Associate Professor Leslie Cannold is Cranlana’s resident ethicist and Associate Professor of Ethical Impact. During programs she has facilitated, transparency is commonly named as a desirable demonstrable trait of leaders and organisations.
In this article, Leslie seeks to explore how, in an era where we have elevated transparency to a revered status, we can recalibrate our understanding.
You are encouraged to consider the possibility that transparency is not a destination, but instead a stepping stone – a necessary but insufficient pathway towards genuine accountability, trust, and ethical conduct.
Transparency has been the favoured ethical solution of the 21st century. In my engagement with senior leaders from around Australia, transparency is consistently named as a key personal but also institutional virtue, featuring in many of their organisation’s values and codes of conduct.
From disclosure statements for banking, financial and technological services to open-government initiatives projects and real-time political donation registers, Australian leaders and both private and public sector organisations have shared the faith of liberal democracies worldwide that transparency achieves two important goals:
- Inhibiting corruption by exposing it to the “disinfectant” of “sunlight.”
- Fostering public trust by demonstrating an individual or institution has nothing to hide.
But does transparency actually achieve these aims? Or does evidence suggest that while transparency is a necessary tool in the social license and public trust arsenal, it is insufficient on its own to halt corruption or repair declining levels of social licence and trust? What other virtues, practices, or systemic approaches might complement transparency to create a more holistic framework of institutional integrity? How can leaders and organisations move from revealing information to cultivating a culture of genuine ethical commitment, where transparency is just one example of a deeper, more substantive moral infrastructure?
Transparency and moral corruption
In 2017 the federal government established a Royal Commission into the banking and financial services sector. The inquiry was long overdue, preceded by a cascade of post-GFC corporate scandals in which golden parachutes were plentiful and meaningful accountability was scant.
As the Commissioner made clear in the final report issued in 2019, detecting corruption was not enough to deter it. Instead, he argued,“misconduct will be deterred only if entities believe that misconduct will be detected, denounced and justly punished.’
Cornell University’s Sunita Sah agrees that disclosure is not enough. In a report conducted for the Royal Commission, Sah shows how transparency measures fail to reduce the incidence of the sort of conflicts of interest rife in the Australian banking and financial services sector.
In one study, 93% of advisors without a conflict of interest gave clients financial advice that served the client’s interests, while those who were conflicted did the same in a mere 18% of cases.
Other research has shown that disclosure, the prescribed solution for mitigating the harms of conflicts of interests, has little effect. In one study, advisors who disclosed their conflicts to a client felt that disclosure morally licensed them to give that client biased advice. Indeed, some advisors gave even more biased advice after disclosing a conflict to counteract what they anticipated would be the discounting of that advice by the client.
They needn’t have worried. Research reveals that when advisors disclose their conflicts to clients, it increases the trust the client has in the advisor’s advice.
Why? Because they interpret the disclosure as an indication of the advisor’s ethicality.
Why disclosure alone doesn’t work
As this latter example makes clear, transparency in the form of disclosures relevant to decisions are seen as an essential step in securing a valid consent whether that consent is to the provision of financial advice, to a medical procedure or the terms of service for a phone application.
Transparency and trust
The implicit promise of transparency is to inform clients or citizens in ways that increase their engagement and trust. Certainly, this seems to be the purpose of Australia’s parliamentary interest register where the Australian Prime Minister dutifully registered the business or first-class upgrades provided to him by Qantas.
Indeed, that he had complied with such disclosure requirements was his primary defence when, despite the disclosures, the Opposition leader continued to ask questions about the practice that commentators agreed did not pass the “pub test.”
It failed the pub test because while our representatives would like to believe that open disclosure of corruption is sufficient to satisfy the conditions for public trust, the public disagrees. Instead, some seem to feel that insofar as the requirement for such disclosures does not deter the corruption from happening in the first place or lead to the denouncement and punishment recommended by Commissioner Haynes, the problem is not solved.
The key take-away for leaders is that sunlight is only the best disinfectant when it deters corruption from happening in the first place, or leads to denunciation and punishment.
For the individual required to disclose,
becoming aware of the limits such disclosures have on self-serving behaviour is critical. In other words, if you want to avoid undermining public trust – a worthy goal – the solution is to avoid self-serving behaviour, not disclose it when it occurs.
For institutional leaders,
the time to consider the limits of disclosure schemes in preventing corruption and undermining the public trust required for social licensing is now. The evidence of its weak impact and unintended consequences is in.
To be clear, this does not mean that disclosure plays no role in an effective anti-corruption and pro-trust approach, but that it is not a stand-alone. Instead, transparency measures need to be coupled with other practices that deter corruption in the first place and/or build public trust.
Perhaps the most powerful is that advised by Sah herself. As she says:
“professionals may comply with standards when reminded of relevant ethical norms simply because putting the [client/citizen] first is the right thing to do.”
Leslie’s insights go beyond research and her own ethical expertise.
They are informed by the rich dialogue that takes place in Cranlana’s programs, where ideas are tested amongst curious peers and assumptions are pushed further into the grey.
If you’d like to experience what makes Cranlana a uniquely enriching part of your leadership story, explore the programs we have on offer:
