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Trust is essential for future success

06 February 2020 Myra Knoesen
Richard Rattue

Richard Rattue

An ethical culture, The Ethics Institute states, is the most powerful driver of organisational behavior and is thus one of the most important variables for determining the state of ethics in an organisation.

According to Richard Rattue, Managing Director of Compli-Serve, ethics, or doing what is right, drives trust and trust is essential for future success.

Taking into consideration the latest Edelman Trust Barometer, Rattue shares his thoughts on why ethics matter more than ever.

Ethics drive trust more than competence

Ethics is considered three times more important to company trust than competence, according to the 2020 Edelman Trust Barometer. Launched at the recent World Economic Forum in Davos, the annual survey, which tracks trust and credibility across 28 global markets is now in its 20th year. Respondents are asked to assess business, NGOs, government and the media. This year over 34,000 respondents took part. 

Ethical drivers such as integrity, dependability and purpose drive 76 percent of the trust capital of a company, while competence accounts for only 24 percent, says the report on the findings. 

“There has been an inexorable rise in the importance of ethics, across all industries. Ethics, or doing what is right, drives trust and trust is essential for future success. It matters to customers, employees, regulators and investors and drives resilience against risk as trusted companies have stronger consumer buyers and advocates,” said Rattue.

Overall, business was the only category of institution considered competent in the survey but was seen as far too self-interested, and thus, not ethical. “This may partly be due to the fact that businesses profile their competence, not their ethics,” added Rattue.

Lack of trust

The lack of trust in business is not just the result of corporate scandals, though those have not helped. According to the survey, trust has traditionally been spurred by a growing economy.

However, trust and GDP have become uncoupled and there is a growing anger at income inequality, particularly in developed countries.

“Add to this a prevailing sense of fear about the future, and a sense that capitalism in its current form is doing more harm than good, and it is no wonder that trust has become so important,” said Rattue.

Ethics under the spotlight

Financial services continued to be the least trusted among 15 sectors tracked, though it has moved from a position of distrust over the past eight years to a more neutral reading. Family owned businesses were the most trusted, followed by privately owned businesses and public (listed) businesses. State owned businesses came in last.

While South Africa’s financial services industry is considered highly competent, its ethics often come under the spotlight, despite the tsunami of regulations that has hit the industry since the global financial crisis. Consider the collapse of VBS Mutual Bank which was robbed into insolvency.

“Ethics and integrity training need to become mandatory in financial services. There needs to be a better balance. Instead of being 80% about competence and 20% about ethics, the weighting should be closer to 50% for each,” he said.

He pointed to the Financial Advisory and Intermediary Services (FAIS) Act, a cornerstone of legislation governing the industry, and said the Act has a strong focus on competence, with a more generic approach to ethics.

The corporate function most directly involved with regulations in a financial services company is compliance.

Rattue said that an ethics function needs to be created and, ideally, become part of compliance. This will help to broaden the framework of compliance officers. “One can envisage companies of the future having a Chief Trust Officer with dotted lines to compliance, finance, human resources, and marketing.”

An interesting study

The Ethics Institute, in its 2019 South African Business Ethics Survey (SABES), revealed that, on average, listed and large private organisations operating in South Africa fall within a moderate ethical culture risk category, with some aspects of an ethical culture present, and others underdeveloped.

The overall corporate South Africa Ethical Culture Risk Score is 63, which represents a moderate risk and developing ethical culture.

It is interesting to note that tertiary industries - the banking, investment, finance, insurance and medical services industries - appear to have lower ethics risk and more mature ethical cultures than their primary and 'secondary' industry counterparts, with score rates ranging between 67 and 72.

This, the survey states, could be because tertiary industries employ more skilled labour, with many individuals obtaining better salaries, higher relative status, and possibly better (ethical) treatment.

According to the survey, the most pertinent ethical culture risks as perceived by employees in corporate South Africa were a lack of ethical treatment of employees, with a score of 62, and a lack of ethics accountability and responsibility in organisations, with a score of 64.

There are higher perceptions of ethics culture maturity in senior leaders, compared to less positive perceptions from lower-level staff. Senior management (70%) perceived a much higher level of ethical culture maturity than middle management (64%) and non-managerial employees (61%).

In outlining the leavers of change, the survey shows that ethics accountability and responsibility has the greatest influence on overall ethical culture (20%), followed by senior management commitment to ethics (17%), middle-management commitment to ethics (16%), ethics awareness (15%) and ethical treatment of employees (14%).

Writer’s Thoughts

As mentioned above, ethics drive trust and trust is essential for future success. In a world of constant change and innovation, with technological advancements, risks and threats added to the mix, trust is important. Trusted companies have stronger consumer buyers and advocates, do you agree? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts myra@fanews.co.za

Comments

Added by Peter Dexter, 07 Feb 2020
Absolutely spot on Richard. I have always believed that trust is based on a combination ethics and competence. Now if we could insist on just a little of both in the public sector, especially parliament, South Africa would improve dramatically.
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Added by Jackie Drotsky, 06 Feb 2020
Just yesterday I found an interesting book written by Michael Volkov (Corporate Compliance Insights) on ethical business conduct and what effect it has on a company's sucess. It is becoming more and more apparent that an ethical business culture is very important for long-run success.
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