Building Trust in Corporations

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Abstract
The paper identifies three necessary conditions for investors and other stakeholders to trust companies and how such conditions might be met. First, directors require systemic processes for obtaining information independently of management on the strengths, weaknesses, opportunities and threats in both management and the business. Second, directors require sufficient security of tenure to provide them with the will to act. Third, directors require the capability to act alone, if required, to protect the interests of the company as a whole. The paper outlines how these conditions could be met with corporate constitutions that create a division of power among shareholders with corporate officers being elected in different ways. In addition, shareholders would constitutionally provide employees, customers and suppliers, including the host community, voice to advise directors and themselves on the performance of management and the business independently of management and provide a systemic process for detecting when trust in management might be misplaced.

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