ti - transparency in corporate reporting

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Transparency in

corporaTe reporTing:

assessing The WorldslargesT companies


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www.transparency.org

ISBN: 978-3-943497-22-9

2012 Transparency International. All rights reserved.

Printed on 100% recycled paper.

Author: Barbara Kowalczyk-Hoyer

Design: www.tanikadesign.com

Cover photo: istockphoto.com/Ola Dusegrd

Every eort has been made to veriy the accuracy o the inormation contained inthis report. All inormation was believed to be correct as o June 2012. Nevertheless,

Transparency International cannot accept responsibility or the consequences o itsuse or other purposes or in other contexts.

We would like to thank all the individuals who contributed to all stages o theresearch and preparation o the report. Generous support or this report wasprovided by the Task Force on Financial Integrity and Economic Development.

Transparency International is the global civil society organisation leading

the ight against corruption. Through more than 90 chapters worldwide and

an international secretariat in Berlin, we raise awareness o the damagingeects o corruption and work with partners in government, business and

civil society to develop and implement eective measures to tackle it.

TaskForce

Financial Integrity &Economic Development


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CONTENTS

1. INTRODUCTION 4

2. EXECUTIVE SUMMARY 5

3. PROJECT RATIONALE AND METHODOLOGY 7

4. REPORTING ON ANTI-CORRUPTION PROGRAMMES 10

copny esuts 13

inusty hghghts 15

5. ORGANISATIONAL TRANSPARENCY 16

copny esuts 20

inusty hghghts 22

6. COUNTRY-BY-COUNTRY REPORTING 24

copny esuts 27

inusty hghghts 31

7. FINANCIAL SECTOR: SPECIAL SECTION 34

repotng on nt-oupton poges 37

county-by-ount y epotng 40

8. POLICY RECOMMENDATIONS 41

ANNEXES 45

annex 1: methooogy 45

annex 2: Questonne 50

annex 3: lst of opnes 52

annex 4: dt tbes 56


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Diagram 1Index Results

Scale 0-10 where 0 is least transparent and 10 is mosttransparent. This Index is based on the unweightedaverage o results in all three categories.

ACP = result or reporting on anti-corruptionprogrammes

OT = result or organisational transparency

CBC = result or country-by-country reporting

Note: Google, Microsot, Procter & Gamble, SAP and Shellare corporate supporters o Transparency InternationalSecretariat. HSBC and Rio Tinto are members o

Transparency Internationals Business Principles SteeringCommittee. Other companies covered in this reportmay also provide support to Transparency Internationalchapters worldwide.

Statoil

Rio Tinto

BHP Billiton

ArcelorMittal

BG Group

HSBC Holdings

BASF

France Telecom

BP

Allianz

Tesco

Novartis

ExxonMobil

Vodaone

Wal-Mart Stores

ANZ Banking

Siemens

GlaxoSmithKline

Royal Dutch Shell

ENEL

GDF Suez

Telenica

British American Tobacco

Bayer Group

Westpac Banking Group

General Electric

Home Depot

LOral Group

Deutsche Telekom

E.ON

Roche Holding

Sanof-Aventis

ENI

Nestl

SAP

8.3

7.2

7.2

6.9

6.7

6.7

6.7

6.6

6.6

6.6

6.5

6.5

6.4

6.4

6.4

6.3

6.3

6.2

6.2

6.2

6.2

6.2

6.1

6.1

6.0

6.0

6.0

6.0

6.0

6.0

5.9

5.9

5.9

5.9

5.8

ACP OT CBC

100% 100% 50.0%

92% 100% 23.7%

92% 100% 23.6%

85% 100% 21.3%

100% 100% 2.4%

92% 100% 8.0%

100% 100% 0.0%

81% 100% 17.2%

92% 100% 5.6%

88% 100% 8.5%

69% 100% 26.2%

92% 100% 1.8%

88% 100% 4.3%

85% 100% 7.5%

77% 100% 14.0%

88% 100% 0.8%

88% 100% 0.6%

85% 100% 2.4%

85% 100% 2.1%

85% 100% 0.8%

85% 100% 0.6%

69% 100% 15.5%

81% 100% 2.3%

81% 100% 2.0%

96% 83% 1.7%

81% 100% 0.3%

81% 100% 0.0%

81% 100% 0.0%

73% 100% 6.3%

77% 100% 1.7%

77% 100% 0.9%

77% 100% 0.4%

92% 83% 1.3%

73% 100% 3.6%

65% 100% 8.8%

TRANSPARENCY

IN CORPORATEREPORTING


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Barclays

Schlumberger

Saudi Basic Industries

Philip Morris International

China National Oshore Oil Corporation (CNOOC)

Industrial and Commercial Bank o China (ICBC)

Citigroup

JPMorgan Chase

Pfzer

McDonalds

ConocoPhillips

PepsiCo

Visa

Cisco Systems

Microsot

Walt Disney

Goldman Sachs Group

Teva Pharmaceutical Industries

Verizon Communications

Mitsubishi UFJ Financial

Apple

Bank o America

Commonwealth Bank

Canon

Google

Anheuser-Busch InBev

Toyota Motor

Gazprom, OAO

Amazon.com

Nippon Telegraph & Telephone Corporation

Berkshire Hathaway

China Construction Bank

Honda Motor

Bank o Communications

Bank o China

4.0

4.0

4.0

3.9

3.9

3.9

3.8

3.8

3.7

3.7

3.7

3.5

3.5

3.4

3.4

3.4

3.3

3.3

3.3

3.2

3.2

3.2

3.1

3.0

2.9

2.9

2.8

2.8

2.8

2.6

2.4

1.9

1.9

1.7

1.1

ACP OT CBC

69% 50% 0.8%

69% 50% 0.7%

69% 50% 0.0%

85% 33% 0.0%

15% 100% 1.3%

15% 100% 1.1%

81% 33% 0.0%

81% 33% 0.0%

77% 33% 0.0%

77% 33% 0.0%

73% 33% 3.2%

73% 33% 0.0%

73% 33% 0.0%

69% 33% 0.6%

69% 33% 0.0%

69% 33% 0.0%

50% 50% 0.0%

50% 50% 0.0%

65% 33% 0.0%

46% 50% 1.3%

62% 33% 0.0%

62% 33% 0.0%

38% 50% 5.5%

23% 67% 0.2%

54% 33% 0.0%

62% 25% 0.0%

46% 33% 4.3%

0% 83% 0.0%

27% 50% 6.0%

27% 50% 0.0%

38% 33% 0.0%

8% 50% 0.0%

8% 50% 0.0%

0% 50% 0.0%

0% 33% 0.0%

Toronto-Dominion Bank

Unilever

Banco Santander

Oil & Natural Gas Corporation

BNP Paribas

Coca-Cola

Occidental Petroleum

Chevron

Credit Suisse Group

Total

Amgen

United Technologies Corporation

AstraZeneca

Merck & Co

Hewlett-Packard

Banco Bradesco

Petrobras-Petrleo Brasil

Vale

Reliance Industries

Intel

Abbott Laboratories

AT&T

Lloyds Banking Group

3M

EDF Group

Qualcomm

Royal Bank o Canada

Amrica Mvil

Johnson & Johnson

Samsung Electronics

IBM

Procter & Gamble

Oracle

PetroChina

United Parcel Service

5.7

5.7

5.4

5.4

5.4

5.3

5.2

5.2

5.1

5.1

5.0

5.0

5.0

4.9

4.8

4.8

4.7

4.7

4.7

4.7

4.7

4.7

4.6

4.5

4.4

4.4

4.4

4.4

4.4

4.3

4.2

4.2

4.1

4.1

4.1

ACP OT CBC

62% 100% 8.3%

69% 100% 0.4%

46% 100% 17.3%

46% 100% 15.9%

62% 100% 0.0%

77% 83% 0.0%

85% 67% 5.6%

69% 83% 4.2%

54% 100% 0.0%

92% 58% 1.7%

85% 67% 0.0%

85% 67% 0.0%

96% 50% 3.3%

81% 67% 0.3%

77% 67% 0.0%

77% 67% 0.0%

92% 50% 0.0%

54% 83% 4.9%

23% 100% 18.3%

88% 50% 2.2%

88% 50% 2.1%

73% 67% 0.4%

38% 100% 0.0%

85% 50% 0.4%

31% 100% 1.7%

62% 67% 4.2%

81% 50% 1.2%

31% 100% 0.0%

81% 50% 0.0%

46% 83% 0.5%

77% 50% 0.4%

92% 33% 0.0%

88% 33% 1.7%

38% 83% 0.0%

88% 33% 0.0%


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1. INTRODUCTION

Countries around the globe are struggling to rebuild economies devastated by thenancial crisis. Yet many o the worlds largest publicly traded companies still donot demonstrate that they have put enough transparency measures in place to helpprevent another economic meltdown. These companies continue to publish too littleinormation about their commitments to comprehensive anti-corruption systems andtheir sprawling operations. They also report insuciently on their corporate structures,preventing clarity about their true impact in countries around the world. As a result,the worlds largest companies may contribute to an environment in which corruptioncan thrive.

This study analyses the transparency o corporate reporting on a range o anti-corruption measures among the 105 largest publicly listed multinational companies.1

Together these companies are worth more than US$11 trillion and touch the liveso people in more than 200 countries across the globe, wielding enormous and arreaching power. Their infuence goes beyond investors, stock markets, suppliersand customers it extends to those they employ and to the standards they set orworking conditions and behaviour around the world. This powerul economic orcecan be a source o innovation, competition and prosperity, but when misused theresult can be economic stagnation, poverty and inequality.

Corruption is a risk or multinationals on a number o ronts. Corruption destroysentrepreneurship, inhibits ree markets and undermines the stability vital to successuleconomies. It also enables enormous fows o illicit money outside the real economy in the orm o unpaid taxes, bribes and laundered unds. Companies recognise this,but now more than ever beore they must act to stop corruption. Transparency must

be their resolute response, to address one o the root problems o the economic andnancial crisis.

By adopting greater corporate transparency publicly reporting on activities andoperations companies provide the necessary inormation or investors, journalists,activists and citizens to monitor their behaviour. The importance o corporatetransparency or multinational companies is maniold as their infuence crossesmultiple jurisdictions. Multinationals operate through networks o related entitiesincorporated under diverse legislation but that are inter-related through myriadlegal and business connections. Without transparency, many o these are almostimpossible to trace.

Reporting on anti-corruption programmes, organisational transparency and country-by-country reporting gives a clear and comprehensive picture o a companysoperations, revenues, prots and taxation. As a result, stakeholders have theinormation to make inormed decisions and infuence corporate behaviour. Whileeven good reporting cannot ensure good company behaviour, it is an indication ocommitment, awareness and action. It also enables wrongdoing or misinormationto be more readily uncovered. Ultimately, companies with a good track record oreporting on their anti-corruption programmes and global activities are more likely tobe part o the solution than the problem.

4 Transparency International


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2. EXECUTIVE SUMMARY

Transparency International analysed publicly available inormation rom companywebsites. Building on the experience o two previous studies, Transparency inReporting on Anti-Corruption and Promoting Revenue Transparency2, the researchexplored three dimensions o transparency:

Publicreportingonanti-corruptionprogrammes:coveringbribery,facilitation

payments, whistleblower protection and political contributions

Organisationaltransparency:includinginformationaboutcorporateholdings

Country-by-countryreporting.

Multinationals have a long way to go to improve transparency. Approximately a hal o

the 105 companies do not publish inormation on their anti-corruption programmesand organisational transparency, and the average score in country-by-countryreporting is very low.

REPORTING ON ANTI-CORRUPTION PROGRAMMES

Although some multinational companies now report on their anti-corruptionprogrammes, there is signicant room or improvement with respect to the content osuch programmes. For example, ew indicate that acilitation payments are prohibitedand reporting on monitoring procedures tends to be weak.

There has been some progress since 2009 when the last Transparency in Reportingon Anti-Corruption was published.3 In particular, companies have improved in their

reporting o anti-corruption programmes rom an average o 47 per cent to 68 per cent.

ORGANISATIONAL TRANSPARENCY

Most o the 105 companies disclose ully owned subsidiaries, but the concept omateriality (See Box 4) limits detailed disclosure. Additionally only ew companiesdisclose their aliates, joint-ventures and other holdings. As a result, many relatedentities remain hidden rom public view and scrutiny. The more holdings a companyhas, the less likely it is that any single holding will rise to the level o material vis--vis the company as a whole. Thus signicant numbers o corporate holdings gounreported, which are oten those operating in the poorest and most vulnerablecountries.

5Transparency in Corporate Reporting: Assessing the Worlds Largest Companies


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COUNTRY-BY-COUNTRY REPORTING

Most o the companies disclose little or no nancialdata on a country-by-country basis. Where they do,disclosure is usually limited to discrete data on a ewselected jurisdictions. Very ew companies disclosenancial data across all countries o operations.

FINANCIAL SECTOR: SPECIAL SECTION

As the single largest sector in the sample, nancialcompanies vary in terms o their results, but ingeneral their perormance is poor: as a group theyperormed below average in all three dimensions otransparency. In the context o the nancial crisis,

and given the role o transparency in reducing riskin nancial markets, these results have prompted aspecial section on the nancial sector companiesevaluated in this report.

POLICYRECOMMENDATIONSTO MULTINATIONAL COMPANIES:

Companiesshouldpublishdetailedinformationon their anti-corruption programmes

Companiesshouldpublishcompletelistsoftheir

subsidiaries, aliates, joint ventures and otherrelated entities

Companiesshouldpublishindividualnancial

accounts or each country o operations

Atransparentandinformativecorporatewebsite,

available in at least one international language,should be the standard communication tool orall multinational companies

Inviewoftheirsignicantimpact,nancialcompanies should considerably improve theirreporting on all transparency-related issues andshould, in particular, extend their anti-corruptionprogrammes to cover agents and intermediariesacting on their behal and prohibit acilitationpayments.

TO GOVERNMENTS AND REGULATORYBODIES:

NationalgovernmentsandtheEuropeanUnion

should require companies under their jurisdictionto disclose all subsidiaries, aliates, joint-venturesand other related entities

NationalgovernmentsandtheEuropeanUnion

should require companies under their jurisdictionto report on a country-by-country basis.

TO THE INVESTOR COMMUNITY:

Institutionalandprivateinvestorsshoulddemand

reporting on anti-corruption programmes,organisational transparency and country-by-country reporting and actor this inormation intotheir investment decisions

Riskratingagenciesaswellascorporate

responsibility indices should include companycommitments to transparency measures as anintegral part o their evaluation process

Accountingstandardsrelatingtonancial

accounting as well as to corporate socialresponsibility reporting should include corruption-

relevant disclosures.

TO CIVIL SOCIETY ORGANISATIONS:

Civilsocietyorganisationsshouldgetinvolvedin

the monitoring o multinational businesses locatedor operating in their countries to promote greatertransparency

Civilsocietyorganisationsshouldfocusadvocacy

eorts on multinational businesses located oroperating in their countries to improve the depthand scope o their commitments to transparency,

and in particular, to improve their level o anti-corruption reporting.



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3. PROJECT RATIONALE

AND METHODOLOGYTransparency in Corporate Reporting: Assessing the Worlds Largest Companiesbuilds on Transparency Internationals existing work in combating corruption in theprivate sector. Although transparency does not necessarily equal good perormance,Transparency International believes that reporting demonstrates a companyscommitment to countering corruption and makes companies more easily accountableor shortcomings4 (see Box 2).

This study assesses the transparency o corporate reporting by the 105 largestpublicly listed multinationals, chosen according to their market value, based on data

collected or made available between June and 15 October 2011. We are awarethat relevant inormation may have been published by companies ater 15 October2011; however it is not taken into account in this report.* As the study is designed ormultinational companies only, companies that do not operate in multiple jurisdictionswere eliminated rom the sample.5

Transparency is measured on corporate reporting o three dimensions:

1. anti-corruption programmes

2. organisational structure

3. country-by-country reporting o revenues, transers and value sharing.

These dimensions are all undamental to transparency. Reporting on anti-corruption

programmes is a basic preventative measure and enables companies to showtheir stakeholders that they are committed to countering corruption. Transparentorganisational structures are necessary to ensure that contracts and nancial fowsare easily traceable. Country-by-country disclosure allows local citizens and civilsociety organisations to monitor companies business relations, transers and valuesharing practices, as well as the money transers to governments in the orm otaxation and licensing.

The principal outcomes o this report are:

Theproductionofanoverallindexthatrankscompaniesfromthebesttothe

worst perormers across all three dimensions

Theproductionofthreeseparatecompanyrankings,oneforeachdimension.

* Transparency International encourages companies to engage with us directly and inorm us orelevant changes to their public disclosure since October 2011 or prompted by this report.



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DATA COLLECTION AND ANALYSIS

The data were collected exclusively rom inormation or documents publicly availableon each listed companys global website, including relevant links embedded in them,

and collection was guided by a questionnaire structured along the three dimensionso transparency o corporate reporting:6

Reporting on anti-corruption programmes: the 13 questions in this sectionwere based on the Transparency International UN Global Compact ReportingGuidance on the 10th Principle against Corruption.7 The guidance was derivedrom the Business Principles or Countering Bribery developed by TransparencyInternational.8

Organisational transparency: the eight questions in this section ocused ondisclosure o companies related entities, including subsidiaries, associates, joint-ventures and other holdings.

Country-by-country reporting: or each country in which a company operates, a

set o ve questions relating to country-level nancial data was posed.

In conducting the research, Transparency International did not investigate the veracityor completeness o the published inormation and did not make any judgment aboutthe integrity o the inormation or practices disclosed. Preliminary data underwenta reliability check. The methodology, data and scores were shared with each o thecompanies, and they had the opportunity to review and comment on them. O the105 companies, 15 commented on the methodology and 52 took up the opportunityto review their data. Input rom the companies was validated, and corrections weremade as necessary and appropriate.9

SCORING SYSTEM

Each question was scored on a scale o 01, with 1 being the best score. For somequestions, a hal point was awarded.10 Points achieved or each question (13 in anti-corruption programmes, 8 in organisational transparency and 5 in country-by-countryreporting) were totalled per dimension. As the maximum numerical score is dierentor each o the three dimensions, results are expressed in this report as a percentage.

For example, under the dimension reporting on anti-corruption programmes, thereare 13 questions. The maximum score per question is 1, so the maximum numericalscore is 13. A perect numerical score o 13 is expressed in this report as 100 percent. A result o 50 per cent means that the company received only 6.5 points.

The overall index is derived rom taking a simple average o the results achieved oreach dimension, rescaled rom 010, where 0 is the worst and 10 the best score.

A note o caution regarding interpretation o the results: this report is based on datarelating to 105 companies. As such, conclusions relate to these 105 companies only.With the exception o the nancial sector, the sample sizes are too small to supportbroad conclusions.



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BOX 1: BEST PRACTICE

THE DIMENSIONS OF TRANSPARENCY COVERED BY THE STUDY: Public reporting on anti-corruption programmes

based on the Transparency International UN Global Compact ReportingGuidance on the 10th Principle against Corruption

Disclosure of organisational transparency in corporate holdingsincluding subsidiaries, aliates, joint-ventures and other holdings

Country-by-country reportingon basic nancial data and community contributions

Statoil, Rio Tinto and BHP Billiton achieved the top three positions in the index.These were also the only companies that scored in the top 10 in each o thethree dimensions o transparency.

STATOIL (NORWAY, OIL & GAS):

100percentinreportingonanti-corruptionprogrammes

Disclosesallrequiredinformationonorganisationaltransparencyexceptor its countries o operations

Disclosesinformationonrevenues,taxesandcommunitycontributionson a country-by-country basis or all countries in which it operates.

RIO TINTO (AUSTRALIA/UK, BASIC MATERIALS):

Reportsonallrequiredelementsofanti-corruptionprogrammesexceptor regular monitoring o such programmes

Disclosesallrequiredinformationonorganisationaltransparency

Disclosesinformationontaxesonacountry-by-countrybasisforall

countries in which it operates.

BHP BILLITON (AUSTRALIA/UK, BASIC MATERIALS):

Reportsonallrequiredelementsofanti-corruptionprogrammesexceptor political contributions

Disclosesallrequiredinformationonorganisationaltransparencyexceptor countries o operations

Disclosesinformationontaxesonacountry-by-countrybasisforalmostall countries in which it operates.



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4. REPORTING ON

ANTI-CORRUPTIONPROGRAMMES

istockphoto.com/Chalabala


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68%AVERAGE

HIGHEST PERFORMING:

BASF, BG GROUP, STATOIL

0%WORST PERFORMING:BANK OF CHINA, BANK OFCOMMUNICATIONS, GAZPROM

100%


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4. REPORTING ON ANTI-

CORRUPTION PROGRAMMESAnti-corruption programmes constitute a companys rst line o deence againstcorruption in its many orms. Full and transparent disclosure o such programmesunderscores a commitment to countering corruption and enhances ethical conductamong management, employees, partners, agents and other relevant partiesthroughout the value chain.

In 2009, the Transparency International UN Global Compact Reporting Guidance onthe 10th Principle against Corruption11 was issued. This practical tool, derived romthe Business Principles for Countering Bribery12, sets out clear recommendations

or companies on the elements o their anti-corruption programmes that should bepublicly disclosed.

Companies and their employees already know the value o anti-corruptionprogrammes: a study by PricewaterhouseCoopers ound that having an anti-corruption programme in place and publicising it was seen as valuable or veryvaluable to a companys brand by 86 per cent o companies surveyed. 13

BOX 2: IS REPORTING ON ANTI-CORRUPTION PROGRAMMESMEANINGFUL?

Some argue that the level o reporting a company makes is a supercialindicator, that reporting and compliance or good behaviour are not thesame thing.

While recognising that reporting and compliance are not the same, there arestrong arguments supporting the role o good reporting:

Thelegalandreputationalriskstowhichacompanyexposesitselfby

making alse public statements act as a deterrent

Publiccommitmentsmakeacompanyaccountabletoallitsstakeholders

and to the general public

Publiccommitmentsfacilitatemonitoringbystakeholdersandthe

general public Goodpublicreportingsupportsandpromotesgoodbehaviour

Thepublicationofanti-corruptionpoliciesbymultinationalcompanieshas

a positive impact on employees worldwide because it conrms the parentcompanys committment and support or ethical behaviour.



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COMPANY RESULTSCompanies had an average o 68 per cent in their reporting on anti-corruption

programmes. This indicates a positive trend since Transparency Internationals 2009report on corporate reporting practices.

Three companies, all based in Europe, achieved maximum possible scores: BASF,BG Group and Statoil. Hal o the companies achieved 77 per cent or higher and14 companies got more than 90 per cent. The bottom o the ranking is occupied bytwo Chinese banks and one Russian state-controlled oil and gas company: Bank oChina, Bank o Communications and Gazprom.

The question that received the maximum possible score asked i a company publiclycommits to complying with all relevant laws, including anti-corruption laws. Othe 105 companies, 97 publish such a commitment (including all US companies).The most troublesome question was on acilitation payments (see Diagram 3).14Some companies report having updated their policies on acilitation payments byintroducing a ull prohibition during or ater completion o the research, while othershave revealed that relevant updates will be adopted and published soon. Overall,however, results on the prohibition o acilitation payments were disappointing.

100%

96%

92%

88%

85%

81%

77%

73%

69%

65%

62%54%

50%

46%

38%

31%

BASF, BG Group, Statoil

AstraZeneca, Westpac

BHP Billiton, BP, ENI, HSBC, Novartis, Petrobras, P&G, Rio Tinto, Total

Abbott, Allianz, ANZ, ExxonMobil, Intel, Oracle, Siemens, UPS

3M, Amgen, ArcelorMittal, ENEL, GDF Suez, GlaxoSK, Occidental Petrol, PMI, Shell, UTC, Vodaone

Bayer, BAT, Citigroup, FT, GE, Home Depot, J&J, JPMorgan, LOral, Merck, RBC

Bradesco, Coca-Cola, E.ON, HP, IBM, McDonalds, Pzer, Roche, Sano-Aventis, Wal-Mart

AT&T, Conoco, DT, Nestl, PepsiCo, Visa

Barclays, Chevron, Cisco, Microsot, Saudi Basic, Schlumberger, Telenica, Tesco, Unilever, Walt Disney

SAP, Verizon

Anheuser, Apple, B America, BNP, Qualcomm, TD Bank

Credit Suisse, Google, Vale

Goldman, Teva

Santander, MUFJ, ONGC, Samsung, Toyota

Berkshire, Commonwealth B, Lloyds, PetroChina

AmricaMvil, EDF Group

Nippon, Amazon

Canon, Reliancelnd

CNOOC, ICBC

CCB, Honda

B China, B Communications, Gazprom

27%

23%

8%

0%

15%

Diagram 2Reporting on Anti-Corruption Programmes

Where 100% means ull transparencyon anti-corruption programmes



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Diagram 3Reporting on Anti-Corruption Programmes:

Analysis by QuestionNumber o companies scoring1, 0.5, or 0 respectively, out o 105analysed companies

0.5 POINT1 POINT 0 POINTS

# OF COMPANIES RECEIVING

897

10

4361 1

94

16485

356

20382

46

5055

562326

8221 2

2480 1

26475

1986

1

20184

QUESTION

Compliance with laws committment

Code applies to all employees

Condential reporting channel

Leadership support

Prohibition o retaliation or reporting

Gits, hospitality, travel

Training programme in place

Zero-tolerance statement

Code applies to suppliers

Regular programme monitoring

Code applies to agents

Disclosure o political contributions

Prohibition o acilitation payments



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INDUSTRY HIGHLIGHTSFinancial companies constitute the biggest industry group in the sample (24

companies) and they received the lowest average result o 56 per cent. Withinthis group, results range across the entire spectrum (0 to 96 per cent). As a groupthe nancial companies underperormed on every question in this section, mostsignicantly with respect to reporting the prohibition o acilitation payments (only twobanks posted a positive score in this area).

Oil and gas and basic materials include the ull range o scores. This group includedthe three best perormers (BASF, BG Group and Statoil) and the worst perormer(Gazprom scoring 0).15

The average perormance o the 11 healthcare companies was good; only Israeli Tevareceived a score below the sample average. Still, weak perormance on disclosure opolitical contributions in the healthcare industry should be noted.

Among the 11 technology companies, the average perormance was 69 per cent.Qualcomm is the only company in this group that has a publicly available policyprohibiting acilitation payments. The only internet company in the group, UScompany Google, posted a perormance o 54 per cent.

Among telecommunication and uti lities companies evaluated, the most strikingeature is that French companies occupy both the rst and the last positions. WhileGDF Suez achieved 85 per cent, its industry and country peer EDF Group received31 per cent.

82% 7 companies

11 companies

11 companies

4 companies

8 companies

17 companies

17 companies

24 companies

6 companies

81%

75%

69%

69%

68%

67%

63%

56%

Basic materials

Healthcare

Industrials

Technology

Utilities

Oil & Gas

Consumer goods & services

Telecommunication

Financials*

Diagram 4Reporting on Anti-CorruptionProgrammes: Average CompanyPerormance by Industry

Where 100% means ull transparency onanti-corruption programmes.



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5. ORGANISATIONAL

TRANSPARENCY

istockphoto.com/Nikada


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72%AVERAGE

100%HIGHEST PERFORMING:45 OUT OF 105 COMPANIES

25%WORST PERFORMING:ANHEUSER-BUSCH INBEV


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5. ORGANISATIONAL

TRANSPARENCYOrganisational transparency is particularly important in the case o multinationalcompanies that operate through a network o interconnected subsidiaries, aliates,joint-ventures and other holdings that may be incorporated in diverse jurisdictions,including secrecy jurisdictions. Critical issues such as inter-company nancial fowscan only be ollowed i corporate networks are disclosed.

To determine the dimension o the report ocusing on organisational transparency,the amount o inormation companies disclose on their related holdings is assessed.16Questions cover the names, percentage holdings and country o operations or both

ully consolidated and non-ully consolidated company holdings.

17

Local stakeholders need to know which companies are operating in their territories,bidding or government licences or contracts, or have applied or or obtainedavourable tax treatment. They need to know to which international corporatenetworks these companies belong and how they are related to other companiesoperating in the same countries. Disclosure o corporate holdings shines a lighton corporate practice when it comes to such issues as intra-company payments,government payments and transparency in general. The need or transparencyis especially acute in the developing world, where both public and private sectoropenness may not refect highest standards and/or enable citizen oversight.



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BOX 3: COUNTRIES OF INCORPORATION V COUNTRIES OFOPERATIONS

Country of incorporation reers to the jurisdiction in which the companyis created. It denes rules o corporate governance, applicable regulatoryand tax regimes. Country of operations reers to where a companyactually engages in business (holds assets, enters into contracts,maintains premises, generates revenues, employs people, impacts on theenvironment).

Sometimesthecountryofincorporationandoperationsarethesame,

sometimes they are dierent. The ollowing table provides some examples(rom the companies assessed) o when the two are dierent:

Transparency International recommends ull disclosure o both the countryo incorporation and o operations. Such inormation is critical to multiplestakeholders (investors and citizens) in both countries in order to determine thetrue nature and extent o a companys activity.

COMPANY HOLDING COUNTRY OFINCORPORATION

MAIN COUNTRYOF OPERATIONS

1 A Bahamas Algeria

B British Virgin Islands Azerbaijan

C British Virgin Islands Russia

D Cayman Islands Azerbaijan

E Cayman Islands Azerbaijan

2 A Cayman Islands Bolivia

B Cayman Islands Egypt

C Cayman Islands India

3 A Cayman Islands New York, USA

B Cayman Islands London

C British Virgin Islands Bangkok

D Turks & Caicos Islands Florida, USA

E British Virgin Islands New York, USA

4 A Bermuda Indonesia

B Bermuda Indonesia

C Singapore Australia

D Isle o Man Indonesia

5 A Jersey Middle East

B Bermuda Hong Kong



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COMPANY RESULTSThe average result in organisational transparency was 72 per cent and 45 out o the

105 companies achieved maximum possible scores. While this may appear to be agood result, it must be seen in the context o this study, the requirements o whichare relatively easy to achieve, needing only the disclosure o material entities (to theexclusion o non-material entities - see Box 4).

Diagram 5Organisational Transparency

Where 100% means ull organisationaltransparency

COMPANIES%

100%

83%

67%

58%

50%

33%

25%

Allianz, Amrica Mvil, ANZ, ArcelorMittal, BASF, Bayer, BG Group, BHP Billiton, BNP, BP, BAT, CNOOC, Credit Suisse, DT, E.ON, EDF Group, ENEL, ExxonMobil,

FT, GDF Suez, GE, GlaxoSK, Home Depot, HSBC, ICBC, Lloyds, LOral, Nestl, Novartis, ONGC, Reliance Ind, Rio Tinto, Roche, Santander, Shell, Sanof-Aventis,

SAP, Siemens, Statoil, Telenica, Tesco, TD Bank, Unilever, Vodaone, Wal-Mart

Chevron, Coca-Cola, ENI, Gazprom, PetroChina, Samsung, Vale, Westpac

Amgen, AT&T, Bradesco, Canon, HP, Merck, Occidental Petrol, Qualcomm, UTC

Total

3M, Abbott, Amazon, AstraZeneca, B Communications, Barclays, CCB,

Commonwealth B, Goldman, Honda, IBM, Intel, J&J, MUFJ, Nippon, Petrobras,

RBC, Saudi Basic, Schlumberger, Teva

Apple, B America, B China, Berkshire, Cisco,

Citigroup, Conoco, Google, JPMorgan, McDonalds,

Microsot, Oracle, PepsiCo, Pfzer, PMI, P&G, Toyota,

UPS, Verizon, Visa, Walt Disney

Anheuser



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BOX 4: MATERIALITY

Inorganisationaltransparency,companieswereevaluatedontheirdisclosure omaterialentities.

Materialityis dened by applicable accounting standards, regulations andstock exchange rules. For example, in the US, materiality is dened by theSEC as ollows:

1. the investment exceeds 10 per cent o the companys consolidatedassets

2. the share in the subsidiarys assets exceeds 10 per cent o its ownconsolidated assets

3. the share in the subsidiarys income beore tax exceeds 10 per cent o its

own consolidated income.

Thelistofmaterialholdings can be surprisingly short because theapplication o the materiality rules to each individual holding can result in theexclusion o many o them. Thus, a company that operates through ully-owned subsidiaries in 40 countries could end up listing only a handul osubsidiaries because no single subsidiary ismaterialon its own. The moreholdings a company has, the less likely any one o them will bematerial.

Theholdingsmostlikelytobenon-materialandthereforeomittedarethose

rom developing countries and secrecy jurisdictions, but these are exactlythe holdings that companies should disclose because they are the ones orwhich inormation is otherwise unavailable.

Becausematerialitycan prove to be a signicant limiting actor, TransparencyInternational strongly encourages multinational companies to publicly discloseexhaustive lists o their holdings, regardless o theirmateriality. Such lists shouldbe readily accessible on the company website.



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INDUSTRY HIGHLIGHTSAll our utility companies received maximum possible scores. Technology companies,

at the other end o the spectrum, disclosed the least inormation on their corporatestructures.

The largest industry group, the nancial sector, received an average o 67 per cent,below the sample average. Although eight nancial companies received maximumpossible scores, no US nancial services rm was among them.

Among consumer goods and services, seven companies posted maximum possiblescores, ve o them European and two rom the US: the average result was 65 percent.

Oil and gas and basic materials generally perormed well in this dimension. Amongthe 24 companies representing these two groups there were 13 maximum possibleresults and only one company achieved less than 50 per cent. The Chinese

companies rom this industry scored well on their disclosure o subsidiaries.

The technology industry received the worst average result o 53 per cent. Only thetwo non-US based companies, SAP and Samsung, perormed highly.

Healthcare companies had an average o 70 per cent, close to the average or thewhole sample. Pzer posted the weakest result (33 per cent) and AstraZeneca wasthe only European company that did not receive a maximum possible result.

Both utilities and telecommunication perormed well. As with the other groups, thedierences in the telecoms industry were region-bound, with the US companiesperorming worse than the Europeans.



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Diagram 6Organisational Transparency:

Average Company

Perormance by IndustryWhere 100% means ull organisationaltransparency

100% 4 companies

7 companies

8 companies

11 companies

17 companies

6 companies

24 companies

11 companies

17 companies

90%

82%

81%

70%

69%

67%

65%

53%

Utilities

Basic materials

Oil & Gas

Telecommunication

Healthcare

Industrials

Financials

Consumer goods & services

Technology



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6. COUNTRY-

BY-COUNTRYREPORTING

istockphoto.com/Brasil2


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4%AVERAGE

50%HIGHEST PERFORMING:STATOIL

0%WORST PERFORMING:41 OUT OF 105 COMPANIES


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6. COUNTRY-BY-COUNTRY

REPORTINGThis section evaluates country-by-country disclosure o international operations bymultinational companies. An industry-neutral set o criteria was used to measure thedegree o transparency in nancial reporting o revenues, capital expenditure, incomebeore tax, income tax, and community contributions.

Citizens, including those in developing countries that oten host multinationals, musthave adequate inormation in order to assess the activities o companies operatingin their territory. These businesses generate revenues and prots locally and socontribute to the public budget through royalties, taxation and the like. Government

contracts may include, or example, tax incentives, which need to be transparentlyand airly negotiated and disclosed. In this way, local authorities can be heldaccountable to their citizens and to the international community. In the absence ocountry-by-country reporting, the local public is unaware o how much prot suchoperations generate and what, i any, special arrangements their governments mayhave entered into with multinational companies.

The importance o ull and transparent disclosure on a country-by-country basisis apparent throughout the developing world. For example, in resource-richMozambique, multinational companies that engage in large mining projects areexempt rom corporate tax, import and export duties, VAT and sometimes evenincome tax payments.18 The ailure o multinational companies to report ully onall their operations in Mozambique, one o the worlds poorest countries, makes itdicult, i not impossible, or the people o Mozambique to demand accountabilityrom the multinationals and their government or such practices.



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COMPANY RESULTSMultinational companies operate globally and they typically report to the tax

authorities in each country where their subsidiaries are incorporated or doingbusiness. This means that multinational companies possess nancial inormationinternally on a country-by-country basis, but they rarely present it in this orm tothe public.

The graphical presentation (Diagram 7) o company ranking or country-by-countryreporting is dramatic. First, the high concentration o companies at the very bottomo the scale indicates a very weak perormance. Second, the scale tops out at 50per cent, which means that the best scoring company received only a hal o themaximum possible score. Third, there is just one company on the very top (Statoil),10 companies in the mid-range, 53 companies in the range rom 0.1 per cent to 10per cent and 41 companies scoring zero.19

The average result in this category was only about our per cent. This very weak resultmay be attributed to any one or all o several actors. First, reporting on a country-by-country basis has not yet been the subject o regulatory attention. This shouldimprove as relevant legislation that requires extractive companies to report paymentsto governments comes into eect (in the United States the Dodd-Frank Act andsimilar legislation pending in the EU). Second, companies tend to aggregate theiraccounts only by region or reporting purposes, even though country-level data isavailable to them. While regional presentation may be easier, valuable detail is lostin the aggregation.

Statoil is by ar the best perormer in this category. This European, but non-EU company, discloses a set o nancial data, including details o payments togovernments, in all its countries o operations. This type o disclosure has been madeon a yearly basis or several years. Transparency International strongly encouragesother multinational companies to signicantly increase their perormance.

There are only our companies in the sample that disclose at least one type onancial data across all (or almost all) countries o operations: BHP Billiton, Rio Tinto,Statoil and Tesco.



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Diagram 7Country-by-Country Reporting

Where 100% means a company is ully

transparent in all its countries o operation

COMPANIES%

50%

26%

24%

21%

18%

17%

16%

15%

14%

9%

8%

6%

5%

4%

3%

2%

1%

0%

Statoil

Tesco

Rio Tinto, BHP Billiton

ArcelorMittal

Reliance Ind

Santander, FT

ONGC

Telenica

Wal-Mart

SAP

Allianz, HSBC, TD Bank, Vodaone

Amazon, BP, DT, Occidental Petrol

Commonwealth B, Vale

Chevron, ExxonMobil, Nestl, Qualcomm, Toyota

AstraZeneca, Conoco

Abbott, BAT, Bayer, BG Group, EDF Group, E.ON, GlaxoSK, Intel, Novartis, Oracle, Shell, Total, Westpac

ANZ Bank, Barclays, Cisco, CNOOC, ENEL, ENI, GDF Suez, ICBC, MUFJ, RBC, Roche, Samsung, Schlumberger, Siemens,

3M, Amrica Mvil, Amgen, Anheuser, Apple, AT&T, B America, B China, B Communications, Bradesco, BASF,

Berkshire, BNP, CCB, Canon, Citigroup, Coca-Cola, Credit Suisse, Gazprom, GE, Goldman, Google, HP, Home Depot,Honda, IBM, J&J, JPMorgan, Lloyds, LOral, McDonalds, Microsot, Merck, Nippon, PepsiCo, Petrobras, PetroChina,

Pfzer, PMI, P&G, Sanof-Aventis, Saudi Basic, Teva, Unilever, UPS, UTC, Verizon, Visa, Walt Disney



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BOX 5: EXAMPLES OF GOOD COUNTRY-BY-COUNTRYDISCLOSURE

Transparency International looked at ve areas o nancial reporting on acountry-by-country basis: revenues, capital expenditure, income beore tax,income tax, and community contributions.

Among the selected companies, only our disclosed some o the nancial datain all countries in which they operate: Statoil, Tesco, Rio Tinto, BHP Billiton.

STATOIL

Score:50percent

37countriesofoperation(includingNorway)

Thecompanydisclosesacomprehensivecountry-by-countrydatatableand

includes all countries in which it operates. It includes the ollowing nancialdata: revenues, taxes and community contributions.

TESCO

Score:26percent

14countriesofoperation(includingtheUK)

Thecompanydisclosesrevenuesonacountry-by-countrybasisforall

countries in which it operates (the revenue or India is not explicitly stated,but it can be easily calculated)

Someadditionaldatapointsoncapitalexpenditureandcommunity

contributions are published.

RIO TINTO

Score:24percent

28countriesofoperation(includingtheUKandAustralia)

Thecompanydisclosestheamountoftaxespaidonacountry-by-country

basis or all countries in which the company operates

Someadditionaldata(revenuesforsixcountries)arealsopublished.

BHP BILLITON

Score:24percent

15countriesofoperation(includingtheUKandAustralia)

Thecompanydisclosestaxesonacountry-by-countrybasisforallits

countries o operations except or Mozambique.

Someadditionaldatapointsoncapitalexpenditureandrevenuesarealso

disclosed.



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The remaining companies only disclose limited data on a limited number o selected countries.Most requently, they reveal their country-by-country data on sales and income taxes and partialdata on community/charitable contributions. Least requent is disclosure on capital expenditure.

Three companies: ONGC, Reliance Industries and SAP disclose certain nancial data ona subsidiary basis, which is a step towards corporate transparency, but dierent and lessinormative than country-by-country disclosure. For these companies, partial scores wereawarded or this commitment to greater transparency, but Transparency International encouragesthem to take urther steps and add country-by-country disclosure to their reporting. For morediscussion o this issue, see Box 6.

BOX 6: SUBSIDIARY-BY-SUBSIDIARY VS. COUNTRY-BY-COUNTRY REPORTING

Some companies in our sample report partial nancial data on a

subsidiary-by-subsidiary basis. They are:

ONGC(India)

RelianceIndustries(India)

SAP(Germany)

Such reporting is a positive step towards greater transparency because:

Itconstitutesagoodbasistoevaluatesubsidiaryperformanceandrelated taxation

Itallowsformoretransparencyininter-companyowswithinmultinational

corporations.

However, country-by-country reporting is preferable because:

Largersubsidiariesmayhavecross-borderoperations.Inthiscase,country-

level disclosure is lost by reporting only on a subsidiary level.

Smallersubsidiariesmaybeomittedasnon-material,buttheremaybe

severalsuchnon-materialsubsidiariesinagivencountry,makingthe

companys presence in that country quite relevant overall.

Why do we advocate for country-by-country reporting?

Itexposesthelinkbetweentheparentcompanyandthelocaljurisdictionin which it operates, making companies accountable in both places

Itprovidesabasisonwhichtoevaluateallofthecompanysactivitiesin

a particular country: its sales, costs, prots, royalties, taxes Itshedslightonanyspecialarrangementsbetweengovernmentsand

companies, resulting in greater accountability

Itensuresdisclosureofallholdings,materialandnon-material.



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INDUSTRY HIGHLIGHTSThe best perorming sectors were basic materials and oil and gas achieving the

highest average scores. Companies rom these two industries took six o the top 10positions in the ranking.

Among the 24 nancial institutions evaluated, 13 companies disclose no data ontheir oreign operations, seven companies disclosed single data points and only ourcompanies disclosed considerable country-level data: Allianz, Banco Santander,HSBC and Toronto-Dominion Bank.

Among the 17 consumer goods and services companies, 10 companies disclosed norelevant data, two companies disclosed single data points and only ve companiesdisclosed considerable country-level data, among which Tesco made it to the secondposition in the ranking.



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Diagram 8Country Level Reporting Examples

Where 100% means a company ully reports on itsoperations in the specied country

KAZAKHSTAN

ENI

ONGC

Allianz

Arcelor

Chevron

SAP

30 other

companies

NIGERIA

Statoil

ONGC

Shell

Chevron

CNOOC

Total

BAT

GlaxoSK

SAP

24 other

companies

Gazprom

Statoil

BP

ONGC

Allianz

Arcelor

Conoco

ENEL

Nestl

BAT

SAP

60 other

companies

RUSSIA

DIFFERENT LEVELS OF DISCLOSURE ON OPERATIONS IN THE SAME COUNTRY

40%

40%

0%

0%

0%

20%

20%

20%

20%

20%

20%

20%

20%

20%

20%

20%

10%

30% 30%

30%

30%

50% 50%

50%

10%

10%

10%

10%

10%

Companies oten argue that country-by-country reporting can be hindered by locallegal, regulatory or even inormal requirements. This argument is most oten putorward in the context o developing countries.

Kazakhstan, Nigeria and Russia were examined to assess the validity o thisargument. It was ound that even in these challenging environments, somecompanies were able to disclose inormation, even i the majority did not.

In the diagram below the three countries are compared. Thirty-six companies romour sample operate in Kazakhstan, o which 30 disclose no data on their Kazakhoperations. Among the six companies that disclose some data on their operations inKazakhstan, results range rom 10 per cent to 40 per cent. Among the 33 companiesoperating in Nigeria, 24 report no data and the remaining nine achieve resultsbetween 10 per cent and 50 per cent. Among the 71 companies operating in Russia,only 11 produce any country-level reporting and they received results o between 10per cent and 50 per cent.

Such observations demonstrate that local conditions are not an excuse or poorcountry-by-country reporting. Companies that make the eort can disclose country-by-country inormation even in challenging environments.



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In contrast to the poor results in country-by-country reporting with respect to theirinternational activities, companies disclose considerable data on their domesticoperations. Two companies, Exxon Mobil and 3M achieved 100 per cent,which means that they disclose all recommended data or their US operations.

Disappointingly however, 12 companies, among them six Europeans, received a zeroscore or disclosure with respect to their domestic operations.

I companies can achieve good levels o disclosure with respect to their domesticactivities (note that Chinese companies perormed relatively well in reporting ondomestic operations), it should be possible or them to do the same or overseasoperations.



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7. FINANCIAL SECTOR:

SPECIAL SECTION

istockphoto.com/Nikada


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4.2/10AVERAGE

HIGHEST PERFORMING:

HSBC HOLDINGS

1.1/10WORST PERFORMING:BANK OF CHINA

6.7/10


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7. FINANCIAL SECTOR:

SPECIAL SECTIONFinancial companies constitute the single largest industry sector in the sample.Among the 24 nancial institutions in the survey there are 19 banks, our diversiednancial service providers and one insurance company. They are incorporated in 11dierent countries: six in the US, our in China, three in Australia, three in the UK, twoin Canada and one in each o the ollowing countries: Brazil, France, Germany, Japan,Spain and Switzerland.

The recent global nancial crisis highlighted the need to broaden the discussionabout regulation and oversight o the nancial system. Transparency and related risk

assessments o nancial institutions have surged to the top o the agenda.In the overall index, nancial companies scored on average 4.2. One US and threeChinese companies are among the least transparent o those assessed.

HSBC Holdings

Allianz

ANZ Banking



Banco Santander

BNP Paribas

Credit Suisse Group

Banco Bradesco


Royal Bank o Canada

Barclays

Industrial and Commercial Bank o China (ICBC)

Citigroup

JPMorgan Chase

Visa

Goldman Sachs Group


Bank o America

Commonwealth Bank

Berkshire Hathaway



Bank o China

6.7

6.6

6.3

6.0

5.7

5.4

5.4

5.1

4.8

4.6

4.4

4.0

3.9

3.8

3.8

3.5

3.3

3.2

3.2

3.1

2.4

1.9

1.7

1.1

ACP OT CBC

92% 100% 8.0%

88% 100% 8.5%

88% 100% 0.8%

96% 83% 1.7%

62% 100% 8.3%

46% 100% 17.3%

62% 100% 0.0%

54% 100% 0.0%

77% 67% 0.0%

38% 100% 0.0%

81% 50% 1.2%

69% 50% 0.8%

15% 100% 1.1%

81% 33% 0.0%

81% 33% 0.0%

73% 33% 0.0%

50% 50% 0.0%

46% 50% 1.3%

62% 33% 0.0%

38% 50% 5.5%

38% 33% 0.0%

8% 50% 0.0%

0% 50% 0.0%

0% 33% 0.0%

Diagram 9Index Results in theFinancial Sector

Scale 0-10 where 0 is the leasttransparent and 10 is the mosttransparent. This Index is basedon the unweighted average oresults in all three categories.

ACP = result or reporting onanti-corruption programmes

OT = result or organisationaltransparency

CBC = result or country-by-country reporting



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REPORTING ON ANTI-CORRUPTIONPROGRAMMESThe average result in reporting on anti-corruption programmes was 56 per cent,which is the lowest result among all industry groups. While this result refects the actthat our Chinese banks occupied the last our positions, it is worth mentioning thatthe remaining nancial companies were also below average. The best perormingnancial institution was Westpac Banking Group, which achieved a close to maximumpossible score, missing only hal a point in monitoring its anti-corruption programmes.

The large disparity in scores refects the act that such reporting is mostly voluntary.Financial companies, although highly regulated, are generally ree to choosethe level o public disclosure regarding their anti-corruption programmes. Somenancial institutions expressed concern regarding disclosure o their anti-corruptionprogrammes, indicating that they viewed these as part o their internal riskmanagement. As such, they argue, these programmes should be kept condential inorder to gain competitive advantage. However, results show that some banks scorewell in this dimension. It is thereore possible to separate disclosure o proprietary riskmodels rom best practice in anti-corruption reporting.

Diagram 10Reporting on

Anti-CorruptionProgrammes inthe FinancialSector

Where 100% means ulltransparency on anti-corruption programmes

ASIA

AUSTRALIA

BRAZIL

EUROPE

USA & CANADA

INCORPORATED IN:


HSBC Holdings

Allianz

ANZ Banking

Citigroup

JPMorgan Chase

Royal Bank o Canada

Banco Bradesco

Visa

Barclays

Bank o America

BNP Paribas


Credit Suisse Group

Goldman Sachs Group

Banco Santander


Berkshire Hathaway

Commonwealth Bank


ICBC


Bank o China


96%

92%

88%

88%

81%

81%

81%

77%

73%

69%

62%

62%

62%

54%

50%

46%

46%

38%

38%

38%

15%

8%

0%

0%

FINANCIAL COMPANIES



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Based on the publicly available documents Transparency International evaluated,nancial institutions do not report having extended their anti-corruption policies tothe agents and intermediaries acting on their behal. They also do not report havingapplied such requirements to other third parties with whom they do business, such as

contractors and suppliers.

Facilitation payments are another issue that has rarely been addressed in publicinormation by companies in the nancial sector: only ve o the 24 companies reportthat they prohibit such payments. Full disclosure o policies on political contributionsand any actual political contributions made is another area that needs signicantimprovement.

ORGANISATIONAL TRANSPARENCYThe average result in this group was 67 per cent as compared to 72 per cent orthe sample population. Among the nancial companies scoring in the top 10 or

organisational transparency, there was not a single US nancial institution. Chinesebanks perormed much better in organisational transparency than they did inreporting on anti-corruption policies. O the seven European banks, six receivedmaximum possible scores in organisational transparency.



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Diagram 11Organisational Transparencyin the Financial Sector

Where 100% means ull organisationaltransparency

Allianz

ANZ Banking

Banco Santander

BNP Paribas

Credit Suisse Group

HSBC Holdings

ICBC




Banco Bradesco


Barclays


Commonwealth Bank

Goldman Sachs Group


Royal Bank o Canada

Bank o America

Bank o China

Berkshire Hathaway

Citigroup

JPMorgan Chase

Visa

100%

50%

33%

33%

33%

50%

33%

33%

FINANCIAL COMPANIES

33%

50%

50%

50%

50%

50%

67%

83%

100%

100%

100%

100%

100%

100%

100%

100%

ASIA

AUSTRALIA

BRAZIL

EUROPE

USA & CANADA

INCORPORATED IN:



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COUNTRY-BY-COUNTRY REPORTINGThe average result or nancial companies on country-by-country reporting was a

very low 2.3 per cent. The best perormer, Banco Santander, received only 17.3 percent. While reporting even less inormation, Allianz, Toronto-Dominion Bank, HSBCand Commonwealth Bank perormed relatively well compared to their peers. Six othernancial companies disclosed almost no inormation on a country-by-country basis,and the remaining 13 disclosed nothing at all in this dimension.

Transparency International strongly advocates or greater transparency in the nancialsector. Multinational nancial businesses, those that are too big to ail, play a criticalrole in ensuring the soundness o and condence in the global economy. The resultso this research indicate that these players are not transparent in reporting on anti-corruption programmes, organisational transparency or country-by-country reportingand should be playing a greater part in combating corruption.

I and when nancial institutions ail to sel-regulate, governmental regulators need tostep in. And where voluntary or imposed regulation ails, investors and civil society

must raise their voices and demand greater transparency.

Banco Santander

Allianz


HSBC Holdings

Commonwealth Bank



Royal Bank o Canada

ICBC

ANZ Banking

Barclays

Banco Bradesco

Bank o America

Bank o China


Berkshire Hathaway

BNP Paribas


Citigroup

Credit Suisse Group

Goldman Sachs Group

JPMorgan Chase


Visa

17.3%

54%

0%

0%

0%

0%

0%

0%0%

FINANCIAL COMPANIES

0%

0%

0%

0%

0%

0%

0.8%

0.8%

8.5%

8.3%

8.0%

5.5%

1.7%

1.3%

1.2%

1.1%

Diagram 12Country-by-CountryReporting by FinancialSector Companies

Where 100% means a company isully transparent in all its countrieso operation

ASIA

AUSTRALIA

BRAZIL

EUROPE

USA & CANADA

INCORPORATED IN:



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8. POLICY

RECOMMENDATIONSOn the basis o the analysis, Transparency International has ormulated the ollowingpolicy recommendations.

TO MULTINATIONAL COMPANIES:

Anti-corruption programmes should be publicly available.

Public reporting on anti-corruption commitments increases credibility andaccountability: it sends a strong and clear message to stakeholders, gives support

to employees, and enhances anti-corruption eorts.Good results in this dimension o the study indicate that many companies havealready adopted relevant reporting standards. Nevertheless, even among the biggestpublicly listed multinationals, there are a number who may claim to have appropriateinternal policies, but do not report on them.

Companies should publish exhaustive lists of their subsidiaries, afliates,

joint-ventures and other related entities.

Currently, many companies publish lists o their material subsidiaries; somecompanies also list their material aliates and joint-ventures, but only a smallnumber o multinational companies publish inormation on all o their related entities.The materiality criteria can result in the exclusion o many holdings that are relevant

or understanding and evaluating a companys tax structure and anti-corruptioncompliance. For example, a subsidiary operating in a developing country in whichtax collection is a major problem oten does not meet the materiality criteria o abig multinational company, although the scale o its operations is signicant to thelocal population.

Such lists o all holdings do not have to be included in annual reports, but they shouldbe easily accessible rom corporate websites in one orm or another. Ideally, theyshould include inormation on each company name, the percentage owned by thegroup, the place o incorporation and some basic inormation on company operations(i.e., where it is and what kind o business it conducts).

Companies should publish individual nancial accounts for each country

of operations.

While publishing individual nancial accounts or each country represents arelatively small incremental eort or multinational companies, as the inormationis already available to them internally, it will have a big impact on the countries inwhich they operate. Currently, very ew companies publish their data on a country-by-country basis and even the companies that do usually limit their disclosure to asmall set o data.



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While most companies declare their commitment to supporting local communities,they signicantly hamper the monitoring o this commitment by ailing to publishadequate detailed nancial inormation on their local operations. Transparencyo country-level activity and disclosure o prot, transers, taxes and government

contracts are necessary preconditions to eective monitoring o a companys impacton local economic development.

A transparent and informative corporate website, available in at least one

international language, should be the standard communication tool for all

multinational companies.

Most multinational companies have already accepted publicly available websitesas a basic means o corporate communication. But, some still reserve a greatdeal o corporate inormation or their registered investors, employees or selectedstakeholders. Transparency International strongly encourages all companies topopulate their websites with the greatest possible number o nancial and non-nancial reports and corporate documents available to the general public. This would

oer numerous benets: a well-ounded reputation o openness and transparencyattracts more ethical employees and investors, and enhanced reporting enables civilsociety to play its oversight role.

In view of their signicant impact, nancial companies should considerably

improve their reporting on all transparency-related issues and should, in

particular, extend their anti-corruption programmes to cover agents and

intermediaries acting on their behalf and prohibit facilitation payments.

Transparency International advocates that multinational nancial companies improvetheir reporting on anti-corruption programmes, organisational transparency and theircountry-by-country operations. This sector plays a critical role in the global economyand its transparency is central to countering global corruption and illicit money fows.

O particular concern, given the common use o agents and intermediaries bynancial institutions, is the act that public reports on their programmes do not coversuch agents and intermediaries acting on their behal. Likewise, lowlevels o reportingwould indicate that the nancial sector is prone to acilitation payment risk. The actthat such payments are not explicitly prohibited in public inormation is thereore ogreat concern.

TO GOVERNMENTS AND REGULATORY BODIES:

National governments and the European Union should require companies

under their jurisdiction to disclose all subsidiaries, afliates, joint-ventures

and other related entities.

Currently, laws and regulations generally limit disclosure o holdings to materialinvestments. This standard oten results in limited disclosure and can even resultin the omission o most group holdings. An exhaustive list o related entities oreach multinational company should be publicly available, i not in an annual report,then as a separate document accessible rom the corporate website. Such listsshould include each entitys name, the groups interest in them, and countries oincorporation and operation. This inormation is a necessary precondition to enablethe monitoring o nancial fows into and rom countries.

Transparency International encourages national and European Union regulators toimpose higher standards o transparency and require the publication o detailedinormation on the organisational structures o multinational companies, regardlesso industry.



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National governments and the European Union should require companies

under their jurisdiction to report on a country-by-country basis.

The adoption o the Dodd-Frank legislation in the United States in 2011 was a

positive and signicant step towards ensuring more country-by-country transparencyin international business by requiring extractive companies registered on a US stockexchange to report their governmental payments on a country-by-country basis. EUlegislators are currently considering new transparency rules or the oil, gas, miningand logging industries.

Transparency International recommends that all national governments and EUregulators ollow the lead and adopt legislation that promotes the highest possiblestandards. Indeed, they should go beyond existing legislation and requireallmultinational companies, regardless o industry, to publicly disclose their nancialaccounts on a country-by-country basis. Such transparency would greatly enhancemonitoring o money fows, government contracts, and tax and royalty payments.

TO INVESTORS:

Institutional and private investors should demand reporting on anti-

corruption programmes, organisational transparency and country-by-

country reporting and factor this information into their investment decisions.

Investors should demand that companies provide them with the inormation theyneed to make investment decisions that are consistent with their ethical standardsand strategies. It is in the interest o investors to evaluate all o their investmentrisks. Transparent organisational structures, where each subsidiary, aliate or joint-venture is identied, accompanied by country-by-country reporting, are necessaryto understand the company and identiy signicant risks economic, political andreputational. Lack o transparency on this ront is a serious risk actor, which in itsel

should be careully considered by investors.

Risk rating agencies as well as corporate responsibility indices should

include transparency measures as an integral part of their evaluation

process.

Transparency International encourages risk rating agencies, risk and corporateresponsibility analysts and all institutions that publish indices o corporateresponsibility to include transparency and anti-corruption compliance in theirevaluation models.

Anti-corruption programmes and transparency-enhancing measures lower the riskand incidence o corruption. Thereore, ratings that ail to account or good standardsin reporting on anti-corruption programmes, transparency in organisational structures

and country-by-country operations are at best incomplete and at worst unreliable.

Accounting standards relating to nancial accounting as well as to

corporate social responsibility reporting should include corruption-relevant

disclosures.

International accounting standards requiring organisational transparency andcountry-by-country disclosure should be established. Such standards wouldbenet companies, investors, civil society and governments. They would introducetransparency to companies international operations and thereby expose the manyrelated risks. The new standards would provide much needed inormation to civilsociety and governments, enabling them to ollow nancial in- and outfows to androm their countries, allowing or better detection o budgetary problems and illicit

money fows. Another benet o this change would be to level the playing eld byeliminating any competitive advantage derived rom country-level secrecy.



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TO CIVIL SOCIETY ORGANISATIONS:

Civil society organisations should get involved in the monitoring of

multinational businesses located or operating in their countries to promote

greater transparency.

Transparency International strongly encourages civil society organisations in allcountries to monitor transparency in multinational business. The majority o thebiggest multinational companies are incorporated in developed countries,2 and shouldbe bound to ollow their home country laws and regulations wherever they operate.Civil society should encourage multinationals to apply the ethical standards expectedin their home societies to a global context (i.e., we expect companies not to engagein the employment o children or to bribe oreign ocials even where such practicesmay regrettably be legal), and to report on practices both in their home jurisdiction,as well as others, with equal detail and attention to the three dimensions identied inthis report: anti-corruption programmes, organisational transparency and country-by-country reporting.

Civil society organisations should focus advocacy efforts on multinational

businesses located or operating in their countries to improve the depth and

scope of their commitments to transparency, and in particular, to improve

their level of anti-corruption reporting.

Transparency International encourages civil society organisations to ocus advocacyeorts on achieving greater transparency in multinational business. Such advocacyshould target governments, regulators and companies in both developed anddeveloping countries with the objective o countering corruption and illicit moneyfows. Such advocacy should address all three dimensions o corporate transparency:reporting on anti-corruption programmes, organisational transparency and country-by-country reporting.



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ANNEXES

ANNEX 1: METHODOLOGYThis report is designed and carried out to encourage and increase the level otransparency in international business. It analyses reporting practices o the 105largest publicly listed, multinational companies rom diverse industries and countries.21

The methodology is based on two previous Transparency International projects:Transparency in Reporting on Anti-Corruption and Promoting Revenue Transparency.It is complemented by consultations with evaluated companies,22 civil society andTransparency Internationals network o chapters.

The table below compares the various corporate reporting studies undertaken by

Transparency International.

EVALUATED AREAS

TRANSPARENCY

IN CORPORATE

REPORTING (2012)

TRANSPARENCY IN

REPORTING ON ANTI-

CORRUPTION (2009)

PROMOTING

REVENUE

TRANSPARENCY

(2011)

PROMOTING

REVENUE

TRANSPARENCY

(2008)

Reporting on

anti-corruption

programmes

3 3 3 323

Organisational

transparency3 3

Country-by-country

reporting3 3

INDUSTRIES Various Various Oil and gas Oil and gas

NUMBER OF

COMPANIES105 500 44 42

COMPANY TYPE Listed Listed Listed and non-listed Listed and non-listed

Any comparison between the results o this report with Transparency Internationalsearlier (2009) report must be limited to the analysis o reporting on anti-corruption

programmes and to 97 out o 105 selected companies that the two reports had incommon.

Table 1Comparison o Transparency InternationalStudies on Transparency in Corporate Reporting



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BOX 7: ANTI-CORRUPTION REPORTING TRENDS

Theresearchrelatingtoreportingonanti-corruptionprogrammesissimilarin both the 2012 and 2009 reports. Ninety-seven companies analysed inthe earlier report were also the subject o this report, which surveyed 105companies. It is thereore possible to identiy trends and progress in thisdimension with respect to those 97 companies.

Theaverageresultforreportingonanti-corruptionprogrammesshowsa

positive trend: 69 per cent up rom 47 per cent in the earlier report.

Thegreatestprogresshasbeenachievedbetweenthetworeportsas

ollows:

2009 2012

Whistleblowing 72% 82%

Non-retaliation policies 66% 80%

Training employees on anti-corruption 37% 77%

Policy on gits 69% 79%

Application o the policy to all employees 74% 89%

Extension o policies to business partners 39% 59%



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RATIONALE

In conducting research or this report, and in keeping with other similar assessments,Transparency International consulted with stakeholders at various points in the

research process. The nal methodology benetted rom valuable contributions romcompanies, Transparency International chapters and numerous experts. Quality wasurther enhanced by eedback on results received rom about hal o the evaluatedcompanies.

COMPANY SELECTION

The selection o companies was based on the 2010 ranking o the Worlds BiggestPublic Companies published by Forbes Magazine (The Forbes Global 2000,December 2010). The 105 largest multinational companies by market value werechosen (all market values were calculated by Forbes as at 1 March 2010). Single-country operators (nine companies) were eliminated rom the sample because they

could not be assessed or country-by-country disclosure. Thus, the sample drawsrom the worlds 114 largest companies. The companies that were eliminated romthe sample because they only operate domestically were: China Mobile, Wells Fargo,Sinopec, China Lie Insurance, China Shenhua Energy, Rosnet, Sberbank, Ecopetroland Ping An Insurance Group. The nal list o companies and the structure o thesample are presented in Annex 3.

The subject companies were not selected with a view towards reaching geographicor industry-wide conclusions. To analyse company perormance by industry, theIndustry Classication Benchmark24 was used and consumer goods and consumerservices were combined into one industry.25

CONSULTATION

All companies were contacted in April 2011. They were inormed o planned researchand report and were invited to comment on the proposed methodology. Fiteencompanies responded to this request.26 All companies were provided copies o thenal methodology document in June 2011 prior to undertaking the research.

DATA COLLECTION AND VERIFICATION

All data were collected by desk research conducted between June and August 2011.The sources included company websites and the relevant links and documentsdirectly accessible through them. Data or each question were recorded and theexact sources documented (e.g. corporate documents with page numbers orwebsites with dates o when the data were downloaded). The research was based

on the latest available documentation. The reporting periods covered in thesedocuments may dier among the selected companies.

Selected data was veried by a team o Transparency International researchers andan inter-coder reliability test was also perormed.

Transparency International has not undertaken to veriy whether inormation disclosedon websites or in reports is complete or correct. In other words, i a companypublishes what it reers to as a ull list o its ully consolidated material subsidiaries,this has been accepted at ace value and scored accordingly. In addition, it isbeyond the scope o this research to judge levels o integrity in company practices.Rather, the report ocuses on reporting on transparency and anti-corruption incorporate policies and procedures, which Transparency International believes are

crucial elements to ensuring good corporate governance and mitigating the risk ocorruption.



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DATA SHARING AND REVIEWING

On 19 August 2011 preliminary data sets were shared with the target companies,and each company was given the opportunity to review its own data and to provide

eedback or propose corrections. Feedback was accepted until 15 October 2011.Each data set consisted o our elements:

1. Scores and data sources or questions 113 on anti-corruption programmes

2. Scores and data sources or questions 1421 on organisational transparency

3. List o countries o operations

4. Country-by-country data.

The companies were asked to review the collected data in order to veriy theircompleteness and accuracy. O the 105 companies, 52 responded with eedback.All requests or corrections were careully analysed and discussed within theTransparency International team. Whenever necessary, urther inormation,substantiation or documentation was requested and obtained rom companies. This

process resulted in a number o data point adjustments and in updates o some datasources. For adjustments/ updates resulting rom the publication o new sources orupdated documents, all sources that were published on corporate websites on orbeore 15 October 2011 were taken into account.

Corrections were most oten the result o one or more o the ollowing reasons:

Thepublicationofnewcorporatedocumentsorpoliciesaftertheperiodof

preliminary data collection

Ongoingchangesorupdatesofcertainpolicies(onlineorinpreviouslypublished

documents)

Identicationofdocumentsorsourcesthathadbeenmissed,andtherefore

omitted, by the initial review

Claricationofspecicterminology,especiallyinthesectiononsubsidiaries.

The ollowing companies provided eedback during the data review process: 3M,Abbott Laboratories, ArcelorMittal, Allianz, Amgen, ANZ Banking, ArcelorMittal,AstraZeneca, AT&T, Banco Bradesco, Bank o America, BASF, Bayer Group,BG Group, BHP Billiton, BNP Paribas, British American Tobacco, Citigroup,ConocoPhillips, Deutsche Telekom, E.ON, ENI, ExxonMobil, France Telecom, GDFSuez, General Electric, Google, Home Depot, HSBC Holdings, Johnson & Johnson,Merck & Co, Mitsubishi UFJ Financial, Nestl, Occidental Petroleum, PepsiCo, Pzer,Philip Morris International, Qualcomm, Rio Tinto, Royal Bank o Canada, Royal DutchShell, Sano-Aventis, SAP, Schlumberger, Siemens, Toronto-Dominion Bank, Total,Unilever, United Parcel Service, Visa, Vodaone, Wal-Mart Stores, and WestpacBanking Group.

Transparency International greatly appreciates company engagement in this processas it contributed to the high quality o the methodology and data. As a result o thisdialogue, a better overview and understanding o diverse reporting practices andstandards was gained.



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QUESTIONNAIRE STRUCTURE AND SCORING27

The questionnaire covers a broad spectrum o issues infuencing corporatetransparency. It was constructed in a similar manner to the questionnaire used or the

most recent report Promoting Revenue Transparencyin 2011, but has been adjustedto accommodate the cross-industry elements o this study. It ocuses on threedimensions:

1. Reporting on anti-corruption programmes

2. Organisational transparency

3. Country-by-country reporting.

The rst dimension is derived rom the Transparency International UN GlobalCompact Reporting Guidance on the 10th Principle against Corruption. It includes13 questions; each o them is scored between 0 and 1. The maximum score orthis dimension is 13 points. The nal score or this dimension or each company isexpressed as percentage o the maximum possible score (between 0 and 100 per

cent).

The second dimension evaluates the level o disclosure o material ully and non-ullyconsolidated entities and contains eight questions. For all such entities reporting onnames, percentages owned by the parent company, countries o incorporation andcountries o operations were reviewed. Each question was awarded between 0 and 1point.

The maximum score in organisational transparency is six points (the sum o scoresor questions 1416 and 1820), although there are eight questions in this dimension(questions 17 and 21 being omitted rom the nal score, see below). Companies thatdo not have any non-ully consolidated entities were evaluated on their disclosure oully consolidated entities only (max. 3 points).

During the data sharing and review process, some companies challenged therelevance o distinguishing between reporting on countries ooperations andcountries oincorporation. Many companies that reviewed their data stated thatcountries o incorporation and countries o operations are always the same, henceno need or separate disclosure. As a result o this eedback, questio

ti - transparency in corporate reporting

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