Wednesday, December 14, 2005

Trust and Notification

Authentic trust implies openness. When conditions change (especially when adverse events occur) we may reasonably expect to be notified.

Here are some examples where a first-order trust issue (failure to maintain an expected state) is compounded by a second-order trust issue (failure to notify affected parties).

Identity Theft

Many examples have emerged recently in which personal data has been abused. One of the most notorious was ChoicePoint.

Some have argued that ChoicePoint cannot be accused of betraying the trust of the data subjects, because they had no direct contract or business relationship with these subjects in the first place. However, there seems to be a strong argument for transitive betrayal.

The secondary issue here is that of notification. Should data subjects be notified when their identity has been compromised or stolen? ChoicePoint received a lot of criticism about their notification policy as well.

Split Capital Investment

Chris Flitwick, who was at the centre of the split capital scam, has argued that the split caps were originally low risk, and that it was the investment practices of the fund managers that turned them into high risk. (I have described this elsewhere as an example of Bezzle.)

Such a radical change in investment practices itself might be regarded as a breach of trust, since it compromised the implicit proposition which many investors thought they had accepted. Some investors have argued that the investment companies have a duty of trust to maintain the original risk profile and bear the difference.

But in any case, if events and changing management practices turn a low risk into a high risk, surely there is a duty of trust to notify all stakeholders that the risk profile has changed and give them an opportuity to reconsider their investment/involvement.

Good Examples

In contrast to these examples, they are many companies that have been very prompt and effective at communicating with customers and other stakeholders. And this is a great way to build trust, because it shows two things. Firstly that you care about the people who trust you; and secondly that you understand the situation well enough to appreciate the possible impact on these people. This is a great basis for a trustworthy organization.