ABSTRACT

As future corporate leaders of the society, it is important for us, commerce students, to know how an organization functions. All kinds of organizations, whether for profit or not-for-profit must have some sort of system which keeps it running.

Let’s take for example, our school. The University of San Carlos is known to have a lot of students and is well known for its technologically advanced facilities that cater to the needs of the student body. In our recent brainstorming and prior discussions in school, we’ve come up with the terms, corporate transparency and efficient allocation of resources. We thought this would be a great and somewhat interesting issue particularly on the part of the students since we would benefit the most from what the university has to offer.

First, let’s define corporate transparency. Corporate transparency is the availability of all relevant information to stakeholders and end-users. So, this leads us to the most important question yet to be answered. Is corporate transparency present in the University of San Carlos? How does it affect the system of resource allocation?

The study is conducted in the University of San Carlos. Interviews with different levels of employees were made to get a broader view of the university’s transparency and its effects on resource allocation. It would also be of much help to us to be well- informed of what is going on inside the school because we are directly affected by it.
Top management is responsible for the final say in all decisions affecting the school and this is often accompanied by miscommunication and misinterpretation of information when it goes down to the middle and lower management levels.

The results show that majority of the interviewees believe that USC, as a whole, is only partially transparent. According to them, incidents of improper allocation of resources were discovered which caused delays and losses to the school’s project budgets and resources. In short, the university is somewhat lacking in efficiency regarding the availability and dissemination of information which must be addressed immediately for the school not to suffer anymore losses.

THEORETICAL FRAMEWORK

THE RESEARCH PROBLEM

1. Is corporate transparency present in the University of San Carlos?

2. How did such presence or absence affect the University’s resource allocation? • These first two questions we want to address to the University are related to each other in that we want to prove that a company’s transparency reflects on their efficiency and effectiveness in allocating resources. • By being able to obtain the answers regarding transparency and resource allocation, we will be able to uncover the vital effect of transparency in the company.

3. What criteria are being followed in accepting or rejecting a certain project, when transparency is being practiced?

4. How does management determine or decide on which projects are best fit to be undertaken using the resources of the University?

5. What are the issues the management considers when allocating resources when it follows the doctrine of corporate transparency? • The next three questions would be able to give us the significance of the criteria being followed by the University. It would also provide for the processes being taken in order for projects to be approved and if the criteria being set are followed. • By knowing the answers to these questions, we will be able to see clearly the relationship of transparency, criteria and resource allocation.

BACKGROUND OF THE PROBLEM

Based on a research assignment, we came across the problem of the relationship between corporate transparency and efficient allocation in one of the articles from the Journal of Accounting Research. It examined whether a country’s corporate transparency environment, which includes the quality of accounting information, contribute to its resource allocation’s efficiency.

Prior research points to the role of financial institutions in economizing on information costs by noting the positive relation between financial development and economic growth. While important, these studies do not directly address the role of a country’s information environment on the efficient allocation of resources, and financial development per se does not necessarily eliminate information frictions in a country (Rajan and Zingales 1998).

The methodology used to examine the relationship between transparency and asset allocation was the Fisman and Love’s (2004) methodology. Under this approach, the dependent variable is the degree of comovement (correlation) in industry-specific growth rates for a common set of industries in two countries. They tested the role of corporate transparency in efficient resource allocation by examining whether comovements in growth rates are associated with transparency levels. Upon conducting this research in a cross-country study of various manufacturing industries in different countries, it was established that there is correlation between the two.

It is important to ascertain if the existence of corporate transparency does ameliorate costs and improve resource allocation in an institution like the University of San Carlos. “High information costs may keep capital from flowing to its highest value use” and hence impede growth. Likewise as students of the university, it is important for us to know this as we are directly affected by the activities and projects of the school. It would be of our benefit to be aware of the process of resource allocation of the university since the capital being used to fund projects is from our tuition fees. These may affect the students in a way that the improvements may either have a positive effect or may cause disturbance to the learning experience of the students.

By definition, efficient resource allocation means, distributing capital among an entity’s various operations productively. An efficient resource allocation exists if society has achieved the highest possible level of satisfaction of wants and needs from the available resources and they cannot be allocated differently to achieve any greater satisfaction.[?] http://glossary.econguru.com/economic-term/resource+allocation

The University of San Carlos is not a homogenous organization. The university obtains and expends revenues or resources in different ways; therefore there is no best way to allocate resources given the impact of the existence or non-existence of transparency.

Corporate Transparency is making all relevant information readily available to stakeholders and end-users. By this, the group means that dissemination of information is made timely and effectively to those people affected and concerned.

RESEARCH DESIGN

The researchers will conduct this study in the University of San Carlos, the Main Campus and the Technological Center, since we are directly affected by the decisions they will be making for it is our money that they are using. In this study, we will test the transparency of the University and if this will lead to the efficient resource allocation. The study is bounded to the organization cited and is limited to the truthfulness and faithfulness of the respondents who will be interviewed and those answering the questionnaires.

The group wants to know how the management of the University decides on projects to be undertaken and how they go about on the approval or disapproval of these projects given the amount of resources the organization has. The researchers also want to know the impact of transparency on the efficient resource allocation of the organization studied and the issues the management consider when allocating resources when it follows the doctrine of corporate transparency.

In collecting the data needed, the group intends to conduct interviews personally or through mails, to know the transparency of the organization and if it is visible and practiced by the organization cited above.

EXPECTED RESULTS

To get a more extensive idea on corporate transparency, the group to employ the Exploratory research approach where they will have University of San Carlos as it research base in order to study on its corporate transparency and its resource allocation. This will enable the group to acquire in greater detail the different outcomes, both advantages and disadvantages, of having transparency in a company.

Data will be gathered and analyzed from the results of the interviews made from different levels of employees of the institution. The results of this research will be used primarily to know the consequences of the absence or presence of transparency in the University of San Carlos as to its resource allocation, and also to further understand the operations of the University and get a broader grasp of what is actually happening, especially that the group is directly affected as being students of the said institution. The results will be used appropriately to suggest improvements and to further bring awareness to the people concerned, specifically the students and employees.

RESULTS OF THE STUDY

In order to achieve the objectives, the researchers interviewed different levels of personnel so as to know their views and opinions regarding the university’s transparency and its effects on resource allocation.
Our interviewees consist of middle management (Dean), lower management (Chairman) and from the faculty and staff.
From the interviews that we have conducted, the results were consolidated and showed that: ➢ Thirty-eight percent (38%) of the interviewees believe that University of San Carlos, as a whole, is PARTIALLY transparent, thirty-one (31%) believe that it is NOT transparent. Twenty-three percent (23%) thinks that the university IS transparent. While, eight percent (8%) is UNDECIDED as to its transparency.

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➢ With regards to the interviewees’ definition of corporate transparency, they defined it as:

o There is proper designation and dissemination of information.

o There is nothing to hide, open, honest, able to give benefits to employees and not afraid of the public. They can face the public and the clients.

o Everything is done efficiently and effectively.

o Vital information about the organization is shared by its people from the top down to its subordinates.

o Projects discussed with administration are communicated to the different staff and employees.

o Corporate transparency is a practice of a corporation/ organization where everything is known to all stakeholders.

➢ Things making the university transparent:

o Maintaining open lines of Communication

o The university has a website where information is free to all.

o Participation of student organizations

o For a company to be transparent, it must share the following info:

▪ Financial information ▪ Short-term plans ▪ Long-term plans ▪ Events that would affect the entire university o Objectives are clear and relevant facts and information are made known.

o Trust and accountability in both financial and governance transparency.

➢ Those who are involved in the decision making of the university are:

o Board of Trustees

o Supreme Student Council

o The Top Management is the Cabinet members. The cabinet is the president with the three vice presidents. The Middle management consists of the deans of the different colleges. The lower management consists of the chairpersons of the different departments.

➢ Information considered confidential:

o Grades

o Accounting

o Only matters affecting other faculty members that are considered to be too personal.

o Corporate transparency is making information available for use as scrutiny and an aid to decision making.

o Confidential information is not readily available but may be accessed with the proper permission and justification while classified information is information that is available only to a certain group of individuals in the organization or they relate to certain position.

➢ People asked before deciding on a certain budget:

o In ACS, the department heads are assigned for making the budget and they talk this out with the staff. The allocation of budget must be duly approved by the Department of Finance and the expenses must be evaluated whether they have followed the approved budget or has spent more than what was allowed.

o There is a budget hearing where the section heads will be doing the different budgets and then approved by the Dean then submitted to the VP Finance for final approval and allocation.

o In the administration, there is the planning cycle and consultation. They are interviewed of their needs and wants and then when it concerns physical plant, it is decided. If it is acceptable or it supports directly the conduct of operation or education, then it is really supported and the budgeting comes after. If it is a big thing like constructing a new building then it is to be approved by the Board of trustees.

o The faculty is consulted to determine what resources are needed. At times, the end-users are consulted especially for concerns that directly affect them. The management review justifications submitted for the project.

➢ Incidents of inefficient resource allocation

o Mock hotel

o LGB

o Lack of consultation from top to lower management

o Guidance Department

o Change from ARIS- ISIS; There was a mere statement that a new system will be implemented without proper consultation and proper dissemination of information. Information Technology Department were not informed, were never consulted before the implementation. The implementation of ISIS was shut-gun and the different departments had no choice but to use it. The system was inefficient.

o The deans do not announce sufficient information and chairs are not consulted. Consultation should start from the lower level to provide them with the opportunity to make decisions

o The faculty members are not being well compensated for the extra efforts exerted. USC is demanding as to producing quality graduates, the university should provide trainings, and seminars, but they don’t. The university is tight-fisted/ miserly. Top administration does not listen to the opinions of the faculty. Change of system became extra workload for the teachers.

o Based on the issue of salary, when faculty members demand for an increase the university always says that it’s losing when in fact, USC-TC is expanding.

o Employees were never informed about the renovations and constructions and regarding the transfer of the CAS from the main campus to Talamban. Fr. Miranda directly implemented the transfer despite the opposition of the faculty

o Some processes in the interdepartmental activities are not discussed.

o Suggestions on the pedestrian lane across Talamban Campus and the allocation for railings where students should pass to ensure safety were not heard. Despite the start of the construction, Fr. Miranda instantly changed his mind regarding the waiting shed in TC simply because he did not approve of the location

o Renovations are never-ending since there is no clear planning

o Disagreement among the steering committee members thereby causing project delay o This building is built 40-50 years ago and there are lines here that must have a trouble because we have big bills in water. Our pump is overloaded and we are trying to find out where the system failure is. In the electricity side, we are trying to separate the lighting and air conditioning so that if there is a brown out, the lights could still function without the air conditioning. o The offices have been taken down and concentrated in the lower ground floor because the administration wants the 2nd-4th floor to be classrooms. There is what you call dysfunctional arrangement because of the supposed interaction that could have taken place from this office to other offices. For example, the SAO and Guidance and Testing Centers are what we call student support services and should be clamped in one place and located near the lobby. The clinic also should be placed in a central location because the bulk of the students is in this area although there are P.E. classes. o For the Department of Hospitality Management, students are paying for the in-house service training fees in their tuition fees. This fee is said to be paid for benefit of the students so as to lessen their expenses but the department is cutting 10% of which. This holding of 10% remains to be question mark for the students of that department since they don’t know where it was going. There was no information where it was spent for. All they know was that it will be used for the improvements of their department.

➢ AN INCIDENT CONCERNING THE TRANSPARENCY OF THE UNIVERSITY When we talk about corporate transparency, it means availability of all information to parties concerned. Let’s take for example last week or a few weeks ago, the Board members of the University held a meeting to propose a tuition fee increase for the following year. Although this information was passed on to the Supreme Student Council, transparency does not end there. The voices of the students are represented by the SSC so why doesn’t the school hear what the student body has to say. Isn’t the school about the students’ welfare and well-being?

➢ Impact of Resource Allocation Inefficiencies: o There is slow progress thus deadlines are not met. o Properties are of low quality leading to its deterioration o The front liners, being the main users of ISIS, are the ones being blamed by the students for the problem. They attack the department, not knowing that it is the top administration who decides on it. o Requirements were not met. The software does not respond to the expectations of the front liners. o Big loss of money. We spend more than what we should. o Service delays increasing costs which could have been used for other projects o Teachers still need to be ranked before an increase in salary. It takes time to receive one’s tenureship making their stay in the university disagreeable.

DATA ANALYSIS

From the interviews with different levels of the organization, the group was able to gather different viewpoints regarding the flow of information in the university. They were also able to determine both strengths and weaknesses of the decision making process undergone by the university. With regards to the efficiency and inefficiency of resource allocation, certain incidents were discovered that made implications as to the effect of corporate transparency in a company’s resource allocation.

The group defines Corporate Transparency as making all relevant information readily available to stakeholders and end-users. By this, the group means that dissemination of information is made timely and effectively to those people affected and concerned. The definitions made by the interviewees as shown from the results are more or less analogous with the group’s own definition. This implies that both parties have a mutual understanding and viewpoint on corporate transparency.

As evidenced by the results, it is shown that the Top Management is the one mainly making decisions on matters affecting the university. However, middle and lower levels of management are given authority to implement certain projects, but always with the approval of the top management. With this set-up, problems arise such as miscommunication and misinterpretation of information are encountered since it takes a long process to disseminate information.
The group has discovered a major incident relating to the inefficient resource allocation done by the university. This pertains to the problem with the change of system which is from ARIS to ISIS. This has definitely caused delay in the operations of the university specifically in the enrolment of the students and the use of the system by the front liners. These front liners refer to the faculty directly using the system. The President directly ordered the implementation of ISIS without proper consultation and proper dissemination of information to the people most knowledgeable and concerned with the matter. It can be implied that there is actually a communication problem within the university and thus the whole process of decision making must be improved. Communication is very essential in the effectiveness and efficiency of operations and so it must given more attention.

The incidents mentioned above support the notion of some interviewees who perceive the university as not transparent and thus these inefficiencies occur. With these inefficiencies, requirements are not met in a timely manner, there is a slow progress in the operations of the university, waste of time and money, and low quality properties are deteriorating. From all these, it can be said then that corporate transparency has definitely an effect in a company’s resource allocation.

The transfer of the College of Arts and Sciences from the Main Campus to the Technological Campus created inefficient allocation of resources due to lack of information made available to the affected parties, mainly the faculty, staff and students. Although it may have a good long term effect of saving costs, but the initial stages of transfer created wastage. What could have prevented such losses is making information such as the location to be used, past usage of the rooms and facilities available. With this information, the transfer would have been made efficient in way that appropriate rooms would have been used, such as those rooms that were previously abandoned or were already idle, and thus saving costs on reconstructing the rooms and replacing those being utilized by the college. Information on these would also enable the Department to assess whether the benefits of the transfer actually weigh more than its costs.

Based from the interview which the researchers have conducted from an active student leader from the Department of Hospitality Management, the researchers have seen a lack of transparency and inefficiency of resource allocation. The 10% being taken from the in-house service fees are said to be used for the development of the University, but as far as the researchers know, it is the University, as a whole, who is responsible for paying the renovations of the different departments.

When it comes to paying school fees like tuition, parents and the students themselves ask a somewhat interesting question, “where does the money from the tuition go?” We are relatively sure that part of the tuition, probably 50% of every student’s tuition goes to the salaries of the different professors at the university. Probably another 25% goes to the resources of the school and the never-ending repairs that go around the campus. Which leaves us to wonder, where does the rest of the money go?

The university has never quite had the problem of abundance of teachers; in fact, some of them are even just working part-time. The university lacks teachers, good ones even. If we charge 50% of the tuition to repairs it would be too much wouldn’t it? Many of the repairs done in the school are totally unnecessary. Based on our interviewees, most of the schools resources are not being used effectively and efficiently. So this leads us to our next question, why does the tuition fee keep on increasing every year?

CONCLUSION

It can be said that the level of corporate transparency in the University is dependent on the level of management. As management goes up the ladder, transparency in the organization declines. Since most decisions are made at the top level, they fail to consult with lower levels regarding issues and decisions made.

In the top level, information made known to them is not communicated down the line of management, which can lead to improper and inefficient allocation of resources as lower levels are not consulted before a decision is made.

Regarding lower level of management that is per department, most consider their respective workplaces to be transparent. This can be deduced to the fact that departments are small and close-knit, so it’s easier to disseminate and share information. There is an open communication among the faculty and the chairperson regarding decisions that directly affect individuals and the department.

Due to the time constraint of the study and lack of cooperation from higher level of management we were unable to interview other College Deans and the Vice-President for Finance and Administration which would have added key information to the study like the criteria being followed in accepting or rejecting a certain project, when transparency is being practiced.
RECOMMENDATIONS

Communication is very essential in the effectiveness and efficiency of operations and so this must be given more attention. Top level should see to it that proper dissemination of information is present to help organize the process of resource allocation.

Constant communication with individuals especially in lower levels should be made to avoid high costs in projects, in the end fail to accomplish its objectives.

End-users should be consulted regarding decisions that directly affect them and information should be made available to them as well, so reforms in information confidentiality could be recommended.

In relating this transparency to the school’s tuition fee system, the researchers would like to recommend that the student’s voices be heard regarding this matter.

BIBLIOGRAPHY

From www.ebscohost.com:

Jere R. Francish, Shawn Huang, Inder K. Khurana & Raynolde Pereira, University of Missouri-Columbia,“ Does Corporate Transparency Contribute to Efficient Resource Allocation?”, May 2009, Journal of Accounting Research

APPENDICES

Appendix 1

INTERVIEW QUESTIONS:

1. What is your definition of corporate transparency? 2. Do you think/ believe that the company is practicing corporate transparency? If yes, to what extent? 3. What are the things that make a company transparent? 4. Who are involved in the decision making of the company? 5. What do you consider confidential information? Classified information? 6. In resource allocation, do you ask the people first before you decide on a certain budget? 7. Do you consult end- users before decision making? 8. How does the management determine or decide on which projects best fit to be undertaken using the resources of the company? 9. (Lower level) Can you specify some incidents of inefficient resource allocation? Were you involved in the planning of a certain project before arriving at a final decision?
10. What is the impact of these inefficiencies on the costs of the projects?