Two key questions in any workplace: How much do you report up the ladder? How much do you report down?
Both are determined by the anticipated reaction and by confidentiality obligations. Requirements to protect the well-being of various stakeholders also play a role.
The argument for honesty, which in some cases is indeed brutal, is that it is preferable to the hiding and cover-ups that occur in its absence. On the other hand, there are times when we'd prefer not to know certain items because the level of our response might not be entirely in our hands and a more intense cure might be worse than the disease. That filtering, however, usually applies to upward communication.
When it comes to downward communication, the bias should favor disclosure. Organizations that paternalistically withhold information from employees on the basis that they wouldn't understand or not be able to handle it are unlikely to be trusted. In most instances, people would rather hear the truth than be coddled.
That said, there are times when matters are simply so sensitive that confidentiality is crucial both in the immediate case and to facilitate the reporting and resolution of future ones.
In short, general "We always disclose or never disclose" rules are not appropriate. The decision to filter often requires a case-by-case determination. That is both a strength and an area of vulnerability. It may be sound decision-making but it also provides a great rationalization for inappropriate filtering when what should be an exception becomes the rule.