Milkfish bones and transparency

Every now and then, my wife would be traveling outside the country and I would be the single parent at home. Every time this occurs, there is a heightened sense of responsibility and accountability. I would be the only one to answer their questions, discipline them, and debone their bangus. Bangus, or milkfish, as we all know, has gazillions of tiny bones that are almost too transparent for our eyes to see. Whenever I eat bangus, I always have this mental image of getting the bones stuck in my throat – a thought that makes me quiver. If I am fearful for myself, I could only imagine having one of these tiny bones hurting my daughters. So there I was, carefully deboning the fish for my three kids. During the process, I realized that this is a good way to bond with my kids as it allowed us to be more engaged with each other and spend longer time together on the dining table. A question from my fifth grader was raised during our dinner: Did I participate in cheating activities during exams when I was a grade schooler? I must admit, it was quite a long pause on my end before I was even able to utter a response.

The Securities and Exchange Commission (SEC) recently issued additional disclosure requirements, especially for publicly listed entities. Reporting on material-related party transactions and sustainability have been added to the list of reporting requirements. These reporting requirements highlight the different stakeholders’ needs for more transparency from listed entities, which might be extended to non-listed entities as shared by SEC Commission Kelvin Lee during his presentation in the recently held Sustainability Forum of P&A Grant Thornton and Financial Executives of the Philippines last October 10.

Last week, I was invited by the University of the Philippines Junior Philippine Institute of Accountants to be their guest speaker for an Alternative Classroom Learning Experience session about transparency. As a trying-hard millennial, I googled my way around trying to get inspiration on what angle of transparency do I want to share with the Gen Zs. My deep dive led me to several podcasts, Ted talks, YouTube videos, and research papers about transparency. I shared three stories of organizations that are trying to push the boundaries of transparency and what lessons we can get out of them.

There is already a good number of organizations in the United States that practices transparency in pay, wherein employees know how much their colleagues in the organization are being paid. Organizations such as Buffer, a software application developer for social media management, have made their salary formula public – including the salaries of all its employees. David Burkus, author and keynote speaker, argues that pay transparency solves one of the causes of market failures: information asymmetry. Information asymmetry, defined as the imbalance between two negotiating parties in their knowledge of relevant details, is often present during salary negotiations since the employer has more information compared to the employee. Apart from eliminating information asymmetry, pay transparency allows the organization to ensure that any pay inequalities would be easily identified and corrected. By being transparent with its pay structure, Buffer’s employees are aware on how they can increase their compensations since the salary formula is available for everyone to see.

Another organization that is pushing the boundaries on transparency is Bridgewater. Bridgewater, the world’s largest hedge fund, was founded by Ray Dalio. Dalio and Bridgewater espouse a radical kind of transparency. All employees in Bridgewater are mandated to be extremely open, test each other’s logic and air disagreements. This kind of culture, which is being helped by technology and algorithm, requires any employee, even a newly hired fresh graduate, to rate the ideas or opinions of anybody, including Dalio himself. Being radically transparent allows Bridgewater to pursue the best ideas. For them, decisions should not be based on democracy (majority wins) or autocracy (leadership wins); but rather, decisions should be based on meritocracy (best idea wins). This brings about another benefit of transparency: ensuring that ideas held by individuals who arrogantly think that their ideas are the best, are brought out into the open to be tested by their peers. For Bridgewater, proper collective decisions are always better than individual decisions.

Last is the story of Leilani Schweitzer and her 20-month old son Gabriel’s experience with Lucile Packard Children’s Hospital at Stanford. Gabriel died at the Stanford Hospital in 2005 because of an error made in the hospital. A nurse who just wanted to let Leilani sleep turned off the alarm in the hospital room. Unknowingly, all other alarms outside the room were also turned off. The result: nobody was notified when baby Gabriel’s heart stopped beating. According to Leilani, the management and doctors at the hospital were unexpectedly transparent with her by answering her questions and keeping her updated as they were investigating the incident. The investigation led to the discovery of a lack of a fail-safe mechanism in the equipment attached to baby Gabriel, which might have prevented the nurse from accidentally turning off all the alarms. By being transparent to Leilani and not stonewalling her, two things were allowed to happen: Leilani’s grief eased as she knew of what truly transpired, and it allowed the hospital, the equipment manufacturer and all other hospitals using the same equipment to identify the problem and make necessary corrections. More interestingly, Leilani is now working at the same hospital as its assistant vice president for communications and resolution. The story is a true testament to what transparency can do to a hospital-customer relationship, even in the midst of a fatal mistake.

These stories are proof of the benefits of transparency, apart from the more obvious benefit of making organizations and people accountable for their actions and decisions. Additionally, transparency allows for the elimination of information asymmetry, better decisions, and quicker healing and correction of errors.