RSS feedsAs part of the ICAEW’s ‘Information for Better Markets’ initiative, the institute has produced a new report, Reporting with Integrity, the purpose of which is to look at what integrity is and why it is important for economic activity in general and for business reporting in particular. It says that while the importance of integrity is widely acknowledged, there is no generally accepted understanding of what it means.
The report starts by highlighting five key aspects of integrity: moral values; motives; commitments; quality; and achievements. To explain how these come together, the report says: “An individual of integrity is guided by moral values and motives which are translated into commitments. Such an individual draws on qualities such as rationality and open mindedness to assess what the right thing to do is from a wider community perspective. An individual’s commitments in pursuit of doing the right thing are also likely to require personal qualities, including perseverance and courage, if they are to lead to the hard-won achievements expected of individuals of integrity.”
Around 20 questions are listed on which comment is invited by 30 November 2007.
Philosophy of ethics
At times very philosophical in its approach, the first part of the report seeks
to examine how integrity (actual and perceived) inspires trust, and makes the
point that markets depend on high quality information. “Reliable information
flows underpinned by integrity are necessary to allocate resources efficiently
through markets,” says the report. It adds, quoting a 1970 article from The
Quarterly Journal of Economics, that “The cost of dishonesty, therefore, lies
not only in the amount by which the purchaser is cheated; the cost must also
include the loss incurred from driving legitimate business out of existence.”
As it is obviously so difficult to define what is meant by integrity, it’s fair to ask, why bother? “Some would also argue that it is not necessary to articulate precisely what is meant by integrity since its absence is painfully obvious,” the report acknowledges.
Admit mistakes
But it insists that a more analytical approach to integrity would result in not
only a better understanding of what integrity is but also:
• A greater ability to distinguish between weak and strong claims to integrity; and
• A better grasp of how to uphold integrity and how to uphold the public good.
A person of integrity is thought to be one who will be likely to be honest and truthful; be fair; comply with laws; promote community interests; be open and adaptable; take corrective action; and show consistency. The point about taking corrective action is interesting: misjudgement, misunderstanding, inadequate information or simple human error will cause people to make mistakes. But people of integrity will be willing to admit they were wrong and take corrective action. “While integrity accommodates making mistakes, it does not accommodate recognising a mistake and not trying to rectify it.”
Having said that, a person of integrity is normally associated with “consistent, credible and predictable patterns of behaviour”, the report says. However, it explains how it is possible for people to consistently demonstrate integrity in their public life, but not in their private life.
“People have a tendency to compartmentalise themselves according to roles or spheres of personal, professional and social activities. While individuals constantly move from one sphere of activity to another, each sphere of activity is relatively autonomous from others and has its own norms and values.”
It adds: “Although consistency is an important behavioural trait associated with integrity, it is a matter of debate whether integrity is required in all roles and activities of a person’s life. Perhaps the real issue is not whether a person acts with integrity in their personal, business and social activities, but whether a person is perceived to be hypocritical by claiming to pursue their espoused principles, ideals and commitments in areas of activity where this is not true.”
Organisations and accountants
Organisations of integrity are more than collections of people who individually
have integrity. There are five drivers of organisational integrity: leadership;
strategy; policies; information; and culture.
The role accountants play was summed up by the Prince of Wales in a speech to the ICAEW in 2005. “The essence of an accountant’s professional contribution is not knowledge of figures and finance, important as this is, but integrity: the integrity to provide the meaningful, accurate and timely information needed for the financial decision-making that underpins the success of our economy, the integrity of the independent audit which is fundamental to business trust and confidence and the integrity and impartiality of the business advice offered by firms and individuals,” he said.
In the chapter on promoting integrity in reporting, the report quotes from a book by Professor David Flint who wrote in 1982 – long before Enron, Polly Peck, codes of ethics, or half-inch thick accounting standards – “…accounts which are required to give a true and fair view should comply with specific statutory requirements of disclosure and presentation…; they should ordinarily be prepared in accordance with normal accounting practice and in compliance with Statements of Standard Accounting Practice, recognising, however, that these are a means to an end and not the end itself.”
For details on the ICAEW's Information for Better Markets reports, go to www.icaew.com/bettermarkets.
