Business leaders need to build trust

Jan 29 2010 by Brian Amble Print This Article

If companies think that they can simply go back to "business as unusual" in the post-recession world, they should think again. In Europe and the US, at least, a sceptical public now view trust and transparency as more important than the quality of a company's products and services.

After falling to historic lows in 2009, trust in business has shown a modest recovery over the past year, according to the annual Edelman Trust Barometer. But the rebound is only thanks to a spike in a handful of Western countries, notably the United States, where it jumped 18 points to 54 per cent.

While trust in business remains high - above 60 percent – in Brazil, India, and China, the overall rise is tenuous, with nearly 70 per cent believing that business and financial companies will revert to "business as usual" after the recession.

Richard Edelman, Edelman CEO, said that the increase in trust in business belies its fragility.

"There is concern that short-term actions have been taken only as a result of the crisis and that government will need to remain a watchdog. Companies will have to prove the sceptics wrong and show they can achieve both profit and purpose."

While trust might not be much of an issue for bankers in China, where banks are the most trusted sector, or India, where they rank second after technology companies, it certainly ought to worry those in Europe and the US.

In the US, for example, trust in banks has fallen from 68 percent to 29 per cent since 2007 in the United States. Only media and insurance companies rank lower internationally. In the UK, trust fell from 41 per cent in 2007 to just 21 per cent today.

And it's not just bankers who are mistrusted. Trust in the media is falling around the world with the credibility of print, radio and TV journalism on the wane everywhere.

But whatever the sector, as far as consumers in Europe ands the US are concerned, trust and transparency are now more important to corporate reputation than the quality of products and services and far outrank financial returns, which sits at or near the bottom of 10 criteria in all regions.

Just how far perceptions have changed can be gauged by the fact in 2006, Americans placed financial performance in third place on a list of 10 attributes shaping trust in business.

"We're seeing a vastly different set of factors driving reputation than we did 10 years ago. Trust is now an essential line of business to be developed and delivered," said Richard Edelman.

"CEOs who embrace this new line of business called trust have seen their credibility rise," he added. "Stakeholders are beyond placing blame. They are looking for leaders who will deliver performance, communicate frequently and honestly, and consider the role of business in society."

Just how many CEOs understand this new reality, however, is a moot point. In the US, UK and Germany, for example, more than 70 per cent of those surveyed said that actions such as firing non-performing managers, repaying bailout money or reducing the pay gap between senior executives and rank and file workers would help to restore their trust in a company.

But as PricewaterhouseCoopers' Annual Global CEO Survey, also published this week shows, many business leaders seem unable or unwilling to grasp this simple message.

The PwC survey found that not only do six out of 10 CEOs in banking and capital markets even accept that trust in their industry has declined as a result of the recession, but fewer than a third of CEOs who recognised a decline in public trust said they were changing their compensation practices in response.

So while we can expect plenty of talk from companies about trust over the next year, those that actually take substantive steps to rebuild it might be rather thinner on the ground.