How Much Transparency is Enough?

Sunday, April 21, 2013 Print Email
Accounting standards are supposed to standardize the reporting of figures in corporations and organizations across the board. The idea is that the standards allow one to accurately assess a company’s financial health at a simple glance without having to adjust the assessment depending on the methods the company uses in their accounting. This is difficult enough in creating a list of standards across one country, but in doing so in Europe there is the added difficulty of different currencies, laws and cultures.

The ACCA (Association of Chartered Certified Accountants) has added yet another aspect of difficulty to these existing standards in the demand that companies also include non-financial and diversity information for the companies. Keep in mind that non-compliance with the accounting standards in their reports can involve a serious fine or a penalty of some sort. Now add to that the new non-financial information they are requesting that calls for sustainability information, ethnic diversity of their workforce, environmental, social and employee related matters. According to the ACCA, the goal of this fourth directive is to build trust with stakeholders, future investors and aid in transitioning to operating in a green economy.

The question is how much of this company transparency is needed in these reports? Does it benefit anyone, other than the manufacturers of ‘green’ light bulbs, to know that Company X has replaced all incandescent bulbs in each of their buildings? In a European Union where the value of the Euro is in severe danger of absolute collapse and where due to increasing debt obligations that can never be repaid by several countries how urgent is information on the number of this ethnic group versus another ethnic group in a company? Is this a move that really needs to be made?

Another key question that must be addressed in considering making this new sustainability directive an essential part of a company’s reporting standards involves the consequences of non-compliance. Will a company that hasn’t changed to “green” energy face fines? Will there be an acceptable ratio for hiring minorities and what will the penalty be for a company who has more employees of one race than the other? What is the purpose for these additional reporting requirements? If the purpose is to create a pressure on companies to follow a certain social or political agenda where do these requirements end? How much transparency is enough in what is supposed to be solely financially based reports?

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