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Research Insight

Back to Basics

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The Trust divide and its implications for politics, media and trade rightfully steal the limelight in this year’s Trust Barometer. Amidst the commotion of the last few months that the data points to, it is easy to lose sight that the Trust Barometer charts a course for how businesses in Asia Pacific, the Middle East and South Africa (APACMEA) are expected to behave by the public to protect themselves from this uncertain environment.

Survey respondents score the importance of 31 trust-driving attributes for any company and then rank how companies are performing against each attribute in their country.

Before addressing the expectations of company behavior, let’s put this into the context of trust in company leadership. In 23 of the 28 countries surveyed globally, CEOs are no longer credible. Japan holds the dubious position of being the world’s most distrusting country of CEOs, dropping seven points over 2016 to a meager 18 percent. South Korea dropped 11 points to 24 percent and Hong Kong had the biggest drop of 19 points to 27 percent. Even in China, trust in CEOs dropped 13 points to 44 percent despite a generally high level of trust in business overall at 67 percent.

With business leaders’ credibility in question, companies must find other voices to communicate their actions. Across the region, employees are the most credible spokespeople to talk about a company’s financial earnings and business performance in seven of the 11 countries surveyed in the APACMEA region. Similarly, in seven countries, employees are the most credible source to comment on a company’s business practices and how it handles crises. Not surprisingly, in 10 countries, employees are the authority when discussing the treatment of employees by their company.

Treating employees well is indeed an important corporate trust driver. In eight of the APACMEA markets, stakeholders rank the treatment of employees among the top two in importance out of 31 trust-building behaviors for a company. Only in China, India and Malaysia, does the employee trust-building attribute not feature among the top two, although it features highly as an important attribute in each of these countries.

In all markets, companies are not perceived to live up to expectations on how well they treat employees. The gaps between expectations and performance are particularly stark in Australia, South Africa, Japan, and South Korea. The latter two markets may be explained by the hierarchical corporate cultures that remain entrenched, despite the shift in attitudes to employees almost everywhere else in the region.

The second most common driver of trust across the region is the quality of product or service offered by a company. Quality of product or service is a top-two trust driver in China, Hong Kong, India, Malaysia, South Africa and the UAE. In Australia, Indonesia, Japan, Singapore and South Korea, product quality is not ranked to be as important in driving company trust. With the exception of Indonesia, perhaps because in these relatively more developed markets, product or service quality is assumed as a license to operate.

The importance of product and service quality is understandable in our region. China continues to struggle with food safety (expired milk, irradiated seafood) and health products (vaccines), being high-profile examples. Hong Kong had issues with lead poisoning in tap water across several public housing

estates. A South Korean brand was embroiled in a global recall for one of its smartphones. Significantly, there is an expectation across key industries that government should regulate more. For example, an average of 81 percent of the general population in this region feel that the pharmaceutical industry should be more regulated. Similarly, an average of 75 percent feel that governments should impose a higher tax on food and beverages that have an undesirable impact on people’s health.

The third most important driver of trust across the region is the expectation that companies should have ethical business practices. This ranks in the top two attributes in Hong Kong, Indonesia, Malaysia and Singapore. This is emphasized when the survey respondents cited their biggest societal concerns. In eight of the 11 APACMEA markets, corruption ranked as the top concern. Worryingly for companies in Australia, China, Hong Kong, Japan, Indonesia, South Africa and South Korea is that the gap between perceived importance and performance of ethical business practices was more than 10 points, suggesting that companies still have some way to ago in addressing the fundamental expectation of abiding by the law.

In previous years, there has been more disparity across the region about the most important trust drivers for companies. This year, the sentiment is that companies need to go back to basics by focusing on being ethical, providing a good quality product or service and treating employees well. Trust is certainly more complex than these three factors, but companies that fail to live up to these core principles will not be forgiven.

Undeniably, the basics themselves will not set a company apart. There are lessons to be learned from the political events of the last few months, where the “left-behinds” have demonstrated their dissatisfaction with the status quo. On average, 74 percent of the general population across the region believe that companies have the responsibility to take specific actions to both increase profits and improve the economic and social conditions of the communities where they operate.

The social contract between companies and the community is perhaps needed more than ever to shore up optimism and to prove that companies can contribute more than providing a return to their shareholders.

It is a time for companies to lead by example – the basics and by doing good – or they too may be left behind.

Bob Grove is CEO, Edelman North Asia.

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