A few buzz words are always tossed into social media conversations. One of the favorites is “transparency.”

Zappos.com, an online purveyor of shoes, handbags and more, is always a shining star noted in social media discussions.

However, for the most part, they are transparent about positive aspects of their company. The corporate HQ typically is represented as a caring culture that lives by their tagline of “powered by service.” The company encourages blogging and twittering by its employees. Even the CEO is an active Twitterer.

One could argue that it’s easy to be transparent during smooth sailing; the challenge lies in public scrutiny during dark times.

Yesterday, at about 3:30 p.m. CST, the CEO Tony Hsieh tweeted “Very emotional day for everyone at Zappos. I’ll be sending out an update later today with details of what’s going on.”

An hour later, he shared “Update on today: Here’s the email I just sent to our employees – http://tinyurl.com/5hp9sf.”

An excerpt:

Today has been a tough, emotional day for everyone at Zappos. We made the hard choice of laying off about 8% of our employees. The layoffs will affect almost every single department at Zappos.”

While it’s impressive that Hsieh shared the company memo publicly, it’s also note-worthy that he shared their benefits:

We are offering to pay each laid-off employee through the end of the year (about 2 months), and offering an additional amount for employees that have been with us for 3 or more years.

In addition, because our regular health benefits cover 100% medical, dental, and vision for employees and 50% for spouses and dependents, we decided to offer to reimburse laid-off employees for up to 6 months of COBRA payments.

Finally, he did not shutter twittering.

I’ve been asked by some employees whether it’s okay to twitter about what’s going on. Our Twitter policy remains the same as it’s always been: just be real, and use your best judgement.

The straightforward handling of this difficult economic situation appears to be another case study in transparency for Zappos. Time will tell, but the first steps appear to reflect their core organizational principles.

Obviously, Zappos is not alone. Countless companies will be dealing with layoffs and reductions. If you’re counseling these companies, what’s your recommendation? Is Zappos a model for all or a special case?