Corruption: Shining a light on the world’s biggest companies

The world’s 105 biggest companies are worth more than US$11 trillion. They touch the lives of people across the globe.

But just how much do we know about their impact on daily lives? Too often, citizens experience little benefit from global economic activity while suffering the consequences of unethical corporate activity.

Transparency in Corporate Reporting assesses the disclosure of steps these companies have in place to fight corruption. It also looks at companies’ transparency footprint across 177 countries: to what extent are earnings and taxes in specific countries made public.

Transparency in Corporate Reporting

Companies are scored from 0-10 based on their disclosure of various sorts of business information important for investors and the general public: where they pay their taxes, their corporate structures and what they are doing to prevent corruption. In the scores, 10 is most transparent, and 0 is least transparent.

Selection of the ranking list

1. Statoil (8,3)
2. Rio Tinto (7,2)
3. BHP Billiton (7,2)
7. BASF (6,7)
10. Allianz (6,6)
17. Siemens (6,3)
24. Bayer (6,1)
29. Deutsche Telekom (6,0)
30. E.ON (6,0)
35. SAP (5,8)
69. PetroChina (4,1)
92. Bank of America (3,2)
93. Commonwealth Bank (3,1)
95. Google (2,9)
98. Gazprom (2,8)
101. Berkshire Hathaway (2,4)
103. Honda Motor (1,9)
104. Bank of Communications (1,7)
105. Bank of China (1,1)

Reporting anti-corruption measures

The world’s largest companies are increasingly committed to reporting on their measures for preventing corruption.

Two-thirds of the 105 companies (68 per cent) report on their corruption prevention programmes. This compares to less than half (47 per cent) in 2009, the last time Transparency International analysed corporate transparency.

The vast majority of companies have codes of conduct and provide training for all employees.

Corporate structures shrouded

Modern businesses are complex global operations. The world’s biggest companies have tens of thousands of subsidiaries. These can be massive operations producing consumer products or extracting natural resources, or small offices based in a country solely for tax purposes.

When financial flows within a company are transparent, citizens and investigators can track money flows, exposing money laundering, tax evasion and other crimes, and allowing citizens to hold governments to account and investors to evaluate a company’s prospects.

Without transparency, it is difficult to know how operations in locations such as developing countries or secrecy jurisdictions feature in company earnings. The World Bank has documented the use of subsidiaries to funnel bribes to foreign officials.

Information about who owns what is also vital if companies are to be held accountable for the actions of their subsidiaries, such as respect for the environment and labour rights. When patterns of ownership are obscured, companies can shirk responsibility for the actions of their subsidiaries.

What do companies do in your country?

If companies disclose how much they pay to governments in every country they operate in, citizens the world over can know how much money flows into the public budget from these business operations. This is why new legislation is emerging in Europe and the United States mandating such disclosure for certain industries.

Transparency reduces opportunities for misuse of public money, but also shows how companies contribute to the societies they operate in. Yet few of the world’s biggest companies publicly disclose financial data about each country of operation on their websites.

Some findings from the report

When this disclosure does not happen, it is harder to hold governments to account for the way they use revenues from multinational companies, and harder to track the contribution of companies. The multinational company record in Eurozone debt crisis countries, for example, is not good. Sixty-five of the 105 surveyed companies operate in Spain, but only three publicly disclose their income taxes paid in the country. In Greece, none of the 43 surveyed companies operating there disclose income taxes.

Best performers

When it comes to disclosure, the best performing sectors were mining, oil and gas – the extractives sector. Companies from these industries took six of the top 10 positions in the ranking.

Hopefully this is a sign that pressure from investors, governments and society encourages businesses to become more transparent. Extractive companies have long been targeted for the opacity of their operations, but have improved noticeably in this regard since Transparency International first evaluated them in 2008.

Statoil, ranked first with a score of 8.3 of a possible 10, discloses information on revenues, taxes and community contributions on a country-by-country basis for all 34 countries in which it operates. Runner-up, mining firm Rio Tinto, maintains similar disclosure levels while operating in 28 countries.

Worst performers

Despite the role of hard-to-access company structures in the financial crisis of 2008, the 24 financial companies in our report scored an average 4.2 out of 10. The lowest scoring companies in Europe, Asia and America were all banks.

Among the 24 financial institutions evaluated, 13 companies disclose no data on their foreign operations, seven disclose single data points and only four disclose considerable country-level data.

Resources

See how global giants performed, using the data behind the report.

The XLS charts below show how companies scored according to corruption-relevant indicators. For each criterion, companies received one point for a measure in place or data disclosed and 0.5 for partial disclosure. They scored zero when the information was not available or a click away from the parent company website.

Chart 1: What are companies doing to fight corruption?
Based on guidelines for companies preparing anti-corruption measures, section one scores companies for reporting on anti-corruption programmes, including measures such as facilitation payments and political contributions.

Chart 2: Organisational transparency
Complex corporate structures can hide tax evasion and bribes. This table looks at how much of their operations companies reveal: who are their subsidiaries, where they operate and where they are based for tax purposes.

Chart 3: How transparent are companies operating in your country?
The disclosure of key information such as profits, revenues, and payments to governments by the 105 companies is evaluated across 177 countries.

Here companies are rated for disclosure. This information shows citizens the contributions companies make to their communities, and allows them to monitor how the government manages the money that comes from these companies.

Chart 4: Final scores given to each of the 105 companies
This is a simple XLS file of the final scores for the 105 companies assessed in the new report, Transparency in Corporate Reporting.

Source: Transparency International