Integrity: A Positive Model that Incorporates the Normative Phenomena of Morality, Ethics and Legality

Erhard, Werner; Jensen, Michael C.; Zaffron, Steve

doi:10.2139/ssrn.920625

Cited by 60 publications

(62 citation statements)

References 17 publications

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“…There are differences of opinion within each group and there are some works that are difficult to place into either SWM or normative stakeholder theory camps (e.g., Erhard, Jensen, & Zaffron, 2008;Velamuri & Venkataraman, 2005). However, to use an analogy from statistics, since there seems to be much more variation (in assumptions and conclusions) between groups than within groups, it makes sense to move to a group level of analysis.…”

Section: The Objective Of the Firm: Competing Normative Theoriesmentioning

confidence: 99%

Shareholder Wealth Maximization and Social Welfare: A Utilitarian Critique

2013

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Many scholars and managers endorse the idea that the primary purpose of the firm is to make money for its owners. This shareholder wealth maximization objective is justified on the grounds that it maximizes social welfare. In this article, the first of a two-part set, we argue that, although this shareholder primacy model may have been appropriate in an earlier era, it no longer is, given our current state of economic and social affairs. To make our case, we employ a utilitarian moral standard and examine the apparent logical sequence behind the link between shareholder wealth maximization and social welfare. Upon close empirical and conceptual scrutiny, we find that utilitarian criteria do not support the shareholder model; that is, shareholder wealth maximization is only weakly linked to social welfare maximization. In view of the dubious validity of this sequential argument, we outline some of the features of a superior corporate objective-a variant of normative stakeholder theory. In the second article, we will advance and defend our preferred alternative and then discuss some institutional arrangements under which it could be implemented.KEY WORDS: shareholder wealth maximization (SWM), corporate objective function, normative corporate governance, utilitarianism, social welfare "If you will pardon me for being personal, it makes a great difference in my attitude toward my job as an executive officer of the General Electric Company whether I am a trustee of the institution or an attorney for the investor. If I am a trustee, who are the beneficiaries of the trust? To whom do I owe my obligations?"-Owen D. Young, former Chairman of GE (Dodd, 1932(Dodd, : 1154 T HE ISSUE ARTICULATED BY MR. YOUNG decades ago is still relevant today and is one that a considerable number of scholars have devoted themselves to, not in terms of particular companies, but for corporations in general. This article addresses the underlying question, one that lies at the very core of corporate governance for both practicing managers and business scholars: what should be the objective of corporations in a market capitalist economy? Put somewhat differently, what should managers, who govern these firms, strive to achieve?https://www.cambridge.org/core/terms. https://doi.org/10.5840/beq201323215Downloaded from https://www.cambridge.org/core. IP address: 52.183.12.225, on 28 Apr 2019 at 03:44:10, subject to the Cambridge Core terms of use, available at Business Ethics QuarterlyWe aim to answer these questions in two separate articles. This first article will demonstrate the weaknesses of the conventional corporate objective-shareholder wealth maximization (SWM)-from a utilitarian perspective. It will focus on the apparent logic behind SWM as part of a set of institutions intended to produce maximal social welfare, the ultimate goal of utilitarian moral thought. After finding each of the four interconnected arguments that make up that logic quite weak, we suggest a path toward a credible alternative corporate objective. The second ...

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Section: The Objective Of the Firm: Competing Normative Theoriesmentioning

confidence: 99%

Shareholder Wealth Maximization and Social Welfare: A Utilitarian Critique

2013

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“…Since CEOs are able to impose impediments to information flow to other board members, Nowak and McCabe (2003) point out that management integrity is central to the effectiveness of monitoring and control of the board. By summarizing a series of his recent works (Fuller and Jensen, 2002, Jensen et al, 2004, Erhard et al, 2007and Jensen and Walking, 2010, Jensen (2011) advocates that integrity is essential for workability and thus becomes a necessary (but not sufficient) condition for value maximization. Instead of referring to a moral or ethical code, Jensen Regard the current financial crisis, Jensen and Walking, (2010) and Jensen (2011) further conjecture that agency problems might be only half of the story and the other missing half would be about integrity.…”

Section: Fraud and Executive Integritymentioning

confidence: 99%

Executive integrity, audit opinion, and fraud in Chinese listed firms

Chen

Cumming

Hou

et al. 2013

Emerging Markets Review

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We examine the influence of auditors on corporate fraud in China. We find lower executive integrity firms are associated with higher propensity of regulatory enforcement actions against corporate fraud in the subsequent year. We then show that this effect is moderated by the issuance of modified audit opinion report by the auditors. This finding implies that auditors can serve an early warning role to discourage low integrity executives from engaging in corporate fraud. Our results have policy implications for further strengthening auditor independence in emerging countries like China.JEL classification: G15; G30; K22; M41

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“…More importantly, Erhard et al (2014) emphasize, "One's word to one' s self is a critical part of integrity. By not being serious when we give our word to ourselves, we forfeit the opportunity to maintain our integrity by honoring our word to ourselves."…”

Section: Integritymentioning

confidence: 99%

“…From the author' s own experience, and observations, K' amligihahlhalhl seems to represent a positive phenomenon for the Nisga' a chiefs and matriarchs. In a sense, the spirituality ofNisga' a chiefs provides a sense of wholeness that is supported and important to Erhard et al (2014); as generation after generation of chiefs have shared, K' amligihahlhalhl lives in all Nisga' a; but it is the chiefs who honor him the highest because it is through him that their authority starts. It is K'amligihahlhahl that Nisga'a chiefs rely on to feel a sense of "wholeness, completeness, unbrokenness, unimpaired and soundness, in perfect condition" as suggested by Erhard et al (2014) For the Nisga'a would not be who they are without K' amligihahlhalhl, Chief of the Heavens.…”

Section: Since Time Immemorialmentioning

confidence: 99%

“…From this, the Nisga' a would build a system of accountability, Common Bowl (Nisga' a Tribal Council, 1993 , p.100-101) that would help validate the unique identity with each other. Identities are aspects that are important for several reasons, especially when it comes to being able to measure the degree of integrity people possess as suggested by Erhard et al (2014). For example, for students it could be as simple as promising to make it to school before class starts; if the student falls into a routine of being consistently late for class then the teacher will likely conclude that the student is not very dependable, reliable, or trustworthy.…”

Section: Since Time Immemorialmentioning

confidence: 99%

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Nisga'a: integrity within a nation

Gosnell¹

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This project will present a conceptual analysis of the integrity of the Nisga'a Nation ' s cultural system. In addition, Werner Erhard, Michael Jensen, & Steve Zaffron ' s theory on integrity will form the foundation of the conceptual analysis; their research on integrity is highly regarded, phenomenal, and brand-new. The analysis will focus on significant components ofNisga' a culture using: books, articles, and testimonials that support the structural integrity of the nation as identified by the Nisga' a and examples of some significant recollections throughout their history (and of the author of this project) that affirm the existence and importance of integrity within the nation.This project is not meant to represent all that exists within the Nisga' a system but only to spur future research on something as simple as "honoring our word" or more importantly how the Nisga' a honor their word since time immemorial.lll ACKNOWLEDGEMENTS

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Integrity: A Positive Model that Incorporates the Normative Phenomena of Morality, Ethics and Legality

Cited by 60 publications

References 17 publications

Shareholder Wealth Maximization and Social Welfare: A Utilitarian Critique

Shareholder Wealth Maximization and Social Welfare: A Utilitarian Critique

Executive integrity, audit opinion, and fraud in Chinese listed firms

Nisga'a: integrity within a nation

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