Radical Transparency

Alex Payne recently wrote something of a teaser on the idea of radical transparency:

You will see, in time, organizations that put everything on the table. Organizations for which there is no concept of non-public communication from day one; no internal email, nothing that isn’t a matter of public record, by design. Organizations for which every employee’s salary is public knowledge. Organizations that compete solely on the merits of their work, not on surprise, deceit, and manipulation.

People will think these organizations are crazy. And then, over time, radical transparency will become the norm.

While I share Alex’s desire for a generally more open and transparent society (including increased corporate transparency, as corporations are an essential part of our modern society), I find that I cannot go so far as to endorse his idea for radical transparency. Just as the smooth functioning of civilization is predicated upon each of us being able to keep our less share-worthy thoughts to ourselves, so too is the smooth operation of commerce predicated upon the timely release of financial information.

Let’s not forget, after all, that only public companies are required to publicly disclose what would otherwise be sensitive financial information. Public companies are required to do this because ownership shares in these companies are freely and frequently traded and this information is vital for pricing these shares. Private companies, whose shares are not traded on public exchanges, are required only to make financial information available to shareholders, not the public.

Of course, Alex’s proposal goes quite beyond financial information. He advocates the immediate and complete dissemination of all communication within a company or organization. In Alex’s world, if you have an email (or even an instant messaging) conversation with your boss about how some personal problems may be affecting your performance at work, that would instantly become public knowledge. So would your request for some time off for a medical procedure. Oh, and knowing everyone else’s salary might be handy if you happen to be on the low end of the totem poll and would like a bargaining chip with which to negotiate, but not so nice for those on the other end of the scale. Whoever makes the most money will likely be the target of unremitting hostility from his or her coworkers, regardless of the value that person brings to the company.

Returning to financial information, can you image the volatility of radically transparent stock? If every slow sales day immediately became public information, the stock could lose significant value even if the peak sales season is just around corner. Just as dangerously, the odd day of unusually brisk sales would bring about unsustainably inflated stock prices. It brings to mind the immortal words of Agent K from Men in Black: “A person is smart. People are dumb, panicky, dangerous animals and you know it.”

I have a simpler proposal: Instead of requiring public companies to disclose only financial summaries, let’s require at least some of the raw data used to generate those summaries to be disclosed as well.