Skip to main content
Log in

Trustworthiness, Governance, and Wealth Creation

  • Published:
Journal of Business Ethics Aims and scope Submit manuscript

Abstract

Although trustworthiness has been described as a source of competitive advantage, its value extends to organizational governance and wealth creation. We identify the importance of the commitment–compliance continuum in the decision to trust and note that trustworthiness is a subjective perception viewed through each person’s mediating lens. That lens and each person’s interpretation of the social contract impact one’s commitment to cooperate. We suggest five propositions that integrate trustworthiness, governance, and wealth creation.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  • Arjoon, S., (1998). “Virtue Theory as a Dynamic Theory of Business.” Journal of Business Ethics, Vol. 28, Iss. 2, p. 159-178.

    Article  Google Scholar 

  • Barnard, C. I., (1938). The Functions of the Executive. Cambridge: The Harvard Press.

    Google Scholar 

  • Barney, J. B., (1991). “Firm Resources and Sustained Competitive Advantage.” Journal of Management, Vol. 17: pp. 99-120.

    Article  Google Scholar 

  • Barney, J. B., and Hansen, M. H., (1994). “Trustworthiness as a Source of Competitive Advantage.” Strategic Management Journal, Vol. 15, pp. 175-190.

    Article  Google Scholar 

  • Barney, J. B., and Zajac, E. J., (1994). “Competitive Organizational Behavior: Toward an Organizationally Based Theory of Competitive Advantage.” Strategic Management Journal, Vol. 15, pp. 5-9.

    Article  Google Scholar 

  • Bews, N. F., and Rossouw, G. J., (2002). “A Role for Business Ethics in Facilitating Trustworthiness.” Journal of Business Ethics, Vol. 39, Iss. 4, pp. 377-390.

    Article  Google Scholar 

  • Block, P., (1993). Stewardship: Choosing Service over Self-Interest. San Francisco: Berrett: Koehler Publishers.

    Google Scholar 

  • Bradenburg, D. C., and Ellinger, A. D., (2003). “The Future: Just-In-Time Learning Expectations and Potential Implications for Human Resource Development.” Advances in Developing Human Resources, Vol. 5, Iss. 3, pp. 308-320.

    Article  Google Scholar 

  • Brady, F. N. (1999). “A Systematic Approach to Teaching Ethics in Business.” Journal of Business Ethics, Vol. 19, Iss. 3, pp. 309-318.

    Article  Google Scholar 

  • Brandes, P., R. Dharwadkar and K. Wheatley: 2004, `Social Exchanges Within Organizations and Work Outcomes: The Importance of Local and Global Relationships', Group & Organization Management 29(3), 276–301

  • Burke, P. J., (1997). “An Identity Model for Social Exchange.” American Sociological Review, Vol. 62, Iss. 1, pp. 134-150.

    Article  Google Scholar 

  • Burns, J. M., (2010). Leadership. New York: Harper.

    Google Scholar 

  • Butler, J.K.,(1991). “Toward Understanding and Measuring Conditions of Trust: Evolution of a Conditions of Trust Inventory.” Journal of Management, Vol. 17, pp. 643-663.

    Article  Google Scholar 

  • Butler, J. K., & Cantrell, R. S. (1984). “A Behavioral Decision Theory Approach to Modeling Dyadic Trust in Superiors and Subordinates.” Psychological Reports, Vol. 55: pp.19-28.

    Google Scholar 

  • Caldwell, C., Bischoff, S. J., Karri, R., (2002). “The Four Umpires: A Paradigm for Ethical Leadership,” Journal of Business Ethics, Vol. 36, pp. 153-163.

    Article  Google Scholar 

  • Caldwell, C., and Clapham, S. E., (2003). “Organizational Trustworthiness: An International Perspective,” Journal of Business Ethics, Vol. 47, Iss. 4, pp. 349-364.

    Article  Google Scholar 

  • Caldwell, C., Davis, B, and Devine, J., (2009). “Trust, Faith, and Betrayal: Insights from Management for the Wise Believer.” Journal of Business Ethics, Vol. 84, Sup. 1, pp. 103-114.

    Article  Google Scholar 

  • Caldwell, C., and Hayes, L., (2007). “Leadership, Trustworthiness, and the Mediating Lens.” Journal of Management Development. Vol. 26, Iss. 3, pp. 261-278.

    Article  Google Scholar 

  • Caldwell, C., Hayes, L., Karri, R., and Bernal, P., (2008). “Ethical Stewardship: The Role of Leadership Behavior and Perceived Trustworthiness.” Journal of Business Ethics, Vol. 78, Iss. 1/2, pp. 153-164.

    Article  Google Scholar 

  • Caldwell, C., and Karri, R., (2005). “Organizational Governance and Ethical Systems: A Covenantal Approach to Building Trust.” Journal of Business Ethics, Vol. 58, Iss. 1, pp. 249-259.

    Article  Google Scholar 

  • Cameron, K., (2003a), “Organizational Virtuousness and Performance.” In Positive Organizational Scholarship: Foundations of a New Discipline (Kim S. Cameron, Jane E. Dutton, and Robert E. Quinn eds.), San Francisco: Berrett-Koehler Publishers, pp. 48-65.

    Google Scholar 

  • Cameron, K. S. (2003b). “Ethics, Virtuousness, and Constant Change.” In N. M. Tichy, and A. R. McGill (Eds.) The Ethical Challenge: How to Lead with Unyielding Integrity. San Francisco, CA: Jossey-Bass, pp. 185-194.

    Google Scholar 

  • Cameron, K. S., Dutton, J. E., and Quinn, R. E., (2003). Positive Organizational Scholarship: Foundations of a New Discipline. San Francisco, CA: Berrett-Koehler Publishers.

    Google Scholar 

  • Carroll, A. B., (1996). Business and Society: Ethics and Stakeholder Management. Cincinnati: OH: South-Western College Publishing.

    Google Scholar 

  • Carver, C. S. and Scheier, M. F. (1998). On the Self-Regulation of Behavior. Cambridge, U.K.: Cambridge University Press.

    Google Scholar 

  • Castro, C. B., Amario, E. M., and Ruiz, D. M., (2004). “The Influence of Employee Organizational Citizenship Behavior on Customer Loyalty.” International Journal of Service Industry Management, Vol. 15, Iss. 1, pp. 27-53.

    Article  Google Scholar 

  • Chang, M. K. (1998). “Predicting Unethical Behavior: A Comparison of the Theory of Reasoned Action and the Theory of Planned Behavior.” Journal of Business Ethics, Vol. 17, Iss. 16, pp. 1825 – 1834.

    Article  Google Scholar 

  • Chaudhuri, A., Khan, S. A., Lakshmiratan, A., Py, A. L., and Shah, L., (2003). “Trust and Trustworthiness in a Sequential Bargaining Game.” Journal of Behavioral Decision Making, Vol. 18, Iss. 5, pp. 331-340.

    Article  Google Scholar 

  • Chemers, M. M., (1999). An Integrative Theory of Leadership. Mahwah, NJ: Lawrence Erlbaum Assoc.

    Google Scholar 

  • Christensen, C. M. and Raynor, M. E., (2003) The Innovator’s Solution: Creating and Sustaining Successful Growth. Cambridge, MA: Harvard Business Press.

    Google Scholar 

  • Collins, J. C., (2001). Good to Great: Why Some Companies Make the Leap and Others Don’t. New York: Harper-Collins.

    Google Scholar 

  • Collins, J. C., and Porras, J. I. (1994). Built to Last: Successful Habits of Visionary Companies. New York: Harper Business.

    Google Scholar 

  • Covey, S. R. (2004.) The 8th Habit: From Effectiveness to Greatness. New York: Free Press.

    Google Scholar 

  • Coyle-Shapiro, J. A., Morrow, P. C., Richardson, R., and Dunn, S. R., (2002). “Using Profit Sharing to Enhance Employee Attitudes: A Longitudinal Examination on the Effects on Trust and Commitment.” Human Resource Management, Vol. 41, Iss. 4, pp. 423-439.

    Article  Google Scholar 

  • Creed, W. E. D., and Miles, R. E. (1996). “Trust in Organizations: A Conceptual Framework Linking Organizational Forms, Managerial Philosophies, and the Opportunity Costs of Controls,” in R. M. Kramer and T. R. Tyler, Trust in Organizations: Frontiers of Theory and Research, pp. 16-38. Thousand Oaks, CA: Sage.

    Google Scholar 

  • Deluga, R. J., (1994). “Supervision Trust Building, Leader-Member Exchange and Organizational Citizenship Behaviour.” Journal of Occupational & Organizational Psychology, Vol. 67, Iss. 4, pp. 315-326.

    Google Scholar 

  • Deluga, R. J., (1998). “Leader-Member Exchange Quality and Effectiveness Ratings.” Group and Organization Management, Vol. 23, Iss. 2, pp. 189-216.

    Article  Google Scholar 

  • Deming, W. E. (1986). Out of the Crisis. Cambridge: Massachusetts Institute of Technology Press.

    Google Scholar 

  • DePree, M. (2004). Leadership is an Art. New York: Broadway Business.

    Google Scholar 

  • Dirks, K. T., and Ferrin, D. L., (2002). “Trust in Leadership: Meta-Analytic Findings and Implications for Research and Practice.” Journal of Applied Psychology, Vol. 87, Iss. 4, pp. 611-628.

    Article  Google Scholar 

  • Donaldson, T. and Dunfee, T. W. (1999). Ties That Bind: A Social Contracts Approach to Business Ethics. Boston, MA: Harvard Business School Press.

    Google Scholar 

  • Dunegan, K. J., Uhl-Bien, M., and Duchon, D., (2002). “LMX and Subordinate Performance: The Moderating Effects of Task Characteristics.” Journal of Business and Psychology, Vol. 17, Iss. 2, pp. 275-285.

    Article  Google Scholar 

  • Dunfee, T., (2006). “A Critical Perspective of Integrative Social Contracts Theory: Recurring Criticisms and Next Generation Research Topics.” Journal of Business Ethics, Vol. 68, Iss. 3, pp. 303-328.

    Article  Google Scholar 

  • Fishbein, M. and Ajzen, I. (1975). Belief, Attitude, Intention, and Behavior: An Introduction to Theory and Research. Reading, MA: Addison-Wesley.

    Google Scholar 

  • Fiske, S. T. and S. E. Taylor: 1991, Social Cognition (McGraw-Hill, New York)

  • Galford, R. and Drapeau, A. S., (2003). “The Enemies of Trust.” Harvard Business Review, Vol. 81, Iss. 2, pp. 12-13.

    Google Scholar 

  • Giffin, K. (1967). “The Contribution of Studies of Source Credibility in a Communication Department,” Psychological Bulletin, Vol. 68. pp. 104-120.

    Article  Google Scholar 

  • Goldenberg, G.: 2002, ‘Moses L. Pava, Business Ethicist: Greed is not Good’, Yeshiva University Review Summer, 3–6.

  • Hayes, L. E. and C. Caldwell: in press, ‘Leadership, Trustworthiness, and Ethical Stewardship’, Journal of Business Ethics

  • Heinen, J. S., and O’Neill, C. (2004). “Managing Talent to Maximize Performance.” Employee Relations Today, Vol. 31, Iss. 2, p. 67.

    Article  Google Scholar 

  • Hitt, M. A., Ireland, R. D., and Hoskisson, R. E., (2009). Strategic Management Concepts: Competitiveness and Globalization (8th Edition). Mason, OH: South-Western.

    Google Scholar 

  • Hosmer, L. T., (1995). “Trust: The Connecting Link between Organizational Theory and Behavior.” Academy of Management Review, Vol. 20 Iss. 2, pp. 379-404.

    Article  Google Scholar 

  • Hosmer, L. T., (2007). The Ethics of Management (Fifth Edition). Chicago: Irwin.

    Google Scholar 

  • Huselid, M. A., (1995) “The Impact of Human Resource Management Practices on Perceptions of Organizational Performance.” Academy of Management Journal, Vol. 39, Iss. 4, pp. 949-969.

    Google Scholar 

  • Husted, B. W., and Folger, R., (2004). “Fairness and Transaction Costs: The Contribution of Organizational Justice Theory to an Integrative Model of Economic Organization.” Organization Science: A Journal of the Institute of Management Sciences, Vol. 15, No. 6, pp. 719-729.

    Article  Google Scholar 

  • Inkpen, A. C., and Currall, S. C., (2004). “The Coevolution of Trust, Control, and Learning in Joint Ventures.” Organization Science: A Journal of the Institute of Management Sciences, Vol. 15, No. 5, pp. 586-599.

    Article  Google Scholar 

  • Ireland, R. D., Hitt, M. A., Camp, S. M., and Sexton, D. L, (2001). “Integrating Entrepreneurship and Strategic Management Actions to Create Firm Wealth.” Academy of Management Executive, Vol. 15, Iss. 1, pp. 49-63.

    Google Scholar 

  • Jannsen, O. and Van Yperen, N. W., (2004). “Employees’ Goal Orientations, the Quality of Leader-Member Exchange, and the Outcomes of Job Performance and Job Satisfaction.” Academy of Management Journal, Vol. 47, Iss. 3, pp. 368-384.

    Article  Google Scholar 

  • Kay, J., (1995). Why Firms Succeed. Oxford: Oxford University Press.

    Google Scholar 

  • Kee, H. W. & Knox, R. E. (1970). “Conceptual and Methodological Considerations in the Study of Trust.” Journal of Conflict Resolution. Vol. 14, pp. 957-966.

    Article  Google Scholar 

  • Kim, W. C., and Mauborgne, R., (2003). “Fair Process: Managing in the Knowledge Economy.” Harvard Business Review, Vol. 81, Iss. 1, pp 127-136.

    Google Scholar 

  • Koehn, D. (1997). “Business and Game Playing: The False Analogy,” Journal of Business Ethics, Vol. 16, Iss. 12/13. pp. 1447-1452.

    Article  Google Scholar 

  • Kouzes, J. M., and Posner, B. Z., (2003). Credibility: How Leaders Gain and Lose It, Why People Demand It (2nd Edition). San Francisco, CA: Wiley & Sons.

    Google Scholar 

  • Koys, D. J., (2001). “The Effects of Employee Satisfaction, Organizational Citizenship Behavior, and Turnover on Organizational Effectiveness: A Unit-Level Longitudinal Study.” Personnel Psychology, Vol. 54, Iss. 1, pp. 101-114.

    Article  Google Scholar 

  • Kramer. R. M., and Tyler, T. R., (1996). Trust in Organizations: Frontiers of Theory and Research, pp. 357-389. Thousand Oaks, CA: Sage.

    Google Scholar 

  • Lewicki, R. J., McAllister, D. J., and Bies, R. J., (1998). “Trust and Distrust: New Relationships and Realities.” Academy of Management Review, Vol. 23, Iss. 3, pp. 438-458.

    Article  Google Scholar 

  • Lewicki, R. J., and Stevenson, (1997). “Trust Development in Negotiation: Proposed Actions and a Research Agenda.” Business and Professional Ethics Journal, Vol. 16, Iss. 1-3, pp. 99-132.

    Google Scholar 

  • Lippman, S., and Rumelt, R., (1982). “Uncertain Irritability: An Analysis of Interfirm Differences in Efficiency under Competition.” Bell Journal of Economics, Vol. 13, pp. 418-438.

    Article  Google Scholar 

  • Mayer, R. C., J. H. Davis and F. D. Schoorman: 1995, ‘An Integration Model of Organizational Trust’, Academy of Management Review 20(3), pp. 709–729.

    Article  Google Scholar 

  • McAllister, D. J. (1995). “Affect- and Cognition-Based Trust as Foundations for Interpersonal Cooperation in Organizations. “Academy of Management Journal, Vol. 38. Iss. 1, pp. 24-59.

    Article  Google Scholar 

  • McClusky, J. E., (2002). “Rethinking Non-Profit Organization Governance: Implications for Management and Leadership.” International Journal of Public Administration, Vol. 25, Iss. 4., pp. 539-559.

    Article  Google Scholar 

  • McFall, L., (1987). “Integrity”. Ethics Vol. 98. p. 5-20.

    Article  Google Scholar 

  • McLean, B. and P. Elkind: 2004, The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron (Penguin Group, New York)

  • Morrison, E. W., and Robinson, S. L., (1997). “When Employees Feel Betrayed: A Model of How Psychological Contract Violation Develops.” Academy of Management Review, Vol. 22, Iss. 1, pp. 226-256.

    Article  Google Scholar 

  • O’Regan, N., and Ghobadian, A. (2004). “Short-term and Long-term Performance in Manufacturing SMEs: Different Targets, Different Drivers.” International Journal of Productivity and Performance Management, Vol. 53, Is 5/6, pp. 405-422.

    Article  Google Scholar 

  • Organ, D. W., (1988). Organizational Citizenship Behavior: The Good Soldier Syndrome. Lexington, MA: Lexington Books.

    Google Scholar 

  • Paine, L. S., (2003). Value Shift : Why Companies Must Merge Social and Financial Imperatives to Achieve Superior Performance. New York, NY : McGraw-Hill.

    Google Scholar 

  • Pava, M., (2003). Leading with Meaning: Using Covenantal Leadership to Build a Better Organization. New York: Palgrave Macmillan.

    Google Scholar 

  • Pfeffer, J. (1998). The Human Equation: Building Profits by Putting People First. Boston: Harvard Business School Press.

    Google Scholar 

  • Podsakoff, P. M., MacKenzie, S. B., Paine, J. B., and Bachrach, D. G., (2000). “Organizational Citizenship Behaviors: A Critical Review of the Theoretical and Empirical Literature and Suggestions for Future Research.” Journal of Management, Vol. 26, Iss. 3, pp. 513-563.

    Article  Google Scholar 

  • Poppo, L., and Zenger, T., (2002). “Do Formal Contracts and Relational Governance Function as Substitutes of Complements?” Strategic Management Journal, Vol. 23, Iss. 8, pp. 707-723.

    Article  Google Scholar 

  • Porter, M. E., (1998) Competitive Advantage: Creating and Sustaining Superior Performance, New York: Free Press.

    Google Scholar 

  • Post, J. E., Preston, L. E., and Sachs, S., (2002). Redefining the Corporation: Stakeholder Management and Organizational Wealth. Stanford, CA: Stanford University Press.

    Google Scholar 

  • Primeaux, P., Karri, R., and Caldwell, C. (2003). “Cultural Insights to Organizational Justice – A Preliminary Perspective.” Journal of Business Ethics, Vol. 46, Issue 2, pp. 187-199.

    Article  Google Scholar 

  • Quinn, R. E., (2005). Moments of Greatness: Entering the Fundamental State of Leadership.” Harvard Business Review, Vol. 83, Iss. 7/8, pp. 74-83.

    Google Scholar 

  • Reed, R., and DeFillippi, R. J., (1990). “Causal Ambiguity, Barriers to Imitation, and Sustainable Competitive Advantage.” Academy of Management Review, Vol. 15, Iss. 1, pp. 88-102.

    Article  Google Scholar 

  • Ross, A M. (2002). “The Principle of Prosperity.” Executive Excellence, Vol. 19, Iss. 10, pp. 19.

    Google Scholar 

  • Rousseau, D. M (1995). Psychological Contracts in OrganizationsUnderstanding Written and Unwritten Agreements. Thousand Oaks, CA: Sage Publications.

    Google Scholar 

  • Rousseau, D. M., (2004). “Research Edge: Psychological Contracts in the Workplace: Understanding the Ties that Motivate.” Academy of Management Executive, Vol. 28, Iss. 1, pp. 120-127.

    Google Scholar 

  • Rowe, W. G., (2001). “Creating Wealth in Organizations: The Role of Strategic Leadership.” Academy of Management Executive, Vol. 15, Iss. 1, pp. 81-94.

    Google Scholar 

  • Schein, E.H., (2004). Organizational Culture and Leadership. San Francisco: Jossey-Bass.

    Google Scholar 

  • Schoorman, F. D., Mayer, R. C., and Davis, J. H., (2007). “An Integrative Model of Organizational Trust: Past, Present, and Future.” Academy of Management Review, Vol. 32, No. 2, pp. 344-354.

    Google Scholar 

  • Selznick, P. (1992). The Moral Commonwealth: Social Theory and The Promise of Community. Berkely, CA: University of California Press.

    Google Scholar 

  • Senge, P. M., (1997). “Communities of Leaders and Learners.” Harvard Business Review, Vol. 75, Iss. 5, pp. 30-31.

    Google Scholar 

  • Senge, P. M., (2006). The Fifth Discipline: The Art & Practice of the Learning Organization. New York: Doubleday.

    Google Scholar 

  • Simon, D. G. and M. A. Hitt: 2003, `Managing Resources: Linking Unique Resources, Management, and Wealth Creation in Family Firms', Entrepreneurship: Theory & Practice 27(4), 339–358

  • Solomon, R. C. (1992). Ethics and Excellence: Cooperation and Integrity in Business. New York: Oxford University Press.

    Google Scholar 

  • Steensma, H. K., and Corley, K. G., (2001). “Organizational Context as a Moderator of Theories on Firm Boundaries for Technology Sourcing.” Academy of Management Journal, Vol. 44, Iss. 2, pp. 271-291.

    Article  Google Scholar 

  • Steinberg, R. M., and Pojunis, D. (2000). “Corporate Governance: The New Frontier.” Internal Auditor, Vol. 57, Iss. 6, pp. 34-39.

    Google Scholar 

  • Wech, B. A., (2002). “Trust Context: Effect on Organizational Citizenship Behavior, Supervisory Fairness, and Job Satisfaction: Beyond the Influence of Leader-Member Exchange.” Business and Society, Vol. 41, Iss. 3, pp. 353-360.

    Article  Google Scholar 

  • Weick, K. E., (1979). The Social Psychology of Organizing. Reading, MA: Addison-Wesley Pub.

    Google Scholar 

  • Weick, K. E., (1993). “The Collapse of Sense-making in Organizations: The Mann-Gulch Disaster.” Administrative Science Quarterly, Vol. 38, Iss. 4, pp. 628-652.

    Article  Google Scholar 

  • Weick, K. E., (2008). “Trust: A Bigger Picture.” Academy of Management Review, Vol. 33, Iss. 1, pp. 271-274.

    Google Scholar 

  • Wicks, A.C., Berman, S. L., and Jones, T. M., (1999). “The Structure of Optimal Trust: Moral and Strategic Implications.” Academy of Management Review, Vol. 24, Iss. 1, pp. 99-117.

    Article  Google Scholar 

  • Williamson, O. E., (1975). Markets and Hierarchies, Analysis and Antitrust Implications: A Study in the Economics of Internal Organization. New York: Free Press.

    Google Scholar 

  • Williamson, O. E., (1985). The Economic Institutions of Capitalism: Firms, Markets, Relational Contracting. New York: Free Press.

    Google Scholar 

  • Williamson, O. E., (1991). “Strategizing, Economizing, and Economic Organization.” Strategic Management Journal, Vol. 12, pp. 75-94.

    Article  Google Scholar 

  • Williamson, O. E. (1993). “Calculativeness, Trust, and Economic Organization.” Journal of Law and Economics, Vol. 36, Iss. 1, pp. 453-472.

    Article  Google Scholar 

  • Woodruffe, C.: 2004, ‘The Psychology of Leadership: Six Main Approaches’, Training Journal Oct., 54–57.

Download references

Author information

Authors and Affiliations

Authors

Corresponding author

Correspondence to Cam Caldwell.

Rights and permissions

Reprints and permissions

About this article

Cite this article

Caldwell, C., Hansen, M.H. Trustworthiness, Governance, and Wealth Creation. J Bus Ethics 97, 173–188 (2010). https://doi.org/10.1007/s10551-010-0503-4

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s10551-010-0503-4

Keywords

Navigation