Transparency in Corporate Reporting

Countries around the globe are struggling to rebuild economies devastated by the financial crisis. Yet many of the world’s largest publicly traded companies still do not demonstrate that they have put enough transparency measures in place to help prevent another economic meltdown. These companies continue to publish too little information about their commitments to comprehensive anti-corruption systems and their sprawling operations. They also report insufficiently on their corporate structures, preventing clarity about their true impact in countries around the world. As a result, the world’s largest companies may contribute to an environment in which corruption can thrive.

This study analyses the transparency of corporate reporting on a range of anticorruption measures among the 105 largest publicly listed multinational companies.1 Together these companies are worth more than US$11 trillion and touch the lives of people in more than 200 countries across the globe, wielding enormous and far reaching power. Their influence goes beyond investors, stock markets, suppliers and customers – it extends to those they employ and to the standards they set for working conditions and behaviour around the world. This powerful economic force can be a source of innovation, competition and prosperity, but when misused the result can be economic stagnation, poverty and inequality.

Corruption is a risk for multinationals on a number of fronts. Corruption destroys entrepreneurship, inhibits free markets and undermines the stability vital to successful economies. It also enables enormous flows of illicit money outside the real economy – in the form of unpaid taxes, bribes and laundered funds. Companies recognise this, but now more than ever before they must act to stop corruption. Transparency must be their resolute response, to address one of the root problems of the economic and financial crisis.

By adopting greater corporate transparency – publicly reporting on activities and operations – companies provide the necessary information for investors, journalists, activists and citizens to monitor their behaviour. The importance of corporate transparency for multinational companies is manifold as their influence crosses multiple jurisdictions. Multinationals operate through networks of related entities incorporated under diverse legislation but that are inter-related through myriad legal and business connections. Without transparency, many of these are almost impossible to trace.

Reporting on anti-corruption programmes, organisational transparency and countryby- country reporting gives a clear and comprehensive picture of a company’s operations, revenues, profits and taxation. As a result, stakeholders have the information to make informed decisions and influence corporate behaviour. While even good reporting cannot ensure good company behaviour, it is an indication of commitment, awareness and action. It also enables wrongdoing or misinformation to be more readily uncovered. Ultimately, companies with a good track record of reporting on their anti-corruption programmes and global activities are more likely to be part of the solution than the problem.

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