Michael Bondar is a Principal at Deloitte Risk & Financial Advisory, and Don Fancher is a Principal Global Leader at Deloitte Forensic. This post is based on their Deloitte memorandum. Related research from the Program on Corporate Governance includes The Illusory Promise of Stakeholder Governance (discussed on the Forum here) and Will Corporations Deliver Value to All Stakeholders?, both by Lucian A. Bebchuk and Roberto Tallarita; For Whom Corporate Leaders Bargain by Lucian A. Bebchuk, Kobi Kastiel, and Roberto Tallarita (discussed on the Forum here); and Restoration: The Role Stakeholder Governance Must Play in Recreating a Fair and Sustainable American Economy—A Reply to Professor Rock by Leo E. Strine, Jr. (discussed on the Forum here).
Trust in an organization is an ongoing relationship between an entity and its various stakeholders—and is earned through that entity’s actions. Those actions, however, cannot be strictly embodied in a crisis response strategy to address a trust breach. Instead, by investing in trust proactively, organizations can build “trust equity”—a reserve of trust that can not only improve performance and generate value on an ongoing basis, but also allow the organization to be more resilient when a crisis inevitably hits. Managing these trust-based relationships starts at the very top and requires the focus and attention of the C-suite.
The disruptive events of the past year have shined a bright light on the power of trust, revealing the central roles of transparency and consistency in cultivating it in organizations. (Think vaccine efficacy, for example.) Global and societal challenges have also reinforced how intangibles, rather than physical assets, often lead to value creation. In other words, the stronger the relationships organizations have with their stakeholders, the more trust is generated.
