The findings are important because many organizations already have formal governance structures, including independent boards of commissioners, audit committees, internal control systems, and transparency policies. However, misconduct and integrity problems can still occur when ethical values are not genuinely embedded in the organization’s culture.
According to the study, the main challenge facing modern corporate governance is the gap between procedural compliance and actual organizational behavior. Companies may meet regulatory requirements and complete administrative reporting while still failing to build a culture of honesty, responsibility, and ethical decision-making.
From Rule-Based Governance to Trust-Based Governance
Good corporate governance has traditionally focused on formal principles and control mechanisms. These include transparency in information disclosure, accountability for decisions, responsibility for organizational operations, independence in decision-making, and fairness toward stakeholders.
However, the study by Wau and Kennedy argues that formal structures alone cannot guarantee ethical behavior. An organization may have extensive governance procedures but still experience abuse of authority, financial manipulation, conflicts of interest, or other forms of managerial misconduct.
The researchers describe this situation as “compliance without integrity”—a condition in which organizational actors follow rules formally but do not necessarily internalize the ethical values behind those rules.
The study therefore highlights a broader shift in corporate governance thinking. Governance is increasingly viewed not only as a system of external control but also as a system of values, relationships, and organizational culture.
In this context, trust becomes an important element. Trust does not mean eliminating supervision or abandoning formal controls. Instead, it complements existing governance mechanisms by encouraging ethical behavior, improving collaboration, and reducing excessive dependence on bureaucratic monitoring.
Accountability Must Go Beyond Reporting Obligations
One of the central elements of the proposed governance model is managerial accountability.
The researchers explain that accountability should not be limited to preparing financial statements, submitting reports, or complying with audit requirements. Managers must also take moral and professional responsibility for the consequences of their decisions.
When accountability is treated only as an administrative obligation, it can become a formal procedure rather than a genuine mechanism for preventing misconduct. By contrast, accountability that is internalized as a personal and professional commitment can strengthen ethical decision-making.
The study also emphasizes that trust and accountability are not opposing concepts. Instead, both can work together.
Accountability clarifies who is responsible for a decision, while trust provides managers and employees with the flexibility to perform their responsibilities without excessive supervision. The balance between the two can help organizations become more efficient without sacrificing integrity.
“Accountability creates clarity of responsibility, while trust supports flexibility in task execution,” the study’s conceptual framework suggests.
Organizational Integrity Must Become Part of Daily Culture
The second major element of the proposed model is organizational integrity.
The researchers define organizational integrity as consistency between an organization’s stated values, policies, and actual behavior. Integrity is therefore more than a written code of ethics or a statement displayed on a company website.
For integrity to have a real impact, it must become part of everyday organizational culture.
This process requires consistent leadership, ethical role models, fair reward systems, and a working environment that encourages openness and honesty. Leaders play a particularly important role because employees often observe and follow the behavior demonstrated by those in positions of authority.
An organization that promotes integrity in its daily operations can create an internal control mechanism that works even when direct supervision is absent. Employees are more likely to act responsibly because ethical values have become part of the organizational culture rather than merely a set of formal rules.
The researchers also argue that integrity can strengthen trust among employees, managers, and external stakeholders. When an organization consistently demonstrates that its actions match its stated values, confidence in the organization is likely to increase.
A New Conceptual Model for Corporate Governance
The main contribution of the study is the development of a conceptual model of trust-based corporate governance.
The model integrates three main components: formal governance structures, organizational values, and trust-based relationships.
Formal structures include boards of commissioners, audit committees, internal control systems, and other governance mechanisms. Organizational values include integrity, ethical responsibility, and professional accountability. Trust serves as the connecting element that allows these structures and values to operate effectively in everyday organizational practice.
In this framework, trust is not a replacement for formal governance. Instead, it strengthens the TARIF principles by adding cultural and behavioral dimensions.
The model also combines ideas from agency theory and stewardship theory. Agency theory emphasizes the need for control because managers and owners may have different interests. Stewardship theory, on the other hand, views managers as individuals who can act in the best interests of the organization when supported by appropriate values and trust.
By combining both perspectives, the researchers propose a hybrid governance approach that balances control and trust.
Trust Can Reduce Excessive Oversight—but Must Be Balanced
The study suggests that trust-based governance may help organizations reduce excessive monitoring costs and improve decision-making efficiency.
Organizations built on trust can potentially encourage greater collaboration, faster communication, and more adaptive responses to changing business conditions. Employees and managers may also be more willing to take responsibility when they operate in an environment where ethical behavior and accountability are valued.
However, the researchers caution that trust cannot stand alone.
Excessive trust without accountability could create new opportunities for abuse. For this reason, the proposed model maintains formal governance mechanisms while strengthening them with integrity and ethical responsibility.
The key is balance. Organizations need sufficient control to prevent abuse, but they also need enough trust to avoid excessive bureaucracy and create a more adaptive working environment.
Implications for Modern Organizations
The findings provide a conceptual foundation for organizations seeking to strengthen corporate governance beyond formal compliance.
For companies, the model highlights the importance of combining governance policies with ethical leadership and a strong organizational culture. For managers, it emphasizes that accountability should be understood as a moral responsibility, not merely a reporting obligation.
For policymakers and governance practitioners, the study suggests that evaluating corporate governance should go beyond checking whether formal structures exist. The quality of organizational culture, leadership behavior, integrity, and trust should also receive greater attention.
The researchers believe that the proposed framework can serve as a foundation for future empirical research. Future studies could test whether trust-based governance is associated with lower levels of misconduct, stronger organizational performance, better employee commitment, or more effective internal control systems.
Ultimately, the study argues that effective corporate governance should not only ask whether organizations comply with rules. It should also ask whether the values behind those rules have become part of everyday behavior.
About the Authors
Feliks Setia Wau is affiliated with Universitas Kristen Indonesia and serves as the corresponding author of the study. His research interests include corporate governance, managerial accountability, organizational integrity, and trust-based governance.
Posma Sariguna Johnson Kennedy is also affiliated with Universitas Kristen Indonesia and contributed to the development of the conceptual framework on the transformation of corporate governance toward a values- and trust-based approach.
0 Komentar