All tagged Trust

What I like about Sun Life Financial Inc. giving shareholders an advisory vote on executive compensation (joining seven other Canadian financial institutions including most of the large banks, although not Toronto-Dominion Bank and Manulife Financial Corp.)is that the company has evidently recognized something has to be done by business to rebuild shareholder and public trust.

Since the Enron years, most polling acknowledges a steady decline in trust in business and financial institutions. Any doubts about the extent of the decline are obviated when you look at the results of a recent Harris Poll:

"Those who think 'most people on Wall Street would be willing to break the law if they believed that they could make a lot of money and get away with it' are up to 71%. The highest number previously was 64% in 1996"

True, this is Wall Street we are talking about, ground zero for dishonest and manipulative practices in investment and compensation strategies. But mistrust is becoming indiscriminate and ubiquitous.

There are those who think this trust deficit is temporary, a function of the economic tsunami hitting global finance. Once things go back to "normal", the argument goes, the pressure for greater transparency in compensation policies and increased board oversight will whither away in a sea of fatter profits.

Ian Davis, worldwide managing director of McKinsey, arguing the contrary, is closer to the truth: He has written a piece called 'The New Normal' in which he forecasts that:

". . . around the world governments will be calling the shots in sectors (such as debt insurance) that were once only lightly regulated. They will also be demanding new levels of transparency and disclosure for investment vehicles such as hedge funds and getting involved in decisions that were once the sole province of corporate boards, including executive compensation."

This will be the new normal, and without actions similar to that of Sun Life and the seven other Canadian financial institutions increased shareholder activism, loud public displeasure, media sniping, punishment by consumers and abrupt regulation will surely follow.

Spirited debates happen all the time when people talk about corporate responsibility (CR) especially now that our economies are stumbling along and evidence continues to leak out about the governance missteps that led to egregious examples of greed-driven shortsightedness.

Research studies and white papers on the subject also proliferate, at least as fast and as often as politicians blaming their predecessors for current problems.

Here are a few that have made their appearance recently:

  • The Conference Board released the results of a survey yesterday on the future of corporate giving programs. Corporate giving officers are noticing their companies are concerned about their overall financial health when considering the allotment of their philanthropy dollars. Not surprising. But remember, public expectations about behavior -- and the punishment it inflicts on transgressors -- are not significantly influenced by random acts of kindness no matter how generous or strategic.
  • Yesterday, the Rotman/AIC Institute for Corporate Citizenship also released what it calls "a real-world guide that helps business leaders understand and prioritize key social and environmental issues and identify opportunities as well as potential risks." Called 'What's a CEO to do?", it is described as a toolkit and is built on a model introduced by Rotman School of Management dean, Roger Martin, called the "virtue matrix" which he wrote about in HBR a few  years ago. I haven't had a chance yet to do a deep dive into it, but Rotman often produces worthwhile management frameworks. (Disclosure . . . I have an M.B.A. from Rotman.)
  • The third is truly timely . . . an article in the Deloitte Review called "The Responsible and Sustainable Board. (Sorry I can't find a link to it but it is Issue #4, 2009). It includes a warning to boards of directors that "Even if your organization is disinclined to tackle CR&S issues voluntarily, you may ultimately have no choice if, as expected, regulatory requirements take hold." 

Maybe there will be some kind of retrenchment back into the philosophy of 'the business of business is business'. (Simply wishful thinking on the part of cave-dwellers?) Evidently though it doesn't stop the think tanks from thinking about it.

President Barack Obama and Treasury Secretary Timothy Geithner's strictures on the salaries of investment banks and dealers which the government had to bail out has caused the usual punditry about the best and brightest now fleeing Wall Street for more lucrative fields (manufacturing perhaps?). Terence Corcoran in the National Post, for example, foresees "an exodus of talent"!

Let's parse that idea closely. The critics apparently believe there is a magical stratum of celebrity CEOs who somehow so outstrip the talents of their rivals they can command astronomical sums, even when they completely fail at the competence for which they are rewarded . . . making sustained profit for the company or firm in such a manner as to ensure a solid return for owners (shareholders) without running afoul of regulators and leaving a legacy of a respectable reputation.

John Moore also of the National Post (while dancing around criticism of his more dogmatic colleague Terence Corcoran) put it better than me:

"Pity the bankers and brokers of America. Having run their enterprises into the ground and gone begging for government money to avoid bankruptcy, they're now being forced to get by on $500,000 a year. Worse, their bonuses are being questioned. It really is scandalous that people who aren't any good at their jobs are being publicly shamed about how much money they paid themselves while wrecking their companies."

This is the talent that will now flee Wall Street.

Is it possible the people who end up running these firms for $500,000 a year will be no less competent -- and possibly more humble, restrained and thankful for the hard work of their executives and line staff, and more grateful for their social 'license to operate'  -- than those paid the big bucks who failed so badly? Is it not possible there is a great deal of executive talent waiting in the wings, and that many of those who failed will be relatively easily replaced? And is it also not possible this is often the case and that board compensation committees can stop being held hostage by the idea of the "celebrity" CEO?

With all the parsing of the implied criticisms of George Bush in Barack Obama's inaugural address, few  noticed the VISUAL affect of the cameras lingering over the outgoing president's departure.

An acquaintance of mine who runs a public relations agency in Paris, Christophe Ginisty, noticed this about the long goodbye to Bush and read into it an oblique (or stage managed?) wish to demonstrate that Obama's inauguration finally brings to an end eight years of "cauchemardesques" (nightmares):

"Le deuxième élément est la longueur de la séquence qui a accompagné Bush dans son départ. D'habitude, les télévisions se concentrent assez peu sur le sortant. On voit la sortie, on s'attarde sur la poignée de main, le départ de la limousine (ou de l'hélicoptère) et puis on revient au nouveau Président. Hier, j'ai trouvé que les télévisions avaient vraiment consacré du temps au départ de Bush, comme s'il était aussi important de montrer que ce sinistre chef d'état partait bel est bien, que c'en était vraiment fini de ces huit années cauchemardesques."


Imagery can be telling, whether planned or not.