Compliance Glossary

Transparency in Business

What is Transparency in Business?

Transparency in business is the basis for trust between a firm and its investors, customers, partners, and employees. Being transparent means being honest and open when communicating with stakeholders about matters related to the business. 

Transparency in business can take many different forms depending on the nature of the communication and which stakeholders are involved, but the core objective is always the same: to establish trust and goodwill by building and preserving the firm’s reputation for openness and honesty in its business dealings.

What are Some Examples of Transparency in Business?

Some examples of transparency in business can include:

  • Transparency with Investors and Shareholders – Investors think about transparency in terms of how readily they can access financial information about a company, including its price levels and audited financial reports. Investors must be able to trust that your organization produces financial reports that are informative, accurate, and independently audited.
  • Transparency with Customers – Customers want to see transparency from the businesses where they choose to spend their money. To achieve transparency with its customers, businesses should respond to customer inquiries and feedback in an honest and timely fashion, and increase the accessibility of information about their products and services. Transparency also means admitting to mistakes instead of trying to cover them up, and working to make things right with customers. When executed well, transparency with customers results in elevated brand loyalty, increased sales, and stronger employee satisfaction.
  • Transparency in the Supply Chain – Transparency between an organization and its vendors and suppliers is essential for ensuring a productive ongoing relationship. An organization may cease doing business with a supplier who fails to honestly communicate about the sources of its materials or labor. Supply chains are increasingly being scrutinized by governments, consumers, and NGOs who are concerned about ethical sourcing of labor and materials.
  • Transparency with Employees – Transparency with employees is centered around honest, two-way communications between employees of the business and their managers. This can include transparent discussions about business goals and objectives, challenges, employee performance, and other work-related issues.

What are the Benefits of Transparency in Business?

The primary benefit of transparency in business is that it produces trust and goodwill while safeguarding the firm’s reputation among investors, partners, employees, customers, and other stakeholders. Other benefits of transparency in business include:

  • Increasing employee morale
  • Boosting employee engagement and retention
  • Demonstrating stability and encouraging investment
  • Leveraging honest feedback to improve processes and drive results
  • Demonstrating integrity and ethical behavior

What Transparency Measures are Required for US Companies?

The Securities and Exchange Commission (SEC) is the primary regulator of corporate financial reporting in the United States. To ensure transparency of financial results for publicly traded companies, the SEC requires such companies to file quarterly (Form 10-Q) and annual (Form 10-K) reports detailing their financial results. 

These filings usually include the corporation’s balance sheet as of last fiscal year-end, statements of comprehensive income for the most recent quarter and a previous comparable quarter, and documentation of changes in stockholders equity and noncontrolling interests. 

Financial reports must be certified for accuracy and validity by a senior executive in compliance with the Sarbanes-Oxley Act.

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