During tough times, when they need it the most, both business and government leaders have trouble getting their constituency to believe what they have to say, new research shows.
A study by public relations firm Edelman found that, worldwide, fewer than one in five consumers believe a business or governmental leader will actually tell the truth when confronted with a difficult issue. In the United States, specifically, 38 percent said they don't trust what business leaders have to say in rough times, while 54 percent don't believe in government leaders during such periods.
Following a year in which a number of high-profile leaders were caught lying, the research gives further evidence that we are experiencing a crisis in leadership, said Edelman president and CEO Richard Edelman. In recent news, both Rajat Gupta, former McKinsey managing partner, and Lance Armstrong, former chairman of the Livestrong Foundation, have had lies exposed.
"Business and governmental leaders must change their management approach and become more inclusive," Edelman said. Leaders should do this "by seeking the input of employees, consumers, activists and experts such as academics, and adapting to their feedback. They must also pass the test of radical transparency."
The research shows that respondents have much more confidence in businesses and government entities as a whole than in those individuals leading such institutions. Globally, 50 percent of respondents trust businesses to do what is right, while only 18 percent trust business leaders to tell the truth, a 32-point gap. The study found a 28-point gap between government and government officials.
Overall, the research found that the public trusts academics and technical experts nearly twice as much as it trusts chief executives and government officials.
"This confirms the democratizing trend of recent years, with influence and authority moving away from CEOs and government leaders to experts and peers," Edelman said.
While trust in leaders may have declined, belief in the institutions they work for has grown. The study shows that trust across all institutions increased, including narrow upticks for business and government.
While the technology and automotive industries earned honors as the two most-trusted sectors worldwide, banks and financial services garnered the least trust. The study found thattrust in banks has fallen 11 points since 2008.
The research identifies poor performance and the perception of unethical behavior as the driving factors behind such lack of trust. Developed economies rated bank performance much lower than did emerging markets, giving the industry poor grades in its practice of lending to small businesses and providing home mortgage loans.
"The financial services industry must become more aggressive in explaining its business model and do away with terms such as 'proprietary trading,'" said Alan VanderMolen, president and CEO of global practices for Edelman and vice chairman of Daniel J. Edelman, Inc., the holding company of Edelman. "Stakeholders have to understand how banks are making money and how the industry is working to benefit its shareholders and society."
The study shows that in the United States, trust in government dropped eight points among the general public after the poor handling of the fiscal cliff issue, making government the nation's least-trusted institution.
In the businesses world, the research revealed a dramatic change in how trust in companies is established. The study discovered that stakeholders now place greater importance on engagement and integrity-based attributes such as treating employees well, listening to customers and exhibiting ethical and transparent practices. By contrast, operational-based attributes, including financial performance and recognition as a "best" place to work, were nearly twice as important in 2008 as they are this year.
"Business must show that it has a broader skill set and can execute on engagement and integrity-based attributes," said Ben Boyd, a global practice chair at Edelman. "Now is the time for business to go beyond simply earning the license to operate [and move] toward earning a license to lead, serving the needs of both shareholders and broader stakeholders by being profitable and a positive force in society."
The study was based on surveys of 26,000 people between the ages of 25 and 64 across 26 countries.