Executive trust a major factor in reputation risk

News from court on two prolonged Australian kick-back scandals reinforces that executive trust is a major factor in corporate reputation risk and issue and crisis management.

After seven  years of inquiries and legal proceedings about  the Australian Wheat Board paying over $200 million in illegal kickbacks to the Saddam Hussein regime, the High Court finally drew the case to a close when it imposed a $100,000 fine on former CEO Andrew Lindberg and banned him from running a company until 2014.

A week later, one of the low-level players in the equally long-running foreign bribery scandal involving the Reserve Bank of Australia and note printing company Securency pleaded guilty and avoided prison after agreeing to give evidence about further corruption.  And this was closely followed by revelations of damning new information about the bribery case, in which eight former executives have been named.

Both of these long drawn-out sagas have spawned endless analysis on how unwise executive decisions destroy corporate and individual reputations.  But they also highlight a major challenge for issue and crisis managers – the public don’t trust business, and they trust CEOs and other leaders even less. The only good news is that the public have even greater distrust of politicians.

The annual Edelman Trust Survey for 2012 found that the credibility of CEO as spokesperson had dropped to 38% (41% in Australia) while 27% of respondents around the world did not trust CEOs to tell the truth. (In Australia, the distrust index was even worse at 40% for CEOs and 60% for politicians). Moreover, for the second year in succession, banking and financial services were the two least trusted business sectors.

Sadly these are not isolated findings.
• A Gallup poll in the US found business executives rate low in honesty and ethics, way down in the rankings, just above stockbrokers, advertising practitioners, telemarketers and politicians
• A Pulse study showed 33% of Americans rate non-managers as having high honesty and ethics, whereas only 8% think CEOs possess have the same level of integrity

For organizations trying to respond to issues, or to communicate in crisis situations, this reality is a major problem.  If people don’t believe or trust you, even the best communication won’t fly.  So what can be done?
• Spokespersons should be chosen for their credibility, not their job title
• Senior executives need to accept that they are less likely to be believed than NGOs and other opponents, and should treat them with respect
• CEOs must avoid being surrounded by people who share the same prejudices, which encourages damaging groupthink
• Communication should be better targeted at supportive or neutral stakeholders to start building credibility
• Issue Management and reputation risk are not just about communication, but should be embedded into all activities
• CEOs need to identify and wind back corporate hubris and arrogance, and not think they are above the law
It is impossible to quickly reverse decades of executive misdeeds and mistrust, but these first steps would be a pretty good start.


About managingoutcomes

Issue and crisis management expert
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