Corporate integrity is clearly important for every business and must be felt through the organisation, top to bottom. But should they be implemented as rules, or is it a better idea to have them as principals?
Rules are Imposed – often from outside or above. They are therefore rarely internalised. Yes you can live by them, but rarely are they grasped with passion. You don’t want employees to follow corporate integrity because they have to, as it will never work as well. Principals shine from within and employees are much more likely to buy into them than a strict rule.
Rules tend to be defined by the letter. This means that sooner or later they can be sidestepped with someone looking to define where the edges are and step around them on a technicality. Those familiar with some of the differences between the UK’s more principal based accounting requirements and the US’s more rule based ones will know what a difference there is. Principals lead to those who accept them asking “Is this in keeping with the spirit?”
It is easier to build a cultural aspiration around a set of Principals. This may sound odd but when was the last time anyone proudly pronounced to you “We always stick by the Rules”. Principals are looked on in a totally different light. “We are a principled organisation”, “We live by our “Principals”.
The Potential Downsides
If you are basing your company’s corporate integrity policy around principals, rather than rules, then there can be problems if there is not consistency across the organisations. This largely means that principals have to flow from the top down – it cannot be one set of principals for the people at the top and one set for those at the bottom. When this happens employees will not buy into your corporate integrity and it will not work.
As well as a consistency of principals from top to bottom in your organisation, it is also important to carry that consistency into the market place. There is no use charging customers for slipping up on paper work if you then ignore mistakes on your own. Consitancy of principals must run through every part of your business if they are to be successful in implementing your corporate integrity.
With principles it can be harder to hold people accountable for not following your corporate integrity. This comes from a matter of interpretation, where people may be able to get out of doing what’s expected of them with principals, as there is a less defined structure. With rules there is a strict code and it is much harder for people to dodge responsibility.
Rules are strict and sometimes resented by employees and therefore often, even if they are followed, will not be adopted with the kind of enthusiasm a company might want. With company integrity it is important that employees buy into it. However using principals raises its own problems, mainly in it’s looseness of structure compared to rules. Therefore it is about finding that balance between rules and principals to keep employees invested in corporate integrity without having it so lose in structure that they can be ignored completely.