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        Faculty, Marketing, Research

        Marketing professors: Good ethics is good business

        March 20, 2019 By Linda and O.C. Ferrell

        All News



        Richard Edelman, president and CEO of the global communications and marketing firm that bears his name, unveiled key insights from the 2019 Edelman Trust Barometer at this year’s World Economic Forum in Davos. Findings revealed that trust has changed profoundly in the past year with "my employer" emerging as the most trusted institution.

        Linda Ferrell, Chair and Professor of Marketing at the Harbert College of Business, and O.C. Ferrell, James T. Pursell Sr., Eminent Scholar in Ethics and Director, Center for Organizational Ethical Cultures at Auburn University, weigh in on what this means for the role of trust in driving employee engagement, corporate reputation and brand equity.

        Trust us ... Good ethics is good business

        Trust is a word that is thrown around quite a bit today, particularly when coupled in opinion data with its opposite – distrust. Trust is the ‘glue that holds relationships together’ both on a personal level and with your employer. That fact came out loud and clear in the 2019 Edelman Trust Barometer [1] data, with 75 percent of employees indicating that “my employer” is their most trusted institution – above non-governmental organizations (NGOs), businesses in general, government and the media.

        The Edelman Trust Barometer is an annual survey of over 33,000 respondents evaluating trust towards various institutions. ‘If government and other institutions won’t act, maybe my company will…’ is a perceived sentiment coming from the data. Increasingly, the data shows that companies need to take control and manage both their profitability and their support of economic and social causes in the communities where they operate.

        lindaWhat are some of the positives of this increased alignment of values between employers and employees? Employees become bigger advocates, are more loyal, operate with greater engagement and maintain a stronger level of commitment. This can manifest itself in organizational outcomes that we know migrate directly to the bottom line, such as lower turnover, greater productivity and increased customer satisfaction. But this is not an unconditional relationship. Employees demand that their trust is earned and expect that their employers support and address societal problems as part of their stakeholder engagement.

        Other interesting findings from the Edelman Trust Barometer include the fact that women are less trusting than men, with women’s trust of business coming in seven points lower globally and 15 points lower in the United States. Speculation as to one reason for this includes the fallout of the sexual harassment cases that have been so visible lately. In addition, pay inequity and glass ceilings with less leadership roles and opportunities may be contributing to this sentiment among women.

        ocThere is also a prevailing fear of the change that is coming from so many directions, with the greatest fear in this year’s study being the fear of automation – two thirds of workers report being afraid that their positions may be replaced by machines. With artificial intelligence (AI) enhanced robotics looming in the not-too-distant future and AI already impacting many organizational processes and procedures, the uncertainty and fear of change is palpable for many. By 2025, it has been forecast that AI will perform or assist in half of the jobs in the workplace, versus 30 percent today. [2]

        Back to our original premise that ‘good ethics is good business,’ the Edelman study showed that high trust companies – those with ability, integrity, dependability, and purpose – outperformed their sector stock performance by five percent. This supports Ethisphere Magazine’s assessment of the performance of the World’s Most Ethical Companies showing that over three years, these companies outperformed the U.S. Large Cap Index by nearly five percent. [3] One reason is consumers want to purchase from firms they trust. If that trust is broken, they may stop purchasing and find another firm they do trust.

        Our research indicates that the evaluation of a firm’s business ethics has a direct impact on brand attitudes. Social responsibility also has a positive impact on band attitudes, but unethical conduct can erode trust in the brand even if there are positive social responsibility activities. [4] With so much more information available these days on company behavior, a good reputation may prompt you to buy a product, but as the Edelman study shows, it will take ongoing trust to maintain that relationship (67 percent agree).

        The general mistrust that employees have of society at-large has created a real opportunity for companies, their leaders, and impassioned employees to take control of their community and societal impact and ‘do good while doing well.’

        1 Edelman Trust Barometer, January 2019

        2 Patrick Watson, “Machines Will Do Half Our Work By 2025,” Forbes, September 27, 2018.

        3 “Leading Practices and Trends from the 2018 World’s Most Ethical Companies®,” An Ethisphere Research Report, 2018., accessed 2/14/19. 

        [1] O.C. Ferrell, Dana Harrison, Linda Ferrell and Joe Hair, (2019) “Business Ethics, Corporate Social Responsibility, and Brand Attitudes: An Exploratory Study”, Journal of Business Research, Vol. 95, February; 491-501.