Restoring trust in our institutions has become a critical task. Every week, events in the global economy and political environment emphasise how fragile progress has been towards a collaborative rules-based global system. Every event that undermines our belief in the good intent and ethical standards of Australian institutions – from the behaviours exposed through the Hayne Royal Commission, to significant not-for-profit failures, to the tone of academic and political debates – undermines the capacity and resolve of our institutions to meet these challenges.
Across Western society, and notably within the US and UK, there is evidence of communities fractured along political and ideological lines, to the point where engaging in constructive debate and making sensible compromises is seen as weakness. When those fundamental strengths of liberal democracy are under threat, leaders – and importantly business leaders – have a critical role in restoring faith in our institutions.
Why? The 2019 Edelman Trust Barometer tells us that ‘the employer’ is the most trusted relationship for workers – above governments and NGOs. Boards and executives have a responsibility through their words and actions to retain this trust, and to engage constructively with stakeholders to restore society’s trust in business generally.
At the top of the action list must be accountability and transparency. CEDA’s inaugural Company Pulse survey tells us less than half of the general public are confident that large companies pay fair and correct tax, or positively manage environmental impacts. Whether this belief is supported by evidence is almost beyond the point; this is a deeply held perception that must be addressed through demonstrated accountability and transparency in our actions and reporting. Business must be clear and convincing about its role in the economy.
Complicating that challenge, according to CEDA the public believes that when business leaders speak out, they are far more concerned about their own personal success than they are the national interest or the communities in which their company operates. The community’s concerns with ethics and accountability are only increasing as technologies entwine thoroughly with our day-to-day lives – tracking, listening, watching, learning. It is essential that community concerns feature on board agendas and in key business decisions, and that business is transparent and convincing in its efforts to address these concerns.
The director community itself is concerned with accountability. In a recent survey of AICD’s members, we discovered that only 32 per cent of respondents consider existing accountability mechanisms to be adequate when considering the role of board, and 69 per cent agree that ethics should be an ongoing professional development requirement for directors.
There is a clear alignment between directors and the community generally on accountability, but that alignment could go further. Stakeholders can identify significant and emerging issues that may not be on a company’s radar, and which can provide opportunities to demonstrate accountability. CEDA’s Company Pulse tells us that over 70 per cent of the general public and 90 per cent of business leaders believe that large companies should be equally concerned about their social and environmental performance and their economic performance. Business cannot risk its reputation, or forego opportunities, by ignoring stakeholder concerns.
Far more damaging to the public’s perception of accountability and trust has been evidence of unlawful conduct. It is clear that compliance with existing laws has been inadequate in many cases. A swathe of new regulatory requirements including higher penalties, the introduction of new accountability regimes, and a stronger enforcement focus by regulators is compelling a greater focus on compliance as a consequence. Too great an emphasis on compliance, however, and a determination that directors must be the focus for any and all instances of corporate wrongdoing may stifle the ability of boards to drive strategy and innovation. We must avoid productivity-sapping regulation even as we respond to the legitimate desire for enhanced accountability.
While compliance goes to the heart of trust in our community, sustaining the community’s long-term trust in business is equally about economic opportunity and growth. The Edelman survey revealed that only 32 per cent of the general population thought their economic prospects would improve by 2024, as against 54 per cent of Australia's more affluent communities.
Our poor productivity performance is a serious economic challenge and it sits alongside accountability at the top of the action list. The success of liberal democracies is underpinned by the belief that the benefits and opportunities of economic growth are broadly shared. This means investing in the infrastructure and skills that will help all Australians tackle the challenges of the global economy and the fourth industrial revolution. It means engaging and inspiring the community by creating capability and resilience in our workforce and talking to the tremendous potential in Australia. That potential depends on the support in our society for policies that will drive economic growth. That support will depend on the public’s perception of our accountability and commitment to sustained and inclusive growth.