Trust on the Brink by Edelman

TRUST BRINK THE THE

CONTENT Foreword 5 The EU Perspective

A New Broom Doesn’t Necessarily Sweep Clean

And the Gold Medal for Cynicism Goes to...

Ireland, Trust on the Brink

Mirror, Mirror

You Can’t Win Without Trust

Online Escapism as a Remedy for Crisis Fears?

When There’s No One Left to Trust

Employee Activism: Regular People Rising

Alone in the Dark. The New Challenge for Trust in France.

Trust Your People First

Germany: A Political and Economic Powerhouse – But a Dwarf in Trust

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TRUST ON THE BRINK – FOREWORD “Ich will Europa”, declares the German Chancellor, Angela Merkel, in a new political campaign aimed at reassuring worried German citizens. Loosely translated, Frau Merkel is saying: “I want there to be a successful Europe.” Yes, tough financial measures will be necessary, and will affect everybody. But, she says in a video clip: “At the end of this path, we will have a sustainable and strengthened eurozone and European Union.” Do German (and other) voters believe her? Some will, and some won’t. But what Merkel and all other leaders in business and politics are wrestling with is the almost complete collapse of trust in public figures like them in recent years. As we saw in the 2012 Edelman trust barometer data published earlier this year, the continent is not a terribly trusting place at the moment. Current market uncertainty seems unlikely to improve the situation. The British deputy prime minister, Nick Clegg, recently made a similar heartfelt appeal (in fact an apology) to his electorate. It was parodied and satirised energetically across social media within hours. The Autotuned pastiche version became a big viral hit.

In this selection of brief reports from around Europe, Edelman colleagues give their personal view on the state of trust in their country, and what if anything can be done about it. From France we hear about the self-questioning and doubt that is undermining confidence in the Exceptional State. From Spain we learn about the sort of teamwork that has led to repeated footballing success, but which is still thin on the ground in the business world. From Germany we hear about the paradox of the loss of trust even in the continent’s most vigorous and impressive economy. From Ireland we get an amused shrug at a situation which is, as they say, “desperate but not serious”. From the UK we learn about a country still working its way through the consequences of the phone-hacking scandal.

Trust is on the brink – indeed, it may have toppled right over the edge, and is now merely clinging on by its fingertips. (Our new data for 2013, to be published at the end of January next year, may confirm that hypothesis.) Why is the outlook for trust so bleak? Partly this reflects the difficult economy that has emerged from the wreckage of the great financial crisis. World weariness, reinforced by cynical media, has taken hold. But has trust gone for good? Or can it be regained?

And there’s more, from elsewhere on the continent and around the world. We offer you an informative if not entirely joyful read.

Robert Phillips President and CEO, Edelman EMEA robert.phillips@edelman.com 5

TRUST ON THE BRINK – THE EU PERSPECTIVE Nine months into 2012, it seems like a case of déjà vu all over again, at least as far as Trust is concerned. If it seemed as if things could not get worse, levels of distrust in government and business at least are likely to have taken a further dive this year, though it is more difficult to discern whether the media or NGO worlds will be dragged down by this too or, in relative terms, shine. Although there is a sense that the EU is just about managing to muddle through well enough from one summit to another to avoid a crisis turning into a full blown catastrophe, there is no great sense of optimism about the Eurozone economy or indeed the institutions of government in Europe, let alone rising confidence in the role of business. Instead there is significant worry that we are set for a long period of low growth, and possibly even Japanese style ‘stagflation’, increasing the sense as well as reality of relative decline of European influence on the global stage.

tries such as Greece and Spain. The competitive challenge for the EU is greater than ever, with other regions of the world gaining in strength. The shortterm need to address chronic youth unemployment only exemplifies how the longer term investment in education and knowledge is the key to sustaining employment levels in Europe, even if this will not help those struggling with austerity now. Beyond the shift in arguments over how to balance austerity with investment spending, with all the solutions proposed for the Euro involving a greater degree of political integration amongst the Eurozone, once again, the greatest risk to the success of these ideas is the reluctance of national politicians to take on the argument openly for how and why this is beneficial to the people of each country involved. This case gets harder to make with every day that goes by when the economy stutters and the currency loses strength against it main global partners, or is subject to speculation on its future because of the fragility of the finances in one or other of the current Eurozone members.

There has been a continued slew of stories about corporate misconduct, notably but not exclusively in the financial services sector, banking in particular, and the case for leadership through values and principles could not be stronger as a result – though if this is indeed a moment for the business sector to up its game, there are still too few examples of major companies and their senior management managing to crack that whilst delivering on other metrics against which they are judged, notably financial ones.

The case for a bottom-up campaign involving businesses, citizen consumers and diverse political interests to mobilise and even excite greater numbers of people around this issue is stronger than ever – if ever there were a need for public engagement on an issue, it is on this – but the question is who should lead it and how should be organised. And this is not just in the Eurozone, too. There is increasing recognition of the fact that there is an inner group and outer group of EU members, the inner group drawn around the more integrated Eurozone, the

If trust is a key currency for the EU in ensuring that confidence in the Euro as well as its institutions of government operate smoothly and indeed flourish, the debt problem that we have in Europe at present is as much about that currency as it is about the public finances. We are only now seeing the consequences of this ‘trust deficit’ in the rise of ‘fringe’ parties through which citizens can express their disenchantment and frustration with traditional mainstream options, and even social unrest in coun-

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outer group essentially ‘the rest’. So a key issue is how ‘the rest’ ensure their influence is still felt on EU issues when there is such a strong core that could act as one on many EU issues beyond the economic and fiscal ones. Banking regulation is a clear example of this – and one which exposes the difficulty for the UK in the current situation.

at present are not for that so much a continued decline in support for EU membership. And with moves afoot that could lead to such a referendum, and vocal interests within the Government keen on exiting the EU, that possibility is a real one, even if still remote. In the UK, therefore, it is not just trust on the brink, but its continued presence in the ‘European construction’.

The UK’s position in the EU is moving more and more to a point where the public appreciation of membership of the EU is so low that any referendum on it would prove almost impossible to win, without a dramatic change of mood. That is always possible in a referendum campaign, but the omens

Martin Porter Chair Edelman, Public Affairs, Edelman EMEA martin.porter@edelman.com 7

A NEW BROOM DOESN’T NECESSARILY SWEEP CLEAN KICKING OUT THE INCUMBENTS IN GOVERNMENT AND BUSINESS DOES NOT NECESSARILY BUILD LASTING TRUST

Italy – like so many other countries around the world in 2012 – has tried a new “broom” in government, Professor Mario Monti, and a group of economic technicians. But the window of opportunity, or the public “honeymoon”, which usually follow the choosing of a fresh face and a new set of policies, has been briefer than usual. A fractious group of political parties snipe from both right and left to whittle down the short-lived mood of hope and trust. In fact, trust and popularity did not even reach the traditional first 100 days benchmark. Indeed, this quick and volatile erosion of trust in government has become “the new normal” in many countries, not just Italy and Southern Europe.

made two big bets. The first was the world economy was about to grow briskly. Judging by the past decade’s data, companies tend to hold on to their chief executive when the economy is doing badly and appoint a new one when they feel that spring is in the air. But in 2011, they appointed a lot of new bosses. A hefty 14.2 percent of firms made the change at the top, up from 11.6 percent the previous year, according to a study by the management consultant firm Booz and Company, which has watched the trends for 12 years. The professional life expectancy of a chief executive shrank to 6.9 years from 8.1 years in the past decade.

The Year 2012 will be remembered as “the election Tsunami”, as the World Policy Journal called it. No less than 82 elections worldwide are taking place and pattern has been mostly clear: kick the incumbents out. This has been the case in France (Sarkozy) in Spain (Zapatero) in Greece (a series) in Egypt (the established order), in Mexico and many other places, after Italy – often a political laboratory for the rest of the world – started the New Year with its new “technical” broom, following the exit of Berlusconi.

The second bet is on hiring from the outside. Outsiders were 22 percent of the class of 2011, a sharp increase from the 14 percent in 2007 and a clear reversal of a long period of recruiting “insiders”.

The “new broom” mentality has also pervaded the world of business.

So have these bets been clairvoyant?

For a company, no decision matters more than picking the right chief executive. A good boss can turn a so-so company into a star performer. A bad one can turn a successful firm into a flop. Last year, about 350 of the world’s 2,500 biggest public companies appointed a new boss. What was expected from this new band of leaders?

The Euro crisis has slowed down Europe, while the official Euro Barometer saw trust for the Union drop to 34 percent from 48 percent in 1989. America’s recovery is proving shakier than expected. Growth in the BRICS (Brazil, Russia, India and China) seems to be slowing. Yet some companies have needed to switch captains while the waves are sweeping the deck.

The omens do not look good. In appointing the boss class of 2011, company boards appeared to have EDELMAN – TRUST ON THE BRINK

Another feature of the Booz research on CEOs showed that “insiders” do better, last longer and often produce better return for shareholders.

But even some of the traditional institutions Italians rely on, such as the Church and the charities have not been immune from scandal, and they have also been forced to show the door to the incumbents.

But more than ever, in an interconnected society, whether insider or outsider, it seems the first few weeks of a new reign are key to determine who should be leaving and who should be staying to preserve the basic DNA of a company and a government.

And Italians have grown so alienated with politics that the usual high presence (70 percent or more) at the polling stations has been drastically diminished to below 50 percent turning out to vote in local administrative elections – quite a sea change.

Italy has found its own way to handle the dip in trust. It has opted for sobriety and increased transparency... and some self-criticism. Even from its national team soccer coach, an instant icon, who blamed the problem on being “an old country” reticent to change its ways.

Some worry that the problems of the Italian economy are so deep-rooted after a decade of stagnation and a market where competition is sometimes frozen, that even a technician like the redoubtable Professor Monti may have trouble to get it moving again. Most of all, Italians have discovered like its European neighbours, that austerity and structural reforms (not just taxes) will be of little help unless confidence and trust , the engines of growth, are restored... across the board.

Accordingly, seekers of the sacred flame of Trust in Italy have moved to NGOs and to the traditional media and even to some of the social networks to ferret out the corruption and irregularities, as shown in the 2011 Edelman Trust survey. Thus NGOs and media have higher ratings than in many of the countries surveyed by Edelman.

Fiorella Passoni General Manager, Edelman Italy fiorella.passoni@edelman.com 9

AND THE GOLD MEDAL FOR CYNICISM GOES TO… “The Truth”. These were the bold words printed on the front page of The Sun newspaper in April 1989, introducing an appalling tale of drunken, murderous behaviour by Liverpool football fans at the Hillsborough disaster a few days earlier. There was one main problem with this account. It was not true, at all. This autumn the Hillsborough Independent Panel produced its report into the dreadful events of 23 years ago, during which 96 people died. Its conclusion was that incompetent policing and crowd management led to the fatalities. Liverpool fans, blamed at the time by some, were exonerated.

and parts of the National Health Service, everything else in this country is ok, right? That might be the wearily cynical conclusion drawn by a visitor to Britain after a few days of, well, of consuming our media. If only denigration had been an Olympic event Team GB would have soared even higher up the medals table.

Dominic Mohan, today’s Sun editor, offered a strong apology. “The Sun newspaper made a terrible mistake,” he said. “We published an inaccurate and offensive story about the events at Hillsborough. We said it was the truth – it wasn’t. The Hillsborough Independent Panel has now established what really happened that day.” The paper felt “a deep sense of shame”, he added.

Which is not to suggest that cynicism is necessarily always overdone or unjustified. The Leveson Inquiry into media practice (due to report soon) has been a lengthy and uncomfortable ordeal, shining a light on some corrupt relationships and practices at the heart of our society. Perhaps few countries would come out of a process like Leveson looking good. The UK certainly hasn’t.

Journalists sometimes like to claim that they are writing the “first draft of history”. But sometimes journalists confirm the wisdom of Ernest Hemingway’s observation: that “the first draft of anything is shit”. Coming in the middle of an ongoing crisis of trust in the UK, the idea that its most popular newspaper could have been capable of misleading its readers so wildly did nothing to help restore levels of trust.

What at times looked like systematic and industrialscale dishonesty and criminality seems to have permeated parts of our print media. A conspiracy of silence has kept this fact from readers – the customers of the business. It is all pretty bizarre and, in the worst cases, contemptible. Media executives are waiting nervously to see what Lord Justice Leveson will say in his final report, and whether statutory regulation of the press will be recommended. Whatever the conclusions, few will come out of this well.

And this has come, of course, on the back of years of crisis and scandals – the collapse of some major banks, MPs’ expenses and phone-hacking chief among them.

In the political field things do not look much better. A live field experiment in trust was carried out by the Deputy Prime Minister and leader of the Liberal Democrats, Nick Clegg, in September. He dedicated

But apart from bankers, the rest of business, politicians, the media, the church, our education system,

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a two-minute YouTube video to trying to apologise to voters for breaking a pre-election pledge, on university tuition fees.

always speak louder than words, and the advice to any leader must be to “show not tell”, and achieve things for real before making any grand claims.

It was a naked appeal to restore trust – in him, his party, the government, and in politics generally. It was met with a mixture of disbelief, ridicule and some grudging admiration. (It was also parodied immediately in a range of musically-enhanced versions which went viral.) Will it be enough to save him? It is too soon to tell. But the majority view was that trust in Clegg has been destroyed forever. As one observer put it: “It was a pledge from a pledge-breaker not to break pledges”. Others compared it to the speech made by an erring husband promising fidelity from now on.

And yet, in this Olympic/Paralympic year, Britain also showed itself to be capable of being a generous, entertaining and highly competent host. In the opening ceremony to the Olympic games, in particular, Britain proved that this is a nation with much still to be proud about, and with every reason to look positively towards the future. Yes, the economy is grim, the world is unstable, and we face huge environmental and social challenges. But British people are resilient and resourceful, and have met most of the serious challenges they have had to face until now. We have done it before and we can do it again.

Trust is clearly in trouble in the UK. There is a wall – is it a mountain? – of cynicism to overcome before public figures will be trusted and believed. Actions

Trust the people, then? It has got to be worth a try.

Stefan Stern Director of Strategy, Edelman UK stefan.stern@edelman.com 11

IRELAND, TRUST ON THE BRINK The Irish do funerals and death well. We mourn, we wake, we laugh and most of all we remember. The public mood is much the same. We have all had a sudden death and we have gone through a national process of grieving. We have had shock, we have had despair, resignation and now brief hope has given way to despondency. Trust is perhaps on the brink in this country, but does it make any difference? When considering Trust in Ireland, the starting point has to be a national obsession with our public finances. If you want to find a statitition stop any Irish person and ask them for headline economic numbers and they will know them. It can be a bit grim really. So what are those statistics? Well, ten minutes ago, I looked at our national debt clock, it stood at €125,852,406,580 and rising rapidly. There is no point in going into it here but the staggering insight is the relatively small percentage of the population that generated this debt. They were mainly property developers and bankers; you could nearly name them all individually. Sure we partied in the good times but the hangover seems to be turning into a disease. We are angry and while the Government and media make sure that we get to see the once high and mighty in prison vans as they face into never ending legal processes, it does not really matter. Optics are transitory but statistics are more enduring. Last year, 9 people left Ireland every hour or one person approximately every seven minutes. I don’t mean on a trip abroad, I mean left said good bye and good riddance and just left. This masks an unemployment rate of 14.7%. Generation emigration will be a lasting legacy and will have an impact on trust for some time. Perhaps due to our history, both recent and past immigration and emigration strongly impact on our psyche.

We might be despondent, but unlike our fellow austerity citizens in Europe we just want to get through it. We want to see the light at the end of the tunnel and we want to know that all of this effort is going to get us somewhere. The problem is we don’t know and that is having a severe impact on trust. We knew when we elected the current administration that their choices were limited, equally when we passed the EU Stability Referendum we knew that we were signing up for some tough medicine. Government, however, is just not telling us where we are going and we don’t know if we are at the end of the beginning or the beginning of the end of this economic cycle. We don’t have many Churchill-type figures to make us feel good about ourselves. In fact, government, media and business are collectively failing to provide any real sense of national direction. The collateral damage on trust is significant. “Events, dear boy, events” – Harold Macmillan’s droll observation is true in the case of Ireland. During July and August about a year ago there was a rise in consumer confidence. There was a sense of hope and optimism and perhaps a belief that there was a point to austerity, but that was stymied by the Greek crisis. We understood the hard truth that external events much more than internal dynamics control our destiny. The failure of the European Union to deal with the financial crisis has led to that institution potentially being severely distrusted in Ireland. Once we saw Europe as the golden goose. Now it’s more like the grim reaper. Logically, we accept that the EU has brought great benefits to Ireland but emotionally we realise that we our powerless at the expense of Europe. We have lost economic sovereignty and that does not sit well with us as a race. We have a bit of a thing about sovereignty. We don’t really care if we are largely to blame for our economic woes.

So, what is the solution offered by the political system? Well it’s austerity; pay down debt on the back of a reducing tax base. How? Raise taxes both direct and indirect, introduce new levies and charges on houses and water and just about everything you can find to tax. You can see why trust might be on the brink and you are probably fairly depressed reading this, but the reality of austerity is not pleasant and trust is the casualty.

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We are just not going to trust any European institution which collectively at the apparent behest of one European government seems to be constantly telling us what to do as a nation. The old joke about the Orangemen of Ulster used to be, “the answer is no, now what’s the question”. As we observe the gymnastic efforts of our government to restructure national debt or broker a better deal, we see the EU, the ECB and Mrs. Merkel saying no before the case is apparently even made. Perception is reality and trust suffers as a result.

the hit for the reform of a health service which has a cost base split 70% on wages and 30% on core services. Equally we remember that it was Fianna Fail that got us into this mess so as they languish in the polls. Sinn Fein is making real inroads in the Republic of Ireland. They have read the national mood brilliantly and are making substantial progress. If any party is going to see Trust rise its Sinn Fein as they organise nationally with a simple message that austerity does not work and it’s the bankers of Europe who should pay not the citizens of Ireland. There is nothing like a vacuum to influence trust. There are a few worrying lessons from history which tell us a thing or two about that vacuum.

As for our own Government, we are bored of the debate on the economy and Trust in Government is at an all-time low. We tend however to look at government in the abstract. Fine Gael, the main coalition partner, does austerity. It’s always been their role, so we in the main trust them to get on with it. Labour (the minority partner) is not doing so well. The true Labour voter justifiably feels that the party is supposed to oppose austerity and does not accept that there is no real choice available to its Ministers. It’s Labour that will take the flack as the Government seeks to renegotiate national wage agreements. It’s Labour which ironically may take

Trust is on the brink here but we are not the Greeks. It’s really a case of back to the future. The brink for us is to moan and groan, to emigrate or just to get on with it and hope that things will get better. We remain an industrious people with an open economy; we continue to attract foreign direct investment, we continue to educate ourselves very well. Trust may well be on the brink but we won’t force the issue, we just hope things will get a bit more interesting soon.

Mark Calahane General Manager, Edelman Ireland mark.calahane@edelman.com 13

MIRROR, MIRROR “Trust is like a mirror,” says Lady Gaga. “You can fix it if it’s broken, but you can still see the cracks in that motherf***er’s reflection.” This can probably be described as pretty much a universal truth, but in other ways the concept of trust and its implications in the Middle East differ markedly from the West.

Charity begins at home with Westerners, whereas trust begins at home for the Arab. Trust in the Middle East, like so much else, is relationship based. If you look at how spouses are chosen as an example, families will automatically trust someone from the same family or tribe to be a good husband or wife, but distrust someone from another family, however well suited they might be.

has promised, we will honour,” said the father. In the West they would probably just have spent hundreds of dollars on lawyers’ fees, so maybe this is a better system? Up to a point. It goes back to the traditional family values that one could argue we have lost sight of in the West. There is something comforting in the knowledge that whatever else happens you can trust your family. They are there for you and you are there for them, the bond is inseparable. Family comes first. That feeling is often extended to the tribes, who also stick together and trust each other implicitly. The downside of this is of course that the inclusivity (and by default exclusivity) of this system is the source of so many conflicts in the Middle East.

An Emirati female columnist based in Abu Dhabi sums it up well: “A Khaleeji friend of mine of royal descent had to break off her engagement with her soul mate because her loved one’s mother did not approve of non-relatives as potential spouses. The minute she heard what her last name was, she refused to listen to any more pleading. ‘Non-relatives cannot be trusted. God knows what kind of things they hide,’ the mother told her son. The irony is that this young man knew more about my friend than he ever did about all his female relatives combined.”

So who else do the Arabs trust, apart from family and tribe? If the elections following the Arab Spring are an indicator, it seems that they trust religion. In Egypt, for example, the Muslim Brotherhood won the first, freely contested election. Their main rival was a party backed by the army, so the result shows clearly not only who the people trust, but who they don’t trust.

In the West there are laws that make trust between strangers possible. This is not always the case in the Middle East, so they rely upon reputation and honour. For an Arab, to be seen as dishonourable is the worst crime. Hence the so-called “honour” killings, almost always perpetrated by the victim’s own family. Obviously this is one extreme of the spectrum, but as an example it highlights the importance of honour in this society. This all comes back to trust, because clearly a man without honour cannot be trusted.

In the Gulf, the army and police are a far less sinister force. But I am confident that even there a poll pitting religious forces against a police force would favour religion. If you ask most locals here to name the most important tenets of their lives, they would be religion and family, very often in that order. They trust in God to the extent that they are sometimes almost willing to be almost fatalistic about their own lives. If you examine the Islamic concept of Tawwakul, then this becomes ever clearer. Tawwakul is, simply put, trusting in God’s plan. So whatever might happen to you, it has been planned by Allah, and therefore you must accept it. As the Koran

A colleague of mine was working with an Arab family when there was a dispute about payment. She had been promised a certain amount by one family member, which the others had not approved of. After months of wrangling, the problem was brought to the father to resolve, even though he had had nothing to do with the situation. “What my son

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states: â&#x20AC;&#x153;And whoever puts all his trust in the God, He will be enough for him.â&#x20AC;?

Businesses and governments are more widely trusted than their counterparts in the West. This is perhaps due to the intricate nature of the society that honours trust above all else. Break that, and it cannot be easily fixed.

Going back to the theme of marriage, it is significant that most non-Muslims marrying a Muslim are required by the family to convert to Islam. This not only reflects their trust in religion, but also their distrust of outsiders, again bringing us back to the very tribal nature of trust in the region.

To return to the Lady Gaga quote, once the mirror is shattered, the cracks are probably too large to see any reflection at all.

To conclude, the concept of trust in the Middle East is still utterly rooted in the family, tribe and religious beliefs. Breaking of trust is seen as a matter of honour, and taken extremely seriously. Breaking of trust, and thus honour, especially among family or tribe members, is not something that can be forgiven.

Rupert Wright Chairman, Edelman Middle East rupert.wright@edelman.com 15

YOU CAN’T WIN WITHOUT TRUST I write these words just after Spain’s national football team pulled off one of the most spectacular sporting achievements in the history of the modern game by proclaiming itself Euro 2012 Champion for the second time running, notching up three consecutive major tournaments in a row. Whatever the level of passion this sport awakens in each of us, recognition of this unprecedented achievement by Spain’s national squad has been overwhelming worldwide. I do not intend to analyse this superlative sporting prowess from a technical standpoint. I’ll leave that job to the sports commentators, football professionals and everyone else who have something interesting and original to contribute.

The results of this study are revealing and show that the drop in trust in institutions such as companies and governments has been radical. Aside from financial crisis and other negative phenomena, this has a lot to do with the failure to meet the expectations of Spanish people.

I would like, however, to comment on one aspect which, in my view, marks the cornerstone on which this groundbreaking team has been shaped and has developed. I speak, of course, of trust.

The result we all know. The level of trust (whether domestic or international) generated by the “Spain” brand is currently at an all-time low. Although fortunately, there is much ground to cover and Spain’s national football team can be a good case from which to draw interesting conclusions.

Obviously, many more factors influence the high octane performance of this group of footballing virtuosos, amongst which we mustn’t forget the element of luck. But let’s stop for a minute to consider what, in my opinion, is the key element that lies behind this great sporting miracle: trust.

Trust in the solvency and security of a country or a company is closely linked to trust in the competence, wisdom and integrity of its leaders and their ability to meet their commitments. This is a basic principle for building credibility, trust and a good reputation. And it has more to do with what we do than with what we say.

Trust is not an invention. It is a gift given to human beings that has a lot to do with hope, self-confidence, enthusiasm, encouragement, cooperation, humility, discipline, skill and expertise, determination and a well grounded sense of responsibility.

Therefore, and following the thinking of German philosopher Robert Spaemann, since trust is fundamentally a personal phenomenon, when trust is lacking the assumption prevails that it can only be restored by outstanding individuals (and institutions).

Trust is inevitably a personal phenomenon. Only from an optimal level of trust in ourselves and our capabilities can we persuade others to put their trust in us, generating a multiplying effect. This in turn helps personal trust transform into systemic trust (in a company, a government or public institution).

As I write these lines the image of the footballer Sergio Ramos comes to my mind when he slowly and effectively put the ball in the back of the net during his penalty kick against Portugal in the semi-finals of Euro 2012.

If we review the findings of the latest edition of the Edelman 2012 Trust Barometer, we observe a loss of trust in most countries across the world, in Europe and especially in Spain, which tops the list of European countries in terms of distrust and scepticism. EDELMAN – TRUST ON THE BRINK

Was it strategy or trust?

The solution to this sporting dilemma comes to me courtesy of US General Norman Schwarzkopf, who said “an effective command is a healthy mix of strategy and trust. If you have to deal with something without one of the two... go without the strategy”. Or to put it another way, you can’t win without trust.

Miguel Ángel Aguirre General Manager, Edelman Spain miguel.aguirre@edelman.com 17

ONLINE ESCAPISM AS A REMEDY FOR CRISIS FEARS? According to Edelman Trust Barometer 2012, the European Union is currently becoming a region whose citizens are increasingly distrustful of governments, businesses, the media, and nongovernmental organizations. This trend is also evident in Poland – the largest market of the Central and Eastern Europe. In Poland, according to this year’s Trust Barometer findings, businesses have achieved a significant advantage over the government, as 46% of the polled now trust them, whereas only 28% of the polled trust governmental institutions (a 14 pp decrease of the trust in the government compared to last year). Poles definitely have a negative opinion of the results of the government’s activities. As many as 47% of the polled declare that the situation in the country is going in the wrong direction. The rise of pessimism in Polish society goes hand in hand with the snowballing increase in popularity of social websites, the activity of the blogosphere, and the importance of citizen journalism. Poles seem to feel resigned after following media reports on politicians dragging out their arguments and news about more negative effects of the global crisis on the local economy. Increasingly often, and consciously, we immerse ourselves in the other reality of unreal contacts, selective access to information, and full anonymity. Why does it happen? Why do we place more trust in relationships with virtual friends than in the democratically legitimized government of our own country?

in Poland. The phenomenon of Polish social websites, such as Gadu-gadu or Nasza-klasa.pl, which often effectively compete with recognized global brands, shows that high-tech companies that grow rapidly and achieve success can be established in Poland as well, convincing a growing group of Poles to enjoy the virtual world. As a society, we choose the anonymity, but also the ubiquity and omniscience offered by the Internet, because we are losing our trust in official sources of information about companies, products, and services. Research shows that social media make it possible for people to become someone they are not in “real life”. Customers regard traditional marketing, media publications, or information from an official website as just a part, often unnecessary, of knowledge. Poles want brands to be closer to their lives, to be more open, and to behave more like their friends than envoys from the world of business. The Internet is becoming the most important opinion-making medium for consumers worldwide, and recently also in Poland. Consumer blogs, discussion forums, or customer-created websites devoted to a specific product or service pose a real challenge to marketing communication specialists. This is where consumers will look for a trustworthy message. Trustworthy, because it is immediately verified by

We encounter new technologies every day. They have become synonymous with creativity and growth, as well as, to some extent, independence from mainstream economy or politics. Such brands, and at the same time image sharing platforms, as Facebook, Google, Apple, or YouTube determine the power of attraction of the high-tech industry. Why do we trust them? We probably believe that the crisis will not affect them, and that, due to their social profile, they do not treat us in the same way as impersonal corporations do. The world of hightech will have an increasing impact on the economy and consumers’ behaviour. It is already happening

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thousands of Internet users, who tirelessly check every single piece of information published online.

themselves full-fledged Europeans, feeling equally at home in Warsaw, Paris, or London. As citizens of Europe, we are subject to the same trends as all the other societies on the continent. This is perhaps why we will keep immersing ourselves even deeper in the all-embracing world of online communities, escaping from disliked politicians or the global financial crisis.

It is difficult to say why Poles have taken such a dislike to politicians or official sources of information about companies that they often adopt such a blind approach to their activity and getting knowledge through social media. It certainly stems from global trends, which can be clearly seen in the Edelman Trust Barometer findings. People worldwide have stopped believing the talking heads on TV and the things they say. However, maybe this is happening because too few governments or companies communicate in a professional way. Governments, corporations, and enterprises have to learn not only to talk, but also to receive messages from the society or customers effectively, engaging them in a long-term relationship, instead of just sending out dry dispatches about their decisions. How important it is to reach and engage online communities, thus demonstrating the power of the anonymous online community, was demonstrated some time ago by the argument over the ratification of ACTA, which was lost by the industrial lobby and governmental institutions of many countries in a vote in the European Parliament.

Experts claim that economic slowdown (and turmoil) might last as long as a decade. The trust placed in governmental or business organizations will probably continue to decline. Businesses are likely to find themselves worse off, whereas governments will recover some trust in a longer term. Just as it is government that comes up with rescue packages and procures financial aid from international institutions, it is the government to which society will probably shift its trust. After the situation returns to â&#x20AC;&#x153;normalâ&#x20AC;? and economic processes normalize, people may finally start trusting businesses again. Of course it is important how companies will survive the period of recession. If they focus on layoffs and attach little importance to solving this problem responsibly, the society might be extremely disappointed, which will be to a large extent difficult to make up for. Then Poles and other societies will perhaps choose the virtual reality as the brave new world for themselves.

As the largest country of the Central and Eastern Europe, Poland aspires to join the group of states that determine the shape of Europe. Poles consider

Barbara Kwiecien General Manager, Edelman Poland barbara.kwiecien@edelman.com 19

WHEN THERE’S NO ONE LEFT TO TRUST If the first Earth Summit in Rio twenty years ago was the wake-up call humankind was waiting for, Rio +20 will go down as the moment our leaders fell blissfully back to sleep. In doing so, we may have reached an important tipping point that will set the tone for future stakeholder engagement. Trust between various key groups may have gone for good.

Rio was an embarrassment of inaction and was followed by the usual finger pointing about whose fault it was. But the blame game won’t change the fact that humanity is facing an environmental abyss during this century, and we have never been further away from truly corrective action.

And then look again at Rio+20. Fundamentally we saw a failure of leadership at all levels. And this should be no surprise. World leaders gave up on Rio months ago and planned other engagements accordingly. There was the rather tragic sight of Ban-Ki moon standing on the podium, chastising the participants who were powerless to do anything else than sit at the conference and look sheepish. It demonstrated just how impotent the United Nations has become. And why? Because the UN was founded on the principle of bringing nations together around “a platform for dialogue” and finding common ground. Ironic then that with climate change set to have an impact on the entire planet, there appears to be no common ground. Maybe it’s already under water.

The democratic system of political negotiation and economic compromise is fundamentally broken. And not just when it comes to climatic horse-trading. As we look around the “free” world, we see countries time and again split down the middle on two sides of entrenched positions. President Obama was elected with 52.9% of the vote and it was called a landslide. Once the Republican party decided on a strategy of zero compromise, political gridlock ensued. In France, Francois Holland recently scraped into office with 51.7% of the vote – half the country breathed a sigh of relief, the other half braced itself for the worst.

But before we all get our feet wet, people may take things into their own hands. Edelman’s Trust Barometer and subsequent GoodPurpose study demonstrated that the patience of the citizens of the world is running out. Trust in both government and business is at an all time low, and trust in NGOs is declining for the very first time since we started collecting the data. Expectation that government and business have to take the lead role in creating solutions remains high however. That gap between popular expectation and actual delivery is a worrying trend. That’s how revolutions start.

And it’s not just national politics. Look at the Palestinian-Israeli “peace process”, or the attempts to save the Euro. Look at the failure to overhaul the global financial system despite the fact that it has caused not one, but two, recessions. And closer to our business, look at “stakeholder engagement” – a useful process in terms of an exchange of views, but too rarely leading to a true change of position on either side.

War has already been declared in some quarters. On the final day of the Rio conference, Greenpeace announced that it was moving to a “war footing” in order to save the Arctic. For an organization with its own navy and “activist army”, maybe that’s nothing new. But following years of sitting at the table

We live in the time of black and white. We have lost the ability to compromise, to give a little, to budge. We’re so focused on protecting our own interests, we are willing to lose everything rather than losing a little bit of “face”.

EDELMAN – TRUST ON THE BRINK

across from their corporate adversaries and trying and failing to get them to do “the right thing”, I sense that the game is changing.

become a tipping point in their willingness to do so. A moment that they realised that sitting at a table has been an elaborate charade designed to allow a fragile peace to be maintained and for businessas-usual to continue.

Greenpeace’s recent viral video where they successfully spoofed an oil company event to launch an arctic explorer vessel has been seen by over 800,000 people and generated a mass of media coverage. The video was followed by the launch of a site where individuals can themselves spoof the company’s advertising campaign. It’s had 1.8 million unique hits, and continues to generate reams of media coverage. In the “war” to save the planet, we’re seeing NGO’s becoming more and more sophisticated in the use of digital - often more sophisticated than the companies they’re attacking.

Indications, as we have seen, are that citizens of the world are starting to lose patience with their political and business leaders, and even with NGOs. When we see trust shifting to the individual or “people like me”, they’re effectively saying that there’s no one left to trust beside themselves. What some NGOs have already realized, citizens in many parts of the world are realizing too. This new awakening is that if there’s no one left to trust, then the power you hold has to be turned into action, not just words. To even begin to restore trust in their institutions, leaders will have to do the same.

Many companies would prefer to continue to engage NGOs behind closed doors, but Rio may

Jeremy Cohen Practice Chair, Business + Social Purpose, Edelman EMEA jeremy.cohen@edelman.com 21

EMPLOYEE ACTIVISM: REGULAR PEOPLE RISING This rise of ‘regular people’ has been well charted, not least by the Edelman Trust Barometer which, this year, saw ‘regular employees’ find level pegging with NGOs in the credibility of spokespeople - and surge ahead of more traditional voices, such as those of the CEO. People trust people like themselves and can easily find them within their own networks. These networks are of course not confined to shared interests around sport, poetry, knitting or porn. They exist in the workplace, too, on issues as diverse as executive pay, supply chain ethics and environmental protection. Employees are building coalitions with other employees and these coalitions are based on shared values, not imposed rules. Expectations are changing; the clamour for greater transparency, accountability and responsibility continues to rise. Meanwhile, increasing job insecurity, widening pension gaps and falling real wages decrease company loyalties and make challenges to the managerial status quo more likely.

All this also sits within a wider framework where businesses are no longer expected ‘just’ to deliver great products and services and to make money in return. Businesses are increasingly expected to do good and be good – to play a more influential societal role. The employee demand for this is equally a critical component and will most likely only increase in intensity as more Millenials – better connected and more activist-minded – enter the workplace. Businesses consequently need to think, work and organise themselves from the inside out.

The truth, however, is that in many organisations, a fundamental conflict exists between the prevailing hierarchies – which have historically been built as vertical silos – and the horizontal, more fluid and slightly amorphous spread of employee networks. This has all the potential for painful tension. Smart organisations will be those which fully embrace the Be Do Employees activist and harness this energy, rather than fight it. In this scenario, the employee ceases to be a passive recipient of corporate dictats or centralised initiatives; and instead sits at the centre of a de-centralised and empowered network of likeminded souls who, collectively, can be a reforming force for good. Internally, this is a network that sharpens the accountability of business leadership and therefore makes the business itself more stable and robust. Externally, it is also is a network that can spread the (good) word to the outside world of citizen consumers, through family, friends and their communities beyond. ‘Marketing’, too, is all the better and more authentic - and therefore more credible – by being built from the inside out.

Within business, the opportunity exists for leaders to fully embrace the employee as advisor; the employee as advocate; the employee as agent for change. Be Do Employees coming together around shared interests – and possibly co-funded by the employer – will help drive better internal communications; find richer ideas; embed true innovation; protect the social and environmental bottom-line; and ultimately deliver a more genuinely accountable system of governance. New communications platforms will be formed by real people, not detached marketers – and it is around such platforms that active coalitions and NGO partnerships can be built.

EDELMAN – TRUST ON THE BRINK

This is still a world in transition. The old pyramid that let influence drip down to the masses has not been completely usurped by a wholly inverted pyramid,

where the crowd is the start-point for everything. Not everyone is digitally native, nor are all markets born equal. ‘Conventional’ power structures still apply and direct democracy remains more myth than reality. There is still a lot of advertising that seeks to drive mass awareness and mass consumption, even in an increasingly resource-constrained world, just as there are countries where communications remain partly at the say-so of governments (even with Sino Weibo boasting 300 million users). Globally, the power pyramid model is in fact a hybrid one and will remain so, so long as the transition continues.

who, in their turn, will inform the elites. The process then can work one of two-ways: downwards, to the masses in an old model of command and control; or upwards, again, in a capillary action that reinforces and re-informs the employees and wider activists. This duality is best represented by the ‘hourglass pyramid’ (with thanks to Richard Edelman), in which both worlds happily co-exist and neither exerts supremacy. Each government; each corporation; each brand; each individual has to find its own way in and its own way through, in order to interpret and deliver its own reality. Demographic shifts will only accelerate change as ‘old’ authorities’ grip on power inevitably is weakened. Progressive business leaders will get ahead of the change curve and begin to govern by tomorrow’s rules, not today’s.

Social Advocism (a mash of ‘advocates’ and ‘activists’) is therefore the entry point for many but not all. Those who participate in this way, though, will find activist employees right there alongside them; and they, in turn will reach out to the citizen consumers

Robert Phillips President and CEO, Edelman EMEA robert.phillips@edelman.com 23

ALONE IN THE DARK. THE NEW CHALLENGES FOR TRUST IN FRANCE. French people are among the most pessimistic in the world. Currently they are even less confident in the future than usual. According to the Edelman Trust barometer, the last year saw a record decline in trust in both government and business. The younger generation has a particularly bleak outlook on life. Recently, 78% of those polled said the future represents more worries than hope. What the French call the “fear for tomorrow” is essential to understanding the challenges when it comes to trust in France.

Of course, the economic crisis and its impact on jobs lie at the heart of this problem. Unemployment has just risen above 3 million, while the rate of youth unemployment is around 25%. Many of the biggest French companies, such as Peugeot or Sanofi, have announced significant restructuring plans in the last few weeks. The new president François Hollande has finally announced what he intends to do to reduce French public debt, with the aim of finding 30 billion Euros in the next fiscal year. Having been perceived as having his head in the sand for the first few months of his Presidency, and being afraid to tell to the French people what would be required of them to meet the country’s commitments, he has a huge task to regain trust to stop the fall in polls which began practically the day he was elected.

If we are not to see a shift to extremism, the question is: who else will people trust? The state has no money. Decision-makers are not trusted. The media is not perceived as reliable. CEOs are seen as pariahs. French people feel abandoned in this new world, facing a new environment that they are not able to manage, and feeling increasingly alone in the dark of the crisis. The economy reflects this. Indeed, one of the main challenges for France today is to be able to change and adapt itself to the new rules and realities of globalisation. Will France be able to modernise its social system and modify the role of the state in a highly competitive world? A world where France has to innovate and become much more nimble to generate economic growth. A world where France has lost its diplomatic power and much of its relevance. For so long “l’exception Francaise” was enough to keep France as a true global power. The French exception seems now to be the one thing holding it back.

Nevertheless, the issue goes far beyond the economic crisis. The real challenge is about values as well as trust. The lack of trust is particularly obvious when you look at the presidential election earlier this year. In the first round ballot, almost 30% of the voters chose fringe political parties who aggressively criticized both the ruling parties as well as the main opposition groups. Radicalism on the left and the right had broad appeal, with their extreme positions attracting more support than the mainstream.

EDELMAN – TRUST ON THE BRINK

And yet. France remains full of potential, energy, creativity, and leading thinkers in many fields. And if trust can make a comeback, the economy could start to recover quite quickly. In fact, today’s context is an opportunity for companies wishing to grow or invest in France. It’s time for companies to get back in the game and participate in the creation of the

â&#x20AC;&#x153;post crisisâ&#x20AC;? era. French people are waiting for good news. A light shining in the dark can come from the companies if they catch this unique opportunity to participate in the recovery of the country... and of the French esprit. This crisis is the perfect opportunity to promote the private sector as important sustainable partners for a better tomorrow.

Julien Mayer Director Public Affairs, Edelman France julien.mayer@edelman.com 25

TRUST YOUR PEOPLE FIRST A great deal of ink and many billions of bytes have been consumed debating the implications of social media on communications, reputation, marketing, and advertising, but far less energy has been invested considering the impact of social technologies on business structures. This question is significant, because without the right structure, no business can expect to derive the maximum from its social media activities. The wrong structure – excessively hierarchical or rigid – can be an obstacle to developing the best content, achieving meaningful engagement that delivers real relationships, and connecting the right people within an organization to external audience members.

are having. And make sure your business structures support and do not impede vigorous communication. But the question of finding the proper structure for a world shaped by social technology is significant for another, much more important reason as well: audience expectations. The 2012 Edelman Trust Barometer’s most striking finding illuminates the challenge:

We know that for employees to communicate energetically with customers and other stakeholders they need to feel properly engaged with their own organization. And to create that sort of engagement there has to be trust internally first. Social media shines a bright light on the true nature of the relationships that exist internally. It reveals a lot about how managers are operating and the impact they

EDELMAN – TRUST ON THE BRINK

Only 38% of informed publics think CEOs are credible spokespeople. That’s down from 50% last year. On the other hand, trust in a ‘regular employee’ showed a dramatic rise from 34% last year, to 50% this year. ‘Regular employee’ trailed only academic, technical expert in the company, and person like

yourself as the most credible spokesperson businesses can put forward.

effectively. It also demands refreshed processes to ensure that problems, issues and questions can be escalated quickly and effectively to the right people within the organization.

But too many businesses restrict regular employees and even their technical experts from connecting with external audiences.

Finally, thereâ&#x20AC;&#x2122;s the question of where responsibility for social activity should sit within an organization. The answers will be as diverse as the variety of businesses that exist, but the common principle is a simple one: Social activity should be a unifying activity that brings together employees of different disciplines and empowers them to use social technologies to connect with external audiences in new and more effective ways.

How can interaction between employees and the public be permitted and, indeed, encouraged? Realistically, senior business leaders will need to feel comfortable that doing so carries a minimum of risk and has the potential to add real value for the business. Addressing these needs requires fresh thinking about business structure. This includes ensuring that employees are equipped with the right information, tools and training to interact with external audiences

Marshall Manson Head of Digital, EMEA marshall.manson@edelman.com 27

GERMANY: A POLITICAL AND ECONOMIC POWERHOUSE – BUT A DWARF IN TRUST Although booming in economic terms, and a powerhouse in EU politics, the level of trust in politicians and business is at an all time low in Germany. The situation itself is crazy: Germany’s economic strenghth is becoming even more impressive in the time of the Euro crisis. Especially when many European governments are struggling with their debts, Germany has a booming economy, a low youth unemployment rate, flat but stable economic growth, and even the time to develop leading future technologies and innovations. The economy is benefitting from many years of solid growth rates, realistic agreements between unions and companies, and a limited negative impact from the economic crisis of 4 years ago. Being watched nervously by its European neighbours, the German government is seeking regular consensus with its EU-partners, but also fighting for its position to avoid a massive increase in hidden debts for economic growth programs, which other big EU countries are demanding.

government and business. And even worse: 76% of the citizens think the country is on the wrong track. Why? For the government, it is becoming more and more obvious that the public are not truly buying into the Euro crisis journey being steered by the government. One of the key concerns of the German public is that the government is not listening to them. People read about comittments of (currently) more than euors 700 billion, that the German state has granted to other EU nations. At the same time, public institutions – schools, public swimming pools and so on – are being neglected more and more due to the shortage of money. Nobody is explaining why. In addition, people want the government to protect them against irresponsible business practices. The current discussion over new legislation, and the big impact NGOs have had in public debate, show that things will potentially change quite dramatically in the next few years.

All these developments would normally lead to a high degree of satisfaction and trust among the public in the government at home. And the same should apply to business, recognising the significant competitiveness of global German companies in extremely demanding markets. But the opposite is the case: government and business are currently facing an all time low in trust, especially among the broad public in Germany. Less than a third trust the

EDELMAN – TRUST ON THE BRINK

In the light of the high levels distrust in them, business leaders have clearly failed to use the opportunity of the crisis to earn their “licence to lead”. It is not enough to operate successfully. Questions about moral business practices, listening to customers and responding to them are seen as just as important.

So large-scale distrust in Germany â&#x20AC;&#x201C; in contrast to the strong political and economic performance â&#x20AC;&#x201C; is unexpected only at a first glance. To restore trust the government needs to engage the public and increase transparency with regard to its policy

decisions. By refocussing on the demands of their stakeholders and closing the gaps between demand and performance they will earn more trust, which is necessary in this era of an ever more complex and sceptical society.

Alexander Fink Practice Lead Corporate Communications, Edelman Germany alexander.fink@edelman.com 29

TRUST BRINK THE THE