Restoring Trust

How do we do it? I once found a very smart book on ‘how to interview people.’ The author articulated the view that if you are a small company, you cannot take unnecessary risks. He suggested intensive interviews, using a number of pointed questions which we are not legally allowed to ask nowadays, and specifically emphasized that, if the candidate has an unsavory background, just play it safe by asking questions and sending a polite rejection letter because it is very difficult for people to change their ways.

God forbid if the economy both locally and globally worked along these lines, otherwise, nobody would trust again. But this brings us to the fact that for trust to be re-established, businesses will have to show a fundamental change of the ‘tone from the top,’ new values, behaviors and choices instituted across the firm; compensation systems that reward people who live those values, behaviors and choices, and people with the power to oversee compliance and create strong disincentives for those who violate the norms.

From a business perspective, I believe that there needs to be very far-reaching regulations over credit rating companies such as Moody’s and Standard and Poors etc etc .Any credit ratings for any listed company needs to be based on detailed due diligence, as if the credit companies themselves are seriously considering taking a stake in the company being assessed. This will entail higher costs for ratings—so be it. Also, governments should encourage new entrants to the ratings business and that standards be established for ratings.

Another issue is the entire system of off-balance sheet transactions. Regulators and the accounting profession need to implement new rules and standards to eliminate these distortions of the true financial position of companies.

While we at it, we need to return to the concept that holding equity in a home safeguards the homeowner, the lender, and yes, society at large. House loans need to have a minimum gross debt service of less than 30% or a total debt service ratio of less than 40% at origination, with a minimum deposit of 15%. And amortization should not exceed 25 years. Too often, we’ve seen no equity loans with 40 year amortizations. Everyone is suffering the consequences for this madness.


Fair markets, with good disclosure, provide growth opportunities and a solid basis for investment—and trust. Unless we understand, operationalize and sustain the lessons learned from these crises, we condemn ourselves and future generations to an unending, and ever escalating boom and bust cycle. Change is difficult, as the author of my book noted; but the stakes are too high to individuals, organizations, and governments to stay on the path we are on.