Trust and the Interplay of Confidence and Accountability

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By Byron Loflin, VP, Global Head of Board Advisory, Nasdaq

Trust is presently on the decline in many areas of our world. In the intricate sphere of public-company management, confidence and accountability are two pillars that underpin sustainable success. Nowhere is this dynamic more crucial than in banking, in which trust and transparency dictate relationships with stakeholders and drive key performance metrics, including total shareholder return (TSR) and talent retention.

During the past 15 years, I have interviewed roughly 1,000 board members and chief executive officers (CEOs) on the topic of board effectiveness. This article explores the importance of confidence and accountability, their interplay within board and management leadership, and the broader implications of a bank’s stakeholder relationships with a focus on business sustainability, talent retention and TSR.

The 25th Annual Edelman Trust Barometer Report, released on January 21, 2025, in Davos, Switzerland (World Economic Forum’s annual meeting), highlights some concerning trends in trust, further emphasizing the need for the qualities of confidence and accountability. Looking across 28 countries, Edelman found again that Business was the only institution clearly considered both ethical and competent, with Government and Media continuing to be seen as neither. In fact, Business saw a 19-point increase in its net ethical score, from -2 to +17 since 2020—a huge jump (Page 24). This should not prompt complacency among directors.

Within its report, Edelman subtly emphasized trustworthiness as both an opportunity and an advantage for businesses. While the report did not specifically break out banking from other business sectors, financial services experienced a two-point improvement over 2024 (Page 47).

Confidence: a foundation for success

Confidence reinforces public trust and stakeholder faith in a company’s ability to deliver on promises, achieve growth and maintain stability. For banks, as custodians of public funds, this confidence is indispensable. Customers, investors and other stakeholders trust banks to safeguard deposits, deliver predictable returns and maintain systemic stability.

Confidence in a public company arises from several factors:

1. Strong leadership: Leadership integrity, vision and decisiveness inspire confidence in the board and management.
2. Transparent communication: Clear, honest and timely communication about challenges, opportunities and strategic direction fosters trust.
3. Consistent performance: Delivering on financial targets, such as earnings growth and return on equity (ROE), reassures investors and other stakeholders.

In banking, confidence has ripple effects across the industry. The 2008 financial crisis, for instance, demonstrated how quickly a loss of confidence in one institution can destabilize the entire system, resulting in widespread business failures. Banks must, therefore, ensure that their management teams and boards consistently exhibit competence and reliability.

Accountability: the balancing force

While confidence drives trust and positive sentiment, accountability ensures actions align with expectations. Accountability in public-company management refers to leaders’ obligation to act transparently, answer for their decisions and remain aligned with stakeholders’ interests. For boards and management teams, accountability involves balancing short-term goals, such as quarterly earnings, with long-term objectives, such as sustainable growth and risk management.

Mechanisms of accountability

Accountability in public companies is reinforced through:

1. Corporate governance: Boards of directors oversee corporate vision and strategy, ensure effective leadership and provide stewardship continuity over the long term.
2. Stakeholder engagement: Reliability of communication with employees, investors and other stakeholders holds leadership accountable for both messaging and actions.
3. Smart regulatory oversight: The banking regulatory system is designed to ensure compliance with laws, safeguard customer interests and mitigate systemic risks. It’s important that improvements to the system remain dynamic and forward-looking.

Accountability is essential for maintaining trust, particularly when leadership decisions have far-reaching consequences. For example, when a bank faces a cyberattack or a non-systemic financial scandal, transparent disclosures and corrective actions signal accountability and help rebuild stakeholder trust.

The interplay between confidence and accountability

Confidence and accountability are inherently interconnected. Confidence without accountability risks complacency, mismanagement or ethical lapses. Conversely, accountability without confidence may result in…