Why ethics pay a dividend
The Covid-19 pandemic has resulted in two million deaths and a catastrophe for the world economy, the like of which has not been seen since the Great Depression. It has also accelerated a lurching loss of trust in governments, institutions and the media, which is not surprising given the public has been subjected to a witches’ brew of misinformation, malicious falsehood and fake news. Sifting out the facts in this toxic soup has been incredibly hard.
The question I am asked most often by PRs and market researchers acting for big business is: how do we win public trust.
The answer is this. Trust depends on competence and ethics. Do I believe this person wants to do the right thing, and do I think they are capable of it? In other words, if you hire a taxi, you want to believe the driver won’t rip you off and is capable of driving you safely to your destination.
According to the new edelman Trust Barometer, people’s faith in governments rose early in the pandemic – wishful thinking? – but then fell sharply.
The UK Government suffered one of the most catastrophic declines in trust of any leading economy – down 15pc since May, compared with a drop of ‘only’ 6pc in trust in the Trump administration.
Trust in corporates fell much less and, in fact, business is now the only institution seen as both competent and ethical.
That bears out my own observation that many firms have acquitted themselves well. Pharmaceutical companies, of course, in finding the vaccines. Supermarkets have proved superb at keeping us fed and when they made questionable ethical decisions, such as taking business rates relief while making large profits, they made amends and paid them back.
On the flip side, ethical missteps will be harshly punished. For FTSe 100 giant Compass to send out meagre food parcels to families to replace free school meals was a failure of ethics and competence. As was the insurance companies’ disgraceful refusal to pay out to stricken businesses, which they took right to the Supreme Court, where they were ordered to pay up.
SO too is the behaviour of the banks over the surge in pandemic frauds against their customers. With the exception of TSB, lenders simply abandon far too many accountholders who have lost out to scammers. It is unethical, and frankly unacceptable.
So-called eSG or environmental, social and governance investing has been around for a while but it is likely to take off in a different way this year due to the pandemic.
The remit is growing broader: as well as insisting on diversity, clampdowns on excessive pay, eSG investors want to see social responsibility. Several intend to question Compass about the food parcels debacle.
Like every aspect of business, eSG is riddled with baffling vocabulary, such as ‘corporate purpose’, ‘aligned incentives’ and other gibberish, but what it comes down to is straightforward empathy.
Trust, social cohesion and good governance are key to any sound business – and of a sound economy. Businesses have the opportunity to regain the trust they lost in the financial crisis and other scandals.
But they have to realise this means living up to new and far higher expectations. Nearly seven out of ten people in the edelman report believe the job of chief executives is to step in and solve society’s problems if the government can’t or won’t.
It’s a far cry from the Milton Friedman idea, which held sway for so long, that the only business of business is making a profit.