Indian multinationals top Transparency’s emerging market ranking

India maintains a clear leadership in Transparency International's rankings of emerging economy multinationals, taking 16 of the top 20 slots in a list of 100, in which Chinese companies take the bottom slots.

Tata group companies take six of the top 10 slots in a list topped by Bharti Airtel with Tata Communications in second position and Mahindra in the third.

Tata Consultancy Services, Tata Global Beverages, Tata Motors, Tata Steel, Wipro, Petronas and Tata Chemicals complete the top 10 rankings.

Bharti Airtel and Petronas achieved perfect scores in corporate reporting, while three other companies, including one from China, achieved 88 per cent, the second-best average score.

At the bottom of the ranking, nine companies, eight of them Chinese, scored zero.

With an average score of 9 per cent, emerging market multinationals achieved a higher average for country-by-country reporting than the world's largest multinationals, evaluated in the 2014 report at an average of 6 per cent.

According to Transparency International, state-owned companies managed a weak but nevertheless higher score (18 per cent) than privately owned firms (14 per cent).

Nineteen Indian state-owned companies achieved the best score of any country in the sample of state-run entities, with an average of 77 per cent.

Publicly listed emerging market multinationals performed significantly better than the publicly listed firms in the Transparency International 2014 report assessing the world's largest companies, with an average score of 59 per cent versus 39 per cent.

Maintaining its 2013 leadership in the country-by-country reporting, Chile's Falabella comes in first with a score of 60 per cent, registering a solid improvement of 10 percentage points over its 2013 score.

At the bottom of the scale, 43 companies scored zero. These include 26 Chinese firms and seven of the 12 Brazilian companies covered in the report.

Publicly listed companies, with an average score of 12 per cent, outperformed privately owned firms and state-owned companies. State-owned companies achieved a paltry score of 0 per cent.

With an average score of 9 per cent, emerging market multinationals achieved a higher average for country-by-country reporting than the world's largest multinationals evaluated in our 2014 report (which had an average of 6 per cent).

Emerging market multinationals, however, continue to fall short of the corporate transparency standards that are expected of multinationals operating internationally, says the report.

Publicly-listed companies performed better in all dimensions than state-owned enterprises and privately held companies.

The performance of Chinese companies continues to be disappointing overall, but there are a few notable exceptions, particularly with regard to the disclosure of anti-corruption programmes.

Chinese entities have different standards of disclosure: levels of transparency for China-based state-owned parent companies are lower than those adopted for their publicly-listed foreign subsidiaries and associated entities.

A solid majority of assessed companies (84/100) state publicly that they are committed to compliance with the law, including anti-corruption statutes.

Sixty-seven companies publicly state their zero tolerance of corruption. 
 
At the other end of the spectrum, only 19 companies declare that they prohibit facilitation payments.

Business relationships are a weak area of compliance for emerging market multinationals; only 34 companies state that their code applies to third parties such as agents.

Only 10 companies said that both employees and members of the board of directors have received training on the company's anti-corruption policy.

Publicly-listed companies achieve an average score of 56 per cent, well above the average for the sample as a whole.

Companies in the technology sector achieve the highest score of all industry sectors, with an average of 74 per cent. This compares favourably with the 65 per cent achieved by 35 global telecommunications firms assessed in a special sectoral report published in 2015.

All the Indian companies score higher in the organisational transparency dimension.  This is because legislation in India requires companies to disclose all their subsidiaries and the percentage ownership. Indian companies also do subsidiary-by-subsidiary financial reporting, which earns them higher scores on the country-by-country reporting dimension as well.

As companies that are increasingly operating in the global marketplace, emerging market companies should recognise that they have an obligation to demonstrate more transparency to all their stakeholders, both at home and abroad. Unlisted companies and state-owned enterprises are subject to fewer mandatory reporting requirements. Consequently, their levels of transparency tend to be lower.

Privately-held and state-owned companies from emerging markets should recognise the importance of transparency and accountability in building confidence among stakeholders and strive to improve their disclosure practices. A transparent, informative and unrestricted corporate website, available in at least one international language, should be the standard communication tool for all large emerging market multinationals whether they are unlisted, state-owned or publicly listed.
 
Emerging market companies should emulate Indian companies and step up their disclosure practices by publishing information on all their related entities. Such lists of all holdings do not necessarily have to be included in annual reports, but they should be easily accessible from corporate websites in one form or another.

They should include information on each company name, the percentage owned by the group, the place of incorporation and basic information on company operations, i.e. where it is located and the kind of business it conducts.

While publishing individual financial accounts for each country represents a relatively small incremental effort for multinational companies, as the information is already available to them internally, it will have a big impact on the countries in which they operate.

Although most companies declare their commitment to supporting local communities, they significantly hamper the monitoring of this commitment by failing to publish adequate detailed financial information on their local operations.

Transparency of country-level activity and disclosure of key financial information are necessary preconditions for the effective monitoring of a company's impact on local economic development.