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The Naked Corporation
The need for a transparency strategy, as described by Tapscott and Ticoll, is born out of the massive exposure and risk companies open themselves up to when they conceal activities from the public, or live by poor values. As they say:
Customers can evaluate the worth of products and services at levels not possible before. Employees share formerly secret information about corporate strategy, management, and challenges. To collaborate effectively, companies and their business partners have no choice but to share intimate knowledge with one another. Powerful institutional investors today own or manage most wealth, and they are developing x-ray vision. Finally, in a world of instant communications, whistleblowers, inquisitive media, and Googling, citizens and communities routinely put firms under the microscope.
Using basic tools available online, interested parties and activists can discover a companys darkest secrets and publish them to the world - instantly. Transparency theory states that because the corporation risks being stripped naked in ways it cannot control, it needs to be buff. Firms that live by good values (video) do not fear exposure.
Some firms and industries still opt for secrecy in our transparent world and they often end up paying a price for it. That is because when there is little to no visibility into how firms are operating (no transparency), there is very little trust built with customers. Low trust stifles innovation and can instill fear. This in turn creates conflict as companies try to stay closed and stakeholders try to break free.
Some stakeholders community activists, nongovernmental organizations (NGOs), and the like have little or no direct power over the firm. Their main tool is transparency: the ability to learn, inform others, and organize on the basis of what they know. When community stakeholders use information to gain support of others who do have economic power like the firms customers, shareholders, or employees their power multiplies.
One example, referenced repeatedly in the book, is the Linux community. There are so many transparent elements to Linux, from the inspiration behind its conception (an alternative to closed-source software), to the GPL that keeps it open, and the overall integrity of the software and the community that develops it.
Linux's transparent nature is quickly becoming a standard component of the technology industry. In fact, what could be a better endorsement of transparent business practices than IBM shifting its business strategy to embody open values? Big blue has donated millions of dollars of once proprietary code to the open-source community, and hosts massive developer forums that blur the borders between paid developers and the community. This is all done with the objective of making IBM more transparent to its stakeholders.
The Naked Corporation is a fascinating read filled with the ideals that businesses should aspire towards this century. What makes it most enjoyable to read is that Tapscott and Ticoll ground their concepts with real-world case examples, many of them technology related.
The book is divided up neatly into three sections.
The first, The Transparency Imperative, takes three chapters to thoroughly introduce the concept of transparency, and the structure of open enterprises. Most interesting is the first chapter (available free here), which identifies and explores independently the drivers behind transparency economics, technology, demographics (the power of the Net Generation), and sociopolitical changes (the rising global civil foundation). This is a rich and inspiring study, and the authors fuse their findings at the end of the chapter, stating that:
As emerging economy firms and citizens become integrated into the global economy, they will increasingly expect and gain the ability to demand visibility into Western firms business practices Both emerging economy and Western firms will be under increasing pressure to practice what they preach about open trade and level playing fields, as well as to behave responsibly toward people and the environment.
The second section, When Stakeholders Can See, illustrates just how much information employees, partners, customers and communities can discover about a firm. Given that we live in a knowledge economy, companies cannot block information from becoming free. The ultimate exposure of poor business practices is not a question of if anymore, but of when. The whistleblowers at Enron are proof.
Section three, Being Open, teaches companies about the rewards earned by being transparent. Up until this part of the book, transparency was viewed as a defensive strategy. Now transparency is re-introduced as a core source of new value a firm can tap into. Like IBM is doing now, companies can earn massive profits by adopting a more open stance.
In addition to being a great read for managers, I believe this book should be on the reading lists of members of NGOs, activist groups, and socially responsible corporate watchdogs. This is because in outlining the need for businesses to adopt a transparency strategy, Tapscott and Ticoll also create a blueprint for how to expose opaque organizations.
The drawback of this read, quickly obvious to the reader, is that transparency, ethical business practices, and corporate social responsibility are all such new theories that few know how to effectively apply them. Then again, when thinking about the Web in its infancy, talking about the new possibilities was the first step to the future we have now.
You can purchase The Naked Corporation from bn.com. Slashdot welcomes readers' book reviews -- to see your own review here, read the book review guidelines, then visit the submission page.
Did they forget to mention this book was published on October 7, 2003? Hmm - I smell an advert!!! -6d
In addition to being a great read for managers, I believe this book should be on the reading lists of members of NGOs, activist groups, and socially responsible corporate watchdogs.
Which makes it sound like activists, NGOs, and other entities (like local PTAs, homeowners associations, and the like) are somehow not impacted by the same issues. Entities like the Nature Conservancy sometimes get caught with their financial pants down in odd real estate dealings, and all sorts of non-profits (the United Way, among others) have seen huge problems because of their opaqueness.
The drawback of this read, quickly obvious to the reader, is that transparency, ethical business practices, and corporate social responsibility are all such new theories that few know how to effectively apply them
Actually, the thing that's quickly obvious, here, is that the authors/posters/editors involved in what I'm reading here think that there's never been such a thing as a decent company of more than 10 people, or that running an ethical business is somehow a new invention of the anti-corporate camp, which they've strong-armed onto an unwilling business sector.
Our economy is powered by thousands and thousands of businesses. Hard work, dilligence, and giving a damn about customers and investors is far and away the custom - no matter how much capitalism's philosophical opponents like to trot out the recurring handful of idiot CEOs and boards that smell otherwise.
Where's the rag-tag group of watchdogs watching the crazed HOAs and litigous NIMBYs that actually make more of a direct impact on most people's day to day lives? Those groups are more manipulative, and conduct their decision making in far more nefarious ways than most companies trying to keep their customers, employees, and investors loyal.
Don't disappoint your bird dog. Go to the range.
When companies must give employees full disclosure on wages of co-workers so they can appropriately value their own work, then transparency will be acheived.
The widest canyon capitalism has is the rules are all one way. Submit salary history with resume? How about submit salary history of potential team members so you can make an informed decision?
I find it interesting that most pro-capitalism libertarians, like the authors are all about access to imformation for the investor and other corporations, but not for the workers.
Using Enron or any other corporate scandal as an example in favor of transparency is silly. The "stakeholders" for those companies bear no relation to the people making the very non-transparent decisions.
And those decision makers didn't care about the future of the companies, they just wanted to extract enough money out of them to buy their judgement-proof giant houses in Texas or Florida.
So the issue isn't that well-run corporations should be voluntarily transparent, they already are well-run. The issue should be how to force evil corporations, run by thieving robber barons, into some level of transparency before they've emptied the cookie jar.
paul
Silly Rabbit, sigs are for kids.
type of tribal, village society ... more united against the rich
Right. If you go back long enough before the internet, that's all you had. Whether or not the rich people existed (what, some lords and ladies with rotten teeth, living if they were lucky until their 35th birthday?), their standard of living was nothing compared to what we have now. We didn't get where we are because we were united against rich people. We got here largely on the coat tails of the sort of hard work and risk taking that does, sometimes, also produce rich people. Being against them means being against the things that allow them to exist at all, and that means being against risk taking and the passionate sort of ambition that gets us things like refrigeration, cheap anti-biotics, and airplanes (so that we can fly to Sweden and Denmark to observe village life devoid of rich people).
Oh wait, here are some rich people:
Birgit Rausing & family, Swedes, 32nd richest in the world
Hans Rausing, Swede, 41st richest in the world
Jorgen Clausen & family, Danes, in the top 200 richest in the world
Kjeld Kirk Kristiansen, Dane, in the top 200
I could go on. They're all worth multiple billions, and employ many of their countrymen and others around the world. Why haven't those forward-looking countries simply voted them out of the village? Because people like that are what fund, through huge taxes, the over-the-top costs of the social programs in those countries. Just check in with the flood of un-employed folks from the middle east that are swamping those two countries for free educations and dinner. It's easier when there are billionairs handy to cut the check.
Don't disappoint your bird dog. Go to the range.
Well, while I'd agree that transparency is good overall, it does depend on what kind of information we're talking about.
The management is appointed by the board, which represent the shareholders. Thing is, stocks don't work the way they used to, when people would hold their stock and get rich off the dividends. Today people aren't investing for stock dividends. They buy in the hopes of selling them for more. So the business has to keep growing and keep that stock price up to keep everyone happy.
The problem is, if the shareholders have down-to-the-minute information on everything the board is doing, things get short-sighted. Every single decision the board does would be cause for speculation on the stock.
This, in turn, could make it difficult for the managment to do their job, namely run the company, because any decision which could means lower stock prices, even in the short run, is going to get them into some heavy criticism from the unhappy and increasingly short-sighted investors.
In the worst case, you'd risk ending up with management looking only at what's good for the next day and not what's good for the next decade.
(Of course, it's already a lot like this. I'm just saying it might get worse.)
...you may need to have a PhD in accounting to understand them. When Enron was coming down, I knew someone in the business school at OSU, taking classes in accounting. When discussing Enron's books, his professor said (approximately) "I have 2 PhD's in accounting, and I still can't understand them [Enron's books]." If the company is shady, they may use differing approximations of accepted accounting practices, and the products of those accountings may be hard to correlate to reality. Without significant accounting knowledge, you may not recognize deviations from normaity and/or how big the deviations are.