Chapter

Restoring Institutional Trust after the Global Financial Crisis

Nicole Gillespie, Robert Hurley, Graham Dietz and Reinhard Bachmann

in Restoring Trust in Organizations and Leaders

Published in print May 2012 | ISBN: 9780199756087
Published online May 2012 | e-ISBN: 9780199949571 | DOI: http://dx.doi.org/10.1093/acprof:oso/9780199756087.003.0010
Restoring Institutional Trust after the Global Financial Crisis

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This chapter analyses the global financial crisis (GFC) from a trust perspective to identify insights and principles for the practical repair of institutional trust. A systemic, multilevel framework (the Organizational Trust Repair model) is used to examine the nature of the trust failure, the contributing causes to the GFC, and the trust repair strategies adopted. The diagnosis reveals the GFC was a consequence of (in)action by governments, rating agencies, Boards of Directors, CEOs, management, and agents employed by the financial institutions. Analysis of trust repair strategies shows that ‘distrust regulation’ control mechanisms and structural approaches play a central role, including increased government regulation, reforms in Board governance, cultural change within institutions, replacing senior leaders, and redesigning incentive structures to better align management and stakeholders’ interests. The chapter concludes with insights and a research agenda to advance understanding of institutional trust repair.

Keywords: trust; trust repair; trust failure; global financial crisis; institutions; systems; control; regulation; management; government

Chapter.  14456 words. 

Subjects: Organizational Theory and Behaviour

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