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Directors must confront stable mistrust of business

24 July 2017 by Jimmy Nicholls

Directors must confront stable mistrust of business - read more

Low faith in business leadership, unmoved by the elite crisis, needs addressing, says Jimmy Nicholls.

In the age of Donald Trump’s presidency and Brexit, it has become a cheap cliché to claim that the world is suffering a crisis of elites and a rise in ‘populist’ politics supported by the many but eschewed by the few.

These beleaguered elites are not merely political. The businessman who takes his pilgrimage to the World Economic Forum in Davos, Switzerland every year is as much a villain as the complacent politicians, and just as complicit in the alleged economic stitch-up.

It is a compelling tale, but does the data bear it out? This is the question Bobby Duffy, Managing Director of Ipsos Mori’s Social Research Institute, sought to answer in his keynote at ICSA’s Annual Conference in July.

According to the analyst, faith in business leaders has been steady for a while. ‘There is low levels of trust, but it is not a new crisis of trust,’ he said.

Duffy’s remarks were based on Ipsos’s Veracity Index 2016, the latest in a survey series that dates back to 1983. Over that period the British public’s confidence that business leaders will tell the truth has risen from 25% to 33%, though the trend has zigzagged over time.

Though this places business leaders among the five least trusted trades covered in the poll, it at least ranks them favourably to estate agents (trusted by 30%), journalists (24%) and government ministers (20%). Politicians are trusted to tell the truth by a mere 15%.

This is some comfort for business leaders, but there is a lot of room for improvement. In May, Ipsos released the findings of its Global Trends survey, which polled 18,000 people across most of the G20 and a few other countries.

For business there are some helpful insights. ‘What seems to have changed in some ways is the context in which people judge companies,’ Duffy told the conference.

“What seems to have changed is the context in which people judge companies”

According to Ipsos, since 1984 honesty and integrity have become more important in how companies are perceived compared to the quality of products, services and customer service offered.

Likewise, successful brands will be increasingly pressed to make a positive contribution to society in future. Asked by Ipsos, across the globe some 68% said as much, with some regional variation.

Four-fifths or more agreed in poorer countries like Indonesia, India and China, while two-thirds of people from many of the richer European and North American countries indicated the same.

Though Ipsos argued that this may overstate the extent to which consumers shop based on brand reputation, anyone aware of the reaction to United Airlines violently ejecting a passenger from one of its flights earlier this year will see the dangers of a tarnished reputation.

Even alienating one in a thousand customers can cost millions in lost revenue for large firms, and few people want to work for a company known for misbehaviour, including those on the board.

Addressing the conference, Duffy said: ‘Your role is critical in making sure that companies act with that honesty and integrity, and also lift their heads and look more widely at their wider impact.’

This leaves the question of how one can align the good of a firm with the good of society.

The report of the BEIS Select Committee, previously discussed in Governance and Compliance, offers some suggestions, including around executive pay, worker representation in the boardroom, and board diversity. The Government’s November Green Paper on corporate governance touched on similar matters.

Since then the general election gave us a minority government whose plans on corporate governance are uncertain, but other sessions at the conference yielded some ideas firms can implement regardless.

Those seeking to boost board diversity were advised to advertise positions publicly, be wary of recruiters’ narrow contact books, and be flexible with working hours.

Firms working on culture should define what sort of company they wish to be, ascertain how existing practice differs from that, and only then work out what needs to change.

Britons’ stable if low confidence in business leaders suggests firms are weathering the political tumult better than commonly thought. There is plenty to fix, but for boards seeking to improve their standing, the crisis of elites is for other people.

Jimmy Nicholls is Deputy Editor of Governance and Compliance

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