Winning back the public’s trust
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 publicâ€™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 â€śdo what is rightâ€ťâ€”down dramatically from 59 percent one year beforeâ€”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 publicâ€™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, itâ€™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.Â 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 â€śhad no sense of the broader society around them.â€ť
Thatâ€™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 publicâ€™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 Leviâ€™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 â€śevery company for itselfâ€ť approach. That principle holds true today.
According to Edelmanâ€™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 â€śbase of the pyramid.â€ť
We also need a greater link between these innovations and businessâ€™ 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 lobbyingâ€”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 todayâ€™s markets create incentives that point in the opposite direction. Marketsâ€”including investorsâ€”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.