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Executive Interviews: Interview with Shantanu Dutta on Building Trust
January 2011. - By Dr. Nagendra V Chowdary

Shantanu Dutta
Shantanu Dutta
Vice Dean for Graduate Programs
Marshall School of Business USC
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  • The world's financial markets nearly collapsed in 2008 fall for one reason: lack of trust. Even big banks refused to lend to each other because they didn't trust they would be repaid. What should the banks, the Fortune 500 companies, the regulators, policy makers, and the researchers learn from 2008 financial crisis? What are the trust-related lessons from this crisis?
    The collapse of the financial markets certainly highlighted the importance of trust. This lack of trust arose because there was lack of transparency amongst all the key stakeholders: the banks, the regulators and policy makers. In order to build trust it is

    important for all the stakeholders to improve transparency. While it is not possible for banks to share specific details for competitive reasons, it is nevertheless critical for these financial institutions to recognize that they are custodians of the livelihood of many hundreds of thousands of individuals. The trust that many individuals and small businesses place in the banks puts the onus on the banks to be responsible stewards. Financial institutions can build trust by proactively educating individuals on the potential risks of different investment options. They also have to be transparent regarding any potential conflicts of interest. They also have the obligation to ensure that they properly align incentives in such a way that their employees are focused on the long-run financial health of their customers.

    Regulators and policy makers should also take steps to ensure a high degree of transparency. They must act in the best interests of the economy and not merely respond to the lobbying efforts of various vested interests.

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