The Importance of Corporate Transparency

Transparency around a brand’s corporate values is of increasing importance to consumers, particularly millennials and Generation Xers. A relevant metric proving to be heavily weighted for investors, consumers and employees alike is the transparency and values of a corporation.

For investors

To investors, corporate transparency focuses on clear, easy-to-understand financial statements. High-profile cases of financial mischief in the news over the last 15 years or so, has made the public more aware that C-suite execs don’t always disclose accurate financial reports. A small percentage of businesses consciously intend to defraud investors. Others release information that technically conforms to legal requirements  but is misleading to the public in its reporting. CEO’s can easily take advantage of murky financials and complex conglomerate business structures to conceal unattractive truths or unpleasant news if they want to.

But poor transparency reduces a company’s ability to give investors the critical information they need to properly assess and value their potential investments. They know that a refusal to provide sufficient transparency can hint at problematic issues that are not being addressed.

But transparency pays off. Analysis shows that firms that are straightforward with investors and analysts and provide fuller disclosure are valued more highly than those that don’t. Being more fully informed means less risk to investors. Companies that reveal the key performance metrics that investors are interested in reap more value for their company.

For consumers

Millennials and ethically-conscious consumers care about an organization’s transparency as it is a reflection of the institution’s morals, ethics, and global awareness. To be trusted, companies are encouraged to make their important documents available for public review.

For employees

In 2014, marketing software company HubSpot turned all of its employees into what it called “insiders” by giving them access to financial data before it was released to the public. It was a successful move that furthered their employees’ feelings of trust and investment in the company they work for. Once privy to Hubspot’s financial practices and standing, employees responded by being willing to work harder and better towards increasing the company’s bottom line.

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