Trust Digest 46 (April 14, 2014) 

Behind Intel Corp's Conflict-free Commitment
In January, Intel Corp. announced that it its microprocessors are now ‘conflict-free’, meaning the metals used in their computer chips (tin, tantalum, tungsten and gold) are not fueling armed conflict in the Democratic Republic of the Congo. Behind the headline, though, is a story of how the company assessed the materiality of the issue and chose to take a leadership position without the promise of clear bottom line rewards. To understand what happened behind the scenes, we spoke with Gary Niekerk, Director of Global Citizenship, and the keynote speaker at NAEM’s upcoming “Metrics and Materiality Conference” on May 21-22 in Denver.
Key Words: Intel, Conflict Free
Trust Issues: Responsibility, Integrity, Ethics

Indian Companies and Charities Aren’t Ready for New Giving Law
While India’s largest companies are now required by law to hand out 2% of their profits to charity, few companies know how to give and fewer charities know how to handle the kind of cash that will now be coming their way.
Key Words: Corporate Social Responsibility, India
Trust Issues: Benevolent Concern, Regulation

Walgreens Urged to Leave US to Gain Tax Benefit
Walgreens has come under pressure from an influential group of its shareholders, who want the US pharmacy chain to consider relocating to Europe, in what would be one of the largest tax inversions ever attempted. At a private meeting in Paris on Friday, investors owning close to 5 per cent of Walgreens’ shares lobbied the company’s management to use its $16bn takeover of Swiss-based Alliance Boots to re-domicile its tax base.
Key Words: Corporate tax
Trust Issues: Responsibility, Stakeholders

City Bankers to Evade EU Bonus Cap with ‘Role-based’ Allowances
Several thousand of London’s top-earning bankers will soon be in the highly unlikely position of thanking European lawmakers for boosting their fixed pay. A string of large European lenders and US banks with operations in London will pay “allowances” this year to anyone being caught by the European Union bonus cap, a rule that came into force in January limiting variable pay to the amount received in fixed pay, or twice that level with shareholder approval. Such “role-based” allowances will be counted as fixed pay but will have an advantage over salaries in that they can be adjusted upwards or downwards each year and are not pensionable.
Key Words: Executive Pay, Banking
Trust Issues: Accountability, Regulation, Stakeholders

CEO Interview: Alison Nimmo of The Crown Estate – Success is a team game
An interview with Alison Nimmo. As chief executive of The Crown Estate, Alison Nimmo is responsible for overseeing the company’s diverse portfolio. With a capital value of over £8 billion, the business’s assets range from prime real estate in London’s West End to the entire seabed around the UK.
Key Words: Sustainability
Trust Issues: Responsibility, Integrity

Building Up Trust
Rules and regulations are never enough to eliminate or deter abuse. Their effectiveness depends on the extent to which people see them as fair and legitimate enough to outweigh the benefits of non-compliance. For example, mistrust in government undermines tax compliance, which in turn reduces revenues available for social expenditures. Citizens are more likely to perceive tax obligations more favourably, and comply with those obligations voluntarily, when their government is seen to be acting in a trustworthy manner. For all these reasons, trust is not simply a confirmation of good economic management; rather it is an important ingredient in economic success–a prerequisite, as much as an outcome.
Key Words: Trust, Regulation
Trust Issues: Responsibility, Regulation, Reputation

Nearly Half of Dodd-Frank Rules Still Unwritten
The Wall Street Reform and Consumer Protection Act, commonly known as the Dodd-Frank Act, remains a work in progress almost four years after it was signed into law. As of April 1, only 52% of the 398 rules mandated by the law have been completed, according to law firm Davis Polk & Wardwell LLP.
Key Words: Dodd-Frank, Regulation
Trust Issues: Regulation

Corporate America Doesn't Need a 'Business Case' to do Good
"The business case" is the scourge of everyone who works on safety, ethics, sustainability, or human rights in the corporate world. These are issues for which return on investment is hard to measure. But when things go wrong, the costs in terms of human suffering, reputational damage, legal fees, consumer trust, and bottom line impacts may be massive.
Key Words: Trust, Responsibility
Trust Issues: Responsibility, Benevolent Concern, Reputation, Motives

All at Sea: Shareholders Rebel against $8.7m Pay Package for Top BP Bosses
BP shareholders staged a major revolt against the company yesterday as nearly a third of them failed to back the $8.7m (£5.2m) pay package of chief executive Bob Dudley and other boardroom staff.
Key Words: Shareholders, Executive Pay
Trust Issues: Accountability, Stakeholders

The Slumps That Shaped Modern Finance
What is mankind’s greatest invention? Ask people this question and they are likely to pick familiar technologies such as printing or electricity. They are unlikely to suggest an innovation that is just as significant: the financial contract. Widely disliked and often considered grubby, it has nonetheless played an indispensable role in human development for at least 7,000 years.
Key Words: Financial Crisis, Banking
Trust Issues: Regulation, Stakeholders

Knowing Too Much
Many still question the value of pursuing insider-trading cases, but the ability of enforcement agencies to bring and win new cases is beyond argument. Their success is all the more striking as the crime itself is a relatively new one. The first insider-trading case was brought only in 1961 and, but for the principle involved, was forgettable.
Key Words: Insider Trading, Regulation
Trust Issues: Responsibility, Regulation

Supreme Court's Rejection of U.S. Campaign Funding Limits Opens Door for Big-money Donors
The U.S. Supreme Court on Wednesday struck down a key pillar of federal campaign finance law by allowing donors to give money to as many political candidates, parties and committees as they wish. In the latest in a series of decisions by the high court that have given big-money donors more influence in U.S. elections, the justices rejected the overall limits on how much individuals can donate during a federal two-year election cycle.
Key Words: Supreme Court, Campaign Finance
Trust Issues: Transparency, Regulation

Board Trends at the S&P 1500
The latest issue of ISS Board Practices reflect incremental but meaningful changes in several key governance areas. For the first time, just slightly more than half (51%) of S&P 1500 companies have two people serving as CEO and chairman…10.8 years is the average director tenure in 2013, up from 8.7 five years ago, with little differences among the S&P groups, although 36 companies had average director tenure of over 20 years.
Key Words: Board of Directors, Corporate Governance
Trust Issues: Competence, Stakeholders

The Wallet as Ethics Enforcer
There is a lot we don’t yet know about the disastrous decisions made by General Motors after it became aware of faulty ignition switches in its Chevrolet Cobalts more than 10 years ago…While shareholders of G.M. will shoulder the costs of fines, settlements and the loss of trust arising from the mess, the executives responsible for monitoring internal risks like these are unlikely to be held to account by returning past pay.
Key Words: GM, Corporate Pay, Ethics
Trust Issues: Accountability, Ethics

Lead at Your Best
Senior leaders need a community of supporters to achieve audacious goals, for communities are built through shared objectives and mutual trust. Yet not everyone views trust in the same way, so as leaders we must learn what others value if we want to inspire trust. At a minimum, the effort leads to greater understanding.
Key Words: Trust, Leadership
Trust Issues: Responsibility, Communication, Competence

Global Anti-Money-Laundering Survey
AML has never been higher on senior management’s agenda, with regulatory fines now running into billions of dollars, regulatory action becoming genuinely license threatening, and threats of criminal prosecution against banks and individuals. Financial Institutions are making significant changes in response to regulatory action and increasingly far-reaching global AML regulations; with numerous new regulations across Asia, the U.S. Foreign Account Tax Compliance Act (FATCA) having an impact, and the Fourth European Money Laundering Directive (4MLD) still to come... This survey not only compares firms’ AML programs over the period covered by previous KPMG survey’s but also looks at emerging areas of risk, such as Trade Finance and Tax Evasion, as well as looking at AML trends within the Insurance and Asset Management sectors.
Key Words: Anti-Money Laundering, Survey, Finance
Trust Issues: Accountability, Regulation, Corruption

How To Build Relationships Of Trust
“Trust is a core ingredient to build successful relationships. Both personal and professional ones. It is a major leadership characteristic. However, you can´t take it for granted. You need to work hard to earn trust and to keep it.” -Andreas von der Heydt is the Country Manager of Amazon BuyVIP in Germany.
Key Word: Trust
Trust Issues: Responsibility, Accountability, Competence

Is High-Frequency Trading Insider Trading?
Ever since Michael Lewis went on 60 Minutes Sunday night to accuse high-frequency traders of rigging the stock market, it has been hard to avoid the debate over HFT’s merits and evils. Some of it’s been useful; most has been a lot of angry yelling. The peak of the frenzy came on Tuesday afternoon in a heated segment on CNBC with IEX’s Brad Katsuyama and BATS Chief Executive Officer William O’Brien. To me, this debate is just circling the ultimate question: Should high-frequency trading be considered insider trading?
Key Words: High Frequency Trading, Insider Trading
Trust Issues: Communication, Stakeholders

The Surprisingly Large Cost of Telling Small Lies
Recently, I caught up with one of our angel investors for lunch: Peter is a brilliant entrepreneur from England who has lived all over the world. He has built several businesses and now lives a dream life with a house on a harbor, a happy family and a broad smile. As our conversation drifted from an update of my company to a deep discussion about life itself, I asked him what he thought was the secret to success. I expected the standard “never give up” or some other T-shirt slogan, but what he said took me by surprise. “The secret to success in business and in life is to never, ever, ever tell a lie,” he said.
Key Words: Lies, Success
Trust Issues: Communication, Integrity

Reinforcing a Culture of Integrity in Your Workforce
Amid the string of corporate scandals that has left behind a climate of suspicion, corporate leaders are exploring new ways to build and maintain public trust. According to a recent opening keynote at the Ethisphere/Thomson Reuters annual Global Ethics Summit in New York City on March 20 and 21, the key is working with the right people to avoid potential reputational risks.
Key Words: Integrity, Ethics, Trust
Trust Issues: Competence, Stakeholders, Ethics

Scandal-Hit British Banks Turn to 'Weirdy Beardy'
When Barclays PLC executives wanted to overhaul the culture at their scandal-prone bank, they turned to a long-haired, paisley shirt-wearing professor known as the "weirdy beardy” … Mr. Steare's popularity comes as the issue of "culture" hits fever pitch among banks in London. Critics of the U.K.'s banks, including politicians and regulators alike, have said they promoted a culture of excessive risk-taking and bad behavior among employees.
Key Words: Corporate Culture, Banking
Trust Issues: Responsibility, Stakeholders

How Much Does Your State Trust the Government? See this Map.
Just 28 percent of voters in Illinois have trust in their state's government -- by far the lowest number in the United States. By contrast, about three-fourths of voters in North Dakota, Utah and Wyoming say they trust their government. Those three rank the highest among all 50 states.
Key Words: Trust, Government
Trust Issues: Reputation, Regulation, Stakeholders

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