Corruption flourishes amid ‘pathetic levels of transparency,’ watchdog group reports

Cars manufactured by Chinese corporation Chery Automobile, one of the lowest performers in the Transparency International report on emerging markets. (keso s/flickr)

Transparency is not a well-held ideal among many of the 100 fastest growing international companies based in developing countries. The average level of transparency among the companies fell in the past three years, according to Transparency International. The group argues that the lack of transparency allows corruption to thrive.

“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,” José Ugaz, chair of Transparency International, said in a statement marking the release of the group’s new report. “Although many companies say they want to fight corruption, this is not enough. Action speaks louder than words.”

On average, the 100 companies based in 15 countries scored a transparency score of 3.4 on a 10-point scale. Companies based in China made up about one-third of the list and performed terribly with an average score of 1.6. Transparency blames “weak or non-existent” policies on corruption for the poor performance of Chinese multinationals. Countries with strong anti-corruption programs and policies provide the kind of protection that allows whistleblowers to safely report corruption when it exists.

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

But creating the right environment to root out corruption does not necessarily solve the problem. New research on countries using specialized anti-corruption courts shows some of the challenges institutions face, even when they are set up to deal with corruption. In Indonesia, the expansion of its Tipikor court from Jakarta to all 34 provinces has struggled due to the lack of availability of quality judges. The courts rely heavily on ad hoc judges, which can present instances of lesser-qualified judges hearing cases and more conflicts of interest.

Effective policies do matter. All of the 19 Indian companies included in the Transparency analysis score highly in the area of organization transparency. The best scoring company, Bharti Airtel, is from India and more than half of the top ten in the list are from the country. Transparency attributes part of the high scores to the passage of the Companies Act, which established stronger rules and regulations for corporations in India, and notably started an office for fraud investigations.

China’s poor performance proved to be a drag on the average transparency score of companies based in BRICS (Brazil, Russia, India, China and South Africa) countries. The five nations together are a considerable economic force, producing about 30 percent of the world’s GDP. Transparency argues that their position of power and influence makes it crucial that they create environments that root out corruption.

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The report makes a clear connection to the recent publication of the Panama Papers. Its authors state that this is a moment of public attention and outrage at practices by individuals and corporations that are secretive and evasive.

“These revelations have bolstered a public mood of outrage towards corporate secrecy that can only raise stakeholder demand for greater corporate transparency,” according to the report. “The Panama Papers and other recent scandals have put the spotlight on the urgent need to end corporate secrecy, and add to the momentum towards corporate transparency that is already under way.”

The recommendations in the report lean heavily on raising awareness about the lack of anti-corruption measures in emerging markets. It links the problem to lack of transparency and calls for countries to implement laws that eliminate corruption.

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Tom Murphy

Tom Murphy is a New Hampshire-based reporter for Humanosphere. Before joining Humanosphere, Tom founded and edited the aid blog A View From the Cave. His work has appeared in Foreign Policy, the Huffington Post, the Guardian, GlobalPost and Christian Science Monitor. He tweets at @viewfromthecave. Contact him at tmurphy[at]humanosphere.org.