Rebuilding Public Trust Through Accountability and Responsibility

1
Rebuilding Public Trust Through Accountability
and Responsibility

• Address to the Ethical Corporation Magazine
  Conference
• By Richard Edelman
• President, Edelman PR
• New York City
• October 3, 2002

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Agenda Today

• Edelman Studies on Corporate Governance and
  Corporate Social Responsibility tracking
  attitudes towards business, government, media and
  NGOs
• Establish new approachaccountability and
  responsibilityas road map for business

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Methodology

• Research conducted January 2001, June 2001,
  January 2002, June 2002
• Research among 850 Opinion Leaders
• 400 U.S. Opinion Leaders
• 450 European Opinion Leaders across the U.K,
  France and Germany
• Opinion Leaders are respondents
• Aged 35-64
• Household income 100K in US, 75K in Europe
• College educated
• Business and Media Attentive

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Business Retains Trust

• In the face of the storm, opinion leaders have
  not yet lost confidence in business as an
  institution. Business most trusted institution
  in Europe, 2 in US.
• Perception that business is soundbut key
  elements of the system are flawed.

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Government, Media, NGOs Fade

• We are seeing the ebbing of the 9/11-induced rise
  in favorability for government and media.
• The NGO message is being drowned out by twin
  issues of recession and terrorism, but they still
  dominate certain issues.

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Trust in Institutions
Now I would like you to tell me how much you
TRUST each to do what is right. Please use 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. TOP FOUR BOXES SHOWN
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US Trust in Institutions (Tracked)
Now I would like you to tell me how much you
TRUST each to do what is right. Please use 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. TOP FOUR BOXES SHOWN
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European Trust in Institutions (Tracked)
Now I would like you to tell me how much you
TRUST each to do what is right. Please use 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. TOP FOUR BOXES SHOWN
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NGOs Dominate Specific Issues in Terms of Trust
(January 2002)
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Brand Evaluator

• Brand evaluation shows difference in attitude
  between US and Europe- NGOs are top three brands
  in Europe on trust while top three in the US are
  companies
• This is unchanged since January 2001

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Trust in Brands January 2002
U.S.
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Trust in Brands January 2002
Europe
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Advisors in Trouble

• Trust in consulting/advisory services lowlower
  than business in general
• Particular suspicion of brokerage firms and
  management consultants, especially in Europe

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Trust in Advisory Services
Now I would like to focus on your trust in
industries that provide advisory services to
businesses. Please tell me how much you TRUST
businesses in each of the following industries to
do what is right. Please use 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. TOP FOUR BOXES SHOWN
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Perception of Problem

• European and US opinion leaders have similar
  perceptionsbut more government seems not to be
  the answersense of misleading marketing shows
  risk to brand reputation of corporate
  scandalslow confidence in business to fix it

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Perceived Problems in Corporate Behavior (US
Data)
Percentage saying problem is Extremely or Very
Serious
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Perceived Problems in Corporate Behavior (Europe
Data)
Percentage saying problem is Extremely or Very
Serious
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Low Confidence in Business to Solve Problems
Rank order by US data
Percentage saying they are Extremely or Very
Confident in business ability to police
themselves
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CSR Data

• Tech Industry Ahead
• Gates Foundation Impact
• Young, egalitarian industryno environmental
  issues
• Consumer-facing industries do better
• CSR expected even during recession

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Corporate Social Responsibility
By Vertical Market
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Attitudes CSR and NGOs
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Engagement with Civil SocietyNow a Matter of
Risk Assessment

• Must look beyond traditional constituencies to
  employees and customers
• Business seen as enabler and more powerful than
  government

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Interviews with Six Major NGOs

• Friends of the Earth
• Greenpeace
• Amnesty International
• World Wildlife Fund for Nature
• Transparency International
• Human Rights Watch

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NGOs View New Type of Risk
Banks assess risk, but mainly from a financial
point of view. We aim to create roadblocks for
environmentally abusive companies thereby
forcing the financial institutions to factor
exposure to controversy into their investment
decisions
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NGOs View Capitalism Good or Bad
Wall Street decisions impact the lives of folk
half way around the world. Capitalism is not
an automatic force for good. We intend to make
sure that it is.
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NGOs View Ethics
I honestly dont believe that many financiers
truly understand the meaning of ethics. Its
much more than insider trading. What about the
ethics of protecting endangered species or the
rights of indigenous people. Their common
ignorance of these issues is unacceptable
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• The Road Map
• How to connect in a world filled
• with mistrust?
• What business can do?

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The End of the Inside Game

• Pyramid of authority gives way to sphere of
  cross-influence with multiple stakeholders
• Continuous partial attention and pinging
• Empowered consumers, intelligent employees
• Speak simultaneously with all audiences paradox
  of transparency

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Rebuild Credibility from the Inside Out

• Employees are the first line of connection with
  CSR as a real way to establish emotional link
• Customer experience criticaldialogue, feedback,
  rational and emotional ties

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CEO Profile

• While the era of celebrity CEO is over, corporate
  leadership can not afford to hide
• Need multiple interactions to establish trust
• No single source of credibility

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Issue Agreement
Percentage saying they Agree or Strongly
Agree
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Communication in a Credibility Vacuum

• Need to be visible in media and to work with
  employees and customers in web of trust
• Corporate advertising is not the way

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Sources of Information Credibility Ratings
In general, how credible do you feel each of the
following sources is for information about a
company? Is information about a company that you
get from (INSERT SOURCE) extremely credible, very
credible, somewhat credible, or not credible at
all?
Rank order by US data
Percentage saying source is Extremely or Very
Credible
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You Have to Be It, You Cannot Buy It

• Corporate responsibility is the key issue
• Philanthropy important but secondary to actions
  of company

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Defining Corporate Responsibility
People define corporate social responsibility
many different ways. In your opinion, would you
say that corporate social responsibility is more
about a companys philanthropic efforts, that is,
donating money and resources to the community and
charitable organizations or more about the ethics
that occur within a company, that is, everything
from the way a company treats its employees to
their policies on social issues such as the
environment?
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Change Communication Process

• Broaden group of stakeholders receiving regular
  information
• Document annual progress on key issues through
  sustainability report
• Engage in debate with NGOs
• Empower local markets to connect with media
  community

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New Strategy for NGOs and BusinessPreferred
Dancing Partners

• Advantages for NGOs include companies global
  scale, marketing prowess, flexibility/speed
• Advantages for companies include NGOs
  credibility, link to employees and customers,
  expertise in distant markets
• Government will listen if business and NGOs make
  common cause

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What This Means

• The end of business bashing and the beginning of
  constructive dialogue
• Each disagreement should not wind up in a divorce
• Large NGOs need to stand their ground when
  splinter groups move to preempt issues

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Accountability and ResponsibilityA New Standard
for Companies

• Proper disclosure of financial data important but
  not sufficientalso require true social
  responsibility
• Business pledges to be transparent
• There needs to be a specific agenda and tangible
  progress
• Link to employees and customers

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Conclusions

• Business has window of opportunity
• CEOs must continue to be visible
• Must rebuild trust from the inside out
• CSR is major advantage in converged world of
  multiple stakeholders