How much does trust matter to your board of directors?

We examine aspects of trust relevant to your board of directors – the organisations that have it, those that don't, why it matters and how it can be restored.

In a recent speech to the Committee for Economic Development of Australia (CEDA), Australian chief scientist Alan Finkel AO distilled some daily fundamentals of trust.

“I switched on the light, trusting I wouldn’t be electrocuted by a faulty lamp or cord or socket,” Finkel said. “I ate breakfast in a cafe, trusting I wouldn’t be poisoned by salmonella in my toasted sandwich. I got into a car, trusting that every one of the thousands of components was sound, the mechanic had serviced it properly and other drivers wouldn’t kill me. I walked from my hotel in peak hour, hundreds of cars bearing down on me and nothing to protect me except a red light and a white line. Scary.”

The chief scientist didn’t need to know the people in the cars to trust they would stop. The law said they had to.

“I live in a society where human behaviour is governed by conventions and rules,” he said. “They will stop because breaking those rules would have social consequences, employment and economic consequences far more inconvenient than the temporary inconvenience of waiting for me to cross. That capacity to trust in unknown humans... because of systems we have made, is the true genius of our species.”

Finkel acknowledged the current crisis of trust that many Australian institutions and organisations have been experiencing.

“The case studies from recent Royal Commissions, the near shutdown of the greyhound racing industry, failed charities and even our shamed cricketing greats undermine our trust that the social contract works.”

Bringing the credibility back

The 2018 Edelman Trust barometer found trust in Australia across the four main institutions of business, government, the media and the non-government sector to be at an all-time low. However, it showed a strong resurgence in credibility of individual voices of authority, including CEOs (39 per cent, up from 26 per cent) and boards (34 per cent, up from 24 per cent). According to Edelman, most Australians (65 per cent) believe CEOs should take the lead on change on important issues rather than wait for government to act.

Peter Hearl FAICD, who is on the boards of Telstra and Santos, says the whole question of trust and brand reputation comes down to how companies behave. “Actions speak louder than words and companies have to walk the talk. Actions speak louder than words and companies have to walk the talk. The Australian men’s cricket team spoke some fine words, but they weren’t walking the talk. There was a culture that tolerated poor behaviour.” In the business world order, seven out of the top 10 most valuable global brands are technology companies and this raises questions about how rapidly trust — or distrust — translates.

According to Trust, Legitimacy & the Ethical Foundations of the Market Economy, an upcoming white paper from The Ethics Centre, trust is no longer simply a key factor in product purchase or selection of employment opportunity; it is now the chief factor influencing the functionality of society. This has significant implications for business. “Individuals and organisations will find it difficult (if not impossible) to operate effectively if they do not enjoy the trust and confidence of the community in which they are located.”

Rachel Botsman GAICD, an NRMA director and author of Who Can You Trust?, notes three reasons for the decline in trust:

• Inequality of accountability — some wrong-doers are punished, others face few consequences for their behaviour
• A shift in the principal dimension of trust from experts and elite (vertical) to peers (horizontal) — we trust sleeping in the home of a stranger more than we trust, say, academics who have studied an issue for a lifetime (this opinion is not universally accepted)
• The shift through technology in the way information is mediated, creating echo chambers that reinforce a person’s views and fears.

So in this new world order, how do our organisations build and keep trust? “Trust is not just a marketing tactic or ‘comms’ issue. It is a governance and corporate culture issue,” says Michele Levine, CEO of Roy Morgan Australia. “Trust requires a leadership to embrace and exhibit ethics... not just to plan how to behave, but to believe it. Deeply. On boards and in the executive ranks.”