26 July 2016
This year’s Trust Barometer, our firm’s annual survey, sheds surprising light on how CEOs are perceived as change agents, and suggests that a new model of CEO leadership is emerging – provided CEOs take specific actions. While most CEOs believe that their duty is to centre their communications on the operational and financial aspects of a company, today 78 percent of Australians say that a CEO should be personally visible in discussing societal issues and 74 percent expressed the importance of CEOs communicating about the future of their industry.
This year’s Trust Barometer, our firm’s annual survey, sheds surprising light on how CEOs are perceived as change agents, and suggests that a new model of CEO leadership is emerging – provided CEOs take specific actions.
The Edelman Trust Barometer reveals that the Australian general population trusts business as an institution more than it trusts its leaders. A majority of survey respondents view business as the institution most capable of keeping pace with the changing demands of the global economy (compared to government, NGOs and media), yet almost two thirds of the people surveyed in Australia (39 percent) do not trust CEOs to do what is right.
This trust gap is partially explained by a misalignment between what CEOs have traditionally needed to focus on – near-term gains – and what people now expect them to care about and act on, which is long-term solutions. For instance, in Australia, most say that CEOs focus too much on short-term financial results (72 percent) and lobbying (49 percent), and not enough on job creation (60 percent) or positive long-term impact (60 percent).
Further, there is a sense that CEOs are unrelatable (64 percent agree), perhaps fuelled in part because they are seen as being paid too much in relation to everyone else (67 percent agree) and because people are looking for leaders to share more openly about their personal values (79 percent).
But there’s a deeper change in play. While most CEOs believe that their duty is to centre their communications on the operational and financial aspects of a company, today 78 percent of Australian say that a CEO should be personally visible in discussing societal issues and 74 percent expressed the importance of CEOs communicating about the future of their industry.
With expectations for business higher than trust in CEOs, there’s a clear need for more engaged and purpose-driven leadership to bridge this critical trust gap.
To understand the shifting expectation of business and its leaders, it’s helpful to trace how the public persona of the CEO has changed over the past few decades.
Back in the 1980s and ‘90s, business leaders could engender attention both for their thriving businesses and their status as pop culture icons. And while the current popularity of Donald Trump in the United States might suggest otherwise, the era of the celebrity CEO essentially ended with the recession of 2008-2009.
Faced with growing government regulation and activist investors, CEOs went underground and turned “invisible.” Instead of being present at public-facing activities or weighing in on the issues of the day, chief executives put their heads down and turned inward, focusing solely on increasing revenues and decreasing costs.
It’s not surprising, then, that today 39 percent of Australian Trust Barometer respondents said that they cannot name any CEOs.
The time has come for the invisibility cloak to come off because expectations of business and its leaders are changing. People now expect CEOs to re-balance their attention to near-term gains with action on long-term solutions.
The call for CEOs today to be not just present on the business side, but also to be visible, real and human on the public side is driving the need for what we call Engaged Leadership.
How can a CEO heed the call?
If you are a CEO, shareholders may evaluate you based on your balance sheet. But a broader range of stakeholders shape their opinions and decide whether they trust you through four lenses: your actions; your perceived values; how you treat employees (and what they say about you); and how you engage with the community. People told us that the most important attributes to build trust are around “leading integrity” and there are several ways to communicate integrity to key audiences:
Be visible. Your stakeholders fully expect to hear from you frequently and openly about your dual mandate of earning profits and providing societal benefits. Speak beyond spreadsheets and address industry trends and social purpose. According to Australian respondents, 74 percent expressed the importance of CEOs being personally visible in communicating about the future of an industry.
Take a stand. Be purpose-driven and have a point of view on how your company and industry contributes to society in positive ways. Eight in ten Aussies (78 percent) feel CEOs should be personally visible in addressing societal issues like income inequality.
Tell your story. Be open and share your story in a way that is personal, honest and relatable. According to Australian respondents, the following types of information are important to building trust in a CEO: personal values (77 percent); obstacles overcome (63 percent); personal success story (60 percent); education and how it shaped you (53 percent).
Put employees first. Engage employees directly and frequently. Let them serve as your ambassadors and advocates to help tell and humanize the company’s story. Eighty-one percent of Australian respondents agree that employees are a CEO’s most important audience, even more so than investors and analysts.
Make yourself accessible. Express your values and purpose through direct engagement with stakeholders. Fifty-six percent of Australian respondents expressed the importance of placing the customer ahead of profits, and with an increasing number of communications channels there is a wide variety of ways to engage.
The survey does reveal a direct link between CEO awareness and CEO trust. There was a staggering 24 point rise in trust in CEOs when Australian respondents could name CEOs (63 percent of those who could name two or more CEOs said they trusted CEOs). So if they know you, they are more likely to trust you.
Recently, several global CEOs have stepped forward on a range of important industry and social issues. Mark Zuckerberg (the only CEO who achieved double-digit recall globally in the Trust Barometer) consistently shares a mix of content and commentary across personal, company and industry interests.
These global CEOs know that finding the right balance between attention to financial progress and advancing the societal good truly matters because it has a real impact on business. The Barometer shows that 42 percent of Australians attribute a business’ contribution to the greater good as the reason that their trust in business has grown. Conversely, of those respondents whose trust in business decreased, half cited a business’s failure to contribute to the greater good as the main driver.
CEOs have an incredible opportunity to build and strengthen relationships by carrying themselves and communicating in a way that is transparent and open. As the data indicates, business leadership as usual won’t cut it in today’s world. The remit is now broader, not unlike what citizens expect of a presidential candidate or other major government leader.
But change does not begin and end with the CEO. As Satya Nadella, CEO of Microsoft, noted, “As CEO, I see my role ultimately to be chief curator of culture. Without the right culture, transformation is impossible.” But only an Engaged Leader can create a culture of integrity, setting the right tone through their actions, values, purpose, and employee advocacy.
View the global findings of our Trust Barometer CEO Supplement here: Trust and the CEO
5 July 2016
The TPP comes at a critical time for Australia as the country continues to stumble in its attempts to navigate away through the end of one of the biggest mining booms in history. As it welcomes its latest and fifth Prime Minister in eight years, the country is characterised by a political community in denial about the end of the boom, a business community threatening to usurp government and set its own direction, and a population growing increasingly incredulous at the dysfunction of government and fearful about the effects of the end of the boom.
The TPP comes at a critical time for Australia as the country continues to stumble in its attempts to navigate away through the end of one of the biggest mining booms in history. As it welcomes its latest and fifth Prime Minister in eight years, the country is characterised by a political community in denial about the end of the boom, a business community threatening to usurp government and set its own direction, and a population growing increasingly incredulous at the dysfunction of government and fearful about the effects of the end of the boom. Coming on the back of outstanding successes in trade agreements with China, South Korea and Japan, the TPP is a landmark deal that could bind business and government together in the drive for a new, growing economy. Critically, it needs to be sold well to the public by the new Prime Minister’s team, with support from the business community. This comes at a time when the Government is already struggling to push through the China–Australia FTA. Overall, the negotiations announced this week are being seen as a success for Australia with 98 per cent of tariffs on Australian exports in the region being eliminated.
This is a massive step when you consider that in 2014, a third of Australian goods and services exports, worth $109 billion, went to TPP countries. Australian Trade Minister, Andrew Robb remarked to the closing plenary session negotiating the TPP that the agreement could be “transformational” and would deliver “unprecedented new opportunities in the rapidly growing Asia Pacific region, with its rising middle class, for our businesses, farmers, manufacturers and service providers”. The TPP goes beyond the dismantling of traditional tariff and service barriers. It includes chapters on intellectual property, competition practices and minimum environmental standards. While Free Trade Agreement negotiations are almost always conducted behind closed doors, the far reaching nature of the TPP has led some, including Australia’s Productivity Commission, to question the transparency of the negotiations. However, it is clear that Australia will emerge from the TPP negotiations with significant gains in key sectors – notably, food and agribusiness, and new rights to supply services sectors in which Australian companies already enjoy a world–class reputation.
Potential Winners in Australia Food and Agribusiness
The big winners here are beef, dairy, sugar and wine – with significant tariffs to be slashed when the agreement comes into force and as it progresses. The sugar industry was a clear winner with final outcomes from the deal anticipated to see Australia’s market access to the US double for local sugar producers, starting with a base increase of 65,000 tonnes. In the US, the higher price paid per pound of sugar, comparative to Asia, equates any increase in US market access of more than 500,000 tonnes a year to a benefit of around $100 million to the Australian industry.
The agreement also includes an option to increase access for Australian domestic producers should there be a US shortfall – a provision which could see Australian export volumes reach up to 400,000 tonnes by 2020.
Healthcare and Pharmaceuticals
On the matter of healthcare and pharmaceuticals, negotiations extended into the early hours of the morning as representatives from Australia and the United States sought a compromise over patent protection. Australia paved the way for a group of countries objecting to the US position of allowing pharmaceutical companies keeping data for biologics, advanced medicines made from living organisms, under data protection for twelve years. During that period, companies would have the ability to block the manufacture of biosimilars – generic versions of their drugs by competitors – and set prices accordingly. Concerns stemming from public health advocates and members of the Labor Party had stemmed around the rise in cost the of the Pharmaceutical Benefits Scheme (PBS) this provision could imply, with critics warning that the move could herald an increase in price of subsidised medicines. Under the compromise promoted by Australia, data protection will last a lesser five to eight years and will establish a two–track approach where one track would set the Australian system as the standard and provide for a five–year protection period — an outcome which would not lead to any change to the Australian health system. The compromise means there will be no increase to the costs of medicine in Australia under the PBS. Additionally, and driven by Australia, tobacco companies were excluded from the controversial Investor–State Dispute Settlement (ISDS) process that allows firms to sue governments over regulatory changes that disadvantage them. It is understood Australia led the charge in backing a proposal that would stop tobacco firms from taking action against TPP nations for implementing tobacco–related regulation.
With Australia’s export of services about to overtake our exports in minerals, it was critical that the TPP crack open some markets that have been closed or limited to our best and brightest companies. There are some big market access wins for financial services (including insurance), telecommunications, health and education services. The Agreement also now levels the playing field for Australian companies to bid for Government work in many of the TPP countries. This is significant, as many of the TPP countries have enormous state–owned sectors, such as Vietnam.
Potential Losers in Australia
It’s early days and until the full details of negotiations are released in coming weeks there will be lots of speculation. Interestingly, while eCommerce was another sector to come out on top following the negotiations, new rules that promote and protect internet–based commerce could impact Australian bricks and mortar retailers, a sector already under intense pressure in Australia due to economic headwinds. Under the TPP framework, signatories will no longer be able to place customs duties on electronic transmissions.In addition, the Australian government will no longer be allowed to force localisation on global companies, which is in effect the requirement by domestic governments that businesses establish local infrastructure (such as data, servers etc.) to host their local customer data and legitimise their access to foreign markets. This will slash the costs of foreign retailers accessing Australian consumers and presents huge savings for groups such as Google, Uber and [soon to launch] Amazon in Australia. Ultimately, the deal was structured to allow US technology and service giants access global markets for less money, so while it’s difficult to say who could lose,Australian retailers and local service providers should expect even more competition. What should Australian companies do now? For individual companies, it’s important not to get hung up on the headlines. When the TPP text comes out, companies should be combing through the fine detail to see how it impacts their particular product or service line. Now is the time to assess how you can leverage the agreement for new investment, new export markets, and better relations with Governments who will be looking to make the most of this new landmark agreement.
Nic Jarvis – Head of Public Affairs, Edelman Australia
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