Corporate Trust

From Harvard Business Review —

Rebuilding Trust in Business
11:00 AM Tuesday March 17, 2009
by Bronwyn Fryer
Is that thundering sound you hear a hammer and nail? The business world is shaking like a Wittenberg church door. And no wonder: we’re about to undergo a Reformation. Our faith is shaken to the core; our sense of normality unhinged. Wall Street lies in metaphorical rubble. The “Greatest Banker Who Ever Lived,” Alan Greenspan, says he misunderstood market mechanics. Jack Welch says focusing on share price was a dumb idea. The Future of Capitalism is itself in question.

When the business pages make no sense, it’s time to turn to a philosopher.
I recently returned to the HBR articles of Charles Handy, vicar’s son-turned-oilman-turned-business-school-professor-turned philosopher, who has raised many questions and made many accurate prognostications about the future of business.

Consider what he said, post-Enron, about the erosion of trust. “Markets rely on rules and laws, but those rules and laws in turn depend on truth and trust. Conceal truth or erode trust, and the game becomes so unreliable that no one will want to play,” Handy wrote in “What’s a Business For”  (December 2002). “The markets will empty and share prices will collapse, as ordinary people find other places to put their money–into their houses, maybe, or under their beds. The great virtue of capitalism, that it provides a way for the savings of society to be used for the creation of wealth–will have been eroded. So we will be left to rely increasingly on governments for the creation of our wealth, something that they have always been conspicuously bad at doing…..Trust is fragile. Like a piece of china, once cracked it is never quite the same. And people’s trust in business, and those who lead it, is today cracking.”

What will help corporations survive? Here is Handy’s prescription:
“….what enables a corporation to succeed in the longer term is a wish for immortality, or at least a long life; a consistent set of values based on an awareness of the organization’s own identity; a willingness to change; and a passionate concern for developing the capability and self-confidence of its core inhabitants, whom the company values more than its physical assets. I suggest that those conditions are best met when organizations live up to the literal meaning of the word company–“the sharing of bread”–and regard themselves as communities, not property… time, the laws governing corporations will change to reflect (this) new reality.” (“Looking Ahead,” HBR September 1997)

So what does the future of the organization look like? In one of his very first books, Gods of Management: the Changing World of Organizations, Handy advanced the idea that the best organization operates most like a village–a place where people equally contribute their skills for the good of the whole, where culture matters most, where the initiative is bottom-up, where the shareholders are the people who do the work. “Villages are small and personal, and their inhabitants have names, characters and personalities,” he wrote. “What more appropriate concept on which to base our institutions of the future than on the ancient organizational social unit whose flexibility and strength sustained human society through millennia?”
What’s on your reading list that you hope will help you make sense of things?

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