BUSINESS ETHICS AND CORPORATE TRUST

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BUSINESS ETHICS AND CORPORATE TRUST
Roger Bolton Brian Moriarty APCO
Worldwide Business Roundtable Institute for
Corporate Ethics Tuck Symposium on
Communication New York City June 2, 2009
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Agenda

• Brief Overview of our organizations and why we
  are engaged in public trust in business
• Defining Business Ethics
• Defining Trust
• Three Core Dynamics of Trust
• Recommendations
• Whats Next

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(No Transcript)
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Business Ethics
The Dynamics Of Public Trust In Business
Emerging Opportunities For Leaders
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BUSINESS ETHICS
Is Business Ethics an Oxymoron or Pleonasm?

• Is it defined by scandals?
• Is it defined by value creation?
• Is it relevant to both?

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BUSINESS ETHICS
Business

• The idea of business as cowboy capitalism,
  that capitalism works because people are
  completely self-interested, and will only act for
  others if they have the proper incentives is
  outmoded and shopworn.
• Business is a form of social cooperation, working
  together to create value that no one person could
  create on his or her own.
• This idea of business is not newit is at least
  as old as Aristotle
• Ed Freeman Business is about creating value for
  stakeholders.
• At a minimum stakeholders are customers,
  employees, suppliers, communities, as well as
  shareholders or other financiers.

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BUSINESS ETHICS
Ethics

• Too often we think about ethics as about
  deciding who the saints and sinners.
• Ethics is about the most important parts of our
  lives, our core values and must be center
  stageespecially in turbulent times.
• Ethics is about how we get along with each other,
  how our values and interest interact.
• Ethics always works at two levels personal and
  interpersonal.

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BUSINESS ETHICS
A Paradox or a Positive Sign?

• An survey from 2006 reports that
• 81 agree the first priority for any corporation
  is to make a profit so they can stay in business
• 88 agree the first priority for any corporation
  is to be a good corporate citizen by acting in
  socially responsible ways
• 91 agree it is possible for companies to find a
  balance between making a profit and giving back
  to society
• Source American Management Association, The
  Ethical Enterprise Doing the Right Thing in the
  Right Ways, Today and Tomorrow, A Global Study of
  Business Ethics, 2006, p. 2

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BUSINESS ETHICS
Putting Ethics At The Center The Basics

• Creating value for customers.
• Managing suppliers so that they want to make your
  business better.
• Managing employees so that they show up and use
  their brains.
• Being good citizens in the community.
• Making money for financiers.
• Stakeholder interests have to go together over
  time. All have to win.

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BUSINESS ETHICS
Putting Ethics At The Center The Basics

• Trust Panelist The values and culture of our
  company compels us almost to do things not
  expected or required.
• Ethics and values give us anchors, stakes in the
  ground.
• They serve as stabilizers and shields.
• They empower and inspire us. They lead to
  everyone pulling in the same direction.
• In short, values and ethics can drive business
  strategy.

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BUSINESS ETHICS
Putting Ethics At The Center Vision and Values

• Value Creation How does the firm make others
  better off?
• Trust Panelist The question we need to ask is
  why does the world need this enterprise.
• Stakeholder Cooperation What values and
  directives help build commitment to the firm?
• Stakeholder/Societal Expectations Do our values
  and commitments obey social norms and laws?

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BUSINESS ETHICS
Corporate Communications Ethics

• Corporate communicators
• Have expertise in engaging stakeholders
• Understand the uses and implications of emerging
  technologies and trends
• Have a clear set of professional values
• Arthur W. Page Society Principles
• Authentic Enterprise Reports

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DEFINING TRUST
The Dynamics Of Public Trust In Business
Emerging Opportunities For Leaders
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DEFINING TRUST
Dimensions of Trust

• Fidelity Consists of caring, respect, advocacy
  and avoiding conflicts of interest
• Competence Avoiding mistakes and producing the
  best achievable results
• Honesty Entails telling the truth and avoiding
  intentional falsehoods
• Confidentiality The protection and proper use
  of sensitive or private information
• Global Trust A catchall, but also a significant
  component that is irreducible or not subject to
  dissectionwhat one might call the soul of
  trust

Source Mark A. Hall, Elizabeth Dugan, Beiyao
Zheng, and Aneil K. Mishra, Trust in Physicians
and Medical Institutions What Is It, Can It Be
Measured, Does It Matter?, The Milbank
Quarterly, Vol. 79, No. 4, 2001)
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DEFINING TRUST
Competence and Goodwill

• How do you think business scores on competence?
• How do you think business scores on goodwill?
• The news is better than you might think
• A Harris Interactive survey reported that 63 of
  the general public trusts that most companies
  have good intentions and work hard not to repeat
  similar mistakes again.

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DEFINING TRUST
The Trust Arena is Complex

• Interpersonal
• Organizational
• Inter-organizational
• Institutional
• Public

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DEFINING TRUST
Public Trust in Business

• Public trust in business is the level and type of
  vulnerability that the public is willing to
  assume with regard to business relations. It is a
  critical ingredient for social cooperation and
  market efficiency and a cause for deep concern
  when it is absent or threatened.

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DEFINING TRUST
Does Public Trust Matter?

• Trust Panelist No one ever talks about public
  trust in the boardroomwe talk about customer
  loyalty and the Fortune 500 survey of the Most
  Admired Companiesthings that seem more closely
  related to our company.
• What does public trust have to do with your
  company?
• Annual cost of compliance with regulations post
  Sarbanes-Oxley estimated to be 1.1 trillion,
  more than 10 of the GDP
• January 2009, The Conference Board Consumer
  Confidence IndexTM reaches all-time-low of 37.7.

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WHY TRUST MATTERS

• Trust improves the efficiency of transactions
• Trust within firms impacts employee
  performance.
• Trust among firms impacts customer acquisition
  and retention.
• Trust among the business units of large firms
  impacts innovation.

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WHY TRUST MATTERS
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WHY TRUST MATTERS

• U.S. Trust in Institutions
• How much do you trust each institution to do
  whats right? Source
  Edelman Trust Barometer

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THE THREE CORE DYNAMICS OF TRUST
The Dynamics Of Public Trust In Business
Emerging Opportunities For Leaders
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THE THREE CORE DYNAMICS

• Mutuality
• Balance of Power
• Trust Safeguards

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THE THREE CORE DYNAMICS

• Mutuality
• Based upon shared values or interests
• Create value for multiple stakeholders
• Concern for societal values and interests

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THE THREE CORE DYNAMICS

• Balance of Power
• Risks and opportunities are shared
• Mediating institutions have influence
• Authentic dialogue occurs between parties

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THE THREE CORE DYNAMICS

• Trust Safeguards
• Legal compliance mechanisms
• Create protection for stakeholders
• Reparations are required for violations

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REPORT RECOMMENDATIONS
The Dynamics Of Public Trust In Business
Emerging Opportunities For Leaders
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REPORT RECOMMENDATIONS
Goal of the Project on Public Trust in Business

• To help business leaders make better decisions
  by
• Exploring the unchartered territory of public
  trust in business
• Offering business leaders actionable
  recommendations, including opportunities to build
  public trust in their companies, industries and
  in the institution of business

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REPORT RECOMMENDATIONS

• Ensure that values are adhered to consistently
  across your enterprise.
• Build and manage strong relationships with
  mediating institutions.
• Embrace transparency.
• Work to build trust in your business sector.
• Focus on the core contribution that the firm
  makes to society.

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THE VALUE OF VALUES
The Dynamics Of Public Trust In Business
Emerging Opportunities For Leaders
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THE VALUE OF VALUES
Globalization
DigitalNetwork Revolution
Stakeholder Empowerment
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THE VALUE OF VALUES

• Implications for enterprises
• Threats
• Influential new stakeholders
• Demands for transparency
• Risks to brand and reputation
• Regulatory activism

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THE VALUE OF VALUES

• Imperative for enterprises
• The enterprise must be grounded in a sure sense
  of what defines and differentiates it (mission,
  values, principles, beliefs).
• And those definitions must dictate consistent
  behavior and actions.

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• THE VALUE OF VALUES
• Our Credo
• We believe our first responsibility is to the
  doctors, nurses and patients,to mothers and
  fathers and all others who use our products and
  services.In meeting their needs everything we do
  must be of high quality.

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THE VALUE OF VALUES
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STAKEHOLDER RELATIONSHIPS
The Dynamics Of Public Trust In Business
Emerging Opportunities For Leaders
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STAKEHOLDER RELATIONSHIPS
Globalization
DigitalNetwork Revolution
Stakeholder Empowerment
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STAKEHOLDER RELATIONSHIPS

• How do you build relationships with disparate
  stakeholders?
• Authentic dialogue
• Free consulting
• Look for common ground
• Be willing to change

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STAKEHOLDER RELATIONSHIPS

• Aetna in the 90s
• Put customers and shareholders first
• Strong form managed care
• Anti Managed Care Backlash
• Physicians, patients rebelled
• Government mandates
• New CEO - A Doctor
• New values The Aetna Way
• Balance the needs of ALL constituents
• New approaches
• Settle lawsuit

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STAKEHOLDER RELATIONSHIPS
The New York Times May 23, 2003
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STAKEHOLDER RELATIONSHIPS

• The once notoriously stingy and fiercely
  unpopular company is now frequently cast as the
  country's most physician-friendly insurer.
• BusinessWeek, Jan. 4, 2006
• By Jessi Hempel and Diane Brady

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STAKEHOLDER RELATIONSHIPS

• Engage in meaningful dialogue with responsible
  mediating institutions that have legitimate
  interests and influence traditional stakeholders
• Create partnerships with groups that can
  enhance your value-creating activities

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EMBRACE TRANSPARENCY
The Dynamics Of Public Trust In Business
Emerging Opportunities For Leaders
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EMBRACE TRANSPARENCY

• Transparency leads to
• better understanding of a firms good
  intentions
• more informed engagement with mediating
  organizations and other stakeholders.

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EMBRACE TRANSPARENCY
Web 2.0
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EMBRACE TRANSPARENCY

• 108 million blogs, increasing by 175,000 daily
• Nearly one billion camera phones worldwide
• Second Life 14 million people, 80 countries
• YouTube 100 million videos/day

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EMBRACE TRANSPARENCY
Biggest Influence on Opinion about IBM
Personal experiences with companys employees
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1
1
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1
1.3
Analysts or professional organization opinions
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1.9
Opinions of colleagues, peers, or friends
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5
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5.4
What companies are doing for others in your
industry
Company websites
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6.0
White papers, research, or case studies
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6.0
Articles in magazines or newspapers
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7.6
Online sources, not directly from the company
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7.7
Tradeshows, conferences, industry forums, events
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5
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7.7
IBM Survey of executives in seven countries
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We continue to advocate IBMers' responsible
involvement today in this new, rapidly growing
space of relationship, learning and collaboration.
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EMBRACE TRANSPARENCY

• Be willing to disclose meaningful,
  nonproprietary information about the firms
  business, policy and lobbying practices
• Embrace the notion that transparency leads to
• better understanding of a firms good
  intentions
• more informed engagement with mediating
  organizations and other stakeholders.

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BUILD TRUST IN YOUR SECTOR
The Dynamics Of Public Trust In Business
Emerging Opportunities For Leaders
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BUILD TRUST IN YOUR SECTOR
Employee Trust by Industry

• These percentages of employees, by industry
  believe that if the misconduct they observed in
  their companies became publicly known, the
  organization could significantly lose public
  trust

Source KPMG Forensic, Organizational Integrity
Survey 2008-2009, p. 2.
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BUILD TRUST IN YOUR SECTOR
Public Trust by Industry
Sector Generally Trust More Regulation
Banking Oil Pharmaceutical Health Insurance Computer Hardware Computer Software Supermarkets 21 (-14) 4 10 7 17 16 30 36 (16) 53 49 49 5 6 6
(Source Harris Interactive News Release, More
Regulation for Banks, December 8, 2008)
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BUILD TRUST IN YOUR SECTOR
THE HALO EFFECT

• Trust in one organization can effect trust in
  another related group
• The Halo Effect Respects No Borders A strong
  correlation has been shown between trust in
  physicians and trust in insurers although it is
  unclear whose halo is shining upon whom. (Hall
  et al, 2001)
• The positive side of contagion
• Partnering have positive impact

Source Mark A. Hall, Elizabeth Dugan, Beiyao
Zheng, and Aneil K. Mishra, Trust in Physicians
and Medical Institutions What Is It, Can It Be
Measured, Does It Matter?, The Milbank
Quarterly, Vol. 79, No. 4, 2001)
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BUILD TRUST IN YOUR SECTOR
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BUILD TRUST IN YOUR SECTOR
DII Signatory Companies are united in their
commitments to adopt and implement the highest
standards of business ethics and conduct.  Not a
lobbying organization, DII seeks to promote and
nurture a culture of ethical conduct within every
company in the defense industry.
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BUILD TRUST IN YOUR SECTOR

• Develops Industry Standards Regarding
• Environmental Issues
• Fair Labor
• Manufacturing and Safety

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FOCUS ON THE CORE CONTRIBUTION THE FIRM MAKES TO
SOCIETY
The Dynamics Of Public Trust In Business
Emerging Opportunities For Leaders
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FOCUS ON CORE CONTRIBUTION

• View societal trends as business opportunities
  connected to the core value-creating purpose of
  the firm
• Being socially responsible is not about
  offsetting negative impacts, but about taking
  actions that are good for business because they
  create value for a broad spectrum of stakeholders

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FOCUS ON CORE CONTRIBUTION

• Aetna Chairmans Initiatives
• Genetic testing
• Disparities in health care
• Care at the end of life
• Depression management

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FOCUS ON CORE CONTRIBUTION
GE Imagination
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FOCUS ON CORE CONTRIBUTION
IBM A Smarter Planet
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FOCUS ON CORE CONTRIBUTION
The MBA Oath As a manager, my purpose is to
serve the greater good by bringing people and
resources together to create value that no single
individual can build alone. I will safeguard
the interests of my shareholders, co-workers,
customers, and the society in which we operate.

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FOCUS ON CORE CONTRIBUTION

• Ensure that all managers understand how the core
  contribution of the firm to society creates trust
  in the firm
• Create social value in the public interest
  through the firms core contribution to society
• Align business objectives with the public
  interest

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NEXT STEPS
The Dynamics Of Public Trust In Business
Emerging Opportunities For Leaders
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NEXT STEPS
Filling the Knowledge Gap

• How does public trust in business impact my firm
  or my sector?
• Which trust configurations matter most to my firm
  or my sector?
• How does public trust in business impact how
  regulators think about business?
• What drivers are most likely to affect trust in
  my company with respect to various stakeholders?
• What business outcomes are connected to various
  types of trust or distrust and to the actions
• of mediating institutions?

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NEXT STEPS
Organize a high-level working group of experts
representing major stakeholders to develop
principles for effective financial markets
regulation. Conduct a series of research
studies. Promote dialogue between thought
leaders to advance game-changing solutions with
regard to practice and policy. Assemble
leading academics in the area of trust to begin
filling the knowledge gap, delivering actionable
knowledge to executives (Fall 2009). Devote
increased attention to public trust in our
ongoing work.
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NEXT STEPS
Your Suggestions?

• What questions do you feel research should
  address?
• What else should we be doing?

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BUSINESS ETHICS AND CORPORATE TRUST
Roger Bolton Brian Moriarty APCO
Worldwide Business Roundtable Institute for
Corporate Ethics Tuck Symposium on
Communication New York City June 2, 2009