Newly proposed SEC rules should make US listed extractive companies more transparent

Newly proposed SEC rules should make US listed extractive companies more transparent



Although big oil and energy companies have been lobbying against formalising disclosure at the project level, the US Securities and Exchange Commission (SEC) proposed new rules on 11 December 2015 would require resource extraction companies listed on US stock exchanges to do just this. They will have to disclose payments made to the US federal government or foreign governments (including subnational governments) for the commercial development of oil, natural gas or minerals on a country-by-country and a project-by-project basis. 

These rules are important because they will allow governments, civil society and journalists to follow the money and spot potential corruption risks. They are also in line with a new global norm that is bringing greater corporate transparency.

Transparency International and TI-USA have advocated for strong disclosure rules in the extractive sector to contribute to international transparency and accountability efforts. The extractive sector is rife with corruption and the benefit from extractive revenues in resource-rich countries too often does not reach large sections of their populations. 

Project-level reporting by companies will also enhance the ability of investor groups to evaluate risk profiles and company performance.

The European Union, Canada and Norway have also moved in this direction. Similar measures regarding the disclosure of payments to governments made by European companies in the extractive and logging industries are in place. With last week’s US decision there is now the opportunity of instituting a global transparency standard in the oil and gas industry.

Many companies are cross listed on multiple exchanges and a consistent global standard would reduce compliance costs for such cross listed companies. Some companies are already publishing project by project reports, including Norway’s Statoil, Kosmos Energy and Tullow Oil, proving it can be done in a commercial environment.

Transparency International, along with other activists, has advocated country-by-country reporting as a global standard in all sectors.

In the European Union, public country-by-country reporting already exists for the banking sector. Transparency International has been advocating for an extension of this legislation to all EU-based multinational companies.

This summer the European Parliament inserted a country-by-country measure into a Commission proposal on corporate governance rules, the Shareholder Rights Directive. This measure would mean the public disclosure of key corporate financial data, such as profits, taxes paid and a list of subsidiaries, in every country where companies operate.

EU Member States are negotiating this directive and the Commission is carrying out an impact-assessment due in the first quarter of 2016.

A transparency test

In addition to limiting corruption, country-by-country reporting will also help reduce the ability for companies to opaquely shift profits around the world to reduce their tax liabilities. Too often multinationals are able to exploit loopholes in domestic and international tax laws to move money from one country to the next, often through tax havens or “secrecy jurisdictions”, with the end goal of reducing or even eliminating the tax they pay to governments.

Country-by-country reporting will make it easier to reconcile whether companies are paying taxes in the jurisdictions that they have economic activities in.

Without leaks and whistleblowers, even governments only see a small window into the inner workings of companies, which makes proving tax avoidance or evasion nearly impossible. When multinational companies report on their profits, revenue, taxes paid, and number of employees, the numbers include aggregate global figures with subsidiaries’ results bundled together. This makes it harder to understand a corporation’s operations in any specific country.

The next phase of the US rule-making process is a public comment period to 25 January 2016.  We applaud the SEC’s issuance of these rules and look forward to participating in the next phase of the discussion with a clear goal of ensuring strong final rules.

 

Editor's note, 17 Dec 2015: This article was amended on 17 December to remove France from the list of places moving toward greater disclosure. While France's parliament initially voted in favour of country-by-country reporting, the amendment was later rejected by a second vote in the National Assembly.

For any press enquiries please contact press@transparency.org

Latest

Support Transparency International

Fighting land corruption in Sub-Saharan Africa: Widows tell their story

See a short film created by Ghanaian widows evicted from their land who decided to organise and challenge official indifference.

Corruption in Asia Pacific: what 20,000+ people told us

We spoke to nearly 22,000 people about their recent experiences with corruption in 16 countries and territories in the Asia Pacific region. See what they revealed.

FIFA must do more to win back trust of football fans

It’s been one year since Gianni Infantino was elected president of FIFA with promises to clean up football. How do football fans think he's doing?

17 commitments for a clean Bulgaria – will politicians sign on?

Bulgaria’s voters will head to the polls in a snap election on 26 March. Our chapter is urging politicians to commit to needed reforms.

Applications now open for the Transparency Summer School on Integrity 2017

Apply now for the Transparency School on Integrity (TISI), taking place during 10-16 July, 2017 in Vilnius, Lithuania.

Open data: promise, but not enough progress from G20 countries

G20 countries made commitments to publish data that could help curb corruption. How well are they keeping their promises?

República Dominicana marcha para acabar con la impunidad

Desde que salió a la luz el escándalo de corrupción en torno al constructor Odebrecht, miles de dominicanos salieron a la calle para denunciar la impunidad y luchar contra la corrupción.

Social Media

Follow us on Social Media

Would you like to know more?

Sign up to stay informed about corruption news and our work around the world