Management Accounting

Top U.S. Firms Too Opaque, Says Watchdog

Among the 10 worst global companies for organizational transparency and country-by-country financial disclosures: Berkshire Hathaway.
Matthew HellerNovember 5, 2014
Top U.S. Firms Too Opaque, Says Watchdog

Some of the largest U.S. public companies including Berkshire Hathaway, Amazon, Google and Walt Disney are keeping too much private, according to a survey of the transparency of corporate disclosures.

In a report published Wednesday, anti-corruption watchdog Transparency International rated 124 companies based on their measures to prevent corruption, their organizational transparency and their country-by-country financial disclosures.

While there were six Chinese companies among the 10 worst performers, Warren Buffett’s Berkshire Hathaway was the sixth-worst overall. Other U.S. companies in the worst 20 were Amazon (ninth); Google (12th); Disney (15th); Johnson & Johnson (17th); and Visa, Citigroup, and Apple, who all tied for 19th-worst.

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No U.S. company made it into the top 20 for transparency, a group dominated by European firms. Perhaps somewhat surprisingly given the tobacco industry’s reputation, Philip Morris International was the most transparent among U.S.-based multinationals.

“We need more transparency from multinational companies, whose power in the world economy closely rivals the biggest countries,” Transparency International chairman Jose Ugaz told Reuters.

“By not responding to people’s demands for greater transparency and accountability, companies risk harming their brand and losing customers,” he warned.

U.S. companies performed particularly badly in the area of organizational transparency, with 14 scoring a mere 13%, compared to an average of 39% for all companies. “U.S. regulators require the disclosure of material subsidiaries only, which partially explains the poor performance of U.S. companies in this dimension,” Transparency International noted.

Companies from Germany and India, where legislation compels the disclosure of all subsidiaries, scored consistently high for organizational transparency.

As far as country-by-country reporting, the average score was only 6%, with some 50 of the 124 companies scoring zero. Fifty-four companies do not disclose revenues from foreign operations and 90 do not publish the taxes they pay in foreign countries, Transparency International found.

The Berlin-based watchdog named Bank of China, Honda Motor, Bank of Communications, Agricultural Bank of China and Russia’s Sberbank as the five least transparent companies. In the top five were Italy’s Eni, Britain’s Vodafone, Norway’s Statoil, Anglo-Australian multinational BHP Billiton and Spain’s Banco Santander.

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