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Every once in a while when you open the newspaper and turn the pages, you see story after story that helps explain why there has been such a vast loss of trust in so many aspects of our society. For example, if you picked up the Thursday July 18^th issue of the New York Times, on the front page you would read about the Federal Energy Regulatory Commission’s allegation that JP Morgan devised “manipulative scheme” that led some states to overpay for energy.  On the same page, you also read that the poisoning and death of 22 school children in India may have been in part due to corruption and mismanagement. When you got to page 4, you learned that Xu Zhiyong, a scholar and human rights activist, was detained in Beijing. When you got to page 10, the headline read “In China and U.S., Mutual Distrust Grows, Study Finds” and then on the next page “Politicians Are Slowed by Scandal, but Many Still Win the Race.” If you were hoping for an improvement in the Business section right away, you would be smacked with the SEC case against a former Goldman Sachs trader accused of deliberately misleading investors. Then on page 3, there was a story about China baring a GlaxoSmithKline executive from leaving during a bribery inquiry, and on page 4, a report about the conviction of a Chevron employee of corruption charges in Indonesia was featured.  If you were courageous enough to read to Op-Ed, you would hear from Nasser al-Awlaki who expressed his frustration that his lawsuits have been judged “outside the court’s jurisdiction” as he tries to force the U.S. government to explain why his grandson, who was a U.S. citizen, was killed by a drone strike.

All of these stories cataloged different events but they all have one thing in common: they deal with trust. When agents deceive or manipulate, they are eroding trust. When agents are incompetent or corrupt, they are destroying trust. When governments use their power to silence legitimate debate or avoid accountability, they are eroding trust.  Trust is a judgment of confident reliance and we offer this precious commodity to those we judge as trustworthy. When we read about agents that are deceptive, corrupt, incompetent and those who try to gain unfair advantage, we file them away as signals of a lack of trustworthiness. If this happens too often, we become more cynical, untrusting and cautious. What is most frightening is that the research shows that when we lose trust, we also tend to disengage with the institutions we deem untrustworthy (e.g., Congress).

Consumers of media seem to have a preference for stories of scandal. Unfortunately it seems that reading about politicians, banks, oil companies and other trustees that are doing the right thing is just too boring for us. But we need to begin to find and celebrate those agents that have worked hard to manifest the core elements of trustworthiness (benevolence, competence, integrity and transparency). We need to give these trustworthy agents our trust, our business, our votes and withhold the same from the untrustworthy. The Consortium for Trustworthy Organizations will try to locate these virtuous agents and tell their story so others can learn and so you know in whom to place your trust. In the meantime, stay engaged, and don’t stop reading.

As the fallout continues from revelations about IRS targeting Tea Party groups, we learn more about trust. The initial diagnosis was that there were “partisan motives” which would be a violation of ethics (lack of fairness) and unconstrained self-interest (a lack of benevolent intentions or motives). As the story unfolds, evidence is appearing as it often does.  The root cause of the trust violations was incompetence – there was a “group of bad apples” who were not following proper procedures in part because they were poorly supervised and overwhelmed by the task confronting them.

To be truly trustworthy an organization must have multiple elements of trustworthiness:

• Benevolent intent – do good when it is possible
• Competence - deliver on commitments 
• Integrity – do what you say you will
• Predictability – develop a track record of reliability
• Open communication – listen and communicate openly

These elements need to be deeply and pervasively embedded in the DNA of the firm to warrant stakeholders’ trust.  The IRS is only one of many institutions that need major work before they can be considered trustworthy. It’s time we stopped the blame and hyperbole and got to work in earnest to build trustworthy organizations!

I have not written a blog in a few weeks as I have been busy finishing a book chapter on trust in banks. As part of that research, I read all 200 plus pages of the Salz Review that was published by Barclays in early April 2013. Salz was hired by Barclays to investigate and report on the firm’s trust violations and they had full independence in conducting this review. The investigation included over 600 interviews and was global in scope. What’s more, Barclays published the entire “warts and all” review. Contrast this with the Goldman Sachs review of business conduct. The Goldman review committee included no fully independent outsiders, and the report that was published only included recommendations for reform and nothing in the way of transparent disclosure of what really happened that violated stakeholder trust. Ironically, one of the recommendations of the Goldman review was to be more transparent. By making the Salz report public, Barclays has far exceeded Goldman in both calling for transparency and actually living it.

Why is transparency so important to trust repair? After taking a beating from the media who pick through the report and highlights the most egregious violations, transparency does some really important things for Barclays longer term. First, it avoids the self-surgery biases that can lead to a failure to really understand the root causes of trust violations. It is not at all clear that Goldman has really gotten to the heart of what went wrong at that once great firm. Second, transparency signals to trustors that the firm really understands that it did something wrong and respects those whose trust was violated enough to allow them to see the guts of the repair process. Third, the act of disclosing great detail about violations, and deliberately making themselves vulnerable, is an act of trustworthiness itself. This suggests that they are genuine about repairing trust rather than merely treating the investigation as a PR ploy in the damage control process. Transparency and vulnerability are an act of penance paying that shows, beyond cheap talk, that the firm truly acknowledges and feels badly about the harm it has caused.

Having studied a number of trust repair processes, I have seen time and time again that half-hearted, self-interested and opaque investigations merely white wash what happened and do little to set the stage for real reform and re-building of trust. The Salz report’s major finding was that Barclays had failed to embed elements of trustworthiness deeply into its organization. For example, each subsidiary had its own culture and the HR and compliance functions lacked adequate power and influence. The bank has made a good first step in trust repair with the Salz Report. Let’s hope they continue down the slow and steady path of building trustworthiness deeply into the mission, strategy, leadership, culture, incentives and core operational processes of the company. Wouldn’t it be great if we had a bank that was the paragon of trust? I know where I’d put my money!

This week, BP settled criminal charges and agreed to pay 4 billion dollars. The Deepwater Horizon explosion that killed 11 people and caused devastating environmental and economic damage was tragic. It has been said that success has many fathers but failure is always an orphan. This is often true with trust violations. Research tells us that in our heart of hearts, trustors know that perfection is not possible and we are willing to forgive, but it also tells us that we only forgive when the offending party has acknowledged the wrong doing and made a genuine effort at trust repair.  While BP failed to reform itself adequately after its 2005 Texas Oil refinery explosion, the company deserves great credit for what it has done since the April 20, 2010 Gulf Oil spill.

After failing at the outset due to Tony Hayward’s aloofness and rude comment about wanting his life back and misrepresenting the volume of oil that was spilling into the Gulf, BP’s record at taking responsibility has been excellent.

On June 16, 2010, BP created a 20 billion dollar compensation fund and stops paying dividends. According to a US district judge, BP began paying out claims before the law required it. On July 26, 2010, BP removed Tony Hayward. By August 9, 2010, BP had spent over 6 billion dollars to contain and fix the leak. On September 8, 2010, BP released a 193 page report and accepted responsibility in part of the disaster.  On September 19, 2010, BP finally sealed the well.  BP has settled charges, paid massive penalties and each time expressed its desire to take responsibility. It has also spent millions of dollars in advertising trying to restore tourism in the Gulf. In contrast, Halliburton, the expert cement contractor hired by BP, has accepted no responsibility and hidden behind the indemnity clause in its contract with BP. Transocean, BP’s other major partner, recently paid a major fine and accepted some responsibility.

The Deepwater Horizon spill was a tragedy and there remain over 20,000 abandoned wells in the Gulf, so we are not sure if the system as a whole has been made more trustworthy. We also do not yet know if BP has yet succeeded in the deeper reform of its safety culture and organizational processes. What we can say for sure is that BP is taking responsibility and seems to be on the road to doing the right thing. A part of real trustworthiness is admitting mistakes and taking responsibility. Let’s give BP some well deserved credit and let’s keep an eye on Halliburton. 

Even before Wall Street Banks were found complicit in the melt down which would be recorded in history books as “the global financial crisis,” measures of trust in business and CEO credibility were in decline. One of the few groups with lower trust scores was the U.S. Congress in which only about 10% of Americans currently say they have a great deal of confidence. Now CEOs are trying to step in to fix the government’s gridlock and dysfunction as we near the fiscal cliff. Their message is about in competitiveness and jobs something they argue both Democrats and Republicans should care about.

The Wall Street Journal captured this dynamic in a profile about David Cote the CEO of Honeywell. Similarly General Electric CEO Jeff Immelt weighed in during a Dec 10 interview with Charlie Rose. While these and other CEOs are criticized by some groups as being motivated by self-interest and a desire to grow their profits, this development brings some very positive dynamics to a political and regulatory system that has lost all credibility and trust. First, business leaders can credibly create a common and practical platform for compromise between ideological combatants: jobs and competitiveness! A major root cause of dysfunction in Washington is a lack of common values that form the basis for governance. CEOs understand that you cannot run a large organization without a common mission. The November election proved that competitiveness and jobs is the common ground for governance and CEOs (along with groups representing labor) have a place at the table in this conversation. Second, business leaders help expose the dysfunction of the U.S. government relative to our global competitors. As Jeff Immelt said on Charlie Rose, the Chinese government has a long-term plan and they get things done. David Cote, after hearing the warring ideologists and lack of pragmatic results, said to a Washington group: “Who are you people? Is this the way you do the nation’s business? I’d fire all of you.” An essential dimension of American competitiveness is a trustworthy partnership between business and government to establish regulatory, taxation and other elements of a growth-friendly environment. While business earned the scorn heaped on them during the global financial crisis, a number of scholars have suggested that of the two partners, it is the government in the U.S. that has been the most dysfunctional from a governance and regulatory standpoint.

Finally, with Warren Buffet leading the way, many CEOs have expressed willingness for shared sacrifice to solve our fiscal crisis and many other pressing problems of society. It is refreshing to see business people doing the right thing. Too often it seems that business scandals like money laundering and Libor appear on the front pages but the good news never gets reported. Congratulations to some business leaders who are helping to restore trust in business and in government. Without competent trustworthy leaders and institutions, there will surely be more cliffs ahead that put Americans at risk.