

Years considered: 1980–2022.

Articles

e.

Articles citing “integrity” at least 10 times or “organisational integrity”.

4.

Articles on integrity selected after applying the eligibility criteria.

38

included Analysis

● References organisation: Mendeley and exported to NVivo.

 

● Method: citation content analysis (Anderson & Lemken, 2023). ● Unit of analysis; citation context or “citance”. ● Categories of analysis: (1) virtue ethics tradition; (2) article type - theoretical or empirical; (3) level of conceptual analysis for integrity - individual or organisational; (4) degrees of engagement with the concept of integrity, categorised as limited, intermediate, and comprehensive; (5) article’s main themes. ● Tools: Mendeley, NVivo, and Excel. ● Methodological procedures: first reading of the title, abstract, keywords, and citation context to specify the number of citances of “integrity” and “organisational integrity” (Table 14.2). Codification of articles’ content in NVivo, using a codebook with the categories, validated between two authors.

(3) level of conceptual analysis, whether the concept of integrity is applied at the individual or group/organisational level; and (4) degrees of engagement with the concept of integrity, categorised as limited, intermediate, and comprehensive. We categorised comprehensive approaches as articles that advance the concept of integrity at both individual and organisational levels. Table 14.2 presents these 38 articles along with the respective number of citation contexts for each virtue ethics perspective. The articles listed in Table 14.2 reveal that the most prolific traditions in addressing integrity from the perspective of virtue ethics studies are Aristotelian, Eclectic, Empirical Organisational Psychology (EOP), and MacIntyrean. The findings of this literature review are presented in the next sections. Main Themes, Definitions, and Implications of Integrity in Virtue Ethics Traditions When analysing the type of article according to the virtue ethics tradition, Aristotelian perspective has seven theoretical articles. EOP stands out with the highest number of empirical

216  Research handbook on organisational integrity Table 14.2

Integrity’s citation contexts per article by virtue ethics perspectives #Citances of Organisational

#Citances of Integrity

Integrity (%)

(% in the article)

Solomon (1992)

–

9 (8.9%)

Solomon (2004)

–

6 (11.9%)

Murphy et al. (2007)

–

5 (5.7%)

Segon and Both (2015)

–

7 (9.8%)

Sison and Ferrero (2015)

1 (1.27%)

2 (2.4%)

Newstead et al. (2018)

1 (1.90%)

1 (1.7%)

Akrivou and Scalzo (2020) Hacket and Wang (2012)

– –

6 (9%) 10 (11.4%)

Crossman and Doshi (2015)

–

5 (10.7%)

Ananthram and Chan (2016)

1 (1.02%)

9 (7.6%)

Lemoine et al. (2019)

–

6 (3%)

Adewale (2020)

–

7 (7.1%)

Nguyen and Crossan (2022)

–

11 (9.7%)

Empirical

Fuerst and Luetge (2021) Shanahan and Hyman (2003)

15 (22.70%) –

7 (8.5%) 5 (12.5%)

Organisational

Cameron et al. (2004)

1 (1.65%)

6 (7%)

Psychology

Chun (2005)

–

10 (13.5%)

Bright, Cameron and Caza (2006)

–

5 (6.3%)

Wright and Goodstein (2007)

1 (1.05%)

6 (6.4%)

Rego et al. (2010)

1 (1.71%)

4 (6%)

Payne et al. (2011)

–

10 (10.2%)

Palanski et al. (2011)

–

22 (24.2%)

Rego et al. (2013)

1 (1.49%)

7 (6%)

Sadler-Smith (2013)

–

7 (10.6%)

Rego, Reis, and Pina e Cunha (2015)

–

10 (10.1%)

Chun (2017)

–

12 (14.9%)

Hur et al. (2017)

3 (4.83%)

6 (7.7%)

Arjoon et al. (2018)

–

5 (4.8%)

Meyer (2018) Moore (2005a)

2 (1.59%) –

4 (3.9%) 10 (21.3%)

Moore (2005b)

–

5 (6.6%)

Graafland and Ven (2011)

–

4 (8.8%)

Marsh (2013)

–

8 (8.5%)

Moore (2015)

–

5 (8.9%)

Robson (2015)

–

16 (18.3%)

West (2018)

–

13 (16%)

Chan and Ananthram (2019)

–

14 (13.4%)

Asher and Wilcox (2022) 38 articles

– 27

7 (10.2%)

Virtue ethics

Articles

perspective Aristotelian

Eclectic

MacIntyrean

Total

292

studies, nine, using survey methods and six theoretical articles. Eclectic virtue ethics has four theoretical and three empirical articles using qualitative research approaches. MacIntyrean perspective presents five theoretical and four empirical studies. Regarding the number of articles over the years, there is a noticeable prevalence of limited conceptualisation articles. However, the number of articles discussing integrity has been

A virtue ethics perspective on organisational integrity  217 growing steadily over time. Figure 14.1 depicts the number of articles every five years, based on the degree of conceptualisation of integrity.

Figure 14.1

Number of articles and level of conceptualisation of integrity

The analysis reveals that most of the articles (n=23, 60.5 per cent) have a limited conceptualisation of integrity. Meanwhile, eight articles (21.0 per cent) offer an intermediate conceptualisation, and seven studies (18.4 per cent) make comprehensive contributions to the concept of integrity. The comprehensive contributions are from different perspectives, including two from an Aristotelian perspective, three from a MacIntyrean perspective, one from the Eclectic, and one from Positive Organisational Scholarship. It is worth noting that articles classified as limited do not necessarily indicate a lack of quality, as they may explore other concepts or list virtues or virtuousness. Notably, the recent work of Fuerst and Luetge (2021) presents a robust conceptualisation of organisational integrity, which is unique in this sample. Each perspective also develops unique concepts, such as the corporate character from the MacIntyrean perspective and organisational virtuousness from the EOP perspective. The neo-Aristotelian perspective remains primarily focused on integrity as a human attribute. Despite the different perspectives, the articles on integrity have not had much communication and articulation between them. Authors search for coherence with main assumptions from a virtue ethics perspective, such as the Aristotelian or MacIntyrean, because some assumptions are not shared by all the perspectives. Neo-Aristotelianism considers the crucial role of practical wisdom or phronesis (Sison & Ferrero, 2015). Inside the MacIntyrean school, authors propose new concepts in line with MacIntyre’s main concepts, such as corporate character (Moore, 2005a, 2015). Theoretical-methodological assumptions from POS support articles on integrity as an organisational virtuousness (Meyer, 2018). Few works articulate different

218  Research handbook on organisational integrity perspectives, such as the case of eclectic articles (Nguyen & Crossan, 2022; Fuerst & Luetge, 2021). Articles’ Main Themes and Scope of Analysis of Integrity The articles on virtue ethics investigate the concept of integrity across three distinct yet complementary domains: individual, organisational, and group/team levels. Kaptein and Wempe (2002) were the first to mention the concept of organisational or corporate integrity in the context of virtue ethics. Since then, it has been widely discussed in the field of business ethics (e.g., Maak, 2008; Paine, 1994; Rendtorff, 2011), from different perspectives and methods: (1) Organisational virtuousness, as developed in the field of Positive Organisational Scholarship (Arjoon et al., 2018; Bright, Cameron, & Caza, 2006; Cameron et al., 2004; Hur et al., 2017; Meyer, 2018; Rego et al., 2010; Sadler-Smith, 2013; Wright & Goodstein, 2007); (2) Organisational virtue, which emphasises the moral character of organisations (Chun, 2005; 2017; Payne et al., 2011); (3) Organisational culture as a driver of virtuousness, which makes up the corporate ethical virtues (Huhtala et al., 2018; Kaptein, 2017); (4) Corporate character based on MacIntyre’s ideas (Moore, 2005b, 2015; West, 2018); and (5) Eclectic perspective studies that draw on a range of theoretical and empirical approaches (Ananthram & Chan, 2016; Fuerst & Luetge, 2021). Consequently, there are various themes and management functions being explored. Leadership, for instance, is discussed from different virtue ethics perspectives and through different scopes (Hacket & Wang, 2012; Crossman & Doshi, 2015; Lemoine et al., 2019; Marsh, 2013; Adewale, 2020; Nguyen & Crossan, 2022), as highlighted in Table 14.3. Leadership is recognised as a crucial factor associated with integrity in organisations. Table 14.3

Articles’ main themes by virtue ethics perspective and scope for integrity

Virtue ethics perspectives Aristotelian

Articles’ main themes by conceptual scopes on integrity Individual Integrity

Organisational Integrity

● Aristotelian virtue ethics (Solomon, 1992)

● Corporations as communities (Solomon,

● Relational marketing (Murphy et al., 2007)

2004)

● Emotional intelligence (Segon & Both, 2015) ● Neo-Aristotelianism & virtuousness’ differences (Sison & Ferrero, 2015) ● Virtue’s concepts (Newstead et al., 2018) ● Practical wisdom and relational selves (Akrivou & Scalzo, 2020) Eclectic

● Leadership styles and virtue (Hacket & Wang, ● Ethical decision-making (Ananthram & 2012) ● Not-knowing (Crossman & Doshi, 2015) ● Moral approaches to leadership (Lemoine et al., 2019) ● Virtuous leadership (Adewale, 2020) ● Character-infused ethical decision-making (Nguyen & Crossan, 2022)

Chan, 2016) ● Organisational integrity’s concept (Fuerst & Luetge, 2021)

A virtue ethics perspective on organisational integrity  219 Virtue ethics perspectives Empirical Organisational Psychology

Articles’ main themes by conceptual scopes on integrity Individual Integrity

Organisational Integrity

● Virtues ethics’ scale development (Shanahan

● Organisational virtuousness and perfor-

& Hyman, 2003)

mance (Cameron et al., 2004) ● Virtuousness’ effects in downsizing organisations (Bright et al., 2006) ● Organisational virtue’s scale (Chun, 2005) ● Character and organisational virtue (Wright & Goodstein, 2007) ● Organisational virtuousness (Rego et al., 2010) ● Organisational virtue orientation (Payne et al., 2011) ● Group-level integrity (Palanski et al., 2011) ● Organisational environment virtuousness (Sadler-Smith, 2013) ● Authentic leadership and group-level virtuousness (Rego et al., 2013; 2015) ● Organisational virtue and stakeholders’ outcomes (Chun, 2017) ● Organisational virtuousness, work engagement (Hur et al., 2017) ● Virtuousness, common good (Arjoon et al., 2018) ● Organisational virtuousness’ concepts

MacIntyrean

● MacIntyrean virtue ethics, craftsmanship (Moore, 2005a) ● Financial sector professionals’ virtues (Graafland & Ven, 2011) ● Integrity and constancy (Robson, 2015) ● Religion-based decision-making (Chan & Ananthram, 2019)

(Meyer, 2018) ● Corporate’s character-virtue, culture-values (Moore, 2005b) ● Ethical leadership, learning (Marsh, 2013) ● Corporate character, corporate virtues (Moore, 2015) ● Accounting ethics, MacIntyrean ethics (West, 2018) ● Virtues in risk management (Asher & Wilcox, 2022)

The need for leaders, managers, and professionals to express virtues is often discussed in articles exploring integrity at the individual scope, which mostly adopt an Aristotelian, MacIntyrean, or Eclectic virtue ethics perspective. On the other hand, EOP predominantly explores integrity at the organisational scope, as demonstrated in Table 14.3. We found resonance of Solomon’s (1992) treatment of virtues in articles that discuss lists of virtues, such as Shanahan and Hyman (2003). However, the concept of integrity at the individual scope has received limited in-depth conceptual development, except for Robson (2015) and Akrivou and Scalzo (2020). Some studies address integrity at the team or group scope (Palanski et al., 2011; Rego et al., 2013, 2015), describing it as “the consistency of an acting entity’s words and actions” (Palanski et al., 2011: 204). These studies relate virtuousness to team behavioural integrity concepts (Palanski et al., 2011) and authentic leadership (Rego et al., 2013, 2015), with authentic leadership being a predictive factor of group virtuousness (Rego et al., 2013).

220  Research handbook on organisational integrity Integrity Conceptions In this section, we will discuss the conceptions of integrity presented in the articles that comprehensively engage with integrity, as outlined in the previous section. Regarding the individual scope, Akrivou and Scalzo (2020) present the Inter-Processual Self (IPS) paradigm, which seeks to overcome the reductionist view of the self, human agency, and action by associating practical wisdom with a more comprehensive perspective of moral psychology based on neo-Aristotelian virtue ethics. In this paradigm, integrity plays a prominent role as the basis for practical wisdom. According to Akrivou and Scalzo (2020: 8), “The IPS paradigm … acknowledges moral integrity as a basis for practical wisdom; it integrates cognitive, ethical, affective, and practical aspects and is a precondition for good action in business and management”. Furthermore, the IPS considers integrity an ongoing challenge in relation to how to be a good person and help others grow. The IPS also prioritises virtues that orient toward integrity or wholeness in one’s life, with continuity and unity in the agent’s personal identity being crucial. The IPS links past, present, and future action in relation to the agent’s ongoing moral search for “who I am” and how to become more fully and essentially human, including exposure to the self and the other (Akrivou & Scalzo, 2020). On the inter-relational level of integrity, the authors note that one’s agency is affected by the agency of others. “Acting in ways that bolster people’s agency vis-a-vis others increases or decreases relational integrity; yet excessive agency may also make others passive” (Akrivou & Scalzo, 2020: 6). Therefore, individuals should be able to exercise a measure of autonomy in living a good life while being subject to laws and other restrictions of liberty that benefit all members of the community or organisation (Hartman, 2020). Moving to the group-level scope, Palanski et al. (2011: 204) define integrity as “the integrity of the team as a separate, autonomous entity that is irreducible to the individual level of analysis”. They use a behavioural approach to integrity at the individual level and expand the concept to the team level, considering that virtues have isomorphic characteristics common to different levels of analysis. This methodological approach serves as a reference for Fuerst and Luetge’s (2021) conceptualisation of organisational integrity. Fuerst and Luetge (2021) transfer the concept of integrity from the individual and group level to the organisational scope, considering philosophical and positive social science contributions to the conception of virtues and integrity. They argue that organisational integrity is conceivable only if organisations can have agency in a non-metaphorical manner. They adopt the same methodological justification of Palanski et al. (2011) that virtues are fundamentally isomorphic and apply it to the internal decision structures of organisations. Fuerst and Luetge (2021) propose that organisational integrity is not the sum of the integrity of the organisation’s members but an intrinsic virtuousness (Bright et al., 2014) that includes self-evaluation and awareness of both its strengths and weaknesses. Finally, they suggest the following definition of organisational integrity: Organizational integrity is the integral ability of a company to practice self-fidelity in the sense that its activities are based upon an internally consistent framework of principles and reflects to which extent self-legislated norms and legal standards in force are implemented into organizational actions. A certain maturity is required regarding the company’s infrastructure, and its corporate internal decision structures. Organizational integrity includes the ability to self-evaluate and incorporates awareness of both its own organizational strengths and weaknesses, resulting in the ability to further

A virtue ethics perspective on organisational integrity  221 mature (in the sense of further development). Finally, organizational integrity is in need of desirable moral principles like legal compliance, honesty, and respect. (Fuerst & Luetge, 2021: 6)

Some scholars, such as Moore (2005b, 2015), West (2018), and Asher and Wilcox (2022), explore the role of the corporation as a moral agent from certain MacIntyrean assumptions. Moore (2005b) states that corporate character may play a critical role in determining the behaviour of the corporation and influencing the behaviour and character of individuals within the organisation. When an organisation or corporation shows a stable character over time, helps individuals to be consistent in their characters, living with integrity. Moore (2015) revises his definition of corporate character and suggests that corporations should have a virtuous purpose (telos) and an orientation towards excellence. Corporate integrity enables the pursuit of a good purpose across all activities or practices (the consistency component), and constancy enables the pursuit of a good purpose over time (the narrative component). The purpose of an organisation conforms to practices, narratives, and the tradition of the society to which it belongs. Together, these works point to some key assumptions, such as the inter-relational level of integrity and the relationship between individual and organisational integrity. These assumptions suggest that organisational integrity, from a virtue ethics perspective, involves the codependent and collaborative social dynamics that support life in a community. Organisational integrity is intrinsically linked to the notion of a flourishing community life and the role of institutions that support practices. Together with the notion of the common good, the role of organisational integrity in a broader virtue ethics worldview could enhance future theoretical and practical explorations of integrity. In summary, virtuous organisational integrity supports current management and practices by effectively handling past (commitments, narratives, traditions, reputation, culture) and future (purpose, goals, existence) aspects in a coherent, fair, and wise manner. Organisations face various factors that can enhance or diminish their integrity (Fuerst & Luetge, 2021). It is important to recognise that integrity goes beyond visible manifestations for the public and includes intangible and subjective elements within the organisation. Organisational integrity is influenced by individual integrity, which means organisations may need to take responsibility for their members’ actions, expanding their scope of responsibility. It is a lifelong journey towards the common good rather than a static measure of integrity at a given moment.

CONCLUSIONS Virtue ethics has been explored through various theoretical traditions, such as the eclectic perspective of Fuerst and Luetge (2021), the neo-Aristotelian approach of Akrivou and Scalzo (2020), and the MacIntyrean-based approaches of Moore (2015) and Robson (2015). These traditions have led to comprehensive discussions on integrity at the individual, group, and organisational levels (Akrivou & Scalzo, 2020; Fuerst & Luetge, 2021; Moore, 2005b; Moore, 2015; Palanski et al., 2011; Robson, 2015; Solomon, 1992, 2004). Work in the field has been devoted to gaining a deeper understanding of existing concepts such as organisational virtuousness (Meyer, 2018), integrity and constancy (Robson, 2015), and ethical leadership (Lemoine et al., 2019). Themes related to organisational integrity include leadership, decision-making, and the role of corporations. Managing these factors wisely can help an organisation maintain its identity

222  Research handbook on organisational integrity while pursuing its purpose. Future studies could explore how practical wisdom, through deliberation and counselling, can contribute to organisational integrity and highlight the complementarity of individual and organisational integrity. However, there are methodological limitations when transferring integrity from the individual to the organisational or group scope based on isomorphic attributes of virtues (Fuerst & Luetge, 2021; Palanski et al., 2011). For instance, voluntary actions of a free agent are necessary for virtuous behaviour, which an organisation lacks. Additionally, organisations are not entirely autonomous and rely on the moral agency of their members. Furthermore, measuring the perception of virtue through surveys may not fully capture the complex nature of virtue ethics. Our argument is that organisational integrity in virtue ethics requires the gradual development of the moral character of organisations, as well as the use of practical wisdom in management. By applying practical wisdom, managers and employees can acquire virtuous behaviour and act with integrity while pursuing the common good of society and their organisations. This literature review reveals few studies addressing integrity from virtue ethics. This is curious because integrity is such a valued aspect in leaders and organisations, but there are still few theoretical bases on its relationship with the common good, for human flourishing, and virtuous practices that are consolidated through habits. Organisational integrity from virtue ethics is extremely relevant, because the identity or purpose of the organisation are aspects achieved in the long term, not in a single action, and articulating individuals, groups, organisations, and communities. This includes acquiring coherence (“walking the talk”) and responsibility for commitments and purposes. In addition, the Aristotelian and MacIntyrean frameworks provide a basis for understanding integrity in its subjective and sociological dimensions. Although there may be conceptual debate regarding the notion of organisational integrity being based solely on individual integrity, there is room to broaden the scope of analysis to include larger spheres. It would be worth asking which dimensions of integrity are yet to be explored, such as the inter-relational (Akrivou & Scalzo, 2020) and the spiritual/transcendent element (Arjoon et al., 2018). Future studies could explore the role of integrity within a production chain, as well as integrity within specific industries such as cosmetics or automotive manufacturing. Furthermore, investigations could delve into the integrity of geographic regions, such as municipalities or countries, to gain a deeper understanding of the factors that contribute to a culture of integrity. From the organisation, one could further explore integrity in relation not only to organisational identity and purpose, but also by considering the organisation’s path, narrative, or history (long-term perspective). Furthermore, the mutual influences between different agents suggest aspects of organisational integrity that could be better understood. The concept of organisational integrity could draw on organisational theories such as the systems approach, institutional theory, or social network theory to understand the relationships between actors. This could contribute to a better understanding of the interactions between the organisation and its macro environment. The interrelationship between the different components of the virtue ethics framework and integrity could be better understood through a systems methodological approach to this model, focusing on understanding the process of reinforcement or learning of the virtue of integrity by different moral agents. Additionally, one could investigate how the approach to organisational integrity from the perspective of virtue ethics could contribute to studies and practices on compliance, and in what way a focus on the gradual development of the moral character of organisations could complement compliance practices and programmes.

A virtue ethics perspective on organisational integrity  223

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15. A contractual perspective on organisational integrity Ben Wempe and Johan Wempe

Integrity theories and social contract theories are two distinct groups of ethical theories that have been developed within the field of business ethics. While the general ethical theories upon which these applied theories are based continue to engage in a robust debate with each other (see, e.g., MacIntyre, 1984; Rawls, 1971/1999, 1993; Sandel, 1982; Taylor, 1989; Walzer, 1973, 1983), the discourse within the field of business ethics on this matter remains somewhat limited. Social contract theory, a political and ethical mode of argumentation that originated during the Enlightenment, was reintroduced in the 1970s and 1980s as a response to the prevailing utilitarian neo-liberal and libertarian ideologies focused on prosperity that emerged after World War II. A substantive part of the integrity paradigm consists in classical virtue ethics. This was already prevalent in classical antiquity and the Middle Ages, but rediscovered during the 1980s and 1990s under the label of communitarianism. This can be seen as a response to the neo-liberal and libertarian thinking as well as to the liberal social contract thinking of that time. Social contract philosophers were in those years engaged in intense debates with the neo-liberals and libertarians (Nozick, 1974) on the one hand and with communitarians at the other. An important debate between social contract thinking and communitarianism centred around the question about the priority of the right over the good. In this debate, the core of social contract thinking, that prioritises individual rights and individual freedom, is directly opposed to the communitarian approach, in which views on the good life and a well-functioning society are relevant and sometimes more important than respect for individual rights and freedom (Sandel, 2010: 248). In this chapter, we will explore the principles of social contract theory as applied to business ethics, examine the commonalities between the social contract theory and the integrity theory applied in business organisations, and discuss how they differ.1

THE DEVELOPMENT OF BUSINESS ETHICS Business ethics emerged in the 1980s and 1990s. All three schools of political and ethical philosophy current at the time—utilitarianism, liberal egalitarianism and virtue ethics/ communitarianism—were represented in the debates on business ethics. The focus was on the application of these theories. The primary debate centred around the implementation of moral principles in the context of business organisations: Is it meaningful to hold corporations morally accountable? Gradually, there was more attention given to the questions of what distinguishes the business domain from other sectors of society, what is the difference between 226

A contractual perspective on organisational integrity  227 ethics applied to individuals and collectives such as businesses and what norms ought to be applied. This led to the development of theories more attuned to the business context. The social contract argument (SCA) was an obvious theory to use as a starting point for an applied theory for business ethics. In the 1980s, it became necessary to justify the assessment of companies’ performance in moral terms. From a neo-liberal point of view, Milton Friedman opposed the notion of morally evaluating companies. SCxB therefore primarily challenged the adage of Friedman (1970), that businesses have no social responsibility at all. Any sound notion of corporate responsibility should be sought in making profits for the owners of companies. The concept of the ‘social contract’ between consumers and producers, between the company and its stakeholders or between society and the business sector, provided a basis for the social responsibility of companies. The idea of a multi-party contract fitted well with companies and markets. It was also suitable for application to collectives (Kaptein & Wempe, 2002). IxB is founded on a single virtue among the many acknowledged by virtue ethics, and has evolved into a comprehensive set of theories. As an approach originating mainly in the practice of business and public organisations, it now also received a solid theoretical foundation. IxB seeks to answer the question of how coordination and coherence can be achieved amidst a multitude of interests and perspectives, even in competitive conditions. The theory emphasises the qualities that a company should possess in striving towards wholeness without sacrificing diversity. The integrity theory is sometimes seen as (also) based on a Kantian-deontological perspective, especially because integrity is understood as ‘standing for something’ or being ‘principled,’ i.e., being driven by values or principles (DeGeorge, 1993; van Willigenburg, 2000; Calhoun, 1995; McFall, 1987). We consider the integrity approach as a virtue ethics that is valuable for persons as well as for organisations. Being value-driven or principled primarily focusses on the attitude of people or organisations and is therefore more a characteristic or quality that people or organisations should possess rather than a norm for behaviour. Integrity theory heavily relies on virtue ethics, which emphasises virtues as desirable intrinsic qualities of individuals and communities (Brown, 2005; Rendtorff, 2011), and on communitarianism, which values the historically grown and dynamic culture and structure of communities. The focus on communities, in particular, leads to the transition from virtues of people in general to virtues of people who function in organisations (Becker, 1998), making it obvious to translate this concept into the organisational context, resulting in the emergence of IxB (Badaracco, 1997; Brown, 2005). As the name already indicates, IxB centres on the concept of integrity. This concept has demonstrated to be valuable for understanding ethical behaviour within and among business organisations. It focusses on the dynamic between and within organisations due to role conflicts, tensions between the stakeholders and the conflict between the societal and the commercial goals of the corporation.

THE HISTORY OF THE SOCIAL CONTRACT ARGUMENT The social contract argument (SCA) boasts a long tradition. In a well-known survey of the history of political theory, the subject is even introduced with an essay on ‘the rise and extraordinary persistence of the theory of the social contract’ (McClelland, 1996: 171). A version

228  Research handbook on organisational integrity of SCA can already be found in Plato’s dialogue Republic, arguably the first text in political philosophy (Plato, 2007). In book II of that work (369b–375a), Socrates explains the origin of society as a result of individuals becoming specialised in certain fields. In this way potential inhabitants of a community aim to better meet certain basic needs and thus hope to better ensure their maintenance. For that purpose, specialised professions such as farming, building, weaving and shoemaking will emerge. If everyone focuses on their own specialism, this will result in increased efficiency. But it also creates interdependencies that did not exist before. The new collaboration also creates a distribution issue because you need to know to value the output of each profession. How many pairs of shoes will you exchange for a house? As we will see, SCA is extremely useful for conceptualising distribution issues such as these. But apart from being invoked as a device for settling problems of distribution, SCA was used as a fruitful model to theorise the legitimacy of political authority by specifying the conditions under which national states could operate legitimately. In this manner Johannes Althusius (1563–1638) used SCA in the seventeenth century to justify the revolt of the Republic of the United Netherlands against Phillip II of Spain. In the context of the great wars of religion fought in that same seventeenth century in England, Thomas Hobbes (1588–1679) and John Locke (1632–1704) used SCA to reason out the conditions under which a monarch can legitimately exercise his sovereignty. In Hobbes’ version of SCA (Hobbes, 1651), the Sovereign is in a very strong position. Hobbes argues that rational individuals will agree to a contract whereby they will give up various natural rights in exchange for a strong authority that guarantees political order. With Locke, the SCA works out much less favourably for the incumbent ruler. Locke’s political writing was therefore an excellent argument to justify the Glorious Revolution, which deposed James II by his son-in-law and daughter, William and Mary. In the eighteenth century, SCA was also invoked by Jean-Jacques Rousseau (1712–1778) and Immanuel Kant (1724–1804). Rousseau’s Du Contrat Social inspired the Jacobins in the great French Revolution of 1789. Kant employed the concept of a social contract as an ‘Idea of Reason,’ a regulatory idea necessary for the formation of an ordered society. After these impactful versions of the doctrine in the seventeenth and eighteenth centuries, SCA fell somewhat into disuse until it made a spectacular reappearance in the second half of the twentieth century in the work of American political thinker John Rawls (1921–2001), who used the SCA to reason the terms of a theory of social justice. In the relatively young history of business ethics, several authors have contributed to the development of a social contract theory for business (SCxB). In this respect, by far the most outstanding contribution was made by the American business ethicist Thomas Donaldson, who has developed no less than three variants of such a theory (1982, 1989, 1999). The first version (Donaldson, 1982) starts from a brief overview of three classic political social contract theories so as to develop an analogous elaboration for the field of business ethics. The 1982 SCxB is concluded between the contracting parties ‘business’ and ‘society’ whereby business is operationalised at the aggregate level as ‘the class of productive organizations,’ while society is operationalised at the level of consumers and workers considered as individual persons (1982: 42). Donaldson subsequently presents his argument by proposing a hypothetical contract between these entities, illustrated through a thought experiment that analogously to the state of nature in SCA explores a ‘state of individual production.’ He defines this as a world in which productive organisations do not exist (Ibid.: 44). According to Donaldson, in this negotiating

A contractual perspective on organisational integrity  229 situation it would be rational for the contracting parties involved to agree upon establishing the following set of rights. Firstly, productive organisations should be acknowledged as authorised agents with the capacity to make legally valid decisions, including the authority to utilise land and natural resources and employ workers. Secondly, the benefits of SCxB for society as consumers encompass the following: ● Enhanced efficiency achieved through maximising the advantages of specialisation, improving decision-making quality and optimising the utilisation of technology and resources. ● Greater stability in the production and distribution of manufactured goods. ● Enhanced accountability. For their part, employees have an interest in creating the institution of productive organisations because they can earn more income that way. Collaboration in the context of productive organisations also offers greater dispersion of personal responsibility, and the ability to better align livelihood resources with the needs of individual employees over a lifetime. These are all prima facie advantages that must be weighed against prima facie disadvantages that can be foreseen in the creation of the new class of productive organisations. Among the expected disadvantages for people as consumers, we should think of pollution and depletion of natural resources, reduction of personal liability and abuse of political power. Seen from the point of view of workers, he mentions worker alienation, lack of control over working conditions, and dehumanisation of workers (Ibid.: 51–52). All these different advantages and drawbacks must ultimately be weighed against each other in an overarching trade-off. In this way, the balance of expected prima facie advantages and disadvantages for people as workers must be weighed against the corresponding balance for people as consumers. As long as the final balance is positive, one can derive a moral foundation for corporations from it: ‘Corporations considered as productive organizations exist to enhance the welfare of society through the satisfaction of consumer and worker interests, which relies on exploiting corporations’ special advantages and minimizing disadvantages’ (Ibid.: 54). One of the more remarkable features of Donaldson’s first straightforward attempt to apply the SCA to the business domain is that in setting up his SCxB, he does not invoke Rawls. He discusses Rawls only in the context of a criticism of what he labels teleological arguments (Ibid.: 90–106) and not in the actual set up of SCxB (Ibid.: 42–57). Nor did he take into account the later revision that Rawls (1993) made in response to the communitarian criticism of his big project. The main reason for this revision in Rawls’ later position was a lack of stability in the original project—Rawls saw that the original version of his social contract was itself a comprehensive doctrine as it depends for its justification on an appeal to values and deeply held convictions and beliefs. This makes it impossible to come to a consensus as a basis for the social contract. Rawls therefore considered that what was needed for a stable conception of justice was a political doctrine, i.e., a social contract argument that could be agreed upon by the contracting parties without appealing to fundamental values, such as religious beliefs about omnipotence etc. To get to a stable conception of justice, Rawls saw that he had to relax his doctrine and to address all citizens under conditions of public reason. In other words, the social contract should be based only on arguments that are persuasive for all citizens and not just for adherents to particular comprehensive beliefs. In order to cope with this challenge, he intro-

230  Research handbook on organisational integrity duced the ideas of reasonable pluralism, overlapping consensus, and a political conception of justice. Donaldson’s second version of SCxB shifts the perspective from corporations working within a national economy and political system to multinational companies operating across borders. In this second version the human rights perspective was added as a criterion more explicitly than in his 1982 SCxB. Moreover, this version was inspired by the work of David Gauthier (1986) rather than Rawls, which means that it was based on more specifically Hobbesian assumptions about the motivations of the contractors in the state of individual production. Donaldson’s third version of SCxB is based on a collaboration with Tom Dunfee in their book on Integrative Social Contracts Theory (Donaldson & Dunfee, 1999). This framework seeks to integrate two opposing modes of reasoning: on the one hand, this is the inductive approach that generalises the community consent of existing social contracts into more general rules of corporate morals. On the other hand, that community consent is again tested against a set of hypernorms that deductively set universal limits on locally grown community norms. These hypernorms fall into three classes. Structural hypernorms support essential background institutions in society; procedural hypernorms facilitate consensus building in microsocial contracts; substantive hypernorms guide the formation of moral consensus through the formulation of fundamental concepts of the right and the good (Donaldson & Dunfee, 1999: 52). With the benefit of hindsight, we can conclude that of the three versions of SCxB developed by Donaldson, the 1982 version has been by far his purest application of the social contract model to the field of business ethics. As he progressed through the development of later versions, the SCA seemed to become more infused with other ideas.

ADJUSTING RAWLS’ DOMESTIC JUSTICE TO THE LOCAL JUSTICE OF BUSINESS ETHICS Rawls has made his ideas known to the world in a number of works, gradually elucidating and specifying the scope of his message. But the central message of his work was already expressed in A Theory of Justice, his magnum opus, originally published in 1971 and revised in 1999. To understand how Rawls’ work might inform a theory of business ethics, we need to consider a number of theoretical simplifications Rawls used in developing his theory, as well as a number of domain constraints he makes to keep his theory manageable. Rawls’ design can then be modified so as to serve as the basis for a theory of business ethics. We will consider in particular Rawls’ construct of a Basic Structure of Society; his stipulation of society as a closed, national system (the so-called ‘domestic case’); as well as the manner in which he deals with the problem of collective action. The Basic Structure of Society Rawls (1971/1999) proposes a holistic argument with regard to the organisation of society. He sets out to derive two principles by which it is possible to judge the justice of society as a whole. It is emphatically not his ambition to establish principles for individual institutions— he merely looks at the effect of the interplay of all major institutions in society as a whole. To

A contractual perspective on organisational integrity  231 operationalise this holistic perspective, he introduces a construct specially equipped for this task, which he calls the Basic Structure of Society (BSS). This is defined as ‘the way in which the main political and social institutions of society fit together into one system of social cooperation, and the way they assign basic rights and duties and regulate the division of advantages that arises from social cooperation over time’ (2001: 10). The types of institutions he thinks of making up the BSS include ‘[t]he political constitution with an independent judiciary, the legally recognised forms of property, and the structure of the economy (for example, as a system of competitive markets with private property in the means of production), as well as the family in some form’ (Ibid.). Rawls defends the simplification of focusing his theory on the concept of a BSS in two ways. On the one hand, he claims that ‘[t]he significance of this special case is obvious and needs no explanation.’ On the other hand, he points to the natural follow-up research his project will lead to: ‘once we have a sound theory for this case, the remaining problems of justice will prove more tractable in the light of it. With suitable modifications such a theory should provide the key for some of these other questions’ (1999: 7). There is an extensive discussion about which institutions are and which are not part of the BSS as envisaged by Rawls, but for our purposes this is less relevant than underlining the holistic nature of Rawls’ (1971/1999) project. It is essential that the two principles he argues are merely intended for the way in which society as a whole functions. It follows that if you wanted to apply Rawls’ framework to the domain of business ethics, some sort of translation would need to be made from Rawls’ holistic level to the context of individual institutions such as the Western system of enterprise production and the free market. A number of authors have attempted this translation, including Donaldson (1982) and Freeman and Evan (1990). Before looking at how precisely they attempted this transition, it is useful to note that, while Rawls’ version of the SCA is not directly applicable to individual institutions such as business, his thinking has obvious indirect implications for individual institutions. Rawls is most clear about this in the elaboration of his lecture notes as edited by his student assistant, Erin Kelly. In these notes Rawls points out that ‘firms and labor unions, churches, universities, and the family are bound by constraints arising from the principles of justice, but these constraints arise indirectly from just background institutions within which associations and groups exist, and by which the conduct of their members are restricted’ (2001: 10). He then elaborates this conclusion on the basis of a number of striking examples of the (indirect) effects of his argument regarding the BSS on individual institutions. For example, he points out that whereas religious institutions are free to excommunicate heretics, they may not then burn those persons—after all, that would be a direct violation of the first principle (equal basic liberties). Similarly, universities must not discriminate when recruiting staff and admitting students. Certain forms of selection would conflict with the principle of fair equal opportunities. Another example Rawls gives with respect to this latter principle is that whereas parents are always free to send their children to a school with a philosophy of life of their own choice, they are not allowed to keep their children at home and raise their kids themselves. This would violate the principle of equal (educational) opportunity (Gutmann, 1999: 128–139).

232  Research handbook on organisational integrity Society as a National, Closed System of Mutually Advantageous Cooperation A second inevitable adjustment to apply Rawls’ theoretical framework to issues of business and business ethics concerns the assumption that society is a closed system (2001: 55). That is to say, with Rawls you can enter a society only by being born into it, and leave society only by dying. As Rawls explains the scope of society in his project: ‘we view citizens as born into society: it is there that they will lead a complete life. They enter that social world only by birth, leave it only by death’ (2001: §16). The whole idea that people could become members through immigration, political asylum and/or naturalisation therefore falls outside the assumptions Rawls makes to keep his theory workable (1971/1999: 7). On the other hand, Rawls’ conception of society is much broader than the activities within organisations and firms. For Rawls characterises society as ‘a cooperative venture for mutual advantage.’ While entities such as the corporation and the world of business, the natural subject of a theory of business ethics, can also be characterised as ‘cooperative ventures for mutual advantage,’ Rawls’ characterisation is much broader than just the Western system of enterprise production. Within society, people contribute to the creation of mutual benefit in a much more general way than in the case of entrepreneurial production alone. For example, the fact that more people live together in cities than in the countryside makes it feasible to provide products and services in a big city that would not be profitable in rural areas. The crucial question Rawls asks in choosing the BSS as the subject of his theory is: To whom does the mutual benefit thus created belong? This naturally leads to the question of what would be a fair distribution of the added value created in this way. Thus, if one chooses Rawls’ project as the basis for a theory of business ethics, one must somehow translate Rawls’ level of social justice into the question of justice of the system of entrepreneurial production of goods and services. The Problem of Collective Action (PCA) In addition to the theoretical simplifications and domain restrictions discussed above, which Rawls uses to keep his theory manageable and at the same time sufficiently general, there are also types of concerns that play no role for him precisely because he limits himself to the special case of the BSS of a national economy. He refers to his own version of the theory of justice designed for national, closed societies as the ‘domestic case,’ as distinguished from international justice on the one hand and local justice, the level of individual institutions, on the other. Moving from Rawls’ (1971/1999) level of the domestic case to the question of ‘local justice’ consisting of the problem of the fairness of the Western system of enterprise production and free markets, we are faced with what is referred to in standard economics literature as the problem of ‘external effects.’ This effect is often also discussed under the heading of ‘the problem of collective action’ (PCA). This topic can be explained as follows. Most actual agreements between specific interested parties, or ‘stakeholders,’ such as entrepreneurs, employees, suppliers and customers, as evidenced by actual transactions between these parties (i.e., when a customer actually buys a product or service, or a supplier actually provides the necessary raw materials or semi-finished products) there remains an external dimension to be identified, i.e., parties or stakeholders who are not part of the transaction, but who are nevertheless effectively

A contractual perspective on organisational integrity  233 disadvantaged by such an agreement or form of mutually advantageous cooperation. The classic economic solution to this PCA is to incorporate all effects of the activity considered so that the economic system will take all effects into account. Within Rawls’ domestic case, the PCA is actually resolved by the domain focus of a national economy. But it is clear that this restriction does not apply to the kinds of problems defining the domain of business ethics. We firmly believe that the development of SCxB can be achieved by building on Rawls. By translating Rawls’ principles into the necessary requirements for the corporate world, it is imperative to consider the three themes we have outlined in this paragraph.

COMMONALITIES AND DIFFERENCES BETWEEN IXB AND SCXB IxB and SCxB represent two fundamentally different approaches within the field of business ethics. Table 15.1 compares these two approaches along several dimensions. In this paragraph, we will delve deeper into this comparison. Table 15.1

Comparison of the two frameworks for analysing business ethical issues

Aspect

Social Contract Theory for Business (SCxB)

Integrity Theory for Business (IxB)

Object of

● Institutional framework for action

● Patterns of cooperation between people

● Consent by parties to the contract

● Wholeness:

assessment Normative basis

● Purposeful organisation ● Constituent elements stand for something Goal

● Actions that align with the fundamental principles that underpin the BSS

● Balance between constituent elements ● Excellence, and flourishing of participating individuals, organisations and society

● Fair cooperation, i.e., fair distribution of the ben- ● Teleological: intrinsic efits and burdens of ‘cooperative ventures’ (such as the corporation) ● CSR: inclusions of external effects, i.e., interests outside the contracting parties Method

● Rational decisions

● Emergent processes

Context

● Theorising abstracted from context

● Context taken into account

SCxB and IxB are both ethical theories. SCxB applies the general framework of social contract theory to the business context, allowing for the development of a host of new applied theories. IxB is an evolving theory that stems from the notion of ‘integrity’ as one of the numerous virtues exhibited by individuals operating within the realm of businesses. In the early applications of virtue ethics in the business context, ‘integrity’ was just one of many concepts used to indicate important qualities of people within businesses (Solomon, 1992). In Solomon’s book from 1999, the concept of ‘integrity’ has grown into a key attribute of individuals shaping the organisation (Solomon, 1999). The concept has primarily been developed in practice since the 1990s. The developments surrounding governance and compliance and the attention that was given to non-compliance with rules by employees provided an impulse for the use of the concept of ‘integrity’ and the development of the ‘Integrity approach’ (Sharp Paine, 1994). Integrity theory developed in this way into a theory of corporate integrity.

234  Research handbook on organisational integrity Object of Moral Assessment Both groups of theories establish standards for collectives, particularly moral standards for organisations. This was a key topic during the early stages of business ethics debates. In the beginning, SCxB theories assumed that corporations are nothing more than a collection of contracts between different parties, and the corporation was viewed as a nexus of contracts (Jensen & Meckling, 1976). Business ethicists built on the ideas of Rawls, Gauthier and economists such as Jensen and Meckling, and used the concept of the social contract for the institutional principles formulated by individuals that underpin a just business sector. Later business ethicists perceived business as a sector of society that is defined by the underlying principles of the enterprise that is defined by a social contract between stakeholders, or between a company and society. Some business ethicists perceive the corporation as a social entity in itself created by the social contract between stakeholders (Kaptein & Wempe, 2002). In all these cases the corporation was recognised as a cooperation between stakeholders and the norms that were formulated based upon the social contract to address the corporation and the business sector. IxB theories adopt a direct approach by examining the patterns of collaboration among individuals both within and surrounding corporations. These cooperation patterns serve as the focal point for normative evaluation of IxB. This assessment encompasses various aspects, including the organisational structure and culture of business entities, as well as the individuals who influence them, such as leaders, supervisors, human resource managers and accountants. Normative Basis Both approaches provide a normative basis for businesses and the individuals shaping them. However, the normative basis for the two groups of theories differs. SCxB upholds the liberal principle of consent, which asserts that individuals’ agreement is necessary for the binding force of the principles based upon the social contract. This consent ensures that the principles are fair, legitimate and accepted by all parties involved in the social contract, providing a solid foundation for a just society. IxB does not solely concern itself with individuals as rational actors, but also acknowledges the impact of various instincts, social factors, upbringing, and historical context on their behaviour. IxB recognises that individuals are embedded within social structures and processes that influence their decisions and actions. Therefore, it considers the interplay between individuals and their social environments, including various institutions, organisations and cultural norms that shape and are shaped by their behaviour. This broader perspective enables a deeper understanding of the complexities of human behaviour and the social world. The normative dimension of IxB resides in the notions of wholeness and balance. Within the multitude of influences and behaviours, emerges a sense of unity and growth for individuals, organisations, and society as a whole. This wholeness and balance are not achieved solely through rational choices, but rather through the interplay of various forces, urging employees, companies and society to contribute to human flourishing and collective well-being. Goal Social contract theory presupposes that individuals willingly consent to fundamental principles that underlie the organisation of society and provide a basis for evaluating behaviour in

A contractual perspective on organisational integrity  235 moral terms. Rawls perceives society as a ‘cooperative venture for mutual advantage,’ whose members acknowledge ‘certain rules of conduct as binding,’ rules that ‘specify a system of cooperation designed to advance the good of those taking part in it’ (Rawls, 1971/1999: 4). Corporations play an important role in that cooperative venture. Basically, SCxB is neutral with regard to the purpose of the corporation as long as it is in line with the principles that individuals would choose to realise mutual benefit. SCxB recognises that in a society, everyone must contribute to collective provisions that make a well-organised society possible. We pay taxes to the government to provide for safety, roads, good education and health care. Businesses contribute to this by producing products and goods that society needs, providing income for employees, as well as attracting a diverse workforce so that everyone can contribute to society and no one is excluded from it, and offer equal opportunity for women to pursue their career. SCxB formulates the rules that we follow to create the conditions under which businesses can and may function and the way in which businesses contribute to a fair distribution of benefits and burdens to bring about this well-organised society. In a free society, one must assume that there are different opinions about what that well-organised society looks like. The concept of a social contract aims to provide a basis for agreement. SCxB assumes the agreement of all involved parties. As it is assumed that everyone agrees to the social contract underlying the principles on which business is founded, business is authorised to use the means available to society to produce goods and services that society needs. In this regard, the term ‘licence to operate’ is often used with regard to businesses. IxB does not reason in terms of the rights of corporations to use resources that society possesses (‘licence to operate’) and obligations to contribute to society, nor does it reason in terms of rights and obligations towards stakeholders, like SCxB does. Instead, IxB has an organic vision of businesses, recognising that management, employees, shareholders, consumers and other involved parties all have a role to play in making the organisation successful and fulfilling its societal role. IxB acknowledges that communities have diverse values and interests, which can result in conflicting expectations and abuse of power. IxB recognises the importance of alignment and preventing corruption, but does not assume that alignment can be achieved through rational decision-making alone. Instead, IxB emphasises the need to seek wholeness and balance in daily practice, allowing for tensions to exist, which can lead to healthy debates and create resilient organisations (Badaracco, 1997). IxB primarily aims to bridge tensions and mobilise all forces to achieve excellence at an individual, organisational, and societal level. This pursuit of excellence revolves around realising happiness by becoming a better person, organisation or community. The purpose of IxB is intrinsic; it is not tied to an external objective but rather embedded within the activity itself. Method SCxB aim to identify principles that govern the behaviour of individuals within and around organisations, as well as the behaviour of organisations themselves. Specifically, the endorsement of these principles requires the active involvement of as many parties as possible, who consciously and willingly choose to adhere to them. SCxB often takes the form of voluntary codes or covenants that are supported by those who are engaged. IxB is built upon emergent processes that serve an often implicit purpose and can be influenced by the understanding of that purpose by the involved people. A key concept utilised by

236  Research handbook on organisational integrity MacIntyre (1984) in this context is the notion of practice. It encompasses a complex set of actions aimed at achieving an intrinsic goal, and implicitly involves the expectation of striving for continuous improvement. Context There is a significant distinction between SCxB and IxB regarding the role of context in the development of norms. In SCxB, the context is considered irrelevant or, at most, indirectly influential. For that reason, Rawls’ social contract is formulated ‘behind a veil of ignorance.’ This device ensures impartiality and serves as the foundation for the justice of the principles derived from it. On the other hand, IxB recognises the importance of context. Norms and values within a community have evolved and have a meaning within that specific context. What matters is the community’s appreciation and understanding of the facts and circumstances surrounding these norms and values.

PRACTICAL APPLICATIONS OF THE RIVAL APPROACHES SCxB and IxB present distinct viewpoints on the functioning of businesses. SCxB approach focuses mainly on the institutional foundation of the corporation and formulates norms for the behaviour of companies and people acting on behalf of the companies towards society (what is the company’s licence to operate) and towards its stakeholders (which rights must be respected). Specifically, SCxB is often translated into codes and covenants. This ranges over a broad spectrum of codes, from the UN Sustainable Development Goals (which mandate governments, companies and civil society organisations) and the Global Compact to codes with regard to privacy protection, the use of Artificial Intelligence, company codes and professional codes. Debates are taking place in countless places about what responsible conduct means in this organisation or within this profession. The codes formulate general principles that are (implicitly) agreed upon that guide the actions of companies and people within those companies. The UN Global Compact is a case in point. The former Secretary General of the UN, Kofi Annan, introduced the UN Global Compact during a speech at the World Economic Forum as a compact between the United Nations and the private sector. Several authors have interpreted this agreement as a social contract (Bäumlisberger, 2019). The UN Global Compact is a voluntary initiative. The UN Global Compact encourages companies to align their strategies and operations with the ten universally accepted principles in the areas of human rights, labour, environment, and anti-corruption. These principles are derived from four generally accepted declarations and codes: the Universal Declaration of Human Rights, the International Labour Organization’s Declaration on Fundamental Principles and Rights at Work, the Rio Declaration on Environment and Development, and the United Nations Convention Against Corruption. Examples of these principles are: Principle 4: ‘Businesses should uphold the elimination of all forms of forced and compulsory labour’; Principle 6: ‘Businesses should uphold the elimination of discrimination in respect of employment and occupation’; Principle 7: ‘Businesses should support a precautionary approach to environmental challenges’; and

A contractual perspective on organisational integrity  237 finally, Principle 10: ‘Businesses should work against corruption in all its forms, including extortion and bribery.’ The UN Global Compact is seen as a positive step towards promoting corporate responsibility. This compact is particularly compelling because it provides a clear set of principles for companies to follow. With just ten concise guidelines, it offers a straightforward framework for ethical decision-making. However, there is also fundamental criticism (Hess, 2008; Williams, 2004). This concerns the voluntary nature of the Global Compact. There is no enforcement mechanism to ensure that companies comply with these principles. The idea of consent as basis for the social contract leads to this voluntary character and at the same time leads to undermining its credibility. Another point of criticism concerns the generic nature of the Compact. Due to the very broad description of the principles, it is possible to limit the contract to ten principles. However, this has the consequence of not providing sufficient guidance on how companies should implement them. What is meant by ‘Businesses should uphold the elimination of all forms of forced and compulsory labour’? Does that imply a responsibility for the labour conditions of the business partners or customers of the company? It makes it difficult for companies to know what is exactly expected of them. This also holds for the stakeholders of these companies. It is not clear for them what they can expect from the companies that subscribe to these principles (Williams, 2004). Another issue concerns the representative character of the Compact. The Global Compact is primarily driven by large multinational corporations. There are hardly any smaller companies, civil society groups, or other stakeholders in the initiative. That would not be practically possible. However, on what grounds will these parties feel bound by the agreements laid out in this social contract? These ten principles focus primarily on the behaviour of companies and do not address broader issues related to the economic and political systems in which these companies operate. The principles do not address crucial societal issues such as income distribution, gender and race inequality, discrimination, and corporate influence on government policies (Donaldson, 2003). IxB pays particular attention to the (often implicit and informal) regulative mechanisms in organisations, which stem from culture, leadership, tradition, and mechanisms such as bonuses and remuneration systems. It aims to help individuals to become aware of this implicit and informal steering of and within the corporation and correct them if necessary. IxB focuses on inspiring goals, leadership and power positions, pride in successes, ingrained customs that sometimes hinder progress, roles and role conflicts within companies, and conflicting expectations towards the company. Does the corporation contribute to the well-being of the stakeholders, and does the organisation contribute to a thriving society? Tensions often arise in these informal processes. When are these tensions healthy and contribute to the proper functioning of the organisation, and when do they become destructive, preventing the organisation from fulfilling its role in creating a well-functioning entity and contributing to a flourishing society? Corruption as a Moral Issue for Business Organisations An issue that both SCxB and IxB pay attention to concerns corruption. The definition of corruption, according to the World Bank, is the abuse of public office for personal gain (World Bank, 2020). This encompasses various forms of wrongdoing, including bribery, embezzlement, fraud, extortion, nepotism, and other illicit practices. Corruption has a significant detrimental impact on societies, as it undermines economic development, erodes public trust in government institutions and diverts resources away from public goods and services. It is

238  Research handbook on organisational integrity a major obstacle to achieving sustainable and inclusive growth, and poses a serious challenge to the promotion of good governance and the rule of law. When SCxB is translated as a statement in a corporate code, it often involves strong statements: corruption in any form is prohibited and fought against. In virtually all national laws, corruption is criminalised. The United Nations Convention against Corruption (UNCAC) is the primary international legal instrument formulated to combat corruption. It was adopted by the United Nations General Assembly in October 2003 and came into force in December 2005. Currently, 187 countries have endorsed the UNCAC. The UNCAC also forms the basis for the Global Compact voluntarily endorsed by companies. There are plenty of institutional frameworks. The social contract underlying these frameworks is clear. It is actually surprising that, in addition to enforceable legal frameworks, various corporate codes and international codes are still needed to condemn and prevent corruption. This is where IxB approach comes in. Corruption is a persistent problem within companies, government organisations, and civil society organisations such as FIFA. IxB draws attention to the temptation faced by those who represent companies, civil society organisations, or public organisations. IxB also accounts for conflicting interests and the culture within an organisation or sector of society. Employees feel pressure to use methods that conflict with codes and legal frameworks in order to generate revenue. IxB will point out the different contexts. When does a tip become a form of bribery? Can a business relationship still be combined with a friendly relationship? The whole economy depends significantly on building relationships and networks. In addition to straightforward corruption, there are many unclear situations. This means that the phenomenon of corruption is portrayed as too simplistic by the codes based upon a SCxB approach. Michael Sandel formulates an interesting and even more fundamental vision of the phenomenon of corruption. He discusses numerous examples that illustrate how the logic of the market economy leads to corruption. Corruption is much more than ‘the abuse of public office for personal gain.’ It is about undermining the essence of the value at stake: Markets in refugee quotas, procreation permits, and the right to shoot a walrus, however efficient in economic terms, are questionable policy to the extent that they erode the attitudes and norms that should govern the treatment of refugees, children, and endangered species. The problem I am emphasizing here is not that such markets are unfair to those who can’t afford the goods being sold (although this may well be true), but that selling such things can be corrupting. Standard economic reasoning assumes that commodifying a good—putting it up for sale—does not alter its character; market exchanges increase economic efficiency without changing the goods themselves. But this assumption is open to doubt. As markets reach into spheres of life traditionally governed by nonmarket norms, the notion that markets never touch or taint the goods they exchange becomes increasingly implausible. (Sandel, 2013: 132)

The way in which the issue of corruption is analysed is interesting. It shows that corruption is a problem that involves multiple layers. Clear principles are needed that are established in codes and an institutional framework. Here, SCxB proves its worth. However, principles can conflict and lead to dilemmas. The tension between these principles then becomes a reason for debate and leads to adjustments of the codes and legal frameworks. There is often also a culture where people feel pressure to use inappropriate methods to serve the interests of the company. Organisations should also be aware of incentives, such as bonuses, that promote corruption. But also, the market economy drives people to see everything as a product on a market. Here, IxB complements the norms based on SCxB.

A contractual perspective on organisational integrity  239 The corruption issue involves multiple layers. Both theoretical approaches address a different dimension of the problem. It is, as it were, two sides of the same coin.

CONCLUSION SCxB has developed as an application of the established model of social contract theory to the corporate context. IxB originated mainly from the need of practitioners to ensure compliance with legislation and codes, as well as in the field of governance to fulfil the board’s responsibility for the entire organisation. Since the 1990s, IxB has evolved into a variant of virtue ethics. SCxB is a powerful theoretical framework that can be used to establish standards for corporate impact, particularly in situations where overarching principles are needed to guide behaviour and set boundaries. When used alongside stakeholder theory, it can effectively address tensions between conflicting stakeholder interests and establish principles to balance those interests. By providing direction for individuals and organisations to follow, SCxB can help ensure that actions are aligned with the more fundamental standards and objectives. In our perspective, the development of SCxB should predominantly occur by translating Rawls’ principles into the requirements that the system of corporate production ought to fulfil. Within this chapter, we have recognised several themes that this translation from Rawls to the corporate context should consider. IxB proves particularly valuable in situations where there are frequent implicit conflicts among values. It can effectively uncover and address these conflicts, seeking solutions for the competing values involved and contribute to a more balanced consideration of the qualities that employees, the organisation, and society need to master to contribute to a meaningful organisation at all levels. While SCxB provides overarching principles to guide decision-making, IxB can help contextualise the decision by considering consequences and weighing different interests against one another. The criteria for assessment are based on the desirability of achieving a goal that aligns with the decision made regarding the dilemma. One of the main strengths of IxB is its ability to navigate conflicts between values that can lead to practical challenges. In summary, both perspectives have their strengths and complement each other well. IxB focuses on the motives behind actions and supports decision-making, while SCxB provides a framework for guiding behaviour and establishing principles. Together, they provide a more comprehensive approach to corporate impact and decision-making, helping organisations achieve their purpose while considering the interests of all stakeholders involved. Suggestions for Future Research We started this chapter by expressing our surprise that in the present state of business ethics, there is hardly any debate between IxB and SCxB, while the debate between each of the three general ethical theories is quite fierce. For the further development of IxB and SCxB as theories of business ethics, it is desirable to explore the strengths of each approach, where they complement and reinforce each other, but also where they contradict each other. The peaceful coexistence between SCxB and IxB seems attractive. In particular, where IxB is supportive of compliance with rules and the search for unity and alignment in the organisa-

240  Research handbook on organisational integrity tion, this pragmatic stance is positively appreciated. However, there are also areas where the two approaches conflict. Breaking through the glass ceiling for women and minorities will not be achieved through a code or legislating quotas. Such rules might even backfire. Doubts may arise about the qualities of women or minorities appointed on the basis of such a policy. IxB seems to be more appropriate. Respecting people’s rights, for example safe working conditions or a ban on child labour, should not be relativised by referring to local customs or by pointing out that these children are relatively better off. Here, a social contract approach is more obvious. Fundamental rights of children cannot be balanced against economic considerations or tradition. Where the two approaches conflict with each other, it is desirable to examine how the application of both approaches should take place. The discussion that social contract theorists had with communitarians revolves largely around the question of the ‘priority of the right over the good’ versus the ‘priority of the good over the right.’ It would seem that this debate corresponds to the distinction between the compliance and the integrity approach (Sharp Paine, 1994). It would be interesting, therefore, to investigate to what extent this distinction can be seen as a translation of the aforementioned discussion between communitarians and the social contract approach. Another highly relevant question for further research is why it is that the major tension between general ethical theories, virtue ethics and communitarianism on the one hand and social contract theory on the other, more or less disappears when applied in the business context. Is this because this translation to the business context entails preconditions that remove the sharp edges of the debate? Or is it because the translation to the business context automatically forces us to think in terms of acting in partnerships or acting by collectives? Future research should delve into the dynamics of the coexistence between integrity-based theories for business ethics (IxB) and social contract theories for business ethics (SCxB), exploring their strengths, complementarity, contradictions, and areas of conflict. Investigation into how the application of both approaches should occur when they clash, would contribute to a more comprehensive understanding of their interplay. This discourse taking place within the domain of business ethics has the potential to transcend its boundaries, igniting fresh perspectives and forging new insights in the longstanding debate between communitarians and social contract philosophers.

NOTE 1. In this chapter, we will discuss the application of social contract theories for business (SCxB) and integrity theories for business (IxB). We realise that much of it can be applied one-to-one in other types of organisations.

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242  Research handbook on organisational integrity Williams, O. F. (2004). The UN Global Compact: The challenge and the promise. Business Ethics Quarterly, 14(4), 755–774. World Bank (2020). Anticorruption Fact Sheet. www​.worldbank​.org/​en/​news/​factsheet/​2020/​02/​19/​ anticorruption​-fact​-sheet.

16. A regulatory perspective on organisational integrity Martin de Bree and Annemiek Stoopendaal

In this chapter we explore organisational integrity from a public regulator’s perspective. Obviously, regulators observe regulated organisations through the specific lens of legal requirements. In the traditional command-and-control regulatory approach, regulators check whether regulated organisations are in compliance with legal requirements. Their first interest may not be in how compliance or non-compliance is produced. The most important problem is probably that the regulator may only observe problems when they have already been manifested in actual incidents. This implies that a regulator is often too late to prevent harm to public interests. As a response to these disadvantages, regulators are searching for more proactive strategies that will allow them to intervene before harm has been done. Consequently, regulators are experimenting with shifting the focus of their attention to the inside of the black box, so within the regulated organisation. Logically, regulators end up looking at organisational aspects like culture, governance, quality and management systems, ethics programmes, etc. Organisational integrity is clearly a relevant aspect as it is positively related to the reliability of the organisation. Also, organisational integrity is a key element for trust and thus essential to build effective collaborative interpersonal relationships (Werbel & Paulo, 2009). Integrity is also a determining factor in overall approval or disapproval of an organisation, whether it be a for profit (Somera & Holt, 2015) or a non-for-profit organisation (Feldheim & Wang, 2004). Public regulators intend to prevent organisations from behaving in a way that is harmful for society and to correct or punish illegal conduct with sanctions. As organisational integrity is an important predictor for the actual or future behaviour of a regulated organisation, it should be considered relevant for public regulators. When a regulator would differentiate between regulated organisations with high and poor integrity, she may be able to customise her strategy and be more effective in preventing incidents and other manifestations of harmful conduct. Furthermore, the organisational integrity of the regulatory body itself may not be such an important issue if the regulator uses a traditional command-and-control based approach. In that case, there may be little discussion about whether a certain output is compliant or non-compliant with rules and if there is, there is always the judge to go to. However, in regulatory approaches that are based on a cooperative model rather than a deterrence-based model, the relationship between regulator and regulatee becomes more important. Then the integrity of the regulator turns into a factor that may help shape trustful relationships that are needed to make such an approach successful. First of all, because of the intrinsic value of organisational integrity, but also as a functional characteristic in more advanced strategies. As integrity supports trust in a relationship, integrity can be a productive element of regulator–regulatee relationships (De Bree & Ruessink, 2015). This chapter starts by defining regulation and organisational integrity. Second, as academic research about the direct relationship between regulation and organisational integrity is close 243

244  Research handbook on organisational integrity to non-existent, we explore the relevant aspects of organisational integrity in order to facilitate a connection with academic work on regulation. Third, we discuss relevant academic work on a regulator’s perspective of organisational integrity, again looking at the different aspects of organisational integrity. Fourth, we discuss the importance of integrity of the regulators’ own organisation in the light of specific regulatory strategies. We end this chapter with conclusions and suggestions for future research.

REGULATION There are several different definitions for the concept of regulation. Selznick (1985) proposes to understand regulation as a sustained and focused control exercised by a public agency over activities that are valued by the community. Baldwin et al. (1998) recognise that regulation is a specific form of governance often including some administrative agency for monitoring and enforcing compliance with authoritative rules. We follow the definition of Selznick with the additional remark that regulation is usually operationalised into three activities: ● the collection of information about whether an action or case meets the requirements set, ● then forming an opinion about it and ● possibly intervening as a result. However, this view of regulation as a formal top-down oriented process has been challenged by new insights. Black (2001) describes a shift form a hierarchical state-society relationship to a heterarchical relationship, which implies a different role for the state: one of mediator, facilitator, enabler. Quoting Murphy (1997) Black (p. 146) states: “The question is not whether law can survive without hierarchy but rather how law can learn to understand itself in a world of horizontally rather than hierarchically configured relations”. Black defines regulation as a process involving a focused and sustained attempt to alter the behaviour of others according to defined standards or purposes with the intention of producing a broadly defined outcome or outcomes. Also, Murphy perceives regulation as an ever expanding concept not only in terms of what it is, but also who or what the regulator is, what form it takes, what actors or area of life it affects and what instruments and techniques are used. Following the de-apexing of the state she describes, and unlike the notions of Selznick (1985) and Baldwin et al. (1998), Black assumes that regulation can be seen as a concept not exclusively attached to government. Being aware of the assumed broad concept of regulation as proposed by Black (2001), we choose to focus this chapter on public regulation and the perspective of the public regulator including also parties that are involved in public prosecution of criminal conduct. Having said that, Black convincingly makes the point that non-public regulation is existent. As we may safely assume that non-public regulation may regularly seek to influence elements of organisational integrity, we consider non-public regulation as an obvious part of the public regulator’s scope. The traditional framing of regulation as a top-down process of making rules and enforcing compliance with these rules has been criticised as societies become more complex and dynamic. Consequently, regulators are put in a position to cope with rules that increasingly do not fit on specific situations. They experience a substantial and growing drifting apart of what is regulated and what is harmful (Kasdorp, 2022; Sparrow, 2020). In other words, regulators are facing a serious challenge as they face situations of legal but harmful behaviour and, the

A regulatory perspective on organisational integrity  245 other way around, unharmful but illegal conduct. Not surprisingly, more and more regulators tend to focus on the underlying goal of the rules, often referred to as the spirit of the law. On a more general level, Ruhl (1997) proposes that law-making systems should be transformed to complex adaptive systems if they are to keep up with the complex and dynamic outside world they aim to regulate. Regulators are in the midst of the heat of this gap between the relative static world of laws and regulations and the dynamic complexity of day-to-day society. Therefore, they are attempting to find effective strategies to cope. One of these strategies is to create more freedom of space by not holding on too strictly to detailed rules and focus on the situational risks for the public interests those rules aim to serve and how these are controlled by regulated organisations. An example of such a strategy is system-based regulation, where the regulator focuses on the effectiveness of the management system of regulated organisations to assure the public interest in question (De Bree & Stoopendaal, 2020; Gilad, 2011; Wengle, 2016). In the case of system-based regulation, also organisational integrity comes into play. The reason for this is that the effectiveness of management systems in assuring public interests depends heavily on the adequate operationalisation of public goals into the management system and the adequate implementation of the management system in day-to-day practice.

ORGANISATIONAL INTEGRITY FROM A REGULATORY PERSPECTIVE There are several definitions of organisational integrity. The main question appears to be whether integrity is seen as consistency of an acting entity’s words and actions (Palanski & Yammarino, 2007), which can be perceived as one of many virtues, or an overarching concept that includes this consistency in combination with other, moral, virtues. Kaptein (2005) describes integrity as the strict adherence to a moral code leading to transparent honesty and complete harmony in what one thinks, says and does. Acting with integrity mainly has to do with consistency. Bauman (2013) argues that there are three reasons why a definition of integrity should include a moral component. First, the general use supports that integrity has a moral element. Second, books and scholarly publications consistently demonstrate an ethical meaning of integrity. Third, moral integrity is used in important research about ethical commitments. For the regulator, it is quite clear that organisational integrity should include a moral component as from a regulatory point of view, ethics and public interests are undoubtedly interlinked. The regulator does expect, and does so more and more, that the leadership of an organisation installs and designs specific elements to assure integrity rather than await whether its members have integrity. On top of external regulations, a regulated organisation should have internal rules and procedures as tools to guide members of the organisation about the decisions to make sure individual conduct is aligned with ethical codes. Sanctions also may serve to underline the importance to adhere to rules, procedures and moral codes. Internal audits may be organised to check whether rules and procedures are complied with. Furthermore, culture training programmes may be organised to train individuals in behaving in line with ethical codes, rules and procedures. Organisational integrity can be organised to a certain extent, by developing and implementing specific elements of organisation. Or, as Paine (1994, p. 106) puts it: “Ethics has everything to do with management”. Consequently and borrowing from Kaptein (2005),

246  Research handbook on organisational integrity in this chapter we use the following definition for organisational integrity from a regulatory perspective: The organised commitment to public interests and preventing harmful conduct demonstrated by harmony in what is thought, said and done by that organisation. The definition of integrity we have chosen to use allows us to explore the different aspects of organisation integrity: ● adherence to a moral code (leading to) and ● harmony in what is thought, said and done by that organisation. In the next sections, we dive deeper into these two elements. This will help us to explain their importance for public regulators.

ADHERENCE TO MORAL CODES Generally speaking, a code of business ethics is a document that expresses what a corporation considers as its moral norms and values (Kaptein & Wempe, 2002). For the regulator, moral codes are important in the sense that they express the formal intentions of an organisation with regard to ethical issues, such as how they address topics of public interest. Kaptein and Wempe propose that five behavioural principles should be addressed in a moral code: openness, empathy, fairness, solidarity and reliability. Codes of ethics are widely used by companies and should be comprehensive, authentic, morally justifiable and manageable (Kaptein, 2008). A code must not necessarily be put on paper to be effective. Tacit moral values and norms which are consistently present in the hearts and minds of the members of the organisation expressed in the real practices an organisation develops may be just as effective and can also be considered a code of ethics. Codes of ethics are meant to regulate the behaviour of people in such a way that they comply. Kaptein distinguishes four levels of morality regarding codes: law and regulations, other codes for business, legitimate expectations of stakeholders and ethical progressive standards. Furthermore, an excellent code is also morally progressive, meaning that the company is an example for other companies in setting new principles and standards. As moral codes give some information to the regulator about the formal stand of an organisation regarding issues of public interests, having a code put on paper is not sufficient to regulate behaviour. Several authors (Collier & Esteban, 2007; Kaptein, 2008) argue that the code’s effectiveness depends not only on the content of the code, but also on its embeddedness in the organisation. In other words, the code should be implemented in the organisation to be effective. Following the definition, the actual result of the implementation of the code should be harmony in what is thought, said and done by that organisation and transparent honesty. Collier and Esteban (2007) following Weaver et al. (1999) argue that codes of ethics may be decoupled from daily organisational activities under the influence of institutional pressures in which case employees may know little about the ethics policy of their employer. Clearly, the notion that a moral code on paper is necessary but not sufficient is relevant for regulators. This means that regulators should not be satisfied without collecting information about the level of implementation of the code.

A regulatory perspective on organisational integrity  247

HARMONY IN THINKING, SAYING AND DOING Harmony in thinking, saying and doing is a subject poorly found in academic research. As such, the term “harmony in thinking, saying and doing” produces zero hits when used in Google Scholar. However, institutional theory provides notions that are relevant for understanding harmony in thinking, saying and doing within organisations. This information sends a clear message to regulators. As we have seen, having a management system or an ethics code on paper is clearly not enough to be certain that public interests are effectively assured. We explain what relevant research on this topic has revealed. Meyer and Rowan (1977) argue that organisations tend to formally adopt a policy that is consistent with its institutional environment, but fail or decide not to align their actual behaviour with this policy. This gap between formal and actual behaviour is referred to as decoupling. This phenomenon has received much attention in academic research since. One of the main reasons for decoupling is that organisations reflect the desires of their institutional environment in their formal policy, hoping to gain advantage of this in terms of legitimacy, without the burden of having to implement the policy in practice. Therefore, decoupling is a phenomenon that regulators should take seriously notice of. Where Meyer and Rowan (1977) describe the gap between policy and practice, Bromley and Powell (2012) introduce an extended model, proposing potential gaps between formal policy, daily practice and intended outcome. Building on this work, De Bree and Stoopendaal (2020) derive a four-level model of decoupling from empirical work based on a system-based regulation strategy. De Bree and Stoopendaal found that when applying a system-based regulation approach, the Dutch Healthcare Inspectorate could recognise different forms of decoupling within healthcare organisations, namely decoupling between goals and management system, between management system and daily practice and between daily practice and real outcome. Other authors demonstrate decoupling between ethics programme and individual-level perceptions and behaviour (MacClean et al., 2015) and decoupling of environmental management systems from actual practice (Sandholtz, 2012). An interesting aspect of decoupling is that it may be deliberate and undeliberate. Deliberate decoupling occurs when the management is aware that adopting the formal policy symbolically brings about advantages while not having the attention to actually implement it. An advantage of deliberate decoupling may be more legitimacy from their stakeholders or the opportunity to mitigate conflicts (George et al., 2006). However, not all organisational decoupling is intentional in such a way that the leadership consciously decides to decouple to gain legitimacy from the environment including regulators. Undeliberate decoupling may occur if the management has the intention to implement the policy, but experiences unexpected difficulties in implementation like resistance at lower levels of the organisation (Crilly et al., 2012). As the possibility of decoupling should be of great interest to the regulator, the reverse process is maybe just as interesting. If goals, management system, daily practice and real outcome recouple, this actually means that the harmony in thinking, doing and saying benefits from this. For the regulator this implies that the organisation is more reliable in terms of walking their talk. Therefore, we explain the process of recoupling. As an organisation decouples daily activities from formal policies like a code of ethics, employees may become cynical and forces may develop recoupling (Tilcsik, 2010). Tilcsik argues that recoupling occurs as a consequence of a number of events. First, the decoupled organisation becomes aware of the

248  Research handbook on organisational integrity need for specialised skills and knowledge for the symbolic implementation of the policy. This leads to hiring new staff with these skills and knowledge and thus the entry of new organisational members into the organisation. As a result, the practices of implementing the policy professionalise and new members of the organisation attempt to spread their vision. As the new members gain political resources by, for example alliances and achieving key positions, the new vision triumphs and the rationale for decoupling resolves. This process eventually results in recoupling of the formal decoupled policy.

RESUMING Decoupling, conceptualised as the gap between the management system and actual practice, therefore is a serious threat to the harmony in thinking, saying and doing. More specifically, deliberate decoupling of an ethical code is a form of disharmony between thinking and saying and between saying and doing. Furthermore, deliberate decoupling conflicts with transparent honesty as the real intention of the management differs from what they promise to do as expressed in the formal policy. Undeliberate decoupling of an ethical code is a form of disharmony between saying and doing and could be conflicting with honest transparency when the management is not openly communicating about the setbacks and their consequences. The reverse process of recoupling provides notions for strategies to restore harmony in thinking, saying and doing by making use of the forces involved in the recoupling process.

A REGULATOR PERSPECTIVE ON ORGANISATIONAL INTEGRITY We present two lines of reasoning that lead regulators to show interest in organisational integrity: ● The first line of reasoning originates from criminal law practices to engage in organisational root causes of criminal breaches. ● The second line of reasoning arises from attempts of regulators to follow a proactive policy rather than reacting on incidents and countering challenges related to the complex and dynamic reality of today’s societies. Criminal Breaches Committed by Organisations From a regulatory perspective, the recognition of an organisation as a potential perpetrator of criminal act – as opposed to an individual human being – is different per country. In some countries, such as The Netherlands, an organisation can be criminally prosecuted as perpetrator of criminal conduct. In other countries, such as the United States, organisations can be held responsible vicariously by prosecution of their agents (Weissman & Weissman, 2007). The notion that an organisation can be held liable as an organisation implies that regulators should try to understand how the conduct of an organisation is shaped. More specifically, the reason for this is that the culpability is determined by – amongst other elements – what the organisation has done to prevent the violation from occurring. This line of thinking has

A regulatory perspective on organisational integrity  249 led in the United States to a provision in the Federal Sentencing Guidelines that a penalty is reduced if a company has an effective compliance programme. A compliance programme is a management system specifically designed and implemented to prevent misconduct, detect deviations from the organisation’s policy and align the activities of the organisation with regulation (Soltes, 2018). Interestingly, this reasoning leads the regulator into the inside world of organisations, their codes of conduct, their management systems, their governance and their organisational culture. Another, more proactive application of the concept of a compliance programme is to make it a part of a penalty or a settlement between the public prosecutor and the organisation as a consequence of a breach. The United States has been a frontrunner with compliance programmes as a part of prosecution policies (Braam et al., 2022). Here, the idea is that forcing an organisation to establish a compliance programme will help prevent criminal breaches from reoccurring. To assure that the organisation implements an effective compliance programme, external gatekeepers may be imposed to assist organisations to set up a compliance programme that is fit for dealing with the challenging and demanding regulatory environment they are facing (Root, 2016).1 The Netherlands has followed this development by creating the possibility to demand a compliance programme as part of a settlement and has recently also included the option of installing an external monitor (Braam et al., 2022). So, in criminal law practice, efforts of organisation to prevent criminal conduct may be recognised, both as a factor that may reduce the penalty and as a means to prevent criminal conduct from happening again. The latter development, however logical it may seem, appears to be going somewhat beyond the core goal of criminal prosecution, which is commonly perceived as the punishment of misconduct. With a measure to implement an effective compliance programme, the prosecutor stretches the goal towards prevention of criminal conduct. Proactive Regulatory Strategies A second development within the field of regulation worth noticing is that regulators in various fields attempt to design policies based on leading indicators for misconduct. Furthermore, regulators are more and more faced with general regulations that do not fully cover potential harmful behaviour (Kasdorp, 2022). The question we attempt to answer in this section is how academic research on public regulation addresses this opportunity of engaging in the integrity of regulated organisations. We first discuss the general idea of shifting part of the rulemaking to the regulated community, also indicated as self-regulation. Then we focus on system-based regulation as a concept that is clearly related to organisational integrity. Several scholars in the field of regulation refer to aspects of organisational integrity. McGrath and Walker (2022), for example, posit that ethical behaviour in banking may be supported when meta-regulation is designed to stimulate the development of professional identity and using the professional group as a moral anchor. Bardach and Kagan (1982) use the term management-based regulation as a form of meta-regulation. Management-based regulation does not specify the technologies to achieve desirable behaviour, nor does it prescribe specific results in terms of social goals. A management-based approach requires firms to maintain their own planning and internal rulemaking aimed toward the achievement of certain public goals. Coglianese and Lazer (2003) posit managers and employers are more likely to view their own organisation’s rules as reasonable when they are allowed to make their own decisions. As a result of this the degree of compliance may be higher than in the case of

250  Research handbook on organisational integrity government-imposed rules. This may be a valid reason to give firms the flexibility to create their own privately induced regulatory approaches, enabling them to experiment and arrive at more innovative, and better solutions, as long as these rules are functional to achieving the public goals defined by government. This can be perceived as partial self-regulation where the government sets the overall framework (the “what” in terms of output or outcome) and the regulated organisations are left the liberty to choose the detailed rules they internally see as effective (the “how” in terms of throughput). In practical terms, if companies are willing and able to design rules for their own situation that serve safe labour conditions, the public regulator should seriously consider to let them do so. First, because the support for own rules is bigger than for externally imposed rules. Second, because professional companies may be better positioned in terms of knowledge about the situational risks than the external public regulator. Third, not all harmful behaviour is regulated and not all regulated behaviour is potentially harmful (Kasdorp, 2022; Sparrow, 2020). This notion opens the door for regulators to an interesting alternative for sticking to the rules, namely to focus on situational risks that may threaten public interests and try to influence potentially harmful behaviour. Kasdorp demonstrates that regulators can and actually do attempt to prevent harmful but legal regulatee conduct. Both Kasdorp and Sparrow argue that in individual cases (a) there is harmful behaviour that is not covered by formal external rules and (b) there are rules that are not relevant in terms of the public interest. Therefore, Sparrow advocates that public regulators should focus on harmful behaviour whether or not this behaviour is legal. Although the relevance of self-regulation by regulated organisations has been noticed by several authors (Coglianese & Lazer, 2003; Coglianese & Mendelson 2010; Gunningham & Sinclair 2009; Short & Toffel, 2010) academic attention for the dynamics within regulated organisations from the perspective of public regulators is poor. Some authors (Gilad, 2011; Wengle, 2016) have studied the role of the management system as a vehicle to operationalise self-regulation by regulated companies. De Bree and Stoopendaal (2020) have linked regulation theory and institutional theory in a study focusing on the ability of public regulators to identify decoupling and influence the process of recoupling within regulated healthcare organisations by applying system-based regulation. System-based regulation is a form of regulatory supervision that takes the management system of the regulated organisation as a focal point in an attempt to (a) better understand the root causes of potential harmful behaviour within the regulated organisation and (b) influence these organisational root causes for the better, leading to improved assurance of public interests. The underlying assumption of system-based regulation is that by focusing on the design and implementation of the management system, which can be perceived as the operating system of the organisation, the regulated organisation can be stimulated to assure a more desirable public outcome. Paine (1994) emphasises the managerial responsibility for ethical organisational behaviour. Paine stresses the importance to incorporated integrity in day-to-day operations of an organisation. With two examples from the car and food industry the author illustrates how important the own quality management system of the organisation is, holding the system accountable. Ethical conduct goes beyond legal conduct. According to Paine, organisational integrity is

A regulatory perspective on organisational integrity  251 based on self-governance engaging managers in the process. Also, deterrence and punishment is not deemed sufficient, referring to the work of Tyler (2006) on compliance: obeying the law is strongly influenced by its legitimacy and moral correctness. There are several reasons why public regulators may take on the management system of the regulated organisation as a focal point (De Bree & Stoopendaal, 2020): ● A management system is the operating system of an organisation; ● A management system is the intermediate stage between the organisations’ goals and its actual behaviour; ● Management systems typically include a requirement for self-evaluation; ● A management system is the blue print for organisational behaviour and as such a suitable point to engage in double-loop learning (Argyris, 1976).

Source: De Bree and Stoopendaal (2020).

Figure 16.1

Regulation may stimulate recoupling

De Bree and Stoopendaal (2020) found that a regulator can actually identify forms of decoupling which are related to management systems, namely decoupling between goals and management system, between management system and daily practice and between daily practice and actual outcome. Furthermore, these authors found that by giving feedback about the

252  Research handbook on organisational integrity identified forms of decoupling, the process of recoupling was supported. More specifically, by confronting the regulated organisation with decoupling between goals and system, recoupling was observed to improve the operationalisation of goals into practical procedures and instructions. Furthermore, an analogue stimulus for recoupling was observed between management system and practice by confronting the organisation with examples of poor implementation of procedures. Figure 16.1 shows how system-based regulation may support forces aimed at recoupling.

THE REFLECTIVE ROLE OF REGULATORS Not only can regulators focus on the organisational integrity of regulated organisations, they may also point the attention to the integrity of the regulatory agency itself. The integrity of public officials is said to be a key determinant of public trust in government and a central concept in good governance (Eccleston, 2011). Many countries have put in place integrity systems or ethical frameworks to support and enhance the integrity of public officials. These ethical frameworks include regulatory measures such as codes of conduct, anti-corruption agencies or risk assessment strategies. Such frameworks are implemented alongside existing institutions such as audit bodies, Ombudsmen and Attorney Generals. All of these together constitute an integrity system. However, we currently know very little about the effectiveness of these systems in achieving high integrity, let alone whether public trust in government is increased. Baldwin and Black (2008) make the point that really responsive regulators have to be responsive not only to the compliance performance of the regulated organisations and the agency’s own operating and cognitive frameworks. They should also be responsive to the broader institutional environment of the regulatory regime, to the various logics of regulatory tools and strategies, to the regime’s own performance and finally to changes in each of these elements. Referring to the work of Tyler (2006) we see that compliance is strongly influenced by its legitimacy and moral correctness. This implies that the regulator as an organisation not only has to be reflective, but morally correct too. Reflective regulation is characterised by learning, by applying a continuous process of self-observation and self-critique in order to generate options for improvement (Rutz, 2017). Six and Lawton (2013) argue that the integrity of the regulator is key to trust in the regulatory system by regulatees and by the public in general. A system of strong values-based ethics policies, practices and leadership will strengthen integrity of an organisation, even as ethical codes and dialogues about ethical dilemmas do. Six and Lawton argue that the internal integrity system of the regulator should be strong enough that correctional interventions from external bodies are not necessary. Like corporate managers of regulated organisations, the regulators are expected to “walk their talk”, meaning that they should ensure consistency between organisational values and actions. There is a logical symmetry in this statement; a regulator who is holding regulated organisations responsible for maintaining organisational integrity cannot afford to demonstrate poor organisational integrity itself. When a regulatory body fosters critical reflections from both inspectors and regulatees, this will open the organisation for discourse and enables a consistent development of values (Rasche & Esser, 2007). As governance and regulation are intertwined, regulation shapes the governance of the regulatees and is simultaneously

A regulatory perspective on organisational integrity  253 influenced by changes in the meaning of governance (Stoopendaal & Van de Bovenkamp, 2015). Therefore it is important to emphasise the mutual development of the concept of integrity between regulatees and the public regulator. In establishing trust in the relational process between regulator, regulatees and public, reciprocity plays an important role. The behaviour of one party influences that of the other. The sociologist Simmel already described in 1900 how exchange and interaction form the basic mechanism on which all trusting social relationships are based (Witteveen, 2009). Reciprocity creates a continuous, iterative process by which eventually stable, reliable institutions are created. This can contribute to social trust. This is especially true in more modern regulation strategies like system-based regulation. In this approach the relationship between regulators and regulatees becomes less formal and more cooperative and informal. Obviously, this approach benefits from a trustful regulator– regulatee relationship where both parties can be open about their internal challenges and dilemmas in a safe space that the two seek to maintain (Perezts & Picard, 2014). If regulators want to meaningfully interfere with the integrity of regulated companies, as is often the case in management- and system-based regulatory strategies, then it is necessary to also reflect on their own organisational integrity. Only a regulator that is trustworthy has the legitimacy to ask the regulatees to be trustworthy. Where trust relies heavily on integrity, the relationship between regulator and regulatee becomes more generative if there is more mutual trust. Without (reflection on their own) integrity, the regulator may well become its own limitation (De Bree & Ruessink, 2015).

CONCLUSIONS AND SUGGESTIONS FOR FUTURE RESEARCH Academic work about regulators directly engaging in the integrity of regulated organisation is close to non-existent, although practitioners are experimenting with various aspects relevant for organisational integrity like culture, governance and management systems. We have demonstrated two important lines of reasoning that point regulators toward clearing up the black box of regulated organisations and attempt to understand its dynamics in relation to organisational integrity. First, in some countries criminal law practice recognises organisational integrity expressed in effective compliance programmes as a reason to lower the penalty and a possible measure to prevent criminal conduct from reoccurring. Second, regulators in different domains recognise organisational integrity as a focal point central to more proactive and preventive regulatory strategies. Regulators may identify decoupling within regulated organisations and stimulate recoupling of formerly decoupled goals from management systems and management systems from daily practices. A last point of eminent importance concerns the integrity of the regulatory agency itself. If a regulator wants to credibly hold regulated organisations responsible for maintaining integrity, it is essential to demonstrate the integrity of her own organisation. Ignoring this notion may well mean that the regulatory body becomes its own limitation. This study clearly reveals a gap in academic research regarding the direct engagement of public regulators with organisational integrity. This is surprising as organisational integrity can be considered a valuable conception for (a) understanding how and predicting whether organisations actually live up to their requirements and (b) developing regulatory strategies that are targeted at improving organisational integrity in order to serve societally desirable behaviour of regulated organisations, maybe even beyond compliance. So clearly, future

254  Research handbook on organisational integrity research may be aimed at closing this gap by studying how public regulators may engage in organisational integrity, both within their own organisation, as well as in the organisation of regulated parties. Mostly, regulatory requirements for organisational integrity are absent. As a consequence, future research may well further explore the dynamics of regulator–regulatee interactions regarding organisational integrity in a setting that is relatively new for regulators, namely a space that is relevant from a public interest perspective, although not formally regulated. A promising approach may be to include the conduct of the regulator in this research, as shaping a productive regulator–regulatee relationship depends on the behaviour of the regulator as well.

NOTE 1. U.S. Department of Justice Criminal Division Evaluation of Corporate Compliance Programs (updated June 2020).

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17. An institutional perspective on organisational integrity Timo Fiorito and Michel Ehrenhard

Organisational integrity is commonly understood as organisational actions that are in accordance with embraced moral or socially accepted values. Empirical studies suggest that an adherence to core values has a positive effect on employee commitment (Ostroff et al., 2005), the relationship with external constituents (Voss et al., 2000), and long-term firm profitability (Collins & Porras, 1996). In contrast, integrity failures that constitute a glaring disregard for accepted ethical, regulatory, and normative principles damage reputations, harm employee morale, increase regulatory costs, and evoke investor divestment (Bundy et al., 2021; Connelly et al., 2016; Paruchuri et al., 2021), as exemplified by Wells Fargo’s cross-selling practices, the Volkswagen emission scandal, and the BP Deepwater Horizon oil spill. While modern organisations tend to portray themselves as internally consistent and integrated wholes (Bromley & Sharkey, 2017; King et al., 2010), scholars have highlighted how the increasingly pluralistic institutional environment has led many organisations to have multiple, and sometimes conflicting, goals, interests, values, and identities (Greenwood et al., 2011; Kraatz & Block, 2008). Consequently, the inner life of many of these organisations has become characterised by a great many internal complexities and inconsistencies (Ashforth & Reingen, 2014; Battilana & Dorado, 2010; Smith & Besharov, 2019), “sometimes involving conflict, sometimes simple decoupling and hypocrisy” (Bromley & Meyer, 2015: 23). These internal tensions, if maintained unchecked, may lead to value subversion or mission drift (Grimes et al., 2019), may disrupt organisational institutions (Kraatz, 2009), and can thus make an enduring commitment to organisational integrity difficult to sustain (Besharov & Khurana, 2015; Gallagher & Goodstein, 2002). Despite significant scholarly attention to individual integrity in relation to employee and leadership behaviour (see Palanski & Yammarino, 2007; Simons et al., 2015), the concept of organisational integrity has largely been ignored in the organisational and management literature (Dacin et al., 2002; Goodstein, 2015; Selznick, 2000). Notably, the literature is not clear what integrity entails when organisations are confronted with heterogeneous institutional demands and, consequently, have selves that comprise multiple distinct goals, interests, values, and identities. As scholars tend to view organisational values as unitary and collectively shared, we lack a conceptual understanding of how the increasingly complex environment may manifest itself in internal incoherence, which in turn can undermine a sustained commitment to organisational integrity. This research gap is troubling, considering that organisations as unique social actors are increasingly becoming the subject of moral scrutiny. To better grasp the profound complexity of modern organisations, we suggest that research should explore how competing institutional pressures may impact a sustained commitment to organisational integrity. Accordingly, we pose the following research question: How is the integrity of organisations affected when they operate under institutional pluralism? We develop a conceptual model that allows us to better understand how field-level forces interact 257

258  Research handbook on organisational integrity with intra-organisational dynamics in either strengthening or weakening organisational integrity. To do this, we move beyond the “view of organizations as unitary and tightly integrated entities making univocal decisions” (Pache & Santos, 2010: 456) and recognise the complexity of intra-organisational arrangements and social structures. Such an approach is based on the notion that organisations are deeply affected by their environments. This chapter offers two theoretical insights. First, we offer renewed attention to the notion of organisational integrity. We believe that a theoretical endeavour to better understand this concept and its challenges is needed because organisational integrity as a “unified, cross disciplinary research subject is only beginning to come of age” (Breakey et al., 2015: 37). By integrating the recently reinvigorated organisational scholarship on values (Gehman et al., 2013; Kraatz et al., 2020) with that of identity (Haslam et al., 2017; Whetten & Mackey, 2002) in our conceptualisation of integrity, we acknowledge the potential dangers of normative fragmentation within organisations. By conceptualising integrity at the organisational level, we attempt to answer the recent calls by organisational scholars who underscore the need for “understanding, explicating and researching the enduring, noun-like qualities of the organization” (King et al., 2010: 290). Second, while institutional pluralism has become a vibrant research area (Kraatz & Block, 2017; Radoynovska et al., 2020; Yu, 2013), institutional plurality has seldom been explicitly discussed in research related to organisational morality and values (Heugens & Scherer, 2010). Therefore, we contribute to institutional theory by theorising about how the increasingly pluralistic societal landscape may challenge a sustained commitment to organisational integrity.

INTEGRITY AND THE ORGANISATIONAL ACTOR In the following, we put forward the notion of “organisational actorhood” (Bromley & Sharkey, 2017; King et al., 2010) and tease out some of the central tenets of organisational integrity. Organisational scholars portray the modern institutional landscape as one in which organisations are socially constructed as actors in their own right, denoting bounded autonomy, decision-making capacity and sovereignty (Meyer & Bromley 2013; Scott, 2014). That is, organisations are increasingly treated as “human-like entities authorized to engage in social intercourse as a collective and possessing rights, obligations and responsibilities as if the collective were a single individual” (Whetten & Mackey, 2002: 395). Perhaps the most elaborative interpretation of this social actor perspective of organisations is that proposed by King, Felin and Whetten (2010). According to these scholars, the social actor perspective incorporates two central assumptions. First, the external attribution of action assumption delineates how the properties that grant organisations actorhood – such as sovereignty, the capability for autonomous actions, and ascribed responsibility – are attributed to them by their principal constituents. We treat the organisations we interact with as capable of deliberate and goal-orientated actions, while also holding them accountable for their behaviours. In other words, organisations are social actors because “society, not only legally but also practically and linguistically, grants them that status” (King et al., 2010: 292). Second, the internal attribution of intentionality assumption presumes that organisations have goals and intentions that are quasi-independent of the values, beliefs, and desires of their members and constituents. Organisations are not mere social aggregates of the members that comprise them, but possess unique properties, including distinct histories, cultures and decision-making

An institutional perspective on organisational integrity  259 structures, that guide members’ behaviours and thus convey collective responsibility and agency (Steele & King, 2011). Notably, both assumptions emphasise the centrality of identity in the treatment of organisations as social actors. Scholars have come to understand organisational identity as those self-defining characteristics that describe what is central, enduring, and distinctive about the organisation (Albert & Whetten, 1985; Haslam et al., 2017). The social actor perspective of organisational identity is connected with the notion of organisational actorhood and broadly asserts that “organizational identity is a set of external legitimizing claims and behavioral commitments, which are path dependent and binding, and therefore provide organizations with central, enduring, and distinctive characteristics” (Haslam et al., 2017: 324). The identity of an organisational actor is essentially a collection of identity claims that explicitly articulate who the organisation is, what it represents and how it will behave (Haslam et al., 2017; Whetten & Mackey, 2002) providing meaning for collective sensemaking, prioritisation and interpretation among members and stakeholders, and thus binding the organisation to a particular course of action. Importantly, the two assumptions underlying the notion of organisational actorhood reflect the view of organisations as agentic as well as constrained by environmental opportunities, pressures and prescriptions. That is, the organisation is both “real, semi-autonomous, and independent of individual actors” who constitute it, and “legally and institutionally endowed with agency, rights and responsibilities” (Haslam et al., 2017: 325; Steele & King 2011). Such internal and external attribution also recognises that the identity of organisations is an institutionalised accomplishment. Because the identities that constitute the organisational self comprise a blend of an organisation’s unique beliefs, values and traits, as well as its distinct connection with and obligations to the society in which it is embedded, they are profoundly “value-based” (Kraatz & Block, 2017: 548; Selznick, 1992). Consequently, the identity claims of organisations provide moral agency, purpose and justification for action (Kraatz et al., 2020; Steele & King, 2011) as well as a reference point for judgement and evaluation by key constituents (Love & Kraatz, 2009; Mishina et al., 2012). Thus, organisations are considered to be not only social, but indeed also moral actors. Defining Organisational Integrity Having described the underlying assumptions for the treatment of organisations as both social and moral actors, in the following we present some of the commonly used definitions of organisational integrity. Selznick defined organisational integrity as “fidelity to self-defining principles” (1992: 322). Similarly to the notion of organisational actorhood, Selznick saw organisations as moral entities capable of purposive actions and asserted that integrity arises from their consistent commitment to moral values and purpose. Organisational integrity, in this view, presumes at least “a core of morally justifiable commitments” and is associated with moral coherence, both between actions and self-defining values and in terms of its connection to the exter