Speaking of Trust

Written by Latha Ramchand on April 4, 2016

Last week, I had the opportunity to serve on a panel to discuss the 2016 Edelman Trust Barometer survey. In partnership with Texas CEO Magazine, and ably led by publisher Pat Niekamp, Edelman hosted the panel which included Terry Wade (Reuters), Kathy Beiser (Edelman) and myself.

We discussed the results of the 2016 Edelman Trust Barometer. This year’s survey shows that trust levels for business and for CEOs are bouncing back. The informed public — defined as those between ages 25-64, who are college educated and who belong to the top 25 percent of household income per age group in each country and who are avid consumers of media — places more trust in business, government, media and NGOs, compared to the mass population, which represents the remaining 85 percent of the population. Interestingly, for the 16th consecutive year, the technology sector continues to lead the trust index. Over the last five years, the energy sector has witnessed an increase in trust as has financial services (which despite this increase, continues to be the least trusted sector and comes in below pharmaceuticals).

Why is business regaining trust?

Is this a business cycle phenomenon?

When times are good, we tend to believe that businesses are doing the right thing and tend to increase our levels of trust. In addition, anymore, it is not your father’s capitalism. Whether it is Mackey’s ideas on “conscious capitalism” or Benioff’s appeal for “compassionate capitalism,” there is a recognition that customers, employees, and society at large are as important to business as shareholders. Fortune’s “Companies that Change the World” list looks at companies that do well by changing the world for the better. CVS, whose stock price has risen 66 percent since announcing that it will not carry tobacco products on its shelves; Ecolab, which is as much about water and conservation as it is about cleaning and sanitizing; Vodafone, which has helped over 16 million people in Kenya, India and other emerging market countries use financial services without ever having entered a bank; or our own Waste Management in Houston, which has made it easier for us to recycle so we can save the world from ourselves — these are good examples of doing well and doing good.

When Corporate Social Responsibility goes beyond a 30-minute chat on a Friday afternoon, when responsibility gets woven into the business plan, when companies appreciate that long term sustainability and growth are linked to building a trustworthy brand among all stakeholders in society — this is when trust is not merely a word in your values statement; rather, it is your corporate work ethic, which builds your brand and grows market value.

Speaking of market value, the gap between market and book values may have to do with growth options.  At the same time, to believe that a company can grow speaks to the trust that investors have in the firm’s model and mission. Under current accounting rules, U.S. companies do not record intangible items that capture trust on their books.  According to Leonard Nakamura, an economist at the Philadelphia Fed, more than $8 trillion in intangible assets is currently not on the books.  In 2014, companies invested the equivalent of 14 percent of the private sector’s GDP in intangibles and 10 percent in physical assets, the reverse of what it was 40 years ago when 13 percent of private sector GDP went to tangibles and 9 percent to intangibles. Intangibles as a proportion of total investment overtook tangibles in the mid-90s, right before the dot com bubble and have exceeded the proportion in tangibles ever since.

In a survey of global executives, Weber Shandwick finds that 44 percent of a company’s market value is attributable to CEO reputation.

How can CEOs grow, retain and maintain trust, brand and reputation?

  1. Keep the company at the forefront of your message. Repeat the message. As Jeff Immelt says, your message has “got to be repeatable, it’s got to be learnable, and it’s got to be teachable.”
  2. Leaders and CEOs need to cultivate a visible public profile that is about credibility, not so much celebrity. Engage/speak at events, be accessible to news media and be visible on the company website so you can repeat the company message. Am I repeating myself?

Tell me what you think.

Posted Under: Economy

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