how-directors-can-support-ceos-on-navigating-trust

CEOs remain firmly in the spotlight. And while bringing accountability and transparency to their leadership is a good thing, the role of the CEO – particularly in terms of managing a range of stakeholders – is not an easy one. Arguably, with social media and other new avenues for shareholders and the community to raise their voices, the role of the CEO has become even more difficult. There also appears to be a low tolerance for mistakes, or even missteps, with calls for ‘heads to roll’ often starting with the CEO, followed by their board allies.

CEOs must, therefore, navigate a fine line between knowing enough and delegating and empowering others to do their jobs. They must be responsive, whilst not pandering or taking their eye off what really matters. They must understand the big issues, not turning a blind eye, but also make good decisions for their business. Directors can play an important role in supporting their CEO to navigate these new challenges leadership presents.

Use technology, data and AI to support good decision-making

New data and AI capabilities present an opportunity for CEOs to understand their stakeholders at a deeper, more meaningful level and make better decisions that account for different needs across stakeholder groups.

However, the most recent EY CEO Imperatives Report (based on a survey of 305 CEOs of the Forbes Global 2000), revealed that less than half of CEOs (41 per cent) reported being able to combine ‘machine’ and ‘human’ data effectively to inform their decisions. The most pronounced gap — called a ‘chasm’ — related to trust, with only 34 per cent of CEOs globally believing customers trust them with their data. CEOs in Australia and New Zealand reported slightly higher levels of trust at 40 per cent, however there’s still an evident trust gap.

CEOs in Australia and New Zealand recognise that earning and keeping stakeholder trust has become an increasingly important part of their job – more so than their global peers – with 60% strongly agreeing that the ‘quest to win stakeholder trust’ will be an increasing part of their role (compared to just 30% of global CEOs). This recognition places them well to drive change.

There’s obviously still work to do in building this trust, and directors can support their CEO in making decisions that will meet shifting expectations.

Acknowledge and understand changed expectations

For many years, trust surveys have confirmed that the community expect CEOs to take the lead on change for the good of society, or as the 2019 EY CEO Imperative Study put it, ‘respond to humanity’s greatest challenges’. In 2018, Larry Fink, CEO of BlackRock, informed companies that in order to receive his firm’s support, they must contribute to society, with the responsibility for this sitting firmly with the CEO. This year, in the Edelman Trust Barometer, 86 per cent said CEOs should not just lead on social change, but publicly speak out. In Larry Fink’s 2021 annual letter where he starts with the address, ‘Dear CEO,’ he stated, “I cannot recall a time where it has been more important for companies to respond to the needs of their stakeholders.”

There’s not only pressure from big investors, it’s also coming from within organisations. Research confirms that ‘meaningful work’ matters, not just to the young, but to all. In fact, nine out of 10 people are willing to earn less money to do more meaningful work. It’s no longer a matter of external activists, but also internal ‘champions’. CEOs who don’t listen to and understand staff expectations risk low engagement and ultimately turnover.

So while ‘stick to your day job’ was once a common refrain, doing so now could see CEOs risk losing the top job. It may be fraught and difficult to navigate an environment where trust appears to be ‘won’ and ‘lost’ on a daily basis, but there are areas that directors can focus on in helping their CEO get it right, at least most of the time.

Treat diversity and inclusion as a matter of trust

In recent years, we’ve seen that diversity and inclusion are unquestionably trust issues, not just for staff, but for the community and shareholders. Poor internal practices or even individual incidents are taken as systemic, driving down share prices and leading to CEO dismissals and board sweepouts. Even so, the CEO Imperatives Report found that CEOs continue to prioritise more efficient decision-making over diversity or bringing in outside perspectives – this is a risk that boards must work with CEOs to address.

Getting your priorities right

Paul Polman, former CEO of Unilever, famously challenged the status quo when in 2012 he stated, “I don't think our fiduciary duty is to put shareholders first”. Instead he prioritised his customers and people, confident the shareholder would be served if he first got those right – and he was right, Unilever performed exceptionally well during his reign.

Close to a decade later, having an honest conversation about stakeholders – including how to prioritise them and understand the ‘trade-offs’ that inevitably take place when trying to serve them all – is a good place to start and something CEOs and boards can do together, for the good of us all.

Elevating stakeholder voices to the board

The AICD’s new guide to effective stakeholder governance is designed to help boards identify and elevate stakeholder voices to the board.

View