Trust, Efficiency and Corporate Transparency
As corporations occupy increasingly powerful positions in all aspects of economic, political and social life, calls for greater corporate transparency have increased as well. These calls for greater transparency have become more pronounced with each corporate collapse or scandal that takes place on the international stage. Many scholars, business managers and regulators recognize, however, that excessive amounts of disclosure can actually impede rather than promote corporate accountability. With that background in mind, the paper addresses, from different critical perspectives, what level of corporate transparency might help limit abuses of corporate power and promote greater corporate sensitivity to the communities they inhabit. The discussion of corporate transparency covers both descriptive and normative elements of corporate organization and practice. From a normative standpoint, the paper assesses the nature of corporate transparency and its connection to accountability, disclosure and constituent participation in corporate governance. From a descriptive standpoint, the paper examines the relationship between corporations and other institutions that surround and affect corporate practices. To accomplish the goal of the investigation, the paper employs an interdisciplinary approach that combines economic theory with a philosophical analysis of trust, the basic principle underpinning the duties that corporate board members and managers owe to corporations and their shareholders. Trust, as a philosophical construct, however, remains incredibly broad and difficult to use effectively as an organizing principle. To rehabilitate trust as a useful organizing concept that could guide corporate decision making, the paper posits that a philosophical account of trust which also promotes economic efficiency could provide essential guidance. In particular, the paper argues that by implementing an “encapsulated account” of trust, corporations could limit agency costs and diminish the gap between manager and shareholder incentives, at least with respect to matters involving information disclosure and corporate transparency.
Keywords: Corporate Transparency, Accountability, Disclosure, Trust, Efficiency
Dr. Michael Siebecker
Assistant Professor of Law, College of Law, University of Florida