Greg Medcraft: ‘Business must embrace the evolving expectations of customers’
Rebuilding trust will depend on the willingness of the private sector to engage with its new place in society, says Greg Medcraft, Director of OECD Directorate for Financial and Enterprise Affairs.
Think about your last encounter with a global business. Maybe you ordered a product, used a service, chatted with a customer agent (or more likely a chatbot). What was your level of trust in that transaction? Did you feel 100% comfortable you were getting what you were paying for and expecting? That the information you received was credible? Did you believe that company’s promises?
Now think back to the global financial crisis of 2008. Overnight, the financial services sector lost the trust of millions of customers, taking years even to begin to recover. In the wake of the global pandemic, the latest Edelman Trust Barometer shows plummeting trust in government and media, leaving an opportunity for businesses to take more of a leadership role on societal issues. A remarkable 68% of consumers surveyed agree that they have the power to force corporations to change. That’s a powerful message for CEOs everywhere.
The idea for what would become the Trust in Business initiative began brewing before I joined the OECD in 2017, during my time as Chairman of the Australian Securities and Investments Commission (ASIC). While there, I generated some controversy when I said that the problem with conduct in banks was one of culture. You’ve got to have a culture that your customers can truly believe in.
Following the global financial crisis, the trust gap started to emerge – and it wasn’t just in the banking sector, beset by allegations of money laundering and the manipulation of the LIBOR rate. We have also seen trusted brands such as Volkswagen manipulating emissions standards. Even Wells Fargo in the US – hitherto regarded as one of the most trusted banks – was found to have manipulated customer accounts. People wouldn’t accept that kind of behaviour.
One of the things I used to say at ASIC is you can ignore the government, you can ignore regulators, but you can’t ignore the crowd. The fact is, today the crowd is so powerful that you’ve got to be watching how they feel. They can not buy your products, they can not buy your stock, they can not come to work for you. With social media there’s nowhere to hide and if you do anything that can’t be trusted, you’ll be found out pretty quickly.
At the OECD we created the Trust in Business initiative to encourage businesses to adopt some of the same policies and standards we were advising governments about. The three key areas within that are anti-corruption, responsible business conduct and corporate governance. Some of the countries that multinationals work in are pretty corrupt, and supply chains deal not just with human rights but also environmental degradation and paying your fair share of taxes. So even though these are policy standards for governments, they translate into best practice for good business conduct.
Since we established Trust in Business, we’ve launched a couple of projects. One is Compliance Without Borders, which addresses the threat of corruption in both the private sector and state-owned enterprises (SOEs). The risks of corruption are particularly large in SOEs, partly because the tickets are so big – infrastructure projects, for example, where there’s a lot of potential for cronyism. It’s inspired by Doctors Without Borders, and connects private-sector compliance officers with their peers in SOEs to exchange knowledge and strengthen anti-corruption systems. It’s a secondment where professionals from often very different backgrounds and contexts come together to learn about different corporate cultures.
Risk and reputation
We also set up the Trust in Business Network, which brings together like-minded businesses, governments and civil society interested in building trust and a level playing field within the framework of OECD guidelines. We have members from across sectors: retail, banking and finance, construction, oil and gas, professional services, energy, infrastructure, healthcare.
The reason companies are generally interested in Trust in Business is simple – it’s good for the bottom line. Surveys show that reputation has been regarded as the number one corporate risk for several years now. If someone does something really bad in part of your network, it contaminates everyone – again, there’s nowhere to hide. For multinationals, risk is a massive problem. They want to encourage a particular culture around the world. That’s a hard thing to achieve, but they have to do it, because if they don’t and something goes wrong, it’s a problem for the whole company – it can wipe them out. That’s the power people have over companies that let them down.
Many are starting to wake up to the fact that they can’t afford to ignore the crowd. A good company has to be thinking beyond what’s legally required to what the community expects of them. This is where business and ethics intersect.
When I became a chartered accountant 40 years ago – I’m a member of CA ANZ – we were studying ethics. It was drummed into us that we were professionals. Like a doctor or a lawyer, being a chartered accountant means you are trusted. I remember being told, “You’re a professional first and no matter who you work for, your loyalty has to go to your trust as a professional – it goes beyond any company.” This was a good guiding principle, because as chartered accountants, especially in audit, there will come a time when you may see stuff you don’t think is ethically correct and you’ll have to make a decision about it.
As much as technology has been a great enabler when it comes to trust – machine learning, AI, blockchain are amazing tools for detecting corruption and securing data – you still need humans to make a decision about how to interpret the information technology provides. CEOs who leverage these tools, who understand the power of the crowd and who foster credible, compassionate company culture have an amazing opportunity not just to create trust, but to shape better business practices for everyone.