For episode 68 we welcome as our guest Peter van Keulen, a prominent lobbyist at the firm Public Matters. He talks about trust as a fundamental aspect of lobbying, and the importance to establish and maintain it through transparency, integrity, and access. He discusses the essential elements for building trust in lobbying, namely integrity, and access. Integrity is demonstrated through a code of conduct that outlines how lobbyists protect their client’s interests and how they act toward the people they seek to influence. Access is the ability to interact with decision-makers due to relationships built over time. While knowing decision-makers does not guarantee success, it can be useful.
In the United States, lobbyists must register and disclose certain information about their activities under the Lobbying Disclosure Act of 1995. In Europe, regulations have been introduced, but they vary by member state, and The Netherlands has been slow to regulate lobbying. The European Commission has rules in place that prohibit former commissioners or high-level professionals from acting as lobbyists for a specific party for a specific period after leaving their position.
However, there are still stereotypes and misconceptions about lobbying that can impact the perception of the profession as a whole. When people view lobbyists as only representing big corporations or having questionable motives, it can be challenging to establish trust. That’s why it is crucial to educate the public and policymakers about the diversity of actors involved in lobbying and how it operates to foster trust and create a more positive image of the profession.
Ultimately, building trust is an ongoing process that requires open and honest communication and a commitment to ethical practices. NGOs, governments, and municipalities also engage in lobbying activities, and the growth of lobbying activities in the Netherlands is at the municipalities and provincial decision-making levels. By promoting transparency, integrity, and access, lobbyists can build and maintain trust with decision-makers and the public.
On Lobbying
I don’t want to lose myself in definitions. And many people look in a different way on what lobbying is, what public affairs is and what stakeholder engagement is, because that is the three levels we distinguish in our profession. I distinguish three circles, basically and lobbying for me is in the heart of the definition, lobbying being the profession of influencing elected officials, politicians, members of Parliament, municipality councils or whatever. So that’s the inner circle of definition that is lobbying, reaching out and influencing politicians. Then the second circle around lobbying is the public affairs circle in which you try and influence decision-makers like civil servants working at ministries or in the province or wherever. And then the third circle covering lobbying and public affairs. That is what we call stakeholder engagement, where you indirectly try to influence scientists or NGOs or legislators and trying to convince them of a specific position with which they influence civil servants and or politicians
Are only companies lobbying?
(…) people think that only companies with a lot of money can influence politicians, and the contrary is the case. You see a lot of competition between lobbyists from companies, yes, but also from NGOs in the environmental industry or governments. The biggest growth of lobbyists in the Netherlands was from lobbyists on the municipality or regional decision-making level. So governments, municipalities or province influencing members of the House of Representatives, that’s where the biggest growth has been. And it sounds a little bit strange, but for me it’s an confirmation that lobbying or public affairs is a real profession and you need experts to do so. And that is what municipalities saw themselves as well. And also on the European level, where you saw the recent case where Germany, the German government is now lobbying against specific regulation on the Fuel Directive, where the European Commission is electrifying cars within ten or to 15 years. And the German government is now lobbying against that regulation. And also that is perceived as lobbying. It’s a bothering thing for me that only multinationals or consultants are perceived as they have money so they can be a lobbyist and I think that is something that the professional organization should own and explain more on what lobbyists do and that there’s a high variety of lobbyists”.
On Lobbying and Trust
there are two crucial cornerstones that define the relationship between lobbying and trust. On the one hand, that is the activity of lobbying, during which an exchange of information takes place between stakeholders and the recipient of this information needs to be able to have full trust in, for example, the quality of information. The second cornerstone that defines the trust between lobbying and trust is related to the, let’s say, the voice and face of the information that is exchanged. That is the person of the lobbyist, as sender, he or she should be trusted as source of that information. To me, this trust in the personal relationship is even more important than the information itself relating to transparency and ethical practices, to me they are the means that define the context of trust. So being transparent, a lobbyist can demonstrate that he or she has nothing to hide and is committed to acting in the best interests of all stakeholders and this explicitly includes the common and societal interest and not self-interest. And doing so ethically based on, for example, a code of conduct, the recipient can hold the lobbyist accountable for the way he or she operates. And let’s be clear, becoming and maintaining a trusted influencer is an ongoing process to me that takes months or sometimes even years, it requires an ongoing effort and investment and also requires to be available for a stakeholder when the information exchange is not directly related to self-interest. So trust plays, to me, a critical role in successful lobbying.
Our guest in episode 67 of the podcast is Alison Taylor, clinical associate professor at New York University Stern School and Business Executive Director of Ethical Systems, a non-profit research collaboration focused on bringing the best ideas on business ethics from academia into the corporate sector. She has had a diverse career working in corporate investigations in emerging markets, leading her to question the role of culture and leadership in businesses. Her background in political science, history, and organizational psychology has given her a unique perspective on business ethics. She believes that society has lost consensus on what it means to be a good business and her upcoming book aims to clarify this confusing debate.
She argues that organizations should focus less on rules and compliance programs and more on building ethical decision-making capacity. They should bring in the wisdom of the collective and have debates about gray areas to jointly make decisions based on the collective’s wisdom. Rather than treating ethics as a fundamental black-and-white issue, she suggests building thoughtful capacity for ethical reasoning among the workforce and in society in general.
We talk about Elon Musk’s decision to lay off the director of Ethics, Transparency, and Accountability at Twitter, she believes that he may have underestimated the complexity of content moderation and is now facing the consequences of his decision.
She raises the topic of transparency and questions the notion that more transparency leads to more trust in businesses, despite the increase in the level of information available about corporate conduct over the past two decades. She argues that businesses need to change how they think about ethics and be more transparent and honest, while also being more restrained in what they promise to achieve. She suggests corporations should have a more focused strategy on what they can and cannot solve and stop exaggerating and spinning a story to deflect scrutiny. Finally, she explains how leaders can navigate ethical dilemmas and make decisions in the best interest of their organization.
About Business Ethics
(…) the things we name as business ethics are very often really efforts to protect the corporate person and to deflect scrutiny. So to protect the organization and protect corporate value from reputational and regulatory risk. So it is about legal contracts and it is about forms of PR that are designed to shield the organization from scrutiny. And one of the problems is that given the rise of social media, given shifts in values, shifts in expectations about what we want from business, and then particularly the rise of employee activism and employee voice, those metaphors, those defenses aren’t working very well anymore. So we really need to change how we think about our ethics efforts. We certainly need to be more transparent and honest, but maybe we also need to be more restrained and exaggerate less in terms of what we think businesses can really achieve. So I would rather see a corporation be more cautious about the problems it can and cannot solve, have a more focused strategy on the problems it can and cannot solve, and stop exaggerating and stop spinning a story in an effort to pull the wool over our eyes.
Stop Obsessing about Rules
I think that what we really have to do is to stop obsessing on rules and compliance programs and to start to build ethical decision-making capacity among the organization. So a good approach to ethics is less about a compliance process. It is less about rules, it is less about leaders barking orders from the top, and it is more about bringing in the wisdom of the collective to make better decisions. It is more about building ethical muscles. It is more about having debates about gray areas. You are based in The Netherlands, and I know that several Dutch banks have got ethics committees that are really based on this model. So they bring in young employees, they debate the questions, they are honest about their strategic trade-offs, and they try to then jointly make decisions based on the wisdom of the collective. I think that is a better approach to ethics than treating this as a fundamental black-and-white issue that is all about law or is all about right and wrong. Different people agree and disagree on what the ethical course of action is. We need only think about something like the oil and gas industry to see this. So I think we are maybe not benefiting from this very rigid 20th-century view of ethics and that what we need to do is to really build thoughtful capacity for ethical reasoning among the workforce and in society in general
On regulatory action, bribery and corruption
There’s lots of regulatory action, particularly on bribery and corruption that is still going on. I think here the points I’d make are twofold. We have very often in the white-collar crime realm, at least in the US, punishments and fines that are not in proportion with the damage that a company has caused. PG&E, the electric utility in California was responsible for dozens of deaths and no one has been to jail and the fine isn’t even that significant. We have Hertz, the auto rental company, accused its customers of stealing cars that were in fact lost in lots somewhere and has paid a fine of only 168 million. So there’s a real problem with regulatory accountability. Perhaps an even bigger problem is that via lobbying and political spending and campaign finance companies are influencing the regulatory process for their own needs and in their favor. So if we go back to Milton Friedman, who envisaged that a corporation should just make profit and is the role of the government to protect other stakeholders, the reason that that doesn’t work is that corporations have increasingly, in the last 50 years, been able to interfere behind the scenes in the political process, undermining democracy as they go.
Boston Consulting Group‘s Ai-based Trust Index measures and decodes stakeholders’ perceptions of the trustworthiness of more than 1,000 of the world’s largest companies. It enables companies to break down stakeholder perceptions of their trustworthiness. Analyses based on the Index have yielded valuable insights about what builds, sustains, or destroys trust.
What Is Trust, and Why Is It Hard to Measure?
In academic literature, trust is defined as the willingness of a party (the trustor) to be vulnerable to the actions of another party (the trustee). In a business context, broadly speaking, stakeholders (trustors) put a certain level of trust in a company (trustee) to fulfill a promise—whether that promise takes the form of a value proposition (product or service) to customers, an intangible such as corporate purpose to employees, earnings guidance to investors, or some other commitment. In doing so, stakeholders put themselves in a vulnerable position, trusting that the business will act in a way that aligns with their own interests. For example, you might trust your bank to safeguard your money, or your employer to live up to its societal aims, or your Tier 1 supplier to honor its pledge to reduce its carbon footprint.
As a latent psychological state and a predisposition to engage, trust is only indirectly measurable, through indicators such as transaction costs, or inferred from the attitudes and behaviors that people convey explicitly or implicitly in their communications and actions. Trust is naturally dynamic. It fluctuates, as individuals reevaluate their perceptions in response to new information and changing circumstances.
BCG’s Trust Index
The elements that generate, sustain, and enhance trust among stakeholders—the traits, decisions, and actions of companies—are many and complex. Until now, it has been difficult to distill them in order to understand their interrelationships and to link them to business performance. BCG’sTrust Index does just that.
Unlike traditional efforts to measure trust, BCG’s Trust Index draws on real-time stakeholder communications and applies natural language processing (NLP) and AI to analyze and quantify stakeholder perceptions. Constructing the Trust Index involves scraping the internet (traditional news sources as well as Twitter), combing through thousands of articles and posts on each company, and using a research-validated list of more than 200 trust-related keywords to identify instances in which the text mentions the company in the context of trust. Working with an NLP engine, we then analyze the trust sentiment behind each mention to gauge whether the perception is positive, neutral, or negative. (For this report, we searched only English-language sources, but the index can be applied in other languages as well. A detailed explanation of the methodology appears in BCG’s full report.)
To identify the mentions that relate specifically to trust (or distrust), we categorize keywords according to four dimensions of trust, which we identified in our past research:
Competence—whether the company can effectively accomplish a specific task at hand, or (in other words) whether it can deliver on its promise to stakeholders
Fairness—how equitable and empathetic the company is in delivering on its promise
Transparency—how open and unambiguous the company’s decision-making and actions are
Resilience—how effectively the company avoids or recovers from challenges and crises
This approach enables an analysis of a company’s trust score on an overall level and by individual dimension—for example, how its competence score has trended over time—so that we can more deeply understand its perceived trustworthiness. Dimensions also provide a window into context-specific reasons that encourage people to trust (or mistrust) and into the multifaceted nature of trust. Thus, we might notice that people trust a particular business for its competence in delivering its products and services to customers, but do not trust it for its fairness because of its weak commitment to social responsibility. Because the NLP engine can identify common themes in the trust-related mentions, we can assess the rationale underlying the scores. By analyzing the influence of each of the four trust dimensions and examining the more granular themes associated with companies that earned high and low trust scores, we obtain a useful reading of a company’s trust “health,” and we start to decode the “why” behind that reading.
Exhibit 1 illustrates this multidimensional tracking capability, using data underlying the trust score of one company in our data set. The graph on the left compares the company’s trust score to its industry benchmark. The center graph shows that social media mentions had a powerful impact on the company’s drop in perceived trustworthiness. The graph on the right shows that, despite the company’s relatively high competence score, its overall trust score has been trending downward as a result of declining scores for fairness, transparency, and resilience.
What the Index Reveals
In addition to uncovering the trust performance of individual companies, the Trust Index gives us a macro view of the trust record across a full data set—in this case, 1,100 of the world’s largest public companies (those with market capitalizations exceeding $20 billion) from 2018 through 2021. We break down perceived company trustworthiness along different lines to discern broader trends: by the entire set of companies, the Top 100, or the Bottom 100; by region or sector; and by a given point in time or an entire time period. We also deep-dive into the sentiment underlying trust scores to better understand the dynamics and patterns that govern how trust in businesses is built, maintained, and destroyed.
In the full report, we probe a wide range of questions, including the following:
Do the most trusted companies generate more financial value?
In what regions and industries are the most- and least-trusted companies found?
How dynamic are trust scores? And how much does the roster of Top 100 companies change from year to year?
On average, has trust in the world’s largest companies increased or decreased over the past four years, pre- and mid-pandemic?
How does trust correlate with other business metrics, such as ESG ratings?
What types of actions or events lead a company to be perceived as most- or least-trusted?
Among BCG’s many noteworthy findings are the following:
Trust pays off. The 100 most trusted companies generated 2.5 times as much value as comparable businesses at year-end 2021. They also had 47% higher P/E multiples. The link between trust and value highlights the need to take trust seriously.
Trust is highly dynamic. Fewer than half of the Top 100 companies from any given year were still in the Top 100 the following year. For the Bottom 100, turnover was as high as 70%. So business leaders need to measure and manage trust on an ongoing basis.
Trust levels rose during the pandemic. For all but the Bottom 100 companies in our study, average trust levels grew between 2018 and year-end 2021. Trust score CAGR grew less for the Top 100 than for the overall group (likely because the Top 100’s levels were already high), but it eroded the most among the least-trusted companies.
Ten themes commonly affect companies’ trust positions. We identified ten specific themes that most frequently establish, enhance, or destroy trust. The ability to track performance at such a granular level can help leaders devise strategies to improve their companies’ trust position. We found that the impacts of these themes vary markedly, depending on the company’s starting trust position. For example, for low-trust companies, crises are a major trust destroyer, especially when caused or exacerbated by negligence or recklessness. In contrast, high-trust companies, while not immune to major unexpected difficulties, avert, handle, and recover from crises in ways that maintain or even strengthen their perceived trustworthiness.
How Can Businesses Decode and Improve Their Trust Position?
The left-hand side of Exhibit 2 shows the correlations between the four trust dimensions (competence, fairness, transparency, and resilience) and the ten themes most commonly associated with establishing, enhancing, or destroying trust, based on the analysis of our dataset. The right-hand side indicates which areas companies need to focus on to sustain or improve their trust positions.
Consider the transparency dimension, for example. The theme that, by far, correlates most strongly with transparency is social responsibility. In other words, transparency scores were most influenced by mentions of social responsibility; the thick dark green wavy bar linking the two reflects the high volume of online mentions of social responsibility (whether positive or negative). The next-strongest influence on transparency involved discussions of corruption, fraud, and scandals, followed by discussions about innovation. Conversely, while innovation correlates strongly with transparency, it correlates even more strongly with competence, as the relatively greater thickness of the bar connecting innovation and competence shows.
The right-hand side of the exhibit shows how companies can advance their trust improvement efforts by targeting trust enhancers, trust foundations, or trust destroyers, based on their existing trust position. High-trust companies should continue to concentrate on trust enhancers, while also keeping an eye on trust foundations. Those with middling trust scores would get the greatest benefit from building up their trust foundations, while also tending to enhancers and guarding against destroyers. Low-trust companies should prioritize efforts to mitigate trust destroyers, while they work on building trust foundations.
Leveraging the findings from our Trust Index analysis, our report provides a set of actions that leaders can take to improve their company’s trust position. It also offers case examples and recommendations to business leaders for managing and improving their company’s perceived trustworthiness.
