The Edelman Trust Barometer released at Davos captures stark, even foreboding shifts in public sentiment about confidence in institutions and their leaders. At the same time, an avalanche of announcements from the White House creates chaos for executives left questioning the future of geopolitics, trade, consumer confidence, and collective action on climate change.
Many executives have been thrown off balance or pulled into the spotlight. While CEOs scramble to regain their footing, we still need their leadership. What signals are they taking from current events, and from one another?
At the heart of what Edelman terms a “Crisis of Grievance” is declining trust in American-style capitalism. This is not about the performance of the stock markets. To rebuild trust takes us right into the wealth building machine, the corporation. It is about clarity of purpose, capital allocation, and having a long-term playbook. And to rebuild trust may require a generational rethink about who gets what and how decisions are made.
Will business leaders take advantage of this moment to make the right moves?
The shocking assassination of United Healthcare CEO Brian Thompson on December 4th has been overwhelmed by the transition of power in the US and the torrent of news from Los Angeles to Gaza to the virtual lands of TikTok and Crypto, yet the underlying issues hold constant.
The social media outcry in the wake of Thompson’s murder that justice was served is reflected in this finding by Edelman:
“To bring about change, 4 in 10 would approve of one or more of the following forms of hostile activism: attacking people online, intentionally spreading disinformation, threatening or committing violence, damaging public or private property.”
For respondents between the ages of 18-34, the approval rate for this list is 53%.
The response to Thompson’s murder is the tip of the iceberg in the growing hostility towards business. The perception that the system is cooked and insurers are failing to protect the vulnerable will only be compounded as property and casualty insurers vacate regions and markets due to climate events.
Two key findings from Edelman’s global data capture underlying grievances that resonate in the United States:
- Failure of Capitalism: 55% of 18–34-year-olds say capitalism ‘does more harm than good’, and
- Wealthy Take More Than Their Fair Share: 67% believe the wealthy fail to pay appropriate taxes; 65% say the wealthy’s selfishness causes many of our problems.
These findings suggest a new chapter in public attitudes towards “big business” and accumulation of massive wealth.
How can leaders begin to reconnect with the public, and especially younger Americans, in this highly charged moment?
The stories over the the last weeks about money and politics are transactional in nature. To restore trust in business will require something wholly different. The upside for corporations that make the right moves won’t be captured in short-term ROI; it’s about securing the health of the business and creating real, sustainable value for future generations. The solutions require long term vision – and courage. The need is urgent.
“You cannot overtake 15 cars in sunny weather…but you can when it’s raining.“ — Ayrton Senna, legendary Formula One champion
Over the next months, the leaders and members of trade groups and business lobbying groups like the Business Roundtable will focus on the immediate opportunities in Washington – to cut taxes and address regulatory overreach. Back in their offices and boardrooms, executives will need to process a host of management dilemmas from brand management with media operating under new rules, to shoring up internal culture with so much disruption afoot, to keeping commitments on climate, and inclusion – without the acronyms.
Yet, none of these actions truly address the public outcry – or constitute trust-building.
Business earns its license to operate through the public will. Losing that trust undermines individual businesses but also the economy as a whole. To rebuild confidence in business corporations and markets – to right the ship – will eventually require changes in priorities of business associations and networks. But the changes won’t start there. The catalysts will be individual agents of change who are both influential and respected, and who send fresh signals about what matters most.
This is a moment for meaningful action—to turn down the short-term noise from shareholder-traders, and elevate new questions and priorities in both boardrooms and the C-suite. What is needed to secure the long-term health of the enterprise and the health of our society from which business draws its strength?
Now is the moment. We need a reset, and those changes will need to be sustained over a long time.
Ironically, the Business Roundtable was a catalyst for change when it opened the inquiry that led to the restatement of corporate purpose in 2019.
The overarching goal of BRT’s restatement, personally signed by almost all of the 200 members, was to “Promote an economy that serves all Americans.”
While well intended, we know from Edelman and other data that we aren’t making enough progress against that goal. And the signals that corporations still prioritize “shareholder value” and profit maximization over employee welfare (“shared value”) are abundant, from Boeing to Purdue Pharma, and yes, United Healthcare, and private equity entering housing markets as an investment opportunity.
A generation ago, corporate profits represented approximately 5.5% of GDP, but by last year had almost doubled, to 10% while worker compensation share of GDP fell from 55.8% to 52.1%. Employees, and consumers caught in the same squeeze play no longer believe in the future. There’s a 39-point chasm between the personal outlook of executives and that of employees. Wages no longer rise with higher productivity; they remain flat.
Edelman’s data on trust captures it this way:
- Lack of Hope for Next Generation: Confidence in a better future is just 36% globally, with lows in every Western democracy including France (9%), the UK (17%), and the U.S. (30%).
Yet, scores of executives are speaking clearly and forcefully – albeit more quietly – about the underlying values that sustain their business. All is not lost. In fact, it is the best time to secure competitive advantage. To think differently.
B2B companies that tend to operate out of the spotlight are tackling sustainability with confidence; they demonstrate that conservation of resources, and planet and nature-enriching innovations, are not only required by their customers, but build competitive advantage. They illuminate the way of the future.
“Sustainability is back to being contrarian – when it was a consensus idea all the upside was arbitraged out by the market: when it’s crowded it’s hard to stand out, but when it’s no longer buzzy and cool – that’s when the real building happens.” – Aspen First Mover Fellow and investment professional
Large employers who are in the spotlight also have extraordinary levers to pull. Choices available to assure fairness, better working conditions, financial security and quality goods and services are an important part of the solution space and are within the control of the executive.
If it’s true that “business cannot succeed in a failed society,” what do the right moves look like?
First, executives need to ditch the focus on share price and tee up metrics that matter to the health of our citizenry and democracy, as the foundation of the business leader’s playbook.
Stock price is not a substitute for measures of the quality and sustainability of a firm’s products, or the health of the labor and resources on which it depends.
The key measures of progress are unique to each enterprise or industry. To understand both risk and the opportunities that lie ahead starts with what the company aims to do—its purpose. Business leaders are right to push back against the plethora of reporting regimens that span myriad expectations of business but fail to help us understand real performance and progress on the ground, and what’s needed to pick up the pace of change.
Second, the board needs to rethink how it functions and who’s on the speed dial of directors.
Legally, the fiduciary duty of boards is to the long-term health of the enterprise—not to shareholders who are short-term by nature and buy and sell shares at will. That doesn’t mean stockholders don’t matter or are ignored, but the health of the enterprise today requires that governance embrace different players, particularly if the goal is an economy that “works for all.”
Finally, if business is to continue to earn the license to operate granted by the state, i.e. the people, we need to revisit what the corporation is designed to do and who gets what.
In turbulent times, personal values are a source of strength. They help clarify choices to guide the enterprise today and into the future—long after the current managers have left the helm.
It will take courageous leaders to break ranks with competitors who choose low-cost contractors over creation of good jobs, and deploy new practices for listening to and engaging workers. It will require a fresh look at how much is spent on tax avoidance. And the most courageous could open the Pandora’s box of executive compensation, which is over-indexed on share price and designed to drive inequality to unforeseen heights.
There are no easy answers, but these questions should be examined by boards focused on the long-term health of the enterprise—and by confident leaders who want to create useful and sustainable products, and job opportunities designed to attract the best talent, but also distribute the wealth of our nation to those who create it.
This blog post was originally published on LinkedIn. Follow Judy Samuelson for more insights on business and society.