Forced disclosure has positive spin-offs

A European Union directive requires major listed extractive companies to disclose payments to governments.

The big mining companies have issued these reports for mercenary reasons, but it is good that they have done so, said Peter Major, director mining of Cadiz Corporate Solutions.

But getting the nod from some of the world’s largest pension funds is part of the deal.

The Extractive Industries Transparency Initiative lobbied for greater transparency and it lists many major extractive companies, including Glencore, Anglo American and BHP Billiton, as supporters of it, as are 95 global institutional investors who collectively managed more than $19-trillion as of July 2013. In a statement of sup- port, the investors explain they are concerned that extractive companies are particularly exposed to the risks posed by corrupt operating environments.

“Companies that make legitimate, but undisclosed, payments to governments may be accused of contributing to the conditions under which corruption can thrive,” the statement said.

“This is a significant business risk, making companies vulnerable to accusations of complicity in corrupt behaviour, impairing their local and global ‘licence to operate’, rendering them vulnerable to local conflict and insecurity and possibly compromising their long-term commercial prospects in these markets.”

Glencore has had to play its cards in the open since it listed. With the chief executive’s wealth tied up in the company, listing is thought to have been a necessary exit strategy. “And when the share price fell, it had to be more open,” said Major. “No one has done as big an aboutface as Glencore.”

It has previously reported on its contributions in countries in which it was most active. It has now reported on all in which it operates extractive businesses. Not included are payments relating to refining processing, marketing and trading, which make up the remaining $2.14-billion in Glencore’s total $5-billion government contributions in 2015.

Major said he personally would expand on the report and tally the jobs created, a more important metric than taxes.