Fortunately, there is no alternative
Under the title of ‘The Trust Crisis,’ the April/May Edition of Acuity (Magazine of Chartered Accountants Australia and New Zealand) contains two articles on the topic of trust and business. Each emphasises the important role of trust for businesses and the need for transparency. The days of ‘trust me’ on a say so, are well gone.
Impact of scandals in Australia
The first article titled “Who can you Trust?” by Susan Muldowney looks at the impact of recent high profile corporate scandals such as the Commonwealth Bank of Australia (CBA).
It refers to the annual ‘Trust Barometer Report’ prepared by the global communications and marketing firm, Edelman, which shows a continual global decline in consumer trust in businesses over the past five years.
This is no real surprise considering the range of scandals that have hit global businesses over the past few years. The article goes on to question if the problem (lack of trust) is unfixable or is it simply a by-product of modern society where so much information is available at the touch of a screen.
Headlines, not good news, sell
The transparency of information, often required by regulators, leads to the consumer having a greater understanding – or perceived understanding – of business practices.
Equally, in a world requiring more and more startling headlines, the media seek to deep dive into the data to gain a better understanding and even better headlines.
Headlines are what sells news and further fuel the consumer perspective on business.
Rarely is it the case that good news sells papers.
The second article is titled ‘The Barometer of Trust’ by Tim Dean.
He notes that in Australia trust in business fell 3% since last year, to 45%. The surprise here is that the decline was not more significant.
He goes on to note that trust is the “lubricant of reciprocal exchange and reciprocal exchange is at the heart of commerce. Our society and commerce cannot function effectively when the community lacks high levels of trust.”
Importantly for New Zealand, less trusting countries tend to have poorer performing economies and lower average incomes. Foreign investors are far less likely to invest in such countries and they require higher returns when they do.
Dean goes on to note that transparency can make businesses uncomfortable.
By visibly incurring a cost or taking a risk intended to benefit customers and stakeholders, a business is sending a significant message that it takes trust seriously.
Importantly, businesses need to note the old adage that “trust is hard won and easily lost” and be ever vigilant in their pursuit to remain “trusted.”
The New Zealand Context
The recent damage done to and by businesses in Australia has so far mainly missed New Zealand. In broad terms, there is a higher level of trust in business here and so far, we have avoided the major crisis created by the likes of CBA and AMP.
Many believe that trust is core to the “Kiwi Way.” This applies as much to the business world as it applies to politicians and the Government sector.
To maintain this trust, we need to embrace changes in society referred to earlier about the availability of information, and the plethora of journalists anxious to deep dive for information in the pursuit of creating a headline.
This is not a criticism of journalism but a reality based on the availability of information and the consumer needs for headlines.
A bad headline is enough to damage trust and often there is little opportunity to protect the brand after the headline has been made, whether guilty or not.
More Business Transparency
This brings us to the need for more business transparency.
We understand the need for business to protect trade secrets or key competitive information. We accept that this is imperative to maintaining effective competition.
More business transparency is needed however, when it comes to issues which impact consumers or society more generally (for example tax).
They need to tell “the good, the bad, and the ugly” – regularly.
Then, businesses need to be seen to be working to offset the bad and ugly by demonstrating the plans in place to rectify the issues.
Failure to report transparently will lead the general public to the conclusion that they are not facing up to their corporate responsibilities with a resulting backlash on their brand.
There is no choice – businesses must be transparent to embed trust and protect their value. The alternative is lost value and, ultimately for some, failure.
Declan Mordaunt is a member of Transparency International New Zealand, with Delegated Authority Affiliations, Civil Society Network and T20 Professional Services Network. The above article appeared in the June 2018 issue of Transparency Times of Transparency International New Zealand.
The Indian Newslink Sir Anand Satyanand Lecture was established in 2011 to promote Good Governance, one of the tenets of which is Transparency. Sit Stephen Tindall, Founder-Chairman of The Warehouse Group and Chairman, Team New Zealand is the Guest Speaker at this year’s Lecture scheduled to be held on Monday, July 9, 2018 at Pullman Hotel. Ethnic Communities and Building & Construction Minister Jenny Salesa is the Master of Ceremonies and former Labour MP Dr Rajen Prasad is the Commentator. For Tickets, priced at $150 per person and for tables seating ten persons at $1500 plus GST per table, please call 021-836528 or email email@example.com
Declan Mordaunt (Courtesy: Transparency Times)
Transparency Image Courtesy: Best Christian Work Places Institute, Mercer Island, Washington, USA