Corporate Secrets

Behind the dismal state of global economics these days, there’s a largely unrecognized culprit at work: the almost universal belief that corporations are entitled to keep secrets.

Some secrets are small, almost petty. When General Motors was chastised for flying into Washington DC on luxurious corporate jets, in order to beg Congress for bailout funds, their reaction was classic. They tried to keep their flights secret. GM asked federal aviation authorities to remove the company jets from the public database that shows flightplans for most aircraft.

Some secrets are unbelievably stupid. The same week that AIG received its bailout billions, they made a bad decision to send their corporate executives to a meeting at an exclusive resort. When news of the meeting broke, and general outrage grew, AIG’s response was a classic: they tried to hold their next meeting in secret!!!

But these are small potatoes. The big secrets that companies keep are the ones that wind up costing billions and ruining lives. No one ever really knew what Enron was doing in its energy trading business, or how Bernie Madoff was so unbelievably successful with his investment funds (a 2001 profile of Madoff in Barron’s magazine was titled Don’t Ask, Don’t Tell, and made a huge point of how secretive Madoff was, and how skeptical his fellow fund managers were of Madoff’s results).

Even companies on the straight and narrow do enormous damage with the secrets they keep. Enron and Madoff were crooks, with obvious reasons to hide their activities. But AIG kept its collateralized debt obligation (CDO) business largely under wraps, until that little-known, little-understood segment of its business dragged down the entire company, and unbelievably, the collapse of this single company appeared to seriously threaten the global economy. When a corporation is that big — too big to fail, as the saying goes — it is also too big to be keeping secrets.

I’ve started a blog, No More Corporate Secrets, to give some visibility to this issue, which I think is largely unappreciated in the corporate and financial world, as well as among the government and NGO entities that are supposed to be the overseers of the world of business.

Please put it on your Favorites list, if this is of interest.

2 Responses to “Corporate Secrets”

  1. eiffel says:


    I can see why an individual should be permitted (encouraged and assisted, even) to keep corners of their life private – but I can’t see why a legal entity should be entitled to keep secrets.

    Openness is in society’s interests. It enables us to make level-headed decisions about the role of corporations in society.

    Openness is in the shareholders’ interests. It enables them to check that the corporation’s profits aren’t being frittered away through fraud or waste.

    Openness is in the government’s interests. It makes it easier to spread the tax burden fairly, and to reduce fraud.

    Openness is in the interests of the economy. Increased transparency makes it possible for society to regulate corporations using a “lighter touch”, which leads to increased economic efficiency.

    Openness is in the interests of the environment. It makes it harder to disguise or “hush up” environmental damage.

    Now, if only we could extend the same principle of “no secrets” to government at all levels…

  2. David says:

    Eiffel….we must have been separated at birth!!!!

    Wonderful comment. Thanks so much.