Human Values and Social Impact: Can Trust Exist Without Accountability?

Editor's Note: This is the fifth post in a six-part series examining the Supreme Court’s 2010 “Citizens United” decision that affirmed the legality of treating corporations as persons. Using JPMorgan Chase as an example, Donald J. Munro of the University of Michigan focuses on how certain human moral values and some corporate behaviors are incompatible. You can follow the whole series here. 

By Donald J. Munro

Trust is a state of mind in which an individual expects benefits from another person or organization to which she gives something of value, while understanding that the other person could possibly cheat her. For example, a candidate for office may tell me that he will support policy X. I trust him. I believe in his integrity. He gets my vote. But then he is in a position to vote for policy Y, to my detriment. The candidate gets an advantage -- my vote -- which helps get him in office. But he does not have to give back any benefit to me.

At first, I believe in the integrity of the other person. My trust is enhanced by transparency in relevant actions and in sharing relevant information. Trust is essential for non-coercive relations between the leaders and the led. It promotes cooperation and enables people to have some justified foresight regarding matters of concern. The cooperative behavior is reinforced in part because trust is pleasurable, measured at the objective level by examining the oxytocin and dopamine levels of trusting parties.

Cooperation involves some conformity with group rules, which results in predictable, consistent behavior. Among the reasons people seek it is that is that it reduces stress and provides a sense of being in control of situations. Evidence of this can be found by measuring levels of the hormone cortisol.

Scientists have investigated the association of stress and levels of hormones; they have found elevated levels of cortisol in people who are under stress. Thus they have been able to demonstrate that people engaged in cooperative behaviors have less cortisol — less stress — than people engaged in non-cooperative behaviors, whose cortisol levels are higher than normal. In this sense, cooperation can be said to foster group evolutionary survival.

Can there be a trust relationship when the purchaser of a home loan does not know who owns the mortgage? Before large investment banks got into commercial banking, the mortgage holder was a local bank in which the loan officer was likely to know the borrower. This ended with the advent of bundling together many home loans (including risky ones) into mortgage-backed securities, sold as a profit to hedge funds. These are CDOs or “Collateralized Debt Obligations.” Obviously, in this situation the home owner does not know who carries his mortgage and has no way of figuring out whom to trust.

The record of JPMorgan Chase

1. A group of 10 mortgage services, including JPMorgan Chase, agreed on Jan. 7, 2013 to pay a total of $8.5 billion to end a review of housing crisis foreclosures. There had been allegations of robo-signed documents and faulty foreclosures. [GMIRatings]

2. On May 10, 2013, the attorney general of California sued JPMorgan Chase, charging that the company falsely signed documents to collect credit card debt from about 100,000 people. He accused the company of the illegal robo-signing of legal documents, without reviewing bank records or even reading the documents before signing. [GMIRatings]

Can there be trust when there is no accountability? In September, 2013, JPMorgan Chase agreed to pay $920 million to settle civil allegations brought by the Securities and Exchange Commission and other regulators due to the London Whale case.

But where is the money coming from to pay that “record fine”? As Andrew Ross Sorkin pointed out in the New York Times, the answer is: the shareholders, who already were victims of the scandal.

Next: Learning and foresight

Image credit: Flickr/epicharmus

Donald J. Munro is professor emeritus of philosophy and Chinese at the University of Michigan. Munro connects venerable philosophical traditions to modern scientific discoveries, always with a concern for the ethics of human action. His books include The Concept of Man in Contemporary China, Images of Human Nature: A Song Portrait, and Individualism and Holism: Studies in Confucian and Taoist Values. In recent years he has been the Ch’ien Mu Lecturer in Chinese History and Culture (2006) and the Tang Junyi Visiting Professor (2009) at the Chinese University of Hong Kong. He is a founding member of the Interfaith Partnership for political Action (ippa.us).