The CEO Said What? Being Transparent With Employees, Investors And Other Entrepreneurs

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Written by Dana Sanchez

Binny Bansal, co-founder of Indian e-commerce giant Flipkart, is the latest high-profile CEO to go down in a blaze of personal misconduct allegations.

Walmart acquired a 77-percent stake in Flipkart in May. The $16 billion deal was the largest ever for the U.S.-based supermarket retail chain and will help it compete with Amazon in India.

Bansal will have to watch from a distance. Although an investigation failed to find any conclusive evidence of personal misconduct by him, it revealed “serious lapses in judgment, particularly a lack of transparency,” Financial Express reported.

Papa John’s Pizza CEO and founder John Schnatter made a racial slur and he’s out as CEO.

Elon Musk casually tweeted that he had a deal in place to take the company private. He was fined $40 million by the SEC and now he’s out as CEO of Tesla.

Major shareholders are calling for Mark Zuckerberg to step down from Facebook in light of the way he handled data privacy issues and 30 million hacked accounts.

Founders sometimes mislead stakeholders on the health of their business. Communication builds trust with employees and investors.

“All over the world, research illustrates that poor judgment and unethical behavior on the part of company founders directly impacts positive perception of a company,” said Peter Daisyme in a Forbes guest column.

Daisyme is co-founder at Hostt, a company that sets up online accounting and security systems. “In advising companies, including founders, I have seen just how closely behavior and company perception are related, especially in a day and age when stakeholders expect transparency and sound judgement from leadership and brands.”

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Daisyme suggests some things founders can do to stay safe in their companies:

  • Consider today’s social environment. Social media has changed everything, spreading awareness about how what we do and say impacts others. There’s a focus on exposing bullying, harassment and cruelty online and off. “Even if certain words and opinions were tolerated when you were younger, be aware of what has changed and why certain opinions and phrases should be struck from conversation,” Daisyme writes. “Even if you don’t mean anything cruel by it, certain words and actions are no longer acceptable. The last thing you want to do is have those reflect on your brand value.”
  • Pay attention to what others want rather than promoting your own agenda. Truett Cathy founded Chick-fil-A believing that employees, vendors and customers are more important than himself. He believed they deserve honesty, care, concern, and kindness as part of his servant leadership approach. Founders can create this culture.
  • Consider your walk, monitor your talk. In addition to your words, actions require thoughtful consideration, Daisyme said. “I tell founders to focus on actions that come with a social benefit … When you concentrate your efforts on making the world a better place, you’ll be less likely to say or do something that negatively impacts your brand.”
  • Practice social media self-control: Before hitting “share,” ask yourself if you’re doing it with a clear head. Check your emotions to ensure they’re not taking over.

Rand Fishkin is the co-founder and former CEO of Seattle-based marketing tech startup Moz. He’s known for sharing information publicly that many others hide, such as fundraising failures, internal startup struggles, and company financials.

Transparency became one of Fishkin’s defining traits as an entrepreneur, Geekwire reported. It happened after he hid his company’s financial struggles from his dad, leading to a rift in the family.

His book, “Lost and Founder,” was released in April, offering “A Painfully Honest Field Guide to the Startup World.” The book is full of insights on startup leadership, hiring, exits, management and fundraising. But transparency is what makes it authentic, Geekwire reported.

transparent
Photo: Unsplash

“I don’t think transparency is a tactic,” Fishkin said in a Geekwire podcast. “I think it’s a value, and a value means that you are willing to sacrifice positive business outcomes in exchange for adhering to the value. So if you say we value kindness here, or we value productivity here, it means you’re willing to trade off things that could be more optimal for the business in exchange for living up to that value.”

Most startup founders are slow to embrace the idea that company information should be accessible by everyone, according to Stuart Levinson, CEO and co-founder of leadership communication platform Carrot.

Some founders want to protect employees from stressful aspects of startups, like how little cash flow there is. “This may seem noble, but it isn’t,” Levinson wrote in a Medium report. “It’s self-serving and unfair. Not sharing difficult information isn’t about protecting employees, it’s about protecting themselves, fearful their employees might leave.”

Other founders want to control who knows what. Restricting key information becomes part of the culture. Founders begin to spin information for all-hands employee meetings and investor updates to tell a better story.

Other excuses for lack of transparency from Levinson:

  • Transparency is too time-consuming.
  • Employees don’t have the context to understand the transparency.
  • “They never asked.”

Either way, transparency is an opportunity to build trust, Levinson said.

“The startup ecosystem and business culture usually urge us to keep silent,” Fishkin wrote in his book. “I’m done with the pain of secrecy, happy to trade it for the challenges transparency brings.”

Transparency will benefit employees, investors and advisors, but the founders themselves will benefit most, Levinson wrote:

The leader’s job is less isolated and stressful when everyone is fighting together with equal information. The demands for transparency from all stakeholders grow louder by the day. To compete, founders must be open. Fortunately, they will find leading with transparency is the the simplest and most valuable thing they can do for their startups and for themselves. Carefully controlling information is a seductive path, but leaders embracing transparency are creating engaged organizations with outsized impact.” — Stuart Levinson, CEO and co-founder of leadership communication platform Carrot.