- In This Issue
Public Trust, Employee Trust: Can It Be Rebuilt?
Aon's Risk Consulting executives offer an exclusive blueprint for businesses in skeptical times
This article was published in the Q3 2010 issue of Aon One, September 2010.
In the 1950s, The Big Boss was a tough-as-nails leader, willing to roll up his sleeves and rub elbows with workers on the assembly line to get things done. That gave way to the Ivory Tower Elite in the 1970s and '80s, when corporate leaders squirreled themselves away in elegant suites, emerging only during requisite corporate functions. In the 1990s, business leaders took up the Celebrity CEO mantle, publishing best-sellers and serving as pundits and prognosticators in the media. And now?
Now, company leaders are regularly pilloried in the press, dragged before governments to explain misdeeds and convicted in the court of public opinion. The mantra: CEOs can't be trusted. And this distrust extends to their companies as well. After all, according to the old adage, "as the CEO goes, so goes the company."
How serious is the state of mistrust? According to the 2010 Edelman Trust Barometer, a yearly report used by the PR giant to gauge trust in companies globally, only 29 percent of respondents trust banks will "do what is right." And although 54 percent of respondents trusted U.S. businesses, it was the direct result of short-term actions, such as decreasing bonuses or repaying bailout loans. Seventy percent of respondents believe that business and financial companies will return to old (read: bad) habits once the recession completely subsides.
So the key question is: Can public trust be rebuilt globally—and sustained over the long term? The answer is yes. Of course. But to determine what needs to be done to rebuild trust, it's also important to look back on what got us to this point in the first place.
THE EROSION OF TRUST—REAL TIME REPUTATION RISK
In many corporations, a CEO's measure of success has changed, says Michael McInerney, vice president, executive and board services, Canada Aon Consulting. Previously a chief executive was responsible for all aspects of management. In the past decade, however, there has been increasing pressure on chief executives to look primarily at short-term growth potential and quarterly earnings. That, coupled with an explosion of micromanaged financial opportunities, has created an environment where short-term gain is coveted most.
"When you have shareholders pushing for quarterly earnings, the whole notion of what the CEO does changes," McInerney says. "Instead of focusing on long-term viability, the CEO is now concerned with short-term results. And even though the CEO's compensation includes a base salary, an annual bonus can amount to an additional 50 to 100 percent of that. While there are long-term stock options, they're subject to the vagaries of the economic cycle. So, the thing the CEO controls most in terms of compensation is the short-term incentive plan."
And that can significantly affect decision making—or could even lead some leaders to adopt a "profit above all else" approach—in order to maximize gain.
Another challenge for CEOs and businesses: the Internet-spawned 24-hour news cycle now fueled by social media. As recently as five years ago, the most timely business stories were parceled out by a print editor, determining what was worthy of publishing in the next morning's newspaper. For the most part, journalistic standards were adhered to, meaning facts were checked and reputations were built on accuracy of information. When errors occurred, retractions were published promptly.
Now, TV networks, websites and bloggers hunger for news—any news—which means items such as internal memos, employee twitter feeds and personal blog posts are fair game. Because there's more news about more companies, the public gets unvarnished and sometimes negative or false information, which, in turn, affects opinion. "In the age of the Internet and social media, you have the ability to damage trust overnight," says Corey Gooch, regional director for Aon Global Risk Consulting. "All it takes is one tweet, one Facebook post or YouTube video and a reputation can be destroyed. The 24-hour news cycle is great at getting bad news out—even if it isn't completely accurate. Unfortunately, the outlets aren't as willing to post corrections with quite the same vigor as the original story."
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