Shell’s Financial Transparency Claim Rings Hollow

March 4th, 2011


Better transparency in the extractive industries is essential, but, in all sectors, multinationals take advantage of the secrecy offered by the opaque financial system to avoid contributing to the societies from which they benefit. For this reason, country by country reporting must become a mandatory requirement for multinationals in all sectors – and for oil company executives like Peter Voser to attack such transparency suggests not only being out of touch with the political times, and indeed his own company’s position, but also a lack of concern for some of the poorest people on the planet.

Wednesday, the Financial Times reported that Voser, the CEO of Royal Dutch Shell, came out vociferously against the U.S. Dodd-Frank Act requiring companies operating in extractive industries to disclose publicly the payments they make to governments. This landmark legislation has been hailed on all sides by civil society organisations, investors and revenue authorities around the world as a significant step towards greater transparency for the sector. This improved transparency will allow for much greater accountability of companies and governments to citizens in resource rich countries, who have in too many cases not benefited from the enormous riches under their feet.

In a speech to the Extractive Industries Transparency Initiative (EITI) conference, Voser said “Dodd-Frank treats foreign governments not only as irrelevant, but as a problem and not a solution,” said the chief of the Anglo-Dutch oil multinational at the Paris event. “It may even require companies to violate sovereign laws to disclose information that the laws do not allow.” He advocates voluntary transparency initiatives such as the EITI, which are not legally binding.

In attacking mandatory reporting requirements, Voser has exposed the tendency of some within the extractive industries to push against financial transparency. Only in January, Royal Dutch Shell’s submission to the European Commission’s consultation on country by country reporting said “We support, in principle, a ‘fit-for-purpose’ mandatory global reporting rule for all companies.”

Dodd Frank should not be seen as isolated unilateral action by one sovereign nation at the expense of others, but as a leading step towards global reporting requirements. U.S. leadership has spurred European states into action, with France, the UK and Germany now supporting mandatory country by country reporting for extractives. The International Accounting Standards Board, the body capable of setting a global accounting standard for country by country reporting, is dragging its feet and won’t decide whether to do so until later this year. The political pressure created by American and European support for country by country reporting is vital in forcing the IASB to act.

Voser’s suggestion that increased transparency will violate sovereign laws and not be in the interests of states is a strange argument to make – except, perhaps, in cases where corrupt governments have a vested interest in keeping this information secretive. And many developing countries are calling for this. Only the other day, Albert Oduman, Uganda’s shadow Minister for Finance, expressed his support and appreciation for global transparency efforts.

The next step, of course is to expand this standard to cover other industry sectors and to expose underlying financial information of multinationals on a country by country basis. Then governments and citizens would be in a position to challenge tax dodging on an international scale.

Civil society can use the same information to hold their governments to account for their taxation and spending decisions. Transparency supports the legitimacy of states and is not only profoundly in their interests but, more importantly, in that of their citizens.

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Written by Julian Boys

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