Trust deficits: the new normal? _______ November 2016 Prepared by Populus About Populus Populus is a full service research and strategy consultancy. Since we set up in 2003, our goal has been to equip companies and individuals with a sophisticated understanding of their markets, audiences and brands. We believe this Critical Knowledge has the power to shape a healthy political, social and economic environment. In a market saturated with research agencies that simply deliver data, Populus stands out as a consultancy capable of delivering Critical Knowledge through expertise across political, reputation, corporate and consumer research and a leading edge suite of products and services. www.populus.co.uk About DLA Piper DLA Piper is a global law firm with lawyers located in more than 30 countries throughout the Americas, Europe, the Middle East, Africa and Asia Pacific, positioning us to help companies with their legal needs anywhere in the world. 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We also advise governments and public sector bodies. www.dlapiper.com/en/uk Trust deficits: the new normal? 2 Contents Executive summary ........................................................................................................ 4 Research findings ........................................................................................................... 6 Revisiting the trust deficits .................................................................................................................. 6 Trust in business: the view from around the world ....................................................................... 17 Businesses working to build trust ...................................................................................................... 18 Rebuilding trust in business: suggestions from Saїd Business School ................................................ 23 Address negative narratives........................................................................................................... 23 Address negative narratives: views from around the world .......................................................... 30 Build more open networks ............................................................................................................ 31 Build more open networks: views from around the world ............................................................ 38 Embrace emerging norms .............................................................................................................. 39 Emerging norms and societal expectations: views from around the world ................................... 45 Executive remuneration................................................................................................................. 46 Executive remuneration: the view from around the world ........................................................... 52 Corporate social responsibility .......................................................................................................... 53 Corporate social responsibility: the view from around the world ................................................. 58 The European Union referendum and business ................................................................................ 60 Methodology ................................................................................................................. 64 Appendix: list of participants ....................................................................................... 65 Trust deficits: the new normal? 3 Executive summary _______ There remains widespread pessimism about the level of trust in big business in the UK, and numerous causes are highlighted. But most business leaders feel that only sustained and committed improvement in business behaviour, combined with a significant change in how business communicates its benefits to society, can have any kind of substantial impact on trust. Many point to the seemingly never-ending series of business scandals as crucial to preventing any improvement in trust over the past few years. Indeed, there is considerable frustration that, although the vast majority of businesses are intent on behaving as responsible corporate citizens, scandals involving a minority of businesses and business people ensure that many people in the UK continue to regard big businesses as untrustworthy. This view, however, is held despite the actions of business leaders’ own businesses. In fact, business leaders argue that they, their boards, and their businesses are more committed than ever to behaving as society demands, to demonstrating that they believe that “doing the right thing is the right thing to do, no matter what the law says”, and to communicating their positive value to local communities and wider society. The fact that they are not getting the credit they feel they deserve, combined with the widely reported irresponsible actions of a small number of other businesses, means that many business leaders are trying – but not always succeeding – to combat an encroaching sense of helplessness. Business leaders all continue to say rebuilding trust is a vital task, but frequently ask rhetorically what more they can do, considering what many interviewees regard as the extensive efforts already made. Many point to the lack of trust in elites, not just in business, as evidence that the problem is widespread and potentially one that business cannot address alone. When presented with the recommendations made by Oxford University’s Saїd Business School Centre for Corporate Reputation on how businesses can rebuild trust, interviewees admit they are unsure as to whether these will have an impact – a reflection of the scale of pessimism among business leaders. Rebalancing narratives around business is widely regarded as a potentially constructive path, but many point out that their previous efforts along these lines have been unsuccessful. The suggestion of business leaders publicly shaming businesses that seem to be behaving unethically is seen as a step too far by most. The idea of seeking more forums for celebrating business was widely welcomed; most agree there are not enough arenas highlighting and championing the contribution of business and showcasing their corporate and social responsibility. Opinion is also divided on the issue of whether businesses need to construct more open networks. The Saїd Business School report ‘Rebuilding Trust in Business, written after the second wave of DLA Piper-Populus research on the trust deficit, suggested that “the aim should be to moderate the social distance between business and the public”. Many business leaders, however, respond that that they already reflect and represent society better than ever before. It is believed that social media has meant businesses are more in-touch with the public and with customers – and business leaders feel they are more attuned to the lives and concerns of their customers than in the past. Further, many of the business leaders interviewed, as well as some of the commentators, suggest that focusing on widening and opening networks will be ineffective. There is some agreement that more should be done to ensure that the biggest businesses in the UK see better representation of women and ethnic minorities in management and board positions. Like with other issues – including pay and environmental impact – several interviewees argue that business can only build trust when it leads by example. Most, however, think that significant progress has already been made prior to and following Lord Davies’s review. And several others posit that action in Trust deficits: the new normal? 4 this area will have a negligible impact on trust anyway, arguing that most people are no more likely to trust a business with a mixed board than one full of middle-aged white men. The third area of Saїd Business School’s suggestions – emerging norms and societal expectations – is an area that business leaders admit is a difficult one. Many agree, to varying degrees, that businesses can gain a reputational ‘halo’ or benefit by moving early on an emerging norm and adapting to societal expectations. Whether this change is worth the capital expenditure, and a potential decline in shareholder return, is where interviewees disagree. Many contend that only when consumer behaviour aligns with societal expectation is there a legitimate reason for businesses to change behaviour – essentially when the business will lose out financially if it fails to act. Others, however, argue that business can only build trust if it is clearly seen to be changing behaviour – and spending money in doing so – in order to become a more responsible corporate citizen. There is a clear lack of a consensus on this. There is more agreement about the impact of executive remuneration on levels of business trust. Most think that the tone of media reporting on executive remuneration has fuelled hostility to big business among the wider public. Some also believe that the absolute level