Corporate Transparency

Description of Corporate Transparency. Explanation.

Definition Corporate Transparency. Description.

Corporate Transparency is a term that reflects the idea that the more information is disclosed about organizational activities in a more timely fashion to a wider public the better it is. The call for more Corporate Transparency is a typical seasonal event. After the Asian economic crisis of the late 1990s and more recently after the collapse of Enron and WorldCom and the burst of the Internet bubble there was a demand for greater Transparency. Experience also suggests that drowning investors in more and more data does not make companies more transparent. In fact, the opposite can often be the case.

Some degree of Corporate Transparency is important since it is one of the theoretical conditions required for a free market to be efficient. Too much transparency however could be an obstacle in the creation of competitive advantage.

Some typical options for more corporate transparency include:

• Extending financial and reporting standards and guidelines.

• Increasing penalties for misleading reporting.

• Prohibiting a firm from providing both auditing and management consulting services to the one client.

• Prohibitions on certain remuneration techniques.

• Disclosing senior executive remuneration and dealings in shares.

• Establishing an independent supervisory board to monitor compliance with ethical rules.

The concept is strongly related to other concepts such as Corporate Accountability, Corporate Governance, Corporate Responsibility, Corporate Sustainability and Intangible Assets.

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End of description Corporate Transparency. An explanation.