Dennis Nally remarks during the International Insights Panel at the World Business Forum 2009

Good morning.

It's great to be with you. And thank you for having me here.

Today I want to talk about something that I think is really important to sustain our economic recovery.

(pause)

And that is how we begin to restore confidence and rebuild trust.

A common result of an economic crisis as severe as the one we're going through is a loss of trust at nearly every level:

• Governments don't trust business …

• Countries point the finger at each other about who caused the crisis …

• And the innocent public -- those who endured the most harm -- understandably don't trust anybody.

When trust erodes not only does investment grind to a halt …

…but also the dialogue and collaboration about how countries can work together to make things easier for consumers and investors ceases as well.

We see evidence of this right now …

… Constructive dialogues about developing a single set of global reporting standards

And about how fair value should be used --

Get side-tracked, and end up fueling suspicion, versus solving a problem.

But unless a much higher level of trust is restored, I am convinced that the process of recovery and repair will continue slowly and remain incomplete.

But how do we get people to trust each other again?

I believe it won't happen until there is more openness and more transparency.

I am optimistic, however.

Because if there is any silver lining from this severe recession, it's the rethinking that's now taking place.

I believe this has the potential to shift our focus beyond finger-pointing to root causes.

Further, when this happens, it will quickly spark a dialogue about transparency in its broadest sense ...

… Beyond financial reporting … into fundamental behavior that impacts companies across territories and jurisdictions.

(pause)

I recently experienced an example of how important the transparency dialogue may become.

Just three weeks ago, I attended a forum in Russia where I participated in a panel with prime minister Putin.

He was interested in attracting foreign investment to Sochi -- a resort area in Russia that will host the winter Olympics in 2014, but will require millions in order to prepare for the games.

The moderator of the panel asked me one question:

What advice could you offer the prime minister for attracting investment to Russia and to Sochi?

My answer may have caused some surprise -- because of what I didn't say.

I didn't say "more government guarantees or backing."

… and I didn't say "new investor protection laws or regulations."

I said, "Mr. Prime minister, what is most needed is greater transparency."

I said this because I believe transparency is the lifeblood of investment.

Only when investors have accurate and reliable information, can they understand risks and opportunities.

And once they do, investment will follow.

(pause)

But there is more: transparency and trust make possible other good things ... Specifically, convergence and simplification of standards, rules, and laws.

Multiple sets of rules not only add to the expense of complying, but also complicate decision-making.

Historically, both businesses and investors have insisted on simplifying them.

"why," they asked, "should profits be determined one way in Europe and another way in the us.?"

Yet despite the fact that nobody has a very good answer to such questions ...

…the financial crisis has effectively caused us to suspend an otherwise helpful dialogue around convergence.

Of course I realize how difficult the last two years have been. Many businesses had to focus on nothing else but survival.

But things are now beginning to change.

We're getting more optimistic reports about the global economy … as well as about our own economy here in the U.S.

• according to the most recent update from the international monetary fund, global activity is forecast to expand by two and one-half percent in 2010.

• the Peterson institute for international economics thinks that may be too modest:

they're predicting more than four percent growth in real global gdp next year.

• and in the U.S., federal reserve chairman Bernanke has declared that the recession has "very likely" ended.

These statements seem to me to indicate that the world economy has started to turn around.

I think we have reached the point when we can stop re-examining the past …. And begin to look forward to the future.

I have no doubt that we're going to hit some more bumps along the road to recovery.

But we must not let that keep us from advancing our long-term agenda, where transparency and convergence become priorities again.

Now is an appropriate time to restart the dialogue on transparency that we were having before the global crisis occurred.

In fact, the crisis provides an additional reason for doing so: it has forced us to recognize how interdependent businesses are around the globe.

To succeed in such a connected world requires ever more transparency among businesses, financial institutions, governments, and investors.

There must be agreement on the most important elements of standards and regulations.

As a global investor, for example, you want to know that standards in one part of the world are consistent with those in other parts.

This simply makes it easier and cheaper to understand investment risks and opportunities -- whether in Sochi or Singapore.

(pause)

To understand why we must have convergence, consider what happens when you don't have it.

The controversy over mark-to-market or fair value accounting provides a good example of the harm that can result when dialogue breaks down.

Now I'm sure there are different points of view in this room on the appropriateness of fair value accounting …

…but let me summarize -- and simplify -- a very complicated issue to illustrate where I think this debate now stands.

One side of the argument asserts that fair value is the only way to achieve true transparency …

…the only way, for example, to ensure things like the value of impaired assets are properly and consistently disclosed to investors.

The other side holds that fair value is based so heavily on unpredictable future events that it undermines measuring near term economic performance.

And of course it didn't help when this debate became politicized, with each side -- in some cases -- ridiculing the position of the other.

The truth is that both sides make valid points … but we will never reach a sensible result unless the dialogue is more collaborative and constructive.

(pause)

Contrast that example with the more constructive discussion around IFRS -- the international financial reporting standards.

IFRS provides a set of high-quality global standards that reduce the unnecessary complexity that exists with multiple financial reporting languages.

Among the several benefits of IFRS convergence are that:

• it helps achieve greater global comparability;

• it improves investors' ability to assess options across a full spectrum of globally available securities;

• it broadens accessibility of cross-border capital;

• and it generates process and cost efficiencies for multinational issuers.

That is the kind of convergence that we need.

As I said, investor confidence and trust will develop only if there is more transparency around the risks and rewards associated with making investments ...

… and IFRS helps do that.

Examples like that convince me that we owe it to investors to do a much better job at driving globalization of standards and regulations.

(pause)

The only way to achieve meaningful transparency and convergence is to resume the collaborative conversations that were taking place before the financial crisis occurred.

These robust dialogues must include business-to-business discussions … business-to-government … and government-to-government.

Let's take a moment to consider each of those categories.

We again have very encouraging data from our 12th annual global CEO survey on both business-to-business and business-to-government dialogues.

More than half of our 1,100 CEOs say they are collaborating with each of their most important stakeholder groups.

• seventy-five percent are collaborating with customers and clients … supply chain partners .. And their own employees.

• more than fifty percent are collaborating with governments and regulators … and with their local communities.

They are engaging their stakeholders in frank, open dialogues … learning how possible regulations and standards could affect both parties.

Government-to-government dialogues -- the third category -- have received much attention over the last year.

Delegates from both emerging and developed nations have met for serious discussions under the auspices of such organizations as the IMF, the united nations, and -- most recently -- the g-20.

Because of the potential compulsory nature and wide scope of any agreements at that level, it is essential that advocates of transparency and convergence be at the table.

collaboration among informed business people and government representatives will be essential to ensure that agreements on standards and regulations help…

…but equally important, do not hurt the fragile recovery that our global markets are now experiencing.

Collaboration will be necessary for achieving the transparency and convergence that will drive our global economy to sustained growth.

(pause)

So as I wrap up this morning, let me pose a challenge for all of us.

Sustained economic recovery will not come unless all of us focus on restoring trust.

And to me... This means more transparency and collaboration at every single level.

I hope you agree this is a worthy goal, and that each of you in this room will be committed to it.

Thank you.