In recent years, there has developed a belief that transparency is good for corporations. The corporations benefit by letting shareholders, stakeholders, and customers know more about the company, how it operates, and what it intends to do. The information provides clarity over strategic aims and this in turn provides a measure of certainty and consistency that markets and investors want. In this, transparency is a means to an end for the corporation. At the same time, the belief in corporate transparency is linked to the belief in corporate social responsibility. A socially responsible corporation is one that behaves like a good corporate citizen. To do this, it has to be aware of its impact on its community, its market, and the environment. A corporation demonstrates its responsibility through transparency, in part, as well as through the deeds, that are what it does in the community, the market and the environment. What has developed, in this social media age, is that the same transparency should extend to the executive.
The idea is that Transparency is the new Leadership Imperative. Despite the interesting example presented in the case study justifying this idea, it is a myth. Executives do not want to be transparent. What they want to do is manage their reputation, manage what is being made transparent. We should not confuse blogging with transparency. Blogging is only a controlled transparency or simply another way of managing one’s image. For any executive, in particular politicians, it is almost understandable that there is a resistance to being transparent. To the extent that transparency can make them accountable, it will be resisted. The resistance should not be seen as automatically negative. In part, it is resisted because the executive sees it as inefficient. Instead, executives will want to be accountable in ways that they want, which is why they prefer horizontal accountability, to peers or the board, or regulators, rather than vertical accountability to their direct reports or the wider organisation. In a certain sense, this is natural; it is part of the principal-agent problem. However, it is more than that problem because of what executive power entails.
An executive does not amass power, either corporate or political, to be held to account in ways that they cannot manage. An executive wants to be in the C-Suite or the Oval Office to get things done. In a sense, they have to be “bridled” or “tamed” to fit them within an organisation. In that sense, the transparency represents a bridle which they want to avoid. Instead, they want to be judged by the outcomes not by what transparency reveals: their processes and motives. Executives want to avoid transparency because it affects their dynamism, their freedom of action. When it is unmanaged, transparency can create a burden by forcing them to show their thinking. The chill is created by the disclosure of what they plan to do and how their views, which they which to control, may be disclosed. They will be concerned that decisions will be disclosed before they can be made and thus have to be redefined or revised. Unmanaged transparency can be as bad as a leak.
In either situation, the disclosure of information hinders the executive. The executive acts secretly, that is without transparency, so that they can achieve their aims. The Federalist Papers described this type of executive and contrasted it with the sluggish uncertainty of decisions made by groups. An executive can act with directness and energy that groups cannot show.
“Decision, activity, secrecy, and despatch will generally characterize the proceedings of one man in a much more eminent degree than the proceedings of any greater number; and in proportion as the number is increased, these qualities will be diminished.”
For the politician, the “secrets”, are not so much state secrets as the secrets of the political process. In that sense, it is not so much secret as being anonymous or hidden. In this, politicians, bureaucrats, or corporate executives do not hide in secrets; they hide in the political or business process. For politicians, a key transparency tool that is difficult to manage is the Freedom of Information process. The FOIA only reveals the process, the political context, and the mechanics of a decision. If you do not know what the Executive (any politician effectively) is doing, then they are in effect secret. If you know them only by their acts, the outcomes, then the democratic is weakened because the people lack a way to influence the democratic process. For businesses, the situation is similar. The Board has to know about what the executive intends and how they are going to do it, so that there can be accountability. At the same time, the direct reports and the organisation that will carry out the decisions have to know what is happening. In most cases, though, the transparency stops at the surface.
The challenge in any organisation is to find ways to look beyond the surface to discover what the executive is doing. As Machiavelli says about the Prince, it is difficult to see them as they are. A Prince protects himself with the majesty of the state so that the image they wish to present is the only one available.
Every one sees what you appear to be, few really know what you are, and those few dare not oppose themselves to the opinion of the many, who have the majesty of the state to defend them; and in the actions of all men, and especially of princes, which it is not prudent to challenge, one judges by the result.
Transparency changes this relationship because the executive can be seen for what they are; they can be touched, in a sense, where before they could only be seen. At the same time, that transparency allows others to strip away the accepted view, the common opinion, and they can judge the executive for themselves. In much the same way that the bankruptcy investigation at Lehman Brothers revealed much more about the executive than they would have ever have disclosed to direct reports or the board. One sees the same issues at the failure of Enron where the image of the executive was maintained until it could not be maintained anymore and the market was able to see it for the shell that it was.
We may consider these aberrations, yet, the underlying issue is that companies resist transparency and they are trained to resist it. One could argue that Public Relations firms and corporate communications are designed to limit transparency. The training to avoid transparency that creates accountability begins in business school. Consider the following example.
A business school class is given the following problem. A drug that their company manufactures is found to be killing people. Their reaction is to fight the FDA and “contain” the crisis.
“A breakdown in moral training?
The task of “influencing ethical behavior” is made more difficult today—at least in the view of some faculty members—because students arrive at graduate school less well prepared—ethically speaking—than students in the past. “The training on ethical and moral issues is considerably less than was seen previously—in the church, the home and the school system,” says Horniman. “And since each has less influence, they don’t support each other. The schools are terrified to talk about moral issues such as promise-keeping, truth-telling, etc.”
There seems to be a popular view that one has to be amoral to succeed in business. Each year NYU’s Lamb presents his class with a case study of a pharmaceutical company that discovers that one of its drugs has been killing 20 people a year. He tells the class to imagine they’re on the company’s board of directors. Do they pull the drug from the market? Or try to “contain” the crisis?
“Invariably, they decide to fight the FDA and sell the drug abroad,” reports Lamb.
Lamb then asks a second question: Would you want your own doctor prescribing the drug?
“Invariably, they say no.”
The case usually “sparks” a lively discussion about ethics and corporate responsibility. Lamb, for one, believes students become “excited” by ethical issues.”
What is interesting is that they want to be transparent, at least as it affects them, but if it affects the corporation, the goal is to “contain” the crisis and limit the transparency. The continued survival of the corporation becomes the overriding goal and transparency, which would hinder that survival, will be resisted. For organisations, as for governments, silence is a powerful protector. Anything that makes an organisation “speak” especially in ways that it cannot manage, will be resisted. In this, the lesson returns full circle. Executives and, most importantly, those training to be executives want transparency that they can manage. They want to decide how they are seen and keep others from “touching” them and knowing them as they are. Thus, the transparent executive is a myth and not a reality.
- Does the UK have an ecology of transparency? (lawrenceserewicz.wordpress.com)
- Corporations under pressure on political spending (usatoday.com)
- The 18 Most Secretive Corporations in the Citizens United Era (alternet.org)
- Co-operative Corporate Governance (funnyardstick.wordpress.com)
- SPIN METER: Candidates use transparency as a club (seattletimes.nwsource.com)