|
Previous
Part - III
Challenges of Transparency - the potential costs as well as business benefits?
Transparency is critical for good governance. Without transparency, new laws and governance codes can do little to boost investor confidence. Various steps like use of standardized accounting practices, free flow of information and clear policies are needed. Transparency has its costs and benefits. The benefits include increased shareholder confidence, reduced cost of capital. The main benefit is however seen in times when company is not doing well. Companies with strong corporate governance records have found it easier to sail through bad times and secure support of all stakeholders even in the companies' bad times. In addition to administrative costs of transparency, the major cost is proprietary cost. i.e. cost of competitive disadvantage. Being transparent runs the risk of competitor knowing about your policies, styles of functioning and get useful competitive information. However in the long run, the benefits of transparency far outweigh its costs.
Concluded.
* Contributed by: -
Harshdeep Jolly,
PGP - 2,
IIM Bangalore.
|
 |
|
|
