Business has trust issues. And they’ve been a long time coming.
The issue of public trust “roughly describes the level and type of vulnerability the public is willing to assume with regard to business relations,” according to a 2009 study by Arthur W. Page Society and Business Roundtable’s Institute for Corporate Ethics.
A majority of people believe they are vulnerable in business relationships because of a “power imbalance” that allows companies and executives to assume less risk than the average person, according to the study – and the recent financial crisis exacerbated those feelings. The study concluded: “The general distrust of business hurts all companies, and, indeed, all participants in the global economy.
The “trust equation” – worldwide – is at an all-time low, said Chairman of PricewaterhouseCoopers International Dennis Nally in a panel discussion at this year’s World Economic Forum in Davos; his firm surveyed some 1,300 CEOs worldwide on the question. Likewise, trust between business and government is “absolutely at the lowest point, which is really a concern,” Nally said. “When you think of how things are moving in this dynamic world, without that degree of trust it’s really going to have a significant implication to the recovery of this global economy,” he said. “So I think business has a real challenge, how do you begin to really regain that level of trust.”
Despite the trust issue, “businesses are really the only functioning entities around the world,” said Indra Nooyi, PepsiCo CEO, at the panel. “They create the jobs, they are the engines of efficiency, and if we don’t have private enterprise and business, I’m not sure economies can be successful. Especially at a time when government’s are unable to enact policy, within countries.”
“The central challenge of the 21st century is to build prosperity for a planet of 9 billion people,” said Aron Cramer, a third panelist and CEO of Business for Social Responsibility. Cramer added that companies have to look at long-term sustainability and find motivation beyond short-term results. “I think the question is: Do you want to be around for three years or three decades?” he said. “It’s tough, when in the U.S. we have holdings that used to be kept for seven years are kept for seven months… failing to think longer term actually ends up biting in the short term.
Over the last 30 years, business has lost sight of the position it’s held for the previous 100, said Feike Sijbesma, CEO and chairman of the Managing Board, Royal DSM, Netherlands. A century ago, the role of business was running the economy and providing jobs. “Today business has to realize its role has been changed, the boundaries between what is public interest and private interest has been blurred,” he said.
“Companies have a public responsibility, as well. They can care for the environment, they can care for social issues in the world,” he added. “And if companies do not express that change and make clear that they see that they have a broader responsibility, creating value on three axes: People, planet and profit – and not only profit. And if we really do not show that off, I think this distrust will remain.”
Nally wrapped up what business needs to do in a tight package:
The role of business in this debate is to really define exactly why an institution exists. What its purpose is, for society, which is much more than just delivering the financial performance. I think companies can start to change this debate with much more transparency around why the organization exists, what it’s trying to do from a longer-term stand point, what are the right kind of metrics that you want to have out in the public domain, and hopefully with a dialog with the media that begins to shift this debate to say: ‘Yeah, business is here to have a financial return, but it also exists for a lot of other reasons for the betterment of society.’
Can Business Regain the Public Trust? was originally published on Ideas Lab
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