Trust Across America-Trust Around the World™

Will you join Trust Across America in a pledge to model trustworthy business behavior?

Curtis C. Verschoor, CMA, a member of the IMA Committee on Ethics and one of Trust Across America’s Top Thought Leaders in Trustworthy Business Behavior trustacrossamerica.com/offerings-thought-leaders.shtml recently wrote a blog post called A Disturbing Thirty Days www.accountingweb.com/article/disturbing-thirty-days/219658

Essentially, the post talks about the enormous worldwide corporate transgressions that occurred from mid-June to mid-July 2012 beginning with $4 billion in fraud and ethics fines levied against the pharmaceutical industry. The enormity of these global trust violations is staggering.

Life is a series of small interpersonal transactions that either build trust or lose trust. I believe that the economics of trust works as follows: every small positive deed, whether seen or unseen, adds to ones personal and professional value. In this environment, a single transgression can derail decades worth of “brand” building if trust has not been “banked”.

Lately I’ve thought quite a bit about trust violations and what’s behind them. In most cases, the root cause of the breakdown of trust is self-serving and self-interested behavior, often on the part of those in the most trusted positions in business. While all professionals, regardless of their field, can build and bank trust, sadly few choose to. Even those who work in the fields of trust and ethics don’t always take the high road. And so here we are today witnessing some of the worlds largest companies paying billions of dollars in fraud and ethics fines, with no apparent end in sight.

Most of us have fallen victim to trust violations, and while the “big” cases, like those referenced in the link above, make the news, the day-to-day transgressions may not. Regardless of their size, trust violations harm interpersonal, inter-organizational and international relations.

Franklin Delano Roosevelt’s second inaugural address in 1937 included the following passage. “We have always known that heedless self interest was bad morals, we now know that it is bad economics. Out of the collapse of a prosperity whose builders boasted their practicality has come the conviction that in the long run economic morality pays.” Roosevelt was correct. Economic morality does pay but it seems that the business world needs a reminder.

Will you join Trust Across America in a pledge to model trustworthy business behavior? Will you take that pledge today? Will you serve as a role model for your children, your friends and your co-workers? Will you remind them (as often as needed) that economic morality pays? Will you share this short blog post with those who have banked trust and those who should start?

On Twitter: #pledgetobetrustworthy

Barbara Kimmel is the Executive Director of Trust Across America. Send your comments to barbara at trustacrossamerica.com

Trust Across America (TAA) receives frequent inquiries from the financial media. Here’s how the conversation usually goes.

TAA: Hello TAA. How can I help you?

Media: Hi! This is Debbie Downer from major financial news network. We understand that TAA ranks public companies according to their trustworthiness. Is that correct?

TAA: Yes we maintain a database of approximately 2500 public companies and our FACTS® Algorithm can measure the major drivers of trustworthy business behavior. We can even show you how each company ranks according to its market cap, industry and sector peers.

Media: Great. Can we get a list of the lowest ranked companies?

TAA: Just to clarify. You want a list of the least trustworthy companies?

Media: Yes

TAA: Sorry but TAA’s mission is to highlight the good guys. How about if we give you some examples of companies doing good and doing well at the same time?

Media: Good guys? No thanks. The public is not interested. Only bad news sells.

Click.

Jonathan Low at www.lowdownblog.com recently wrote about the disappearance of the small investor, and with the help of Barry Ritholtz www.ritholtz.com/blog/ listed 10 reasons why. I propose #11.

#11 The financial media industry is obsessed with bad news and scandals of the day. How will confidence in the financial markets ever be restored if this cycle continues? Jonathan and Barry, it’s really not a matter of poor returns. There are great companies who are meeting the needs of all their stakeholders including their shareholders.

It’s the responsibility of the financial news networks to refocus. Report to the public about companies that are behaving in a trustworthy manner. A few names that come to mind are Accenture (Symbol: ACN) and United Natural Foods (Symbol: UNFI). We are not suggesting that these companies are perfect. They may trip along the way.  But our research shows that they will also recover much faster. They have “banked” trust.

So to all the Debbie Downers of the financial news networks. Here’s my suggestion. Try highlighting a few of the good guys. Treat the public with more respect. Use this as an opportunity to be a positive role model for the rest of your industry. Don’t be part of the race to the bottom. Don’t be that guy (or gal)!

What do you think? Should the financial news networks report more good news? Send your comments to barbara at trustacrossamerica.com

Anyone still hesitating to embrace the business notion that trust is an asset – an asset that can leverage real business gains – should look at the ongoing data from Trust Across America (TAA) comparing companies with strong trust profiles to all other companies.   TAA is a US-based think tank exploring the issues of corporate trust and the relationship between trustworthy business and company performance in America – this, at a time when we feel corporate trust is not only rare, but also misunderstood and unappreciated as a business-building tool.

Among the empirical data we have collected over three years studying 3,000 US public companies, is the vivid performance of our “Gold 59” – including US brands such as Mattel, United Natural Foods and Accenture.   The Gold 59 comprises the US-based public companies that met our minimum benchmarks of trustworthy business behavior – which essentially means an above-average score in each of our five drivers of trust including Financial stability, Accounting Conservativeness, Corporate Integrity, Transparency and Sustainability (FACTS®). While many companies may be strong in multiple drivers, our research shows that a “weak link breaks the chain” and this is why only 59 companies qualified.

Compared to the S&P Index, an accepted standard for stock performance among some of the largest 500 companies in America, the Gold 59 is presently 500 basis points (or 5%) ahead since November 2010 when TAA began to formally share its data. Certainly the 10-year trend is even more enlightening, compared to a very stagnant S&P.

Source: Trust Across America May 2012

  We can point to five critical areas that show why the Gold 59 is so much further ahead of the S&P:

• Governance: Companies that made it into our Gold 59 put transparency and governance high on their priorities lists to ensure they have operations that meet and exceed the minimum standards expected. They are not “just compliant.”
• Stakeholder Engagement: Trust is a tango of at least two, and companies that engaged key stakeholders in meaningful, two-way communication received unbiased high trust marks.
• Consistency: There is nothing like being reliably consistent in delivering on product and service excellence and business performance to solidify trust with the audiences that make a business succeed.
• Authenticity: “Keeping it real” is a motto that rises to the highest levels in business performance, which means being honest about successes, failures, goofs and unexpected triumphs.
• Relevance: Companies that reflect real needs and real opportunities are the companies that attract the highest level of interest and potential for trust dividends by delivering on those high expectations. Sales increase because customers like doing business with trustworthy companies. We see this in other highly ranked FACTS companies like Nike and Starbucks.

“When we deliberately and consistently behave in ways that inspire trust, we will experience high-trust ‘dividends’,” says Stephen M.R. Covey, author of the bestseller The Speed of Trust. “There are actual economics to high trust – the dividends of greater speed and lower cost – just like there are economics to low trust – the “taxes” of lower speed and higher cost.  These economics of trust are experienced in relationships, on teams and in organizations, and ultimately these economics translate and extend into the financial marketplace.”

Perhaps the most exciting aspect of trusted companies “beating the street’ is the evidence of the upward virtuous cycle that is created because of the reciprocal nature of trust. When we trust people, they tend to trust us back. When we reward trusting behavior in organizations, it begets more trust-building behavior — which is the essence of a free and civil society.   The Gold 59 proves that the market values trustworthy behavior.   So why does the crisis of distrust continue and why are companies not running to prove their trustworthiness?   This is the inspiration for many more columns on the asset of corporate trust, but it boils down to a system that makes other assets priorities over trust – specifically, antiquated notions of shareholder value and settling for regulatory compliance as the marker of ethical behavior, among other distractions. The value of a company is derived from the relationships it maintains will all its stakeholders, not just shareholders. When we look at corporate performance we can no longer look at the short-term and we cannot merely look at investors.

If we study the other 2,941 pubic companies that don’t meet TAA’s minimum threshold for trustworthy business behavior, we see how rare trust is and how easily poor performance is justified by the apparent fact that “everyone else is doing it.” Trust leadership requires a more progressive stance on building authentic relationships with stakeholders – a relationship that pays trust dividends.  It also requires a long-term focus. And for those pioneers in valuing trust and investing in trust, the upside is clear –and the short-term takes care of it self.

Barbara Kimmel, Executive Director of Trust Across America (TAA), a US based think tank and communications program (www.trustacrossamerica.com) whose mission is to restore corporate trust. Email your thoughts and ideas to barbara at trustacrossamerica.com