The Challenge of Leadership Accountability for Integrity Capacity as a Strategic Asset

Original publication by Joseph A. Petrick and John F. Quinn
Journal of Business Ethics, Volume 34, Issue 3/4, December 2001, Pages 331-343, Dordrecht.
Synopsis by Petrick and Quinn with contributions by Adele Bergstrom (CMC ’05), Leadership Review Assistant

Why are there so many recent incidents of domestic and global corporate moral irresponsibility among business leaders? One explanation offered by Petrick and Quinn is that business leaders are provided neither with an adequate model of moral responsibility during their formal business education nor routinely held accountable for a lack of integrity capacity in their business performance.

To overcome these two impediments to responsible business leadership, Petrick and Quinn offer the comprehensive construct of “integrity capacity” to anchor business moral responsibility and assign business leadership accountability for it as an intangible strategic asset. Neglect of integrity capacity becomes, therefore, not only a moral flaw but an indicator of culpable leadership incompetence.

Petrick and Quinn define integrity capacity as the “individual and/or collective capability for repeated process alignment of moral awareness, deliberation, character and conduct that demonstrates balanced judgment, enhances sustained moral development and promotes supportive systems for moral decision making.” While the construct contains four dimensions – process, judgment, development and system – the primary emphasis of the article is on cultivating inclusive and balanced judgment in the handling of competing managerial, moral and economic values.

Instead of having business leaders justify their strategic judgments on the simplistic basis that they produce short term financial and moral results for investors, Petrick and Quinn argue that adequate managerial, moral and economic justification of business judgments today should include a balanced account of four dimensions: results, rules, character and context. The basis for their normative claim is the extensive empirical research on managerial performance that demonstrates the capacity of superior business leaders to simultaneously achieve goals (results) effectively, control processes (rules) efficiently, foster teamwork (character) humanely, and generate innovation (context) adaptively.

Thus, aspects of multiple microeconomic management theories find their place in the model:

1. rational goal theory (stresses setting goals and taking initiative to maximize output)
2. internal process theory (monitoring information management and document control)
3. human relations theory (flexibility that facilitates involvement, conflict resolution and consensus building) and
4. open systems theory (developing continual creativity and adapting to external trends).

Overemphasizing or underemphasizing any of these theories distorts business judgment.

Obtaining short term financial results for investors, by violating internal operational standards or external rules, by destroying teamwork trust, and/or by eroding the supportive external context for adaptive innovation is now no longer accepted as superior business leadership performance. The parallel areas of judgment integrity capacity in moral and economics theories respectively are as follows: teleological ethics and investor capitalism (results); deontological ethics and regulatory capitalism (rules); virtue ethics and community capitalism (character); and system development ethics and entrepreneurial capitalism (context).

Without judgment integrity capacity that demonstrates proficiency in handling behavioral, moral and economic complexities, business leaders will be held accountable for the resulting offended stakeholders, neglected opportunities, eroded trust and corrupt environments. Conversely, the ideal leader shows a “coherent unity of purpose and action” when faced with challenging questions of ethics and interests, particularly in the context of pressure from internal and external forces. Using the skills of cumulative know-how and experience and the ability of top management teams, leaders with good business judgment can balance competing management, economic and ethical considerations in forming policies and establishing leadership practices.

In conclusion, Petrick and Quinn recommend two practices to prepare business leaders to manage integrity capacity as a strategic asset. First, treat ethics in business education within the framework of integrity capacity as a personal and corporate strategic asset for which business leaders are and ought to be held accountable. Second, expand the scope of business leader accountability to include regular organizational moral, social and environmental audits with transparent public disclosure of the results.

In short, the authors provide a model that demands business leadership accountability for integrity capacity as a strategic asset, a model which anticipated and provides future guidance to avoid the rash of corporate irresponsibility scandals due in large part to the routine neglect of integrity capacity by business leaders.