{"id":1322,"date":"2014-07-02T12:09:36","date_gmt":"2014-07-02T16:09:36","guid":{"rendered":"http:\/\/www.trustacrossamerica.com\/blog\/?p=1322"},"modified":"2014-07-14T12:24:01","modified_gmt":"2014-07-14T16:24:01","slug":"trust-the-direct-route-to-profitability","status":"publish","type":"post","link":"https:\/\/www.trustacrossamerica.com\/blog\/?p=1322","title":{"rendered":"Trust: The Direct Route to Profitability"},"content":{"rendered":"<p style=\"color: #444444;\"><a href=\"http:\/\/www.trustacrossamerica.com\/blog\/?attachment_id=1005\" rel=\"attachment wp-att-1005\"><img decoding=\"async\" loading=\"lazy\" class=\"aligncenter size-medium wp-image-1005\" src=\"http:\/\/www.trustacrossamerica.com\/blog\/wp-content\/uploads\/TAATAW_LOGO_H_color-tagline-300x122.jpg\" alt=\"TAA_R2_EDIT-CS3\" width=\"300\" height=\"122\" \/><\/a><\/p>\n<h6 style=\"color: #444444;\"><\/h6>\n<h6 style=\"color: #444444;\"><\/h6>\n<h6 style=\"color: #444444; text-align: center;\"><\/h6>\n<h6 style=\"color: #444444; text-align: center;\"><\/h6>\n<h6 style=\"color: #444444; text-align: center;\"><\/h6>\n<h6 style=\"color: #444444; text-align: center;\"><\/h6>\n<h6 style=\"color: #444444; text-align: center;\"><\/h6>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<h6 style=\"color: #444444; text-align: center;\">Do \u00a0Trustworthy Companies Sacrifice Profitability?<\/h6>\n<h6 style=\"color: #444444; text-align: center;\"><\/h6>\n<h6 style=\"color: #444444; text-align: center;\"><\/h6>\n<h6 style=\"color: #444444; text-align: center;\">Not a Chance!<\/h6>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p><a href=\"http:\/\/www.trustacrossamerica.com\/blog\/?attachment_id=1329\" rel=\"attachment wp-att-1329\"><img decoding=\"async\" loading=\"lazy\" class=\"aligncenter size-medium wp-image-1329\" src=\"http:\/\/www.trustacrossamerica.com\/blog\/wp-content\/uploads\/FACTS714-300x165.png\" alt=\"FACTS714\" width=\"300\" height=\"165\" \/><\/a><\/p>\n<p style=\"color: #444444;\">Copyright \u00a9 2014 Next Decade, Inc.<\/p>\n<p style=\"color: #444444;\">Trust Across America, via its \u00a0<a href=\"http:\/\/trustacrossamerica.com\/about.shtml\"><span style=\"color: #444444;\">FACTS\u00ae<\/span> Framework\u00a0<\/a>has been tracking the performance of the most trustworthy public companies for over 5 years, and the results are nothing short of staggering. Trustworthy companies have produced an 82.9% return vs. the S&amp;P&#8217;s 42.2% since August 2012.<\/p>\n<p style=\"color: #444444;\">But the daily headlines continue to feature countless \u00a0stories about bad corporate behavior and the ongoing distrust in business.\u00a0Rarely do we hear senior management even mention the word &#8220;trust&#8221; until they are attempting to minimize the fallout from the latest crisis. And what is usually the root cause of the crisis? Low trust, and a failure of senior leadership to place trust on its agenda. If it sounds like a vicious cycle it is, and certainly no way to reverse decades of declining trust in business.<\/p>\n<p style=\"color: #444444;\">Combine the chart above with the following data and The Case for Trust \u00a0becomes increasingly difficult to ignore.<\/p>\n<p style=\"color: #444444;\"><strong>The Hard Costs of Low Trust<\/strong><\/p>\n<ul style=\"color: #444444;\">\n<li>Gallup\u2019s research (2011) places 71% percent of U.S. workers as either not engaged or actively disengaged.<\/li>\n<li>\n<p class=\"p1\">The disengaged workforce (Gallup, August, 2013) is costing the US economy $450-550 billion a year, which is over 15% of payroll costs.<\/p>\n<\/li>\n<li><i>The Washington Post<\/i>\u00a0reported 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<ul style=\"color: #444444;\">\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<ul style=\"color: #444444;\">\n<li>According to\u00a0<i>The Economist Intelligence Unit (2010),\u00a0<\/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<ul style=\"color: #444444;\">\n<li>According to Edelman globally, 50% of consumers trust businesses, but just 18% trust business leadership.<\/li>\n<\/ul>\n<ul style=\"color: #444444;\">\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 style=\"color: #444444;\">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 style=\"color: #444444;\"><strong>The Low Cost of Hard Trust<\/strong><\/p>\n<p style=\"color: #444444;\">Building a trustworthy business will improve a company\u2019s profitability and organizational sustainability.<\/p>\n<p style=\"color: #444444;\">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 style=\"color: #444444;\">In a Harvard Business School working paper from July 2013 called\u00a0<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 style=\"color: #444444;\">According to\u00a0<i>Fortune\u2019s\u00a0\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 style=\"color: #444444;\"><i>Forbes\u00a0<\/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, a more limited definition of trustworthy companies than Trust Across America&#8217;s FACTS Framework but still somewhat revealing. The conclusions they draw are:<\/p>\n<ul style=\"color: #444444;\">\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 style=\"color: #444444;\"><b><\/b>\u00a0In addition to the chart above, numerous indirect indicators of trust also show a direct correlation to superior financial performance.<\/p>\n<p style=\"color: #444444;\">From Deutsche Bank:<\/p>\n<ul style=\"color: #444444;\">\n<li>100% concurrence on Lower Cost of Capital (\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 (\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 (\u201c\u2026 studies reveal these types of company\u2019s consistently outperform their rivals on accounting-based criteria.\u201d)<\/li>\n<\/ul>\n<p style=\"color: #444444;\">From Global Alliance for Banking on Values, which compared\u00a0<i>values-based<\/i>\u00a0and\u00a0<i>sustainable\u00a0<\/i>banks to their\u00a0<i>big-bank<\/i>\u00a0rivals and found:<\/p>\n<ul style=\"color: #444444;\">\n<li>7% higher Return on Equity for values-based banks (7.1% ROE compared to 6.6% for\u00a0<i>big banks)<\/i>.<\/li>\n<li>\u00a051% higher Return On Assets for\u00a0<i>sustainable<\/i>\u00a0banks (.50% average ROA for\u00a0<i>sustainable<\/i>\u00a0banks compared to\u00a0<i>big bank<\/i>\u00a0earning 0.33%)<\/li>\n<\/ul>\n<p style=\"color: #444444;\">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\u00a0<i>Harvard Business Review<\/i>.<\/p>\n<p style=\"color: #444444;\">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>Please share your comments and suggestions! Email:\u00a0<a href=\"http:&#x2f;\/&#x77;&#119;&#x77;&#x2e;t&#x72;&#117;&#x73;&#x74;a&#x63;&#114;&#x6f;&#x73;s&#x61;&#109;&#x65;&#x72;i&#x63;&#97;&#x2e;&#x63;o&#x6d;&#47;&#x62;&#x6c;o&#x67;&#47;&#x62;&#x61;r&#x62;&#97;&#x72;&#x61;&#64;&#x74;&#114;&#x75;&#x73;t&#x61;&#99;&#x72;&#x6f;s&#x73;&#97;&#x6d;&#x65;r&#x69;&#99;&#x61;&#x2e;c&#x6f;&#109;\">&#x62;&#x61;&#x72;&#x62;&#x61;&#x72;&#x61;&#x40;&#x74;&#x72;&#x75;&#x73;&#x74;&#x61;&#x63;&#x72;&#x6f;&#x73;&#x73;&#x61;&#x6d;&#x65;&#114;&#105;&#99;&#97;&#46;&#99;&#111;&#109;<\/a> <strong>Barbara Brooks Kimmel<\/strong> is the Executive Director of\u00a0<a href=\"http:\/\/trustacrossamerica.com\/index.shtml\">Trust Across America-Trust Around the World<\/a>\u00a0whose mission is to help organizations build trust. She is also the editor of the award winning\u00a0<a href=\"http:\/\/trustacrossamerica.com\/order.shtml\">TRUST INC.<\/a>\u00a0book series. In 2012 Barbara was named <em>One of<\/em> <em>25<\/em> <em>Women<\/em> <em>Who are Changing the World<\/em> by Good Business International.<\/p>\n<h5><\/h5>\n<p>.\u00a0<a href=\"http:\/\/www.trustacrossamerica.com\/blog\/?attachment_id=1233\" rel=\"attachment wp-att-1233\"><img decoding=\"async\" loading=\"lazy\" class=\"wp-image-1233\" src=\"http:\/\/www.trustacrossamerica.com\/blog\/wp-content\/uploads\/TrustInccover313-e1402235843856.jpg\" alt=\"Print\" width=\"141\" height=\"212\" \/><\/a><a href=\"http:\/\/www.trustacrossamerica.com\/blog\/?attachment_id=1225\" rel=\"attachment wp-att-1225\"><img decoding=\"async\" loading=\"lazy\" class=\"wp-image-1225 alignnone\" src=\"http:\/\/www.trustacrossamerica.com\/blog\/wp-content\/uploads\/ND-Trust-CEO-cvr-140602-ft-e1401989324478.jpg\" alt=\"ND Trust CEO cvr 140602-ft\" width=\"153\" height=\"212\" \/><\/a><\/p>\n<p style=\"color: #444444;\">Copyright \u00a9 2014 Next Decade, Inc.<\/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=1322&title=Trust: The Direct Route to Profitability\" title=\"Share this on oknotizie\"> <\/a><\/li><li class=\"twitter\"><a href=\"http:\/\/twitter.com\/home?status=Trust: The Direct Route to Profitability &raquo; https:\/\/www.trustacrossamerica.com\/blog\/?p=1322\" title=\"Share this on twitter\"> <\/a><\/li><li class=\"delicious\"><a href=\"http:\/\/del.icio.us\/post?url=https:\/\/www.trustacrossamerica.com\/blog\/?p=1322&title=Trust: The Direct Route to Profitability\" title=\"Share this on del.icio.us\"> <\/a><\/li><\/ul><\/div>","protected":false},"excerpt":{"rendered":"<p>&nbsp; &nbsp; &nbsp; Do \u00a0Trustworthy Companies Sacrifice Profitability? Not a Chance! &nbsp; &nbsp; &nbsp; Copyright \u00a9 2014 Next Decade, Inc. Trust Across America, via its \u00a0FACTS\u00ae Framework\u00a0has been tracking the performance of the most trustworthy public companies for over 5 years, and the results are nothing short of staggering. Trustworthy companies have produced an 82.9% [&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":[122,18,66,136,5,6,121],"_links":{"self":[{"href":"https:\/\/www.trustacrossamerica.com\/blog\/index.php?rest_route=\/wp\/v2\/posts\/1322"}],"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=1322"}],"version-history":[{"count":26,"href":"https:\/\/www.trustacrossamerica.com\/blog\/index.php?rest_route=\/wp\/v2\/posts\/1322\/revisions"}],"predecessor-version":[{"id":1443,"href":"https:\/\/www.trustacrossamerica.com\/blog\/index.php?rest_route=\/wp\/v2\/posts\/1322\/revisions\/1443"}],"wp:attachment":[{"href":"https:\/\/www.trustacrossamerica.com\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1322"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.trustacrossamerica.com\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1322"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.trustacrossamerica.com\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1322"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}