{"id":1004,"date":"2014-01-12T08:59:40","date_gmt":"2014-01-12T13:59:40","guid":{"rendered":"http:\/\/www.trustacrossamerica.com\/blog\/?p=1004"},"modified":"2014-01-13T12:23:40","modified_gmt":"2014-01-13T17:23:40","slug":"the-business-case-for-trust","status":"publish","type":"post","link":"https:\/\/www.trustacrossamerica.com\/blog\/?p=1004","title":{"rendered":"The Business Case for Trust"},"content":{"rendered":"<p style=\"text-align: left;\">\u00a0<a href=\"http:\/\/www.trustacrossamerica.com\/blog\/?attachment_id=1005\" rel=\"attachment wp-att-1005\"><img decoding=\"async\" loading=\"lazy\" class=\"size-full wp-image-1005\" alt=\"TAA_R2_EDIT-CS3\" src=\"http:\/\/www.trustacrossamerica.com\/blog\/wp-content\/uploads\/TAATAW_LOGO_H_color-tagline-e1389534413622.jpg\" width=\"320\" height=\"131\" \/><\/a><\/p>\n<p style=\"text-align: center;\"><b>\u00a0<\/b><\/p>\n<h3 style=\"text-align: left;\"><strong>Why does corporate America continue to turn a deaf ear when profitability need not be sacrificed in the name of trust?<\/strong><\/h3>\n<p>The daily headlines are packed with stories about ongoing distrust in business, and rarely do we see indications that the tide is shifting.\u00a0\u00a0 Perhaps it\u2019s because business leaders continue to question the relationship between trust and profitability. We\u2019ve aggregated recent data in this article, thereby making The Case for Trust more difficult to ignore.<\/p>\n<p><span style=\"text-decoration: underline;\">The Hard Costs of Low Trust<\/span><\/p>\n<ul>\n<li>Gallup\u2019s research (2011) places 71% percent of U.S. workers as either not engaged or actively disengaged.<\/li>\n<li>The price tag of disengagement (Gallup) is $350 billion a year. That roughly approximates the annual combined revenue of Apple, General Motors and General Electric.<\/li>\n<li><i>The Washington Post<\/i> reported that \u201cthe federal government imposed an estimated $216 billion in regulatory costs on the economy (in 2012), nearly double its previous record.\u201d<\/li>\n<li>The cost of the tort litigation system alone in the United States is over $250 billion. \u2013 or 2% of GDP (Forbes, January 2012)<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<ul>\n<li>The six biggest U.S. banks, led by\u00a0JP Morgan Chase &amp; Co.\u00a0and\u00a0Bank of America Corp. have piled up $103 billion in legal costs since the financial crisis (Bloomberg, August 2013)<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<ul>\n<li>According to <i>The Economist Intelligence Unit (2010), <\/i>84% of senior leaders say disengaged employees are considered one of the biggest threats facing their business. However, only 12% of them reported doing anything about this problem.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<ul>\n<li>According to Edelman globally, 50% of consumers trust businesses, but just 18% trust business leadership.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<ul>\n<li>And finally, in the United States, the statistics are similar, but the story is a bit worse for leadership. While 50% of U.S. consumers trust businesses, just 15% trust business leadership.<\/li>\n<\/ul>\n<p>This trust gap negatively impacts a company\u2019s revenue, market share, brand reputation, employee engagement and turnover, stock price, and bottom line profitability.<\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"text-decoration: underline;\">The Low Cost of Hard Trust<\/span><\/p>\n<p>Building a trustworthy business will improve a company\u2019s profitability and organizational sustainability.<\/p>\n<p>A growing body of evidence shows increasing correlation between trustworthiness and superior financial performance. Over the past decade, a series of qualitative and quantitative studies have built a strong case for senior business leaders to place building trust among stakeholders high on their priority list. While none of these studies are perfect, over the next decade their results will be increasingly difficult to ignore.<\/p>\n<p>In a Harvard Business School working paper from July 2013 called <i>The Impact of Corporate Sustainability on Organizational Processes and Performance<\/i>, Robert G. Eccles, Ioannis Ioannou, and George Serafeim provide evidence that High Sustainability companies (those integrating both environmental and social issues) significantly outperform their counterparts over the long-term, both in terms of stock market as well as accounting performance.<\/p>\n<p>According to <i>Fortune\u2019s\u00a0 <\/i>\u201c100 Best Companies to Work For\u201d, based on Great Place to Work Employee Surveys, best companies experience as much as 50% less turnover and Great Workplaces perform more than 2X better than the general market (Source: Russell Investment Group)<\/p>\n<p><i>Forbes <\/i>and GMI Ratings have produced the \u201cMost Trustworthy Companies\u201d list for the past six years. They examine over 8,000 firms traded on U.S. stock exchanges using forensic accounting measures. The conclusions they draw are:<\/p>\n<ul>\n<li>\u201c\u2026 the cost of capital of the most trustworthy companies is lower \u2026\u201d<\/li>\n<li>\u201c\u2026 outperform their peers over the long run \u2026\u201d<\/li>\n<li>\u201c\u2026 their risk of negative events is minimized \u2026\u201d<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<p>FACTS\u00ae. After years of reviewing such studies and vetting independent data providers, <a href=\"http:\/\/www.trustacrossamerica.com\">Trust Across America \u2013 Trust Around the World<\/a> (TAA-TAW) has been blending five indicators of trustworthy business in its unique FACTS\u00ae Framework: Financial Stability, Accounting Integrity, Corporate Governance, Transparency, and Sustainability<\/p>\n<p>The FACTS monthly (rebalanced) portfolio of 25 trustworthy companies significantly outperformed the S&amp;P 500 index (64.3% vs. 30.9% from August 2012 through November 2013).<\/p>\n<p>&nbsp;<\/p>\n<p><b><a href=\"http:\/\/www.trustacrossamerica.com\/blog\/?attachment_id=1007\" rel=\"attachment wp-att-1007\"><img decoding=\"async\" loading=\"lazy\" class=\"aligncenter size-full wp-image-1007\" alt=\"1113FACTS\" src=\"http:\/\/www.trustacrossamerica.com\/blog\/wp-content\/uploads\/1113FACTS1-e1389534678905.jpg\" width=\"320\" height=\"184\" \/><\/a>\u00a0<\/b><\/p>\n<p>Numerous indirect indicators of trust also show a direct correlation to superior financial performance.<\/p>\n<p>From Deutsche Bank:<\/p>\n<ul>\n<li>100% concurrence on Lower Cost of Capital<br \/>\n(\u201c\u2026 academic studies agree that companies with high ratings for CSR (corporate social responsibility) and ESG (environment, social responsibility, governance) factors have a lower cost of capital in terms of debt (loans and bonds) and equity.\u201d)<\/li>\n<li>89% concurrence on Superior Market Performance<br \/>\n(\u201c,,,studies indicate companies with high ratings for ESG factors outperform market-based indices\u201d)<\/li>\n<li>85% concurrence on Greater Performance on Accounting \u2013Based Standards<br \/>\n(\u201c\u2026 studies reveal these types of company&#8217;s consistently outperform their rivals on accounting-based criteria.\u201d)<\/li>\n<\/ul>\n<p>From Global Alliance for Banking on Values, which compared <i>values-based<\/i> and <i>sustainable <\/i>banks to their <i>big-bank<\/i> rivals and found:<\/p>\n<ul>\n<li>7% higher Return on Equity for values-based banks<br \/>\n(7.1% ROE compared to 6.6% for <i>big banks)<\/i>.<\/li>\n<li>\u00a051% higher Return On Assets for <i>sustainable<\/i> banks<br \/>\n(.50% average ROA for <i>sustainable<\/i> banks compared to <i>big bank<\/i> earning 0.33%)<\/li>\n<\/ul>\n<p>These studies are bolstered by analyses from dozens of other respected sources including the American Association of Individual Investors, the Dutch University of Maastricht, Erasmus University, and <i>Harvard Business Review<\/i>.<\/p>\n<p>Business leaders may choose to continue to challenge the business case for trust but the evidence is mounting. There is not only a business case but also a financial case for trust.\u00a0 Trust works.<\/p>\n<p><b>Barbara Brooks Kimmel<\/b> is Cofounder and Executive Director of <a href=\"http:\/\/www.trustacrossamerica.com\">Trust Across America \u2013Trust Around the World<\/a> and editor of <i><a href=\"http:\/\/amzn.to\/10A1mhk\">Trust Inc. Strategies for Building Your Company\u2019s Most Valuable Asset<\/a><\/i>. In 2012 Barbara was named one of \u201c<i>25 Women who are Changing the World<\/i>\u201d by Good Business International. For more information, please contact: <a href=\"m&#x61;&#x69;l&#116;&#x6f;:&#66;&#x61;r&#98;&#x61;ra&#x40;&#x74;r&#x75;&#x73;t&#97;&#x63;r&#111;&#x73;sa&#x6d;&#x65;r&#x69;&#x63;a&#46;&#x63;o&#109;\">ma&#105;&#x6c;&#x74;&#x6f;&#x3a;Ba&#114;&#98;&#x61;&#x72;&#x61;&#64;tr&#117;&#x73;&#x74;&#x61;cro&#115;&#x73;&#x61;&#x6d;eri&#99;&#x61;&#x2e;&#x63;om<\/a><\/p>\n<p>&nbsp;<\/p>\n<p>Copyright \u00a9 2014 Next Decade, Inc.<\/p>\n<p>&nbsp;<\/p>\n<p>Would you like to help us build our Case for Trust? Enter our <a href=\"http:\/\/trustacrossamerica.com\/trust-challenge.shtml\">Case for Trust Challenge<\/a>!<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<div class=\"wp-best-social-bookmark\"><ul class=\"socials\"><li class=\"oknotizie\"><a href=\"http:\/\/oknotizie.virgilio.it\/post.html.php?url=https:\/\/www.trustacrossamerica.com\/blog\/?p=1004&title=The Business Case for Trust\" title=\"Share this on oknotizie\"> <\/a><\/li><li class=\"twitter\"><a href=\"http:\/\/twitter.com\/home?status=The Business Case for Trust &raquo; https:\/\/www.trustacrossamerica.com\/blog\/?p=1004\" title=\"Share this on twitter\"> <\/a><\/li><li class=\"delicious\"><a href=\"http:\/\/del.icio.us\/post?url=https:\/\/www.trustacrossamerica.com\/blog\/?p=1004&title=The Business Case for Trust\" title=\"Share this on del.icio.us\"> <\/a><\/li><\/ul><\/div>","protected":false},"excerpt":{"rendered":"<p>\u00a0 \u00a0 Why does corporate America continue to turn a deaf ear when profitability need not be sacrificed in the name of trust? The daily headlines are packed with stories about ongoing distrust in business, and rarely do we see indications that the tide is shifting.\u00a0\u00a0 Perhaps it\u2019s because business leaders continue to question the [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[45],"tags":[122,18,13,66,15,116,3,5,6,121,7],"_links":{"self":[{"href":"https:\/\/www.trustacrossamerica.com\/blog\/index.php?rest_route=\/wp\/v2\/posts\/1004"}],"collection":[{"href":"https:\/\/www.trustacrossamerica.com\/blog\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.trustacrossamerica.com\/blog\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.trustacrossamerica.com\/blog\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.trustacrossamerica.com\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1004"}],"version-history":[{"count":6,"href":"https:\/\/www.trustacrossamerica.com\/blog\/index.php?rest_route=\/wp\/v2\/posts\/1004\/revisions"}],"predecessor-version":[{"id":1013,"href":"https:\/\/www.trustacrossamerica.com\/blog\/index.php?rest_route=\/wp\/v2\/posts\/1004\/revisions\/1013"}],"wp:attachment":[{"href":"https:\/\/www.trustacrossamerica.com\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1004"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.trustacrossamerica.com\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1004"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.trustacrossamerica.com\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1004"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}