Analysis…Trust and business: pathways ahead

Analysis…Trust and business: pathways ahead

By Arif Zaman

Arif Zaman

Arif Zaman

It has been ‘astonishing’ – to use one of the many striking words in the House of Commons Select Committee report published a few days ago on the shenanigans by the Murdochs – to see how faith in the media has most definitely been shaken not stirred. The unfortunate phrase used by the Sun newspaper in a jingoistic front page headline at the height of the Falklands conflict 30 years ago comes to mind: ‘Gotcha.’ At a time when some of the highest profile media reputations in the West have been shattered and roundly condemned, it is to South Asia that the world can look to see values and vision through the drive and determination of the Jang Group and the Times of India’s Aman ki Asha initiative which has provided hope, exceeded initial expectations but which has now reached a crucial phase.

Conferences are set piece events. Davos has the exclusivity and elitism but is never a space where developing countries really count. As power ebbs away from the G7 – a club now scarcely mentioned – to BRICS and others and a 1945 global governance structure looks seriously past its sell-by date, the inclusion of developing countries matters more. In comparison, the Commonwealth biennial summits bring together 54 heads of government with a common point of reference and afford an opportunity for having open dialogue with the private sector, civil society and young people (all separately) and then formulate an agenda and a roadmap. But while these are more inclusive and convivial, they run the risk of being seen as an isolated occasion, not a sustained, interlocking and accelerating process.

So where does an Aman ki Asha economic conference fit?

The short answer is that it does not. It is only the second such meeting and is still really finding its feet, even though the organisers seem to be facing forward and picking up pace. Beyond the events in Lahore this week, there is a question which is worth considering and applies to Aman ki Asha (more perhaps than any other forum) but one which business people too seldom address: who can build trust between Pakistan and India?

At its core, trust is the willingness to accept risk based on a rational judgement. So, to build trust, you need to be trustworthy yourself because it is irrational to accept risk based on the recommendation of an untrustworthy source.

This makes the answer to the question straightforward. According to recent global data on educated publics, business is more trusted than governments (GlobeScan 2011). In India, 69 percent of people trust business whereas 53 percent trust the government. More specifically, 43 percent do not trust government leaders “at all to tell the truth” as compared to 10 percent for business leaders. Similar findings are recorded for comparable countries to Pakistan (which is not included in the data). And 63 percent found Indian CEOs to be credible sources of information, far outpacing CEOs in the US, Europe, China and Japan (Edelman Trust Barometer 2012).

Perhaps this is unsurprising. Governments – and politicians more broadly – in both Pakistan and India have seen trust shaken in senior figures in the light of well-publicised corruption cases/allegations covered by a flourishing print, broadcast and electronic media. But as the 17th century Enlightenment philosopher John Locke first saw, holding leaders to account in a democracy means not trusting them too much in the first place. But while healthy scepticism is essential for strong democracies, it is a barrier for building trust with other states.

Since the 1990s, the emergence of strong indigenous corporate brands like Engro and Kingfisher, to name but two, has created a competing set of trustworthy national leaders.

Here, then, is a new dynamic. The trading links between Pakistan and India cannot flourish until the foundations of trust have been laid between the two economies. Due to their perceived trustworthiness, business leaders – not politicians – have now the opportunity and capacity to lay those foundations. (Asad Umar’s choice by DawnNews viewers in their programme ‘Enter the prime minister’ is a case in point – even if recent events with the former CEO of Engro seem to have caught up with themselves.)

This need not be such a daunting a task if we learn from current research conducted by Dr Andrew Tucker of Brunel University, London and Mettle Consulting. The presence of trust between trading countries enhances portfolio and foreign direct investment potential, overcomes customer wariness to purchase and decreases regulatory barriers to entry. Conversely, the absence of trust undermines any price premium opportunities, impedes supply chain efficiencies and prevents collaborations between businesses.

In other words, ‘business trust’ drives down transaction costs between economies. This is quantitatively different from ‘political trust’, the absence of which has been sadly evident for too long between the two countries and the cost of which in past conflict and current national balance sheets is all too clear. Business trust is the willingness of stakeholders to accept commercial risks based on rational trading – not political – judgements. As such, it has different drivers than political trust does.

Concentrating on business trust drivers, we can identify:

* trusted for what? – a transactional element whereby customers can trust a company’s brands, suppliers can trust operating processes, regulators can trust product quality.

* trusted how? – an iterative element whereby investors can trust a company’s governance processes, customers can trust service levels, employees can trust leadership

* trusted why? – a values element whereby investors can trust a company’s long-term strategy, media can trust the board’s leadership and regulators can trust the company’s vision.

The leaders of the world’s most trusted companies have learned to balance the different trust drivers of different stakeholders simultaneously. For example, General Electric CEO Jeff Immelt is a master of driving trust with customers, employees, regulators and investors around the world. By contrast, politicians trying to serve the mutually incompatible interests of their constituents and their financial backers often risk being perceived as untrustworthy by both.

Let us be realistic. We cannot build a high-trust trading environment between Pakistan and India overnight. And trade facilitation measures et al need to be followed in letter and spirit. After 60 years, we are only now off the starting block and there are distractions and diversions always competing for attention, especially in a politically charged pre-election period. It will be a long journey made up of single steps by committed leaders. However, at least we know what steps are required. In the recent ‘Reputation Management’ edited volume (Bloomsbury Publishing and Qatar Foundation), the most trusted companies around the world have shaped their environment by:

* emphasising country-of-origin with regional markets as a mark of quality and reliability over global brands

* leading from the front rather than waiting for permission from politicians, the media and those benefiting from the status quo

* proactively showing their portfolio and foreign direct investment potential by commissioning independent research on their governance standards, supply chain solidity and brand strength in local markets.

Learning from business leaders around the world who build trade through building trust, Pakistani and Indian business leaders now have a real opportunity to prosper and even build the conditions for peace. As the saying goes: if not now, when? and if not us, who?

The writer is an adviser to the CBC and an associate with Mettle Consulting.

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