05 Feb. 2019 | Comments (0)
On Governance is a series of guest blog posts from corporate governance thought leaders. The series, which is curated by the Governance Center research team, is meant to serve as a way to spark discussion on some of the most important corporate governance issues.
“Trust is like a marble jar,” says Brené Brown, a research professor of social work at the University of Houston, head of the Brené Brown Education and Research Group and best-selling author.
What does Dr. Brown mean by that analogy? Watch this video for her full explanation, but one key idea is that trust "is built on very small moments"—gestures or actions of goodwill that may seem insignificant on their own but gradually fill up that jar to form trust.
As with most things in business, our capital markets depend on trust. William D. Duhnke, Chairman of Public Company Accounting Oversight Board (PCAOB), has called trust "the underlying assumption of a well-functioning capital market."
There are massive institutions, entities, and laws designed to foster trust in the markets. One of those entities is the public company auditing profession itself, which over the years has built up a solid foundation of trust and confidence among US investors. In the United States, regulatory agencies like the Securities and Exchange Commission and the PCAOB are also critical to fostering trust through their oversight and enforcement roles.
Yet, for our market system, building trust isn't just the work of massive entities. No less important are the day-to-day interactions by countless individuals working across the marketplace in many capacities. Tim Ryan, US Chairman, and Senior Partner at PwC, wrote eloquently about these “little things” in a recent LinkedIn post:
I have seen the senior financial management of a client react swiftly when a weakness in the talent at an important subsidiary was in need of an upgrade.
I have seen a client’s audit committee invest significant time to understand its cyber risk and the potential impact on its financial statements and internal controls…
I was with an audit partner when she shared her view with a client that the scope of an original investigation into a potential illegal act should be expanded beyond what the client’s management had expected and budgeted.
It may be impossible to highlight every single one of these unsung heroes or deeds, but we can still work to spread awareness of the great variety of steps that are taken throughout the market to build trust.
In the public company auditing profession, one way that many firms raise this awareness is through the publication of annual reports that provide a wealth of information on how they promote audit quality, along with affirmations of the firms' core commitment to professional skepticism, ethical behavior, independence, and objectivity.
These reports are valuable, and we at the Center for Audit Quality think they can become even more so. This month, we've just released a new resource aimed at bringing new levels of consistency and comparability in transparency reports. Our resource provides a disclosure framework built around key "Points of Focus" in areas such as firm leadership, ethics, and audit engagement performance.
Like Brené Brown's marbles, these Points of Focus can firms help nurture trust, one piece of information at the time.
How do you build trust in your profession or day-to-day work? I welcome your thoughts in the comments.
This blog post originally appeared on Cindy Fornelli’s LinkedIn page.
The views presented on the Governance Center Blog are not the official views of The Conference Board or the Governance Center and are not necessarily endorsed by all members, sponsors, advisors, contributors, staff members, or others associated with The Conference Board or the Governance Center.