Winning back the public’s trust

September 8, 2009

aron-cramer– Aron Cramer is president and CEO of BSR, a global business network and consultancy focused on sustainability. The opinions expressed are his own. –

The fall of Lehman Brothers last September triggered a collapse in financial markets, and then the real economy. It also signaled a further decline in the public’s trust in business. One year on, has anything changed?

At the start of 2009, only 36 percent of the U.S. public trusted business to “do what is right”—down dramatically from 59 percent one year before—according to surveys from the PR firm Edelman. But as of this July, trust levels in business had recovered somewhat, to 48 percent. Yet just as with the economic recovery overall, it is far too early to declare victory.

This is about more than winning a popularity contest. Without the public’s trust, business faces cynical consumers, unhappy employees, and public officials that tap into this mood with punitive legislation: hardly the conditions most companies want and need.

Before considering how to make further progress, it’s best to diagnose how this happened.

Inevitably, an economic decline brings a fall in trust. When large swaths of the public feel insecure economically, business suffers, too. We like the private sector a lot more when unemployment is at 5 percent than we do when it nears 10 percent.

Business is also represented by some rather unsavory figures in the public mind right now.  Bernie Madoff and John Thain symbolize this economic downturn, and for some, they symbolize the entire business community, regardless of whether their sins are widely practiced.

But the core of the problem is this: In the eyes of many, the objectives of the business sector are disconnected from broader social purposes. As UK Financial Services Secretary Lord Paul Myners said not long ago, too many in the financial services industry “had no sense of the broader society around them.”

That’s why so many people conclude that the economy is rigged against them. When business is viewed as consumed only with its own interests, and not wider public needs, the public is destined to be more cynical about its objectives. This is especially true as the debates over health care and climate change roll on.

The Edelman survey shows that there are some green shoots of trust beginning to develop. Just as with the overall economy, it is not guaranteed that these improvements will last. To make that happen, there are several steps business can take.

First is to restore the public’s sense that business exists to serve a larger purpose than producing quarterly profits. Business is, in fact, critical to our collective ability to make progress on our most pressing global challenges. We see companies from Nike to IKEA to GE making substantial investments in reducing climate change, and companies like Levi’s and Coca-Cola are exploring new ways to use water more efficiently. The shift to sustainable business is well underway, and is a core asset in the re-establishment of trust.

At key points in our history, business has earned the trust of the American public by embracing collective challenges, not by taking an “every company for itself” approach. That principle holds true today.

According to Edelman’s survey, nearly 90 percent of respondents said they would trust companies that drive better innovation by investing in research and development. We are again at a turning point when more companies should focus on building a different kind of future. Some are already: Starbucks is looking to support a fully functioning health care system, Clorox and SC Johnson are innovating to reduce the chemicals in all our households, and Procter & Gamble is developing water-purification products that meet the needs of people at the “base of the pyramid.”

We also need a greater link between these innovations and business’ lobbying efforts. For some time, there has been a concern that companies trumpet their green credentials on the one hand, while working to reduce public policy reforms on the other. With health care and climate change debates coming to a head this fall, there is a need for greater alignment between green messaging and lobbying—this will pay big dividends for the private sector and for public policy.

Business should look to remake the incentive structure to develop products and services we really need. Too often today’s markets create incentives that point in the opposite direction. Markets—including investors—prize short-term profits over long-term value. Compensation schemes cause executives to sacrifice innovations for the long haul. Had incentives for long-term thinking been in place sooner, rewarding leaders pushing for more fuel-efficient cars, rather than the SUVs that seemed like a good idea at the time, Detroit might be in a better position than it is now.

Business has a chance over the next few months to write a new chapter and align its interests with those of the public as we face the many global challenges ahead. Indeed, that is the only way for business to rebuild public trust and ensure a sustainable economic recovery.

19 comments

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The main problem is not that people don’t see the broader social interest in business, the problem is that while governments make available hundreds of billions to keep these organizations going they have done nothing for the average person. To the tax payers who had to bailout this toxic debt created by these institutions for the very mortgages they never should have been offered they are double paying because while the toxic debt has been absolved through the bailouts these people have not had their end of the debt relieved by that same bailout. While credit defaults were illegal for nearly 100 years it was these lobbyists who had those regulations scrapped and then burdened the system with unbacked betting on an astounding scale. While these issues have caused people to lose faith it is the failure of governments and corporations to provide any stimulus to the average person which has hurt them the most.

As for companies like coke-a-cola trying to save more water they still own several brands of bottled water which is incredibly wasteful. What corporations and governments need to keep in mind is that it is not the corporations that drive the economy, it is average people making a living wage where they can save up instead of simply living paycheck to paycheck in constant debt.

Posted by Orgizmo | Report as abusive

When credit card companies continue their irresponsible and ridiculous tactics, such as raising rates to 30%, the trust of the public cannot be gained.

Credit Unions have maintained low rates. Why not bank credit card companies?

Posted by C. G. Miller | Report as abusive

There should be no regaining of the public trust possible.The public has clearly seen how they are thought of by big business,and it is an UGLY picture!Mainly consisting of keeping the “host” minimally surviving while the “parasite” feeds freely and richly enough to suit their constantly growing appetite.
We need a complete restructuring of our industrial sectors and complete rethinking of our commodity needs and supplies.
Isn’t it about time that we began acting and thinking more responsibly instead of just giving lip service to the ideas of sustainability and environmental interaction?

Posted by Bob Akins | Report as abusive

the corporate environment has become one of unwarranted priveledge which is counter-productive to effective Captialist-Democratic government. This is why we have not seen an emergence of a Thomas Edison in this generation – in this generation Thomas Edison would be relegated to ‘Washing Boat Bottoms’ while a group of Oligarchs decide whether, when and if to give him $1.00 against 200 billion.

This has caused a systemic regression and disconnect between the financial markets (gaming system) and the increasingly angry public that does not want a communist system and will not be placated by promises of Socialists.

Quite simply, we want our American form of Capitalist-Democracy back and this ‘bonus-system’ imposter to be disassembled.

“Coca-Cola are exploring new ways to use water more efficiently”

How about this idea for Coca-cola – stop using up more water in production than contained in a bottle of water?
Or stop sucking so much water out of the ground in India to bottle water while village women have to walk more miles to get water from a well?

Levis should spend some time on quality control. We have bought the same style of Levis for 35 yrs and in the past few years getting a pair that are cut correctly is a matter of luck.

How about manufactures stop making things design to fail?

Posted by gmf | Report as abusive

What we need is a new system to fix the ills of the present. The whole planet is going through a cleansing so to speak. Instead of a Wall Street driven solely by profits, the new formula should be that profits count for only 10% of the total equation. There should be other, much larger percentages in the areas of community philanthropy (arts, the underprivileged, and education), ecological stewardship , corporate citizenship, carbon credits that should each receive much higher percentages in determining whether a stock deserves to go up or not. I also believe the lion share of the percentage needs to be on community philanthropy. Look, if JD Rockafeller was able to give Billions to the masses I don’t see why the corporate America can’t do the same. This is one way we can cut the corporate greed right in the butt. Let’s start by eliminating such high salaries for the executives at the top and those ridiculous bonuses. Another area should be how the current employees rate their own company. ( I can see the CEOs shaking in their boots now!) There should be a list of questions developed to ascertain how the company treats it’s employees including the area of fair compensation, not just at the top. If a company is rated great by it’s employees it’s stock deserves to go up. If not, then down, down, down. I don’t believe Wal-Mart would fare well in most of these categories, but neither would most of Wall Street, don’t you think?

Posted by D. Fernande | Report as abusive

Why is it that Americans are so forgetful about our own history. Less than a Century ago Robber Barons, including JP Morgan, were running roughshod over the landscape of this country. Things got so bad the government had to institute the Antitrust Act. Why, you might ask? Because as with back then, Americans could not and still can not reign in the greed of corporate America. The concept of Wall Street needs to be severely modified and not based solely on profit. See comment above.

Posted by D. Fernande | Report as abusive

People won’t trust big business nor government until Congress and the Obama administration stabilize the plummeting housing market.

1. Stabilize housing so families quit losing their homes. Put a new moratorium on foreclosures if that’s what it takes.
Give the $15,000 tax credit to ALL buyers, not just first time buyers. Make it retroactive to Sept. 1, 2009.

2. As housing stabilizes and recovers, so will the job outlook.

3. Either pass some form of health care, or table it for 12 months. We’ve got serious economic meltdown occuring in family lives, and this has got to be stopped.

4. Bring back usury rates. Eliminate banks overdraft charges on debit cards or checking accounts unless someone signs an agreement accepting them.

5. Make banking boring. Eliminate all creative stock selling methods.

Until people feel safe that their homes and neighborhoods are stable, nothing will be okay in this country. Nothing.

Posted by Sam Adams | Report as abusive

Dear Mr.Aron,
I am regularly reading and grasping of your writings on economic subjects.
Your writings are readable and reliable.
I think that,we all read the famous book for psychological boosting for day today smooth sailing to our boats.
Now,Americans have wide knowledge and day today happenings on big,known business houses role in their economic systems.
After some bail out exercises,American companies started showing some recovery signs to her people.
The time has come to USA to increase her exports,prices moderations,jobs creations, spending resources on infrastructure activities and procstonation towards spending on entertainment activities by many youth and adults will surely bring very bright lights to their homes and to their country.
Good to read and good to arrive a real generalisation.

Humans always tend to overreach. The form of the overreaching varies with time and culture. For the last few centuries we’ve lived in an essentially materialistic culture of which money/capital is the principal medium of the manipulation and allocation of social materialistic forces. it is therefore inevitable that there will be crises of the present sort, just as it is inevitable, given human nature, that there will be war. All one can hope for, and strive for, at best, is to minimize the damage–one cannot eliminate it.

The combination of essentially materialistic values, often with an overlay of nationalism or religion, with a poorly structured mass democracy explains the present situation very nicely–any competent Martian Observer would predict no other outcome. Similarly, cries for melioration or reform are essentially predictable. Even more predictable is that those cries are paralyzed int he vast majority of cases by parochial self interest.

Everyone is ‘brilliant’ when a market, whether stocks, commodities, housing, currency, whatever, is up, and everyone blames others when it inverts. Clearly we’re in the latter phase at present, likely with a second substantial wave down to follow.

The only possibility to moderate some of these excesses of materialistic forces would be to reduce the materialistic value structure of society. That, however, is sufficiently difficult as to be nearly impossible, while paralysis, scapegoating, and business as usual, is far easier.

Guess which of the two we’re witnessing?

Posted by Scarecrow | Report as abusive

I think in general the problem is not just one of public and private accountability vis a vis growth and employment. It’s also one of economic ideology. With global population projected to hit 10.5 billion by 2035 and with an economic ideology premised on maximum growth and resource utilization over time, then guaranteeing the prolongation of the existing high growth model into the 22nd century will be difficult at best. Why is it that the only kind of growth that societies can imagine is ‘capital’ growth? Why is it that ecologically friendly growth is not yet cool and marketable? Why is it that short term gains are valued over longer term futures? Why is that the smallest coffee offered by coffee chains is twice as big as the one I wish to order? Why is it that the packaging I neither want or need can not be separated from the product I do want? Why is it that we have failed as a species to develop a viable public transport system that can seriously replace the excessive use of personal vehicles?

Furthermore, if attaining high growth futures requires excessive leveraging – thereby essentially mortgaging the future – it is logical to see a major right-sizing of the economy as the hype dissipates and real values re-emerge. Yet, as it is the job of businesses to increase production, to increase margins and to maximize employment, and the job of the public sector to create the enabling environment for this to happen, then nothing short of a change in ideology will allow the issues you right talk about to emerge centre stage!

This underpinnings of this problem are all very simple. Corruption. As a recent graduate student in business, it was spelled out in no uncertain terms that ignoring the well-being of the society in which you operate was gross mismanagement. Corporate America, as well as the government are mismanaging to such an extreme degree that they are destroying the underpinnings of society. Yet there does not seem to be any penalty for these social miscreants.

They have rigged the game to such an extreme degree, that as society is blatantly sucked dry, they are personally profiting. Did you ever hear of the quaint concept of conflict of interest? How about malfeasance, misfeasance or non-feasance.

These destructive actors have to be rooted out and prevented from ever having any power again. Without that we’ll get the failure of the system. Why? Because without trust any system becomes every man/woman for themself. Citizens are forced to go along with corruption to survive. Not a pretty picture. Reminds me of the Soviet Union.

Posted by Jonathan Cole | Report as abusive

There is no system that will work period. It doesn’t matter what rules or systems we put in place.

What we lack are people of conscience that run and participate in these systems.

Whether it’s business or government. What we are experiencing right now in terms of turmoil is the direct result of the actions of people without conscience. Our suffering is the result of people who use their intellects to serve their own personal base needs at the expense of their brothers and sisters in this place.

There is no trust to be earned. And people who trust our systems only do so because they don’t know they have any other choice. And this is how those in power in business and government want it.

Trust yourself. Think for yourself. And if a system doesn’t work for you then don’t participate in it.

As long as we value rules over lives we are doomed to fail and to die.

The middle and lower classes have no reason to trust our institutions including the big banks, business, and government. The middle and lower classes exists only to be harvested.

The Big Banks shamelessly bringing down the world economy. Americans loose their life savings while others in less developed nations starve. They give themselves enormous bonuses. They change credit credit rates to usury levels. They steal money in the stock market by using flash and high frequency trading. They don’t lend money to the very people who bailed them out. They threaten to leave our country if they don’t get their way (let them go – good riddance). They buy laws and regulations.

Business moves American jobs offshore where people earn slave wages and where there is no concern about the environment. They lay off Americans and reduce their even though they continue to make profits. They pay top management enormous salary’s that are, in some cases, hundreds of times what they pay some of their employees. They move their “headquarters” offshore to avoid taxes though they still remain in America.

Government passes any law or regulation as long as they get paid off. They permit “pay day” and “title” loans that strangle the lower class. They start unnecessary wars costing trillions while many Americans don’t have health care. They speak to Americans in slogans like we are children. They let the cost of a college educations, a requirement for twenty-first century jobs, rise to such levels few Americans can afford or leaves them with crushing debt.

Why should Americans trust our institutions?

Posted by Mory Oxon | Report as abusive

We may be well beyond the point in American economic history at which trust in government or business can be effectively restored.

Ethics should matter, but history proves repeatedly that greed wins every time. We don’t train our citizens to think for themselves or to act on their thoughts, and those who do will find few doors open to them for efficacious participation in government or dominant business cultures without compromising their noble notions.

Reading any basic economics history textbook will make it clear that we’ve been in our current economic situation many, many times. Despite the superficiality of an African-American president, we’re not on virgin territory politically, either.

We can rant through pseudo discussions like these, but none of it will matter until the ranters find a way to turn their rants into action. Ah, but this isn’t the 1850s, the 1890s, the 1930s or even the 1960s. We live – and far from bravely — in the stifling plasma of 1984.

Get real

Posted by DAC | Report as abusive

Greed does trump all other things and it will again but this time there is a difference that will delay faith in business. It is about layoffs, under-employment, and reduction and elimination of benefits.

During the period following WW2 through the approximately the mid 90′s employers were as committed to employees as much as the employees were committed to there employers. Somewhere along the line the commitment of employers to employee disappeared. Short term profit became the name of the game – the only name of the game.

Employees feel more disposable than ever. This is important in understanding the relationship of the population towards business. There is no commitment. It is every man for himself. Greed has turned to distrust and fear.

The lack of commitment has led to a generalized skepticism of all American business. The crisis of 2008 has turned skepticism into distrust.

Some time in the future American’s will regain trust in business. Greed will win but this time it will take more time.

This is real.

Posted by Mory Oxon | Report as abusive

There is no trust to be earned. The people have put their trust in systems that cause pain and bring suffering. Education, health and a home are all basic human rights. Business can facilitate the acquisition of these things.

Unfortunately business is also attempting to dictate who is worthy of these things based on the criteria that make business work. Health, Education and housing, are all basic human rights because they are all basic human needs. Without these things in place it is impossible for a human being to manifest themselves to their full potential. We are not animals. And we should not be content to live as such.

By turning basic human needs into commodities to be bought and sold, the business sector has defiled the human condition and turned humanity into nothing more than a business opportunity. There is nothing wrong with the buying and selling of goods and services. But when the needs of the human are subjugated to the rules of a system, then the human is dehumanized. The person becomes merely a consumer, a number, a participant on paper, and nothing more. Just as those who are employed in our economic engine are merely workers serving the interests of those in control of our systems.

So people live and die, go hungry or eat, and become truly educated or remain in ignorance, simply because one may poses more money than another. Or because one may carry more influence than another. All human beings are worthy of these things simply because we are human. Trust no system. Trust yourself. Think for yourself. Find out for yourself. We are not animals and should not be content to live as such.

This article, to me, is insubstantial.

Bob Akins above: ‘Isn’t it about time that we began acting and thinking more responsibly instead of just giving lip service to the ideas of sustainability and environmental interaction?’

Maybe we should ask advertising agencies and movie producers to help out with our moral and ethical dilemmas ? We might then even feel better about ourselves.

Posted by Casper Lab | Report as abusive

Never trust a man (or company) that says “Trust Me”.

Posted by Russ | Report as abusive