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Do corporations have a duty to be trustworthy?

Kirby, N., Kirton, A. and Crean, A.

Since the global financial crisis in 2008, corporations have faced a crisis of trust, with growing sentiment against ‘elites and ‘big business’ and a feeling that ‘something ought to be done’ to re-establish public regard for corporations. Trust and trustworthiness are deeply moral significant. They provide the ‘glue or lubricant’ that begets reciprocity, decreases risk, secures dignity and respect and safeguards against the subordination of the powerless to the powerful. However, in deciding how to restore trust, it is difficult to determine precisely what should be done, by whom, and who will bear the cost, especially if any action involves a risk to overall market efficiency and corporate profitability.

The paper explores whether corporations have a moral duty to be trustworthy, to bear the cost of being so and thus contribute to resolving the current crisis of trust. It also considers where the state and other social actors have strong reason to protect and enforce such moral rights, while acknowledging that other actors have similar obligations to be trustworthy.

The author outlines five ‘salient factors’ that trigger specific rights to trustworthiness and a concomitant duty on corporations to be trustworthy: market power, subordination (threat and intimidation), the absence of choice, the need to preserve systemic trust and corporate political power which might undermine a state’s legitimacy. Absent these factors and corporations do not have a general duty to be trustworthy, since a responsible actor in fair market conditions should be able to choose between the costs and benefits of dealing with generally trustworthy corporations.

A trustworthy corporation is defined as one with a robust disposition to fulfil its commitments to another, providing rational grounds for that other to rely on. A commitment (implicit or explicit) involves an overriding obligation to act or not act. It transcends, for example, corporate aims, including profit and offers accountability (remedy, compensation etc) if the obligation is not met.

The author notes that commitments may or may not be enforceable, and not all breaches undermine trustworthiness of a corporation, which may breach for reasons of self-defence, for example. Corporations might also face conflicting commitments, raising the difficult moral question of prioritisation.

Trustworthiness involves reliance, or not adopting contingencies against risk, resulting in vulnerability to an unfulfilled commitment. Being worthy of reliance means how the corporation is structured, resourced, incentivised and motivated, and crucially, may be very costly to the corporation. Making commitments that were implicit explicit, and allowing others to make your commitments enforceable are two ways of demonstrating reliability.

External measures, derived from agents such as the state, professional bodies, unions or consumer groups, may make internal measures more reliable. Reputation, which can be enhanced or damaged by other corporations in the same sector, is another source of evidence of reliability. Likewise, people may trust systems, groups and societies because of the qualities of one individual.

The author notes a widespread desire, partly born of legitimate frustration and injustice, to ‘take back control’ and restore trust in corporations. That will involve both controlling measures such as regulation, vigilance and threat or punishment, but also measures to instil values, culture and purpose to corporations, increasing the social capital and rewards of trustworthy behaviour and structuring markets in a way that avoids a ‘race to the bottom’. To rebuild trust, we must distribute the duties to make it happen and the responsibilities to bear its cost.

For further information please contact the Project Manager on FOTC@thebritishacademy.ac.uk.

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Do corporations have a duty to be trustworthy?

Nikolas Kirby, Andrew Kirton and Aisling Crean  | 

Article posted to Journal of the British Academy, volume 6, supplementary issue 1 (Reforming Business for the 21st Century).

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