Countries around the globe are struggling to rebuild their economies after the financial crisis. But the world’s largest publicly traded companies do not demonstrate enough transparency measures to help prevent another economic meltdown, says a new Transparency International report.
Transparency International (TI), the independent corruption-fighting organisation, analysed the transparency of corporate reporting on a range of anti-corruption measures among 105 publicly listed multinational companies that together are worth $11 trillion.
Only a few of the companies publish information about their anti-corruption commitments.
“As a result, the world’s largest companies may contribute to an environment in which corruption can thrive,” TI stated in the report, released 10 July.
The watchdog analysed publicly available information from the companies’ websites in the report Transparency in Corporate Reporting: Assessing the World’s Largest Companies, and the research explored three dimensions of transparency – public reporting on anti-corruption programmes, organisational transparency and country-by-country reporting.
Corporate income tax disclosure in Greece, Spain
The results are striking. None of the 43 companies operating in Greece disclose corporate income tax paid to the government. Of the 65 companies operating in Spain, only three companies disclose taxes paid to the government.
“In a time of falling public revenues and growing austerity, companies need to demonstrate that they are also making a fair contribution to the countries where they operate,” said Jana Mittermaier, director of TI’s EU Liaison Office.
“The European Parliament and national governments now need to consider how these standards of accountability can be enshrined in EU legislation,” Mittermaier added.
In its analyses, TI gave the multinational companies points on a scale from 0 to 10 with 10 being the most transparent. The Norwegian oil and gas company Statoil took first place in being the most transparent company with an average score of 8.3.
Statoil was followed by the metal and mining companies Rio Tinto and BHP Billiton that both got 7.2 on the scale.
The least transparent companies were Honda Motor, Bank of Communications in Shanghai and Bank of China, ending on 1.9, 1.7 and 1.1 points on the scale, respectively.
Contributions to countries out of sight
TI said there had been some progress since the last report was published in 2009. In particular, companies have improved in their reporting of anti-corruption programmes. On average, the reporting has increased to 68% from 47%.
However, the average score in country-by-country is still very low. Only a few companies are reporting how much they contribute to the economies of the countries in which they operate.
The report says 41 of the 105 ranked companies disclose no information for their local operations and the average result for the transparency of “country-by-country” disclosures is 4%.
The European Commission has proposed legislation that would require EU-based oil, gas, mining and forestry companies to disclose their payments to governments on a country-by-country basis. The European Parliament will vote on these proposals in the autumn.
In April, a resolution that was endorsed by the majority of MEPs welcomed the European Commission’s proposals and recalled that “country-by-country reporting requirements for cross-border companies are essential for detecting corporate tax avoidance”.
EU criticised for listening to biased advisory
In another report on big companies and transparency, published on 10 July by the Alliance for Lobbying Transparency and Ethics Regulation (ALTER-EU), the European Commission was criticised for its reliance on advice from big business.
ALTER-EU examined the membership of the European Commission’s advisory groups in its enterprise and Industry directorate and to see whether the balance of expertise among the members reflects the interests of society.
The Commission’s advisory groups provide expert advice on specific issues, which are often used to shape new policies, and DG Enterprise is particularly powerful.
ALTER-EU identified 83 expert groups set up by DG Enterprise, and found that 482 corporate advisors are represented in these groups, compared to 255 other non-government advisors; with 32 groups dominated by big business.
The transparency campaign group also found that two-thirds of the remaining groups were dominated by business interests. Just six groups had a more or less balanced composition.
“With such a one-sided structure, it is hard to see how societal needs are really taken into account. DG Enterprise cannot know what it takes to “meet societal needs” if it mainly takes advice from corporate interests,” ALTER-EU said in the report.
The Commission reportedly said that it is reducing the number of expert groups, and that it is difficult to ensure balance between interests when some NGOs do not participate in some of them due to a lack of resources.