Director’s Integrity: An Assessment of Corporate Integrity

Abstract

Present corporate governance practices have created an era of corporate conformance: ticking boxes, running through drills and complying with codes. However, most corporate governance problems centre on human weaknesses. This discrepancy points to serious limitations in the present rule-based governance system. Annual reports have failed to communicate fair corporate governance information to the public. Ticking off boxes for compliance only leads to a false sense of security that the right judgements and right actions are being taken. This study seeks to address the methodology issues that arise when assessing and measuring corporate governance practices in publicly listed companies. It advances the analysis of corporate governance practices by obtaining from members of company boards of directors and top management their perceptions and opinions of what is important to assuring directors’ integrity. Corporate governance indicators were used to design a scale that measured the assessment of directors’ integrity. Factor analysis was then used to identify nine directors’ integrity factors. The present study reports the validation of corporate governance reporting by benchmarking it against the boards of directors’ and top management’s perceptions and opinions about directors’ governance. The integrity factors identified earlier were used in the validation.