Corporate Transparency and Information Balance
Companies today must walk a fine line between protecting trade secrets and proprietary information with the expectation of consumers and candidates alike that, in the age of Glassdoor and Google, insights and information about employers are readily available and, most importantly, completely authentic.
Too little transparency leads customers and employees to believe a company is intentionally concealing or hiding important information, an opaqueness caused by omission that can lead to people assuming the worst (albeit often erroneously). Too much transparency, however, can erode competitive advantage and market positioning.
Practically speaking, employees need information about a company to successfully do their jobs, particularly in outwardly facing functions like recruiting; business opacity can hamper personal performance as well as employee engagement – not to mention the ability to attract top talent.
A recent study of Korean chaebols conducted by Hanyang University found a direct correlation between company performance and a transparent corporate commitment to ethics; companies whose values follow ethical transparency, in turn, have greater returns on their talent investment, with increased worker productivity and satisfaction.
Corporate Transparency and Social Responsibility
The fact that there’s a direct correlation between companies’ commitment to ethical behaviors and improved financial performance is the business equivalent of karma – not to mention proof that CSR is more than simply a PR ploy. Businesses that rank in the top quartile for social responsibility not only have huge cache for a company’s brand reputation and marketing, but they also lead their peer groups in terms of employee satisfaction, recruitment, and retention.
Building a socially responsible organization starts with corporate transparency; when current and prospective employees perceive their employer as altruistic and committed to the greater good, studies show increased willingness to work additional hours, contribute to intellectual equity and become those all important “brand ambassadors” who actively promote the organization through organic promotion and word-of-mouth marketing.
Similarly, consumers who identify a business as being committed to corporate social responsibility are more likely to become customers or clients; studies suggest consumers are over 50% more likely to buy from brands they perceive as socially responsible over a competitor, even at the same price point.
The ROI Of Corporate Transparency
With SOX having been enacted over a dozen years ago, the long term impact of this legislation are just beginning to be realized. A study published in the Journal of Banking and Finance looked at the return on investment and cost of debt associated with SOX compliance in 252 large firms. The study found that the companies sample realized a $844 million cost savings over five years as a result of SOX compliance.
For these companies, corporate transparency gave them a better credit rating and yielded significant returns on offset investments. They also found that the companies with less conservative earnings saw greater advantages from corporate financial transparency. When it comes to cost of debt, turns out transparency pays off.
No matter what market or industry your employer happens to be in, corporate transparency has consistently proven the most prescient predictor of company success. Even at public companies or other enterprises that rely on market viability, transparency is more strongly tied to forecasting future outcomes than their accounting or balance sheet.
We talk a lot about the concept of “transparency,” but it’s more than a buzzword – it’s big business’ public commitment to putting their money where their mouth is.
And that’s the bottom line.
By Matt Charney
Matt serves as Chief Content Officer and Global Thought Leadership Head for Allegis Global Solutions and is a partner for RecruitingDaily the industry leading online publication for Recruiting and HR Tech. With a unique background that includes HR, blogging and social media, Matt Charney is a key influencer in recruiting and a self-described “kick-butt marketing and communications professional.”
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