ABSTRACT
This chapter demonstrates that a relationship between integrity, ethical idiosyncratic credit, and profitability exists and that higher levels of integrity and ethical idiosyncratic credit lead to greater long-term profitability. In the course of doing business, managers face considerable pressure to conform to the existing standards within their particular industry. Until the financial crash of 2008, investment bankers traded risky financial instruments, including mortgage-backed securities and collateralized debt obligations, to some extent because everyone was doing it. Managers at the middle-level ranks as well as those who are managing from the top who act in an ethical and moral fashion and show consistency in their words, actions, and business dealings will put their firms on a steady and more certain path toward profitability. The chapter suggests that there are five important outcomes of an ethical culture—shared governance, the attraction of talented employees, enhanced reputation, the long-term strategic orientation, and favorable stakeholder perceptions—which, in turn, lead to higher company profits.
