In 2011, shortly after the Arab Spring, I addressed a conference in Cairo on best practice in capital market communications. It was extraordinarily well attended for what is not famously a crowd-pulling topic. The main attraction for this audience of vocal young men was the opportunity to interrogate CEOs of some of Egypt’s major quoted corporations. The failure of this dialogue is relevant for us all – companies and citizens – across the globe.
Gillian Karran-Cumberlege
As a speaker and guest of the Egyptian Stock Exchange I had good opportunity to observe at close hand the tremendous economic potential of the Egyptian market with its population of 83 million. The enthusiastic audience was emblematic of highly educated youth seeking direction and fulfilment. Clearly many institutions have failed in Egypt. At the conference in 2011 there was a brief glimpse of a future with markets and corporates working together to create meaningful employment opportunities for an eager and educated work force.
What I observed however was an evident breakdown of trust between the corporate leaders on the platform, who were often closely associated with the recently fallen regime, and the enthusiastic young “journalists” in the audience fresh from Tahrir Square. While this is an extreme example with subsequent tragic consequences, I’ve been struck by how powerfully the breakdown of corporate trust resonates in London 2013.
The anniversary of the sudden flare of street violence in the London 2011 riots ensures that this debate about corporate trust is not a theoretical discussion between communications and CSR professionals. Politicians care and the general public cares. Across much of Europe right now there is a vague but tenacious perception that multinationals are creating wealth for a narrow elite and that this wealth creation is not cascading down to the broader populace.
The backlash against the bankers is the most obvious example. Regulators pursue an agenda that is at least partly politically motivated with tremendous zeal. As a result the media and public are not short of egregious examples of behaviour by traders and bank bosses where the greater corporate good, and indeed the good of the clients, has been manifestly neglected.
Research shortly to be published by a leading London communications consultancy maps how banks have communicated publicly in the past 5 years. Frequently the C-suite of heavily criticised banks simply failed to engage in any form of public discourse. The chosen language and vocabulary of the banks was arguably intended to mystify and obfuscate, rather than clarify and reassure.
Observing this mistrust in a macro-economic context, Tim Harford of the FT, describes how the income share of the top 1 per cent has roughly doubled in the US since the early 1970s, and is now about 20 per cent. This is a trend common to Australia, Canada and the UK but not France, Germany and Japan. Harford argues why increasing inequality as seen in the US and the UK is bad for us all – the rich live in confines and the broad masses lack opportunity. He also alludes to an alternative vision of effective capital markets that work to create wealth and disseminate that wealth more broadly.
The idea of a free, market-based society is that everyone can reach his or her potential. Somewhere, we lost our way.”
– ‘How the wealthy keep themselves on top’ by Tim Harford, FT UK, August 2013
It is clear that Boardrooms across Europe and the US are alert to the challenge presented by public scepticism about the validity of their respective business models. Public distrust has obvious political consequences. Misjudging the political will can ultimately result in enormous value destruction. A communications director of a leading global company that was unable to convince regulators of a transformational merger noted how powerful lessons have now been learned about the importance of effective and early engagement through public affairs.
Political engagement is nothing new for corporates but is currently absorbing a greater share of the communications voice and wallet. More interesting are the changes underway in how leading corporates engage directly with key stakeholders – employees, customers, public opinion. These are the stakeholders who need to be convinced of trustworthiness.
We see among our clients, both major corporates and leading consultancies, a recognition that in future stakeholder and shareholder relations will look very different from today. This transformation is necessary – even for B2B organisations – in order to retain trust. We note that companies highly acclaimed for the quality of their communications today are very frequently the most humble and also adventurous when developing their communications platform for tomorrow.
If you once forfeit the confidence of your fellow citizens, you can never regain their respect and esteem.”
– Speech at Clinton, Illinois, September 8, 1854, Abraham Lincoln
One Boardroom challenge is establishing trust against a backdrop of rapid change. We opened this Overture considering political change; high frequency trading and social media both ensure that volatility is here to stay.
We have been heartened to see companies stepping up to the challenge. For example the recognition that “digital” is a disruptive but potentially highly valuable business stream is leading to changes in the screening processes for new graduates – Oxbridge arts graduates are not the only answer. (As an Oxbridge arts graduate, I have great confidence in this particular educational route but answers should quite rightly be sought elsewhere as well.)
In the same vein, as technology transforms communications, it also transforms the professionals engaged in that communication. As reported in Fidelio’s research published in July 2013 “From Communications Director to Chief Trust Officer“, we see a much greater involvement of the senior Communications officer in business decisions and strategy formulation. For major corporates it is now quite typical for the Corporate Affairs or Communications Director to be represented on the Executive Committee. In particular for companies in the public eye, strong communication skills are an essential component of the CEO profile. These skills may be enhanced by a rotation through the Communications function en route to the Board.
Social media has given powerful voice and increasing influence to a number of stakeholder groups. We see thoughtful Corporate Affairs Directors recognising that effective engagement is best conducted by those who have a deep understanding of the stakeholder constituency and indeed may well come from a particular stakeholder group. This discernible trend could radically shake up how corporates communicate with their stakeholders. It will certainly shake up the communications function.
A far cry perhaps from tragic recent events in Cairo. But Boardrooms are wise to focus on the contract of trust with society at large. Trust secures the license to operate and ensures that a company is attractive to investors, employees and customers alike. Executives who understand this paradigm are increasingly prized.
Coming Up…
Overture explores how talent drives valuation. Future editions of Overture will include:
• The disruptive force of digital media
• How Boards keep on learning
• Building leadership teams for new markets
• Plc readiness and the IPO
Please contact us with comments or for more information on Fidelio Partners at info@fideliopartners.com