Monday, March 20, 2006

The Naked Corporation

On the Flight to Fremont, I read “The Naked Corporation – How the age of transparency will revolutionize business”. You likely think I must have issues since I always read about “naked” (Like “Naked Conversations”) but don’t worry – its not like that. In this age of Search Engine Optimization, I wonder if the authors thought they might get more hits but that is another topic.

The Naked Corporation talks about the transparency needed in todays post Enron, post Worldcom environment. The basic thesis of the book is that this transparency is good. I agree. It talks about the benefits to the company for being transparent and how it saves money and builds support for the company.

If I have a counter view, it is not to transparency it is to Sarbanes Oxley (SOX) which attempts to legislate ethics and in doing so imparts a huge cost and overhead which ironically might hurt the very shareholders they seek to protect. In some cases, SOX is like buying a safe for $1000 to protect $500 worth of valuables.

The book actually did make the point that often companies are not transparent because the law requires them to complicate things. Just look at the filings and annual reports of many companies. Warren Buffet says “you should be able to understand the financial statements of a company in a few minutes”.

One part of the book I found interesting was the story of poor ethics and no transparency at Chiquita Bananas. Fortunately, they have moved to high transparency and appear to have mended their ways. (Fortunate because I like bananas).

One quote which I love (and will use) is by Warren Buffet “If you lose dollars for the firm by bad decisions, I will be very understanding. If you lose reputation for the firm, I will be ruthless.” I have believed for a long time the reputation is far more important than money. I like many of Warren Buffets’ philosophies and in a article some years ago, EMJ was cited as being a perfect Warren Buffet company. I am not sure when it comes to ethics though that selling sugar water (Coke – on of Warren Buffets’ companies) would count as good ethics. So as with everything, I need to filter what I like about someone from what I do not. Learn from the good.


At 2:36 AM, Anonymous Anonymous said...

Corporate transparency has been an issue for a long time here in US. Honestly, nobody can understand Financial Statements of any corporations by just looking at it anymore. It's a complex cat and mouse game played by many corporate executives for a long time. I don't think there will ever be any complete transparency but board members need to do more then again most board members are just happy to be there so whose watching over those executives.

The Blog Tribune

At 9:21 AM, Anonymous Anonymous said...

From EMJ's Product News and Updates blog:

Sarbanes Oxley Simplified: Competence Software has an interesting program you can download and learn about Sarbanes Oxley.


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