During the summer of 2003, a small NPO was the source of several press releases announcing the financial success of the organization. The NPO promoted to the public a status of financial solvency after three years of economic problems. A new CEO had been hired, and within a year, the institution was now operating in the black. What followed was a scandal that resulted in the firing of the CEO and full disclosure revealing a debt of nearly one million dollars.
Technically, the NPO did not lie in its press releases. The debt was real, but was hidden with creative bookkeeping. The organization was able to post positive numbers by estimating its value based on the total worth of all assets if they were liquidated. While it was true the NPO had no money, it would be debt free if it sold off all of its assets. Of course, selling the assets would have put the organization out of business, which is something it did not want to do. The NPO did not reveal to the public the creative accounting of the CEO, nor did it reveal the past management history of the CEO. Legally, the rights were on the side of the NPO. But was this full disclosure?
Although this is only one example, the same rights apply to corporations engaging in international trade. International Trade Law states, “There must be full disclosure of the conditions of the business, or of those affecting competition, including, in particular, the capacity of the preferred producers to fix the prices for the market.” (Interstate Commerce Commission v. United States Campbell) However, the concept of full disclosure is open to interpretation. In reality, corporations are only responsible for full discloser within the requirements of the law. If a CEO is being investigated by the SEC for previous infractions, and if those infractions do not directly affect the corporation he or she worked for, the corporation is not obligated to reveal this information. In Central Bank of Denver, N. A., Petitioner v. First Interstate Bank of Denver, N. A. and Jack K. Naber, the court states, “ respondents could not maintain a private action against petitioner for aiding and abetting another's use of a manipulative device or material misstatement where petitioner had not been the primary violator of the statutory prohibition and had not committed any manipulative or deceptive acts.”
The law is clear. Only obligated full disclosure is required. This may be the legal requirement, but is it smart from a public relations viewpoint? “A lot rides on how transparent a company is these days, from the confidence of investors who are betting on the company's future to the willingness of local communities to support the construction of new manufacturing facilities. Ultimately, it all comes down to the company's reputation. And reputation management falls squarely within the communicator's purview.” (Holtz, pg 18) When the news broke in Central Ohio concerning the perceived cover-up of the NPO, many other NPOs were damaged by the fallout. The general public viewed large NPOs as being “less than honest” and a noticeable decline was posted in public support. Now, eight years later, it is widely believed that the NPO community is still suffering financially from the actions of this organization. Is there no one legally accountable for these actions? The answer is no.
While corporations may be protected by laws concerning full disclosure, “In a lot of companies,
information isn't shared simply because there is no requirement to share it,” (Holtz, pg 20)
there are changing attitudes concerning the issue. Much of these attitudes are being driven by the consumer. The public relations professional has the enormous task of understanding the law and providing a communication bridge between corporations, stakeholders, and publics. “As organizations recognize that being transparent is in their own best interest, communicators
should be at the forefront of the effort to become more transparent.” (Holtz, pg 20)
Whether a small NPO or a large international corporation, the law is clear concerning the responsibilities of full disclosure and “manipulative or deceptive acts.” Arguably, the law is wrong. When the protected speech of a corporation results in public distrust, economic downturns, and damage to innocent business, the intent behind full disclosure must be reexamined. Legal and right don’t necessarily go hand in hand.
References
289 US 385 Interstate Commerce Commission v. United States Campbell | OpenJurist. (n.d.). OpenJurist, the home of Legal Information, Lawyers and the Law | OpenJurist. Retrieved November 13, 2011, from http://openjurist.org/289/us/385/interstate-commerce-commission-v-united-states-campbell
Amar, V. D. (n.d.). CENTRAL BANK OF DENVER, N. A. v. FIRST INTERSTATE BANK OF DENVER, N. A., ET AL. :: Volume 511 :: 1994 :: Full Text :: US Supreme Court Cases from Justia & Oyez. US Supreme Court Cases from Justia & Oyez. Retrieved November 13, 2011, from http://supreme.justia.com/us/511/164/case.html
Holtz, S. (2008). A clear case for transparency. Communication World, 25(6), 16-20. Retrieved November 12, 2011, from the Communication & Mass Media Complete database.
