Behavior that lacks integrity leads to value destruction. This paper analyzes some common beliefs, actions, and activities in finance that are inconsistent with being a person or a firm of integrity. Each of these beliefs leads to a system that lacks integrity, i.e., one that is not whole and complete and therefore creates unworkability and destroys value. Focusing on these phenomena from the integrity viewpoint, the authors argue, makes it possible for managers to focus on the value that can be created by putting the system back in integrity and correcting the non-value maximizing equilibrium that exists in capital markets. Overall, this paper summarizes a purely positive theory of integrity that has no normative elements whatsoever, and demonstrates how it applies to both individuals and organizations. In effect, integrity is a factor of production just like knowledge, technology, labor, and capital, but it is undistinguished—and its affect (by its presence or absence) is huge. Key concepts include:

  • Integrity matters. Not because it is virtuous, but because it creates workability.
  • Workability increases the opportunity for performance, and maximum workability is necessary for realizing maximum value.
  • Integrity thus becomes a necessary (but not sufficient) condition for value maximization-a proposition that should become an important element in every finance course in every business school.

– The text above is as stated in Harvard Business School – Working Knowledge – The Thinking That Leads – about the working paper by Werner Erhard and Michael C. Jensen entitled, Putting Integrity into Finance: A Purely Positive Approach