Cor­rup­tion ‘hid­ing in plain sight’

Lesotho Times - - Business -

JO­HAN­NES­BURG — Trans­parency In­ter­na­tional warns that just be­cause a company has an an­ticor­rup­tion pro­gramme, it doesn’t mean that it isn’t cor­rupt — it’s just less likely to be.

This week, the or­gan­i­sa­tion re­leased “Trans­parency in Cor­po­rate Re­port­ing”, a survey analysing 124 of the world’s largest pub­licly traded com­pa­nies with a com­bined value of $14-tril­lion (about M154tril­lion) — many of which ei­ther op­er­ate in South Africa or are listed on the JSE, in­clud­ing Sabmiller and BHP Bil­li­ton.

It found that 97 per­cent state pub­licly that they are com­mit­ted to com­ply­ing with all laws, in­clud­ing an­ticor­rup­tion laws.

But only 45 per­cent ac­tu­ally pro­hibit “fa­cil­i­ta­tion pay­ments“— jar­gon for bribes. Although low, this is an im­prove­ment on the 20 per­cent that pro­hib­ited th­ese pay­ments in 2012.

Tesco ranked 16th out of 124, the be­lea­guered UK re­tailer mak­ing a strong show­ing in terms of an­ticor­rup­tion pro­grammes and or­gan­i­sa­tional trans­parency.

The rank­ing con­trasts sharply with claims that the re­tailer over­stated its re­cent fig­ures on trad­ing profit. Pend­ing le­gal ac­tion has added to the group’s woes and has hit Tesco’s share price hard.wal­mart also has a fairly high rank­ing, de­spite re­cent al­le­ga­tions of bribery in Mex­ico and South Amer­ica.

De­spite th­ese anom­alies, Trans­parency In­ter­na­tional “be­lieves that pub­lic re­port­ing by com­pa­nies on their an­ticor­rup­tion pro­grammes al­lows for in­creased mon­i­tor­ing by stake­hold­ers and the pub­lic at large, thereby mak­ing com­pa­nies more ac­count­able”.

David Lewis, the head of South Africa’s Cor­rup­tion Watch, agrees that for­mal com­pli­ance pro­grammes do cor­re­late with bet­ter company per­for­mance.

“But he says: “They are no guar­an­tee of bet­ter per­for­mance ... there has to be the will.”

South African com­pa­nies need to be more ac­tive, he says. “If com­pa­nies want to do some­thing, they need to have more than a com­pli- ance pro­gramme, they need to be seen to be tak­ing strong ac­tion when some­thing hap­pens,” he says.

The lat­est re­port, the sec­ond of its kind by Trans­parency In­ter­na­tional, as­sesses the dis­clo­sure prac­tices of com­pa­nies with re­spect to their an­ticor­rup­tion pro­grammes, company hold­ings and the dis­clo­sure of key fi­nan­cial in­for­ma­tion on a coun­try-by-coun­try ba­sis.

Ben Elers, a pro­gramme di­rec­tor at Trans­parency In­ter­na­tional, says that one of the rea­sons com­pa­nies in the fi­nan­cial sec­tor and ex­trac­tive in­dus­tries have per­formed rel­a­tively well in the lat­est survey is the in­tro­duc­tion — or pend­ing in­tro­duc­tion — of laws aimed at im­prov­ing trans­parency.

In the US, the 2010 Dodd-frank Wall Street Re­form and Con­sumer Pro­tec­tion Act, which has yet to come into force, will re­quire coun­try-level re­port­ing of all pay­ments to gov­ern­ments by US ex­trac­tive com­pa­nies.

Sim­i­lar leg­is­la­tion is ex­pected to be en­acted in the EU next year.

In the fi­nan­cial sec­tor, new re­port­ing re­quire­ments have been put in place that will re­quire EU credit in­sti­tu­tions and in­vest­ment firms to re­port on prof­its made, taxes paid and sub­si­dies re­ceived for each fi­nan­cial year at each ge­o­graphic lo­ca­tion.

The ab­sence of sim­i­lar reg­u­la­tory ac­tion aimed at in­for­ma­tion tech­nol­ogy com­pa­nies may ex­plain why Ap­ple, Google and Ama­zon rank so poorly in the survey.

Elers says it is ironic that com­pa­nies con­trol­ling so much of the world’s in­for­ma­tion flow are so un­will­ing to de­clare in­for­ma­tion about how their own or­gan­i­sa­tions op­er­ate.the poor over­all per­for­mance of coun­try-by-coun­try re­port­ing is at­trib­uted to the fact that this is a com­par­a­tively new agenda.

Elers is con­fi­dent that in time things will im­prove on this front.

One rea­son why it will im­prove is the con­certed move by tax au­thor­i­ties across the globe to clamp down on trans­fer pric­ing, which al­lows com­pa­nies to at­tribute prof­its to low-tax coun­tries such as Ber­muda, Ire­land, Mau­ri­tius and Lux­em­bourg.

In­ad­e­quate coun­try-by-coun­try dis­clo­sure has en­abled the prac­tice of trans­fer pric­ing to go largely un­de­tected.

In South Africa, Mr Lewis warns that cor­rup­tion in the pub­lic sec­tor in­vari­ably in­volve peo­ple op­er­at­ing in the pri­vate sec­tor.

The head of Cor­rup­tion Watch says: “There is a grow­ing risk of con­ta­gion within the pri­vate sec­tor.” — Bdlive

AC­CORD­ING to Trans­parency In­ter­na­tional pub­lic re­port­ing on their an­ticor­rup­tion pro­grammes al­lows for in­creased mon­i­tor­ing.

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