This book is about what a company needs to do to manage its integrity and to avoid making the kind of mistakes (an Environmental Protection Agency [EPA] fine, a product safety disaster, an employment lawsuit, an overseas worker exploitation charge) that can lead to penalties, a loss of share value, and a damaged corporate reputation.

Integrity in business has never been more important. In many ways, companies have a lot more to lose today than even 10 years ago, simply because the potential for being caught and exposed by activists, lawyers, prosecutors, government agencies or the media is greater than ever before. The penalties are larger loss of share value, consumer boycotts, lawsuits, greater regulation and more personal, with executives and board members increasingly being held accountable for the actions of the company with heavy personal fines and even imprisonment. The triple combination of personal-incentive-based pay, new levels of empowerment, and a leaner, more aggressive economy means that employees at all levels, as never before, are caught in that tug-of-war between doing what is right and doing what their superiors want and need, in order to achieve unrealistic targets. To avoid these types of disasters, companies need to do more than simply give money away in philanthropic gestures and claim that they are "socially responsible." They are going to have to start actively managing their risk in a much more effective way.

Putting aside some obvious cases of pure malfeasance on the part of corporate executives in recent scandals, the fact is that most...