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  • From A. Thakor, The Four Colors of Business Growth (Academic Press, 2011), 5.
  • From A. Thakor, The Four Colors of Business Growth (Academic Press, 2011), 5.
  • From A. Thakor, The Four Colors of Business Growth (Academic Press, 2011), 5.
  • Composite score is an average of a country’s trust in all four institutions. Informed Publics ages 25-64 in 20 country global total (excludes Argentina, Hong Kong, Malaysia, Singapore, Turkey and UAE) and across 25 countries
  • Composite score is an average of a country’s trust in all four institutions. Informed Publics ages 25-64 in 20 country global total (excludes Argentina, Hong Kong, Malaysia, Singapore, Turkey and UAE) and across 25 countries; General population in 25- country global total (excludes Turkey) and across 25 countries
  • For example, this is the way the Attribute Clusters appear on that x/y axis – we call it the Trust Impact Grid – given the global view of all business. You can see that the Trust companies do have is largely because they’re delivering on Products & Services and Operations, but performing better on Engagement, Integrity and Purpose attributes will gain Business Trust.

Cies 2013 governance_ethics_trust Cies 2013 governance_ethics_trust Presentation Transcript

  • NEW DIRECTIONS IN CSR & CORPORATE GOVERNANCEREFLECTIONS ON THE ISSUES & CHALLENGES FACINGCORPORATE BOARDS OF DIRECTORS & MANAGERSSteven Olson, Ph.D.Director, Center for Ethics & Corporate ResponsibilityAcademic Director, Certified Professional Innovator ProgramJ. Mack Robinson College of BusinessGeorgia State University
  • THE CONTEXT FOR MY REMARKS
  • THE CHALLENGE OF “GOOD GROWTH”:10 YEAR AVERAGE ANNUAL PERCENTAGES OF STANDARD & POOR’S 500PERFORMANCE QUARTILES, 1985-19951stQuartile2ndQuartile3rdQuartile4thQuartile1 Returns to Shareholder 24% 15% 11% 3%2 Revenue Growth3 Earnings Per Share Growth4 Return on Net Assets5 Cost of Capital6 Returns on Net Assetsabove (below) Cost of CapitalFrom A. Thakor, The Four Colors of Business Growth (Academic Press, 2011), 5.Line 1: Top ¼ delivered ~25% return to shareholders (dividends +stock price appreciation)!
  • THE CHALLENGE OF “GOOD GROWTH”:10 YEAR AVERAGE ANNUAL PERCENTAGES OF STANDARD & POOR’S 500PERFORMANCE QUARTILES, 1985-19951stQuartile2ndQuartile3rdQuartile4thQuartile1 Returns to Shareholder 24% 15% 11% 3%2 Revenue Growth 15% 7% 7% 7%3 Earnings Per Share Growth4 Return on Net Assets5 Cost of Capital6 Returns on Net Assetsabove (below) Cost of CapitalLine 2: all companies grew revenue every year on average.
  • EARNINGS PER SHARE GROWTH IS HARD10 YEAR AVERAGE ANNUAL PERCENTAGES OF STANDARD & POOR’S 500PERFORMANCE QUARTILES, 1985-19951stQuartile2ndQuartile3rdQuartile4thQuartile1 Returns to Shareholder 24% 15% 11% 3%2 Revenue Growth 15% 7% 7% 7%3 Earnings Per Share Growth 16% 8% 4% (.03%)4 Return on Net Assets5 Cost of Capital6 Returns on Net Assetsabove (below) Cost of CapitalLine 3: EPS growth proves difficult! (“Don’t ever promise morethan 15%” Warren Buffet.)
  • RETURN ON ASSETS SEEMS ROBUST, BUT…10 YEAR AVERAGE ANNUAL PERCENTAGES OF STANDARD & POOR’S 500PERFORMANCE QUARTILES, 1985-19951stQuartile2ndQuartile3rdQuartile4thQuartile1 Returns to Shareholder 24% 15% 11% 3%2 Revenue Growth 15% 7% 7% 7%3 Earnings Per Share Growth 16% 8% 4% (.03%)4 Return on Net Assets 16% 11% 9% 7%5 Cost of Capital6 Returns on Net Assetsabove (below) Cost of CapitalLine 4: if we just look at Return on Net Assets, all quartilesperform admirably…HOWEVER…if we factor in the cost of capital….then…
  • THE BOTTOM LINE: GOOD GROWTH IS HARD10 YEAR AVERAGE ANNUAL PERCENTAGES OF STANDARD & POOR’S 500PERFORMANCE QUARTILES, 1985-19951stQuartile2ndQuartile3rdQuartile4thQuartile1 Returns to Shareholder 24% 15% 11% 3%2 Revenue Growth 15% 7% 7% 7%3 Earnings Per Share Growth 16% 8% 4% (.03%)4 Return on Net Assets 16% 11% 9% 7%5 Cost of Capital 12% 10% 10% 11%6 Returns on Net Assetsabove (below) Cost of Capital 4% 1% (1%) (4%)Line 4 minus line 5: all companies grew ROA every year onaverage (line 4), but subtract the cost of the capital theydeployed (line 5) and note that the bottom 50% destroyedvalue (line 6). Returns were below the cost of capital!
  • Firm InfrastructureHuman Resource ManagementTechnological DevelopmentProcurementOutboundLogisticsInboundLogisticsServiceMarketing&SalesSupportPrimary Activities Adapted from Porter, 1985.
  • POINTS FOR CSR: SOCIAL SOURCES OF ACOMPETITIVE CONTEXT FOR FIRMSCopyright 2011, RCB. All rights reserved
  • Copyright 2011, RCB. All rights reserved
  • PRIORIZANDOCopyright 2011, RCB. All rights reserved
  • REACTIVA? ESTRATÉGICA?Copyright 2011, RCB. All rights reserved
  • SINE QUA NON OF SUSTAINABLE VALUE CREATIONTRUST• Two types1. Rational/Calculative2. Motive/Character-basedWhat is the state of the sine qua non of value creation?
  • GOVERNANCE, ETHICS AND VALUE CREATION• ETHICS and its product, TRUST, create and protectthe conditions that make value creation possible.• Unethical behavior and its product, DISTRUST, erodeand destroy the conditions that make value creationpossible.• LEADERS’ FIRST DUTY IS TO PROTECT the conditionsthat make value creation possible.
  • EXERCISE: IN GROUPS OF 3-4Please indicate how much you trust businessesin each of the following industries to do what isright.Assign each industry one of the followingnumbers, according to how much you trustbusinesses in that industry.1: Trust them a great deal to do what is right.2: Trust some of them, some of the time, to dowhat is right.3: Distrust them to do what is right.
  • HOW MUCH YOU TRUST BUSINESSES IN EACH OFTHE FOLLOWING INDUSTRIES TO DO WHAT ISRIGHT?• Automotive• Banks• Brewing & Spirits• Consumer Packaged Goods• Energy• Financial Services• Food & Beverage• Media• Pharmaceuticals• Technology• TelecommunicationsRating Scale1: Trust them a great deal todo what is right.2: Trust some of them, someof the time, to do what isright.3: Distrust them to do what isright.
  • DATA ON THE STATE OF TRUST• Let’s look at the global data and compare themwith what we are seeing in the United States
  • US FINDINGS
  • 13TH ANNUAL SURVEY, LARGEST GLOBAL EXPLORATION OF TRUST22MARKET COMPARISONSDeveloped: US, UK, France, Germany and JapanEmerged: Brazil, Mexico, Russia, India and ChinaONLINE SURVEYIN 26 COUNTRIES• 31,000+ respondents• 5 years in 20+ markets• 8 years in 10+ marketsGENERALPOPULATION• 1000 respondents percountry surveyed• Ages 18+• 2 years of dataINFORMEDPUBLICS• 500 respondents in U.S. andChina & 200 in other countries• Ages 25-64• College-educated• In top 25% of householdincome per age group in eachcountry• Report significant mediaconsumption and engagementin business news and publicpolicy• 13 years of dataIndicates Global DataIndicates US Data
  • TRUST 2013FINANCIAL AND BANKING INDUSTRY DEEP DIVETHE PATH FORWARDGOVERNANCE: A CRISIS OFLEADERSHIPTHE STATE OF TRUST23
  • STATE OF TRUST
  • GLOBAL 57China 80Singapore 76India 71Mexico 68Hong Kong 67UAE 66Malaysia 64Canada 62Indonesia 62U.S. 59Netherlands 59Brazil 55Germany 55France 54Sweden 54UK 53Italy 51Australia 50Poland 48S. Korea 47Ireland 46Argentina 45Spain 42Turkey 42Japan 41Russia 362011 20132012DISTRUSTERSTRUSTERSNEUTRALGLOBAL 51China 76UAE 68Singapore 67India 65Indonesia 63Mexico 63Netherlands 61Hong Kong 61Canada 58Malaysia 57Italy 56Argentina 54Australia 53Brazil 51Sweden 49U.S. 49South Korea 44Poland 44U.K. 41Ireland 41France 40Germany 39Spain 37Japan 34Russia 32EDELMAN’S TRUST INDEX: AFTER A YEAR HIGH OF DISTRUST IN 2012,SHIFT BACK TO NEUTRAL IN 2013GLOBAL 55Brazil 80UAE 78Indonesia 74China 73Netherlands 73Mexico 69Singapore 67Argentina 62India 56Italy 56Canada 55South Korea 53Sweden 52Japan 51Australia 51Spain 51France 50Poland 49Germany 44U.S. 42U.K. 40Russia 40Ireland 39Composite score is an average of a country’s trust in all four institutions. Informed Publics ages 25-64 in 20-country global total25Big Changesfrom 2008Germany +19China +18Canada +14India +11Big Changesfrom 2012Germany +16France +14UK +12US +10
  • 201326GLOBAL 57China 80Singapore 76India 71Mexico 68Hong Kong 67UAE 66Malaysia 64Canada 62Indonesia 62U.S. 59Netherlands 59Brazil 55Germany 55France 54Sweden 54UK 53Italy 51Australia 50Poland 48S. Korea 47Ireland 46Argentina 45Spain 42Turkey 42Japan 41Russia 36GLOBAL 48China 70India 64UAE 63Singapore 63Indonesia 61Malaysia 61Mexico 59Hong Kong 54Canada 52Brazil 51Netherlands 50Argentina 48U.S. 45Germany 44UK 43S. Korea 43Turkey 43France 41Italy 40Sweden 40Australia 39Spain 37Japan 35Poland 34Ireland 33Russia 30Composite score is an average of a country’s trust in all four institutions. General population and Informed Publics ages 25-64 in 26 country global total and across 26 countriesLargest Differences betweenGen Pop & Informed PublicsPoland, US, Sweden: - 14 pointsSingapore, Ireland, Hong Kong,France: - 13 pointsGeneral Population is9 points lower thanInformed PublicsINFORMED PUBLIC2013GENERAL PUBLICDISTRUSTERSTRUSTERSNEUTRALLOWER TRUST AMONG GENERAL POPULATION THAN INFORMED PUBLICS
  • 13% 17%19% 21%Q11-14.[TRACKING] Below is a list of institutions. For each one, please indicate how much you trust that institution to do what is right using a 9-point scale where onemeans that you “do not trust them at all” and nine means that you “trust them a great deal”. (Top 2 Box, Trust a great deal and Top 4 Box, Trust) Informed Publics ages 25-64SIGNIFICANT INCREASES FOR ALL INSTITUTIONS IN THE US, BUT…TRUST A GREAT DEAL22% 25%14% 16%NGOSBUSINESSMEDIAGOVERNMENT2012 2013 2012 20132012 2013 2012 2013Trust Total: 43%Trust Total: 53%Trust Total: 50%Trust Total: 62%Trust Total: 45%Trust Total: 51%Trust Total: 58%Trust Total: 70%TRUST IN INSTITUTIONS – US27FRAGILE
  • Q11-14.[Business in General and Government in General] Below is a list of institutions. For each one, please indicate how much you trust that institution to do what is right using a9-point scale where one means that you “do not trust them at all” and nine means that you “trust them a great deal”. (Top 4 Box, Trust) Informed Publics ages 25-64 in 26-countryglobal total and across 26 countriesBUSINESS TRUSTED MORE THAN GOVERNMENT IN16 OF 26 MARKETS SURVEYEDTRUST IN BUSINESS VS. GOVERNMENTGovernmentBusinessGAP BETWEEN BUSINESS & GOVERNMENT GROWINGGlobally, largest gap since 2007*Trust in Government62% of markets surveyed havetrust score below 50%Trust in Business35% of markets surveyed havetrust score below 50%2859%82%64%49%74%56%81%44%56%52%44%40%62%56%47% 48%63%58%48%61% 60%77%44%58%65%74%31%50%41%33%19%47%30%57%20%35%32% 32%29%53%47%40%43%60%58%48%62% 63%82%49%65%73%81%44%
  • 7%45%6%20%20%TRANSPARENCY ISSUESPOOR PERFORMANCE/ INCOMPETENCELACK OF REGULATION OR CONTROLCORRUPTION OR FRAUDWRONG INCENTIVES DRIVING POLICIES4%10%11%35%36%TRANSPARENCY ISSUESPOOR PERFORMANCE/ INCOMPETENCELACK OF REGULATION OR CONTROLCORRUPTION OR FRAUDWRONG INCENTIVES DRIVING BUSINESSDECISIONSREASONS FOR DISTRUSTING:MAIN REASONS FOR DECREASED BUSINESS AND GOVERNMENT TRUST – US(AMONG THOSE WHO REPORTED TRUSTING BUSINESS OR GOVERNMENT LESS OVER THE PAST YEAR)Q22. [ASK IF TRUST GOVERNMENTLESS IN Q18] Which of the following is the main reason why your trust in government decreased over the last year?; Q24. [ASK IF TRUST BUSINESSLESS IN Q20] Which of the following is the main reason why your trust in business decreased over the last year? General PopulationREASONS FOR TRUSTINGGOVERNMENT LESSREASONS FOR TRUSTINGBUSINESS LESS71% 40%29
  • 30TRUST IN INDUSTRIES – US80%75%72%70%70%66%59%55%52%50%50%TechnologyBrewing and spiritsFood and beverageAutomotiveConsumer packaged goodsTelecommunicationsEnergyPharmaceuticalsFinancial servicesBanksMedia2013Q43-60. [TRACKING] Please indicate how much you trust businesses in each of the following industries to do what is right. Again, please use the same 9-point scale where onemeans that you “do not trust them at all” and nine means that you “trust them a great deal”. (Top 4 Box, Trust) Informed Publics ages 25-64 (only industries tracked from 2012 to2013shown)TRUST BY INDUSTRY2: Trust some ofthem, some of thetime, to do what isright.1: Trust them agreat deal to dowhat is right.
  • CULTURAL DIVIDE: SMALL BUSINESS TRUSTED MOST INWEST; WHILE BIG BUSINESSES ON TOP IN EMERGINGECONOMIESTRUST IN DIFFERENT TYPES OF BUSINESSESQ15-17.Thinking about different types of businesses, please indicate how much you trust each type of business to do what is right using a 9-point scale where one means that you“do not trust them at all” and nine means that you “trust them a great deal”. {Small Businesses or Companies; Big Businesses or Companies) (Top 4 Box, Trust) Informed Publicsages 25-64 in 26-country global total, Developed Markets (includes US, UK, Germany, Japan, France), Emerging Markets (includes Mexico, China, Brazil, Russia, India), US, UK, China,UAE3170%76%70%86%78%65%55%62%53%79%55%48%89%73%GLOBAL DEVELOPED EMERGING US UK CHINA UAESMALL BUSINESSESBIG BUSINESSES
  • Q11-14.[NGOs TRACKING] Below is a list of institutions. For each one, please indicate how much you trust that institution to do what is right using a 9-point scale where one meansthat you “do not trust them at all” and nine means that you “trust them a great deal”. (Top 4 Box, Trust) Informed Publics ages 25-64 in 20 country global total (excludes Argentina,Hong Kong, Malaysia, Singapore, Turkey and UAE) and across 26 countriesN/A50%NGOS REMAIN MOST TRUSTED INSTITUTION; DRIVESCORPORATE PARTNERINGTRUST IN NON-GOVERNMENTAL ORGANIZATIONS (NGOS)2008 67% of markets surveyedhave a trust score above 50%2013 88% of markets surveyedhave a trust score above 50%322008 China:48%58%78% 79%68%70%64%66%58%60%67% 66% 67%75%48%65%53%74%55% 54%49%59%51% 53%41%28%30%63%83% 81%76% 76%75% 73%70% 69% 69% 67%66% 66%64%64% 63%63% 62% 61%59%57% 56% 55%51%46%40%37%20122013
  • CORPORATE-NGO PARTNERSHIPS OF NOTE(CORRELATION WITH TRUST?)3380%75%72%70%70%66%59%55%52%50%50%TechnologyBrewing and spiritsFood and beverageAutomotiveConsumer packaged goodsTelecommunicationsEnergyPharmaceuticalsFinancial servicesBanksMedia2013BP and Leading UK Cultural InstitutionsExtend Partnerships with £10 MillionSponsorship (2011)
  • 34The Gulf Spill: BP Still Doesnt Get ItA catastrophe of this magnitude should change a companyforever. Indeed, BP has been shaken to the ocean’s floor. Yetvirtually every BP press release or CEO commentary aboutreputation links rebuilding trust to rebuilding shareholdervalue. The culture that reportedly made trade-offs for thebenefit of the bottom line before the spill continues to lurk inthe nooks and crannies of the C-Suite. To restore trust, BP’sleaders must take shareholder value out of their reputationequation and think singlemindedly about reputation alone.Until they do that, BP will never rebuild its image.Currently, the stock price is down 35% from pre-spill levels.Maybe that’s all the incentive the company needs to tryharder.4/20/2012 @ 8:22AM
  • BANKING AND FINANCIAL SERVICESDEEP DIVE
  • 2013200850%Q43-60. [TRACKING] Please indicate how much you trust businesses in each of the following industries to do what is right. Again, please use the same 9-point scale whereone means that you “do not trust them at all” and nine means that you “trust them a great deal”. (Top 4 Box, Trust) Informed publics ages 35-64 in 18-country global totaland across 18 markets-20-19-25-19-26-24+ 1136-13-13-25-11US Trust in Banking Industry has doubledover past two years, from 25% (2011) to50% (2013) among Informed Publics 25-64.SEVERE DROPS IN TRUST IN BANKS OVER FIVE YEARS, 2/3 OF MARKETS NOWBELOW 50% TRUST LEVELINDUSTRY SAW BOTTOM IN 2012 FOR UK/FRANCE/GERMANY, US BOTTOM WAS 201156%72%83%61%59%49%67%52%69%53%63%51%35%26%56%42%47%45%35%45%83%80%71%60%59%54%49% 49%47%44%38%32% 31% 31%23% 22%19%11%
  • BANKS PERFORMANCE REPORT CARDRELATIONSHIP BETWEEN TRUST AND PERFORMANCEQ151-156. Now, thinking more specifically about different actions banks can take, how would you rate banks’ or the banking industry’s performance in carrying out each of the following actions?Informed Publics ages 25-64 in 26-country global total and across 26 countries (Total Excellent/Good) in Develop markets, Emerging markets, US, UK, Canada, Australia and China3750%+ = 40-49% = O<40% = XSCORINGKEYRating of Banks’ Performance in each ofthe following (Total Excellent/Good)Developed Emerging US UK Canada Australia ChinaLending to small businesses X O X X O X Providing home mortgage loans X O X X  O Offering reasonable credit cards X O X X O X Trading and investing in government debt X O X X X X Ensuring the privacy & security ofcustomers personal information O   X   Overseeing initial public offerings forcompanies X X X X X X OTrust in Banking Industry 42% 69% 50% 29% 59% 40% 80%
  • 28%25%9%7%11%18%38WHAT DO YOU THINK IS THE BIGGEST CAUSE OFTHESE SCANDALS? – USQ161. [ASK IF FAMILIAR WITH BANKING SCANDALS (Q160=VERY/SOMEWHAT FAMILIAR)] Based on the information you have read, seen or heard about the banking/ financial servicesscandals, specifically those at Barclays, J.P. Morgan and Standard Chartered, what do you think is the BIGGEST cause of these scandals?(ASKED OF RESPONDENTS WHO ARE FAMILIAR WITH BANKING/FINANCIAL SERVICESSCANDALS OVER PAST YEAR)62% of causes ofscandals areinternal andwithin business’controlCORPORATE CULTURE DRIVEN BYCOMPENSATION/BONUSESCORPORATECORRUPTIONCONFLICTS OF INTERESTCHANGES IN THE ECONOMYBANKS ARE TOO LARGELACK OF REGULATION
  • GLOBALLY, 63% SAY BANKING AND FINANCIAL SERVICESBEHAVIORS ARE COMMON ACROSS ALL BUSINESS“Make no mistake, for UBS traders the manipulationof Libor was about getting rich,”“As one broker told a UBS derivatives trader: „Mateyur getting bloody good at this libor game ...think ofme when yur on yur yacht in monaco won‟t yu‟”Q163. Based on your general knowledge of the global banking and financial crisis and events which occurred this year, do you believe that the behaviors and actions exhibitedare unique to the banking and financial services industry or are these behaviors and actions common in business, regardless of industry? Informed Publics 25-64 in 26-countryglobal total and across 26 countries39
  • THE ISSUE OF INCENTIVES: EXECUTIVE COMPENSATIONWho is generallyconsidered the greatestUS baseball player of alltime?Pete RoseWhy is he not in theBaseball Hall of Fame?40
  • 41
  • 42In Italy, a Soccer Scandal Casts a Shadow OverEuro 2012By Stephan Faris Friday, June 01, 2012Just after sunrise on May28, Italian police swept into thesquads training camp to questionDomenico Criscito, a 25-year-olddefender who was a starter forItaly at the 2010 World Cup andwas widely expected to startagain in the upcomingtournamentThe raid, during which policesearched Criscitos room, was partof a wide-ranging match-fixingscandal that has thus farimplicated dozens of currentplayers, former players, andcoaches in Italy. On the same dayinvestigators raided the trainingcamp, police also arrested StefanoMauri, the captain of Romes Lazioclub, and took another 13 peopleinto custody.
  • WHY DON’T WE LET ATHLETES BET ON THEIR SPORT?The Expectations Market (stock market)Vs.The Performance Market(actual value creation; “good growth”)431stQuartile2ndQuartile3rdQuartile4thQuartile1 Returns to Shareholder 24% 15% 11% 3%2 Revenue Growth 15% 7% 7% 7%3 Earnings Per Share Growth 16% 8% 4% (.03%)4 Return on Net Assets 16% 11% 9% 7%5 Cost of Capital 12% 10% 10% 11%6 Returns on Net Assetsabove (below) Cost of Capital 4% 1% (1%) (4%)
  • GOVERNANCE:A CRISIS OF LEADERSHIP
  • 69%67%61%51%51%50%43%36%Academic or expertTechnical expert in thecompanyA person like yourselfFinancial or industryanalystNGO representativeRegular employeeCEOGovernment official orregulatorCREDIBLE SPOKESPEOPLE29%38%46%50%50%65%66%68%Government official orregulatorCEOFinancial or industry analystNGO representativeRegular employeeA person like yourselfTechnical expert in thecompanyAcademic or expert20132012Q130-143. [TRACKING] Below is a list of people. In general, when forming an opinion of a company, if you heard information about a company from each person, howcredible would the information be--extremely credible, very credible, somewhat credible, or not credible at all? (Top 2 Box, Very/ Extremely Credible) Informed Publicsages 25-64 in 20 country global total (excludes Argentina, Hong Kong, Malaysia, Singapore, Turkey and UAE) (only spokespeople tracked from 2012 to 2013 shown)4574%69%63%52%54%56%43%41%2013WHO DO WE TRUST IN FORMING OUR OPINIONS OFCOMPANIES?
  • 45%52%70%55%52%73%41%52%34%36%62%55%42%22%37%39%43%27% 28%56%37%34%54%26%40%35%48%38%18%36%22%32%54%23%35%22%25%54%48%35%15%31%36%41%25%27%55%37% 36%56%32%47%45%60%50%Q130-143. [TRACKING] (Credibility of CEOs and Government officials/regulators) Below is a list of people. In general, when forming an opinion of a company, if you heardinformation about a company from each person, how credible would the information be--extremely credible, very credible, somewhat credible, or not credible at all? (Top 2 Box,Very/ Extremely Credible) Informed publics ages 25-64 in 26 -country global total and across 26 markets (only spokespeople tracked from 2012 to 2013 included in analysis)2013 CREDIBILITY OF CEOS VS. GOVERNMENT OFFICIALS/REGULATORSGovernment official orregulator CredibilityCEO Credibility46MAJORITY OF MARKETS: BOTH GOVERNMENT AND BUSINESSLEADERS BELOW 50% IN THEIR CREDIBILITY RATINGBusiness leaders trusted less than50% in 16 of 26 marketsGovernment leaders trusted lessthan 50% in 21 of 26 markets
  • 8%6%10%20%24%13%33%38%38%55%71%41%FranceGermanyUSIndiaChinaGlobalTrust in GovernmentTrust Government Leaders to tell the truth10%13%15%34%32%18%37%42%50%68%67%50%FranceGermanyUSIndiaChinaGlobalTrust in BusinessTrust Business Leaders to tell the TruthLEADERSHIP TRUST GAPGAP IN TRUST IN INSTITUTION VS. TRUST IN LEADERSHIPQ11 -14. Below is a list of institutions. For each one, please indicate how much you trust that institution to do what is right using a 9-point scale where one means that you do not trustthem at all and nine means that you trust them a great deal. (Top 4 Box, Trust); Q144A-147A. *“To Tell the Truth Regardless of how Complex or unpopular it is”+ How much do you trustbusiness leaders to do the following? Q144B-147B. *“To Tell the Truth Regardless of how Complex or unpopular it is”+ How much do you trust government leaders to do the following?(Top Box, Trust A great Deal) General Population-32-35-34-35-27-28-47-35-28-25-29 -3247
  • 26%20% 19% 18%SOLVE SOCIAL OR SOCIETALISSUESCORRECT ISSUES WITHININDUSTRIES THAT AREEXPERIENCING PROBLEMSMAKE ETHICAL AND MORALDECISIONSTELL YOU THETRUTH, REGARDLESS OF HOWCOMPLEX OR UNPOPULAR IT ISCRISIS IN LEADERSHIP – TRUST IN ETHICS AND MORALITY VERY LOWGLOBAL TRUST BUSINESS AND GOVERNMENT LEADERS TO DO THE FOLLOWING:15% 15% 14% 13%SOLVE SOCIAL OR SOCIETAL ISSUESCORRECT ISSUES WITHIN INDUSTRIES THAT ARE EXPERIENCING PROBLEMSMAKE ETHICAL AND MORAL DECISIONSTELL YOU THE TRUTH, REGARDLESS OF HOW COMPLEX OR UNPOPULAR ITGOVERNMENT LEADERS48BUSINESS LEADERSQ144A-147A. [SPLIT SAMPLE] How much do you trust business leaders to do the following? (Top Box- Trust A great Deal) GeneralPopulation across 26-country global total
  • TRUST BUILDING
  • 16 ATTRIBUTES TO BUILDING TRUSTCOMMUNICATES FREQUENTLY AND HONESTLY ON THE STATE OF ITS BUSINESSLISTENS TO CUSTOMER NEEDS AND FEEDBACKTREATS EMPLOYEES WELLPLACES CUSTOMERS AHEAD OF PROFITSINTEGRITYTAKES RESPONSIBLE ACTIONS TO ADDRESS AN ISSUE OR CRISISHAS TRANSPARENT AND OPEN BUSINESS PRACTICESHAS ETHICAL BUSINESS PRACTICESPURPOSEOPERATIONSDELIVERS CONSISTENT FINANCIAL RETURNS TO INVESTORSHAS HIGHLY-REGARDED AND WIDELY ADMIRED TOP LEADERSHIPRANKS ON A GLOBAL LIST OF TOP COMPANIESPRODUCTS & SERVICESIS AN INNOVATOR OF NEW PRODUCTS, SERVICES OR IDEASOFFERS HIGH QUALITY PRODUCTS OR SERVICESWORKS TO PROTECT AND IMPROVE THE ENVIRONMENTADDRESSES SOCIETY’S NEEDS IN ITS EVERYDAY BUSINESSCREATES PROGRAMS THAT POSITIVELY IMPACT THE LOCAL COMMUNITYPARTNERS WITH NGOs, GOVERNMENT AND 3RD PARTIES TO ADDRESS SOCIETAL NEEDSENGAGEMENTEdelman Trust Barometerresearch reveals 16 SPECIFICATTRIBUTES which build trust.These can be grouped intoFIVE PERFORMANCE CLUSTERSlisted here in rank order ofimportance.50
  • HOW WE HAVE EVOLVED…NOW THE ATTRIBUTES CAN BE GROUPEDINTO 5 DISTINCT CLUSTERSINTEGRITY (58%)PURPOSE (47%)OPERATIONS (39%)PRODUCTS & SERVICES (54%)ENGAGEMENT (59%)Edelman Trust Barometer’s2013 TRUST PERFORMANCE CLUSTERSEdelman Trust Barometer’s2008 TRUST DRIVERS*OPERATIONS(76%)Reputation as a place to work (81%)Financial performance (76%)Respected CEO or leader (71%)51*Data used includes Informed Publics ages 35-64 only in 18-country global total
  • 18%29%27%43%32%29%28%27%25%27%26%51%29%33%34%33%37%42%45%46%52%55%55%57%62%65%71%72%72%74%74%74%PARTNERS WITH NGOS, GOVERNMENT AND THIRD PARTIES TOADDRESS SOCIETAL ISSUESRANKS ON A GLOBAL LIST OF TOP COMPANIES, SUCH AS BESTCOMPANIES TO WORK FOR OR MOST ADMIRED COMPANIESDELIVERS CONSISTENT FINANCIAL RETURNS TO INVESTORSIS AN INNOVATOR OF NEW PRODUCTS, SERVICES OR IDEASHAS HIGHLY-REGARDED AND WIDELY ADMIRED TOP LEADERSHIPADDRESSES SOCIETYS NEEDS IN ITS EVERYDAY BUSINESSWORKS TO PROTECT AND IMPROVE THE ENVIRONMENTCREATES PROGRAMS THAT POSITIVELY IMPACT THE LOCALCOMMUNITY IN WHICH THE COMPANY OPERATESHAS TRANSPARENT AND OPEN BUSINESS PRACTICESCOMMUNICATES FREQUENTLY AND HONESTLY ON THE STATE OF ITSBUSINESSPLACES CUSTOMERS AHEAD OF PROFITSOFFERS HIGH QUALITY PRODUCTS OR SERVICESTREATS EMPLOYEES WELLHAS ETHICAL BUSINESS PRACTICESLISTENS TO CUSTOMER NEEDS AND FEEDBACKTAKES RESPONSIBLE ACTIONS TO ADDRESS AN ISSUE OR A CRISIS52-41-40-41-43-21-45-38-37-30-27-26-20-3-18-13-19Q80-Q96. [TRACKING] How important is each of the following actions to building your TRUST in a company? Use a nine-point scale where one means that action is “not at allimportant to building your trust” and nine means it is “extremely important to building your trust” in a company. (Top 2 Box, Very/ Extremely Important) General Population inUS (excludes ‘Don’t Know’ responses Q114-Q129.)Please rate [INSERT COMPANY] on how well you think they are performing on each of the following attributes. Use a nine-point scale where one means they are performing“extremely poorly” and nine means they are performing “extremely well”. (Top 2 Box, Performing Very/ Extremely Well) General Population in USTRUST BUILDING ATTRIBUTES – LARGE GAP IN EXPECTATION VS. PERFORMANCEBUSINESS IMPORTANCE VS. COMPANY PERFORMANCE – USGapImportancePerformance
  • TRUST IMPACT GRIDENGAGEMENTINTEGRITYPURPOSEOPERATIONSPRODUCTS &SERVICES53STATEDIMPORTANCEPERCEIVED PERFORMANUNDER-PERFORMING ON HIGH PRIORITIES PERFORMINGLOW PERFORMANCE ON LOWER EXPECTATIONSOVER-PERFORMING ON LOWER PRIORITIESTRUST-BUILDINGIMPACTQUADRANTENGAGEMENTINTEGRITYPRODUCTS & SERVICESPURPOSEOPERATIONS
  • THE WAY WE WERE54G E N E R A L P O P U L AT I O NCEOBOARD OF DIRECTORSGOVERNMENTOFFICIALSACADEMICSTECHNICAL EXPERTSELITE MEDIAVERTICAL FLOW &CONTROLLED INFORMATIONPYRAMID OFINFLUENCE“As the circle of those who decide isnarrowed, as the means of decision arecentralized and the consequences of decisionbecome enormous,the course of great events often rests upon thedecisions of determinable circles.”- C. Wright Mills, 1956
  • THE NEW DYNAMIC: THE DIAMOND OF INFLUENCE55ACTION CONSUMERSEMPLOYEESG E N E R A L P O P U L AT I O NSOCIALACTIVISTSCEOBOARD OF DIRECTORSGOVERNMENTOFFICIALSACADEMICSTECHNICAL EXPERTSELITE MEDIATO 2013FROM 2000FEW MANYDICTATE CO-CREATEFIXED FLEXIBLEMONOLOGUE DIALOGUECONTROL EMPOWERMENTPYRAMID OFCOMMUNITY(Horizontal)PYRAMID OFAUTHORITY(Vertical)
  • GOVERNANCE LESSONS FOR LEADERS56Observe re-ordering of authority and credibilityOld values are not sufficient (zero-sum competition)Trust is fragile; perceived motives for actions are barrierHuge opportunity for business:innovate to build trust elements into the brand(holistic value proposition)
  • 18%29%27%43%32%29%28%27%25%27%26%51%29%33%34%33%37%42%45%46%52%55%55%57%62%65%71%72%72%74%74%74%PARTNERS WITH NGOS, GOVERNMENT AND THIRD PARTIES TOADDRESS SOCIETAL ISSUESRANKS ON A GLOBAL LIST OF TOP COMPANIES, SUCH AS BESTCOMPANIES TO WORK FOR OR MOST ADMIRED COMPANIESDELIVERS CONSISTENT FINANCIAL RETURNS TO INVESTORSIS AN INNOVATOR OF NEW PRODUCTS, SERVICES OR IDEASHAS HIGHLY-REGARDED AND WIDELY ADMIRED TOP LEADERSHIPADDRESSES SOCIETYS NEEDS IN ITS EVERYDAY BUSINESSWORKS TO PROTECT AND IMPROVE THE ENVIRONMENTCREATES PROGRAMS THAT POSITIVELY IMPACT THE LOCALCOMMUNITY IN WHICH THE COMPANY OPERATESHAS TRANSPARENT AND OPEN BUSINESS PRACTICESCOMMUNICATES FREQUENTLY AND HONESTLY ON THE STATE OF ITSBUSINESSPLACES CUSTOMERS AHEAD OF PROFITSOFFERS HIGH QUALITY PRODUCTS OR SERVICESTREATS EMPLOYEES WELLHAS ETHICAL BUSINESS PRACTICESLISTENS TO CUSTOMER NEEDS AND FEEDBACKTAKES RESPONSIBLE ACTIONS TO ADDRESS AN ISSUE OR A CRISIS57-41-40-41-43-21-45-38-37-30-27-26-20-3-18-13-19Q80-Q96. [TRACKING] How important is each of the following actions to building your TRUST in a company? Use a nine-point scale where one means that action is “not at allimportant to building your trust” and nine means it is “extremely important to building your trust” in a company. (Top 2 Box, Very/ Extremely Important) General Population inUS (excludes ‘Don’t Know’ responses Q114-Q129.)Please rate [INSERT COMPANY] on how well you think they are performing on each of the following attributes. Use a nine-point scale where one means they are performing“extremely poorly” and nine means they are performing “extremely well”. (Top 2 Box, Performing Very/ Extremely Well) General Population in USTRUST BUILDING ATTRIBUTES ARE AN OPPORTUNITY FOR HOLISTIC VALUE BRANDSBUSINESS IMPORTANCE VS. COMPANY PERFORMANCE – USGapImportancePerformance