New framework for trust and legitimacy

In our report The Trust, Legitimacy & the Ethical Foundations of the Market Economy, we outline why legitimacy is more important than trust to the success of Australian companies and must be underpinned by an ethical framework.

It’s a distinction between trust and legitimacy that must be understood by corporations today who are facing a precipitous decline in levels of public trust. Trust is wholly dependant on legitimacy, which can only be maintained when performance is linked to a legitimate purpose and guided by a core ethical framework. While trust in corporations, can be compensated for by increased surveillance, legitimacy once lost, cannot be recovered at any cost.

This report draws on philosophical thinking to identify a minimum threshold of four fundamental values and principles companies must meet to maintain legitimacy: respect people, do no harm, be responsible, and be transparent and honest.

Dr Simon Longstaff AO, The Ethics Centre’s Executive Director and co-author of the paper says “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.”

“This framework must enable agility and protect against the risks of poor decision-making. An alternative and complementary approach to more compliance is to establish a values and principles framework that guides rather than dictates decision-makers.”

The report includes threshold indicators for the four fundamental values and principles identified to help companies undertake a legitimacy self-assessment.

The full report can be accessed here: trustandlegitimacy.com.au