Thirty years ago this year, Francis Fukuyama penned his seminal study on, Trust: The Social Virtues & the Creation of Prosperity. Opening with the observation that nearly all political questions revolve around economic ones, he noted that economic questions, in turn, are “grounded in social life.” This social life, Fukuyama added — from its most basic right up through all of our shared civil society — must in turn “be nourished through an increased awareness and respect for culture.”
And if our political, economic, and social interests are collectively bound up in questions of culture, Fukuyama insisted, then “a nation’s well-being, as well as its ability to compete, is conditioned by a single, pervasive cultural characteristic: the level of trust inherent in the society.”
With this conclusion, Fukuyama helped to launch a flurry of academic inquiries into the relationship between how we organize ourselves — our public institutions and private organizations, our polities, and our shared international systems — in order to optimize for prosperity by optimizing for trust.
Only five years after the publication of Fukuyama’s lastingly important work, Richard Edelman, of the public affairs firm that bears his name, observed that we seemed to be suffering from a deficit of trust in our most essential institutions. He launched the Edelman Trust Barometer — an ongoing annual survey project — to gauge shifts in the levels of trust among those institutions across time, and to try and map out the causal drivers of its seeming erosion.
Now in its 25th year, the series traces a depressingly southward arc towards a “Crisis of Grievance” that provides endless fodder for the news headlines. Today, trust in our most essential institutions is at a nadir — and people are angry.
“Sixty-one percent globally have a moderate or high sense of grievance,” Edelman reports, “defined by a belief that government and business make their lives harder.”1 Worryingly, some 40 percent of those surveyed approve the use of hostile action to drive change — a sentiment rising to over 50 percent among the young.
In Trust, Fukuyama described culture as “inherited ethical habits” that shape all aspects of human behavior, including economic behavior. Cultures that promote widely shared social trust promote widely shared prosperity — and the reverse is also true.
“Earning and retaining trust is essential for public policy to be effective,” Agustín Carstens argued in a speech last month2 — one of the last he’ll give in his capacity as General Manager of the Bank for International Settlements before turning over the reins to past Governor of the Bank of Spain, Pablo Hernández de Cos, who takes up the post from July this year. By marking out the importance of trust, Carstens signals the task ahead for his successor
Carstens discussed trust in terms of “society’s expectation that public authorities will act predictably in the pursuit of predefined objectives and that they will succeed in their task,” observing that “It is much easier to make the necessary changes in a dynamic and uncertain environment if the public trusts policymakers and their policies.” Trust, in short, “underpins the effectiveness and legitimacy of policies,” and when it is lost, “the capacity to make effective public policies disappears.”
“We are in a crisis of trust today,” Fukuyama warns in the opening Preamble to this report. “The loss of social trust constitutes one of the greatest weaknesses of modern liberal democracies,” Fukuyama argues here.
And for the reasons Agustín Carstens highlights above, among others, restoring it must become an immediate policy priority. If this is to be achieved, then we are pointed towards questions of culture as a first order interest. So why, then, do discussions of culture not inform public policy debates more visibly?
“Economists, believing themselves to be the most hardheaded of social scientists, generally dislike dealing with the concept of culture,” Fukuyama complained in Trust. He attributed this to the fact that culture “is not susceptible to simple definition and hence cannot serve as the basis for a clear model of human behavior” — at least not as neatly as is permitted by the economists’ preferred view of humans as ‘rational utility maximizers,’ as it goes in the discipline’s jargon.
But a reluctance to grapple with culture is a crippling error. “A rich and complex civil society does not arise inevitably out of the logic of advanced industrialization,” Fukuyama insisted thirty years ago. It rests “on a bedrock of social and cultural habits that are too often taken for granted.” The trust crisis described here by Fukuyama, Edelman, and our many other contributors, suggests that we can no longer take these salutary habits for granted — and that it is perilous to do so.
There is a difference — crucial, structural — between that which is merely problematic and that which is deemed a problem.
That which is ‘problematic’ is a discomfort to be endured. It is tolerated. It lingers. It is handled through accommodation and workaround. It is sensed but not solved, discussed but not defined. That which is problematic is something you learn to live with.
But a ‘problem’ presumes tractability. It invites intervention. It demands that we name it, measure it, and manage it. When we call something a “problem,” we’ve accepted the frameset for a solution, we presume that solutions are to be found, and we seek them out.
I am a 60-year-old man this year, and my lower back regularly aches. I treat it with a mix of exercise, stretching, the occasional massage, and regular ibuprofen. It’s problematic, to be sure, but I’ve learned to live with it and to accept that it simply comes with the territory.
But when I cleverly dropped a 45-pound weight-plate on my foot in the gym, breaking it in several places, I sought a cure. And the curative path for that injury is well-traced, with an established set of steps I was able to follow, carrying me toward a solution: renewed skeletal load-bearing integrity.
As this series of reports has chronicled, financial sector regulators have concluded, with some degree of unanimity, that organizational culture is a matter of supervisory significance. But their relevant rhetoric has gone unmatched by any specific guidance. And while insisting that it is not for them to be prescriptive regarding culture cures, they’ve warned firms and their leaders that they will be held personally accountable for culture related risk governance lapses.
In practice, that is, while the global regulatory community has been content to treat culture as something problematic, they have insisted that the firms they oversee treat culture as a problem.
Today’s supervisory frameworks for culture default to familiar heuristics — “tone from the top,” “leadership commitment,” “values alignment,” “effective challenge” — without ever establishing whether these proxies track to observable outcomes, as is merely presumed. Firms, meanwhile, are expected to evidence an ability to manage that which regulators have not clearly defined.
Changing this will involve problematization: the process by which assumptions are surfaced, and causal mechanisms are made visible. This is not semantics: to treat culture as a problem is to move it from the realm of abstraction into the domain of discipline. Problematization is a prerequisite step for solution design, testing, application, and refinement.3
Through problematization we translate vague culture questions into rigorous operational inquiries: What patterns of behavior are being reinforced in an organization? Through what systems of reward, hierarchy, and information flow? Where are the gaps between stated values and actual incentives? Regardless of what they say, what do people actually do, and what performance outcomes can we thus anticipate? Who serve as reliable conduits of cultural contagion, for good or ill? And through what identifiable levers can we drive operational outcomes in desired directions?
Without the translation into tractability that problematization fosters, management interventions are guess-work. A new code of conduct, revised compensation metrics, updated training modules — none of these are likely to address the root causes of culture-driven operational misalignments. And repeated reliance on such flaccid measures over time, without demonstrable effect, erodes credibility — both inside the firm and within the supervisory architecture to which it must conform.
Without problematizing culture, relevant governance and supervisory efforts remain reactive, symbolic, or structurally misaligned, culture continues to be invoked but indistinct, and terming something a “culture problem” is effectively a tacit admission of “resigned impotence.”
Now in its 8th year, the Starling Compendium continues to chronicle global efforts to grapple with the challenge of culture risk governance and supervision.
In keeping with our past reports, you will find here deeply informed perspectives offered by leading figures from officialdom and industry bodies who have contributed to an IN FOCUS series of inserts. Readers will also find articles and interviews by renowned scholars in a series of inserts from THE ACADEMY. This is complemented by GOOD COUNSEL offered by legal scholars and practicing attorneys. Our GROUND BREAKERS series profiles remarkable leaders who have been kind enough to share their relevant experience and the hard-won wisdom it affords. And we continue to curate provocative PEER PERSPECTIVES from prominent figures outside the financial sector. We are humbled by their collective generosity and hope that our 2025 Compendium is found to be as valuable to readers as its predecessors.
As in past editions, the main body of this report discusses relevant events and priorities in evidence across the world’s major markets over the course of the last year. Where we had organized that material by different geographies in past reports, this year we instead follow the thematic narrative outlined in our Top Ten Takeaways. We hope that makes the report easier to navigate.
Those wishing to be regularly informed about global events of relevance to the topics we consider here may choose to sign up for the on-going series of Weekly Readings offered through our thrice weekly online newsletter, as well as our occasional DEEPER DIVE whitepapers, which expand upon topics discussed more briefly herein. And a quick reminder that all of these materials, and more, are available at STARLING INSIGHTS our searchable peer knowledge exchange platform. See STARLING INSIGHTS
The 2025 Starling Compendium is dedicated to our friend Jim Hennessy, who led the governance and culture reform program at the NY Fed for a decade. “The problems caused by weak cultures can be larger than any single firm, regulator, or jurisdiction,” Jim rightly reminds in our 2020 Compendium.
The work he led thus aimed “to help the industry understand how and why norms take root within a group, and to learn about how to influence human behavior to achieve better outcomes.”
Sadly, in our last conversation regarding these topics, Jim cautioned me regarding an element of “culture fatigue” that he had come to perceive in the global supervisory discourse. Lest we risk alienating an audience that had grown weary of the topic, Jim lamented — an audience that seemed resigned to culture as a matter that is at once important and yet intractable — he advised that we might be better off if we were to drop reference to “culture” in our own work altogether.
This I steadfastly reject.
Those who might complain of “culture fatigue” would do well to consider what this implies. For to dismiss culture as tiresome is, in effect, to register fatigue with the very conditions that permit for prosperity. And it is to demonstrate an ill appreciation for the shared norms, the social trust, and the institutional legitimacy that underpin capitalism and democracy.
Cultural dynamics supportive of mutual trust form the basis of all collaborative endeavor, and therefore set the preconditions for capital formation, for market functioning, and for the productive risk-taking that lies behind innovation and all of the advancements and social goods this affords.
A culture that promotes “inherited ethical habits” of mutual trust is what allows for democratic governance to persist when consensus breaks down. That work cannot be abandoned. Not because it is fashionable — but because it is foundational to all we claim to hold dear.
Most sensible people will acknowledge this. So I would argue that what people have called “culture fatigue” isn’t really about culture at all. It’s about exhaustion from ambiguity without remedy, compliance without coherence, and supervision without definition. This is obfuscation fatigue.
And it makes the work we do here that much more important, as I hope you’ll agree.
Join The Discussion