Predictors of Employee Trust of Their CEO: A Three-Country Study

Abstract

The extent to which the words and actions of a firm's top management can be trusted is a major corporate governance issue in today's U.S. organizations. Concern over CEO and top-management trustworthiness is not unique to U.S. firms. It is now an international concern. In Russia, beleaguered Gazprom, the country's largest firm with 2001 sales of $20 billion, has adopted measures to improve its corporate governance (Rossant et al., 2002). Gazprom plans to choose its next auditor by competitive bid and have a board-level audit committee. Another Russian firm, Aeroflot, which is 51% government owned, replaced its executives in 2000 because they abused their power (McCarthy and Puffer, 2002). Standard and Poor's 2001 corporate governance evaluation attributed a $140 million increase in Aeroflot's 2000 revenues to the replacement of these corrupt executives with more credible, competent ones (McCarthy and Puffer, 2002). Crangle (1998) commented on the corrupt reputation of managers at the highest levels of Eastern European firms. Disenchantment with the firm's CEO and top management appears not only to be a problem in U.S. organizations but in Eastern European firms as well. Even though corporate governance is being scrutinized primarily to fix shareholder disillusionment, the ill effects of employee distrust of a firm's top management can be considerable. The most important leadership quality is credibility, which means that, above all else, leaders must be believable, competent, and enthusiastic (Kouzes and Posner, 1995). One of the four competencies that Bennis (1999) identifies in his work on leadership is the leader's ability to generate and sustain trust among followers. According to Bennis, competence, caring, fairness, candor, and authenticity form the essential mix for leader trust. Kouzes and Posner's First Law of Leadership is: If we don't believe in the messenger, we won't believe the message (1995: 26). As early as 1938, Chester Barnard stated that employees quickly sense the insincerity emanating from the firm's executives. He added that executive sincerity is the key to building adherence (i.e., cohesion and consensus) throughout the organization. Argyris (1964) commented on the connection between top-management trust and organizational productivity. Argyris (1973) pointed to a top-management credibility gap as having the consequence of neutralizing the outcomes of organizational development programs. Rodgers and Hunter's (1991) findings demonstrated that the consistency between what top management says and does is a major determinant of the success of organization-wide change interventions such as management-by-objectives. In sum, distrust of a firm's CEO and top management may unravel investor confidence, weaken employee confidence and undermine organizational performance, while trust in a firm's CEO is a direct factor in organizational success. Because employee trust in the firm's top management seems to be critical to the firm's performance, identifying its predictors should prove useful. Gaining an understanding of the antecedents of employee trust in the CEO allows the firm to take appropriate measures in managing trust levels of the CEO and top management. Therefore, the purpose of this study is to identify predictors of employee trust in the firm's CEO and top management. By including samples from the United States, Poland, and Russia, our study looks at various predictors of top-management trust from the international perspective. In this article, we survey the previous literature on trust of the firm's top management, propose and test the hypotheses based on this literature, and then present and discuss our findings. Lastly, managerial implications of our findings and limitations of the study are provided. PRIOR RESEARCH Past research in management trust has targeted predictors that relate to the employee's job context and interpersonal communication. …

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