On October 2, the Consortium for Trustworthy Organizations at Fordham University in New York sponsors
“The Summit on Restoring Trust in
Business,” on West 60^th Street in Manhattan. 

An A-list of
participants from major companies and consultancies will be there. Those with
professional or academic interest are invited – program details and enrolment
information are here.

I have the pleasure
of bringing my perspectives on risk management, litigation and disputes to a
great panel, “Effective Trust Repair,”
led by Charlie Green (for whom, see Trusted
Advisor Associates and his
blog, Trust Matters).

With the quality of
gathered credentials and experience, the discussions will be seriously
substantive – with more nuance and value than the sometime platitudinous
slide-decks of the typical Trust-Building
101 curricula.  

Because a forum of
this sophistication can dig far beyond the “easy stuff,” we expect to probe some
of the conventional attitudes. Three such topics are sketched below — in no
more than the possible appetizer-sized portions.

“Trust Survival” May Be the
Best There Is

Run-of-the-mill literature
on trust in business strongly features its preservation and maintenance. But
take note: when corporate times are rosy, the language of trust gets subsumed
within the overall anodyne vocabulary of feel-good success. 

And after the fact
of a disaster, it’s too late.

At the only time it
truly matters – when an enterprise faces existential crisis –– continuity of
trust is at best a problem of second-order importance. And the small circle
making life-and-death decisions — those directly reporting to the chairman or
the CEO –- are the only people with real influence.

Examples:

• As
  Arthur Andersen spiraled into disintegration in 2002, it was the peeling away
  of partners, clients and its non-US firms – trust was implicated, to be sure,
  but at stake was the immediate impact on the firm’s very viability.

• At MF
  Global last fall, Jon Corzine would have cared less for the preservation of
  customer or counter-party trust, when what really mattered was a Hail Mary scramble
  for survival that turned into $ 1.6 billion in missing customer funds.

• And at
  Knight Capital over the weekend of last August 4-5, virtuous concerns for
  trustworthiness, following the $ 440 million loss inflicted by a trading
  software glitch the week before, would have been subordinated to the search for
  friendly rescuers – surrendering ownership to investors prepared to salvage the
  firm’s ability to open for business that Monday. 

Only if the
enterprise survives, in other words, do the re-builders of trust have a chance
at an invitation to the table.

And even then,
trust-related advisors in a post-breakdown environment risk relegation to the
same role as the medieval camp-followers after battle – executing the wounded
and looting the corpses.     

“Trust Building” May Not
Always Really Matter 

The constraints of
a cartel or the impositions of regulation affect whether trust in business is
relevant at all.

Nobody loves the indifferent
service of the local cable company or the lock-step piracy of the neighborhood
filling stations. But subscription and consumption continue.

As Michael Corleone
was reminded by Frankie, the disaffected mob soldier in The Godfather II (1974), “Your father did business with Hyman Roth.
Your father respected Hyman Roth. But your father never trusted Hyman
Roth.”

Bond offerings
require ratings, despite the agencies’ consistent behind-the-curve performance
during times of crisis, from the savings-and-loans of the 1980’s to the
subprime mortgage and sovereign debt calamities of this decade. Audit reports
are required by law on the financial statements of public companies, despite
manifest dissatisfaction with their content or their usefulness to readers.

The result in these
contexts is narrowed relationships and skeptical doubts about value. Notions of
“trust” are conspicuously absent from the dialog.    

“Trust Repair” May Be
Non-Strategic 

Finally, when
business trust is broken, and a supplicant comes around to plead for another
chance, symmetry requires a response by those asked to re-affirm their faith.
What conditions should apply? 

In other words,
“fool me once…” – and then what?

Consider the
frequency with which a large-scale fraudster gives early signals of his
corruption – Bernie Madoff’s unbelievable golf scores evidenced his flim-flam. Or even confirms,
like the recently re-jailed Barry Minkow of ZZZZ Best, the overwhelming rate of
recidivism among white-collar criminals.

What combination of
sentiment and compassion, or venality and credulity, blinds the risk processes
of those charged as fiduciaries for their stakeholders, such that the
victimizations continue?

Salience does enter
in, of course. A single disappointing meal at a favorite restaurant should not
kill its reputation, nor an explicable one-time lapse in service by a supplier
or payment by a customer. Some tolerance is required, for the inevitable
breakdowns that inhere in complex systems of human design.

But while
repentance and forgiveness have their place in a caring society, prudent risk
management counsels against re-admitting a known fox for a return visit to the
henhouse.

These are among the
complex issues, and they have no simple answers. Reactions here are invited and
encouraged. And those able to extend the discussion in New York on October 2
are most welcome.

 

Thanks for joining this dialog. Please share
with friends and colleagues. Comments are welcome, and subscription sign-up is
easy and free, both at the Main
page.