With the release of its latest Economic Contribution and Payments to Governments Report today, BHP Billiton becomes the latest in a growing list of companies and business leaders highlighting the importance of company ownership transparency, and starting to walk the talk by being transparent about elements of their own company structures, entities and ownership.
The 2016 report includes a policy statement expressing support for
“the introduction of public disclosure requirements relating to beneficial ownership (the ultimate holder of the benefits of ownership of the company)”
This is accompanied by a disclosure of ten subsidiary companies that are incorporated in low-tax jurisdictions (tax havens) and an explanation for why.
The chorus of business voices calling for transparency of company ownership, and crucially, public access to that information when governments do collect it, has been developing for some time. The B20 — the business platform that engages with G20 leaders — has supported beneficial ownership for a number of years now.
The B Team Leaders, including Richard Branson, Arianna Huffington, Mo Ibrahim, Paul Polman, Guilherme Leal, Francois-Henri Pinault, and Ngozi Okonjo-Iwaela published an open letter to the G20 in 2014, and followed it up with a report on the business case for ending anonymous companies in 2015.
More recently, businesses in the U.S. have been voicing their support for action at home in the wake of the Panama Papers. The U.S. is a key jurisdiction for action on beneficial ownership — it is the easiest place in the world to create a company where the real identity of the people who own or control them can be kept secret. It’s also an increasingly desirable destination for hiding the proceeds of crime or corruption.
A proposed bill, the Incorporation Transparency and Law Enforcement Assistance Act is now gaining support from business. Gregory Baer, President of the Clearing House Association, a banking association owned by the world’s largest commercial banks, sent a letter of support to the sponsors of the bill, stating that his members believe the legislation will allow the private sector to better identify suspected money laundering and potential terrorist financing through beneficial ownership disclosure. An additional 24 institutional investors representing more than $740 billion in assets under management also expressed their support for the bill in a letter to House and the Senate in May 2016.
BHP Billiton are not the only company to back up their support for change in regulation on beneficial ownership by voluntarily disclosing more information. In May of this year Unilever and Natura published more of their own company structures and ownership information. Companies are now engaging with a new consortium to be part of discussions to help create a global register of beneficial ownership information.
So why is business so worked up about an issue that requires more transparency of the private sector?
There are a range of reasons but three stand out:
- It is good business: Knowing who you are doing business with is fundamental to productive relationships and joint ventures, and to manage a range of risks in value chains. At the moment, attempts at due diligence are often undermined by the lack of information in the public realm about the ownership of companies.
- It creates a good environment for business: Transparency helps create financial stability, and ensure fair competition, whereby companies win government and private contracts on the basis of the quality of their products and services, their sustainability and integrity, rather than based on who they know, bribes or favours.
- It is good for society: This kind of transparency can help prevent corruption and the disastrous loss of resources that ultimately belong to citizens, and to reduce impunity by enabling authorities to track down those who benefit from corruption. In BHP Billiton’s case, they support beneficial ownership transparency to support better tax systems by “ensuring assets and incomes are fully disclosed to relevant regulatory bodies” so that countries can ultimately benefit from taxation based on a company’s activities and value creation in their countries. As the world works to mobilise 90 trillion USD over the next 15 years to achieve the sustainable development goals and the targets of the Paris Agreement,the losses from corruption cannot continue.
Most fundamentally, being honest about who owns, controls and benefits from companies can start to restore trust in business and in governments. At a time when trust is declining in large institutions (private and public) creating trust and building accountability is crucial, and business knows it.
If your company wants to contribute their voice to the growing chorus of companies supporting beneficial ownership transparency please get in touch at firstname.lastname@example.org.