Transparency with Clients and Shareholders Is a Crucial Business Value. but It Should Come through Self-Regulation, Not the Heavy Hand of Government-Imposed Regimes, Which Force Unnecessary Communication

By Ocana, Fernando | European Business Forum, Winter 2005 | Go to article overview

Transparency with Clients and Shareholders Is a Crucial Business Value. but It Should Come through Self-Regulation, Not the Heavy Hand of Government-Imposed Regimes, Which Force Unnecessary Communication


Ocana, Fernando, European Business Forum


Financial transparency in any company, large or small, is essential to promote good internal financial controls and to protect the interests of clients and shareholders. It is also vital to any organisation that wants to do business in the US or even many parts of Europe. While this concept of good governance is easily taken on board in good faith, until you work for a business linked or owned by a US company, you will, many a late night, curse the day that you signed up for the exhaustive task. While the clock strikes midnight and my team and I are still burning the late night oil, I often think to myself: isn't there an easier way?

Since the Sarbanes-Oxley Act of 2002 made its ascent into the international business community, it has become a regulatory headstone for many small and medium-sized businesses trying to break into the US market. All publicly-traded companies in the US, including all wholly-owned subsidiaries, and all publicly-traded non-US companies doing business in the US are affected. Also, any private companies that are preparing for their initial public offering may need to comply with certain provisions of Sarbanes-Oxley.

Every sector has been introduced to new ways to make their industry's trade practices more consistent and transparent in order to provide clients with comparability. For example, European advertising board associations have created standard advert sizes for online campaigns, which have helped buyers of advertising make media planning simpler and cost-effective. While having advertising costs available online provides another level of transparency, it is also divulging what some industries may consider trade secrets. There's a thin line between offering full disclosure and giving away your proprietary trade information to the competition.

Some industries, such as food processors or large manufacturing conglomerates, have used disclosure to their benefit For example, proving your manufacturing is environmentally friendly or your products are free from animal testing can add intrinsic value to your product and ultimately your share price. But those in the service industry are not always in the same boat.

Somehow, one rule for all doesn't work in the business world. We, for example - being owned by a US parent, FCB - are required to disclose every cost incurred to our business (time sheets, invoices, financial statements), which means our internal costs have increased by 30 per cent. The legislation is a bureaucratic nightmare, which stops management from getting on with the important task at hand: working with clients and on campaigns. And the let-down is that all the "transparency" has not provided a better service to our clients' campaigns or shareholders.

The Act has created obsessive costs and controls. The large corporate financial scandals involving Enron, WorldCom, Global Crossing and Arthur Andersen caused such colossal damage to individual and institutional shareholders, it's no wonder the US Federal government acted fast in an effort to stop such atrocities ever happening again. But the idea of a "big brother" regulator is scary, so much in fact that some clients abandon the US market completely or even pull the plug on their IPOs.

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Transparency with Clients and Shareholders Is a Crucial Business Value. but It Should Come through Self-Regulation, Not the Heavy Hand of Government-Imposed Regimes, Which Force Unnecessary Communication
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