on the organisational structures of multinational companies, regardless of industry and ownership structure.
3. National governments in emerging markets should require companies under their jurisdiction to report on a country-bycountry basis. The adoption of the Dodd-Frank legislation in the United States in 2011 was a positive and significant step towards ensuring more country-by-country transparency in international business by requiring extractive companies registered on a US stock exchange to report their governmental payments on a country-bycountry basis. EU legislators recently adopted new transparency rules for European companies in the oil, gas, mining and logging industries. These companies will be obliged to report payments of more than €100,000 made to the government in the countries where they operate. Transparency International recommends that all national governments in emerging markets follow this lead and adopt legislation that promotes the highest possible standards. Indeed, they should go beyond existing legislation and require all multinational companies incorporated or operating in their country, regardless of industry or ownership structure, to publicly disclose their financial accounts on a country-by-country basis. Such transparency would greatly enhance the monitoring of money flows, government contracts, and tax and royalty payments.
4. Accounting standards relating to financial accounting as well as to corporate social responsibility reporting should include corruption-relevant disclosures. International accounting standards requiring organisational transparency and country-by-country disclosure should be established. Such standards would benefit companies, investors, civil society and governments. They would introduce transparency to companies’ international operations and thereby expose the many related risks. The new standards would provide much needed information to civil society and governments, enabling them to follow financial inflows and outflows to and from their countries, allowing for better detection of illicit money flows.
TO INVESTORS 1. 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 emerging market companies provide them with the information they need to make investment decisions that are consistent with their ethical standards and strategies. It is in the interest of investors to evaluate all of their investment risks. Transparent organisational structures, where each subsidiary, affiliate or joint venture is identified, accompanied by countryby-country reporting, are necessary to understand the company and identify significant risks – economic, political and reputational. Lack of transparency on this front is a serious risk factor, which in itself should be carefully considered by investors.
Transparency in Corporate Reporting: Assessing Emerging Market Multinationals
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