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A crisis in trust . . .

February 2, 2010

Leadership under scrutiny.“We,” that is the royal we, are apparently in no mood to put up with politicians, greedy executives and big bankers on Wall Street. Main street, as the saying goes, “hates” Wall Street. No leader of big organizations (including religious and other not-for-profits) or small business owner is exempt from this disgust with the rich and powerful. How did all this happen?

Where to start and what can business leaders learn? I will speak only for myself. I too have come to be disgusted with politicians who glibly declare what it is that the “American taxpayer wants.” Really? Each side knows? And it’s different? There’s only one citizen consensus? And I have become equally disenchanted with public company boards who have approved huge bonuses and executives who have demanded them. Having said all that, I’m left with the mystery of what has gotten us in this pickle – certainly these guys aren’t stupid. And in the information age, you, they and I are certainly not without access to the information to make better informed choices.

Malcolm Gladwell in his book What the Dog Saw, points out one of the ironies in this information age. We have too much information and people hide things right in front of us. It will get worse, not better. For example, Gladwell points out that all the information about how shaky Enron was before its collapse, was available to the public. In fact, students at Cornell University studied Enron as a business school exercise. They analyzed the public financial information: “The students’ recommendation was on the first page, in boldfaced type: Sell.” Keep in mind that this report was published (and is still available) in May of 1998 long before the disaster hit. Here is one tidbit from the students’ recommendation:

In addition, our analysis has found that Enron takes more marginal risk than its competitors, in part to set up a high fixed cost platform for anticipated new markets internationally and in electricity, without a corresponding return to balance the risk. This is risky. Time will tell if it’s prudent.

Emphasis is mine. What’s the point? Well, the information the students gathered was in the public domain. They did not “Watergate” the Enron offices. What about the rest of us? In hindsight, it is almost as if the executives at Enron simply said, hey, let’s do what we’re supposed to do and report our special entities, make all the appropriate disclosures in foot notes and see if anybody notices. Few did. Disaster struck.

As a member of the board of a public company, or advisory board member to a private company or an employee, or a citizen voter we need to do a better job at educating ourselves about the issues at hand. Certainly we can’t do the same difficult, tedious and time consuming job the Cornell students did for every company issue or referendum, but we can help ourselves by learning more about how our modified capitalistic system works in general, keep up with scientific advance affecting our lives, and bother to see another’s point of view.

It has become obvious that we cannot trust the politicians to do the right things (no matter which party). It should be said they do the same thing many of us are doing; voting for things they don’t really understand and/or extorting advantages for themselves and constituents at the expense of the larger good, and/or purposefully creating huge obfuscating bills. “Let’s just put it all out there,” they say, “nobody will bother to read it or understand it beyond the paragraph that gives them what they want.”

So the bottom line is that average American citizens, frightened about their prospects since more than 10% of their fellow employees are out of work, believe they can trust almost no-one. Not their religious leaders, not their political leaders, not their business leaders and not even those involved in educating the next generations. It seems as if everyone is out for themselves regardless of the effect their actions might have on the rest of society or their companies.

It’s time for us to take the blinders off. First we must live our own lives with integrity. Then we must not assume that it’s only the other executive or senator or representative that is corrupt – it could be our own executive, senator or representative that is corrupt. We have to hold ourselves and others accountable if we are to get back to doing business based on trust. As I’ve said before, trust is knowing that you have my best interest at heart, not just your own. We have to do this hard work to make our democracy thrive. We have to educate ourselves on the issues and not fall for the glib sound bites that bombard us every day. The information is there. We need to get it and think for ourselves rather than simply listen to our usual news source or special interest group. We have to go out of our way to understand opposing points of view.

So, what will you do to make sure that we create an environment of trust and integrity? You are no doubt adding to the information we all see, so will you pass along to others; only one point of view without checking validity? Will you not even try to understand an opposing idea or different point of view? Or will you go out of your way to be hear and consider another person’s position? If your view doesn’t “carry the day,” will you sulk or be passive aggressive or will you accept the majority rule (or executive team decisions) and move things forward? In the end, we get the corporate culture and the democracy we deserve. It’s up to us.

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