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Opinion: Trust is the secret sauce that Warren Buffett and others value highly in companies


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Opinion: Trust is the secret sauce that Warren Buffett and others value highly in companies

Business

Category: Business News

Trust-based corporate cultures promote autonomy and accountability

For his 100th birthday last week, George P. Shultz, distinguished businessman, cabinet member and scholar, wrote an op-ed in the Washington Post reflecting on the single most important quality in American institutions and life: Trust. If trust is in the room, whatever room, he wrote, then good things happen. Shultz went on to illustrate with examples in 10 different settings including family, military, management, religion, government, leadership, diplomacy, writing, negotiations and politics.

Shultz’s thesis seems profoundly right, and all of his examples warrant being expanded on, starting with trust in the corporate realm — encompassing management and leadership as well as other aspects such as stewardship.

For decades, American corporate culture has moved in the direction of command and control. Boards faced rising pressure for accountability, leading them to command corporate officers to install elaborate internal controls, information systems and compliance programs. While well-intentioned, such efforts dampen the trust employees up and down the ranks need to have.

Over the same period, corporate governance moved toward prescribed mandates for all companies. Today all boards are expected to follow delineated protocols ordained “best practices,” whether or not they are best for a particular company. Such uniformity diminishes the trust that can form when directors and shareholders exchange views and make their own decisions based on the needs of the company.

Countering this trend of control is a trust-based culture. A trust-based corporate culture relies on the assumption that businesses should be decentralized into the smallest possible units whose performance can usefully be measured to identify problems and opportunities. Hallmarks of a trust-based corporate culture include autonomy and decentralization.

Continue readinghttps://www.marketwatch.com/story/trust-is-the-secret-sauce-in-companies-that-warren-buffett-and-others-value-highly-2020-12-17

Source: MarketWatch

Published: June 30, 2022