Danese 2 February

Trust and trustworthiness in experimental organizations
Monday 2 February 2015, 2pm
Room 6, Department of Sociology and Social Research – via Verdi 26, Trento
Dr. Giuseppe Danese – Universidade Católica Portuguesa
Prof. Luigi Mittone – Università di Trento
In this paper we discuss two instruments through which corporate law attempts to promote trust and trustworthiness in business
organizations: (i) monitoring of the manager by a principal, as in the agency approach; (ii) moral suasion, as in the approach according
to which managers are “fiduciaries”. We present the results of a laboratory experiment designed to investigate the effectiveness of
these two instruments in promoting: (i) profitable, but at the same time risky, entrustments of assets to a manager from a group of
investors earning their endowment through real effort; (ii) a higher payback for those investors who entrust more assets to the
manager. The first is a measure of trust of the investors in the manager, while the second is a measure of the manager’s
We find that moral suasion increases the investors’ trust. Monitoring also increases the investors’ trust, but only in the case in which the
manager is not aware of the experimental identity of his/her principal. The manager is trustworthy up to a certain degree, regardless of
the governance structure of the organization and of the accuracy with which she observes each investor’s entrustment. Finally, we find
a modest positive effect of noise on trust, but no strong effect of noise on effort or trustworthiness.
JEL classification system: K22, C92, L21