Dr. Robert Hurley is a professor of Management and director of the Consortium for Trustworthy Organizations at Fordham University. He consults with organizations on leadership development, top team development, coaching, managing transformational change, developing and implementing strategies to maximize customer value. He has published over 30 articles or book chapters. His work has appeared in the Wall Street Journal, Financial Times, California Management Review, and Harvard Business Review. Click here to read full bio. 
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  • Wed, August 19, 2015 7:09 AM | Robert Hurley (Administrator)

    The two major players in a high stakes game of credit and economy have been characterized as untrustworthy (Greece) or vengeful (Germany) in the press. Angela Merkel has said about Greece: “The most important currency has been lost and that is trust.” Greece has been painted as a “live for today” southern European country with a dysfunctional government and tax system. Germany on the other hand has been described as a “prepare for tomorrow,” responsibility obsessed nation that wants to punish the Greeks by demanding austerity measures while conveniently forgetting the growth enabling debt relief that was extended to it after WWII.

    The words trust and trustworthy have been thrown around rather loosely in all of this. Scholars have defined trust as something we offer to a trustee in whom we have positive expectations concerning their likely behavior in a risky situation.  For example, I trust my son with my car because he has shown me that he is responsible and so I am willing to accept the risk of allowing him to take it for the weekend. In the world of finance, I lend country money because their track record tells me that there is a reasonable likelihood that they will be responsible and pay me back. In both cases, we are making a judgment of the degree of trustworthiness (i.e., are they responsible, fair, competent, transparent, have integrity, etc.). If we judge someone to be trustworthy, we form an orientation toward them (intention to trust) that makes it ok to go forward with a trusting act  (give them the loan or the car). When we have conditioned others to distrust us, loans and valuable assets are not made available to us because the owners are seeking to reduce their risk.

    Given this understanding of trust, is it true that creditors should not trust Greece because they are in fact untrustworthy? First of all, like all countries, there are many trustworthy and untrustworthy people in Greece. But in this case, we are not assessing the trustworthiness of people; we are assessing the trustworthiness of the country. In evaluating the trustworthiness of the country our primary focus is gauging the integrity, fairness, competence and reliability of the government as agent for the people.

    Lets examine the facts concerning the Greek government and ask if they have signaled any elements of trustworthiness? Well they adopted the Euro in 2001 but met the debt ratio criteria only by misrepresenting their numbers (lying – lack of transparency). Greece has spent half the years since 1800 in default on its external debt (lack of reliability). According to Transparency International surveys, for the last 10 years the perceived rate of government corruption in Greece has been about double that of Germany (lack of benevolence and competence). Finally, the government, while it has cut spending, has yet to fix a dysfunctional tax system that has one of the highest rates of unreported income and failure to pay taxes among industrialized nations according to the Organization for Economic Cooperation and Development (lack of competence). I just returned from a week in Greece and found the country and its people lovely. Having said that, based on the facts and what we know about how to assess trustworthiness, a strong case can be made that creditors are right to not fully trust the country of Greece in this new bailout scheme. Perhaps with reform Greece can be trusted, but this is not yet earned or proven.

    But is Germany also been untrustworthy? As far as competence based trust goes, Germany has an efficient economy and a solid tax system to finance its economy. But what about benevolence and fairness based trust?  Some have argued that Germany has benefited tremendously from the Eurozone and that moral standards require it to share some of this excess with the less fortunate within the Eurozone. A 2013 quote by Merkel, when she was running for re-election, reveals that her call for solidarity in the Eurozone is an act of self-interest not benevolence toward others: “That (a unified euro area) is such a treasure, such a boon, that we can’t place it in doubt. That’s why the euro is more than a currency. For this reason we’ve shown solidarity, but solidarity always linked to responsibility for reforms in those countries that experience our solidarity.” It seems that Greece can make a subtler, and perhaps weaker, case questioning Germany’s trustworthiness.

    Greece and Germany are in a union that has benefitted one party more than the other. In fairness, Germany has some obligation to help, which they have done to some extent with prior bailouts. But the German government and its people cannot be held responsible for the irresponsibility or incompetence of other European Union members. Here lies the problem with the Eurozone. No currency or economic union is sustainable without a social fabric that has the right balance of trust (goodwill) and controls (governance and enforcement mechanisms). The Greece crisis is not just about differences in culture and lifestyles in Europe. It is about where the boundaries of trust and economic partnership will be drawn and whether they will hold together when things get challenging. What we may be seeing is the beginning of a re-drawing of the Eurozone boundaries in a way were financial capital is supported by the social capital of trust and cooperation which has apparently been damaged between Greece and Germany. Stay tuned for more changes in an unstable Eurozone.


  • Fri, May 29, 2015 7:48 AM | Robert Hurley (Administrator)

    Todays WSJ reports that Dick Fuld gave his first public speech since the demise of Lehman. Fuld's comments reported by the WSJ are correct that government incompetence (Fed) and corruption (Dodd, Frank and Fanny) were major causes of the GFC. But the Fuld quotes from the article also suggest that Fuld is a case study narcissist who is not capable of learning from experience. There is no doubt that having such a person at the top of Lehman leading up to GFC contributed to its demise. The truth is that Morgan Stanley and Goldman would have also collapsed if they were not allowed to use the FED window for liquidity. This would also have probably saved Lehman as well but it was not an option at that time. A careful reading of Fuld's comments makes a compelling case for more regulation because many of the people behind the GFC still have not learned. But more ineffective regulations and silly rules will also be a problem. We need smarter regulation not more. We also need compliance people and leaders who notice and catch organizational drift towards trust violations.This is a solvable problem.

  • Mon, January 13, 2014 11:03 AM | Robert Hurley (Administrator)

    Chris Christie did a masterful job of trying to restore public trust at his news conference yesterday. But was it authentic or was it just a good performance by a savvy political actor who was well coached? The answer to this question requires that we have keen insight into what makes any person or organization trustworthy.


    The need for Christie’s damage control news conference came from the "Bridge-gate" scandal that erupted after emails documented that some of the Governor’s aides had manufactured a massive traffic jam near the George Washington Bridge in retribution for the Mayor of that town not endorsing Christie for re-election. Christie took responsibility for this breach of trust yesterday, held the guilty parties accountable by removing them and sent a strong public signal that he finds this kind of behavior reprehensible and will not tolerate in his administration. He also said very clearly that he himself had no involvement in the planning or execution of this major violation of public trust.  A very impressive performance.


    But here is what he did not explain or take responsibility for. How is it that one of his trusted advisers who has been with him for years could possibly think that this act of revenge, which inflicted pain on citizens, would have been acceptable to the Governor? Did this previously sane and competent aide lose his mind temporarily? Christie has given us the bad apple defense most recently used by News Corp to deflect their phone hacking scandal: "This terrible thing that has happened is due to a few bad apples in the barrel. The barrel is big (I have 65,000 people that work for me); I cannot know what each apple is doing! Most of the barrel (my organization) is good and virtuous and now that we have rid ourselves of the few bad apples, all is well."

    But Governor, please tell us what caused these apples to think that being bad was ok? Major trust violations DO NOT happen by accident. They happen because something is wrong with the organizational system. This was true for BP (oil spill), Goldman Sachs (Abacus deceptions), Wal-Mart (Mexico bribery) and every other organization that has paid billions in fines for violating the public trust. Trust violations occur because some disease has infected the apple tree.


    So, I applaud Chris Christie for taking action, facing the public and sharing what seemed like a genuine and sincere apology. But until he reforms the system that enabled the bad apples, I remain skeptical.  The fact that he did not clearly own up to the fact that he set the tone that enabled these untrustworthy behavior, tells me that he may not understand that reforming his organization may require that he change some things about himself. It is not yet fully clear if he really “gets” the lesson here. The only way that we will really know if he is a trustworthy leader who deserves our confidence and trust is if we see future actions that tell us that he does understand, can reform things and is the real deal – an authentic, competent, self-aware leader. Stay tuned, watch the video (actions) more that the audio (words). We need to get better at discerning who is trustworthy that as those great rock philosophers the WHO advised, “we don’t get fooled again.”

  • Thu, November 28, 2013 12:27 PM | Robert Hurley (Administrator)

    Feeling that the world we live in is fair and just is a central component of trust. When we feel that the system is rigged and that only rich and the powerful can win, it creates frustration, despair and distrust. Pope Francis seems to understand this better than any Pope in my lifetime. He has challenged Catholics and others to question some things. At the heart of his challenge is the question of what is the justice and fair society and how does the economic system operate in such a society. His conclusion is that we are a long way from where we ought to be. Already people like Rush Limbaugh are calling the Pope a Marxist and criticizing him. The Pope challenges us to wrestle with some very important questions. While it is clear that communism and Marxism has failed, we should not conclude that the version of capitalism practiced in the Western world is without flaws.

    Here are some quotes from Pope Francis’s recent Apostolic Exhortation:

    “Today we also have to say 'thou shalt not' to an economy of exclusion and inequality. Such an economy kills. How can it be that it is not a news item when an elderly homeless person dies of exposure, but it is news when the stock market loses two points?

    "Today everything comes under the laws of competition and the survival of the fittest, where the powerful feed upon the powerless. As a consequence, masses of people find themselves excluded and marginalized: without work, without possibilities, without any means of escape.

    “In this context, some people continue to defend trickle-down theories which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world. This opinion, which has never been confirmed by the facts, expresses a crude and naïve trust in the goodness of those wielding economic power and in the sacralized workings of the prevailing economic system. Meanwhile, the excluded are still waiting. To sustain a lifestyle which excludes others, or to sustain enthusiasm for that selfish ideal, a globalization of indifference has developed. Almost without being aware of it, we end up being incapable of feeling compassion at the outcry of the poor, weeping for other people’s pain, and feeling a need to help them, as though all this were someone else’s responsibility and not our own. The culture of prosperity deadens us.

    “One cause of this situation is found in our relationship with money, since we calmly accept its dominion over ourselves and our societies. The current financial crisis can make us overlook the fact that it originated in a profound human crisis: the denial of the primacy of the human person! We have created new idols. The worship of the ancient golden calf (cf. Ex 32:1-35) has returned in a new and ruthless guise in the idolatry of money and the dictatorship of an impersonal economy lacking a truly human purpose.

    “While the earnings of a minority are growing exponentially, so too is the gap separating the majority from the prosperity enjoyed by those happy few. This imbalance is the result of ideologies which defend the absolute autonomy of the marketplace and financial speculation.

     “To all this we can add widespread corruption and self-serving tax evasion, which have taken on worldwide dimensions. The thirst for power and possessions knows no limits. In this system, which tends to devour everything which stands in the way of increased profits, whatever is fragile, like the environment, is defenseless before the interests of a deified market, which become the only rule.

    “Behind this attitude lurks a rejection of ethics and a rejection of God. Ethics has come to be viewed with a certain scornful derision. It is seen as counterproductive, too human, because it makes money and power relative. It is felt to be a threat, since it condemns the manipulation and debasement of the person. In effect, ethics leads to a God who calls for a committed response which is outside of the categories of the marketplace.

     “Ethics – a non-ideological ethics – would make it possible to bring about balance and a more humane social order. With this in mind, I encourage financial experts and political leaders to ponder the words of one of the sages of antiquity: 'Not to share one’s wealth with the poor is to steal from them and to take away their livelihood. It is not our own goods which we hold, but theirs.'

    “A financial reform open to such ethical considerations would require a vigorous change of approach on the part of political leaders. I urge them to face this challenge with determination and an eye to the future, while not ignoring, of course, the specifics of each case. Money must serve, not rule! The Pope loves everyone, rich and poor alike, but he is obliged in the name of Christ to remind all that the rich must help, respect and promote the poor. I exhort you to generous solidarity and a return of economics and finance to an ethical approach which favours human beings.”

    Wow, a leader with a strong and principled point of view. Let's all really think about these issues!

  • Mon, November 11, 2013 12:14 PM | Robert Hurley (Administrator)

    The Nov. 10th Wall Street Journal article “Worry Over Inequality Occupies Wall Street” highlights the impact of trust erosion on the US economy. The article cites Bill Gross, manager of the world’s largest bond fund by assets, as saying “Developed economies work best when inequality of incomes are at a minimum.” The article goes on to mention other big fund managers who are concerned about growing disincentives for people to participate in the US economy. One disincentive, in manager James Chanos’ words, is when the public believes the “game isn't fair.”



    In my book The Decision to Trust, I explain why the question of fairness and income distribution is so central to trust. Studies have shown that lower levels of trust are found in nations with greater income disparities. The explanation given for why low trust tends to be associated with more income disparity is that trust is connected with people’s sense of optimism and hope for a better life, both of which suffer when there is great variance in wealth. When we feel hopeful that we can have a better life, we tend to be more trusting. In contrast, if we feel despair and think others have advantages that are not available to us (i.e. there is a lack of fairness), we tend to be suspicious. Low trust tends to result when there are many “have-nots” looking at the “haves.”

    Some argue that redistributing wealth robs people of the chance to build self-esteem through hard work, creating incentives for sloth and disincentives for entrepreneurship. Although this may be true in certain circumstances, these arguments do not change the empirical fact that high trust correlates to higher levels of income equality. If a nation values a high level of societal trust as a goal, fairness in the ability to earn income coupled with mechanisms to avoid excessive income inequalities must exist.

  • Tue, November 05, 2013 2:56 PM | Robert Hurley (Administrator)

    While no doubt Edward Snowden’s Guardian leaks have caused embarrassment and damage, it also seems very clear that he has generated some vitally important conversations that would not have happened had he not turned “double agent.” Some of this conversation helps us understand trust better.


    Total trust means being willing to make oneself vulnerable to the actions of another and to eschew any monitoring or control over that other person. I trust you to do the right thing, even though I cannot control or monitor you. This level of trust is rare indeed, and after September 11th it is even more rare in the United States. Why? Terrorists took advantage of the open society in the US and plotted deadly attacks that killed thousands. What’s more, the inadequacies of the US intelligence system failed to catch warning signs of suspicious actors taking flying lessons in the US. On September 11th, the trust that the American people had in its government to keep them safe was damaged. Now, en route to repairing that trust, other trust relations have been damaged – the Iraq weapons of mass destruction narrative spun by Cheney and others proved incorrect and serving of their interests (leading to questions of deliberate deception).  Secret prisons, Abu Ghraib, and now spying on world leaders.


    Trust relations are both simple and complex. Simple in the following sense – treat everyone the way you would want to be treated and you’re likely to earn trust. But what if you were the CEO of a bank, an oil company or a country? Could you follow that advice and be a trustworthy leader? Of course not. Why? Because as a steward you have a responsibility for risk management and if you were open and trusting with everyone, including bad people or people whose interests conflict with yours, your decision to trust would do damage to you and those you lead.


    That puts you in the real world of managing trust relations. You will have some very high-trust relationships and others that are low-trust, for good reason. If you trust no one, you will have a small life and a small company. If you trust everyone, you will be burned. If we learn how to make good trust decisions, place trust in the right people, and manifest trustworthiness with those people, we will be safer and more prosperous.


    But as a CEO dealing with real world trust relations, what this means is that you must locate distrust where it is warranted to manage your risk. You must have certain monitoring routines and controls in place to avoid disaster. You cannot trust everyone and manage risk well. In fact, if done correctly and in proportion, controls become a platform from which trust with certain stakeholders can blossom. For example, I trust my airline because they have a process in place to hire trustworthy pilots and they do not leave it to the pilots' discretion on when to be trained. Process done poorly erodes trust all around – with friends and enemies alike. I distrust my bank because their processes led to my being charged hidden fees and failed to detect their manipulation of LIBOR rates.  If the US monitoring of communication detects threats to us and our friends without unreasonably infringing on others’ rights, then it can be trust-enabling. If it does not detect threats and alienates our friends, it disables trust and increases our risks long term.


    Maybe the US government and NSA have gone overboard in correcting intelligence inadequacies and managing risk, and maybe they have not. But the real question is: does our risk management approach have integrity? Can we be proud of our actions and defend them to those around the world that admire our nation as a force for good? To answer this we need to ask ourselves what freedoms we are willing to give up to have more control over risk. We must also examine how we want the government to relate to its own citizens and to our friends around the world to build and sustain their trust. Trust got much more complicated after September 11th. Maybe we need to step away from the trauma of that infamous day and revisit some of these fundamental questions. Unfortunately, our government officials, whose own trust ratings are lower than at any time in history, are too busy posturing and blaming to be of much help here. Perhaps it’s time that citizens and other thought leaders started this dialogue.

  • Tue, October 01, 2013 1:40 PM | Robert Hurley (Administrator)

    Well, it happened. On October 1, 2013 the impasse between the Republicans and the Democrats led to the need to stop paying government employees. Congress has sent yet another signal that it is untrustworthy and we can expect a continued decline in the American people’s confidence and ratings of trust in their government. By the way, these ratings are now at historic lows; what may be happening is just a deepening of our cynicism as it relates to Congress. This is concerning because a citizenship that has become cynical and lost hope in its government is rather dangerous. Research shows that extreme distrust in an agent leads to a reduction of cooperation. When citizens stop cooperating with their government society breaks down. People stop volunteering, paying their fair share of taxes and obeying laws.


    But what is the root cause of this particular impasse. Who is right and who is to blame for this trust violation?  We all have our opinions, but some facts and theories can help. First, the Affordable Care Act was enacted into law. Second, we have two groups (mostly Republicans and Democrats) with different belief systems and judgments about whether the Affordable Care Act is good or bad government. Third, one group (House Republicans) believe it is their duty to use every possible source of power to stop what it believes is bad government, even if this causes other problems. Fourth, two other groups (Democrats in the Senate and the White House) have labeled these tactics extortion and refused to negotiate, and so there is an impasse and the government has shut down.


    Consider a corporate metaphor for this. The company has adopted a strategy but one functional area disagrees. They express their grievances, fail to change peoples’ minds and then block execution of the strategy. No company in the world could operate in this way sustainably. In a well-functioning company there is robust dialogue, perhaps even some politics and arguing but, at the end of the day, the enterprise must choose a direction and each area must support the strategy or risk being accurately labeled as disloyal, not a team player or constructionist. In the corporate world the head of such a functional area would be fired or would resign.


    The government shutdown is yet another example that Congress is incapable of coming together on any major issue unless less there is a crisis atmosphere that forces compromise. In the language of trust research, Congress lacks three things that make it untrustworthy as an institution:


    Alignment of Interests - They serve the interests of their base and not the larger country

    Benevolence - They serve themselves to get re-elected, not the larger community

    Communication – They lack the relational and communication processes to achieve understanding and compromise


    If I were advising the CEO of a company with these problems, we could understand the root causes of the problems and fix them. In the case of Congress, the problems can also be understood but the solutions require many difficult changes. As a trust expert and an American whose ancestors died in the defense of this country, I grow more and more concerned that the government’s inability to act proactively will make problems such as extremes of income inequality, structural unemployment, a weakened infrastructure for living and competing globally much worse. At the Consortium for Trustworthy Organizations, we will try to do our part and hold conferences and write about some solutions. At the end of the day, however, the voting public must be heard loud and clear! It’s time to really understand what is going on and take action.

  • Wed, September 18, 2013 1:53 PM | Robert Hurley (Administrator)

    Sometimes performance-driven organizations, with their intense focus on accountability, can be breeding grounds for fear and other problems. JPMorgan Chase is about to pay an 800 million dollar fine to settle a variety of violations, the big one being the London Whale fiasco where employees at the company were found to have deliberately hidden losses from senior management, regulators and the markets. The trust violation here is that JPMorgan Chase engaged in high-risk trading to increase profits, called it hedging and, when the bets went bad, failed to report this material information in a timely manner to regulators and investors.


    Reading some of the email trails among some of the actors in this drama shows that one of the root causes of this trust violation was a desire to delay communicating problems until solutions could be designed and presented along with the bad news. There was too much “management of reality” going on, rather than actually dealing with reality. Many of us have heard the maxim: Always bring solutions along with problems. In many firms, this gets burned into the culture by punishing people who are good at identifying problems but who fail to present solutions. They are “coached” (criticized) and told that continuing this behavior is a career limiting move (CLM). That is code for: “you will be fired.” And so they naturally learn to avoid punishment by taking the time to find solutions before they communicate problems.


    Normally this is good. There is a sense of accountability for performing well that is essential for competence-based trust that customers desire. Such a culture leads people to take ownership of issues and seek to solve them at the point of pain. But what if there are no solutions at your level? What if finding a solution or mitigating negative impact requires broad communication, more resources and diverse thinking applied to the problem? What if delaying communicating the problem serves your need to avoid punishment but actually makes the problem grow and hurts the organization? You can see how a culture of “you’re paid to solve problems, not identify them” can become an organizational learning disability that causes problems to grow and delays resolution.


    Changing this requires developing in employees some judgment about when to escalate problems but it also requires that employees trust that their managers will do the right and fair thing with information they are given. Even if I have enough good judgment to know that the solution to a problem may be above my pay grade, if I think that asking for help will lead to a negative reaction, I will be reluctant. This is why all high-trust organizations combine a performance and accountability culture with an even stronger emphasis on integrity and candor. These high-trust organizations know that truly high-performing and trustworthy leaders are the ones who can see, admit and correct mistakes out in the open. GE is an organization that has worked over the years to create an intense accountability and performance culture that tends to reduce the lying and deception of “reality management” by also conditioning people to understand that integrity violations CANNOT be compensated for by superior financial performance.


    The JPMorgan Chase case further reinforces our research that shows that major trust violations always have deep organizational root causes. Once we understand the root cause, we can correct it, repair trust and work towards building an organization that consistently sends signals of trustworthiness.  From what Jamie Dimon has said, this is the path that he wants for Chase. The good news is that there is a road map for building the trustworthy organization.

  • Wed, September 11, 2013 5:43 PM | Robert Hurley (Administrator)

    Two things appeared in the papers today that are instructive about trust.

    First was the 5-year anniversary of the bankruptcy of Lehman Brothers. Dick Fuld is still counting his money (he has a lot so it will take a while) in Greenwich Connecticut, and a Davis Polk analysis showed that regulators have missed 62% of the Dodd-Frank deadlines. Other reports suggested that regulators were engaged in turf wars that have slowed progress.

    The second news item was even more important but a bit more obscure. A court in Frankfurt Germany told Deutsche Bank that they should reinstate four employees who were fired over what the bank suggested were ethical violations in the Libor scandal. What was very interesting was that the court faulted Deutsche Bank for creating an organizational system that enabled traders and those submitting Libor rates to interact and collude. Because the Bank implicitly allowed such behavior, it could not later on turn around and fire the employees for doing something that was accepted. In effect, the court was saying that employees will adapt to the organization’s system and it is the duty of the leaders of the company to create an ethical and trustworthy system (rules, processes, culture etc.).

    At the Consortium for Trustworthy Organizations, we agree. Individual ethics is important but insufficient. There are many systemic reforms required to make the financial system trustworthy and avoid future Lehman style disasters.  We describe these changes in our article Restoring Institutional Trust: A Systemic Approach which is available in the resources/publications section of on our website.

  • Mon, August 19, 2013 2:50 PM | Robert Hurley (Administrator)

    Goldman Sachs and the question of trust was front-page news again in the past few weeks. At the federal courthouse in Lower Manhattan, Fabrice P. Tourre, a former Goldman Sachs trader, was found liable for deliberately misleading investors in the Abacus deal. Tourre worked with one of Goldman’s clients (Paulson) to create an instrument that was designed to fail. Also on Sunday July 21, the New York Times broke the story of Goldman Sachs' exploitation of the regulations for pricing aluminum to bolster profits while driving up the cost of the commodity. At the heart of both cases is the question of whether Goldman used deception to gain an advantage at others’ expense. While the legal system will take months to determine whether Goldman broke any laws, some cogent analysis enables us to decide whether its behavior enhances or erodes its reputation for trustworthiness.


    Research confirms that trust is a judgment of confident reliance on a person, group or company and in making this trust judgment, we look for: Ability (competent to deliver), Benevolence (fair and concerned about my interests) and Integrity (communicate honestly and honor one's word). Some of these elements of trustworthiness become more difficult when banks act as market makers or begin to trade for their own accounts. For example, if I were one of the presumably sophisticated investors that bought the Abacus instrument and lost a great deal of money, would it reduce my trust of Goldman when I found out that it had worked with another client to pick particularly bad loans to package in the instrument?  Furthermore, would I reduce my trust in the firm when I learned that while it was aggressively selling Abacus to get it off the books, it failed to mention that it was shorting the market and predicting a decline?  What about the Aluminum market? Is it trust-inducing for clever bankers to exploit the arcane formula for how the spot market cost of metal is computed and have consumers pay for it when they buy a can of soda?  Of course learning these facts would demonstrate to me that Goldman was acting competently to serve its own interests and not mine.  My future stance towards Goldman would be to approach the firm with low trust, take care to protect myself and assume that it will look after its own interest – Caveat Emptor (let the buyer beware). Even if none of Goldman’s behavior is illegal, it induces suspicion, not trust. Acting in a trust-inducing manner would have required that Goldman’s competence serve its own interests while respecting and fairly considering others’ interests as well (win/win).


    If Goldman told me upfront that I was a counterparty and not a client, and should therefore not expect benevolent concern, I would have more trust because it would have respected my interests and have had the integrity to be honest with me. On the other hand, if Goldman led me to think that I was a client, whose interests it would look out for, but then treated me like a counterparty and acted opportunistically to serve its own needs, this is deception and a trust violation.  A trade is a trust violation when there has been a deliberate attempt to deceive in order to gain advantage. Goldman’s first corporate value is that clients come first. This may have been true when the firm was an investment bank in an advisory role, but it is less clear that this is true now that the firm is an underwriter, market maker, and trader. How do you operate when you are a trader? Do you feel you have an obligation to make sure the buyer of your used car is getting a fair deal? Do you offer any negative information about the car if the buyer has not asked about it? Does any of this change if the buyer is someone you expect to have an ongoing relationship with?


    The high-trust approach would say that you should treat all possible buyers as you would want to be treated. You benevolently share all relevant information with total honesty. The lower-trust approach is to say you have no obligation to protect the interests of the counterparty, and you expect them to do their own due diligence. If you got paid millions of dollars and were under great pressure to make deals, which approach would you take?  The lowest-trust approach is to deliberately deceive the buyer to gain advantage. Like banks, you must be clear about whether you want a reputation for trust and act in a way that demonstrates your trustworthiness. This is the problem of the erosion of trust when bankers become traders and when there are millions of dollars in executive compensation at stake. Community banks tend not to have as many conflicts or huge paydays, and their trust scores have been much higher than the large banks.


    Senator Elizabeth Warren and the regulators trying to implement Dodd Frank and the Volker rule prohibiting proprietary trading are trying to rein in the scope of the banks. Regulators may not know how to reconstitute the banking system for trust, but it is clear that large banks themselves need to explore their mission and purpose and decide where they want trust relations. Banks must engineer organizational systems that function to consistently send key stakeholders signals of ability, benevolence and integrity. Only then, when they have built authentically trustworthy organizations, will the public’s abysmally low score of trust in larger banks begin to rise. This journey will require a great deal of self-examination and change, but the banks that lead the way will end up with a real competitive advantage. After all, the word credit comes from the word credo – to believe, to trust.
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