CLOs and investors perceive trust differently

By Jerome Doraisamy|13 October 2020

New research shows that the impressions of chief legal officers on what will engender investor trust in an organisation vary significantly from what investors actually think.

The Association of Corporate Counsel (ACC) and global communications firm Edelman have released the first joint Trust in Business Report, a survey of chief legal officers (CLOs) and institutional investors on their perceptions of how to increase public trust in businesses.

The report is the “first collaboration of its kind”, ACC said in a statement, measuring the factors that impact corporate trust from the perspective of chief legal officers (CLOs) and institutional investors. It draws on ACC’s 2020 CLO Survey and Edelman’s 2019 Trust Barometer.

As already reported by Lawyers Weekly, the report outlined the vastly different views between CLOs and institutional investors when it comes to the importance of increasing diversity and also detailed the varying views on how best to measure company culture.

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Results

When it comes to what will have a positive impact on trust in an organisation, 59 per cent of CLOs and 56 per cent of institutional investors see value in enforcing a corporate code of conduct at all levels of the business. Similar numbers think there is value in maintaining a healthy company culture, with 54 per cent of CLOs and 59 per cent of investors approving of this strategy.

This is where similarities end, however, with CLO and investor perceptions on what will breed trust varying substantially on other metrics.

Diversity on the board of directors and executive team is important to 55 per cent of institutional investors, while just 28 per CLOs think investors care about this. Similarly, 53 per cent of investors think equal voting rights will have a positive impact on trust, compared to just 26 per cent of CLOs, and 55 per cent of investors see value in having a separate chairman and CEO, in contrast with 25 per cent of CLOs.

Elsewhere, the differences in perception are even starker.

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Addressing societal issues such as immigration, inequality and diversity is something that 53 per cent of investors think will have a positive impact on trust, while just 17 per cent of CLOs agree that investors want this. Further, 48 per cent of investors see value in proxy access compared to only 12 per cent of CLOs, and frequently refreshing the board of directors will positively impact trust in the eyes of investors, in contrast to 9 per cent of CLOs.

Commentary

Reflecting on the results, ACC and Edelman wrote: “Perhaps these corporate practices are a wish list for investors – or practices they see at companies they already invest in. After all, presumably the two groups of respondents represent a Venn diagram; there is only partial overlap.”

Or CLOs simply do not know investors’ minds as well as the investors do. Some questions that might result: How might investors act on their beliefs? And how much do the differences matter?” ACC and Edelman said.

CLOs and investors perceive trust differently
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