Beyond Agency Theory: The Hidden and Heretofore Inaccessible Power of Integrity

To be in integrity, you must honor your word, or inform all of the stakeholders that you won’t be keeping your word, and clean up the following mess. It might sound simple, but as Michael Jensen told an auditorium filled with Wake Forest University Schools of Business students and faculty, “integrity is a mountain with no top so you better get used to it, and even like climbing.”

Jensen is the Jesse Isidor Straus Professor of Business Administration Emeritus at Harvard University. He presented “Beyond Agency Theory: The Hidden and Heretofore Inaccessible Power of Integrity on Jan. 31 as part of the BB&T Center for the Study of Capitalism Ethics Passport series.

“In every facet of life we are losing the war in the battlefield of integrity,” said Jensen. “Everyone espouses it, but few live it.”

Jensen defines integrity as a positive phenomenon, a state of soundness or completeness, versus a virtue. He used the analogy of a wheel with spokes, explaining how having broken or missing spokes impairs workability, and eventually leads to a collapse. His three dimensions of integrity include design, implementation and use.

When an object or system is out of integrity it becomes less workable, performance declines, and value declines. For a person, you are a man or woman of integrity, according to Jensen, if your word is whole and complete–if your actions follow your word.

Jensen used meetings as an example to show when behavior can fall out of integrity. If someone shows up late, fails to attend or is distracted by answering e-mails, he or she is out of integrity.

It is nearly impossible to guarantee that you will keep your word, but Jensen says you can honor your word in the following ways: keep it; let others know that you won’t be keeping it on time; or let others know you will not be keeping it at all, and deal with the consequences. He asserts that by following these actions, you will immediately build trust with others and improve relationships in your professional and personal lives.

So what causes people to sacrifice integrity? Jensen cites seven reasons making up the “Veil of Invisibility.” Those include: seeing integrity as a virtue rather than a necessary condition; self-deception; seeing integrity as keeping your word, versus honoring it; failing to see integrity as a factor of production; failing to do a cost/benefit analysis on giving your word; and doing a cost/benefit analysis on honoring your word.

In closing, Jensen encouraged his audience to master the seven factors that contribute to the Veil of Invisibility and assured a 100-500% increase in productivity. “It’s just amazing what happens,” he said.
Click here to view the accompanying slides.

Dr. Michael Jensen “Beyond Agency Theory: The Hidden and Heretofore Inaccessible Power of Integrity” from WFU Schools of Business on Vimeo.