When it comes to transparency in corporate reporting among global telecom companies, there is both good and bad news. The good news is that many telecoms perform reasonably well when it comes to disclosing their anti-corruption practices. The bad news? They do much more poorly at disclosing their organizational structures and country-by-country operations.
These findings are detailed in Transparency in Corporate Reporting: Assessing the World’s Largest Telecommunications Companies, a report conducted by Transparency International (TI) and its national chapter in Hungary. The report comes at a time when the intersection of liberalized rules and regulations as well as large licensing fees, major equipment contracts, the sale of state operators and an increase in mergers and acquisitions all increase the potential for corruption.
The report measures transparency in corporate reporting at the world’s 35 largest publicly listed telecommunications companies—including 29 telecommunications service providers and six equipment manufacturers—drawn from the Forbes 2014 Forbes Global 2000 list. TI scored each company on a scale of zero (least transparent) to ten (most transparent), based on a detailed assessment of 26 total questions covering three areas: reporting on anti-corruption programs, organizational transparency, and country-by-country reporting.
The three companies that scored highest overall were Deutsche Telekom (8.8), Vodafone (7.4), and Telenor (6.4). Twenty-six companies scored less than five out of 10 overall. The three lowest scoring companies were Telecom Italia, Nokia, and BCE, each with a score of four. Some leading telecommunications companies, such as Vimpelcom, Alcatel-Lucent, TeliaSonera, and China Mobile, have been subject to extensive corruption investigations in recent years.
Geographic location played a prominent role in the transparency practices of companies. European companies performed the best, and Asian companies performed the lowest. Seven of the top 10 countries are from Europe, and seven of the bottom 10 countries are from Asia. This could be due to the generally higher level of regulation in the European telecoms sector, the report said.
According to the report, telecom companies perform “reasonably well” disclosing their anti-corruption programs. Examples of measures by which each company was scored include whether the company publicly commits to anti-corruption; senior leadership demonstrates support for anti-corruption measures; the code of conduct explicitly applies to all employees and directors; and whether the company has in place an anti-corruption training program for its employees and directors.
“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 anti-corruption programs of three companies—Deutsche Telecom, Orange, and Alcatel-Lucent—scored a perfect 100 percent. Three other companies—Telenor, Ericsson, and TeliaSonera, followed closely behind, scoring 96 percent.
As just one example, TeliaSonera, which ranked fourth overall with a score of 6.2, says it has made significant efforts over the last few years to strengthen its anti-corruption work.
TeliaSonera has a dedicated ethics and compliance team of 17 individuals, many of whom have or are in the process of certifying their skills in anti-corruption work through TRACE or through the Society of Corporate Compliance and Ethics, according to Michaela Ahlberg, TeliaSonera’s head of ethics and compliance. “We have a totally revised policy, instructions, and process structure for anti-corruption, including special processes for gifts and hospitality, conflicts of interest, and due care in third-party processes,” Ahlberg said.
Fifteen other companies achieved scores of more than 75 percent for their anti-corruption programs. One company, Emirates Telecom, scored a zero in this category for disclosing no information at all.
No company achieved a perfect score in the category of organizational transparency. In fact, most did quite poorly, with an average score of just 34 percent. This section assessed how well companies disclose their fully consolidated subsidiaries and non-fully consolidated holdings—such as associates and joint ventures—and their countries of incorporation.
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, receiving a score of 81 percent. Deutsche Telekom discloses a broad range of information, explains its chief compliance officer, Mauela Mackert. The company’s commitment is to anti-corruption and the strong support of senior management and the board concerning the company’s Code of Conduct, trainings, certifications, and a lot more, she says.
“Besides this, we describe our subsidiaries—fully and non-fully consolidated—with regard to the percentage we own in each of them, the countries of incorporation, and more,” adds Mackert.
Ranking second was Orange, with a score of 75 percent. Telenor also achieved a high score of over 50 percent. The other 32 companies achieved scores of 50 percent or less. Motorola received the lowest score of six percent.
Companies where legislation compels the disclosure of all subsidiaries, such as Germany and India, performed better than companies from countries where the disclosure rules are less demanding, such as the United States. In this category, European companies scored an average of 42 percent, while U.S. companies received the lowest score of 19 percent.
The average score in the category of country-by-country disclosure was 22 percent, representing the lowest overall score of all three categories. Companies were measured on the disclosure by country of financial reporting of revenues, capital expenditure, income before taxes, and community contributions.
Deutsche Telekom scored the highest, once again, at 84 percent. Part of this high score stems from Deutsche Telecom’s country-by-country disclosure—including revenue or income before taxes—which can be found on the company’s website.
TELUS ranked second in this category with a score of 80 percent. Fifteen out of the 33 companies scored less than ten percent, with AT&T scoring only one percent.
TI noted in the report that no major difference was observed in the level of reporting between European companies and U.S. companies. Asia-based companies, however, 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, according to the report.
“Chinese and Japanese companies generally provide little financial data relating to the foreign countries in which they operate,” the report said. “In addition, they fail to show they are taking anti-corruption measures that are considered.”
The good news is that progress is being made. Two years ago, Transparency International Hungary and several telecom companies established the Telecom Integrity Initiative, the aim of which is to facilitate industry-wide dialogue on corruption and best practices in this sector.
TeliaSonera, for example, was one key initiator of the group. “Standing together,” says Ahlberg, “we might have a better chance of making change.”