One of the great casualties of the financial and economic wreckage has been trust. Whereas we used to trust businesses, chief executives and even bankers, this has plummeted. It reminds one of the old line about politicians: “How do you know when a politician is lying? Answer: their lips are moving.”
In many ways, the modern market economy and the City in particular were built on trust. Indeed the fuel of the economy was credit, derived from the Latin word meaning trust. Founded in 1801, the London Stock Exchange’s motto was “Dictum Meum Pactum”, which translates as “My Word is My Bond”. In the square mile, there were well established relationships of trust between the banks and their clients. Often deals were done over a long lunch and a handshake. The public had some degree of confidence in captains of industry.
But the financial implosion has damaged trust in business. It is not just banking in particular that has suffered, but business in general. Unscrupulous bankers and miscreant investors such as Bernie Madoff traded in trust, but this has been shattered. Shareholders, investors and the public have diminishing confidence in companies.
According to a survey from earlier this year, 62 per cent of people worldwide trust business less than they did a year ago; in the UK only 45 per cent of people trust business to do what is right and in France and Italy the figures are 29 per cent and 27 per cent respectively. Clearly there is a massive problem.
Why should business be worried about this? Because highly trusted companies tend to have higher productivity and perform better. Over the longer term, a trusting workforce is one that is likely to stay with a company and have beneficial relationships with suppliers. Also consumers are more inclined to buy goods from companies they trust.
The influential American intellectual guru Francis Fukuyama, in his book on the issue, has applied trust theory to economics. He shows that highly trusted countries such as Germany and Japan are able to develop innovative organizations and keep down the cost of doing business.
Having described the problem, what then can be done to rebuild trust? New laws will only take us so far. We need a behavioural shift, entailing an apology for mistakes and a commitment to do better next time. As one senior banker, a committed Christian, told me privately recently: “we need a civic Yom Kippur”. Getting the culpable to seek repentance may make for good theatre, but more importantly it may make them think twice before over-indulging next time.
