Transparency on Trial

In today's environment, the mere threat of an embarrassing lawsuit or the public release of potentially damaging charges  -- regardless of veracity -- can throw management off its game for months, even years. As a result, CEOs of public corporations are losing their appetite for risk. They've grown hesitant to explore new ventures, new terrain.                          --Maurice R. Greenberg, former chairman and CEO of AIG

Corporate executives were berated years ago in the ClueTrain Manifesto -- the bible of some bloggers -- for failing to let it all hang out and engage nakedly in what is known as "the conversation." However, the ClueTrain cult members have never truly taken any responsibility for the implications of their wild-eyed advice. If they had, they would realize that, in today's over-regulated and over-lawyered environment, the extreme transparency they advocate is a suicide pact for Corporate America.

Perhaps I've missed something. But I rarely read measured analysis on this subject. While Robert Scoble and Shel Israel offer some sensible advice on the limits of corporate blogging in their recent book Naked Conversations, we are more likely to be confronted with snotty, self righteousness in the blogosphere -- stuff like Jeff Jarvis' open letter to Michael Dell. 

It's no wonder that corporate executives are unwilling to "open the kimono" (what an awful image that is) and bear their souls to a bunch of hostile strangers -- and lurking lawyers. Just imagine what a field day legal parasites like William Lerach would have with such openness.

But don't get me wrong. I think open and honest communication is a powerful thing. I agree with the ClueTrain premise that "markets are conversations." And I believe winning corporations will be those that get in front of the curve and learn how to participate in these conversations in an effective and sensible way. Just don't stand nakedly out there -- and don't, as the ClueTrainers relentlessly demand, simply speak your mind. Why? They will tear you apart. 

Consider this: Companies are now exiting or avoiding America's public markets to escape the excessive costs and risks they now represent. As Mr. Greenberg noted in a recent issue of the Wall Street Journal, heavy regulations -- such as those associated with Sarbanes-Oxley -- have stultified the public markets.  "Of the 25 largest IPOs worldwide in 2005, only one took place in the U.S," he noted. "Most went to London or Hong Kong. Even Australia weighed in with three."

Here's a thought. If you want to be more open and transparent, then maybe you have to take your company private (or stay private). It's happening in high tech. Sungard Data Systems, WRQ, Attachmate and many others have been taken private in recent years. And Greenberg cites other major companies going (or planning to go) private: Hertz, Toys "R" Us, Kinder Morgan, Albertson's, Univision. While these companies are likely taking action to get out from under the oppressive weight and costs of regulation, these concerns also apply to the risks of open communication.

The point is that companies may be simply too exposed on the public markets to engage in open and honest communication. Expect more of them to go private, escaping the glare of securities regulators, zealous trial lawyers and Wall Street analysts. That, ironically, may be the only sane and sensible means of becoming transparent.

Comments

[vinnie mirchandani]

certainly brain twisting - but may be extreme to expect companies to go private for transparency? (there are other reasons to consdier it). within our current legal framework companies could be so much more open.

some examples:

I was on call with Delta customer service this week - nice lady but cannot solve my issue. I ask her to escalate it. She tells me she is NOT ALLOWED to escalate. I have to write snail mail to a general address with my complaint. No email either. And I am a 2 million miler. tell me Delta cannot become more trasparent and give out specific executive names and engage in more conversation with customers when they are unhappy?

I told you about Gartner telling Jim Holincheck not to share metrics of queries he is seeing. It costs Gartner nothing and does not spill anything proprietary about specific clients.

GM and Ford rate their dealers on bunch of metrics. Do they share that with customer base?

there are plenty of areas companies can share what they have with customers, employees without getting in to legal trouble...

[Lewis Perelman]

Jim Carey's movie, "Liar, Liar," satirically illustrated how problematic--if not downright impossible--perfect transparency would be. So the practical question really is what's the healthy balance. In this piece, you are talking about everyday, ordinary corporate communications. In that context, you may be right that less transparency may work.

But under circumstances of crisis or disaster, the issue is different. Experts argue that, in a crisis, candid, accurate, and generous public communication is essential. Moreover, being a trusted communicator is not something that can be just switched on after disaster strikes. Companies need to establish their reputation for candor and reliability beforehand, over a period of time.

So, while you are right that too much transparency may entail some business risk in normal times, a lack of trustworthy, open communication can entail a hidden risk that may come back to bite a company when trouble strikes--potentially turning a manageable crisis into a spiralling disaster.

[shel israel]

Thanks for the kind words on Naked Conversations. But I have to tell you that our book never would have happened if not for the original thinking in Cluetrain. To my recollection, Cluetrain never advised CEOs to tell all, ut to show some humanity when they did speak and to be candid. Since that time millions and millions of business bloggers have posted what may be over a billion times. Increasingly these posts include CEOs and even lawyers. Yet there has not been a single lawsuit brought against a company because of comments posted on a blog. Nor is there a single case IP being breached by a blogging employee. As far as Jarvis' open letter, that was not his first postingf about crummy service at Dell. It was about his 7th. It turned out that a great many Dell users felt the way he did and Michael Dell would have been wise to show he was listening.

[Britton Manasco]

Great responses to this post. Thanks for your insights.

Vinnie, you certainly offer some vivid examples of the need to become more transparent. I offered my "solution" in a somewhat tongue-in-cheek fashion, recognizing that "going private" is not truly the only way to open up communication. Just serves to make the point that publicly traded companies are pretty shackled these days.

Lew, you also suggest that today's rules and regs are no excuse -- that we must be "trusted communicators" one way or another. Disasters will strike and we have to have the built up confidence of our stakeholders when they do. I agree. Companies have to find smart ways of communicating and building trust, despite the risks they face.

Finally, Shel, I agree that the publishing of "ClueTrain" was an important event. I explained that I agree with much of it. But some people follow that book too religously and I simply detect too much anti-corporate hostility (and too little empathy) among them. For them, it's as if everyone who doesn't have a blog "just doesn't get it." Maybe this is necessary in some ways. I have noted elsewhere in my blog that Jeff Jarvis and others got Dell to take some action; I simply think their tactics show more attention-grabbing narcissism than honest interest in smart communication.

I also would quibble with your point about "millions and millions of bloggers." I don't believe they are joining the blogosphere in those numbers from publicly traded companies -- and not with any connection being made to their employers. And even the ones that do blog face their share of legal and employment risks (as do their employers). As you know, plenty of people have already been "dooced" (http://en.wikipedia.org/wiki/Dooce). And Apple sent off the first legal shot with regard to IP being released on blogs. No doubt, there will be other suits and firings -- putting a chill on what employees will say.

I heartily agree with you about the need for open and candid communication -- conversation, really. My interest is simply in seeing that the ClueTrain -- impressive though it is -- doesn't take us all off the rails.