The 2011 Black List of least transparent companies.
By Dirk Olin
Long before Harry Potter donned his invisibility cloak, the tale of the ring of Gyges could be found in Plato’s Republic. There, Glaucon relates the story of a shepherd who finds a ring of invisibility in a cave, then uses it to seduce the queen, kill the monarch, and take over the kingdom himself.
Though subsequently treated by Socrates to a typical round of philosophical dissection, the legend has come down as a cautionary tale about the importance of visibility to the social construct of morality. You might have had a parent or professor demand that you consider the idea of living your life “as if it were on the front page of the daily paper.”
Quaint as that trope sounds in a world where 24/7 pixelated voyeurism too often passes for news, the notion holds water nevertheless. Most of us subscribe to the idea that the prospect of shame is inseparable from the ideal of virtue, that the moral imperative risks corrosion once the possibility of public sanction is removed. Gollum skulking through The Lord of the Rings comes to mind.
Of course, some actions are properly vetted in private. The president and the speaker of the house recently played a round of golf during which the cameras and microphones were banned after the first hole. Fine. Confidentiality has its place, particularly when rabid polarization has poisoned so much of public discourse.
But for public officials—and publicly traded companies—a presumption of openness and transparency obtains most of the time. Sunshine being the best disinfectant and all of that.
Which brings us to the black hole of corporate America, our annual list of the least transparent companies in the Russell 1000. As the explanation of our methodology after the list makes clear, it would have been a simple matter for any of these mavens of opacity to avoid the list this year.
This is not a survey. It is an involuntary audit of presumptively public information. The standard is not proof of superhuman altruism or the emptying of corporate coffers into the pockets of widows and orphans. The standard is not even minimal environmental or governance performance, much less best practices. The standard is simply disclosure.
Does the company allow directors to serve on more than four boards? Does it reveal the results of energy conservation programs? Does it offer flexible spending accounts via its healthcare plan? Even if the answer is no to these and many other questions, any company can avoid the “Black List” simply by answering one of the questions.
Note the threshold there: one question. As with last year’s list, the members of this year’s cohort have exactly zero points of relevant data that could be found to compare their transparency against the rest of the Russell 1000.
This is not to say we claim an “apples-to-apples” equivalency of each company, either here or on our “100 Best Corporate Citizens List.” A retail clothier and an extractive energy producer have vastly different concerns on these fronts. But that is nothing to hide behind.
Upon being informed of their inclusion on this year’s list, one of the members—whose identity will be kept anonymous out of fairness to others who have likewise unsuccessfully sought exceptionalism—asked for special dispensation. Declaring their operation “an externally managed closed-end fund that has elected to be treated as a business development company,” they asserted a version of defensible unaccountability. (In the ‘80s, the phrase was “plausible deniability.”)
They said they rely exclusively on outside private companies for administrative services and to manage investments; that they lease office space directly for operations in four American cities; that they own no real estate, manufacture nothing, have no employees, pay no compensation other than under an investment management and advisory agreement and an administration agreement—and have no international operations. As a result, they concluded, disclosure of the type we recognize would not be “relevant” to their investors.
Of course, that would be for their investors to decide, wouldn’t it? And stakeholders of other stripes might very well want to know what these folks don’t do. This is one reason why our audit, for example, tracks indirect greenhouse gas emissions—which is starkly on point in this case. But, beyond that, the cost of minimal disclosure is so low as to be nonexistent. If you don’t track carbon offsets, just say so.
The moral is simple: Responsibility abhors a vacuum.