LONDON (Thomson Reuters Foundation) - Multi-national companies based in emerging nations are failing to tackle corruption with a lack of transparency allowing unscrupulous practices to continue and exacerbating poverty, a study by an anti-corruption group said on Monday.
The report by Transparency International found that three quarters of the 100 fastest-growing companies based in 15 emerging market countries and active in 185 countries scored less than half marks in transparency tests.
José Ugaz, chair of Transparency International, said customers should demand companies have high anti-corruption standards or take away their business, companies need to be more transparent, and governments must have strong anti-bribery laws.
“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,” Ugaz said in a statement.
The study found Chinese companies fared worst, with an average score of 1.6 out of 10 in the tests, due to having weak or non-existent anti-corruption policies and procedures.
By contrast, India led the way, with all 19 of its companies in the study achieving a score of 75 percent of more in being open about their company structures and holdings which was attributed to the country’s Companies Act.
According to the IMF, emerging markets account for over 70 percent of global growth, with concerns that corruption will hamper growth and limit socio-economic progress.
The report follows the “Panama Papers” leaks which exposed the use of shell companies and offshore tax havens, often for illegal purposes such as tax evasion and money-laundering.
This put tax avoidance and corporate secrecy at the top of the global agenda.
The Transparency International study took into account three different ways in which companies can address corruption.
These included the reporting of anti-corruption programs such as policies to ban bribes or “facilitation payments”, the disclosure of company structures and holdings, and the disclosure of key financial information in each individual country where they operate, such as tax payments.
Transparency International researchers said this information was gathered from corporate websites and other publicly available sources.
On average the companies scored 3.4 out of 10, which was a drop of 0.2 compared to the last similar survey in 2013.
Researchers said one explanation for this worse result could be the emergence of more stringent legal requirements.
But this score was also lower than a survey of 124 of the world’s largest multinational companies by Transparency International in 2014 which led to an average score of 3.8.
“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,” the group said in its report.
Editing by Belinda Goldsmith and Jo Griffin; Please credit the Thomson Reuters Foundation, the charitable arm of Thomson Reuters, that covers humanitarian news, women's rights, trafficking, property rights and climate change. Visit http://news.trust.org