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5 Years After Lehman and Still Major Work Needed to Restore Trust

Wed, September 11, 2013 5:43 PM | Robert Hurley (Administrator)

Two things appeared in the papers today that are instructive about trust.

First was the 5-year anniversary of the bankruptcy of Lehman Brothers. Dick Fuld is still counting his money (he has a lot so it will take a while) in Greenwich Connecticut, and a Davis Polk analysis showed that regulators have missed 62% of the Dodd-Frank deadlines. Other reports suggested that regulators were engaged in turf wars that have slowed progress.

The second news item was even more important but a bit more obscure. A court in Frankfurt Germany told Deutsche Bank that they should reinstate four employees who were fired over what the bank suggested were ethical violations in the Libor scandal. What was very interesting was that the court faulted Deutsche Bank for creating an organizational system that enabled traders and those submitting Libor rates to interact and collude. Because the Bank implicitly allowed such behavior, it could not later on turn around and fire the employees for doing something that was accepted. In effect, the court was saying that employees will adapt to the organization’s system and it is the duty of the leaders of the company to create an ethical and trustworthy system (rules, processes, culture etc.).

At the Consortium for Trustworthy Organizations, we agree. Individual ethics is important but insufficient. There are many systemic reforms required to make the financial system trustworthy and avoid future Lehman style disasters.  We describe these changes in our article Restoring Institutional Trust: A Systemic Approach which is available in the resources/publications section of on our website.

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