Radical Transparency

Daniel Roth has a great article in Wired on the need for what he calls “radical transparency.”

He makes the case that so many of the “unexpected” events of our current downturn could not have been known by the investing public (and possibly the regulators) because the data was hidden in private sources.

Applying a kind of Web 2.0 thinking, he makes the case that corporations should disclose much, much more about their operations. Then the masses of investors and stakeholders can make sense of it all. He does not spend a lot of time rebutting the arguments on confidentiality which will be on the lips of every corporate officer that reads this. But everyone must suspend this initial reaction and listen to the whole argument.

Roth makes the case that the financial reporting we have today was a radical innovation that came out of the 1930′s depression. Until then, public companies did not even report their financial results. The changes we need to make today will feel as radical as the changes in the 1930′s but will someday, in retrospect, will appear obvious.

He also makes a strong case for XBRL, including a story about the efficiencies it brings:

A few years ago, when banking regulators started requiring filings in XBRL from its member banks, it found that the time it took auditors to review a bank’s quarterly financial information dropped from about 70 days to two.

Unfortunately, he does not make the pitch for the need to add intangibles to the information stream. I’ve written about this here and here. And, don’t worry, I already commented on his article here. Chime into the conversation–what do you think?