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A matter of Trust

What Chief Legal Officers should know

As we recover, reopen, and rebuild, it’s time to rethink the importance of Trust. At no time has it been more tested or more valued in our leaders and each other. Trust is all encompassing. Physical. Emotional. Digital. Financial. Ethical.

The nest egg is necessary because the loss of trust can be costly. We looked at three large companies hit by a trust-related scandal that led to regulatory or government intervention. Before the scandal, each of these companies had a market cap of at least $10 billion. Afterward, their market cap declined 20 to 56 per cent for a combined loss in total value of roughly $70 billion.

Trust is a currency of commerce. That’s truer than ever today, with much of the world’s trade taking place among parties in distant locations who may never have met face-to-face. Every exchange may be viewed to some extent as an expression of trust, and the successful ones pile up like deposits in a bank account. In this way, the organisation creates a nest egg to draw upon in the event—hopefully uncommon —that something goes amiss.

The nest egg is necessary because the loss of trust can be costly. We looked at three large companies hit by a trust-related scandal that led to regulatory or government intervention. Before the scandal, each of these companies had a market cap of at least $10 billion. Afterward, their market cap declined 20 to 56 per cent for a combined loss in total value of roughly $70 billion.

Chief legal officers (CLOs) have always had a key role in the conscience of the enterprise, setting the course for ethics and, often, compliance. Today, as business moves faster and the CLO takes on a larger role in the strategic direction of an enterprise, trust continues to be a fundamental imperative and a growing factor in a company’s success—not only for the organisation broadly, but for the CLO’s ability to be effective as a member of the senior executive team. And, while trust may be difficult to touch or see, it can be built.

Trust is essential for the functioning of society and the economy. We rely on others to act with integrity and honesty. We expect governments, businesses, and organisations of all types to deliver on their promises and conduct themselves ethically and responsibly. The rise of complex and polarising societal forces, the pace of technological change, free access to information, and the demands of a new generation of consumers and workers are changing the nature of business leadership, influencing the call for a bold vision, a renewed sense of purpose, and new models of thinking. Furthermore, these shifts are leading to business leaders being held more accountable in living up to their slogans of purpose.

Trust is all encompassing. Physical. Emotional. Digital. Financial. Ethical.

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