A Loss of Trust in Business: Crisis or Opportunity?
  • Governance

A Loss of Trust in Business: Crisis or Opportunity?

FT | IE assemble a stellar panel to discuss an important new juncture for business and the societies in which business operates


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The latest event in the Foresight Series from the FT | IE Corporate Learning Alliance was a fast-paced, charged, and yet thoughtful panel discussion. Just the kind of mood you would expect for a subject peaking in salience with each passing news cycle: the loss of trust in business.

Michael Skapinker, panel chair and executive editor of the Corporate Learning Alliance, spoke of a feeling that we are approaching an important juncture for business, and perhaps for capitalism too. With high-speed dissemination of information comes new levels of accountability and scrutiny – particularly around the twin issues of remuneration and tax.

He kicked-off by asking the panel: has there been a fracturing of the social compact between business and society?

Peter Montagnon, Associate Director of the Institute of Business Ethics, answered first. “If you look at trust ratings as raw numbers, they fluctuate within a range, and we are not out of that range. But anecdotally the intensity of that distrust seems higher than ever. The unwillingness of big companies to pay much tax implies an unwillingness to give back to society. Trust in business will not come back until there is a consensus between business and the public on what business is here for. And I think we are a long way from that.”

Alison Cottrell, CEO of the Banking Standards Board, didn’t see ‘trust’ per se, as the area to focus on – but rather ‘trustworthiness.’  “Trust is a measure which can go up and down over time. Instead we need to focus on 'trustworthiness'. A firm is either trustworthy, or it is not. This is something the firm itself controls; can influence, and can change. High levels of trust in a sector which is not trustworthy - that is where you have the biggest problem. That is what we saw with the banking crisis in 2008.”

Cottrell defines trustworthiness in business as, “a combination of honesty, reliability, and competence.” – and goes on to advise board members and business leaders to ask themselves; “What is your business for? - And are you doing what your business is for?”

Robert Phillips, Co-founder of Jericho Chambers and author of "Trust Me, PR is Dead", added, “We need to stop endlessly talking about trust and start behaving differently. The word ‘trust’ is often used in a vacuous way. Whether in corporate communications or in politics. I actually don’t think business can be trustworthy. I believe people can be trustworthy. If the leadership is not honest, reliable, and competent – then there is no reason to trust them.”

“What role do incentives and corporate goals have to play in this?” – asked Skapinker next, citing the Volkswagen engineers pushed too hard to achieve their targets, and the Barclays Libor traders judged on numbers alone, and not how the numbers were made. “What should you do if asked to act contrary to your values?”

Cottrell replied; “If the story of an organization is that people are remunerated for what they do and not how they do it - and that when push comes to shove, how they did something can be buried – then that story is what will drive your organizational behaviour. The balanced scorecard and other top-down processes won’t change that.”

Phillips said, “CEOs need to think more like Chief Social Activists. The future of leadership should be negotiated rather than imposed; trust policies can’t be dictated from above but co-created from within. Activism, collaboration and more importantly dissent. Companies just don’t listen properly. Unless you listen to people who genuinely disagree with you, you can’t change.”

Skapinker probed a little further, asking; “What about the shareholder who says; we hear all the nice words, but where is the share value?”

Phillips responded; “A conversation on what is fair profit – as uncomfortable as it may be - that’s the conversation we need to be having. That’s the conversation Paul Polman at Unilever is trying to have but he is doing it from a very lonely place. We’ve all got to hold hands, jump in together and ask: what do we really want business to do? The purpose of business is not to sit around in some ad agency room or on some crazy away-day and come up with words around ‘transparency’, ‘integrity’ and ‘trust’. It can’t be.”

Cottrell added, “Trust is only valuable if it is justified. I am much more interested in what firms are doing to be; honest, reliable and competent. ‘Trust’ is a word which can distract from what is actually being done.”

“I agree entirely,” said Phillips, “We have an incredible nostalgia about trust. There is no going back to it. Trust was fragile. We need to learn to love the complexity and the chaos and the new layers of accountability that come with that. Our rose-tinted idea of some 1950s nirvana of trusted bank managers sitting behind large mahogany desks... I’m not sure it ever existed but there is no going back to it now!”

Montagnon countered; “Business must be able to make reasonable returns and get on with that with the approval of society. For the board this means a whole new era of accountability. This has been process driven up to now, and inward-looking. Now boards and leaders need to look outward, into the organization itself to correct behaviours, but also outward to society.”

Phillips ended his remarks saying, “I would just add that I am not pessimistic about this at all. This is a great moment of opportunity.”

A sentiment shared by Cottrell: “I would echo that this is not a pessimistic picture. Business is complicated, things are changing. It is interesting but it is not a crisis. Constant feedback from staff and increased accountability is a very healthy thing for all of us.”

A positive note on which to end.

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Headspring was launched April 2019 as a continuation and development of the successful collaboration between the Financial Times and IE Business School, formerly known as FT | IE Corporate Learning Alliance, an initiative created in 2015 to transform the way executive education and professional development meet the changing needs of business.

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