Fixing the Trust Deficit
Stanford GSB Dean Jon Levin writes about the relationship between corporations and political institutions for Stanford Business magazine.
This letter from the dean was published in the digital-only edition of Stanford Business in December 2020.
At Stanford, we have a long tradition of engaging with the biggest issues at the intersection of business, government, and society.
In early December, Stanford GSB hosted a major conference on Corporations and Democracy. With virtual technology, we had hundreds of participants from around the world.
In the United States, it is often possible to take for granted the political institutions that underpin business and economic activity: the rule of law, the enforcement of contracts, the regulatory state, even democracy itself. Yet modern corporations and competitive markets exist only because of these institutions.
The reliance runs both ways. In providing jobs, driving innovation, and fostering improvements in standards of living, corporations strengthen the social contract that sustains political institutions. In the U.S., corporations are responsible for over three-quarters of technology investment, R&D investment, and labor productivity growth. They are the engine that has enabled the American economy to lead the world.
Corporations also shape our political institutions. They affect legislation and regulation through the political process. They influence political attitudes and beliefs. More generally, virtually all business decisions, depending on how they are made, have the potential to increase or decrease trust in how our overall economic and political system functions.
Today, we face a deficit of trust. The deficit has many contributing factors: concerns about economic opportunity, political division, a lack of faith in government to tackle big problems or even to execute basic functions. It is remarkable, and deeply concerning, that more than a third of Americans believe we failed to carry out a free and fair democratic election this fall. The skepticism about political institutions is matched by concerns about our economic system. In the latest Edelman Trust Barometer, more than half of global respondents reported that capitalism does more harm than good.
The trust deficit demands the attention of business schools. We seek to educate business leaders who take seriously their social responsibility, and to illuminate and improve, through our ideas, the functioning of business and the rules that govern business. These goals are fundamental.
In the last few years at the GSB, we have re-energized our efforts in this area through new courses, programs, and research. The Corporations and Society Initiative, which began four years ago under the leadership of Professor Anat Admati, and is now co-led by Paul Pfleiderer, is a crucial part of that effort. It hosted the December conference as the culmination of a full quarter of events. Professor Brian Lowery has been developing a new program, the Leadership for Society Scholars, to encourage MBA students to spend time at the GSB engaging with major societal challenges. During the pandemic and in the run-up to this fall’s election, it has been especially inspiring to see GSB students up their level of civic engagement.
The school’s potential to inform and improve both business and government was exemplified by Professor Eddie Lazear, who passed away in November. Eddie was a distinguished scholar and beloved teacher who also served at the highest levels of government. He chaired President George W. Bush’s Council of Economic Advisors, helping to shape the country’s response to the financial crisis. He was a firm believer in the power of business to raise standards of living, while keenly appreciating the role of government in addressing market failures. Eddie taught generations of GSB students about markets and innovation, and about public policy.
The events of this fall — from our recent conference to our remembrances of Eddie Lazear, to our engagement around the election — epitomize the GSB’s ability to have a positive impact at the intersection of business and government. It is within our power to help shape an economic system that is fueled by innovation and growth and that generates broad opportunity — and to contribute to a political system capable of addressing challenges that the market alone cannot solve.