A new approach should ensure a clear articulation of corporate values which must be enshrined into governance so that wider stakeholders can trust performance. Alternative governance approaches can be adopted including through Articles of Association or introducing a Trust Board to uphold corporate values. Each company should evaluate what it needs to do to fundamentally rebuild trust with stakeholders; the public mood suggests in all cases this needs to be quite radical
Healthy relationships are built on trust not contracts or regulation. But why should any stakeholder - government, employee, supplier - trust an infrastructure company? And is that trust for the long term; can anyone be confident that corporate values of today will be consistently upheld?
If the owners of infrastructure and management are driven by short term objectives and pressures; share price, maximising shareholder returns, increasing apparent earnings; then how confident can anyone be that the company will behave in ways not detrimental to other stakeholders and the long-term health of the infrastructure assets?
The answer lies in Trusted Infrastructure Companies putting in place structural reasons why that long-term trust is merited; a demonstration of intent to stakeholders. Its stewardship of public infrastructure is valid if it can give clarity of what the company stands for, its social values and long-term objectives and how, institutionally (not by fine words), these will be upheld and not be over-shadowed by short term pressures.
To build trust, it is important that trusted behaviour is enshrined in governance; how the company is structured and monitored that ensures it will respect those overriding values. There are several ways this could be done. For instance:
• Articles of Association - Writing social objectives into the Articles of a company, so institutionalising how it will work. For instance, The Green Deal Finance Company ('TGDFC'), set up to finance Government's national home energy efficiency programme, was established with Articles that defined its strategy to provide low cost finance to everyone, at one price. This inclusive policy flies in the face of normal lending practices, where the individual should be charged at a rate that reflects their personal credit rating. But by constraining itself to these social principles, TGDFC gained cross industry support, with public and private sector members. Its governance led to that support.
Actually, despite not differentiating by credit history, its bad loan experience proved to be exemplary; the social good of energy efficiency seemed to attract the best bill payers.
• Trust Board - under this structure, a company articulates the principles it stands for and elects a Trust Board above the executive management, to hold them to account to meeting those principles. This approach is described in detail in Professor Colin Mayer's excellent book Firm Commitment - Why the corporation is failing us and how to restore trust in it. A key part of the trust company is a trust board made up of individuals that engender trust; that stakeholders would believe will uphold those values. Numerous examples of successful trust companies exist; the BBC is obviously one that has successfully combined a successful business with upholding its broadcasting values; or Siemens, with its Supervisory Board, more representative of a European stakeholder-focused approach, or the Tata group, with trust boards and philanthropy baked into its corporate structure.
• Partnership - By definition partnerships are less susceptible to short term pressures (but not wholly exempt). The more inclusive the partnership, the more its employees are involved and invest in its long-term future and customers can see the values for which it stands; the highly successful and admired John Lewis being the most cited example.
There is no one size fits all; what trust model a company might adopt needs to suit its particular industry and circumstances. But if you run a company where trust is low (as it now is in infrastructure, to the extent that it is fundamentally to the detriment of the business and the future of the sector), then could adopting a radically new approach change your relationship with regulators, government and the public?
This paper suggests that without the combination of adopting low cost of capital models for new infrastructure and new governance for all infrastructure to address the fundamental decline in trust in private ownership of infrastructure, the existential threat to the industry will not go away.