After a year in which the global economy crashed and stories of corporate malfeasance filled the front pages, nearly two-thirds of informed publics (62 percent) trust corporations less than they did a year ago, according to the 10th Edelman Trust Barometer. When respondents in the United States were asked about trust in business in general, only 38 percent said they trust business to do what is right—a 20 percent plunge since last year—and only 17 percent said they trust information from a company’s CEO.
Both are lower levels of trust than those Edelman measured in the wakes of Enron, the dot-com bust, and the events of September 11.
“It has been a catastrophic year for business, well beyond the evident destruction in shareholder value and need for emergency government funding,” says Richard Edelman, president and CEO, Edelman. “Our survey confirms that it’s going to be harder to rebuild our economies because no institution has captured the trust that business has lost—trust is not a zero-sum game.
“Business must recast its role in society and move beyond simply generating ROI to its shareholders. It must partner with government and other institutions to assume societal responsibilities.”
This decline in trust has real-life consequences for business. More than three in four (77 percent) said they refused to buy products or services from a company they distrusted—the first time the survey explored people’s direct actions toward trusted and distrusted companies. Almost as many (72 percent) criticized a distrusted company to a friend or colleague.
And by a three-to-one margin, respondents say that government should intervene to regulate industry or nationalize companies to restore public trust.
In the major Western European economies of the U.K, France, and Germany, three-quarters say that government should step in to prevent future financial crises (73 percent, 75 percent, and 74 percent, respectively); and even in the United States—traditionally more supportive of the free market—not even half (49 percent) say that the free market should be allowed to function independently.
Globally, the call for government intervention also extends to issues like energy costs, global warming, and access to affordable healthcare, as respondents, by at least a two-to-one margin, say government has the primary responsibility for solving these issues. But business must collaborate: two-thirds (66 percent) expect business to partner with governments and advocacy groups to solve these issues.
And this demand for government intervention persists despite the fact that government—which failed to intervene to regulate the worst excesses of the market—scored lower trust marks even than business.
However, in contrast to the lack of trust in the Western economies that have historically shaped the global agenda, trust in business in several emerging economies increased. In China, the “trust in business” score rose from 54 percent to 71 percent among 35-to-64-year-olds. In Brazil, trust in business climbed to 69 percent from 61 percent a year ago. And while trust in banking dropped by 33 percentage points in the United States, trust in banks rose from 72 percent to 84 percent in China, and from 52 percent to 59 percent in Brazil.
“People in emerging economies credit business with improved standards of living, which remain at historically high levels. But this trust gain for business may now be at risk, as 79 percent of Japanese, 56 percent of Chinese, and 49 percent of Indian opinion leaders say they have growing concerns about business, and Korea, Mexico, and Brazil report new low levels of trust in CEOs as spokespeople,” said Mr. Edelman.
Respondents say being able to “trust a company” is one of the most important factors in determining a company’s reputation. Among a global audience of 25-to-64-year-olds, trust ranks just below the quality of a company’s products and its treatment of employees—more important than a company’s financial future, job creation, giving back to the community, and innovation in products and services. Transparency, defined as frequent and honest communication, also outranks those attributes.
Sixty percent (60 percent) said they need to hear information about a company three to five times before they believe it. Specialists remain the most trusted purveyors of information about a company, with 62 percent globally saying an academic or expert on a company’s industry or issues would be extremely or very credible. Employees and peers are also considered credible sources of information about a company, with 47 percent trusting what they hear from “a person like yourself” and 40 percent trusting conversations they have with employees.
“To regain trust and re-earn the mantle of authority, business needs to make substantive shifts in both policy and communications,” says Edelman. “This means forging partnerships, effecting real change in business practices from executive compensation to supply chain, and communicating all with transparency. Without this type of public engagement, which fuels trust, it will be difficult for business to help rebuild the financial system or earn the license to innovate, much less operate.”
Edelman suggests four actions companies need to undertake to improve their public engagement and restore public trust.
First, the company says, they need to engage in “private sector diplomacy.” Business, the firm says, has both the opportunity and the responsibility to become a primary actor in developing solutions to global problems. “Business must partner with governments and NGOs to address key policy issues and the world’s most pressing problems, not merely the ones that impact their bottom line. This is an opportunity for business to act as a private sector diplomat, recommending appropriate regulatory frameworks across borders. If companies fail to take the initiative to do so, they run the risk of having policies thrust on them.”
Second, they need to engage in mutual social responsibility. “Companies must realign their business practices so they deliver dual objectives: benefit society and the bottom line. Companies must integrate into their products and services approaches to societal problems such as climate change, healthcare, and energy independence. Immediate stakeholders like employees and customers must be invited to participate in a company’s social responsibility decisions and actions—and the public at large must be kept informed about the progress the company is making toward those goals.”
Third, they need to accept the need for shared sacrifice. “CEOs must demonstrate that they too feel the burden of the recession. At a time when workers are losing jobs and investors are seeing stock values plummet, voluntary executive pay cuts and forfeiting of bonuses send a powerful message that leaders are in tune with the realities facing employees. Leaders also must communicate with employees about the problems confronting the company and welcome their voices. This type of transparency and collaborative spirit will help engage employees in finding and embracing solutions.”
And finally, companies need to engage in continuous conversation with their stakeholders. “Sixty percent of our respondents said they need to hear information about a company three to five times before they believe it. The CEO should set forth the company’s position, but then it must be echoed by others—individuals who often sit outside the company—including industry experts, academics, and ordinary citizens. Companies will be well served by moving from a mind-set of control to one of contribution.
“Mainstream media continues to be an important way to reach opinion formers, but it is not the only one. Companies should inform, with a real commitment to speed, the conversations among the new influencers—always under way on blogs, in discussion forums, and bulletin boards. Every company can be a media company by creating easily accessed, substantive online content that can be improved by the public.”
Other key findings of the 2009 Edelman Trust Barometer include:
· Trust in nearly every type of news outlet and spokesperson is down from last year. Trust in business magazines and stock or industry analyst reports—last year’s leaders—decreased from 57 percent to 44 percent and from 56 percent to 47 percent, respectively.
· Globally, only 29 percent trust information about a company from a CEO—down from 36 percent last year.
· Only 13 percent trust corporate or product advertising—down from last year’s low of 20 percent.
· In the U.K, France, and Germany, trust in business was already at a low level of 36 percent among our tracking audience of 35-64-year-olds—and stayed there this year. The only EU countries where business made a notable gain in trust were the Netherlands and Sweden.