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Part of the Solution: Restoring the Public Trust

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Confidence in executives, elected officials is badly damaged. Fix it.

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Editor's Note: Sandy Charet heads up Charet and Associates. For over 20 years, the firm has been placing executives and senior executives at countless companies and organizations around the US, including in many Fortune 500 companies. Sandy is married and the mother of 3.

The bedrock of any recovery will be ethical as well as technical.

Alan Greenspan recently spoke about the essential need for trust in any commercial system: Only this, along with confidence in the counter-party and in the administration of the law, allows a system of trade to function. Contracts, banking, insurance: All assume that our fellow citizens are trustworthy, willing to do their jobs, and willing to honor their ethical obligations.

Recent events have shown that violations of trust can bring the economy to a grinding halt. It is our human capital that failed us: When someone is entrusted with a role -- be it that of worker, executive, or regulator -- in a functioning society, he or she is implicitly entrusted with specific ethical responsibilities. There's an assumption that that person will take reasonable responsibility for that job, and will make an honest attempt to deliver the goods without burning down the store, cheating customers, or poisoning anybody.

There is, of course, some spectrum of expectation: At one end is criminal (i.e. Let's steal all we can, from whoever we can); at the other, we have the paragon, who's doing everything possible to deliver the best possible product in the most expeditious, cheerful, and socially responsible manner.

From a human capital viewpoint, each individual hire contributes to the tone and standards of the group as a whole. Put a disgruntled cook in the kitchen of a restaurant run by indifferent management - and it's very easy to predict what will come out of that kitchen. Put a highly social, energetic, and skilled chef in there, with a management that tirelessly strives for the best, and out comes something very different.

The acceptance of any job should include the acceptance of the ethical responsibilities that come along with it - a commitment to performing one's duties with concern for both the social and economic good. The group expects that everyone will perform this way. Prosperity follows.

From a human capital point of view, the executives in charge of our banking and insurance system failed to do their jobs. They abdicated responsibility, both commercially and socially. They were, in fact, bad employees.

Those charged with setting the standards of conduct for our society failed to do their jobs as well. The regulators, ratings agencies, boards of directors, and government officials were also bad employees. Human resources (that function of our society charged with managing human capital) failed us dismally; like the credit system, it cannot, in its current state, materially contribute to our recovery.

From a human capital point of view, it was actually quite easy to predict the arrival of this perfect storm; the only reason it was obscured is because too many were no longer personally determined to earn trust by doing their jobs well and with pride.

The American electorate just fired the guy who held the top job. There's no fixing the system until ethical standards are repaired all the way down the line. No recovery is possible without the understanding that a job is a trust, and must be done as well as one can possibly do it, and with the common good in mind. Throwing money at the credit markets just isn't going to work.

Fixing the environment, putting people back to work, setting a moral standard for the rest of the world, bringing trust back to the credit markets - these all require the rehabilitation of Grandpa Ruby's ethical standards. Nothing else will work.
No positions in stocks mentioned.

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