It’s Clear That the Board Transparency of Today Has Many Looks
There’s no question that the economic crisis of 2008 helped to reshape transparency within for-profit and nonprofit organizations. Organizational leaders in transparency go beyond the legal definition of accountability, transparency and consultancy.
Today’s organizations have more good reasons than ever to be transparent. Economic times have not changed the type of information that organizations now share. What has changed is the quantity of information entities are sharing and the types of media they are using to share it.
We can credit much of the creativity of how today’s businesses share their information to the Millennial generation. Millennials, who grew up during the 2008 economic crisis, come from diverse backgrounds, are highly educated, and have taken on large amounts of student loan debt. Their station in life causes them to be innovative thinkers, more so than past generations.
Here’s a look at the essential indicators of transparency and the innovative approaches that some companies take toward transparency.
Why Do Boards Need to Be More Transparent Than in the Past?
For-profit and nonprofit boards have much more to gain than to lose in taking a close look at their organization’s transparency. Transparency creates an environment for both types of entities where they become more in tune with their stakeholders, which increases overall effectiveness.
One of the biggest challenges for nonprofit entities is competing for financial support from grants and donors. Increased transparency has the potential to set them ahead of the competition for financial support.
All organizations benefit from gaining the trust of the public. Transparency leads to private and public trust, as well as positive reputational standing. Transparency is a good practice that positions organizations ahead of future regulatory compliance rules.
Most importantly, transparency helps all entities avoid litigious concerns.
The Basics of Board Transparency
For boards that are looking to increase transparency within their organizations, it helps to look at what peer organizations are doing beyond the scope of industry regulations. Here are the top four things you can do to increase the transparency of your board:
Reviewing and sharing financials
Most likely, your organization is already doing this to some extent. Are you prepared to provide the three most recently filed annual tax returns if one of your stakeholders requests them? Does your treasurer have easy access to copies of your tax-exemption documents and any correspondence if a nonprofit stakeholder requests it? Many of today’s companies are adding a direct link to their financial statements right on their websites.
Performing annual evaluations
Boards need to have a committee that takes responsibility for annually evaluating the CEO or executive director. In addition, they should make it a part of their annual duties to perform self-evaluations on each director and the whole board.
Training board members in their roles and responsibilities
The board should be transparent in letting their stakeholders know that board members receive an orientation and get ongoing training in their responsibilities. Training should include learning about current and developing industry regulations.
Having a reputation for addressing issues head-on
Policies are a board’s best friend when it comes to transparency. Profit and nonprofit organizations should have written policies for the following:
- Conflicts of interest
- Sexual harassment
- Board-approved compensation for executive director or CEO
It’s not enough to have these policies in writing. Stakeholders will be watching to see if the board handles such matters with authenticity if they should arise. Stakeholders are often aware of the board’s commitment to diversity and inclusion. Board members always need to be conscious that they are answerable and responsible for the board’s successes and failures.
Boards also need to develop internal controls that hold them accountable for expenditures. Nonprofit organizations need to be clear if they expect all board members to give donations. The nonprofit sector also needs to be truthful about how they use their donations.
A good way for boards to prove transparency is to conduct annual surveys and to consult stakeholders about their views on issues, strategy, and direction — and take their input into account when making decisions.
Which Companies Take the Lead in Transparency?
From making company information public to using social media in creative ways, today’s organizations are thinking outside the box when it comes to sharing information with stakeholders in a transparent way. The following companies demonstrate that there’s no standard approach when it comes to transparency. The only correct approach is the one that works for them. Take a look at what these innovative companies have done.
Valve is a game developer corporation that started in 1996, making such electronic games as Alien Swarm and Left 4 Dead. The company decided that they didn’t want or need a hierarchy, so they don’t have one. That’s right! No bosses. Everyone’s an equal. Valve has more than 300 employees, and their net worth is between $2 billion and $4 billion.
The managers at Unbounce wanted to create a content culture where employees could learn about the company’s journey through its ups and downs, so they created Inside Unbounce. This employee-based social media forum lets employees interact with each other about work and other subjects.
Percolate is a large branding consultancy with big clients like American Express and General Electric. They keep in touch with their employees with weekly meetings where they share challenges and successes. Standard lingo is the preferred method of communication — no techie jargon is allowed in Percolate meetings.
Red Hat is a business strategy company with clients like Sprint, Adobe and Casio. The company offers an internal “memo-list” as a platform where employees can chat about everything from business strategy to jokes. It gives employees an equal opportunity for management to hear their thoughts, ideas and opinions. Management gets to vet the ideas and let the excitement build on the best ones.
Buffer thought it would be a good idea to be transparent with all finances, including company salaries. They believe that openly publishing everyone’s salaries increases trust with employees and customers. It’s a novel idea that seems to be working for them.
Whole Foods is a health food store that came under fire for selling genetically modified foods (GMOs). The company took this criticism seriously, and has a major project underway for labeling all of its products with labels stating whether or not they are GMO-certified.
Consumers not only want to know what they eat, but they also want to know what they are wearing. Patagonia takes a proactive approach about marketing their clothing as being environmentally friendly. They offer stories and videos where customers can trace the footprint of the garments to be assured that there is no harm done in the making of their products.
It’s long been taboo for vendors to access the factories and distribution centers of suppliers. Zappos changed all that by inviting vendors and customers to take tours of their operations. Zappos is so committed to transparency that they wrote it into their company values statement.
The Wrap-up on Board Transparency
Certain components that make for board transparency, like sharing financials and policies, need to remain staples of every corporation. The standout leaders will also be accountable and encourage input from their stakeholders. Beyond these very important basics, the Millennial Generation is a work in progress, experimenting with innovative ways to share information inside and outside their companies. If we’re in luck, these sparks of creativity could be the tip of the iceberg for what the future holds in board transparency.