Davos '09 and the Failure of Leadership

The crisis the world is suffering through now is a failure of leadership. The leaders of the world are in Davos. If the world is watching what happens here this week, it will be to hear solutions and see responsibility and accountability. I’d say that’s not off to a great start, at least on the latter.

This morning, I started my Davos week with talk of trust. The Edelman Trust Barometer presentation revealed plummeting trust in financial, government, and journalistic institutions: 62% of adults in 20 countries trust companies less than they did a year ago. Trust in government is even lower.

Nonetheless, the first trend I spot here: the rise of government. News reports have been saying that this will be a dialed-down Davos, but I don’t see that; it’s the same Davos with the same pastries and parties. The change I do sense is less of a presence and apparent swagger from business and more from government. “Power has shifted from Wall Street to Pennsylvania Avenue,” said a speaker at the Edelman event.

The other obvious trend is America to the woodshed. “America is the new Europe,” Richard Edelman said. In a decade of the survey, they have never seen such a precipitous drop in trust in one category: American business, falling from 58% to 38% in a year, now stands equivalent to France and Germany and under the UK. The least-trusted industries in the U.S.: no surprise — automotive and banking.

In most markets, trust in business remains higher than trust in government, “which is not a good thing for either,” Edelman says. Asked who can fix the economy and prices, government is now clearly the preferred leader, the survey says. The percent who agree that government should impose “stricter regulations and greater control over business across all industry sectors:” 61% in the U.S. up to 84% in France (65% worldwide). The percent who trust business less: 62% worldwide, ranging from 77% in the U.S. down to 49% in India.

The survey reveals a new world spit: optimists in China (where trust in business rose from 54% to 71% in a year), Brazil, India, Indonesia, pessimists in the US, Europe. “The United States picture is really bleak. I can’t put a better face on it,” Edelman said.

Edelman advised companies to make change and not wait for regulation, to recognize mutual social responsibility, and to show “shared sacrifice…. This is not the French Revolution yet but it is certainly not the roaring 2000s,” he said.

His advice on communication: “It can no longer be Moses from the mountaintop.” You have to inform your employees and enable them to blog, for they’ll talk anyway. Communication moves from messaging to informing the conversation, he said. If one can trust companies — only 29% do. Government is worse; only 27% trust what they say.

Lionel Barber, editor of the Financial Times, began the session saying that trust is an issue for the press as well. Edelman found that trust in business magazines and analysts fell from 57% to 44% and from 56% to 47% respectively. Trust in TV news is down from 49% to 36% and in newspaper coverage from 47% to 34%. Stop on that: Two thirds of people don’t trust newspaper articles.

After all this talk about trust, though, breakfast ended up serving spin. An executive of AIG (AIG) split a very long hair, drawing a distinction between distrust over morals and distrust over competence and he argued that our issue now is the latter. An executive at another company said trust fell from a record high to a record low and he wondered whether business had simply oversold itself. Then there was much discussion of a new concept (or new buzzphrase): “private sector diplomacy.” Isn’t that a fancy way to say PR?

Later: A video of Richard Edelman after the session on trust:

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Comments

[morph366:]

Trust will only re-surface when accountability is restored. Most people are more concerned about paying their mortgages and how well their favorite team is doing in the league than holding the crooks to account. Meanwhile some other thoughts about Davos.
The "Masters of the Universe" are listening more closely again to their public relations handlers as it has been announced, in the last day or so, that the leading lights from Barclays, Citigroup and Goldman Sachs are all staying away from Davos in 2009.
Top bankers should not have forgotten during the 2003-6 boom years that it always has been, and always should be, in their best long term interest to be even more focused on PR than Hollywood has been - after all they have bigger illusions to protect than those in LaLa Land,
Not surprisingly this year's World Economic Forum in the Swiss mountains will be primarily attended by politicians, presumably being advised by their spin doctors that it is good for politicians to look very busy during these very troublesome economic times.
Anyone planning to go ski-ing in the Davos locality over the next few days should be extra vigilant as there is an increased likelihood of avalanches as a result of all of the hot air emanating from the conference.

Jan 28 02:41 PM

[css1971:]

Why would anyone trust a banking system built on a pyramid scheme? Or the politicians who are throwing trillions of citizens money at the people behind the scheme, begging for more?

Jan 28 02:47 PM

[Whippet:]

It's a good shift that Americans trust businesses less- but worse that it has shifted to government institutions. Until we trust in God, ourselves, our families and friends- and not morally hazardous bureaucracies or profit-driven institutions- the principles which founded this nation will continue to lose ground to socialism. Entrepreneurship, hard work, thrift, and personal accountability are the only roads out of this quagmire- as they have been since the American experiment began.

Jan 28 03:14 PM

[User 265729:]

Trust? This economy is a joke! The markets are government shills.

Look at the markets today. Based on sound fundamentals? Based on any long-range outlook (1-2 years) that things will significantly improve? NO! When you hear this phrase on the news:

"Stocks rallied today [FILL IN THE BLANK WITH ANY ONE OF THE ITEMS BELOW]..."

1. ...after the House approved a bailout plan...

2. ...after a bailout plan was proposed...

3. ...when the government....

4. ...after the Fed said....

5. ...based on the Senate vote...

6 ...on a/an $X billion or $X trillion dollar stimulus...

Let me tell you something, when you have the U.S. Government saying that they'll do "whatever it takes," I assume they mean lie, cheat, steal and even kill to make things look good.

Meanwhile the IMF sharply revised the downbeat of the economy sharply today and the International Labor Organization (ILO) said that 51 MILLION JOBS could be lost in the world THIS YEAR.

But this is all about appearances, not the real world economy.

Jan 28 03:17 PM

[User 265729:]

PS: At Davos, a great statement from the South African PM, Trevor Manuel:

...wealthy nations appeared to be adopting a "lemming-like approach, trying to get to the precipice without knowing what their money would buy."

Trevor: The lemmings are off the cliff, one after the other.

Jan 28 03:21 PM

[Moon Kil Woong:]

LOL AIG shouldn't even be allowed in the conference let alone invited to speak.

Regarding China optimism, I think that is a rather manipulated statistic (worse even than the US inflation number). I'm sure the growing ranks of unemployed there and rioters would disagree as well as the mass factory shutdowns there. It is interesting to note that people say that China suffered less in the great depression with the silver standard too rather than entertaining the idea that it was just bigger lying. So if I was at Davos I would say the whole world is the new Europe except the US that is threatening to be the new old Japan thanks to quantitative wheezing.

Lastly, yes confidence is an issue. And it's not just a consumer issue when banks can't even trust each other's balance sheet. Off book accounting should be banished. Derivitives disclosures should be mandatory. The reason no one institutes such measures is because the bankers are all scared to show how bad their hand is. Thus, the reason no one trusts each other.

Without trust how can you have confidence? Without honesty how can you have trust? Bernie Madoff should be discussed in regards to this.

Jan 28 03:25 PM

[winslow:]

Businesses and the governments have been run by shills for years. Most have proven to be totally incompetent. Any ethics were thrown by the wayside. Shareholders in companies are looked upon as a mere inconvenience.
A new age has dawned. Where it takes us; we don't know yet.

Jan 28 04:29 PM

[CJJ:]

Surveys are worthless. People who have any salt don't answer surveys.

Also, I applaud the whining by all the previous posters. You are true Americans of the day.

Jan 28 09:12 PM

[Al-USA:]

“shared sacrifice…. This is not the French Revolution yet but it is certainly not the roaring 2000s,” he said"

The reference to the French Revolution says "volumes".

For those not familiar, the French Revolution, which arose from the masses, not only succeeded in toppling the French Monarcy and its Aristocrats, but also laid the foundation for the complete destruction of Europes' then world order: its Monarchical systems of government.

It speaks volumes indeed.

Jan 28 10:30 PM

[notsosmart:]

ok-the french revolution killed thousands.on a lighter note.davos produced a new stand up comedian-vlad putin.

Jan 29 11:13 AM

[Cerberus:]

Failure of leadership. We just overextended ourselves to much and now we gotta pay for it. Failure of humility and the failure of being thrifty.

That's what someone should of wrote about.

Jan 30 01:39 PM