Good on Paper: Integrity in Business Executives

Leslie Pratch, a licensed clinical psychologist, offers a short excerpt from her forthcoming book, Good on Paper, which delves into the psychology behind what makes a successful business executive and how to predict the performance of business leaders. Leslie Pratch earned her Ph.D in Clinical Psychology from Northwestern University, one of the most prestigious and selective medical schools in this field. She began her research for this book during her time at Northwestern.

She offers the following on integrity in business executives:

“Integrity as part of active coping is not only ethically desirable but also a practical virtue. It is particularly important in predicting how an executive will perform. High integrity in executives reduces agency costs because you can believe what they say. By agency costs, I mean both the risk that executives will use organizational resources for their own benefit and the costs of techniques used to mitigate the problems associated with using an agent, such as the cost of producing financial statements or the use of stock options to align executive interests with shareholder interests. You can rely on them to fulfill commitments and meet accepted standards. Executives who demonstrate integrity can help protect a company from illegal or unethical practices. Personal integrity in an executive is crucial because it allows the wheels of commerce to turn more smoothly and efficiently. If executives live up to their values and ideals, they have higher self-esteem and protect shareholder value; these are important effects of active coping and essential for effective leadership. They also uphold the good reputation of their organizations.”