Ever since the financial crisis we have been preoccupied by the need to ‘re-establish trust’ in the banking sector, in the financial services industry as a whole, and beyond it in a wider global corporate world seemingly riddled with scandals around corporate governance.
Now - as we move towards a decade of deliberation on how to go about the restoration of this critical ingredient in any successful contract between business, its shareholders and society at large – it seems more important than ever that we are sure we understand what we mean by ‘trust’ in 2016.
According to the Oxford English Dictionary, ‘trust’ is defined as “firm belief in someone or something” and as “acceptance of the truth of a statement without evidence or investigation.”
But although this is a definition which most people will recognise, it is no longer fit-for-purpose in business, or in boardrooms. In the years since 2008 there has been a tendency to hail the near-magical elements of trust within business relationships, while resisting the urge to express doubts where they exist, and to demand scrutiny regardless of ‘trust.’ In 2016, it is All Change, as a recent survey by Russell Reynolds Associates, the executive search consultants, makes clear.
I covered this report on Forbes recently, in a post entitled Institutional Investors In 2016 Seek ‘To Trust, But Verify” On Governance. Of course, ‘Trust but verify’ was a slogan used during the Cold War to describe the basis for transparency in political relationships – which says something about where we are now in the relationship between business and its stakeholders.
“The Petrobras scandal in Brazil, Satyam and more recent incidents in India, Toshiba in Japan, and perhaps Volkswagen in Germany will have a substantial impact on corporate governance in those countries as legislators, regulators, and institutional shareholders demand more tools to promote accountability and transparency from companies and their boards of directors” says the Russell Reynolds report.
So, it seems there is nothing ‘touchy-feely’ (as we say in Britain) about ‘trust.’ Boardrooms need to understand that all stakeholders demand transparency, and in a post COP 21 world, institutional investors are becoming more and more concerned about Environmental, Social and Governance (ESG) factors on businesses, and the wider ramifications on operational risk.
Transparency and accountability have no magic dust around them, like definitions of ‘trust’ but they are what builds trust – and investors and stakeholders are demanding both those things from business.
In her recent speech to Spain’s Institute of Directors, Turid Solvang, the newly elected first female chair of eCoda and managing director of Norway’s Institute of Directors, made it clear that establishing trust was her prime concern. “As the voice of European directors, it is ecoDa’s responsibility to rebuild trust in boards. In my view, this is our chief task, and it will be my main goal going forward” she said.
Given that the top concerns of boardrooms in 2016 include cybersecurity and the challenges of digital transformation, the diverse composition of any board is surely an essential ingredient to the restoration of trust. In her speech, Ms Solvang quoted a chairman as saying that a board of directors must be comprised of people ‘who can ask the right questions.’
As we look to build and rebuild trust between listed businesses and their stakeholders, surely those people asking questions must be representative of society at large, and reflect both its experience, and its concerns.
Dina Medland, 10 January 2016
Dina Medland er en britisk skribent som blant annet dekker ledelse, styrearbeid og corporate governance i Forbes. Følg hennes månedlige "Governance Watch" på Styreinstituttets nettsider.