Skip to main content

Emerging markets, pathetic transparency

What do Brazil’s massive corruption scandal and the accusations of missing funds involving Malaysia’s prime minister have in common? Big multinational companies have had a major role in both of them.

Cover image of Transparency In Corporate Reporting report

One would hope those scandals would teach the emerging market multinational community a lesson about the importance of transparency and being more open about their businesses to increase accountability. But unfortunately one would be wrong.

The results from the new report “Transparency in Corporate Reporting: Assessing Emerging Market Multinationals” show that emerging market multinationals still have a long way to go until they can call themselves responsible global citizens. Their transparency standards remain low – 75 of 100 companies measured scored less than 5 out of 10 – suggesting they are ill-equipped for the post-Panama Papers era where corporate secrecy is no longer considered acceptable.

Graphic showing 75 of 100 companies stat

Robust anti-corruption programmes must be a priority

Companies that disclose how they fight corruption send a strong signal to stakeholders and citizens that they are committed to clean business practices. If they are not prepared to make such commitments, businesses can end up contributing to the abuse of power, bribery and secret deals.

With an average score of 48 per cent, the 100 companies assessed in the report have barely registered improvement in the disclosure of their anti-corruption programmes since 2013, when their average score was 46 per cent.

Eighty-one of the 100 multinationals assessed do not disclose a policy that explicitly prohibits facilitation payments, also known as petty bribes. Forty-one companies fail to report they have channels for employees to report suspected breaches of the companies’ anti-corruption policy.

While no company achieves the perfect score of 100 per cent, Turkey’s Sabanci Holding comes very close to the full score, with 96 per cent.

Sabanci Holding is against all kinds of bribery and corruption. Accepting bribes or bribing can never be accepted under any purpose.”

– Quote from Sabanci Holding's anti-corruption guidelines

Strong regulation boosts Indian companies

The study also looks at the amount of information companies disclose on their related subsidiaries, holdings and other entities abroad. Knowledge of these global structures is a necessary for citizens, regulators and investors to understand the economic and social impact of multinational business in their societies and communities.

Our report shows regulation can enhance transparency at emerging market multinationals. The 19 Indian companies assessed achieve a high average score of 77 per cent because they are required by law to disclose key information about all their corporate entities abroad including their name, country of operation, percentages owned and some key financial data.

Two companies achieve a perfect score of 100 per cent: India’s Bharti Airtel and Petronas of Malaysia.

Nine companies – among them eight from China and one from Mexico – score 0 per cent.

Citizens know next to nothing about the companies operating in their countries

The payments companies make to governments should benefit the communities these companies operate in. This is why this study also evaluates the disclosure by country of five industry-neutral financial indicators: revenues, capital expenditure, income before tax, income tax and community contributions.

With a very low average result of 9 per cent, the findings show emerging market multinationals are unwilling to disclose key financial information on a country-by-country basis.

Almost half of the emerging market sample (49 companies) score a zero in this dimension, including 26 Chinese and seven Brazilian companies.

Chile’s retailer Falabella, however, scores 60 per cent, confirming that financial disclosure by country is possible and does not put a company at a competitive disadvantage, as the common argument goes.

Again, due to legal requirements all Indian companies score above average. It is only a matter of time until mandatory reporting on key financial information will spill over to other countries and regions. Companies need to catch up or be left behind in the fight against corruption.

Corporate secrecy in the post-Panama Papers era

This report is being published in the wake of the unprecedented release of the Panama Papers, which have exposed the industrial-scale use of shell companies and offshore tax havens. The tax havens are sometimes used for illegal purposes such as tax evasion, money-laundering and financing corruption. While the secrecy offered by these countries can be used for illegal or illicit purposes, it can also be used for legitimate business reasons.

The study reveals that many of the companies assessed have operations in countries such as Switzerland, Luxemburg, the Cayman Islands or Panama that feature prominently among the top 15 countries listed on Tax Justice Network’s Financial Secrecy Index.

In line with the overall low disclosure levels of key financial data in this report, companies reveal very little financial information for these countries. The average disclosure rate of key financial information for the 23 companies that have operations in Switzerland is only 17 per cent. Similarly, the eight companies that say they do business in Panama disclose just one per cent on average.

It is important to note that the data collected for this report does not allow for any conclusions as to why operations in secrecy jurisdictions were set up and for what purpose. Also, it is welcomed when companies disclose their operations in foreign countries including those in secrecy jurisdictions. We advocate for more disclosure, not less.

However, in the wake of the Panama Papers and other leaks, companies must understand that corporate secrecy cannot be upheld. The risk of further unexpected leaks revealing illegitimate if not illicit practices is very real. Pressure from citizens and other stakeholders (including investors) to end secrecy will surge and companies resisting this trend will be increasingly at a competitive disadvantage and may experience financial loss.


Report: Transparency in corporate reporting: assessing emerging market multinationals (2016)

Informe: Transparencia de la información corporativa: análisis de multinacionales de mercados emergentes (2016)

Relatório: Transparência em relatórios corporativos: avaliando multnacionais de mercados emergentes (2016)

Press release | Index (PNG)

Frequently Asked Questions

Use the data behind the report

The XLS files 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.

File 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.

File 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.

File 3: How transparent are companies operating in your country?
Here you will find an evaluation of the disclosure of key information such as profits, revenues, and payments to governments by the 100 companies. 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.

For any press inquiries please contact [email protected]