New Transparency International Study Faults China Companies for Creating Conditions for Corruption

A new report finds that the majority of large, multinational companies based in emerging markets, including China and Brazil, are falling down on their responsibility to provide transparent corporate reporting. The lack of clarity, says Transparency International which published the report, creates an environment that is ripe for corruption to fester.

In the latest edition of Transparency in Corporate Reporting: Assessing Emerging Market Multinationals, 100 of the fastest-growing companies based in 15 emerging market countries and operating in 185 countries around the world scored an average of 3.4 out of 10, where 0 is the least transparent and 10 is the most transparent. The average score fell slightly by 0.2 compared to the last time the survey was conducted in 2013.

“Pathetic levels of transparency in big emerging market companies raises the question of just how much the private sector cares about stopping corruption, stopping poverty where they do business, and reducing inequality,” says José Ugaz, Chair of Transparency International. “Through adequate transparency and anti-corruption measures and will from the top this could have been prevented. Although many companies say they want to fight corruption, this is not enough. Action speaks louder than words,” he says.

Seventy-five companies from BRICS countries (Brazil, Russia, India, China and South Africa) studies by TI failed to beat the average score, as poor-performing Chinese companies dragged the whole group lower. Companies from BRICS countries produce about 30 per cent of global GDP. 

The China Problem

Chinese companies, which account for a third of those assessed, had the weakest overall performance, scoring an average of 1.6 out of 10, with just one making it to the top 25. This underscores the need for China and its business community to take immediate action to raise their standards, said TI in the report. This is especially true in places like Africa where the Chinese government recently pledged to invest $60 billion, money that will likely be spent on services from Chinese companies.

According to TI, the very weak Chinese results stem from weak or non-existent anti-corruption policies and procedures or a clear failure to disclose them in line with international best practice. Regulation matters, the report urged, as also the Indian case shows. Indian companies have the highest average score of any countrythey all score 75 per cent or morein organizational transparency largely due to its Companies Act, which India adopted in 2013.

Across emerging markets all companies need to do much more to pursue comprehensive public reporting to address corruption and provide the transparency that is the basis for robust and accountable governance, said TI. Anti-corruption programs that keep a company from using bribery as a tool or provide ways for whistleblowers to report corruption without fear of retribution must be made publicly available to send a clear message to their customers, staff and partners that a company does not accept corrupt practices, it said.

“Customers should demand the companies they patronize live up to the highest anti-corruption standards or risk losing their business,” adds Ugaz.

The TI report urged governments to implement strong anti-bribery laws, like the UK Bribery Act, and to do a better job of enforcing those laws. IT also called for rules for mandatory reporting on anti-corruption and company structures.