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Honour Bound

01 October 2019 by Anthony Hilton

Honour Bound

Trustworthiness within an organisation is imperative and goes much further than shareholder value

“The louder he talked of his honour the faster I counted my spoons” is a quote generally attributed to Ralph Waldo Emerson, though perhaps it is derived from Dr Samuel Johnson who said “Why Sir, when he leaves our house, the faster I count my spoons”. And according to Google, the Johnson quote can be found even earlier by the same author in Boswell’s 1768 book An Account of Corsica.
Be that as it may, it is the thought that matters. There is no point in banks or any other businesses saying that they can be trusted, because it has the opposite effect. Bank executives have been trying loudly for 10 years to say that they have mended their ways, that the boards have been replaced, the executives are no longer in post and that people should now trust them again. But the customers are deeply sceptical, and companies protesting their innocence make them more so.

I also think that there are two kinds of trust in this context – there is transactional trust but there is also emotional trust. Transactional trust says that the banks will not run off with your money so it is safe to leave your deposits there. But emotional trust is when you get a fair deal, or the banks say it is a fair deal when in fact it is not. Payment protection insurance was one example, but it also matters when banks rip off customers who might occasionally slip into overdraft. These are instances where the banks pursue profit regardless of the impact on customers.

Baroness Onora O’Neill, the philosopher, talking at the Royal Society of Arts at a seminar organised by Blueprint for Business, goes further. Trust is not the issue; it is trustworthiness which businesses should strive for. Trust is not for you to give, she says; trustworthiness comes from other people. Trust is a reputational issue – judges and nurses are trusted, and have been for years, even when they make mistakes. Politicians and journalists are deemed to be at the bottom of the reputational heap and have been for years even if some of them do good.The same with second-hand car salesman and estate agents. No amount of bluster will make any difference.

Trustworthiness matters when the reputation is earned, but that comes from the people, not the organisation. Even then people can be untrustworthy, in spite of your thinking otherwise, but that is a different matter. Generally people recognise if a business is trying to do the right thing.

To become trustworthy, people and organisations have to define what their purpose is. But there is not one purpose – everyone has a set of purposes and sometimes they contradict each other. Recognising this is part of the process of becoming more realistic.

Business has lost sight of this – hence the Friedmanite belief that the onlything that matters is the bottom line – the maximising of profit for shareholders. Any business ought to have a plurality of purposes both public and private. For example, one public issue is the limiting of liability so that if a business goes bust there is a limit on how much the directors have to shell out to make the losses good. 

Other issues where business intrudes on the public, as the American Professor Jeffrey Sachs said in the Financial Times, recently, include distortions in the tax system and the pervasive environmental externalities which are threatening the planet, the successes of powerful corporate lobbies in swaying government regulations towards their own narrow interest, and the insidious ways in which many businesses addict customers to unhealthy products and practices. (An example of the insidious practices was the half billion dollar fine of Johnson & Johnson in recent weeks for its part in the opiate crisis affecting American society.)

Actually, what Sachs wrote was: “American society is furious with a corporate sector that has dangerously polluted the environment, captured Congress and regulatory agencies through mega-lobbying and campaign financing, cheated relentlessly on taxes and finances, lied repeatedly to the public, weakened trade unions through market and political action and awarded sky high compensation packages (or better put, that the CEOs have awarded to themselves beyond the effective oversight by shareholders, bondholders and workers)”.

I will leave it to you to see if some of these trends are also happening in Britain.

Business has to navigate around these issues, which is why fairness and hence trustworthiness matters. Baroness O’Neill, referencing Charles Wookey, CEO of Blueprint for Business, says fair process is key because it can be achieved, whereas the actual result of the process may not be fair to all. Fair results are ambiguous, but the process can be fair and that is what business should strive to achieve. This has to go much further than shareholder value.

Then it may become trustworthy.

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