The Model of the Honorable Merchant: Bridging Compliance and Integrity?

Good corporate governance rests on two contrasting concepts: compliance and integrity. Whereas compliance relies on extrinsic sanctions and incentives, integrity calls for intrinsic virtues and moral self-governance. Integrity shows great potential to complement compliance but is an elusive concept and needs to be spelled out by concrete role models. The "honorable merchant" is an example of such a role model and has (re)gained much attention in German business over the last years. We use this example to show how integrity and a virtue ethics approach are implemented in practice. We also point out the weaknesses of the concept and corresponding challenges to integrity-based management. While role models like the "honorable merchant" can serve as moral orientation for some managers, they need to be reinforced by organizational structures and go hand in hand with elements of compliance like ethically imbued incentives.