When not to trust the handshake
- Schalk Mouton and Jeff Mosala
Trust in corporates is imperative. The global economy relies on it. Yet, large corporations are often extremely conservative in how they manage crises.
Schalk Mouton asked Jeff Mosala, Senior Lecturer in the µÚÒ»³Ô¹ÏÍø School of Accountancy with a strong financial accounting and ethics background, how corporates hinder clients’ trust.
What is trust?
Trust plays a crucial role in human interactions and relationships. It is often defined as a confident expectation that a person will act in ways that consider another’s welfare and will honour obligations. This expectation supports coordination in interdependent relationships but also increases vulnerability. It allows individuals to act in the face of uncertainty and manage risk. While trust is the willingness to depend on another party, trustworthiness refers to the perceived ability, integrity and benevolence of that party. However, trust is a complex phenomenon that spans disciplines and encompasses both dispositional traits and situational states that evolve over time.
Why is it important to build trust into corporate structures?
Building trust into corporate structures fosters strong stakeholder relationships, long‑term success and organisational resilience. It underpins effective stakeholder engagement by ensuring that stakeholders feel valued, informed and confident in the organisation. In e‑commerce, trust is built through secure transactions, transparent communication and reliable service delivery, which encourages repeat business and customer retention. This is essential for sustained profitability and reputation. In addition, trustworthy corporate governance practices foster accountability and credibility.
How do you build trust in these systems?
Corporate trust-building is multidimensional, requiring tailored strategies for different stakeholder groups and contexts. Reputation management, behavioural consistency and transparent communication are foundational but must be adapted to sectoral and cultural nuances, as trust components vary in importance across contexts. For instance, collectivist cultures emphasise relational trust, whereas individualist cultures focus on competence and privacy, and trust may evolve from calculative to cognitive to affective forms.
What erodes trust?
Trust is inherently fragile and is eroded through mechanisms such as negative publicity, lack of transparency, poorly managed disclosures, product tampering or liability issues, which damage perceived integrity, competence and benevolence. The Trust Erosion Framework is like soil erosion, proceeding through detachment (initial breach), transportation (spread of distrust) and deposition (entrenchment of distrust). Perceived hypocrisy, unethical behaviours and lack of transparency initiate and sustain trust erosion.
What would happen if trust in the national/global corporate and financial systems implodes?
The result would likely be a profound and multifaceted crisis.
Economically, credit markets would freeze, businesses could face severe contraction and long-term structural downturns might occur, such as those seen in the 2007-2009 financial crisis, among others.
Politically, the collapse would fuel populism, protectionism and a breakdown of trust in governmental and regulatory institutions.
Socially, widespread uncertainty and instability would erode both interpersonal and institutional trust, necessitating comprehensive strategies encompassing regulatory reforms, leadership changes and robust resilience measures to eventually restore stakeholder confidence.
Past collapses including the panic of 1907 exposed banking failures and in the United States, reaction included the enactment of the Sarbanes-Oxley Act and post-2008 reforms, including Basel III (a set of international banking regulations), the Financial Stability Oversight Council and improvements to asset management regulations.
What recent events are examples of a lack of corporate concern and transparency?
In South Africa, large financial institutions in the banking sector and key public bodies have suffered attacks in which criminal actors accessed client or citizen data and, in some cases, demanded a ransom to prevent its public release. In several instances, customers were informed only in broad terms that a “security incident” had occurred, with limited clarity about the nature and extent of the breach.
Internationally, breaches affecting cloud and database environments across the broader enterprise‑software and data‑management industry have compromised large volumes of customer information. Here, too, public communication has often been carefully managed, with limited disclosure on root causes, the full scope of the data exposed and the long‑term implications for affected users.
Why do institutions choose not to be transparent?
Across both the South African and global contexts, a common pattern is emerging. Institutions respond in ways that prioritise damage control and legal compliance over proactive, detailed disclosure. Many organisations attempt to strike a balance between portraying themselves as open and trustworthy and using information transparency to attract customers, with the potential risk of losing customers due to negative perceptions associated with certain disclosures. The impact of negative incidents on organisations includes financial losses, regulatory risk and reputational damage.
Yet customers maintain their relationships with the same organisation, rarely terminating their accounts - why? Existing research, although largely focused on various dimensions of product and price transparency, shows that excessive communication about data disclosure practices may discourage customers. This may be because consumers do not wish to be constantly reminded of the potential misuse of their personal information as they may already be subconsciously aware of such risks.
In addition, consumers with strong emotional ties to a brand are more likely to overlook corporate misconduct. Their trust is influenced by how they attribute responsibility for crises and by their assessment of the legitimacy of corporate actions, which are embedded in social networks. These structures can either buffer against or amplify trust erosion.
However, be wary: over time, as per the Trust Erosion Framework, mistrust could have already gone way beyond the “initial breach” and is now deeply entrenched, requiring significant evidence of redress before institutional trust is regained.
- Schalk Mouton is Senior Communications Officer at µÚÒ»³Ô¹ÏÍø University.
- This article first appeared in CURIOS.TY, a research magazine produced by  and the .
- Read more in the 21st issue, themed #Trust — the invisible glue binding society, science and technology.