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UBS and Creating a Trustworthy Organizational System

Wed, October 31, 2012 11:56 AM | Robert Hurley (Administrator)

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Former UBS trader Kweku Adoboli,

originally from Ghana, is accused of

fraud and false accounting for a $2.3

billion trading loss.


Simon Dawson/Bloomberg 


Bloomberg reports that in the trial of the UBS "rogue trader" Kweku Adoboli who lost 2.3 billion dollars that Adoboli's defense is presenting evidence that the deceptions and trust violations were systemic at UBS not simply the actions of an evil character. Bloomberg reports Adoboli's testimony supporting this: "In the end, the reason I’m most sad is because these losses weren’t the result of dishonest or fraudulent behavior,” he said. “These losses were the result of a group of traders who were asked to do too much with too little resources in a market that was too volatile.” The jury, through a note passed to the judge, asked for Adoboli to explain why the desk didn’t tell managers what they were doing. Adoboli said his bosses didn’t care what they did, as long as they made money. The desk’s manager until April 2011, Ron Greenidge, “really didn’t understand the complexity of our products,” so the importance of Hughes was heightened, Adoboli said. His next supervisor, John DiBacco, was based in New York “so unable to manage us real-time.”

This presents only one side of the case, but this testimony supports what our research has shown from studying more than 20 major trust violations. The root causes of failures of trustworthiness are not in the character flaws of one or two people but in the leadership, culture, incentives and other aspects of the organization that promote or condone unethical behavior that violates stakeholder trust. It is the depth and pervasiveness of the embedding of trustworthiness of the firm that matters most. All of the firms that have had major trust violations (Toyota, Goldman Sachs, Lehman Brothers, BP, etc.) had some aspects of trustworthiness (codes of ethics, etc.), but they also had subcultures that promoted distrust. At Toyota, it was the Tokyo centric recall system that failed to get word to the US about unintended acceleration problems. At BP, it was a culture of driving profit that overrode safety concerns. Similarly, UBS appears not to have gone far enough in changing its culture and organizational systems to make the whole company truly trustworthy. What we call a "trust crisis" is really a crisis of "trustworthiness" in organizations that allows weak links to exist in the chain that connects them with stakeholders.


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