Richard Edelman on how leaders can regain the public’s trust

Trust in public institutions is at record lows—yet people want greater regulation of many industries. According to Edelman president and CEO Richard Edelman, that’s because business leaders must do more to earn the public’s respect.

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Trust in government is at record lows in the developed world, according to the 2014 Edelman Trust Barometer, yet citizens want greater regulation of many industries. Richard Edelman, president and CEO of the world’s largest independently owned public-relations firm, explains how businesses should respond to this contradiction and why it requires a different approach to leadership. This interview was conducted by McKinsey’s Rik Kirkland. An edited transcript of Edelman’s remarks follows.

Interview transcript

Now, the headline for this year’s trust barometer has to be the fundamental reshaping of the landscape of trust. Because it used to be that business had to be intertwined with government in order to have trust. Now, today, we believe that business has to set the context for change—that business has to lead, but it has to lead differently. Not calling for self-regulation, but actually establishing why and how, not just what.

The 2014 Edelman Trust Barometer

Trust in the US government now is in the mid-30s. That’s the lowest we’ve seen. And then on top of that, numbers we’re seeing in Italy, Spain, and France are in the teens for trust in government. So it’s really a complete “throw the bums out” and watch for what might happen in the European parliament elections this summer.

I do see the threat of populism. I see it in very low numbers, again, in Western Europe for banks in the general population. Again, we’re talking about 20 percent trust in Germany, which is quite a robust economy for trust in banking. So the potential for populism, for being against free trade, for being very nativist, is very real.

In the developing markets, trust in business couldn’t be more robust—in China, Indonesia. But in the West, what’s happened is, since the 2008–09 collapse, business has gradually been building up. But what we now see is a plateau. It’s not going up anymore. It’s sort of run its course.

But what you’re left with, though, is a vast gap in trust between business and government. So, in the United States, it’s 21 points, again, the largest we’ve ever seen. In markets like Brazil, it’s 35 points; in South Africa, it’s 45 points. So the natural inclination of business would be to say, “Well, we’re back to the good times; let’s deregulate.” And that would be exactly the wrong conclusion to draw. Because, again, our data shows clearly that in financial services, food, and energy—by a four-to-one margin—people want more regulation.

You may say, “Well, that’s contradictory.” But in fact, people, in their cerebral cortex, still remember ’08, ’09. They don’t like government, but they don’t trust business enough to do it on their own, to self-regulate.

The chief engagement officer

I think the new role for the CEO is to be the “chief engagement officer,” if you’re going to actually ascend the bully pulpit, to quote Teddy Roosevelt. And that’s a job that traditionally has been done by government: “Here’s the rules and here’s the playing field.” Business has to do that now. And that means business has to talk to audiences it’s not traditionally accustomed to.

A CEO is going to have to go and meet the community and have an open community meeting and actually make relationships personally and listen. And not just go and formulate policy, but listen first and participate in the community—only then be an advocate. And, play the outside game, not the inside game.

Business: 65 percent of people say that big business has too much political influence. That is a clear sign that we’ve got to stop playing the inside game—in Brussels and London and Beijing. We’ve got to start playing the outside game. And talking to people in a real conversation, and changing policy when necessary. And only then being an advocate.

We actually have looked carefully at the most respected companies, and others, and we’ve come up with our own group of 16 factors. What we find is that the most important criteria is no longer—this is since 2008. It used to be, “Do you have great operations?,” and “Do you have a great new product machine?” Those were the things that really drove trust.

Well, since 2008, operations has actually moved down the list of importance. Companies still do it well, and they still make money, they still have respected CEOs. But the new gold is actually in engagement and integrity. So you look at a company like PepsiCo, Indra Nooyi: her ability to treat employees well, to put value on a sustainable product array, to persuade people behind her to follow on this idea of “better for you” foods and recasting the portfolio—not just soda and chips but oatmeal and other things. This is the gold.

So in fact, then, the key things are: pay the right amount of tax, do right by your employees, run a responsible supply chain, and engage—communicate frequently. Those are the new normal for a chief executive.

The 2014 Edelman Trust Barometer surveyed 27,000 general-public and 6,000 informed-public respondents aged 25 to 64 across 27 countries. For more information, visit edelman.com.

About the author(s)

Richard Edelman is the president and CEO of Edelman. This interview was conducted by Rik Kirkland, senior managing editor of McKinsey Publishing, who is based in McKinsey’s New York office.

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