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TRUST IN INSTITUTIONS IS ERODING

By CURTIS C. VERSCHOOR, CMA, CPA
May 1, 2017
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A  young woman looks, wide eyed and worried, through the slats of a wooden Venetian blind. She could be having home security issues, witnessing a crime, or simply be extremely nervous. Copy space on the slats of the blind.

Many believe institutions are failing, and trust in the future has shifted accordingly.

 

The strength of families, businesses, and society at large is dependent on the ability to count on others to “do the right thing.” Academic research studies have shown that good ethics (specifically, an environment of trust) lead to lower costs and higher revenues and profits. Customers want to do business with companies that have a good reputation, and employees want to work for a company that treats its employees and suppliers fairly and honestly. While reputation deals with the past, trust is an indicator of the future. The 2017 Edelman Trust Barometer (ETB) shows a surprisingly broad global downturn in how the general population trusts all four institutional groups: business, government, nongovernmental organizations (NGOs), and the media. Trust in NGOs declined from 55% to 53%, in business from 53% to 52%, in the media from 48% to 43%, and in government from 42% to 41%.

 

The ETB summarizes the results of an online survey of 33,000 respondents in 28 countries, and the size of the fall in trust in each institution has never occurred since Edelman began its separate analysis of the general population six years ago. According to the report, “The majority of respondents now lack full belief that the overall system is working for them. People’s societal and economic concerns, including globalization, the pace of innovation and eroding social values, turn into fears, spurring the rise of populist actions now playing out in several Western-style democracies.”

 

The decline in trust in the media overall is caused by large declines in trust in traditional news outlets and equally large increases in trust in search engines and other online outlets. According to the ETB, the rise in the availability of technology has resulted in an “echo chamber” effect that places more trust in information produced by technology platforms such as search engines than that presented by professional editors. This limitation reinforces preexisting personal beliefs while it shuts out opposing points of view. In 2016, trust in search engines increased by three percentage points to 64%, and online-only media jumped five points to 51%. At the same time, trust in traditional media fell five points to 57%.

 

Sixty percent of respondents agreed that someone like them is “as credible a source of information about a company as a technical or academic expert.” When it comes to believability, respondents value personal experiences just as much as or slightly more than data or statistics. The ETB reports that 64% believe leaked information rather than formal press releases, and 55% think that individuals are more credible than institutions and that a company’s social media page is more believable than its advertising. The ETB recommends that “businesses of all kinds will need to empower their employees to cultivate communities and build authentic relationships the same way that influencers do.”

 

Especially worrisome is the wide gap between what the report calls “the modest trust of institutions of business and of government and a pitifully low level of confidence in their leaders.” Believability in CEOs dropped globally by 12 percentage points from 49% to 37%, a decline of nearly one-quarter in just a year. CEOs were ranked as extremely or very credible in only 18% of the 28 countries studied—all showed a drop from last year to an all-time low. Boards of directors also showed a sharp drop in trust from 45% to 35%, and only 29% believe government officials are credible, a decline of six points in the year.

 

According to Richard Edelman, “We have moved beyond the point of trust being simply a key factor in product purchase or selection of employment opportunity; it is now the deciding factor in whether a society can function.” The extent of distrust is severe, with only 15% of the population affirming that the system is working, 53% stating that it isn’t, and the remainder stating that they are uncertain. Close to half of the “informed public” (those who meet four criteria: age 25-64, college educated, in the top 25% of income in each country, and reporting significant media consumption and engagement in business news) have lost faith in the system. The global divide in trust in institutions between the informed and the general population is 15%, which increases to an average of nearly 20 points in the countries with the largest gap: the United States, the U.K., and France.

 

In the face of a movement away from government regulation in the U.S., 82% of global respondents believe there should be more regulation of the pharmaceutical industry, and 70% believe government should tax foods that are harmful to health. More than half feel that reforms put in place in the financial services industry haven’t accomplished their objective of stabilizing the economy. Almost three-quarters believe that government should favor local interests and protect jobs and industries even at the expense of slower growth. Half believe trade agreements should be avoided.

 

The 2017 ETB concludes, “As business works to maintain trust, it needs to speak to the real fears and uncertainties in the room.” Building a culture of trust in a company is a critical component of everyone’s job—especially for management accountants. The IMA Statement of Ethical Professional Practice states that members shall act in accordance with IMA’s overarching ethical principles of honesty, fairness, objectivity, and responsibility and also shall encourage others within their organizations to follow them. Trust requires fair engagement with affected parties and discussion of the pros and cons of tactics employed to achieve corporate goals. With the failure of government and the media to adequately communicate strategies to achieve societal goals, it’s up to business to be the last resort. Management accountants can play a key role in the development and implementation of sustainable strategy.

 

IMA ETHICS HELPLINE

 

For clarification of how the IMA Statement of Ethical Professional Practice applies to your ethical dilemma, contact the IMA Ethics Helpline.

 

In the U.S. or Canada, dial (800) 245-1383. In other countries, dial the AT&T USA Direct Access Number from www.usa.att.com/traveler/index.jsp, then the above number.

 

The IMA Helpline is designed to provide clarification of provisions in the Statement of Ethical Professional Practice, which contains suggestions on how to resolve ethical conflicts. The helpline cannot be considered a hotline to report specific suspected ethical violations.

 

Curtis C. Verschoor, CMA, CPA, is the Emeritus Ledger & Quill Research Professor, School of Accountancy and MIS, and an honorary Senior Wicklander Research Fellow in the Institute for Business and Professional Ethics, both at DePaul University, Chicago. He is also a Research Scholar in the Center for Business Ethics at Bentley University, Waltham, Mass., and Chair-Emeritus of IMA’s Ethics Committee. Trust Across America-Trust Around the World awarded him a Lifetime Achievement Award in 2016 as a top thought leader in trustworthy business. His e-mail address is curtisverschoor@sbcglobal.net.
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