Integrity can be defined as the quality of being honest and having strong moral principle. A culture of integrity is committed to do the right things not just a matter of marketing or positioning but as uncompromising stance embodied by the word and action of the leader and recognized by the employees and business partner. In ethics, the integrity can be regarded as the honesty and truthfulness or accuracy of one’s action. It is important for these moral principles that are undefined and vary from person to person. The research had been seen that the financial performance of the firm is better when the more employees perceive top manager as trustworthy and ethical as well as the more attractive the firm to the potential employees. A survey can be made among the employees to know the level of integrity about the top management through its action and behavior. As the result, the higher the measure of integrity the better the company performance not only in term of profitability but also in term of better industrial relation, higher productivity and higher level of attractiveness to prospective job applicant. The companies which the culture of integrity is lower will lead to the job dissatisfaction or mistrust in the management. The negative correlation between integrity and unionization shows that the company that have the higher level of integrity are more likely to have satisfied and trusting employees. A strength culture of integrity does not require more work for leader to archive the goal of being sustainable but it need the integrating of principle with performance.
Those ethic and integrity give impact to corporate governance and regulation. Ethic and integrity are very important for developing democratic governance capability. A well balance between ethic and integrity in corporate governance avoid the bad governance at all level. A successful corporate governance underscores the import of adopting system that can ensure adherence to ethical business practice. The corporate governance must not only gain credibility and trust but as part of strategic management for survival, growth and consolidation. The credibility offered by a good corporate governance help in maintaining the confidence of the investor.
Ethic and corporate governance have the advantages. It helps the company in building a good brand image. When there has the good brand image, there will be a loyalty from the employees’ commitment to work in the company and they will be more creative because creativity can become a vital to get a competitive in the current environment. A problem in corporate governance can give impact through the practice revolving around audit committee functioning, auditor independence and corporate ethic. The director needs to examine their responsibility and give more time and energy to their responsibility. Some research had been made that it was the Chief Executive Officer (CEO) and Chief Financial Officer (CFO) had lack of integrity and personal greed. When competing for scare capital in public market, the company will have to pay for a significant risk premium if they do not employ a meaningful governance. Integrity also have impact in the corporate governance where there must be a trust between directors. It is because each director will support the decision made by board. When the trust exists between them, they will respect confidentially and being honest on what they say and do. The director will not work as a coherence team if the director or the chairman acts out of self-interest. This can be avoided when the director chooses to be honest and did not thing about their own self-gain.
Ethic and regulation also have impact toward each other. The ethical system can protect the public from unfair business by making the firm was liable for damages that they did. Company must consider the right of the workers as well as the community when conducting the organization. It is the company’s responsibility to solve and correct any problem that happen by their action. For examples, if the manufacturing company throw the toxin in the river that can cause air pollution, they are chargeable to clean the river that can avoid the air pollution. The responsible agencies for the environment can sue the firm for their action. This can make the company be more careful while doing their business operation which may damage their reputation. As for the advertising product policies, it can protect the public from toxic and unfair price. The company must give the information of the product through the related agencies and quality regulator before product are advertised to make sure the product that they advertise meet the standard and quantity needed in the business. If it did not meet the standard such as unreasonable price for goods sold, it will lead to lose customers as they have the right to choose and buy the product that they want which is affordable price.