The Reporting Gap and Stock Exchange Regulations

March 1st, 2011

Targeting Stock Exchanges is Key in Civil Society’s Push for Country-by-Country Reporting, writes François Valérian

T.I./Revenue Watch

Today, Transparency International and the Revenue Watch Institute have published the Promoting Revenue Transparency 2011 Report on Oil and Gas Companies. This report evaluates corporate reporting performance on anti-corruption programmes, on subsidiaries and partners, as well as on country-level financial results and technical data.

The report shows a concerning reporting gap. Most companies score significantly better in reporting on anti-corruption programmes than in country-level reporting of relevant financial and technical data. This gap further illustrates the major focus of corporate communication, at least for listed companies, which is to satisfy the global capital markets. What those markets want has to be communicated; what they don’t want or want less is given lower priority.

Civil society organisations have been successful in increasing the visibility of the fight against corruption, ensuring that the anti-corruption issue has reached the investor community, and more and more companies are now reporting on what they do in the area. Investors do not always perceive country-level information as relevant since they prefer financial data be broken down by global industry segments or by large regions, when it comes to geography. The political territory is rarely perceived as an economically relevant space.

It is, however, still the most relevant space for most human beings, hence the enduring civil society campaign for country-by-country reporting. This campaign, as we know, won a major battle last July with the Dodd-Frank Act mandating the reporting of all payments made to governments by all extractive companies filing documents with the U.S. Securities and Exchange Commission (SEC).

This week will also see the global conference of the Extractive Industries Transparency Initiative in Paris. Now that countries other than the U.S., such as France or the UK, are supporting mandatory country-by-country reporting, this conference will surely discuss how to integrate the new mandatory disclosure laws with the voluntary, multi-stakeholder process, which has existed since the beginning of the EITI to aggregate corporate fiscal payments on a country-by-country basis.

The requirement for local reporting now goes through the biggest global capital market. Stock market regulations matter much more for global corporations than governmental legislations, and the governmental legislations which have the greatest impact are often those that affect big stock exchanges. Closing the reporting gaps will require stronger advocacy towards stock exchanges, those who invest in them and those who regulate them.

Written by François Valérian

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