An open culture is the best safeguard against the risk of damaging scandals
HEAD OF ACCA UK
BEING in business is about value creation. We live in a capitalist society; it is profits, losses, warnings, and dividends that routinely make the business headlines. But if there’s one thing that recent events involving the press have shown, it is that businesses have to deliver more than just economic value to survive. They need to deliver public value too.
Current events at News International capture this perfectly. The News of the World was a profitable business that sold millions of papers every week. But the scale of the phone-hacking scandal turned the brand toxic, and a profitable paper disappeared from newsstands. Corporate history is littered with examples of reputational damage forcing rebrands or collapses.
With a global society that is more educated and informed than ever before, a company’s value needs to be measured in more than just pounds and dollars. There is an x-factor that is increasingly having an impact on customers, clients, and supply chains.
Looking at the world of finance, the lack of attention given to reputational issues by some finance institutions may have been a significant contributory factor to the financial crisis. A pervasive compliance mindset meant some institutions stopped thinking about whether something was right or wrong or even sensible, just so long as it delivered profit within the rules.
Delivering public value requires a mixture of different actions and behaviours. It requires ethical behaviour, honesty – about a business’s mistakes and its practices – and openness. It means businesses scrutinising their supply chain to ensure it lives up to the values it applies to itself; it means treating employees fairly. It demands transparency.
Transparency is the key to unlocking public value. Without it, good work goes unnoticed, while opacity may be assumed to be covering something up, even if there is nothing to hide.
It can help protect a business from itself, too. Imagine how many scandals could have been avoided if the business involved had asked itself: “what if everybody else knew we were doing this?” Thanks to social media and the internet, it is never going to be too long before everybody else does know.
Businesses needn’t see transparency as a stick, though; there is plenty of carrot involved. Taking a transparent approach to business highlights areas for improvement within a business, allows for benchmarking, and can drive innovation. It can help businesses differentiate themselves from competitors too, by showing exactly how they deliver the public value that their rivals do not.
The need for transparency is something that many businesses are already picking up on. More and more businesses are producing Corporate and Social Responsibility (CSR) reports, for example, with over 3,000 businesses producing CSR reports worldwide in 2010.
The challenge is to make corporate reports true, fair, and informative. Too often corporate reports are interchangeable between companies, having fallen victim to a cautious, boilerplate approach: they say a lot, but reveal nothing. However, once again, our internet age means that any inappropriate reporting is likely to be spotted quickly.
Of course, there are problems with being transparent. Deciding exactly when to be transparent is one of them, especially when trying to maintain competitive advantage or corporate confidentiality. It’s undeniably a tricky balancing act that looks to remain a challenge.
It’s a balancing act that needs attempting though, as any business whose cover-ups have been uncovered can attest.