business ethics and corporate trust roger boltonbrian moriarty apco worldwidebusiness roundtable...
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BUSINESS ETHICS AND CORPORATE TRUST
Roger Bolton Brian MoriartyAPCO Worldwide Business Roundtable
Institute for Corporate Ethics
Tuck Symposium on CommunicationNew York CityJune 2, 2009
AGENDA Brief Overview of our organizations and why we are engaged in
public trust in business
Defining Business Ethics
Defining Trust
Three Core Dynamics of Trust
Recommendations
What’s Next
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BUSINESS ETHICS
The Dynamics Of Public Trust In Business – Emerging Opportunities
For Leaders
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BUSINESS ETHICS
Is it defined by scandals?
Is it defined by value creation?
Is it relevant to both?
Is Business Ethics an Oxymoron or Pleonasm?
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BUSINESS ETHICS
The idea of “business” as “cowboy capitalism,” that capitalism works because people are completely self-interested, and will only act for others if they have the proper incentives is outmoded and shopworn.
Business is a form of social cooperation, working together to create value that no one person could create on his or her own.– This idea of business is not new—it is at least as old as Aristotle
Ed Freeman: “Business is about creating value for stakeholders”.– At a minimum stakeholders are customers, employees, suppliers,
communities, as well as shareholders or other financiers.
“Business”
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BUSINESS ETHICS
Too often we think about “ethics” as about deciding who the saints and sinners.
Ethics is about the most important parts of our lives, our core values and must be center stage—especially in turbulent times.
Ethics is about how we get along with each other, how our values and interest interact.
Ethics always works at two levels: personal and interpersonal.
“Ethics”
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BUSINESS ETHICS
An survey from 2006 reports that:
– 81% agree the first priority for any corporation is to make a profit so they can stay in business
– 88% agree the first priority for any corporation is to be a good corporate citizen by acting in socially responsible ways
– 91% agree it is possible for companies to find a balance between making a profit and giving back to society –
Source: American Management Association, The Ethical Enterprise: Doing the Right Thing in the Right Ways, Today and Tomorrow, A Global Study of Business Ethics, 2006, p. 2
A Paradox or a Positive Sign?
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BUSINESS ETHICS
Creating value for customers.
Managing suppliers so that they want to make your business better.
Managing employees so that they show up and use their brains.
Being good citizens in the community.
Making money for financiers.
Stakeholder interests have to go together over time. All have to win.
Putting Ethics At The Center: The Basics
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BUSINESS ETHICS
Trust Panelist: “The values and culture of our company compels us almost to do things not expected or required.”
Ethics and values give us anchors, stakes in the ground.
They serve as stabilizers and shields.
They empower and inspire us. They lead to everyone pulling in the same direction.
In short, values and ethics can drive business strategy.
Putting Ethics At The Center: The Basics
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BUSINESS ETHICS
Value Creation: How does the firm make others better off? – Trust Panelist: “The question we need to ask is why does the world need
this enterprise.”
Stakeholder Cooperation: What values and directives help build commitment to the firm?
Stakeholder/Societal Expectations: Do our values and commitments obey social norms and laws?
Putting Ethics At The Center: Vision and Values
BUSINESS ETHICS
Corporate communicators:
Have expertise in engaging stakeholders
Understand the uses and implications of emerging technologies and trends
Have a clear set of professional values – Arthur W. Page Society Principles
– Authentic Enterprise Reports
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Corporate Communications & Ethics
DEFINING TRUST
The Dynamics Of Public Trust In Business – Emerging Opportunities
For Leaders
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DEFINING TRUST
1. Fidelity – Consists of caring, respect, advocacy and avoiding conflicts of interest
2. Competence – Avoiding mistakes and producing the best achievable results
3. Honesty – Entails telling the truth and avoiding intentional falsehoods
4. Confidentiality – The protection and proper use of sensitive or private information
5. Global Trust – A catchall, but also a significant component that is irreducible or not subject to dissection—what one might call the “soul of trust”
Source: Mark A. Hall, Elizabeth Dugan, Beiyao Zheng, and Aneil K. Mishra, “Trust in Physicians and Medical Institutions: What Is It, Can It Be Measured, Does It Matter?,” The Milbank Quarterly, Vol. 79, No. 4, 2001)
Dimensions of Trust
DEFINING TRUST
How do you think business scores on competence?
How do you think business scores on goodwill?
The news is better than you might think
A Harris Interactive survey reported that: 63% of the general public trusts that “most companies have good intentions and work hard not to repeat similar mistakes again.”
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Competence and Goodwill
DEFINING TRUST
•Interpersonal
•Organizational
•Inter-organizational
•Institutional
•Public
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The Trust Arena is Complex
DEFINING TRUST
Public trust in business is the level and type of vulnerability that the public is willing to assume with regard to business relations. It is a critical ingredient for social cooperation and market efficiency and a cause for deep concern when it is absent or threatened.
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Public Trust in Business
DEFINING TRUST
Trust Panelist: “No one ever talks about public trust in the boardroom—we talk about customer loyalty and the Fortune 500 survey of the ‘Most Admired Companies’—things that seem more closely related to our company.”
What does public trust have to do with your company?
Annual cost of compliance with regulations post Sarbanes-Oxley estimated to be $1.1 trillion, more than 10% of the GDP
January 2009, The Conference Board Consumer Confidence IndexTM reaches all-time-low of 37.7.
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Does Public Trust Matter?
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Trust improves the efficiency of transactions
Trust within firms impacts employee performance.
Trust among firms impacts customer acquisition and retention.
Trust among the business units of large firms impacts innovation.
WHY TRUST MATTERS
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WHY TRUST MATTERS
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U.S. Trust in Institutions How much do you trust each institution to do what’s right? Source: Edelman Trust Barometer
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30
40
50
60
70
Business
Gov't
WHY TRUST MATTERS
THE THREE CORE DYNAMICS OF TRUST
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For Leaders
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THE THREE CORE DYNAMICS
Mutuality
Balance of Power
Trust Safeguards
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THE THREE CORE DYNAMICS
Mutuality
• Based upon shared values or interests
• Create value for multiple stakeholders
• Concern for societal values and interests
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THE THREE CORE DYNAMICS
Balance of Power
• Risks and opportunities are shared
• Mediating institutions have influence
• Authentic dialogue occurs between parties
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THE THREE CORE DYNAMICS
Trust Safeguards
• Legal compliance mechanisms
• Create protection for stakeholders
• Reparations are required for violations
REPORT RECOMMENDATIONS
The Dynamics Of Public Trust In Business – Emerging Opportunities
For Leaders
REPORT RECOMMENDATIONS
To help business leaders make better decisions by:Exploring the unchartered territory of public trust in business
Offering business leaders actionable recommendations, including opportunities to build public trust in their companies, industries and in the institution of business
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Goal of the Project on Public Trust in Business
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REPORT RECOMMENDATIONS
Ensure that values are adhered to consistently across your enterprise.
Build and manage strong relationships with mediating institutions.
Embrace transparency.
Work to build trust in your business sector.
Focus on the core contribution that the firm makes to society.
THE VALUE OF VALUES
The Dynamics Of Public Trust In Business – Emerging Opportunities
For Leaders
Stakeholder Empowerment
Globalization
DigitalNetwork
Revolution
THE VALUE OF VALUES
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Implications for enterprises:
Threats … Influential new stakeholders Demands for transparency Risks to brand and reputation Regulatory activism
THE VALUE OF VALUES
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Imperative for enterprises:
The enterprise must be grounded in a sure sense of what defines and differentiates it (mission, values, principles, beliefs).
And those definitions must dictate consistent behavior and actions.
THE VALUE OF VALUES
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THE VALUE OF VALUES
Our Credo
We believe our first responsibility is to the doctors, nurses and patients,
to mothers and fathers and all others who use our products and services.
In meeting their needs everything we do must be of high quality.
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THE VALUE OF VALUES
STAKEHOLDER RELATIONSHIPS
The Dynamics Of Public Trust In Business – Emerging Opportunities
For Leaders
Stakeholder Empowerment
Globalization
DigitalNetwork
Revolution
STAKEHOLDER RELATIONSHIPS
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How do you build relationships with disparate stakeholders?
Authentic dialogue Free consulting Look for common ground Be willing to change
STAKEHOLDER RELATIONSHIPS
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Aetna in the 90s Put customers and shareholders first Strong form managed care
Anti Managed Care Backlash Physicians, patients rebelled Government mandates
New CEO - A Doctor New values – The Aetna Way Balance the needs of ALL constituents New approaches Settle lawsuit
STAKEHOLDER RELATIONSHIPS
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The New York TimesMay 23, 2003
STAKEHOLDER RELATIONSHIPS
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“The once notoriously stingy and fiercely unpopular company is now frequently cast as the country's most physician-friendly insurer.”
BusinessWeek, Jan. 4, 2006By Jessi Hempel and Diane Brady
STAKEHOLDER RELATIONSHIPS
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Engage in meaningful dialogue with responsible mediating institutions that have legitimate interests and influence traditional stakeholders
Create partnerships with groups that can enhance your value-creating activities
STAKEHOLDER RELATIONSHIPS
EMBRACE TRANSPARENCY
The Dynamics Of Public Trust In Business – Emerging Opportunities
For Leaders
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Transparency leads to:
– better understanding of a firm’s good intentions
– more informed engagement with mediating organizations and other stakeholders.
EMBRACE TRANSPARENCY
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EMBRACE TRANSPARENCY
Web 2.0
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108 million blogs, increasing by 175,000 daily
Nearly one billion camera phones worldwide
Second Life – 14 million people, 80 countries
YouTube – 100 million videos/day
EMBRACE TRANSPARENCY
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Personal experiences with company’s employees 2 1 1 1 2 1 1 1.3
Analysts or professional organization opinions 1 2 3 2 1 2 2 1.9
Opinions of colleagues, peers, or friends 3 3 2 3 5 4 3 3.3
What companies are doing for others in your industry 6 8 4 7 4 3 6 5.4
Company websites 5 6 5 8 3 5 10 6.0
White papers, research, or case studies 4 4 6 4 7 9 8 6.0
Articles in magazines or newspapers 7 9 10 9 8 6 4 7.6
Online sources, not directly from the company 10 7 7 6 9 8 7 7.7
Tradeshows, conferences, industry forums, events 8 5 9 5 6 10 11 7.7
Influence Source Brazil Ger Spain Italy India Sing JapanAverage
Rank
News stories on TV or radio 11 11 12 12 10 7 5 9.7
Advertising 9 10 11 10 11 11 9 10.1
Direct marketing (e-mail or mail) 12 12 8 11 12 12 12 11.3
Biggest Influence on Opinion about IBM
EMBRACE TRANSPARENCY
IBM Survey of executives in seven countries
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We continue to advocate IBMers' responsible involvement today in this new, rapidly growing space of relationship, learning and collaboration.
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Be willing to disclose meaningful, nonproprietary information about the firm’s business, policy and lobbying practices
Embrace the notion that transparency leads to: – better understanding of a firm’s good intentions
– more informed engagement with mediating organizations and other stakeholders.
EMBRACE TRANSPARENCY
BUILD TRUST IN YOUR SECTOR
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BUILD TRUST IN YOUR SECTOR
These percentages of employees, by industry believe that if the misconduct they observed in their companies became publicly known, the organization could “significantly lose public trust”
Source: KPMG Forensic, Organizational Integrity Survey 2008-2009, p. 2.
Employee Trust by Industry
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BUILD TRUST IN YOUR SECTOR
(Source: Harris Interactive News Release, “More Regulation for Banks,” December 8, 2008)
Sector Generally Trust More Regulation
BankingOilPharmaceuticalHealth InsuranceComputer HardwareComputer SoftwareSupermarkets
21 % (-14)4%10%7%17%16%30%
36% (+16)53%49%49%5%6%6%
Public Trust by Industry
Trust in one organization can effect trust in another related group
The Halo Effect Respects No Borders: “A strong correlation has been shown between trust in physicians and trust in insurers although it is unclear whose ‘halo’ is shining upon whom.” (Hall et al, 2001)
The positive side of contagion
Partnering have positive impact
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Source: Mark A. Hall, Elizabeth Dugan, Beiyao Zheng, and Aneil K. Mishra, “Trust in Physicians and Medical Institutions: What Is It, Can It Be Measured, Does It Matter?,” The Milbank Quarterly, Vol. 79, No. 4, 2001)
THE HALO EFFECT
BUILD TRUST IN YOUR SECTOR
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BUILD TRUST IN YOUR SECTOR
BUILD TRUST IN YOUR SECTOR
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DII Signatory Companies are united in their commitments to adopt and implement the highest standards of business ethics and conduct. Not a lobbying organization, DII seeks to promote and nurture a culture of ethical conduct within every company in the defense industry.
BUILD TRUST IN YOUR SECTOR
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Develops Industry Standards Regarding:
•Environmental Issues •Fair Labor•Manufacturing and Safety
FOCUS ON THE CORE CONTRIBUTION THE FIRM
MAKES TO SOCIETY
The Dynamics Of Public Trust In Business – Emerging Opportunities
For Leaders
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View societal trends as business opportunities connected to the core value-creating purpose of the firm
Being socially responsible is not about offsetting negative impacts, but about taking actions that are good for business because they create value for a broad spectrum of stakeholders
FOCUS ON CORE CONTRIBUTION
FOCUS ON CORE CONTRIBUTION
Aetna Chairman’s Initiatives
• Genetic testing
• Disparities in health care
• Care at the end of life
• Depression management
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FOCUS ON CORE CONTRIBUTION
GE Imagination
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FOCUS ON CORE CONTRIBUTION
IBM – A Smarter Planet
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FOCUS ON CORE CONTRIBUTION
The MBA Oath
“As a manager, my purpose is to serve the greater good by bringing people and resources together to create value that no single individual can build alone.”
“I will safeguard the interests of my shareholders, co-workers, customers, and the society in which we operate.”
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Ensure that all managers understand how the core contribution of the firm to society creates trust in the firm
Create social value in the public interest through the firm’s core contribution to society
Align business objectives with the public interest
FOCUS ON CORE CONTRIBUTION
NEXT STEPS
The Dynamics Of Public Trust In Business – Emerging Opportunities
For Leaders
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NEXT STEPS
•How does public trust in business impact my firm or my sector?•Which trust configurations matter most to my firm or my sector?•How does public trust in business impact how regulators think about business?•What drivers are most likely to affect trust in my company with respect to various stakeholders?•What business outcomes are connected to various types of trust or distrust and to the actionsof mediating institutions?
Filling the Knowledge Gap
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NEXT STEPS
• Organize a high-level working group of experts representing major stakeholders to develop principles for effective financial markets regulation.
• Conduct a series of research studies.
• Promote dialogue between thought leaders to advancegame-changing solutions with regard to practice and policy.
• Assemble leading academics in the area of trust to begin filling the knowledge gap, delivering actionable knowledge to executives (Fall 2009).
• Devote increased attention to public trust in our ongoing work.
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NEXT STEPS
•What questions do you feel research should address?
•What else should we be doing?
Your Suggestions?
BUSINESS ETHICS AND CORPORATE TRUST
Roger Bolton Brian MoriartyAPCO Worldwide Business Roundtable
Institute for Corporate Ethics
Tuck Symposium on CommunicationNew York CityJune 2, 2009