This is the fifth edition of the OECD Business and Finance Outlook, an annual publication that presents unique data and analysis on the trends, both positive and negative, that are shaping tomorrow’s world of business, finance and investment. Using analysis from a wide range of perspectives, this year’s edition considers the importance of public trust in business and finance, offering a conceptual approach to understanding facets of trust in finance, investment and business with respect to economic value, fairness and integrity of conduct, as well as alignment with societal values. The Outlook provides an assessment of factors that contributed to a deterioration of trust during the Global Financial Crisis; reviews recent developments that could contribute to a renewed erosion of trust; and, offers policy considerations to help strengthen public trust in business and finance. These findings will contribute to the work of the newly-created OECD Trust in Business Initiative (www.oecd.org/corporate/trust-business.htm).

Trust underwrites every one of our economic relationships. From everyday commerce to the provision of credit, from long-term investment in infrastructure to the sustainable management of pensions, it is the invisible foundation of a fair and open market.

Following the global financial crisis, public trust in governments, corporates, financial markets and financial institutions in many parts of the world declined as societies across many OECD countries experienced an erosion of economic wellbeing. As governments used unprecedented policy tools – including monetary, fiscal, regulatory, structural measures– to restore stability and growth, surveys have shown evidence of a gradual improvement in public trust.

Trust is a basic element for the well-functioning of institutions, including governments, markets and businesses, and for society more broadly. In the decade since the global financial crisis, many policies and initiatives have been designed to help restore trust at national and global levels. However, the backlashes against globalisation and mounting protectionism trends mean that questions remain about whether enough has been done by public and private stakeholders to support healthy trust in the financial and business landscape. And, if not, what can be done to address remaining concerns?

This chapter considers trust in financial markets by exploring factors that contribute to public trust in markets, post-crisis developments that have contributed to help ameliorate the loss in public trust provoked by the financial crisis, and potential risks to the financial sector that could erode trust in the future. The chapter considers developments in sovereign, corporate and bank debt markets, and the potential for unexpected losses from high leverage in less benign macro and market conditions. It also explores the growth and benefits of market-based finance, and considers whether structural features of certain products could contribute to market risks and amplification of stress in less liquid fixed-income markets.

Population ageing, low returns on retirement savings, low growth, less stable employment careers, and insufficient pension coverage among some groups of workers: These trends have eroded the belief that pension systems are managed with workers’ best interests in mind and that they will deliver on their promises, once workers reach retirement age. This chapter considers three policy objectives to win back trust in financial institutions: promoting prudent pension management and supporting pension funds’ fiduciary duties; enhancing financial consumer protection; and addressing environmental and social risks.

A key pillar of trust in business is the belief that companies conduct their operations —at a minimum—in compliance with the law. This chapter investigates this premise and finds that companies will be more likely to prevent crime and to cooperate in the detection and resolution of cases if the law provides compelling incentives for them to do so. Legal systems change slowly but Parties to the Anti-Bribery Convention have made significant progress over the last 20 years in creating such incentives and are continuing to build the legal frameworks needed to enforce laws covering economic crime.The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law.*

Chapter 4 applies a broad definition of “level playing field”, which is taken to indicate different treatment of state-owned enterprises (SOEs) in the competitive landscape, with respect to corruption and other irregular practices, as well as the conduct of SOEs active in foreign jurisdictions. It demonstrates that SOEs active in certain sectors – notably steel production – tend to be less profitable than private peers, yet less likely to go out of business. Similarly, SOEs appear to have a heightened risk of getting involved in some forms of corruption, but they are less likely than private companies to divest from certain projects or disengage from business partners due to integrity concerns. The chapter finally takes stock of ongoing OECD initiatives that either aim directly at, or could have as an outcome, raising trust in state-owned enterprises and their commercial operations.

Online markets offer a host of benefits for consumers through innovative and low-cost products. However, online markets can only fulfil their potential if they benefit from consumer trust. Where product information is hard to obtain and assess, markets may not respond to consumer needs. Consumers may be forced to rely on imprecise indicators of quality—such as brand names—to establish trust. This, in turn, limits firms’ incentives to improve their offering and deters new entrants. In other cases, consumers may be deterred from using online markets altogether. Establishing an environment of trust in online markets requires multidisciplinary (and often cross-border) approaches from authorities charged with ensuring fair competition, consumer protection, and data protection, as well as other regulators. This chapter considers the benefits and risks associated with online markets from the perspective of trust.