Time has come for emerging market companies to fight corruption

Study highlights major gaps in anti-corruption reporting by emerging market multinationals

Filed under - Private sector

Posted 17 October 2013 by Transparency International Secretariat

Translations: ZH   AR   RU   ES   PT  

Rapidly-expanding companies in emerging economies such as China and India must become more publicly accountable, anti-corruption group Transparency International said today.

The 52-page report, Transparency in Corporate Reporting: Assessing Emerging Market Multinationals, scored 100 of the fastest-growing, companies based in 16 emerging markets.

Three quarters of the emerging market companies scored less than 5 out of 10, where 0 is the least transparent and 10 is the most transparent. Scores were based on publicly available information about anti-corruption measures, transparency in reporting, on how the companies structure themselves and the amount of financial information they provide for each country they operate in.

Chinese companies, which account for more than a third of the assessed companies, had the weakest overall performance among the BRICS (Brazil, Russia, India, China and South Africa) countries, highlighting the need for China and its business community to take immediate action to raise their standards.

“The time has come for emerging markets to play their part in the global fight against corruption,” said Transparency International chair Huguette Labelle. “As emerging market companies expand their influence they should seize the opportunity to play a bigger role stopping corruption internationally.”

Publication of corporate anti-bribery measures should become standard

Emerging market companies should communicate to the public what they are doing to prevent corruption and their relations with governments, Transparency International said. The study shows that about 60 per cent of the companies evaluated do not even disclose information about political contributions.

Furthermore, governments in emerging markets should pass new laws obliging companies to publish what they pay to governments in every country where they operate, Transparency International said.

The report points out that publicly-listed companies performed better than state-owned and privately-held companies, illustrating the positive impact on transparency of the disclosure requirements imposed on publicly-traded companies. 

Thanks to national laws obliging publication of key financial information on their subsidiaries, Indian firms perform best in the BRICS with a result of 5.4 out of a maximum of 10. In country-by-country reporting, Indian firms scored 29 per cent, compared to 9 per cent on average and 1 per cent in China. Last year, in a similar study conducted by Transparency International, the world’s 105 largest global companies scored 4 per cent.

“Businesses operating globally without transparency risk damaging their brand and losing the trust of local communities,” said Labelle. “People have a right to know what multinationals pay their government and how much taxes they pay.”

Seventy-five of the 100 companies in the report come from the BRICS, which have contributed 50 per cent of world growth since the crisis.

The full report is available on: 

http://transparency.org/news/feature/emerging_market_multinational_companies_ready_for_prime_time 

Background:

Transparency International released similar reports on the world’s largest 105 companies in 2012 and the oil and gas sector in 2011.

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