The world’s largest telecommunications companies do not disclose enough information on how they organize themselves and even less on each country where they do business, according to a new report conducted by Transparency International and its national chapter in Hungary.
The first-of-its-kind report analyzed the 35 largest telecoms companies—29 being telecommunications service providers and six being equipment manufacturers—and ranked them based on their reporting of the measures they take to prevent corruption, information about subsidiaries and holdings, and key financial information including payments abroad.
Three companies—Deutsche Telekom, Vodafone, and Telenor—scored over 50 percent in all three dimensions. Twenty-six companies scored less than five out of 10 overall.
Companies where legislation compels the disclosure of all subsidiaries, as Germany and India for example, performed better than companies from countries where the disclosure rules are less demanding, such as the United States. European companies performed significantly better, achieving an average of 42 percent, while companies from the Americas scored only 19 percent.
Companies from Asia are the poorest performers in reporting on anti-corruption programs and in country-by-country reporting, with scores of 37 percent and nine percent, respectively. “Chinese and Japanese companies generally provide little financial data relating to the foreign countries in which they operate. In addition, they fail to show they are taking anti-corruption measures that are considered,” the report said.
According to the findings, 27 out of the 35 largest firms measured do not disclose where their subsidiaries operate. Only four companies reveal information on their tax payments in each of the countries in which they are active.
Deutsche Telekom publicly discloses the most information on its subsidiaries and other affiliated companies. The lowest score of six percent for organizational transparency went to Motorola, which was the only company to score under 10 percent overall.
“While most companies in the sample are present in a large number of countries, they fail to present financial data for each country of operation,” the report said. “Where they do report on financials, the disclosure is limited to discrete data on a few selected jurisdictions.” Twenty-five companies scored less than 30 percent in reporting financial data in each country of operation, with AT&T scoring the lowest, with a score of just one percent, the report said.
“Financial accounts for each country of operation should be published to mitigate political and reputational risks, provide information to local stakeholders and enhance investment certainty by disclosing special tax arrangements and potential for regulatory capture,” Transparency International said.
A number of telecoms companies have started to report their income and taxes on a country-by-country basis. However, community contributions, the amount of investments made and the profit generated before tax are seldom reported country-by-country.
Overall, the telecoms companies perform reasonably well in terms of how much information they disclose about their anti-corruption programs, but a significant number of corporate holdings are unreported, resulting in opaque corporate structures.
The anti-corruption programs of three companies— Alcatel-Lucent, Deutsche Telecom, and Orange—scored a perfect 100 percent. Fifteen other companies achieved scores of more than 75 percent for their anti-corruption programs. One company, Emirates Telecom, scored a zero for its anti-corruption program for disclosing no information.
Some telecommunications companies—such as Vimpelcom, Alcatel-Lucent, TeliaSonera, and China Mobile—have been subject to extensive corruption investigations in recent years. “To ensure compliance with laws and to manage the broader risks of corruption and poor performance against ethical standards, telecommunications companies must adopt strong and clear policies and management systems to curb bribery and corruption.” said József Péter Martin, executive director of Transparency International Hungary.
Despite most telecommunications companies having anti-corruption programs in place, only 15 out of the 35 companies have a mechanism for regular monitoring of this program. “An anti-corruption program can only be applied effectively in practice if it is adequately and regularly checked,” TI said in a statement.