Business 10th Edition by Ferrell,Geoffrey Hirt,Linda Ferrell

Exercise 29

The Challenge of Building Trust in Business
Corporate scandals, a growing awareness of environmental issues, and the last global recession have greatly altered the public's perspective of corporate America. Gone are the days in which consumers blindly trusted company publicity and rhetoric. The public's trust in business has been shattered, and many companies have a long way to go to earn it back.
The Arthur Page Society and the Business Roundtable Institute for Corporate Ethics are dedicated to corporate accountability and ethics. The organizations released a study addressing Americans' mistrust of business and how corporations can begin to win back the hearts and minds of consumers. The study, entitled "The Dynamics of Public Trust in Business-Emerging Opportunities for Leaders," shows that public trust in business has reached a low point. As the economy begins to recover, trust in business has increased. However, trust of business continues to be a serious challenge for businesses to overcome. This presents major difficulties for businesses because trust is the glue that holds relationships together.
A major issue appears to be the imbalance of power. Many consumers are still angry over business scandals and unemployment rates while corporate management still makes huge profits. The government defended corporate bailouts as a way to keep large companies from failing (which could have worsened the recession). Most of the money has since been paid back, and the government has made a profit. Unemployment has decreased in the last few years, although among young people it is still 15 percent. It is believed that if youth unemployment returned to pre-recession rates, the federal government would recoup $7.8 billion.
Distrust of business is not limited to the United States. According to the Edelman Trust Barometer, 54 percent of global consumers indicate that they trust business. Financial service institutions and banks have the lowest rankings in consumer trust worldwide, at 51 percent. More recent scandals at J.P. Morgan Stanley, HSBC, and British financial services firm Barclays continue to keep trust in this sector low.
Although the Arthur Page Society and the Business Roundtable see their report as a way to start a national dialogue, the report does offer a series of suggestions for businesses. First and foremost, the balance of power must be equalized. Companies must focus on creating mutual value and leaders must try to gain and retain trust. The study also suggests that corporations create quality goods/services, sell goods/services at fair prices, create and maintain positive employment practices, give investors a fair return, remain active in social responsibility, and create transparency.
Most firms have not been involved in scandals or misconduct. In fact, most companies operate in an ethical and socially responsible manner. Unfortunately, the public sees reports of misconduct in a few businesses and generalizes the misconduct to all businesses. Nevertheless, companies need to communicate their values and maintain responsible conduct. Another example involves the growing public concern regarding how businesses affect the environment-investors want details on a business's impact and what that business is doing to be more sustainable. As the public fights to make its desires known regarding business behavior, businesses that sincerely want to help the world are receiving some help. Maryland, Vermont, New York, California, and three other states have made "benefit corporations" legal. These corporations must make their values public, report yearly on their socially beneficial behavior, and agree to third-party audits of their social responsibility actions. Acquiring this designation requires the approval of more than half a company's shareholders. Companies may also establish themselves as B corporations, which certifies their socially responsible focus. It is entirely possible for businesses to regain public trust, but it means a change in values for many businesses in today's corporate America. 78
What are some of the recommendations made by the report? Can you think of any other recommendations to give companies on how to behave more ethically?