Multinationals’ Multiple Transparency Transgressions
The openness champion Transparency International offered a second annual screening of disclosure practice at 100 top emerging market-based multinational companies breaking out anti-corruption, organizational, and individual country reporting. On a scale of 10 representing the highest standard, the average score was only 3.5 and 75 percent of the group got under 5. Indian firms led by Tata dominated the best ten, while the Chinese took the rear with a 2 result. The BRICS overall stood at 3, with publicly- listed enterprises far outperforming private and state-owned ones. Over half the roster came from consumer goods and basic material industries, and detailed country information was the worst category although the result doubled from 2012. The universe spanned businesses in 15 different headquarters nations which are not subject to requirements as in US and European law to outline extractive sector payments and environmental and social sustainability criteria. Many endorse a voluntary UN compact against bribery and malfeasance with no enforcement mechanism, and several giants like the UAE’s Emirates Air, Malaysia’s Petronas, Russia’s Rusal, and Brazil’s Oderbrecht were superior in organization description but lagged in other areas. Often zero corruption pledges are posted on websites but actual compliance procedures and outcomes are unavailable. Thailand’s CP Group had no policy in this regard despite involvement in high-profile global acquisitions. A half dozen Chinese state run operations including offshore oil, shipbuilding and technology were at the bottom of presenting affiliate, subsidiary, joint venture and cross-border ownership structures. In the country balance sheet and activity compilation Chilean retailer Falabella was the winner and developing outpaced developed market companies on this front, despite strict mandates imposed as under the US Dodd-Frank law where natural resource supply chain and financial arrangements must be elaborated. Russia’s Lukoil got a perfect mark for domestic revenue disclosure, while Chinese counterparts typically did not reveal any items. Of the 75 BRICS-based members India was second with 20 followed by Brazil with a dozen, and the 3 South African ones placed just behind India’s best. Given their economic and clout they should “lead by example” according to the TI report and compete not only on products and services but with ethical behavior and stakeholder engagement.
Governments should adapt the proposed EU norm for corporations over 500 employees to be more transparent about bribery and development lenders should tie better reporting guidelines to future credit and technical assistance. Global accounting standards should also include social responsibility, and along with civil watchdogs institutional investors and rating agencies should insist on specific steps measured against quantitative and qualitative indices. In line with this trend a New York forum was convened recently on so-called impact investing which treats non-financial returns equally and attracted hundreds of participants from mainstream and specialist houses. In banking micro-finance with both donor and commercial backing has served to prominently display this hybrid.
