What is the average lifespan of a public company?
“A recent study by McKinsey found that those companies listed in the Standard & Poor’s 500 was 61 years in 1958. Today, it is less than 18 years. McKinsey believes that in 2027, 75% of the companies currently quoted on the S&P 500 will have disappeared.” And according to the Wall Street Journal, “the number of public-company listings in the United States peaked in the mid-1990s, at nearly 6,000, but that number has fallen by about half over the past 20 years.” While some might question these insights or argue that mergers & acquisitions and disruptive technology are primarily to blame, maybe lack of trustworthiness is the real culprit.
Every year Trust Across America-Trust Around the World creates a “Top 10” Most Trustworthy Public Company list. The 2022 list can be found here. Four of the companies were founded in the 1800s and all but one has been in business for more than 18 years. The average life span of the ten companies is 77 years. Could it be that the most trustworthy companies are not only great innovators, but also tend to stay in business because they are well governed?
Some of warning signs of poor governance and low trustworthiness may surprise you.
- Trust is taken for granted and viewed as a soft skill. Either leadership never discusses it, or worse yet attempts to delegate it.
- There is a new chief in town who holds the title of Chief Trust Officer but it is not the CEO (see #1 above) as it should be, and the job description is similar if not identical to the Chief Risk Officer. Trust building and risk mitigation skillsets are not one and the same and trust always starts at the top.
- The skillset of the “leadership” team needs a serious reset. For example, layoffs are a first line of defense.
- Employee turnover is high but no one is asking why.
- The company website contains lots of Kumbaya “words” that do not translate into action. Just ask the employees.
- Strategies for elevating organizational trust and trustworthiness have never been discussed let alone described, shared or agreed upon.
- Leadership focuses on survival and short-term profitability. In fact…