Starting this week, the business community has an exciting resource in OwnershipTransparency.com – a new website tailored to businesses and investors that provides information on how to identify the ultimate owners of supplier and partner companies.
[Company] ownership transparency enables businesses to know who they are doing business with, financial institutions to know who their customers are, citizens to see who benefits from public funds, and law enforcement to hold individuals accountable for crime and corruption. - The B Team, The Business Case for Ending Anonymous Companies.
OwnershipTransparency.com—launched at the 17th annual International Anti-Corruption Conference in Panama City, Panama—is a project of The B Team and its partners, Bank of Montreal, Deloitte and Thomson Reuters.
The website calls upon the business community to take the following actions to promote company ownership transparency:
- Publish ownership
- Call for government action
- Practice due diligence
- Require transparent suppliers
- Make data public
- Protect investments.
The B Team is an organization founded by prominent business leaders to be a driving force for social, environmental and economic benefit through responsible business practices. This includes a mandate to end anonymously-owned companies, or companies where it’s nearly impossible to determine who ultimately owns them (also known as “beneficial owners”), which have been shown to pose serious financial and non-financial risks to businesses and investors.
To help combat these risks, investors managing over $740 billion in assets are calling for the U.S. government to require all American companies to report their real owners and to keep that information updated (see letters to the U.S. Senate HERE and House HERE).
The oldest banking association in the U.S., The Clearing House Association, which advocates on behalf of the largest U.S. commercial banks, also supports transparency about the real owners of U.S. companies. According to The Clearing House, allowing financial institutions access to this information would better enable banks to comply with U.S. regulations requiring them to determine the beneficial owners of their corporate clients.
The new website highlights case studies demonstrating that when the criminal and corrupt hide behind secretly-owned companies, it makes it very hard for shareholders to manage all types of risk. Those cases can be found in Chancing It: How secret company ownership is a risk to investors, a report by Global Witness and Global Financial Integrity, as well as other cases from across several industries including:
- The oil giant Chesapeake Energy incorporated
an anonymously-owned shell company to contract for the right to drill on
hundreds of farmers’ land by promising bonuses that were never paid. Though the
company admits no wrongdoing, it agreed to create a $25 million compensation
- TeliaSonera AB allegedly paid an
anonymously-owned company registered in Gibraltar $250 million to bribe the
daughter of the then President of Uzbekistan for a license to do business in
the country. The scandal led to multiple, ongoing legal investigations, the
resignation of several company executives, and a proposal by U.S. and Dutch
authorities that the company pay $1.4 billion in fines to settle the
- China’s ZTE Corp., the mega telecommunications
equipment maker and mobile phone vendor was found to have violated U.S.
sanctions for planning to use its anonymously-owned companies to export
American made technology products to Iran to mask the true destination of the
goods. Due in part to the U.S. investigation, its stock price halved in the
first part of 2012, and its Hong Kong shares were suspended in March
OwnershipTransparency.com also provides tools to help the business community identify valuable opportunities through the management of risks stemming from anonymously-owned companies, and to prevent their significant, negative financial impacts. For more information on the cases and tools in Chancing it, check out my podcast interview with Principles for Responsible Investment (PRI), Corporate Ownership Transparency (listen to the podcast here).
We at Global Witness look forward to working with The B Team to expand and strengthen these tools, as well as to elaborate on the value and importance of company ownership transparency. Please join us! Visit OwnershipTransparency.com to learn how business leaders can take action in the following ways:
- Publish your company ownership and structure
- Call on all governments to implement beneficial ownership transparency
- Investigate any person who owns at least 10% of a company through due diligence
- Require your suppliers to disclose their ownership structure
- Commit to publish your own data on the Global Register
- Protect your investments.