Corporate Disclosure: Extracting Oil, Burying Data
IF OIL, gas and mining firms revealed their payments to governments, campaigners say, it would be easier to expose bribe-payers—and bribe-takers. Activists rejoiced when they got a provision requiring firms to publish payments per project included in the ragbag Dodd-Frank corporate-reform act in 2010. “We thought we had blown up the Death Star,” says Ian Gary of Oxfam America, a charity.
But, he concedes, the empire struck back. A year later, amid increasing objections from the oil industry, the Securities and Exchange Commission has yet to finalise the rules that the law stipulates for extractive-industry companies listed in America. The American Petroleum Institute, an industry group, is now threatening to sue the SEC, claiming its cost-benefit sums are wrong.
In response, campaigners are pressing their case anew, with public stunts and an advertising campaign. Their efforts are echoed elsewhere. In October the European Commission proposed similar rules, but covering forestry and unlisted firms too. These should pass: Britain and France, with the largest extractive industries in Europe, support them. Indonesia and Hong Kong have tightened their reporting rules.
Business has many objections. The new rules are overly intrusive. In countries such as Angola, Cameroon, China and Qatar they may clash with local secrecy laws. They can cause security problems, discourage investment in poor countries and disadvantage law-abiding firms which must compete with unscrupulous rivals. The rules are too vague: how do you define a “project”? And what is a “payment”? Does it include, for example, a $50,000 monthly rent for an expat manager’s housing, paid to a landlord who happens to be a well-connected local official? The result will be confusion, not clarity.
But businesspeople struggle to produce examples of how local restrictions on publishing confidential contract details could clash with transparency requirements elsewhere. Contracts in developing countries typically have a clause permitting disclosures that are required by the company’s home country and stock exchange. Nor does greater disclosure seem to hurt competitiveness. In 2011 Angola awarded several new deepwater oil concessions to firms covered by Dodd-Frank. No oil company has so far cited increased openness as a material risk in its SEC filings.