AB-InBev pilloried by corruption watchdog Transparency International
Google, Amazon, Toyota and AB-Inbev are among the least "transparent" major corporations around the world, according to a new study. Transparency International (TI), the Germany-based not-for-profit group, rated how openly the 105 biggest global companies reported their anti-corruption schemes, country-by-country sales and organisational structures. AB-InBev ranked tenth – from the bottom.
TI issued a damning verdict on 10 July 2011 that many of these global leaders “continue to publish too little information about their commitments to comprehensive anti-corruption systems and their sprawling operations. They also report insufficiently on their corporate structures, preventing clarity about their true impact in countries around the world. As a result, the world’s largest companies may contribute to an environment in which corruption can thrive.”
Although the report went largely unnoticed – judging from the media response – TI is not some insignificant meddler. It is the global civil society organisation leading the fight against corruption. Through more than 90 chapters worldwide and an international secretariat in Berlin, it raises awareness of the damaging effects of corruption and works with partners in government, business and civil society to develop and implement effective measures to tackle them.
Interestingly, the report included findings on AB-InBev because the brewer now ranks among the world’s top 105 companies by size, according to Forbes.
Other brewers will heave sighs of relief that TI did not shed a light on their reporting practices. But, as any long-suffering investor in beverage companies will confirm, they rate hardly better when it comes to transparency in reporting.
In its report, TI focuses on three areas: reporting on company’s anti-corruption programmes, organisational transparency (which refers to disclosing how many subsidiaries they own, at least in part), plus country-by-country reporting (i.e. financial data across all the countries of operations).
As concerns reporting on anti-corruption programmes, the companies under review achieved an average score of 68 percent (100 percent being the best performance). Here AB-Inbev came in slightly under-average at 62 percent. The best performers were the German chemical group BASF and Norway’s Statoil, the energy group. They scored 100 percent.
However, AB-InBev was the worst performer in organisational transparency. Here the brewer only scored 25 percent.
“Organisational transparency is particularly important in the case of multinational companies that operate through a network of interconnected subsidiaries, affiliates, joint-ventures and other holdings that may be incorporated in diverse jurisdictions, including secrecy jurisdictions”, says the TI report.
In the final section – country-by-country reporting – AB-InBev did not do any better. It scored 0 percent. But it was not alone. It was joined by 40 other companies which shy from transparency in financial reporting of how much they earn and pay in taxes in each market.
This is not to say that they are engaged in dodgy shenanigans, just that they are not very open about what they do.
TI is very well aware that the overall poor performance by multinationals in country-by-country reporting is the result of regulatory oversight. Meaning: companies are not forced to do so.
On the basis of the analyses, TI has recommended that anti-corruption programmes should be publicly available; companies should publish exhaustive lists of their subsidiaries, affiliates, joint-ventures and other related entities; and they should publish individual financial accounts for each country of operations.
Overall, AB-InBev was not the worst offender, but by the same token it was not among the best in class.
To all appearances, TI’s findings seem to have fallen on investors’ deaf ears because on 10 July 2012 AB-InBev wowed the market with a USD 7.5 billion bond offering, which drew more than USD 30 billion of orders from investors who have been piling into U.S. dollar corporate bonds as of late. AB-InBev’s offering consists of single-A rated bonds in four different maturities from three to 30 years. The brewer plans to use the money to finish its merger with Mexico’s Grupo Modelo, the maker of Corona.
That’s probably the reason why AB-InBev not even acknowledged the TI report by saying that their reporting standards are above reproach.
Still, AB-InBev is already the second brewer to have been named and shamed by a pressure group over its reporting standards. In November 2010 the UK charity ActionAid accused SABMiller of siphoning profits out of developing countries and parking them offshore, using a web of tax-haven subsidiaries. SABMiller denied any wrongdoing and said that its practices were within the law. ActionAid acknowledged this, but nevertheless launched a campaign to condemn them as unethical.
Until now, multinational companies have been able to shrug off these accusations with a smile. Perhaps not much longer as these watchdogs progress from shock troop to political factor and their pressure on governments to change the rules of the game mounts.
Years ago, no one cared about environmental pollution or the use of child labour by big multinationals. Thanks to non-governmental organisations and their relentless campaigning, today all multinationals at least feel compelled to say that they abhor these practices.
Perhaps a call for more transparency in corporate reporting does not make for sexy and publicity-grabbing campaigns. However, this does not make the call superfluous. ActionAid’s and TI’s crusades are a start and eventually governments will be forced to take notice.
