Davos Man needs his image polishing

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Davos Man needs his image polishing

by M.B. | DAVOS

FEW used-car salesmen are invited to join the business leaders, politicians, do-gooders and celebrities on the annual pilgrimage to the Swiss mountain village of Davos that is the World Economic Forum. More’s the pity—for their presence would probably increase the amount of trust that the public has in Davos Man and Woman.

At the start of the WEF in recent years, the great and the good have been forced to consider what the world thinks of them by Edelman, a PR firm, which publishes its annual Trust Barometer. This year’s report might fool attendees into momentary optimism with its headline conclusion that “Trust Stabilises Globally”’, but only until they realise that stabilising low levels of trust is not exactly a triumph. Besides, on closer inspection of the data—garnered by polling members of the “informed public” (college-educated, in the top quarter by earnings for their age and country, etc) in 23 countries—it turns out that, rather than stabilising, in many respects trust is continuing to decline.

Overall, trust in business to do the “right thing” has risen globally to 56%, up from 54% last year, ahead of trust in government, at 52% compared with 47% last year, and the media, trusted by less than half of those polled— though at 49%, better than last year’s 45%. The world’s most trusted institutions, again, are non-governmental organisations (NGOs), with their trust levels up to 61% from 57% in 2010.

This aggregate picture masks some bad news, especially for the world’s superpower, where the trust Americans have in their government has fallen to a lowly 40%, from 46% last year. Americans’ trust in business has also dropped sharply, from 54% in 2010 to 46%. Trust in business also fell in Britain, from 49% to 44%, though the British feel more trusting towards their government (albeit a hardly ecstatic 43%, up from 38%), perhaps because it is too recently elected to have totally disillusioned them.

A majority of the governments of big countries featured by Edelman have seen rising trust, including Italy, whose rise from 36% to 45% can surely only be explained by the growing confidence of Italians that their prime minister, Silvio Berlusconi, is too busy partying to have time to mess up their country.

Trust in government is up in Japan, too, from 42% to 51%, but this pales beside the remarkably high and increased levels of trust reported in government in Brazil, 85% this year, up from 39% in 2010, and China, 88%, up from 74%. (Indeed, the level of trust reported in the Chinese government is so high that it makes one wonder if the sort of influential people surveyed by Edelman are reluctant to trust opinion pollsters with their real opinion of their political rulers.)

There is a striking difference in the level of trust in developing economies compared with older industrialised countries. As well as high levels of trust in government, trust in business has soared from 62% to 81% in Brazil, and from 67% to 70% in India, and though slipping slightly is at 61% in China – well above the levels in the developed economies, though both Germany and France have seen a 12 percentage-point rise in trust in business this year, rising to 52% and 48%, respectively. On the other hand, people around the world seem to trust companies headquartered in rich countries far more than they do companies headquartered in the developing world.

In Boss we Trust
Three of Edelman’s findings should provoke particularly fierce debate. First, curiously, while trust in business improved only modestly in aggregate, and fell in some leading economies, the credibility of chief executives seems to have risen sharply everywhere. Public confidence that a CEO will tell the truth has jumped from 31% in 2010 to 50% this year.

Secondly, public trust in tech companies is everywhere stronger than in banks and carmakers. In America and Britain, trust in banks has slumped in the past year, though faith in the carmakers has improved markedly. The Chinese and Indians already had a high trust in their banks and car firms, perhaps because of the absence of costly bail-outs, and their trust rose further last year.

Third, another as-yet unresolved question is whether business is currently distrusted in some places because it is perceived as failing to act in the interests of society. Edelman asked its sample if they agreed with the view traditionally associated with Milton Friedman, the late Nobel Laureate in economics that “the social responsibility of a business is to increase its profits.” The United Arab Emirates proved to be the most Friedmanite, with 84% agreeing, just ahead of Japan, rather unexpectedly given its reputation as a stakeholder-oriented corporate world, with 72%. Sweden, which is also seen abroad as an anti-Friedmanite bastion also scored high, at 60% (see chart).

America, supposedly the land of profit maximisation über alles, scored only 56%, and Britain 43%. Less surprisingly, Friedman’s views drew little support in stakeholder-friendly Germany, Italy and Spain, at 35%, 33% and 30%, respectively—ie, less support for profit maximisation than in China, whose nonetheless relatively low score suggests that its public embrace of red-blooded capitalism still has some way to go.

On the other hand, Edelman found, there are very high levels of support for the view that firms should be willing to sacrifice some profits to meet their commitments to their various stakeholders. The percentages are startling—91% in Germany, 89% in Britain, Ireland and China. America is only slightly further behind. Even in those countries with the lowest support for this particular view—Brazil, Japan and the United Arab Emirates—there was still a majority who agreed with it. It will be fascinating to see what the business leaders amongst those gathered in Davos will make of this conundrum.