Tuesday

31st May 2016

Opinion

Time for EU to shed light on Big Corporates

  • The collapse of Lehman in 2008 proved that banks have massive impact in their host countries and beyond (Photo: sachab)

In the dark days of the financial crisis, as credit markets froze around the world amidst uncertainty and confusion, one thing at least was clear. The global financial sector had become interconnected as never before.

In the 19th century, it was said that: "When France sneezes, the rest of Europe catches a cold." In the early 21st century, when Citibank, Goldman Sachs or JPMorgan Chase, cough and splutter, the whole world reaches for the aspirin bottle.

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

The impact of the failure of these firms beyond their home jurisdictions is apparent for anyone to see.

When it comes to assessing the positive contributions of these global giants to the welfare of citizens around the world, the answer is altogether less clear.

These corporations provide vital financial services for the economy, for sure, and in some cases employ large numbers of people, but how much tax do they pay? How much direct capital investment do they make? What kind of financial contributions do they make to the communities which host them?

According to a new report released by Transparency International this week – Transparency in Corporate Reporting: Assessing the World’s Largest Companies – the answers to these questions lie deep in these companies' accounts.

They are certainly not disclosed to the public.

The three big US banks listed above reveal exactly nothing about their financial operations in the countries in which they are based. And this is not just a US phenomenon - neither does BNP Paribas in France nor Lloyds in the UK disclose this kind of information.

The financial sector may have a particular affinity for secrecy, but the problem extends to all sectors including pharmaceuticals, IT, retail and extractives.

Our results show that very few companies are reporting how much they contribute to the economies of the countries in which they operate. We looked at 105 of the largest publicly-listed companies in the world by market value and 41 of them failed to disclose any information for their local operations.

The average result for the transparency of such "country-by-country" disclosures is 4%.

If this were only a matter of basic accountability and corporate responsibility then this would be a serious matter. In a time of declining public revenues and growing austerity, it is paramount that companies demonstrate that they too are making a fair contribution to the countries where they are located.

In this context, it is notable that of the 43 companies we assessed that are operating in Greece, none disclosed corporate income tax paid to the Greek government.

Of the 65 companies operating in Spain, only three companies disclosed their taxes paid to the Spanish government.

For years, multinational enterprises have been publishing consolidated annual accounts at a global level because it was believed that they were accountable to their shareholders only, who had little need of more fine-grained information.

This narrow view is no longer tenable.

It is increasingly recognised that companies have a wider set of stakeholders, including their employees, regulators and other citizens. Although accounts are presented as if the company is a unified entity, this is not how the company is organised, nor how its impacts are felt, nor how it is taxed.

Companies need to cater for this wider group of stakeholders by disclosing important financial information on a country-by-country basis.

Getting companies to release accurate, comparable and timely information is a coordination problem best solved through a legislative standard.

The European Commission, following legislation passed in the US, has proposed just such a standard for the oil, gas, mining and forestry industries, sectors that Transparency International has identified as being particularly prone to corruption and which are most active in countries with the least accountable governments.

This is an encouraging start and it will be important to show that this is a workable global standard.

It now falls to the European Parliament and national governments to make the commission's proposals more robust and to consider ways in which it could be extended to other sectors.

As our report shows, Big Oil is no more opaque in its operations worldwide than Big Finance or Big Pharma. It is time for all these companies to stand up and be counted in the fight against corruption.

Jana Mittermaier is the director of Transparency International's EU liaison office

News in Brief

  1. Hungary reinforces fence on Serbian border
  2. Juncker to seek renewed backing for TTIP talks
  3. EP president rules out return to German politics
  4. Austrian far-right wants to probe election fraud accusations
  5. Irish PM warns Brexit could bring back border controls
  6. Truckmakers risk record cartel fine
  7. London mayor teams up with British PM on Brexit
  8. Syrian refugees sue Denmark over immigration law

Stakeholders' Highlights

  1. ACCAEducation and Training 2020 - Giving Young People the Workplace Skills They Need
  2. EPSUTrade Unions Back New Undeclared Work Platform
  3. European Healthy Lifestyle AllianceCould targeting children’s fitness boost academic performance?
  4. World VisionDeclares the World Humanitarian Summit a Positive Step in a Longer Journey to Ending Need
  5. EJCPresident Dr. Moshe Kantor on Brexit and the Jewish Question
  6. Swedish EnterprisesNew rules for posted workers - Better Protection or the End of Posting ?
  7. World VisionWhy The EU Needs to Put Children at the Centre of Emergencies - In Their Words
  8. ACCASustainability Reporting in Danger of Losing Its Momentum Says ACCA and CDSB
  9. Dialogue PlatformDiversity as Heritage of Humanity! Join the “Colors of the World“ Show at the EP
  10. Centre Maurits CoppietersNew Responses to the Basque Peace Process? MEP Juaristi on Stateless Challenges Conference
  11. European Healthy Lifestyle AllianceImproving Cardiovascular Health Begins by Closing the Gap in Sex Disparities
  12. IPHRBrussels Talks to Take Stock of Human Rights in Turkmenistan

Latest News

  1. EU watchdog calls for fines on shady lobbyists
  2. 2015 was 'a bad year' for EU human rights
  3. Deal with Greece will not work, says Guy Verhofstadt
  4. Greece says it cannot fulfil demands for loans
  5. Juncker agrees to visit Russia in June
  6. Pro-Brexit Tories predict Cameron leadership challenge
  7. Merkel and Hollande pledge unity at Verdun ceremony
  8. Russia mocks ex-Nato chief's new Kiev job