Issues of trust crucial to business success, survey of directors shows

Tuesday, 27 February 2018

Australian directors overwhelmingly believe trust is important for their organisations’ sustainability - over 62% believe their board can adequately challenge management on how to respond to issues that could undermine trust in their organisation.

However, fewer than half (48.4%) feel their board has a proactive approach to building trust with the organisation’s most important stakeholders, and only 38.3% believe they have a proactive approach to building trust with all stakeholders.

Just 23% believe they receive ‘meaningful’ metrics on trust in their organisations.

These are the findings of a survey, by KPMG and the Australian Institute of Company Directors, of 600 AICD members to be released at the Australian Governance Summit on 1 March 2018.

The report found that 41.6% of respondents said they had pro-actively tried to uncover issues which had the potential to undermine trust in the business. Fewer than half (45.8%) said they had had to deal with such damaging issues in the past year.

In terms of the most critical factors for building trust, regular communication with stakeholders (82%) and transparency of business operations (78%) were the top two responses.

‘Internal culture and practices’ was regarded by directors as the biggest trust-related challenge facing their companies – ahead of both customer satisfaction and the financial stability of the organisation.

In a sign of changing times, in listing the most critical stakeholders to maintain trust in the organisation, ‘the local community in which we operate’ came third – ahead of government and investors. Customers and employees were the biggest two response categories.

Alison Kitchen, KPMG Australia Chairman, said: “Our survey shows increasing awareness among directors of trust as a key issue with the potential to damage organisations. But it is concerning that a sizeable minority of directors feel they are unable to satisfactorily challenge management on such issues, or indeed receive adequate reports on them.

“The fact that less than a quarter of respondents receive adequate performance metrics on trust in their organisations represents a potential blind spot for boards. It is important that the issue of trust is embedded into regular management reports and board conversations, so progress can be monitored.”

“It seems that internal culture and practices are the biggest obstacle that directors face in trying to improve the corporate culture in their organisations – which the AICD’s own research shows that 90% of directors are. Given the well-documented loss of trust in business and institutions in society, companies must become more pro-active in reshaping their procedures in addressing trust-related issues.”

AICD Managing Director & CEO Angus Armour said that the report clearly showed that directors took seriously the task of rebuilding and retaining trust.

“These results show that directors from all sectors, from listed businesses to not-for-profits, have heard and are responding to the community’s voice. The strong focus by directors on the need to have robust internal cultures and practices in order to rebuild trust reflects that social expectation,” he said.

“The KPMG-AICD Trust Survey presents a valuable tool for directors to reflect on their own practices and ways to improve their approaches to rebuilding community trust. This is more important than ever as we enter a new period of innovation and workforce transformation which will transparency, accountability and openness between directors and all stakeholders.”

Richard Boele, Partner, KPMG Banarra, said: “The survey shows a degree of increased understanding of the ‘social licence’ issue – I suspect a few years ago the local community would not have been third in the list of important stakeholders.

“Boards need to ask: What stakeholder voices are we hearing? Who is excluded from the conversation, and how do we ensure they have the opportunity to participate? Do we have the appropriate internal capacity, expertise – and willingness - to actively and authentically listen to all stakeholders? How do we equip our people to better listen? This will help introduce a social licence lens to conversations on corporate trust.”

Survey respondents represent organisations across all sectors with 40.7 per cent coming from private business, 30.8 per cent NFPs, 14.0 per cent public sector, and 11.2 per cent from listed companies.

To access the full report, please click here.

AICD Media Contact: Carissa Simons 02 8248 6612 | 0417 348 659

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