Category 'Business and Populism'

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Trust in crisis in Australia

Business and Populism, Insights, Media, Trust
2017 Edelman Trust Barometer Logo_Web_RGB-01

Australia is on the Trust precipice. Fear is driving populism and protectionism. Leadership is in crisis. Communities only listen to those who agree with them. Some politicians are advocating for closing borders and rejecting globalization. Could this signal the start of an era of Australian insularity?

As a nation, Australia prides itself on a healthy skepticism of authority, a dynamic that reflects tumultuous political play in recent years with five different leaders so far this decade.

However, despite this the disconnect between our own informed publics and the general population is stark and growing. Current Prime Minister Malcolm Turnbull is a classic example of the success and trappings of this elite – a multi-millionaire who has risen to the most powerful seat in the country.  2016 has been marked in Australia by accusations that politicians are misusing taxpayer funds and a litany of corporate greed cases.  The responses are widely seen as mishandled by slow government response, bureaucratic commissions or inquiries with few meaningful resolutions for the voting public.

The system is broken

Set against the backdrop of recent international populist results, including Brexit and Trump, the overwhelming global sense that the system is failing is reflected in the Australian Trust findings.

When looking at the results for the general population, trust in government dropped 8 points to 37% from 45% in 2016, 10 points in the case of media (from 42% to 32%), 5 points to 52% for NGOs and 4 points to 48% for business in general.

Trust levels in Australia have also dropped among the informed public (top 25% income, university educated, actively engaged with news) and the rest of the population – a group we call the mass population – but a significant gap also remains between the two.  Although the informed public is more trusting than the rest of the population, they are becoming increasingly less trusting themselves.

Australia’s results, however, are far from anomalous. The level of trust amongst the general population globally in four key institutions – NGOs, Business, Media and Government – is at the lowest recorded level since we started collecting general population data in 2012.  The disconnect between the actions and decisions of these institutions and those affected by them is widening. Not only has trust dropped, but those surveyed have expressed a desire for greater scrutiny, regulation and taxation of business.

Fear feeds populism

Results show that of the five fears driving the embrace of populism – corruption, eroding social values, globalisation, immigration and concern over the pace of change – Australians have identified eroding social values, immigration and globalisation as key drivers for their lack of trust.

It’s no surprise that these fears have been embraced as key platforms by conservative party One Nation.  The Party, led by Senator Pauline Hanson, is becoming an increasingly visible and popular force for the disenfranchised and discontented, attracted by the Party’s commitment to anti-globalization, anti-immigration and protectionist policies.

There is a direct correlation between fear and the belief that the system is broken.  Businesses are also to blame for stoking these societal fears, simply because they appear oblivious to the context.  Automation may mean innovation to business, but to the public, it can translate to job losses and communities in decline, which exacerbates the disconnect.

News imitates fact; our echo chambers are alive and well

But a real standout this year was Australians’ loss of trust in media. Among informed publics (from a 54% trust level last year), media now sits at 40%, a whopping 14-point decline.  Among the general population, trust in media at 32% is among the lowest levels globally, 11 points below the global average of 43% and a 10 point drop from 2016.

The erosion of trust in media has been accelerated by two significant changes this year.  First is the ongoing consolidation of media in Australia, a landscape dominated by a few players (Australian media ownership, and print media in particular, is among the most concentrated in the world).  Relaxation of cross-media ownership and ongoing staffing cuts has reduced diversity in perspective, and fact checking is at the expense of speed to market.

The second is the universal proliferation of fake news on social media, compounded by the fact that many believe that results from search engines are more credible than information collated by editors or journalists….it seems algorithms are perceived to be more reliable than humans when it comes to delivering the truth.

Add to this the impact of self-referential and ‘friend-endorsed’ facts on our social media channels and we find ourselves in a perfectly formed reflective bubble where we place greater value on information from influencers (people like me) than institutions (technical experts and academics).

Leadership in crisis

Australians’ trust in business leadership, including the “c-suite”, company directors and boards, is in dramatic decline.  The credibility of CEOs as spokespeople dropped significantly, reaching a lowly 26% in 2017 (compared to 39% last year) in the case of the general population, and nine point drop to 36% in the case of the informed public.

So how do we lead from here?

When looking at the global results employees are considered the most credible spokespeople on every topic – this is the first time we have seen this result.  We are looking for spontaneous, ‘human’ spokespeople and have a thirst for information from ‘people like me’.  Business has an opportunity to embrace and empower employees to create a stronger and more authentic alignment between their brand and their corporate narrative.

Business now has a clear opportunity to rebuild trust by recognizing the need to do things differently.  We must forget the neat separation of communication and executive function.  We need a holistic approach that puts people at the center of engagement, not just as one more audience to reach.  Rebuilding trust will be driven by how authentically and effectively all institutions engage with the general population, not just the ‘target audiences’ they define as relevant to them.

An Implosion of Trust

Business and Populism, Insights, Richard Edelman, Trust
An-Implosion-of-Trust

It has been a year of unimaginable upheaval. The incumbent party or elected head of state in five of the top 10 global economies (Brazil, Italy, South Korea, U.K., U.S.) has been deposed or defeated. Populist candidates are leading or growing in strength in upcoming elections in France and Germany. The U.K. voted to exit the European Union. There have been violent terrorist acts in Belgium, France, Germany, and the U.S., plus the never-ending tragedy in Syria. Bribery has been exposed at some of Brazil’s leading companies, with CEOs sent to jail. An American unicorn health diagnostics start-up with a sterling board of directors and huge private financing was found to have falsified its clinical trials. The release of the Panama Papers proved tax evasion on a global scale by business moguls and superstar athletes alike. The mainstream media lost audience as its advertising melted away and it confronted the spectre of fake news.

It has been a year of unimaginable upheaval. The incumbent party or elected head of state in five of the top 10 global economies (Brazil, Italy, South Korea, U.K., U.S.) has been deposed or defeated. Populist candidates are leading or growing in strength in upcoming elections in France and Germany. The U.K. voted to exit the European Union. There have been violent terrorist acts in Belgium, France, Germany, and the U.S., plus the never-ending tragedy in Syria. Bribery has been exposed at some of Brazil’s leading companies, with CEOs sent to jail. An American unicorn health diagnostics start-up with a sterling board of directors and huge private financing was found to have falsified its clinical trials. The release of the Panama Papers proved tax evasion on a global scale by business moguls and superstar athletes alike. The mainstream media lost audience as its advertising melted away and it confronted the spectre of fake news.

The 2017 Edelman TRUST BAROMETER finds that two-thirds of the countries we survey are now “distrusters” (under 50 percent trust in the mainstream institutions of business, government, media and NGOs to do what is right), up from just over half in 2016. This is a profound crisis in trust that has its origins in the Great Recession of 2008. The aftershocks from the stunning meltdown of the global economy are still being felt today, with consequences yet unknown.

Like the second and third waves of a tsunami, ongoing globalization and technological change are now further weakening people’s trust in global institutions, which they believe have failed to protect them from the negative effects of these forces. The celebrated benefits of free trade — affordable products for mass consumption and the raising of a billion people out of poverty — have suddenly been supplanted by concerns about the outsourcing of jobs to lower-cost markets. The impact of automation is being felt, especially in lower-skilled jobs, as driverless trucks and retail stores without cashiers become reality.

We have moved beyond the point of trust being simply a key factor in product purchase or selection of employment opportunity; it is now the deciding factor in whether a society can function. As trust in institutions erodes, the basic assumptions of fairness, shared values and equal opportunity traditionally upheld by “the system” are no longer taken for granted. We observe deep disillusion on both the left and the right, who share opposition to globalization, innovation, deregulation, and multinational institutions. There is growing despair about the future, a lack of confidence in the possibility of a better life for one’s family. The 2017 Edelman Trust Barometer finds that only 15 percent of the general population believe the present system is working, while 53 percent do not and 32 percent are uncertain.

The lack of societal and institutional safeguards provides fertile ground for populist movements fueled by fear. Corruption and globalization are the top two issues for the general population, with two-thirds of the public concerned and nearly a third deeply worried about these economic factors. But there also is a deep unease about issues related to personal safety or family life, including erosion of social values, immigration and rapid pace of change. Countries that combine a lack of faith in the system with deep societal fears, such as France, Italy, South Africa, the United States, and Mexico, are electing or moving towards populist candidates.

These macro trends are causing destabilizing aftershocks, with important negative consequences for trust:

First, the trust collapse has moved beyond a simple “class vs. mass” problem to a systemic threat. More than three-quarters of respondents among both informed and general populations agree that the system is biased against regular people and favors the rich and powerful. Although we have reached unprecedented trust gaps between the informed public and the mass population averaging nearly 20 points in the U.S., U.K. and France (and gaps of 10 or more points in strong economies such as India and China), the waves of anger are now lapping at even the top rungs. Close to half of the “informed public” — adults 25-64 with a college education, in the top 25 percent of income, and consume large amounts of media — have lost faith in the system.

Second, there is a lack of belief in leaders, who damage the stature of their institutions. We now observe a huge divide between the modest trust in institutions of business and government and a pitifully low level of confidence in their leaders. Over two-thirds of the general population do not have confidence that current leaders can address their country’s challenges. The credibility of CEOs fell by 12 points this year to 37 percent globally; in Japan, it is 18 percent. Government officials and regulators are the least credible spokespeople, at 29 percent credibility. “A person like yourself” is now as credible as an academic or technical expert, and far more credible than a CEO or government official, implying that the primary axis of communications is now horizontal or peer-to-peer, evidence of dispersion of authority to friends and family.

Third, we’ve registered the demise of government as an effective force in leading change. From an exalted position as savior in the wake of the financial crisis, government is viewed today as incompetent, corrupt and divided, the least trusted global institution at 41 percent. The drop in government trust began five years ago in developed markets, with the inability of the European Union to fashion a compromise on loans to Greece and Portugal, plus the budget impasse in Washington, D.C. In developing markets such as Brazil, Mexico and South Africa, trust in government collapsed in the past four years in the wake of scandals; in Brazil, it slid from 36 percent in 2013 to 24 percent in 2017. Trust in government is now as much as 43 points below that of business in developing markets; in developed markets, it’s 25 points lower.

Fourth, the media, the vaunted Fourth Estate in global governance, plunged in trust this year, distrusted in more than 80 percent of the countries we survey, to a level near government. Media is now seen to be politicized, unable to meet its reporting obligations due to economic pressures, and following social media rather than creating the agenda. Donald Trump circumvents mainstream media with his Twitter account, in this way seeming more genuine, approachable and responsive. Technology has allowed the creation of media echo chambers, so that a person can reinforce, rather than debate, viewpoints. In fact, 59 percent of respondents would believe a search engine over a human editor. It is a world of self-reference, as respondents are nearly four times more likely to ignore information that supports a position that they do not believe in.

Business has much to fear in the present context. Nearly one in two of the general population agree that free trade agreements hurt a country’s workers, while 72 percent favor government protection of jobs and local industries, even if it means a slower-growth economy. Populist-fueled government could implement harsh regulation of specific industries such as manufacturing and technology, and a ban on immigration, even of skilled workers. There could be industrial policy aimed at supporting strategic sectors, from tariffs on imported products to negotiations aimed at preventing outsourcing of jobs. It would be the greatest folly for CEOs to press populist leaders for less regulation— particularly in the environmental arena. Fifty-two percent of the general population say a company’s effort to protect and improve the environment is important for building their trust.

We are in treacherous seas, without the firm moorings of a reliable government able to set easily understandable guideposts. We have lost the objectivity and shared experience of media as a watchdog on institutions. Non-governmental organizations are focused on issues of the most vulnerable but are ineffective advocates for the dispossessed middle class. Business needs to play the role of the solid retaining wall that stops the uncontrollable storm surge, to fill the void left by the other three institutions in global governance.

Institutions must move beyond their traditional roles of business as actor and innovator; governments as referee and regulator; media as watchdog; and NGOs as social conscience. The new president of the United States is inserting himself directly into business decision-making, recently strong-arming an automaker to keep its manufacturing jobs in the country. Business must get out in front and become an effective advocate on policy, moving away from lobbying toward direct public discourse that provides context on trade, immigration and innovation, outlining both benefits and disadvantages. Company-owned social media channels should supplement mainstream media to educate and to encourage dialogue. Business should provide citizens with platforms that invite them to help shape policy —  giving them a positive outlet for their views and fears.

The growing storm of distrust is powerful and unpredictable. Trust in institutions has evaporated to such an extent that falsehood can be misconstrued as fact, strength as intelligence, and self-interest as social compact. This has been a slow-motion meltdown, an angry delayed recognition of permanent decline in economic and social status by those who have not kept pace with globalization and dramatic technological change. If faith in the system continues to fall, rising populist movements could wreak unimaginable havoc, with resurgent nationalism and divisive rhetoric moving to dangerous policies. The onus is now on business, the one institution that retains some trust with those skeptical about the system, to prove that it is possible to act in the interest of shareholders and society alike. Free markets can succeed for all if business works with the people, not just sells to them.

Richard Edelman is president and CEO.

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