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In the recent report on global corporate transparency by Transparency International, ONGC and Reliance Industries were among the top ten per cent companies in organizational transparency and country reporting. For example, government owned oil & gas major ONGC is 14th best among world'stop 124 companies in organizational transparency (OT) with total score of 75 per cent, according to the report. Reliance Industries is just a notch behind ranked 15th with identical score. Their score was on OT was twice sample average score of 38 per cent but behind highest score of 100 per cent. Only two companies from India featured in the TI sample.
In this regard, ONGC and RIL was ahead of some of world's top companies including BHP Billiton (OT score of 69 per cent), Petrobras (62.5 per cent), BP (50 per cent), GlaxoSmitaKline (50 per cent), Tesco (50 per cent), Vodafone (50 per cent), IBM (19 per cent), GE (19 per cent), Berkshire Hathway (12.5 per cent), Johnson & Johnson (12.5 per cent), Walt Disney (12.5 per cent).
In TI survey, score on OT depends company's disclosure of information about its consolidated and non-consolidated subsidiaries and associates in its consolidated accounts and financial statements. Indian companies score high on this score due to mandatory disclosure of norms for subsidiaries and associates.
| Table-1 : India companies high in financial disclosure but low on fighting corruption | ||
| Score | Rank | |
| I. Organisational Transparency | ||
| ONGC | 75% | 14 |
| Reliance Industries | 75% | 15 |
| Sample Average | 39% | |
| Sample High | 100% | |
| II. Country Reporting | ||
| ONGC | 30% | 5 |
| Reliance Industries | 30% | 6 |
| Sample Average | 6% | |
| Sample High | 60% | |
| III. Anti-Corruption Programme | ||
| ONGC | 38% | 110 |
| Reliance Industries | 62% | 92 |
| Sample Average | 70% | |
| Sample High | 100% | |
| Source: Transparency International | ||
Indian companies also score high on country-level disclosures of their international operations. ONGC and RIL are ranked five and six on this parameter respectively with score of 30 per cent each, nearly five times the sample average score of 6 per cent and highest score of 60 per cent. Only four MNCs are ranked higher -Norway's Statoil (66 per cent), Spain's Telefonica (54 per cent), Vodafone (51 per cent) and Banco Santander (31 per cent).
In comparison, many of the world's biggest corporations such as American Express, Toyota Motors, Walt Disney, Visa, Procter & Gamble, JPMorgan Chase and Verizon Communications score poorly on this account, according to Transparency International Survey.
RIL and ONGC however ranked poorly on the Anti-Corruption Programme, ranked 92 and 110 respectively with score well below global average. (See adjoining table)
Experts attribute it to India's stringent disclosure norms and accounting practices as mandated by the Companies Act and Securities & Exchange Board of India (SEBI). "Unlike many countries where Companies Act only governs the rights and duties of various stakeholders, Indian Act also lay emphasis on disclosure of a company's financial and operational information. The scope of disclosure is further widened by SEBI for listed companies. Elsewhere, disclosure norms are largely governed by the listing agreement between the company and the stock exchange where companies get listed," says Sivarama Krishnan, executive director and partner PwC India.
This is visible in the size and scope of corporate annual reports of large listed Indian companies and their global counterparts. A typical Indian annual report is thicker and contains more financial and operational information despite Indian companies being much smaller.
| Table-2 : Indian shareholders get more numbers to play with | ||
| Company | Latest Annnual Report | Financial Statements |
| (No. of pages) | (No. of pages) | |
| Maruti Suzuki | 176 | 60 |
| Suzuki Motor Corp | 70 | 32 |
| Unilever | 153 | 62 |
| Hindustan Unilever | 180 | 52 |
| Cummins Inc# | 125 | 52 |
| Cummins India | 127 | 49 |
| Tata Motors | 216 | 86 |
| General Motors# | 235 | 63 |
| Reliance Inds | 292 | 106 |
| ONGC | 334 | 145 |
| ExxonMobile* | 136 | 84 |
| # 2013 Annual Report on 10-K Form | ||
| * Including summary annual report and financial statements for 2013 | ||
| Source: Companies | ||
For example, Maruti Suzuki annual report for FY14 is 176 pages long including cover page more than twice as thick as its parent Suzuki Motor Corp annual report for FY14. Maruti annual report had 60 pages of financial statements against 32 pages of financial statements in Suzuki's annual report.
Similarly, Hindustan Unilever FY14 annual report at 180 pages was longer than its parent 2013 annual report at 153 pages, though latter had much longer financial statement 62 pages against HUL's 52 pages.
India's two biggest companies that featured in Transparency International Report - ONGC and Reliance Industries produce even bigger annual statements. ONGC FY14 annual report is 334 pages thick with 145 pages of financial statements. Its private sector counterpart RIL is not very far behind with 292 pages long annual report with 106 pages of annual financial statement.
This more than twice what ExxonMobile, world's largest oil & gas company sent to its shareholders last year - 52 pages of summary annual report and 84 pages of financial statements and supplementary information.
Critics however say that corporate disclosures have become a formality in India with little effort by companies to add value. "Indian companies lag in voluntary disclosures and they don't go the extra-mile in adding value to the financial numbers that would improve shareholder's understanding of their operations," says Rohit Mahajan, senior director, Forensic Services, Deloitte India.
India is one of the few jurisdictions where companies are mandated to provide a detailed break-up of various operational costs such as employee expenses, raw materials cost and sales & marketing expenses. In other markets companies mostly provide a summary account of expenses.
Experts say that in developed markets, there is a greater emphasis on balance sheet numbers, while Indian disclosure norms are tilted towards operational data and profit and loss account.
Transparency International agrees but says that Indian companies lag behind their developed world peers in law implementation and fighting corruption. "Indian accounting and disclosure norms are among the best in the world but companies don't follow it in spirit. Besides, Indian companies have little or no policy on fighting corruption and don't have a whistle blower policy unlike firms in the developed world," says Ashutosh Kumar Mishra Executive Director, Transparency International.
