![\"TAA_R2_EDIT-CS3\"](\"http:\/\/www.trustacrossamerica.com\/blog\/wp-content\/uploads\/TAATAW_LOGO_H_color-tagline-300x122.jpg\"){kind=logo}
<\/a><\/p>\n<\/p>\n
If your work brings you in contact with others, and chances are it does, how much time do you, your team or your leaders spend discussing how\u00a0your internal and external stakeholders perceive the company’s integrity? How much time is allocated to reinforcing the notion that strong corporate culture built on trust and integrity are business imperatives? If your answer is \u201clittle to none\u201d you are not alone. As a former CEO told me, most leaders are too busy putting out the day-to-day fires to think much about \u201csoft skills\u201d like integrity. One need only refer to the latest Wells Fargo and Mylan scandals to see what happens when culture, trust & integrity are of little importance to corporate leadership. Ironically, many of these same crises could be averted if the “soft skills” were a business imperative.Why does organizational integrity matter? Can, and should it be measured?<\/p>\n
Why do organizational trust and integrity matter?<\/strong><\/p>\n When the culture and core values of an organization are not only strong but also reinforced daily, and leaders keep their word, the following occurs:<\/p>\n According to a 2011 Booz & Co. study, \u201cThe Global Innovation 1000: Why Culture is Key,\u201d c<\/em>ompanies with both highly aligned cultures and highly aligned innovation strategies have 30 percent higher enterprise value growth and 17 percent higher profit growth than companies with low degrees of alignment.<\/em><\/p>\n A 2013 study by Guiso, Sapienza and Zingales called \u201cThe Value of Corporate Culture\u201d finds that proclaimed values appear irrelevant. Yet, when employees perceive top managers as trustworthy and ethical, firm\u2019s performance is stronger<\/em>.<\/p>\n And in the absence of strong core values\u2026<\/p>\n Can, and should culture, integrity & trust be measured?<\/strong><\/p>\n Jose Tabuena recently wrote an article for Compliance Week<\/em> called \u201cTo Really Improve Corporate Culture it must be Measurable.\u201d It\u2019s worth a read<\/a>. The essence of the article is that \u201cgood measurement informs uncertain decision-making. And if you measure what matters, you make better decisions.\u201d\u00a0While corporate culture, core-values, good citizenship, ethics, integrity and trust are commonly believed to be immeasurable intangibles or soft skills, evidence like that provided above point to the fact that these are not only false beliefs, but also that the benefits of ethical cultures far outweigh the costs. Yet most leaders continue to hold fast to the \u201csoft skills\u201d argument because neither they nor their Boards of Directors are thinking about them, being provided with the \u201cright\u201d data and\/or because systemic change is:<\/p>\n Much of our work at Trust Across America-Trust Around the World focuses on measuring the integrity or trust \u201cworthiness\u201d of pubic companies and identifying \u201cbest in breed\u201d via a unique, holistic lens called the FACTS\u00ae Framework<\/a>.<\/p>\n Developed by a cross-silo multidisciplinary team, and in the wake of the financial crisis in 2008, the framework began to take shape by asking the same question of dozens of \u201csiloized\u201d professionals from leadership, compliance and ethics, legal, accounting, finance, HR, consulting, CSR, sustainability, etc. \u201cWhat do you consider an indicator of corporate integrity or trust \u201cworthiness\u201d that can be independently and quantitatively measured without requiring the input of the organization itself? <\/em>And while every professional had a different perspective, the same indicators were mentioned time and again. \u201cIn order for a company to be trust \u201cworthy\u201d it must display good corporate governance said the governance folks.\u201d Similarly the financial professionals pointed to stable earnings, the accounting group talked about forensics, and so on. And by blending all of these indicators of corporate trustworthiness into a very large integrity spreadsheet, we found ourselves able to measure integrity and trustworthiness with some degree of accuracy. The master spreadsheet also makes glaringly apparent where and why the Enron-like \u201crisk\u201d often lays hidden in these 1500+ public companies.<\/p>\n Fast forward, and with eight years of unique and compelling data, the majority of companies and their leaders continue to hold on to the notion that trust is a soft and immeasurable skill, and that data from one corporate silo to the next need not be viewed as a holistic \u201cwhole body\u201d scan. After all, it\u2019s very hard to balance long-term value creation against the need to \u201cmaximize earnings\u201d and meet the always-looming quarterly numbers. Better to wait until the next corporate crisis to talk about the importance of trust and how measures will be implemented (maybe) to safeguard against future missteps. Or maybe it\u2019s time to start thinking more carefully about integrity & trust.<\/p>\n According to our FACTS\u00ae Framework, during the three-year period from February 2013-February 2016 America’s most trustworthy public companies substantially outperformed the S&P 500 according to the actual composite audited performance shown below and reprinted with permission of Facts Asset Management, LLC.<\/p>\n This was not a “back test” but rather \u201clive\u201d money under management, followed by an independent audit verifying the returns. Trust works as a business strategy.<\/p>\n FACTS\u00ae Managed Accounts were independently audited from Feb.1, 2013-Jan.31, 2016. Prepared by FACTS Asset Management LLC. FACTS\u00ae is our model of identifying America\u2019s Most Trustworthy Companies by applying FACTS strategy parameters. The composite results translate to 50.09% for FACTS\u00ae and 28.1% for the S&P 500 cumulative percentage return shown above, or 16.7% average\u00a0annualized for FACTS\u00ae vs. 9.5% for the S&P 500 over the same period.\u00a0 The audited Composite Performance results shown above may not be indicative of future results.\u00a0 Full audit documents available upon request.<\/p>\n The composite performance records are based on all accounts managed using the FACTS strategy for a three year period, 2\/1\/13 to 1\/31\/16 and are not representative of the FACTS\u00ae Asset Management LLC program. Tax consequences are not reflected in the performance records.\u00a0 Past performance is not an indication of future return.\u00a0 There can be no guarantee that a new program will prove to be profitable in the future or that it will achieve performance results similar to those achieved in the past using the FACTS strategy parameters and you may lose money.\u00a0 The performance numbers reflect the reinvestment of dividends.\u00a0 The composite performance net of fees is calculated using a weighted average fee for the entire period because not all accounts were charged equal fees and some accounts were not charged fees. The S&P 500 is a widely recognized market value-weighted index of 500 stocks designed to mimic the overall U.S. equity market\u2019s industry weightings, and does reflect the reinvestment of dividends. Past results are not necessarily indicative of future results.<\/p>\n FACTS\u00ae Asset Management LLC is a New Jersey registered Registered Investment Advisor.\u00a0Prepared by FACTS Asset Management LLC<\/p>\n <\/p>\n While no company is perfect, a growing group of visionary leaders have struck that balance and are reaping the rewards shown in the chart above. Over the years our FACTS\u00ae Framework has identified many high integrity companies who share above average scores across all measurable indicators of trust \u201cworthiness\u201d and a leadership vision that embraces the new strategic business imperative of elevating integrity & trust.<\/span><\/p>\n Leaders that measure what matters, including trust, DO make better decisions and over time they are rewarded with lower risk and higher profitability.<\/p>\n Barbara Brooks Kimmel<\/strong>\u00a0is the CEO and Cofounder of\u00a0Trust Across America-Trust Around the World<\/a>\u00a0whose mission is to help organizations build trust. Now in its seventh year, the program\u2019s proprietary FACTS\u00ae Framework ranks and measures the trustworthiness of over 1500 US public companies on five quantitative indicators of trust. Barbara also runs the world largest global Trust Alliance<\/a>, is the editor of the award winning\u00a0TRUST INC.<\/a>\u00a0book series and a Managing Member at FACTS\u00ae Asset Management<\/a>, a NJ registered investment advisor.<\/p>\n <\/p>\n Copyright \u00a9 2016, Next Decade, Inc.<\/p>\n\n
\n
\n
\n
\n
![\"FACTS](\"http:\/\/www.trustacrossamerica.com\/blog\/wp-content\/uploads\/FACTS-SP-500-Returns-300x171.jpg\")
<\/a><\/p>\n