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Trust, Legitimacy & the Ethical Foundations of the Market Economy

TYPE:THOUGHT LEADERSHIP

CATEGORY: CORPORATE TRUST 

PUBLISHED: AUG 2018

Trust, Legitimacy & the Ethical Foundations of the Market Economy

At The Ethics Centre, we spend a lot of time talking to regulators, directors and business leaders.

We know that fundamental questions are being asked: What went wrong? Who’s responsible? How do we restore trust? Our research suggests the concept of trust may be less relevant than that of ‘legitimacy’. Where trust is the belief that people/organisations will meet their obligations, legitimacy is the right to claim a status, role or function. Legitimacy, in other words, grants business the social license to operate.

This whitepaper offers insights on the current issues of trust and loss of limited liability, and a framework to participate in the current market economy. Discover the four fundamental values and principles you need to minimise the risk of corporate failure and the potential for unlimited liability. Learn how your purpose, values and principles can be used to guide behaviour and work through the most difficult decisions within an organisation.

"The privileges of incorporation and limited liability were justified by a broad appeal to the common good. If those privileges are to be preserved, then it may be time to establish a new, core ethical foundation for corporations. An alternative and complementary approach to more compliance is to establish a values and principles framework that guides rather than dictates decision-makers."

DR SIMON LONGSTAFF

OVERVIEW

53%
POPULATION DON'T BELIEVE PRESENT SYSTEM WORKS
65%
CEOS CONCERNED BY LACK OF TRUST IN BUSINESS**
89%
OVER-REGULATION IS A TOP THREAT TO GROWTH***
*Source: Edelman Trust Barometer 2017
**Source: AICD-KPMG Maintaining the social licence to operate: 2018 Trust Survey
***Source: PWC, 21st  Annual Global CEO Survey

WHATS INSIDE?

White zig-zag line on a gray-blue background. The line descends in a step-like pattern, resembling stairs or a flowchart diagram element.
An examination of trust’s decline
White window frame with four panes against a teal background, illustrating window design or home decor. Square panes create a symmetrical pattern.
What is legitimacy?
Outline of a square with an X inside, indicating a closed or unavailable option. The background is solid teal, with the square and X in white.
The costs of losing legitimacy
Five horizontal white bars on a teal background, creating a simple, modern design element. Abstract lines.
Ethical foundations of the market
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Reimagining corporate law
White diamond shape and X shape on a dark teal background. Geometric shapes. Abstract design. Simple, modern, and minimalist.
Four fundamental values and principles
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Enabling legitimacy in corporations
White sun cross symbol on a gray background. Wheel cross or solar cross, an ancient religious symbol.
The value of ethical frameworks

AUTHORS

Authors

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Dr Simon Longstaff

Dr Simon Longstaff has been Executive Director of The Ethics Centre for over 25 years, working across business, government and society. He has a PhD in philosophy from Cambridge University, is a Fellow of CPA Australia and of the Royal Society of NSW, and in June 2016 was appointed an Honorary Professor at ANU – based at the National Centre for Indigenous Studies. Simon co-founded the Festival of Dangerous Ideas and played a pivotal role in establishing both the industry-led Banking and Finance Oath and ethics classes in primary schools. He was made an Officer of the Order of Australia (AO) in 2013.

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Victoria Whitaker

Victoria Whitaker has worked across business, civil society, academia and government in the areas of sustainability education, research, policy and advocacy, strategy and evaluation. She previously headed up the Global Reporting Initiative in Australia for five years, before joining The Ethics Centre to manage their consulting and education offering. In January 2019, Victoria joined Deloitte’s risk team.

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The Ethics Centre's book cover featuring an aerial view of a river and landscape. Trust, Legitimacy & Ethical Foundations of the Market Economy.