Values Matter: Emerging Business Policies and Practices for Building Trust and Goodwill

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Values MatterEmerging Business Policies and
Practices for Building Trust and Goodwill

• Stephen Jordan
• Executive Director
• January 18, 2007

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Background

• The U.S. Chambers Interest
• Capital Markets Initiative
• BCLC Activities
• Focus of 2006 Partnership Conference
• Analysis of literature and poll data
• Gallup, Harris, Wirthlin, Edelman, Pew Research
  Center, National Opinion Research Center, AEI
  Public Opinion Study
• Gathering of case studies and profiles
• Release of Values Trust Report Today

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Finding 1 Trust is a Recurring Issue

• Two previous trust crises
• 1900s led to enforcement of Sherman Anti-Trust
  Act and restructuring of American economy
• 1930s led to establishment of SEC
• Current decline in public trust dates back over
  40 years
• Highwater mark early 1950s
• Harris dramatic drop between 1966 (55) and
  1974 (16) in confidence in people running major
  companies
• 2001-2002 corporate scandals reinforced trend

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Finding 2 Trust Is Not Just a Business Issue

• Decline of trust affecting many American
  institutions
• Religion (e.g., Catholic church scandal)
• Nonprofits (e.g., United Way, Red Cross)
• Government (Congress and Presidency)
• Media (e.g., New York Times)
• Academia (e.g., American University, Princeton)

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Finding 3 Values Trust Impact Business

• 556 lawsuits against average large US business
• 50 new lawsuits a year
• 46 billion lost annually to shrinkage
• 40 increase in auditing fees since SOX
• 15 CEO turnover due to governance reforms
• 6 CEO approval rating following SOX
• 1.4 billion in Spitzer settlements

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Trust substitutes ?Transaction Costs

• Information costs (reports)
• Decision costs (due diligence)
• Policing costs (accounting)
• Enforcement costs (audits, collections)
• Regulatory and legal costs
• Marketing costs

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Finding 4 Not All Trust Problems Are Created
Equal

• Nature of Decision-Making Failures

EXTERNAL CAUSES
Nature of Regulations/ External Pressures
External Misrepresentation Or Mis-Guidance
Corruption
Ignorance
Incompetence
Partial Information
Tragic Trade-Offs
Mis- guided
Evil
INTERNAL CAUSES
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Why Dont Businesses Do A Better Job?

• Selected Corporate Responses
• Lack of metrics
• Unclear who is responsible
• CEO turnover
• Employee turnover
• Bad Apples
• The Media
• Economic Cycle
• Globalization (Cultural Differences)

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Finding 5 Disconnect Between General Attitudes
and Personal Experience

• People personally trust their companies to keep
  their promises
• 1989 Harris 43
• 2002 Gallup 50

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Finding 6 Some Companies Are Consciously
Managing Trust

• Corporate Values Practices
• Focus on internal practices to promote
• organizational cohesion
• Stakeholder Relationship Management (SRM)
• Focus on external relations to promote the
  productivity of inter-actions with important
  stakeholders

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The Implications for Business

• Strengthening values and trust is not just about
  compliance.
• Its about developing commitment within
  organizations and open communications and
  relationships between organizations.

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Examples of Internal Corporate Trust Management
Practices

• Training
• Coaching and mentoring
• Reverse coaching
• Volunteerism and team-building exercises
• Retreats and Bonding experiences
• Awards, incentives and recognition
• Internal communications
• Dissemination of corporate credo, value statement

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Examples of Stakeholder Relationship Management
Practices

• Transparency
• Willingness to disclose information
• Open Book management
• Approachability
• Listening sessions
• Feedback mechanisms
• Stakeholder Engagement
• Partnerships and Exchanges

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Reported Benefits

• Organizational Productivity
• Employee Recruitment, Retention, Commitment and
  Morale
• Positive work environment
• Strong relationships with external stakeholders
• Customer enthusiasm and loyalty
• Acknowledgement as an employer of choice

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Analysis of current situation

• More compliance
• More transaction costs
• Passing laws without creating a culture that
  supports them
• Little change in fundamental attitudes toward
  business in general
• Individual companies that do have trust
  management practices are rewarded.

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Ways Forward?

• Company Level
• Diffusion of trust management principles
• Sharing of lessons learned
• Increased focus on measuring intangible assets
• Business and Society Level
• Importance of raising awareness about business
  norms
• Identification of common agenda to build trust
• Partnerships for ethics education

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Contact Information

• Stephen C. Jordan
• VP and Executive Director
• Business Civic Leadership Center
• 202-463-5490
• sjordan_at_uschamber.com