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January 22, 2013

Trust In Leadership Keeps Unraveling: 2013 Edelman Trust Barometer Finds a Crisis in Leadership --- Fewer Than One in Five Trust Leaders to Tell the Truth, New Report Finds

Less than one in five respondents in the 2013 Edelman Trust Barometer believes a business or governmental leader will actually tell the truth when confronted with a difficult issue. This lack of confidence in traditional authority figures was continually reinforced in 2012 against the backdrop of high-profile scandals involving CEO and government officials, including former McKinsey managing partner Rajat Gupta, former Chinese government official Bo Xilai and Lance Armstrong, former chairman of the Livestrong Foundation.

"We're clearly experiencing a crisis in leadership," said Richard Edelman, president and CEO of Edelman, in a news release. "Business and governmental leaders must change their management approach and become more inclusive by seeking the input of employees, consumers, activists and experts such as academics, and adapting to their feedback. They must also pass the test of radical transparency."

The general public's trust in leaders is far below that of institutions in all 26 markets. Globally, trust in business to do what is right is at 50 percent while trust in business leaders to tell the truth is 18 percent, a 32-point trust gap; the gap between government and government official is 28 points. The trust gap between business and business leader is amongst the largest (35 points) in the U.S. and China. At 47 points, China had the greatest divide between government and government official.

This year's Barometer also reveals that academics, technical experts and a person like yourself are nearly twice as trusted as a chief executive or government official. "This confirms the democratizing trend of recent years with influence and authority moving away from CEOs and government leaders to experts and peers," said Edelman.

Trust across all institutions increased, including narrow upticks for business and government. Three of four institutions (NGOs, 63 percent; media, 57 percent; business, 58 percent) surpassed their all- time-highs. While there was an increase, it was tentative, with only 17 percent and 16 percent of those who trust business and government, respectively, saying they trust either business and government a great deal. Trust's fragility was further exemplified by a January follow-up study done in the U.S. and UK. Trust in media in the UK experienced a dramatic 14-point drop, after the release of the Leveson Inquiry — an investigation into the role of the press in the phone-hacking scandal — making it the least trusted institution. In the U.S., trust in government dropped eight points among the general public, making it the least trusted institution, after the poor handling of the fiscal cliff issue.

Overall, the general population is far more skeptical of institutions than informed publics. Trust across all four institutions is nine points lower among the general population; the largest difference, 14 points, is seen in the U.S., Sweden and Poland.

Banks and financial services remain the least trusted sectors particularly trust in banks in Germany (23 percent), UK (22 percent), Spain (19 percent) and Ireland (11 percent). Trust in these sectors reached their lowest point in the U.S. in 2011 and in the UK, France, Germany region in 2012. With trust in two-thirds of the markets below 50 percent, trust in banks, globally, is now 11 points lower than it was in 2008.

The Barometer finds that this lack of trust is driven by poor performance and the perception of unethical behavior. Developed economies rate bank performance much lower than emerging markets, giving the industry poor grades in its practice of lending to small businesses and providing home mortgage loans. More than one in two people globally (56 percent) say they were aware of last year's banking and financial services scandals (78 percent in the UK) with 59 percent saying the cause of those scandals was behavior, specifically corruption, poor corporate culture or poor leadership.

"The financial services industry must become more aggressive in explaining its business model and do away with terms such as 'proprietary trading'," said Alan VanderMolen, president and CEO of global practices at Edelman and vice chairman of DJE, in the release. "Stakeholders have to understand how banks are making money and how the industry is working to benefit its shareholders and society."

The Barometer found multinational companies headquartered in developed markets consistently have higher trust levels than those in emerging markets (China, India and Mexico scored lowest). While companies headquartered in developed markets are trusted globally, companies headquartered in emerging markets face their biggest trust hurdles in developed markets. Furthermore, the Barometer also found that small businesses are most trusted in the West while big business is on top in emerging economies.

There's been a dramatic change in how trust in companies is established as stakeholders are now placing greater importance on engagement and integrity-based attributes such as treating employees well, listening to customers and exhibiting ethical and transparent practices. Operational-based attributes, including financial performance and being recognized as a "best" place to work, were nearly twice as important in 2008 (76 percent) as they are in 2013 (39 percent).

"Innovative products and making money are now table stakes," said Ben Boyd, global practice chair of Edelman's corporate practice, in the release. "Business must show that it has a broader skill set and can execute on engagement and integrity-based attributes. Now is the time for business to go beyond simply earning the license to operate toward earning a license to lead, serving the needs of both shareholders and broader stakeholders by being profitable and a positive force in society."

Other key findings from the 2013 Edelman Trust Barometer include:

  • Business leaders are trusted by less than 50 percent in 16 of 26 markets, while government leaders are trusted by less than half in 21.
  • Technology (77 percent) and automotive (69 percent) were again the two most trusted industry sectors.
  • NGOs remain the most trusted institution posting trust levels above 50 percent in 23 of 26 countries — four of the five top markets are in Asia (China 81 percent, Malaysia 76 percent, Hong Kong 76 percent, Singapore 75 percent).
  • Further dimensionalization helped media continue its rise in trust that began in 2010. Among the general population, mainstream media and online search (both at 58 percent) are the most trusted sources of information. More than half in emerging markets trust all forms of media while developed markets have a high variance in trust levels across the various media types. When looking at social media, emerging markets (58 percent) are more than twice as trusting as developed (26 percent).
  • Germany saw the most significant increases in trust across all institutions. NGOs up 16 points, media up 19 points, business up 14 points and government up 15 points. Argentina experienced the greatest decline in trust among all institutions.

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