General Election 2015: How can business win back the public's trust?

Harriet Green, Luke Johnson, David Cameron and eight other heavyweights on why business faces a crisis of trust - and what can be done about it.

by Anthony Hilton
Last Updated: 09 Mar 2016

It is a commonplace to say that business is more mistrusted today than it has ever been, but is this really true? Was there ever a golden age? Certainly not in the 1920s and 1930s, those years of forced wage cuts, lockouts and bitter strikes. Certainly not in the 1970s when dissatisfaction with the standard business model led to many state-supported experiments with worker control and other ownership models. Nor even in the 1990s.

The preamble of the Cadbury Report in 1993 - the foundation stone of today's system of corporate governance - says that the reason the report was commissioned in the first place was the need to restore trust in business after the Robert Maxwell and Polly Peck scandals.

The financial sector also seems to be confused because it fails to distinguish between intellectual trust and emotional trust. The customer has no intellectual trust when he believes his bank will go bust or its employees will run off with his money. He displays a lack of emotional trust when he does not believe his bank will give him a fair deal. The crash caused a reawakening of concern about the soundness of banks, so intellectual trust became an issue for the first time in years. But the lack of emotional trust is absolutely not new. Have people ever trusted the financial sector to give them a fair deal?

Things are different this time, but the issue is not trust, it is anger. What fuels that anger is the feeling that the system is no longer working in the interests of the many but has been hijacked by the few.

Pay lies at the heart of this. What started off as disgust and outrage at the levels of bankers' bonuses and their lack of contrition for having blown up the financial system has morphed into a general sense of outrage against all business high-earners. It is not only that chief executive pay has gone from 20 times the average to 200 times in the past quarter century, it is that since the financial crisis this splurge has coincided with a real drop in living standards for everyone else. It is the perceived unfairness of this that fuels the anger.

In parallel there has been the arrival of shareholder value as the shining star by which chief executives set their course. The trouble with putting one group of stakeholders so conspicuously in front of the others is that you cannot disguise from those others that they are distinctly second class. So suppliers are alienated by being squeezed on price and never being paid on time; communities are alienated by a company's ability to intimidate or outwit local government; customers are alienated by poor quality and deceptive marketing or call centres providing lamentable service; employees are squeezed on zero-hour contracts and governments are infuriated when transfer strategies mean tax is payable in Luxembourg rather than the UK. That does not leave many to fly the flag for business.

But it is important to maintain a sense of proportion. We talk about business, but we in fact mean big business, and the small part of it that is listed on the Stock Exchange. People rarely feel alienated towards businesses in their community. In small towns the local shops and businesses chip in to support local charities, the local show and the local football team because they regard themselves as part of the town and understand the importance of being seen to be a good citizen. The community in turn accepts them as such. But local staff at national chains and high street banks aren't empowered to be 'good citizens', and unfortunately businesses that behave like aliens get treated as such.

Harriet Green, former CEO, Thomas Cook

There's a public perception disconnect between headlines about banking scandals and tax avoidance and the importance of business to the UK's future prosperity. Without the wealth created by private sector company growth we will be unable to secure the future of the NHS, schools and vital public services. With North Sea oil revenues declining, our service and manufacturing sectors are crucial for economic growth.

Business can't sit on its hands waiting for public appreciation. It has to earn respect, engage with its customers, open up and listen. Embrace social media. Leaders need to be human, visible and accountable to all their stakeholders. Apprenticeships, offering work experience, open days and more visible leaders will all help.

We have a real chance to inspire the next generation that a career in business can be exciting - it's not all like The Apprentice with its public hiring and firing. Business is fun - it makes a difference and we need to get that message out there.

Great programmes like Speakers for Schools, getting business people like me out talking in schools, are an important start. We also need more diverse boards and leadership teams: people the public can identify with and trust, people who are like them.

Luke Johnson, chairman, Risk Capital Partners

Business is the engine that makes modern life possible, but we take its success for granted. Over 85% of jobs in Britain are in the private sector, and all the net taxes to pay for our public spending are generated there too.

Capitalism, free markets and entrepreneurship combine to supply the vast majority of our goods and services. Industry delivers most innovation in society too. The extraordinary standard of living even badly off people enjoy now is thanks to trade and commerce, not state intervention.

Unfortunately, anti-business elements in the media, academia, unions and public life frequently demonise business. Their objections are almost invariably ideological: they know the government is inefficient at running things, but these critics believe in the politics of envy and typically want to expand their own power.

Too few business leaders stand up and make coherent, confident arguments in favour of free enterprise. Citizens are more powerful, thanks to technology, and expect more transparency. Industry is learning to adapt to this state of affairs. Some crony capitalists set bad examples with undeserved pay packages.

Businesses may go broke or behave badly, but these failures are rare. By contrast, most of the man-made misery in history has been caused by governments waging war or oppressing their own citizens. Meanwhile, business offers choice and the satisfaction of material wants. It creates value, while the state merely redistributes it, often badly. We need more champions for capitalism.

David Cameron, Prime Minister

People do understand the vital role business plays in providing jobs and generating growth. But there is a question of fairness. When ordinary people continue to make sacrifices in the wake of the Great Recession, high-profile stories about big business avoiding taxes are extremely damaging.

As a government we are taking every action we can to ensure everyone pays what they owe. We're working with our international partners to identify UK taxpayers hiding assets offshore; we've banned hedge funds flipping currencies, foreigners not paying capital gains tax and banks not paying tax on all their profits.

As we take these steps we must remember that it is business that is helping this country get back on its feet. It is thanks to businesses, especially SMEs, up and down the country that unemployment has fallen: 1.85 million more people are now in work than five years ago.

I'm proud to be leader of a party that is backing our businesses. Whether that's cutting corporation tax, axing jobs taxes to encourage companies to take on more people, or investing in infrastructure, we're doing everything we can to help businesses thrive.

In a new Parliament, a Conservative government would launch a Help to Grow scheme to give small firms the financial backing they need to grow, and we'd save businesses a further £10bn by slashing red tape. A key part of our long-term economic plan is to build the most competitive corporate tax system in the G20 - but one where everyone pays his fair share.

Robert Phillips, co-founder, Jericho Chambers and ex-CEO, Edelman in EMEA

Trust is a funny word. It's been used and abused by business leaders and politicians almost to the point of exhaustion. Too many vacuous speeches and hollow promises, often broken. Trust is earned by actions, not words. It's an outcome, not a message. It's what you do, not what you say that counts. Businesses still hide behind slick marketing and communications campaigns - as though clever PR can build trust or even save them. It can't and it won't. To borrow from film-maker Spike Lee, 'Do the right thing' or they will get you.

Businesses should think about trustworthiness, rather than trust. Trustworthiness demands reciprocal vulnerability. Businesses need to make themselves vulnerable to employees, customers and wider stakeholders, just as those groups always remain vulnerable to them. Trustworthy leaders recognise the world has changed and that they are no longer in control. They co-produce their leadership, ideas and strategies with real people and think and behave more like social activists than conventional CEOs. Their organisations think in terms of citizenship, not consumption, and prioritise the common good. Accountability is everything.

Chuka Umunna, shadow secretary of state for business, innovation and skills

For some people, asking a politician for advice on public trust is like asking the Grand Old Duke of York for tips on military strategy. While only a third of people trust business leaders to tell the truth, for politicians the figure is just a sixth. As politicians have discovered, trust is easier to lose than to gain.

The truth is this is a challenge for all of us. The same sceptical public are voters, but also the customers and employees on whom business depends. Consumers want the brands they buy to reflect their values and employees want to be better engaged at work. The business-led campaign Engage for Success has calculated that as a nation we could be £26bn richer if our employee engagement matched other European nations, such as the Netherlands.

If we are to build a broad-based economy where everyone is connected to opportunity we need the very best practices of our leading firms to become the norm. This is how we increase productivity, raise living standards, meet the trade challenge and restore public finances.

We need to support firms that invest long term, engage their employees properly and take a broader view of the value they create. Markets should drive firms to improve and give consumers a fair deal. And we need government to work with sectors on skills and new technologies where it can make a real difference.

Zoe Williams, columnist, The Guardian

What are the main things that people distrust businesses for? I would say tax evasion, operating as monopsonies (getting so much of their business from government that they operate as essentially a shadow state), huge imbalances between pay at the top and the bottom, significant, opaque influence over government, opportunistic use of zero-hours contracts, short termism and, associated with that, putting profit before people and the environment.

This all coalesces into the broad picture that the power balance between employers and employees, businesses and customers has shifted in favour of those who make the profit, and they are encouraging the shift - via lobbying and the erosion of workplace rights - even further. Whoever you vote for, big business wins, is the impression.

The main reason the picture is unfair is that it elides all businesses, from local ones to global ones and from small and medium-sized companies to giant corporations. But they have allowed this to happen, because they allow their ethical reputation to be determined by outsiders - so they might sign up to a fair trade kitemark, or a charity that rubber-stamps pay differentials, or (a South Korean idea) a 'proud to pay tax' scheme, but they tend not to take ownership of their ethical reputation. As a result, when they do come out with a 'promise' or a 'code', it tends to feel insincere and cut and pasted from the website of some or other charity.

Jeremy Bulmore, MT columnist and former chairman, J Walter Thompson

I won't spend long on why. More people than ever before know more about what businesses and business people have been getting up to - and little of what they know shows business in a good light. Though the consequent erosion of trust needs to be corrected, we shouldn't try to overcorrect: a world in which all citizens had absolute, unquestioning faith in all businesses would be a disaster.

As always, what to do about it is the tough bit; but I think Adam Smith could help. Russ Roberts has written a book called How Adam Smith Can Change Your Life. It's about a 1759 book called The Theory of Moral Sentiments that Smith wrote before The Wealth of Nations.

In it, Smith praises the role of what he calls the Impartial Spectator. If every individual, before taking a questionable decision, consciously remembered the ever-present existence of the Impartial Spectator, a great many venal acts would be avoided. The Impartial Spectator has no opinions, makes no judgements and threatens no penalties. But the simple act of airing your dilemma to such a neutral, unseen force brings with it a sort of moral clarity.

Every businessperson should have one.

John Van Reenen, director, The Centre for Economic Perfomance, LSE

Business bashing is all the rage. Big finance, media and energy firms are about as popular as politicians, journalists or estate agents.

Twas ever thus. Large corporations and their CEOs are envied and feared in equal measure. They are tolerated when times are good because of the improved living standards that accompany healthy profits. But the collapse of the banking sector in 2008-9 ushered in the worst economic crisis since the war. Not only did taxpayers bail out the banks but, to rub salt into the wound, the average UK worker has had cuts in inflation-adjusted pay of over 8% since the crisis, alongside tax rises and public service cuts.

What can be done to restore the image of business? First, more of the benefits of growth need to be shared with employees through higher pay, not just as shareholder dividends or CEO pay.

Second, there needs to be better leadership. Executive pay needs to be more transparent and there have to be large cuts in remuneration when companies underperform and an end to rewards for failure.

Finally, the financial system remains a mess. There is too little competition in retail banking, insufficient separation between the investment and retail parts of big banks and insufficient finance for innovation.

Matthew Taylor, Chief executive, The RSA

You don't have to be a Marxist to see a strong class-based economic explanation for public hostility. The trend over the past 30 years for more corporate income to go into dividends and top pay and less into frontline employee wages has fuelled inequality and resentment.

Beyond this, all large organisations are finding the pace of change in the modern world and the expectations and attitudes of today's citizens hard to handle. If any organisation fails to align self-interest with the public interest it faces reputational risk.

Then there is CSR! Most large companies have a narrative about environmental and social responsibility but too few take alignment of market and social strategy to the heart of their business model. Yet it is when leaders are willing to re-imagine their organisations as places that make money while doing good that the innovative juices start to flow. The hard part, of course, is persuading investors to come on the journey.

Finally, big businesses that are worried about their credibility need to look critically at the lowest common denominator activities and arguments made by the trade associations and lobby groups to which they often unthinkingly belong.

Kathryn Parsons, co-founder, Decoded

What do you believe in? Who do you believe in? Does it matter? We live in a world where the pace of change seems to be accelerating at light speed. Technology is at the very heart of this revolution.

Revolutions are destructive and in times of uncertainty we turn to trust. Yet the levels of trust for big business and politics are low.

Technology, with its immense power for good and potential to be the most democratising tool in the world, has actually created some worrying polarities. Take for example the CEOs of big businesses and politicians. Would it be fair to say they might be the most digitally illiterate sectors of the country?

Thousands of people will find that technology replaces their jobs. How are we reskilling them? Thousands of people will be needed who are digitally literate and skilled. How are we teaching them in schools?

Thousands of women are opting out of technology, yet some of the most highly valued roles of the future will require digital confidence, literacy and skills. Then think about the billions of people in the world with no access to technology at all.

It is possible to put positive values and social impact at the heart of a business. More than possible, it's imperative. We are in an amazing position in the UK to lead the digital revolution.

Chris Morgan, head of tax policy, KPMG UK

It's not just business. It seems practically all institutions are no longer trusted. This follows scandal after scandal where people and institutions have abused positions of trust. Tax is one such area, where the perception is that large corporates have used clever schemes to avoid tax.

Without doubt, there has been some overaggressive planning. There is also a mismatch in expectations: many companies tend to see tax as a business cost but the public sees it instead as a contribution to society. The biggest cause is probably a lack of transparency. Tax is complicated. If companies are not seen to be open about their affairs, the default assumption is they are hiding something.

What can be done? First, companies need to recognise the change in the tax environment and openly adapt their policies accordingly. Second, they need to be more transparent about their tax position. Above all, third, we need a constructive and continuing public dialogue about tax.

This is why KPMG is supporting an open conversation on responsible tax. It is being curated by the think-tank, CoVi, and brings together campaigners, corporates, politicians, journalists, academics and faith leaders to create constructive encounters rather than polarisation. Rebuilding trust cannot start unless dissenting voices are brought together. No one can learn if they do not listen.

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