Integration of Integrity Information into Performance Evaluation: The Impact on Korean Public Enterprises

ABSTRACT

This article analyzes Korean public enterprises that have integrated integrity information within their performance evaluations. Performance and integrity often tend to be separately managed because they are regarded as mutually exclusive. In the Korean case, some public enterprises had expected that the integration of performance and integrity management would not produce significant changes, mainly because of the lack of direct incentives and the light weight (3%) given to integrity in performance evaluation. However, this article shows a positive correlation between performance and integrity. Moreover, we can observe an improvement in integrity following the integration of integrity information into performance evaluation. Such a change was possible not only because of financial incentives, but also because of the increasing attention CEOs placed on integrity management, which made it easier for public enterprises to institutionalize their own ethical management policies. At the same time, competition amongst public enterprises over performance scores expedited the diffusion of innovative integrity policies.