Trust is one of the most valuable assets in any society. It is the foundation upon which markets function, institutions operate and citizens engage with both government and business. Yet across many democracies, public confidence in large corporations has weakened significantly over the past two decades. The reasons are not difficult to identify: financial scandals, corporate misconduct, excessive executive remuneration, regulatory failures and a growing perception that some organisations place profits ahead of people.
John Kay's recent book, The Corporation in the 21st Century, offers a timely reflection on this challenge. His central argument is both simple and profound: modern businesses succeed not because of their physical assets or financial engineering, but because of their capabilities, relationships, reputation and the trust they inspire among stakeholders. When these foundations are undermined, both business performance and public confidence suffer.
The business of trust
This insight should resonate strongly in Malta.
Our economy has undergone a remarkable transformation over recent decades. We have become a service-based economy, attracting investment in financial services, gaming, aviation, technology and professional sectors. Increasingly, the value generated by businesses stems not from machinery or property but from knowledge, expertise, innovation and human capital. In such an environment, ethical conduct is not a peripheral concern. It is a strategic necessity.
Kay challenges the doctrine that dominated corporate thinking for much of the late twentieth century: the belief that the sole purpose of business is to maximise shareholder value. While profitability remains essential, he argues that businesses prosper when they focus first on serving customers, developing employees, innovating responsibly and contributing positively to society. Profit is the outcome of success, not its sole purpose.
Governance beyond compliance
This principle has important implications for governance.
Good governance is often discussed in terms of rules, compliance frameworks and reporting obligations. These are undoubtedly important. However, governance ultimately depends upon culture. An organisation can comply with every formal requirement while still fostering behaviours that undermine ethical standards. Conversely, companies with strong values often make sound decisions even in situations where regulations provide limited guidance.
The distinction matters because many of the most damaging corporate failures were not caused by a lack of rules. They resulted from failures of judgement and leadership.
The global financial crisis of 2008 illustrated this reality. Numerous institutions operated within existing regulatory frameworks yet engaged in practices that proved disastrous for clients, investors and the wider economy. More recently, corporate scandals involving misleading disclosures, unsafe products and unethical sales practices have demonstrated that legal compliance alone cannot guarantee responsible conduct.
For policymakers, regulators and business leaders alike, the lesson is clear: governance must extend beyond compliance towards cultivating ethical responsibility.
Malta has a particular interest in this discussion. As a small jurisdiction competing internationally, our reputation matters enormously. Investors, businesses and international partners assess not only our economic performance but also the quality of our institutions, regulatory credibility and commitment to transparency.
Reputation is difficult to build and easy to lose.
In an increasingly interconnected world, governance failures can quickly become international headlines. Conversely, strong governance frameworks enhance competitiveness by creating certainty, stability and confidence. Ethical business environments attract long-term investment because they reduce risk and promote sustainable growth.
This is why debates about governance should never be viewed as obstacles to economic development. Properly understood, they are essential enablers of development.
Profit, purpose and responsibility
The same applies to the relationship between business and politics. Public confidence is strengthened when clear boundaries exist between commercial interests and public decision-making. Transparency, accountability and effective oversight protect both democratic institutions and legitimate business activity. They ensure that success is earned through innovation, quality and competitiveness rather than privileged access or undue influence.
At the same time, business itself has responsibilities that extend beyond legal obligations.
Modern corporations depend upon a broad network of stakeholders: employees, customers, suppliers, communities and investors. Sustainable success requires maintaining the trust of all these groups. Businesses that neglect employee welfare, ignore customer interests or disregard social responsibilities may achieve short-term gains but often damage their long-term prospects.
Indeed, some of the world's most respected companies built their success on precisely the opposite philosophy. They recognised that ethical conduct and commercial success are not competing objectives. They are mutually reinforcing.
This perspective is particularly relevant at a time when public expectations are evolving. Consumers increasingly seek transparency. Employees, especially younger generations, want to work for organisations whose values they respect. Investors are paying greater attention to governance and long-term sustainability. Companies that fail to adapt risk losing their competitive advantage.
The challenge therefore extends beyond corporate boardrooms. It requires a broader societal commitment to ethical leadership, beginning with education.
Educating the leaders of tomorrow
If we want better governance and more ethical business, we must begin long before individuals reach the boardroom or Parliament. Schools, universities and professional institutions should equip young people not only with technical knowledge and entrepreneurial skills, but also with an understanding of responsibility, integrity and the consequences of decisions.
As Kay's analysis suggests, successful organisations depend increasingly on collective knowledge, relationships and professional judgement. Education should therefore prepare future leaders to understand that success is not measured simply by profit or personal advancement, but by the value they create for others and the trust they earn. Ethics should not be taught merely as a regulatory requirement; it should be understood as a fundamental component of professional excellence and public service.
A culture of ethical leadership is not imposed overnight through regulation. It is developed through education, example and the standards we choose to uphold as a society. This is why schools, universities, professional bodies and public institutions all have an important role in promoting integrity, responsibility and civic values.
As parliamentarians, we too have responsibilities in this regard. The standards we establish through legislation, oversight and public conduct help shape the environment within which businesses operate. By strengthening transparency, supporting robust institutions and promoting accountability, we contribute to a culture where ethical behaviour is rewarded rather than disadvantaged.
Ultimately, the health of any economy depends upon trust. Trust enables investment, encourages innovation, facilitates cooperation and strengthens social cohesion. Without it, even the most sophisticated regulatory frameworks struggle to achieve their objectives.
John Kay reminds us that successful organisations are built on relationships, reputation and shared purpose. The same is true of successful societies. For Malta, the path to sustainable prosperity lies not merely in economic growth but in strengthening the ethical foundations that make growth possible.
Governance and business ethics are therefore not abstract concepts. They are practical necessities for a resilient economy, a competitive business environment and a society in which citizens can place confidence in both institutions and enterprise.
That is a goal worth pursuing.
Jerome Caruana Cilia, PN MP and Shadow Minister for Education and Citizenship