Ask More of Business

Asking More Commentary: Perspectives from Mendoza College of Business

Commentary Post - James S. O'Rourke

Trust is ephemeral: Part II

August 12, 2009

This is the second part of a two-part Commentary. To read the first portion, click here: Trust is ephemeral: Part I

 

Do people trust capitalism?  They don’t trust unregulated markets, that’s for sure.  They don’t trust investment bankers and bond merchants who refuse to speak to them in plain English (despite the best efforts of Arthur Levitt to get them to do so).  They don’t trust a global marketplace with uneven rules that mean lower wages, no health care, and unfunded pensions.

 

As health-care legislation makes its way through committee, it’s clear that the public and their elected representatives no longer trust the private sector to look after many of their most basic needs.  Why?  Company after company, particularly in the American heartland, has shuttered its doors, locked the plant gates, and turned employees away.  Yet, with remarkable regularity, executives in many of those same companies have departed with fat severance packages, rewarding irresponsible risk-taking and sub-standard business decision making.

 

Business people in just about every sector of the economy are saying, “trust me.”  Now here’s a simple question for you: “Why?”  Given your recent behavior, why should people trust you?  People put their money in a demand deposit account because they trust the FDIC, not because they trust the bank.  The fact is, the private sector is going to have to do a better job on a behavioral level in order to regain the trust that’s been lost in this decade.

 

Social psychologists tell us that the three components of an attitude (or intellectual viewpoint) are cognitive, affective and behavioral.  That is, how we look at something (or someone) depends a great deal on what we know, how we feel and how we (and they) behave.  In addition to arguing in favor of mutuality, balance of power and trust safeguards, why not argue in favor of morally acceptable behavior?

 

Business ethicist Ken Goodpaster tells us that business ethics “is the application of what is good and right to that assortment of institutions, technologies, activities, and pursuits which we call business.”  “Ethics,” he says, “refers most often to a domain of inquiry, or discipline in which matters of right and wrong, good and evil, virtue and vice are systematically examined.”

That’s not the same as morality, though.  By contrast, morality refers not to a discipline but to patterns of thought and action that are actually operative in everyday life.  Thus, what we have here is not so much a business ethics problem leading to a breach of trust.  It’s actually a morality problem.  The vast majority of folks in business today (including Bernie Madoff and Alan Stanford) knows and understands the right thing to do.  The problem isn’t what they know or how they feel – it’s their behavior.

 

And, until people in business begin internalizing issues and principles associated with business ethics (and morality) in both a personal and professional way, the public will continue to trust the regulators, auditors, inspectors and legislators.  If you want less regulation, less oversight, and fewer restrictions on business – if you want a resurgence of trust in business – begin making business ethics a part of your core values and everyday behavior.  The pendulum will swing back away from government and toward those managers and firms who’ve shown they’re worthy of our trust.