New Edelman Survey Reveals: People Trust Business More than GovernmentPublished: July 11, 2007 in Knowledge@Emory
In today’s turbulent times, in whom can people put trust? According to the 2007 Edelman Trust Barometer, worldwide, trust in business is on the rise while trust in government is declining.
“It’s not simply happening in the United States, it’s a global trend,” says Richard Edelman, the president and CEO of Edelman, an international public relations firm. “Business is the most trusted institution of all in the less developed parts of the world and that’s remarkable. Why is this happening? Because business is bringing prosperity to those economies.”
Edelman revealed the trust barometer findings during a recent leadership forum at Emory University’s Goizueta Business School. The report details the levels of trust in business, government, non-government, religious and media institutions in North America, the European Union, Asia and Latin America.
Moderated by Jeffrey Rosensweig, a professor of finance and director of the Global Perspectives Program at Goizueta, the forum brought together Mike McCarthy, managing editor of CNN International; Dr. Helene Gayle, president and CEO of CARE; and Ann Cramer, North American director of IBM corporate citizenship/corporate affairs.
According to the report, business is the most trusted institution in seven of the 18 countries surveyed, with government the least trusted in 11 nations. Technology is the most trusted industry worldwide, followed by biotechnology/life sciences. Least trusted: the media, entertainment and insurance.
“People see technology as being about the future,” says Edelman, the keynote speaker. “Technology also has made people a lot of money and it doesn’t pollute or have other big problems associated with it.”
In the United States, the gap between trust in business — at a record 53%, compared to 44% in 2001 — and government (38%) is the widest in the eight years the survey has been conducted.
Business has rebounded from the high-profile scandals of several years ago, aided by Sarbanes-Oxley reforms, notes Edelman, while trust in government has dipped following post-9/11 and post-2004 election spikes.
Critically for corporations, country of origin colors perception. The survey found that the most trusted “headquarter countries” are Sweden, Canada and Germany. Russia, Mexico and Brazil are the least trusted. The United States ranks only 10th among the 18 countries, with U.S.-based companies getting their highest trust rating in Latin America and Asia and lowest in the European Union.
“Canadian, Swedish and German companies are viewed as environmental, (good) to their employees and generally interested in CSR (corporate social responsibility),” says Edelman. “It’s quite amazing that the U.S. ranks 10th. But we’re above Italy (11th) and Poland (13th).”
Rajendra Srivastava, who holds the Goizueta chair in marketing and e-commerce, says the Edelman study has important implications for U.S. companies.
“Emerging markets, especially China and India, trust U.S. brands the most,” observes Srivastava, who attended the forum. “Fortunately, there is more growth available in emerging markets than in Europe. But even in these markets, U.S. companies appear to trail German companies (on trust). Clearly, we face an uphill task. If we do not face up to the challenges, we can expect erosion of share and profitability, not to mention lost opportunities, in global markets.”
Trust is critical in determining “a company’s ability to charge premium prices while maintaining high levels of brand loyalty and customer retention,” Srivastava says. “Conversely, lower competence and questionable perceptions of value can result in customers refusing to buy a company’s products and services, negative word-of-mouth and less willingness to invest in its securities.”
In addition, Srivastava is not surprised by the trust accorded technology worldwide.
“Technology has had a tremendous impact in improving the quality of life globally, hence one might expect an affinity for companies in that sector,” he says. “Fortunately, U.S. leadership in the tech sector is a plus. We cannot afford to lose on this front.”
Goizueta’s Rosensweig characterized the survey’s central finding as more a factor of trust in government declining rather than trust in business rising.
“I just don’t see an overwhelming trust in business out there,” he says. “In relative terms, business may be looking good compared to, say, the media and entertainment, but it’s nothing to be overly proud of. What was interesting to me was how distrusted U.S. businesses are abroad. Europeans are very distrustful of U.S.-headquartered companies, which hurts our competitiveness.”
Rosensweig also was struck by the survey’s finding that people in developing countries generally trust all types of institutions more than do residents of developed nations.
“Maybe those of us in wealthier countries are more jaded,” he says. “Or maybe the institutions themselves have become (less trustworthy).”
One factor creating distrust of government in developed countries — particularly the United States — is the huge role lobbyists play in government, says Rosensweig.
“Call it the Jack Abramoff Effect,” notes Rosensweig, referring to the infamous K Street mega-lobbyist. “It’s not just lobbying either, it’s all the money that’s coming into politics, at levels we’ve never seen before.
“Just look at the amount of money being raised for the next presidential election and how early it’s happening,” he says. “Every aspect of the political process seems to be tainted by money and conflicts of interest. The only place we see bipartisanship now is in the scandals.”
Rosensweig adds that corporations can do much to build trust, but instead, they’re often their own worst enemy.
“When companies don’t conform to the highest ethical standards, it would be a lot more credible if they wouldn’t say it’s just a few bad apples and try to sweep things under the rug,” he says. “The average citizen doesn’t believe it’s just that guy from Tyco or Enron or WorldCom, but rather that they were ones from really big companies who happened to get caught.
“In the same light, some businesses practice corporate social responsibility while others simply pay lip service to it,” Rosensweig says. “It’s fine for your marketing campaign to say you’re a ‘green’ company if environmental practices are integral to your operations, but saying so when it’s not true breeds distrust.”
The Edelman survey polled college-educated people ages 35 to 64 in the top 25% of household income in the 18 countries. Also, those surveyed professed an interest in the media, economy and public affairs.
Edelman said the “trust deficit” U.S. companies face in Western Europe — where business is much less trusted than here — has been compounded by the unpopularity of Bush Administration policies.
“The trust deficit did not begin with President Bush nor will it end with Bush, but it’s been exacerbated by Bush,” Edelman says. “On the other hand, there’s a trust advantage for American companies operating in China, Brazil and some other developing markets. The U.S. halo is welcomed in developing countries, but it’s what Western Europeans dislike.”
Adds Rosensweig, “You would think that Europeans’ distrust of Bush would be divorced from their trust of U.S. business, but in global business, it all interconnects — politics, culture, ethical standards, etc.”
In both North America and the European Union, the most trusted institution is the non-governmental organization (NGO), followed by religious, business, media and governmental institutions, the survey showed.
In Asia, business tops the trust chart, followed by the media, government, NGOs and religious institutions. The Latin American order: business, NGOs, media, religious and government.
The fact that business is more trusted in the developing rather than developed world “is the opposite of what you would expect intuitively,” Edelman says. “In all developing markets the trust in business has gone up substantially over the last year. Business is booming abroad.”
Noting that the media rank “on par with insurance salesmen” on the global trust-meter, CNN International’s McCarthy says there has never been “a greater need for a (trustworthy), impartial news service.” The need is even more acute, he says, given the ongoing explosion in media outlets — 24/7 news channels, Websites, blogs, etc.
“No news executive is naive enough to believe that anyone sits in front of the television for a whole hour anymore to find out what’s going on,” McCarthy says. “People pull information from so many different sources these days. Trust is something that’s very, very hard to earn but very easy to lose. We think about that every single minute of every single day in how we do our stories.”
McCarthy says one way to build trust is through increased interaction with viewers, from e-mail feedback on stories to consumer-generated content. “People also want to see a level of passion from news anchors and reporters, rather than just a passive reading of the facts.”
A prime example, he notes, was CNN anchor Anderson Cooper’s engaged reporting from New Orleans in the aftermath of Hurricane Katrina.
Building trust also involves covering the stories that need to be covered, even when they lack pizzazz, McCarthy says. “There’s this absolute bombardment of news today, and often it’s just the same stories going round and round in an echo chamber. We need to say this may not be the most exciting story in the world, but we’re going to cover it anyway because it’s an important story.”
On the trust front, Gayle says CARE — the international humanitarian agency founded in the aftermath of World War II — is fortunate in that it has a respected, well-known name with which to operate.
“First and foremost, we have to build trust in the populations we serve,” she says. “To do that, we have to have great programs that will impact and change lives. We also have to be accountable to our donors.”
NGOs like CARE can learn from socially responsible corporations that reach out to work with markedly different organizations to attain common goals, Gayle says. “There’s this synergy that can be gained, this multiplier effect, in building on commonly shared values.”
For its part, IBM works in collaborative ways “to leverage assets in ways that make a difference in the world,” says Cramer. Efforts range from education — IBM’s top social priority is improving public school education worldwide — to environmental initiatives such as energy conservation and pollution prevention.
“IBM’s corporate citizenship reflects both our brand and our values by addressing some of society’s most complex problems (through) innovation,” Cramer says.
Edelman says companies need to be aware of the rapidly changing nature of communications as they work to build trust. No longer is the CEO—a rock star in the 1990s but often a beleaguered figure today—the sole carrier of the corporate message.
While the CEO is still critical in addressing “the elites”—investors, regulators, top media—everyday employees and customers increasingly are defining the company in informal, peer-to-peer forums such as blogs, the survey showed. In short, the top-down “controlled” message has been joined by the messier but important “horizontal” message among people of common interest.
Shrewd companies employ both, says Edelman.
“Big point here: There’s a divergence of impressions going on,” he says. “The impression of business is going up while the impression of the CEO is going down. Executive compensation has been a big issue causing this lack of trust in the CEO.
“Let’s face the facts,” Edelman stresses. “Since 2001, most CEOs have had their heads below the parapet. Many believe they should talk only to Wall Street people, and that if they just make their numbers, they’ll keep their job. I disagree with that approach. There’s a middle ground. CEOs aren’t rock stars, nor should they be ducking (attention).”
Edelman research also showed that:
• Trust in government ranges from a low of 16% in the United
Kingdom to a high of 78% in China; trust in business from 28% in France to 71% in Mexico; trust in the media from 19% in the U.K. to 68% in China; trust in NGOs from 27% in Russia to 71% in Mexico; and trust in religious institutions from 17% in Japan to 57% in the Netherlands.
• U.S. trust levels are 57% for NGOs, 55% for religious institutions, 53% for business, 43% for the media and 38% for government.
• Corporations increasingly are expected to play a role in helping solve societal problems, from poverty to environmental challenges. The new “green” includes the proper treatment of employees. This is especially true in developed countries.
• People who distrust companies are not only refusing to buy from them, they’re putting their thoughts on the Web.
• Asians tend to prefer global brands, while North Americans, Latin
Americans and Europeans tend to favor a local presence.
• What’s viewed as the most credible source of information varies from country to country. In the United States, business magazines and stock analyst reports carry the most credibility, advertising and blogs the least. In China, television ranks as the No. 1 source of information. Newspapers reign in Japan and France.
• Although blogs rate low in trust, they’re still important because they often are entry points to the mainstream media, particularly in the technology sector and public affairs.
• There’s a widening information divide between the haves and the have-nots, based on such factors as financial resources and access to broadband. In the United States, for instance, 25% of high school graduates use no media whatsoever.
At the other end of the spectrum, a substantive magazine like The Economist is experiencing a circulation boom, Edelman adds.