The enterprise’s new clothes

Every year, a new business buzzword surfaces. This year, it’s transparency, a term used to describe the new requirements for companies to live in figurative glass houses so the world can see what they’re up to.

When you think about the mischief that went on behind closed doors at Enron or WorldCom,

that sounds like a welcome change. In a transparent corporation — or, as authors Don Tapscott and David Ticoll call it, a naked corporation — stakeholders can no longer be patted on the head and told everything is all right. They can see for themselves.

In Tapscott and Ticoll’s new book, The Naked Corporation: How the Age of Transparency Will Revolutionize Business, they argue for transparency in all facets of a business’s operations.

Transparency, they say, would prevent much of the scandal that has plagued the business world. And there’s been lots of scandal. Between January 1997 and March 2002, for example, according to the U.S. Office of Management and Budget, 10 per cent of all publicly traded companies restated their results. And even if the financial results were properly and accurately published, many annual reports are incomprehensible to the average investor, leading the authors to comment that these results are actually opacity in the guise of transparency.

Consumers, at sea in a world where even the most trusted have fallen, have resorted to research and peer advice instead of blindly accepting what companies tell them. Not only do they scrutinize products and services, they often look at a business’s record of social responsibility, ferreting out things like Nike’s foreign sweat shops and Home Depot’s purchases of lumber from companies denuding old-growth rainforests. To them, balance sheets are beancounter gobbledegook; what matters to them is the humane treatment of workers and the protection of a fragile ecosystem.

Transparency, we can see, means different things to different people. Indeed, the authors define it as “”the accessibility of information to stakeholders of institutions, regarding matters that affect their interests.””

In 10 chapters, Tapscott and Ticoll describe the long journey towards transparency, citing examples of the good, the bad, and the very ugly in many industries. They show how technology contributes to the exposure of dubious business practices, if fact suggesting that IT “”may well be the most powerful single force for transparency in our time,”” not only for informing customers and investors, but for pushing out corporate philosophy and mandates to employees.

Transparency almost inevitably means active participation on the part of investors, especially the large institutions. Tapscott and Ticoll go so far as to state that “”much of the blame for corporate misdeeds belongs squarely on the shoulders of the major institutional investors. Rather than be active and diligent, they have been passive and negligent . . . Active shareholders ensure good corporate governance and independent board members help to guarantee that shareholders’ interests are fully represented at the board level.””

Despite the weighty content, The Naked Corporation is a good read. Drawing examples from everything from computer companies to drug manufacturers, the authors illustrate the consequences and benefits of openness, or lack thereof — by the time you’re through chapter seven and the tale of Chiquita, you will never look at a banana the same way again.

While the authors sometimes give credit for results to transparency, to the exclusion of other, equally valid factors (for example, a cited 12 per cent drop in employee attrition could have something to do with the employment market as a whole, not only on changes in company policies), on the whole they present interesting and compelling arguments for transparency in organizations of all kinds. This book is a great reminder of where we’ve been, what went wrong, and how many corporations have gone about fixing it.

The Naked Corporation: How the Age of Transparency Will Revolutionize Business, by Don Tapscott and David Ticoll. Viking Canada, 2003. $40.00.

Comment: info@itbusiness.ca

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