In these days when companies are reviewing and reinterpreting the forms of communication they maintain with their stakeholders and are seeking different ways to diversify them, corporate transparency is starting to gain a more solid footing in the modern business world and is starting to become a fundamental element in corporate communication.
The concept of corporate transparency, which we do not define with a narrow perspective such as only openly sharing the economic and financial status of the institution, covers the management of a very comprehensive process from the visibility of decision-making mechanisms to the transparent communication of strategic goals.
Globalization and digital transformation, the two most important concepts that continue to occur more rapidly than in the past, make the role of transparency in corporate reputation management even more evident.
Corporate transparency as the focus of the conceptual framework
If we need to briefly mention at the beginning, the concept of corporate transparency is a systematic approach that ensures that all activities carried out by an organization in any form are understandable, traceable and auditable by all stakeholders of the organization.
As I mentioned, corporate transparency is not only about making financial data public. From how decision-making mechanisms within the organization work to supply chain policy, from reporting the company's interactions with the environment to promotion and salary policies, data of very different scopes and dimensions can technically be made publicly available within the scope of the corporate transparency strategy.
Another concept that is conceptually intertwined with transparency and is often confused with each other is accountability. These two concepts are intertwined and it would not be wrong to describe the relationship between them as symbiotic.
To give a simple example, the transparency of an institution is a prerequisite for the managers who manage this company to be held accountable for the results of the decisions they make; this is of critical importance, especially if the company is publicly traded, to ensure that shareholder rights are protected.
The development of corporate transparency on a global scale
We see that the first demands for institutions to be more transparent emerged in the scandals we started to hear in almost every part of the world in the 1990s and in the financial crises that occurred in different periods.
The Sarbanes-Oxley Act, which came into force in 2002 after the audit scandal involving Houston energy company Enron and resulting in the bankruptcy of the company, is important in terms of reshaping transparency standards in the field of financial reporting on a global scale.
This act is a law that brings comprehensive auditing and financial regulation to publicly traded companies and its main goal is to create legislation that helps protect all stakeholders from accounting errors and fraudulent practices.
Another standard that defines transparency on an international scale is the OECD Corporate Governance Principles and the Global Reporting Initiative (GRI). The main purpose of these governance principles is to evaluate and improve the institutional framework for corporate structures and to provide guidance for investors, companies and those who want to improve their corporate development processes.
Thanks to blockchain-based management systems or artificial intelligence-supported production, planning, financing and reporting tools that are of interest to everyone today, there is no need to make a special effort to be transparent and the possibility of intervention in processes is reduced. Perhaps what needs to be understood is that digitalization has completely changed what we understand by transparency.
What is the importance of transparency in corporate communication and what are the fundamental differences between transparency and accountability?
I can count crisis management as one of the places where corporate transparency gains the most importance.
I see in practice that the importance of corporate transparency is increasing day by day in order to manage and protect reputation and to minimize the effects of crisis.
Crisis management requires the corporate structure to openly accept the current and experienced situation and to convey the correct information to its stakeholders in a timely, complete and continuous manner. This communication approach prevents the wrong people from circulating false information that will affect the course of the event and helps to protect its reputation by establishing public trust in the corporate structure by preventing the risks created by information gaps from negatively affecting the entire process.
If institutions try to hide the existence of this crisis in crisis situations or distort information about the situation / remain silent about the distortion, this will result in a loss of trust and reputation.
In many contexts, when we talk about improving brand communication, brand awareness and brand perception, perhaps the worst thing that can happen to a company is for its brand value to be damaged by incorrect crisis management.
Transparency also provides a competitive advantage among competitors in the same sector. Procter & Gamble’s Connect + Develop program is a strategy based on open innovation and joint development processes.
The main goal of this program is to ensure that approximately half of the new products and technologies come from the company’s suppliers. In this way, P&G aims to benefit from the talents of thousands of experts in the field from different parts of the world, not just its own research team.
Another company that has taken remarkable steps in terms of transparency is IKEA. The comprehensive climate and sustainability reports it has published with the aim of becoming a climate positive company by 2030 are an important and striking example. The data in these reports show that the brand acts with a responsibility that covers the transformation not only in its own products and operations but also in all its suppliers and customers.
Although transparency and accountability are complementary concepts in the institutional context, it is important not to overlook that their focuses are different.
Transparency, by definition, is the institution's open, clear, understandable and timely presentation of its ongoing activities, the decisions taken by its managers and the final performance to its stakeholders, while its main goal is to share information.
Accountability, on the other hand, is the institution's assumption of existing and emerging responsibilities expected to be fulfilled in line with the data and information shared within the scope of transparency policies and, in short, its acceptance of being responsible for its actions.
In short, you can summarize transparency as disclosing information and accountability as assuming responsibility for situations that arise as a result of this information.
Establishing institutional transparency, putting it into practice and transparency auditing
Transparency policies of institutional structures should be compatible with the fundamental values of the structure and it should not be overlooked that this should be achieved with a comprehensive and systematic roadmap.
When determining the transparency policy, first the current status and institutional structure of the institution are thoroughly examined and analyzed, the gaps between the current status, the set target are determined, how they will be closed are planned within the framework of clear and explicit rules. This plan should include improvements, developments, investments and changes in the organizational context.
The transparency policy aims to provide stakeholders with regular, understandable information about institutional activities, decision-making processes and the use of resources.
Rules are created that encourage information sharing within the institutional structure, ensure data security and determine the standards of transparency. These should include decision-making processes, making financial and operational information suitable for sharing with the public, what ethical values are and how accountability mechanisms work.
Having these in a clear and understandable form supports everyone working within the structure to adopt and implement transparency standards. The created policy texts are shared with all management, employees and stakeholders in written and multimedia form, ensuring that people are informed about them.
Transparency policies are implemented through internal and external audit mechanisms, the board of directors and audit bodies monitor the applicability of this policy, follow performance indicators, determine the frequency and format of data publication, and update the policy when necessary.
Why do institutions tend to avoid transparency?
Every company has trade secrets, strategies and data that provide competitive advantage that they want to keep to themselves, and there is nothing more natural than wanting to keep these to themselves, and corporate transparency is not just about wrapping all the data about the company in a cute bouquet and making it public with a pack of liqueur chocolates.
The existence of competitors is the main concern that pushes companies away from transparency. Another reason is technically a bit more personal; errors originating from the company's operation, the desire to hide the company's weaknesses and the possibility that financial problems that are not preferred to be visible may shake the trust of investors and stakeholders.
On the other hand, regardless of the sector and the type of model they work with, there are deficiencies in the corporate governance plans of companies. Especially in emerging markets, the fact that the boards of directors and the audit committees that will supervise them are not fully independent in their work and their effectiveness are limited is a striking obstacle to the establishment of transparency in the corporate culture. This limited area of action also strengthens the tendency for companies to only make public the data they desire and that will strengthen and shine their image.
It is an important issue that the legislation has not been developed in a way that shows how and in what way financial and non-financial information will be shared and how it should be read and evaluated.
The most important thing to accept is that transparency will bring with it a cost, I have not even mentioned the bureaucratic work yet. The comprehensive reporting works required for transparency, the audits that need to be carried out, and the continuous and open sharing of information will take up the resources and time of SMEs.
It is important not to ignore that the transparency of an organization, regardless of its type, will reveal ethical problems and corruption, highlight the problems that need to be solved, and force those who manage the company to account for their work...
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