ASSESSING 30 LISTED BELGIAN COMPANIES 2015 1 Responsible publisher: - - PDF document

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ASSESSING 30 LISTED BELGIAN COMPANIES 2015

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Responsible publisher: Transparency Internatjonal Belgium VZW-ASBL, Nijverheidsstraat 10 rue de l‘Industrie, 1000 Brussels, Belgium. Date of publicatjon: 18 December 2015, www.transparencybelgium.be Transparency Internatjonal is the global civil society organizatjon leading the fjght against

• corruptjon. Through more than 100 chapters worldwide and an internatjonal secretariat

in Berlin, Transparency Internatjonal raises awareness of the damaging efgects of corrup- tjon and works with partners in government, business and civil society to develop and im- plement efgectjve measures to tackle it. Every efgort has been made to verify the accuracy of the informatjon contained in this re-

• port. All informatjon was believed to be correct at the date of our review (1-15 October

2015). Nevertheless, Transparency Internatjonal cannot accept responsibility for the con- sequences of its use for other purposes or in other contexts. We would like to thank all individuals who contributed to the research, the review or the drafuing of the report: Karel Boone, Michael Clarke, Evert-Jan Lammers, Mathieu Maes, Anja Siebel and David Szafran (for Transparency Internatjonal Belgium) and Sophie Delcoigne, Sarah Deom, Aloïs Moreau, Martjn Tombal, Léopold Van Oost and Rafaël Vansteenberghe (for Louvain School of Management).

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CONTENTS

• 1. RESULTS AT A GLANCE
• 2. INTRODUCTION
• 3. SUMMARY
• 4. RECOMMENDATIONS
• 5. PROJECT RATIONALE AND METHODOLOGY
• 6. REPORTING ON ANTI-CORRUPTION PROGRAMMES
• 7. ORGANISATIONAL TRANSPARENCY
• 8. COUNTRY-BY-COUNTRY REPORTING
• 9. QUESTIONNAIRE
• 10. SCORES PER COMPANY

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• 1. RESULTS AT A GLANCE

Th This is I Index ex is is b based o ased on th the e unwei weighted ted av avera erage e of r f res esults in a lts in all ll th three cate ee categories ies ACP = = res esult fo lt for rep eporti ting on a anti ti-co corruptio tion p programmes ammes OT = r T = res esult for t for organis isat atio ional t al transparen ency cy CB CBC C = Co = Countr try-by by-countr try y reporting ting Domains BEL20 Other Average

• 1. Antj-corruptjon programmes (‘ACP’)

50% 24% 37%

• 2. Organizatjonal transparency (‘OT’)

72% 74% 73%

• 3. Country-by-country reportjng (‘CBC’)

11% 7% 9% 44% 35% 39%

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• 2. IN
• 2. INTRO

TRODUCTI DUCTION ON

Transparency in Corporate Reportjng: Assessing 30 Listed Belgian Companies 2015 provides an evaluatjon of the transparency of reportjng by 30 Belgian listed companies: 15 of the BEL20 index and 15 smaller companies with internatjonal operatjons. The methodology used (TRAC) focuses on three areas of reportjng which are evolving very fast in the face of rapidly changing public expectatjons of what constjtutes good corporate practjce: antj- corruptjon programs, their organisatjonal transparency (where and through what subsidiar- ies they operate) and country-by-country reportjng and countries. The aim of this report is to encourage companies to align with developing reportjng require- ments rather than lag behind to await the inevitably slower developing statutory require-

• ments. Leading from the front can be a competjtjve advantage, partjcularly in aturactjng in-

vestors and enhancing the public image. Being compliant with formal reportjng require- ments is not enough, companies increasingly need to antjcipate change. This is as true of their investor relatjons as it is of their business strategies. The voluntary reportjng that is described in this report today will be part of the formal re- portjng standards of tomorrow. Transparency Internatjonal encourages companies to adopt these standards now because it makes sense: their statements will be more convincing; their standards will be more credible; their values can be linked to policies and procedures; their vision is translated into strategy, policies and procedures. That is at the core of busi- ness case of transparency in reportjng on antj-corruptjon. All the average scores are unweighted and must be interpreted with cautjon, not least be- cause the relatjve importance of questjons varies from company to company depending on the extent of their internatjonal business and presence outside Belgium and business sec- tors. We would partjcularly like to thank the many companies which responded with useful com- ments on the initjal evaluatjons giving rise to fruitgul exchanges of views. The more we can dialog with companies in such a study the betuer and more useful the fjndings.

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Tra rans nspar arenc ncy y : “Characteristic of governments, companies, organisations and individuals of being open in the clear disclosure of information, rules, plans, processes and actions. As a principle, public officials, civil servants, the man- agers and directors of companies and organisations, and board trustees have a duty to act visibly, predictably and understandably to promote participation and accountability and allow third parties to easily perceive what actions are being performed.” Bri riber ery : : ”The offering, promising, giving, accepting or soliciting of an ad- vantage as an inducement for an action which is illegal, unethical or a breach

• f trust. Inducements can take the form of gifts, loans, fees, rewards or other

advantages (taxes, services, donations, favours etc.).” Cor

• rru

ruption ion : “Corruption is the abuse of entrusted power for private gain. It hits all the people whose live, livelihoods or happiness depend on the integ- rity of those holding a position of authority.”

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Summary

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• 3. S
• 3. SUMMARY

UMMARY

Overall The following general trends and conclusions can be drawn from the TRAC-2015 review:



Firstly, companies improve their corporate reportj tjng over tj

• tjme. This can be seen by com-

paring the scores from the companies that were also included in previous TRAC-studies. This is in line with the trend of increasing reportj tjng on non-fj fjnancial informatj tjon.



Secondly the BEL20 companies do betu tuer than the smaller multj tjnatj tjonals, even though the difg fgerences are not as big as one might expect (average overall score: 44% vs 35%).



Thirdly, companies pay increasing atu tuentj tjon to reportj tjng on antj tj-corruptj tjon programmes (37%) and on organizatj tjonal transparency (73%). However, country-by-country reportj tjng at corporate level does not get the atu tuentj tjon it deserves (9%).



Finally, the BEL20-companies may be twice as transparent on their antj tj-corruptj tjon poli- cies as the smaller Euronext-companies (50% versus 24%) but in this domain they are lagging behind the global average of 70% (1). The results of this TRAC review vary considerably from company to company, ofuen we be- lieve as a refmectjon of the extent to which companies have internatjonal operatjons and presences:



Companies operatjng internatjonally on a large scale may be more frequently faced with issues around bribery and corruptjon, not least the legal risks associated with ex- ternal jurisdictjons such as the US Department of Justjce (DoJ) with the Foreign Corrupt Practjces Act (FCPA) and the UK’s Antj-Bribery legislatjon, now more vigorously pursued by the Serious Fraud Offjce (SFO) as was recently demonstrated by their actjon against Standard Bank for a case involving bribery in Tanzania. Companies with the bulk of their operatjons centred in Belgium, appear to be less conscious of these risks, though they stjll exist, at least as regards public disclosure of policies to combat corruptjon and bribery.



Clearly too, companies with largely domestjc operatjons are less likely to be pre-

• ccupied with disclosure around their corporate organisatjon and country-by-country

reportjng.

(1) Transparency in Corporate Reportjng, Transparency Internatjonal, 2014 htup://www.transparency.org/whatwedo/ publicatjon/transparency_in_corporate_reportjng_assessing_worlds_largest_companies_2014

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Both these factors are refmected in the results as also companies’ appreciatjon of their sec- toral exposure both as regards risks and public expectatjons. The business environment in which companies now operate has been changing very rapidly in recent years in response to a mixture of corporate failures, the fjnancial crisis of 2008 and the resultant increasing public scrutjny of the ethical stance of companies be it as regards fjghtjng corruptjon or perceived fairness in paying taxes. The range of corporate stakehold- ers has widened considerably beyond just investors, employees, customers and suppliers. Governments, politjcians and the general public, partjcularly the younger generatjons, are becoming more demanding. Recent cases such as those of GSK in China and Petrobras in Brazil reinforce public expectatjons of more actjve corporate policies to fjght bribery and

• corruptjon. Reluctant or forced disclosure of corporate tax policies are leading to the rapid

moves towards Base Erosion Profjt Shifuing (BEPS) rules under pressure from the OECD and G20 and even more rapid moves to country-by-country (CBC) reportjng of tax and profjts. The EU Member States must transpose the Directjve on disclosure of non-fjnancial and di- versity informatjon by certain large companies into natjonal laws before the end of 2016. It is expected that the fjrst company reports will be published in 2018 covering fjnancial year 2017-2018. The Directjve introduces measures that will strengthen the transparency and accountability

• f ‘public interest entjtjes’ with more than 500 employees. They will be required to report
• n new matuers including antj-corruptjon and antj-bribery measures. They will be required

to describe their business model, outcomes and risks of the policies on the above topics, and are encouraged to rely on recognized frameworks such as GRI’s Sustainability Reportjng Guidelines, the United Natjons Global Compact (UNGC), the UN Guiding Principles on Busi- ness and Human Rights, OECD Guidelines, and Internatjonal Organizatjon for Standardiza- tjon (ISO) 26000. This Directjve is part of the wider European Union’s initjatjve on Corporate Social Responsi- bility which includes plans for a consistent approach to reportjng to support smart, sustaina- ble and inclusive growth in pursuit of the Europe 2020 objectjves.

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Antj tj-corruptj tjon programmes In this sectj tjon BEL20-companies do betu tuer than the smaller multj tjnatj tjonal companies in every

• ne of the 13 areas under scrutj

tjny (average score: 50% versus 24%). The responses that we have obtained from smaller multj tjnatj tjonal companies indicate that they do have relevant poli- cies and procedures in place but are less inclined to publicly report on them. For companies, the best protectjon against the risk of bribery and corruptjon must be a comprehensive antj-corruptjon programme that is fully implemented and monitored on a contjnuing basis. Such antj-corruptjon programmes need to be very clearly endorsed by the Boards (tone at the top) as an integral part of the company’s ethical stance. The publicatjon of the key-elements of an antj-corruptjon programme demonstrates a com- pany’s commitment to fjghtjng corruptjon and increases its responsibility and accountability to stakeholders. In additjon, a strong and public commitment to a robust antj-corruptjon programme has a positjve impact on a company’s employees as it strengthens their antj- corruptjon attjtudes. Public reportjng on antj-corruptjon programmes can also contribute to positjve changes as the process of reportjng focuses the atuentjon of the company on its

• wn practjces and drives improvements in policies and programmes.

The evaluatjon of corporate reportjng on antj-corruptjon programmes is based on 13 ques- tjons, which are derived from the UN Global Compact and Transparency Internatjonal Re- portjng Guidance on the 10th Principle against Corruptjon. This tool, based on the Business Principles for Countering Bribery, which were developed by Transparency Internatjonal in collaboratjon with a multj-stakeholder group, includes recommendatjons for companies on how to publicly report on their antj-corruptjon programmes. Organisatj tjonal transparency Most companies demonstrate high standards regarding organisatj tjonal transparency (sectj tjon 2) scoring an average of 72-74%, yet they are reluctant to disclose all countries in which they have operatj tjonal actj tjvitj tjes (13% or less). Large multjnatjonal companies operate as complex networks of interconnected entjtjes in- volving subsidiaries, affjliates or joint ventures controlled to varying degrees by the parent

• company. These can be registered and operate in several countries, including secrecy juris-

dictjons or tax havens.

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If companies choose not to disclose these structures and holdings it can be very diffjcult to identjfy them and understand how they relate to each other. US regulators require the dis- closure of material subsidiaries only, which may explain a poor performance of companies with US subsidiaries in this sectjon. Organisatjonal transparency is a prerequisite to efgectjve country-by-country reportjng as the next sectjon illustrates. Country-by-country reportj tjng Scores in this sectj tjon are mostly low (on average 7-11%), which is not surprising given that moves to country-by-country reportj tjng are very recent and the fj fjnancial reports that have been the subject of review are those from 2014. But it is clear that some companies are more advanced than others.



Overall company performance is very weak.



Companies disclose fj fjnancial informatj tjon for selected countries only.



Revenues are the most-ofu fuen disclosed data point; pre-tax profj fjts are the least-disclosed. Country-by-country reportjng is an essentjal element of corporate transparency in order to ensure a stronger accountability of multjnatjonal companies through an increased monitor- ing by stakeholders and citjzens, which will also help to reduce tax avoidance. Currently, multjnatjonal companies publish their accounts by combining data about tax compliance from multjple countries into one single aggregate report, making it diffjcult to distjnguish between the contributjons they make to all the individual countries they operate in. As the recent Luxleaks scandal brought to light, in most cases multjnatjonal companies are not transparent regarding their structure and operatjons, and exploit loopholes in domestjc and internatjonal tax law that allow for ‘profjt shifuing’ from country to country, with the inten- tjon of reducing the taxes paid on profjts. Transfer pricing policies are not per se unacceptable but increasingly society demands trans- parency as to their efgect on taxes paid in the countries in which companies operate. On the 8th of July 2015 the European Parliament voted in favour of measures to increase the transparency of the fjnances of multjnatjonal corporatjons, requiring EU-based multjnatjon- al companies to reveal details of tax payments to governments around the world, reportjng fjnancial informatjon on a country-by-country basis and to publicly disclose informatjon re- garding tax rulings.

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Under the country-by-country provision multjnatjonal companies would be required to dis- close crucial informatjon such as, among others, their turnover, number of employees, profjt made, taxes paid and public subsidies received for all the countries in which they have an establishment.

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Recommenda- tions

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• 4. RECOMMENDATIONS

This sectjon contains recommendatjons to the companies and to the readers of this report. Recommendatj tjons to companies Most public companies have antj tj-corruptj tjon programs in place, but many of them do not see the need to report on this extensively at corporate level. Leading companies do report on such programs to increase awareness and reinforce the preventjon (and early detectjon) of misconduct and errors of judgement. These companies simply make internal policies and procedures (or abstracts) available on their corporate websites. The high scores in this sec- tjon, such as AB Inbev, KBC and Solvay, may serve as examples. Companies increasingly report on their non-fjnancial performance: health, safety, environ- ment, community, etc. In doing so they should explicitly reject all forms of corruptjon be- cause of its impact on society and on corporate reputatjon. Companies can show responsi- bility and demonstrate leadership by reportjng on the key policies and procedures that they have put in place. Only a minority of companies do so while our discussions with others give us the impression that they could do betuer rather easily. Every day the media show us that no sector of industry is free of corruptjon. Public companies should recognize the sense of urgency and act. Regarding organisatj tjonal transparency, we see that companies generally do not disclose all countries of operatjon. They typically argue that this informatjon can be found on the web- sites of their subsidiaries and that they do not want to report on items that they consider

• insignifjcant. These companies do not encourage stakeholders in gettjng the right picture of

their risk management in relatjon to corruptjon. And foreign subsidiaries do not necessarily provide such informatjon either. Small countries can generate big problems. Companies should convince the public that they are in-control, also with remote entjtjes and in small countries, through voluntary disclosure of the countries in which they have operatjonal ac- tjvitjes. In line with the previous recommendatjon companies should also report their revenues, profjts and taxes paid in every country of operatjon, the so-called country-by-country re- portj

• tjng. Only those companies that disclose the local impact of their business allow their

stakeholders to assess the adequacy of their antj-corruptjon programs.

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Obviously reportjng can only be an indicatjon of the quality of the company’s risk manage-

• ment. Risk management must be based on a clear corporate vision on the risk of corruptjon.

It must be driven by shared values and clear policies rather than reportjng standards and

• compliance. Public interest entjtjes in general do comply with statutory reportjng require-
• ments. Although such an assessment cannot be made by looking at corporate reportjng

alone, the absence of corporate reportjng is a weakness and a missed opportunity to show a company’s intentjons at a corporate level. Recommendatj tjons to readers The aim of this report is not to denounce companies that are not doing well enough in the eyes of Transparency Internatjonal. They are all compliant with statutory reportjng require- ments, well embedded in regulatory, supervisory and audit structures. Rather the voluntary reportjng that is described in this report will be part of the formal reportjng standards of to- morrow and Transparency Internatjonal has played a leading role since its establishment in 1993. Transparency Internatjonal encourages companies to adopt these standards now because it makes sense: their statements will be more convincing; their standards will be more credi- ble; their values can be linked to policies and procedures; their vision is translated into strat- egy, policies and procedures. That is at the core of the business case of transparency in re- portjng on antj-corruptjon.

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Project rationale and methodology

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• 5. PROJECT RATIONALE AND

METHODOLOGY

Transparency in Corporate Reportjng: Assessing 30 Listed Belgian Companies 2015 is based

• n a methodology defjned by Transparency Internatjonal. Transparency Internatjonal Bel-

gium has published TRAC-reviews before in 2009 and 2012. The most recent global TRAC- report has been issued in 2014. The TRAC (Transparency in Reportjng on Antj-Corruptjon) methodology consists of four steps. In Step 1 the selectjon of the companies is made. Euronext Brussels counts some 160 public companies, of which the largest (market capitalizatjon) are in the BEL20 index. We have se- lected 30 companies: 15 BEL20 and 15 smaller multjnatjonal companies. These companies are from difgerent sectors of industry: Banks and Insurance companies, Transport, Health and Pharmaceutjcals, Manufacturing, Holding & fjnance, Food, and Services. Chapter 10 in- cludes the names of the 30 companies. Step 2 consists of the review which took place in September-October 2015. The review is based on a questjonnaire containing 26 questjons developed by Transparency Internatjonal. We have assessed the publicly available informatjon on the corporate website. Three main dimensions were assessed for this report (Chapter 9 includes all 26 questjons):



Antj-Corruptjon Programmes (‘APC’): 13 questjons focusing on informatjon about pre- ventjve measures and the commitment to combat corruptjon.



Organisatjonal Transparency (‘OT’): 8 questjons focusing on transparency about corpo- rate structure, holdings and subsidiaries and on the countries of incorporatjon and op- eratjon.



Country-by-Country Reportjng (‘CBC’): 5 questjons on the impact of the business on a country-by-country level. In the TRAC-methodology the questjons are equally weighted in the scores per sectjon and, per company and in the overall score. The TRAC-methodology has slightly changed since the TRAC-2012 review. Some modifjca- tjons have been made in sectjon Antj-Corruptjon Programmes (ACP) and in sectjon Organi- satjonal Transparency (OT). These changes somewhat limit the possibility to compare the

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In Step 3 the drafu scores are sent to the partjcipatjng companies, asking them for their

• comments. Less than 25 percent of the companies have taken the opportunity to respond.

This took place in the month of November. One company has requested us to discuss our fjndings in more detail in a personal meetjng. Step 4 consists of the drafuing of the report, that contains all answers per questjon and per company, as well as trends, conclusions and recommendatjons. More detailed informatjon on the TRAC-2015 methodology can be found at our website (1). Every efgort has been made to verify the accuracy of the informatjon contained in this re-

• port. All informatjon was believed to be correct at the date of our review (closing 15 Octo-

ber 2015). Nevertheless, Transparency Internatjonal Belgium cannot accept responsibility for the consequences of its use for other purposes or in other contexts.

(1) www.transparency.org/corporate_reportjng

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REPORTING ON ANTI-CORRUPTION PROGRAMMES

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5.

• 5. Rep

Repor

• rting

ting on Anti

• n Anti-Corruption

Corruption- Progr

• gramm

ammes es

6.1 Introductj tjon For companies, the best protectjon against the risk of corruptjon and bribery must be a comprehensive antj-corruptjon programme that is fully implemented and monitored on a contjnuing basis. Such antj-corruptjon programmes need to be very clearly endorsed by the Boards (tone at the top) as an integral part of the company’s ethical stance. The publicatjon of the elements of an antj-corruptjon programme demonstrates a compa- ny’s commitment to fjghtjng corruptjon and increases its responsibility and accountability to

• stakeholders. In additjon, a strong and public commitment to a robust antj-corruptjon pro-

gramme has a positjve impact on a company’s employees as it strengthens their antj- corruptjon attjtudes. Public reportjng on antj-corruptjon programmes can also contribute to positjve changes as the process of reportjng focuses the atuentjon of the company on its

• wn practjces and drives improvements in policies and programmes.

The evaluatjon of corporate reportjng on antj-corruptjon programmes is based on 13 ques- tjons, which are derived from the UN Global Compact and Transparency Internatjonal Re- portjng Guidance on the 10th Principle against Corruptjon. This tool, based on the Business Principles for Countering Bribery, which were developed by Transparency Internatjonal in collaboratjon with a multj-stakeholder group, includes recommendatjons for companies on how to publicly report on their antj-corruptjon programmes. 6.2 Results

Unweighted average cores BEL20 Other Average Antj-corruptjon programmes (‘ACP’) 50% 24% 37%

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In this sectjon the companies from the BEL20 advance the smaller companies at Euronext Brussels in every one of the 13 areas under scrutjny (average score: 50% versus 24%). The responses that we have obtained from smaller multjnatjonal companies indicate that they do have relevant policies and procedures in place but are less inclined to publicly report on them. The companies that may serve as an example here are KBC (92%) Solvay (88%) and AB Inbev (85%). It is positjve to see that 10 out of 15 companies from the BEL20-index have scores of 50% or more in this area. Furthermore, the study suggests that those companies substantjally focused on the Belgian domestjc market, make a lower assessment of their possible exposure to bribery and cor-

• ruptjon. All, however, appear to be re-assessing their positjons.

Companies in the BEL20-index The highest score (80%) is obtained on questjon 2: “Does the company publicly commit to be compliant with all relevant laws including antj-corruptjon law?”. For the high-level questjons (questjons 1-4) the average score is slightly lower (63%) as not all companies are explicit about their antj-corruptjon programmes or mentjon only antj- bribery measures which is ofuen defjned as ‘gifus, hospitality and expenses’. The concept of corruptjon is defjnitely broader than that. This is also refmected in the scores on questjons 9 and 13 showing that companies are less inclined to report on facilitatjon payments or politjcal contributjons (37%). The same goes for questjon 26 regarding reportjng on community contributjons (7%). Some 40% of the companies report having training programs on antj-corruptjon for their employees and directors. Finally, the reportjng on policies and procedures in relatjon to reportjng channels (such as hotlines and confjdants) and the protectjon of whistleblowers (questjons 10 and 11) scores a promising average of 52%. Many more companies do have reportjng channels but these are only open to employees and therefore not included in their public reportjng.

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Other companies from Euronext Brussels In the ACP-sectjon (antj-corruptjon programmes) the smaller internatjonal companies are lagging behind the companies from the BEL20-index. This goes for every one of the ques- tjons 1-13, but some difgerences stand-out. As for the BEL20-group the smaller internatjonal companies obtain their highest score (53%)

• n questjon 2 “Does the company publicly commit to be compliant with all relevant laws in-

cluding antj-corruptjon law?” In this domain this is the only questjon with an average score above 50%. For the high-level questjons (questjons 1-4) the average score is only 33% as the majority of companies are not explicit about their antj-corruptjon programmes or mentjon only antj- bribery measures which they give a narrow defjnitjon. Only 18% of the smaller internatjonal companies report that their antj-corruptjon programs explicitly apply to others than employees and directors, for example agents, contractors, ad- visors, representatjves and intermediaries (questjons 5 and 6). Some 30% does conform that it is applicable to employees and directors. Only 13% of the smaller multjnatjonals report having training programs on antj-corruptjon for their employees and directors. Finally, the reportjng on policies and procedures in relatjon to reportjng channels and the protectjon of whistleblowers (questjons 10 and 11) have an average score of only 20%. Reportjng channels are recognised as an efgectjve tool to be informed of any misbehaviour that is not gettjng addressed in day-to-day communicatjon. It is clear to see that serious im- provements can be made in all of the above areas. For companies with stafg numbers over 500 the reportjng requirements are changing funda- mentally and at a rapid pace. All companies in our selectjon should demonstrate a sense of urgency and respond clearly and explicitly in relatjon to their antj-corruptjon programmes, especially for the 13 issues covered in the ACP-sectjon. Transparency internatjonal has traditjonally been monitoring and advising the larger multj- natjonal companies (BEL20) whereas the other companies underwent their fjrst TRAC- review in 2015. This may explain in part the lower scores of the latuer group.

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Industry comparisons Industry comparisons are delicate, especially because of the ofuen limited representatjon of a sector and the substantjal variances between scores of difgerent companies. Keeping that in mind we draw your atuentjon on a few difgerences. Banks and insurance companies have a traditjon of strong regulatjon especially in those areas that can be linked to money laundering, such as corruptjon. They have antj-corruptjon pro- grams in place and are used to monitoring and reportjng on it, as can be seen from the high average score (75%). In this light the healthcare and pharmaceutj tjcal sectors could be ex- pected to have higher scores (51%). The transport sector scores relatjvely well, especially when taken into consideratjon that these two companies are not in the BEL20-group (67%). The below-average score of the food sector (21%) is fmatuered by the 85%-score of AB Inbev,

• ne of the strong performers in the ‘ACP’-sectjon. Here substantjal improvement can be ex-

pected as these companies are operatjng internatjonally and in a sector which has had its share in the past (dioxin; mad cows). Holding and fj fjnance companies do not report clearly and explicitly on their antj-corruptjon

• programmes. They state that they actjvely manage their investments which implies substan-

tjal infmuence over these subsidiaries and hence, in our opinion, the need to report clearly

• n antj-corruptjon programmes. The changing legislatjon the EU (cfr. supra) may have an im-

pact on the reportjng on non-fjnancial informatjon by holding & fjnance companies in the near future.

Sector Companies Average Banks and insurance Ageas, KBC 75% Transport Exmar, CMB 67% Healthcare, pharmaceutjcal IBA, Ontex, UCB 51% Manufacturing Bekaert, Picanol, Sioen, Solvay, Umicore 46% Services Barco, Bpost, Proximus, EVS 23% Food AB Inbev, Colruyt, Greenyard, Lotus Bakeries, Ter Beke 21% Holding & fjnance AvH, GBL 0%

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Organisational Transparency

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• 7. Organisatj

tjonal transparency (‘OT’)

7.1 Introductj tjon Large multjnatjonal companies operate as complex networks of interconnected entjtjes in- volving subsidiaries, affjliates or joint ventures controlled to varying degrees by the parent

• company. These can be registered and operate in several countries, including secrecy juris-

dictjons or tax havens. If companies choose not to disclose these structures and holdings it can be very diffjcult to identjfy them and understand how they relate to each other. Organisatjonal transparency is important for many reasons, not least because company structures can be made deliberately opaque for the purpose of hiding the proceeds of cor-

• ruptjon. More fundamentally, it is important because it allows local stakeholders to know

which companies are operatjng in their territories, are bidding for government licences or contracts, or have applied for or obtained favourable tax treatment. It also informs local stakeholders about which internatjonal networks these companies may belong to and how they are related to other companies operatjng in the same country. In additjon, through full disclosure of corporate holdings, stakeholders, including investors, can gain more complete knowledge of fjnancial fmows such as intra-company transfers and payments to govern-

• ments. Organisatjonal transparency allows citjzens to hold companies accountable for the

impact they have on their communitjes. To assess organisatjonal transparency, Transparency Internatjonal researchers consulted publicly available documents such as annual reports and stock exchange fjlings for infor- matjon about company subsidiaries, affjliates, joint ventures and other holdings. The infor- matjon sought included corporate names, percentages of ownership by the parent compa- ny, countries of incorporatjon and the countries in which the companies operate. 7.2 Results

Unweighted average scores BEL20 Other Average Organizatjonal transparency (‘OT’) 72% 74% 73%

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Virtually all companies disclose their fully consolidated subsidiaries, the percentage of shares held and the countries of incorporatjon of these subsidiaries (93%-95%). For non- fully disclosed subsidiaries the score of this informatjon is somewhat lower (70%-73%). However, companies generally do not disclose all the countries in which they have opera- tjonal actjvitjes (0%-8%). The relatjvely good score for Organisatjonal transparency is a pre- requisite to efgectjve country-by-country reportjng as the next sectjon illustrates. The coun- try of operatjon is important therein, and therefore companies need to be more clear and transparent as to their countries of operatjon. The informatjon is readily available in the or- ganizatjon and can be easily provided at corporate level. Also remote subsidiaries and small countries can provoke big problems to corporates and deserve to be included in antj- corruptjon programmes and related reportjng. Difgerences between the companies in the BEL20-index and the other companies from the Euronext Brussels are limited and not considered worth analysing further.

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Country By Country reporting

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• 8. C
• 8. COUNTRY

OUNTRY-BY BY-COUNTRY OUNTRY

8.1 Introductj tjon The third sectjon of the report assessed the level of country-by-country reportjng on basic fjnancial data. The main objectjve of the CBC-sectjon is for companies to display the profjts they earn abroad and the amount of taxes relatjng thereto. Currently, companies publish their accounts by combining data about tax compliance from multjple countries into one single report making it diffjcult to distjnguish between the contributjons they make to all the individual countries they operate in. This sectjon is likely to become very important in the future as the European Parliament vot- ed in favour of measures to increase the transparency of EU-based multjnatjonal companies

• n the 8th of July 2015. The measures aim to reveal details of tax payments to governments

around the world. The measures voted by the Parliament are now being reviewed by the Commission and

• Council. This could become an EU law, forcing multjnatjonal EU-based companies to comply

with the CBC reportjng standards. In additjon, country-by-country reportjng provides investors with more comprehensive fj- nancial informatjon about companies and helps them address investment risk more efgec-

• tjvely. The publicatjon of key fjnancial data provides citjzens with the opportunity to under-

stand the actjvitjes of a partjcular company in their country and to monitor the appropriate- ness of their payments to governments.

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8.2 Results The scores in this sectjon are low: 11% for the BEL20 and 7% for the smaller multjnatjonal

• companies. The only company with an average score greater than 50% is KBC (60%), fol-

lowed by Solvay and Sioen (each 40%). Only three companies disclose pre-tax income or income taxes for all countries. This is an area that will receive much atuentjon during the coming years due to the changing legislatjon regarding country-by-country reportjng (cfr. Supra).

Unweighted average scores BEL20 Other Average Country-by-country reportjng (‘CBC’) 11% 7% 9%

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• 9. Questj

tjonnaire The TRAC-2015 review is based on the following questjonnaire:

• I. Corporate reportj

tjng on antj tj-corruptj tjon programmes (Sectj tjon ‘ACP’) 1. Does the company have a publicly stated commitment to antj-corruptjon? 2. Does the company publicly commit to be compliance with all relevant laws, in- cluding antj-corruptjon law? 3. Does the company leadership (senior member of management or board) demonstrate support for antj-corruptjon? 4. Does the company’s code of conduct / antj-corruptjon policy explicitly apply to all employees and directors? 5. Does the company’s antj-corruptjon policy explicitly apply to persons who are not employees but are authorised to act on behalf of the company or repre- sent it (for example: agents, advisors, representatjves or intermediaries)? 6. Does the company’s antj-corruptjon programme apply to non-controlled per- sons or entjtjes that provide goods or services under contract (for example: contractors, subcontractors, suppliers)? 7. Does the company have in place an antj-corruptjon training programme for its employees and directors? 8. Does the company have a policy on gifus, hospitality and expenses? 9. Is there a policy that explicitly prohibits facilitatjon payments?

• 10. Does the programme enable employees and others to raise concerns and re-

port violatjons (of the programme) without risk of reprisal?

• 11. Does the company provide a channel through which employees can report sus-

pected breaches of antj-corruptjon policies, and does the channel allow for confjdentjal and/or anonymous reportjng (whistle blowing)?

• 12. Does the company carry out regular monitoring of its antj-corruptjon pro-

gramme to review the programme’s suitability, adequacy and efgectjveness, and implement improvements as appropriate?

• 13. Does the company have a policy on politjcal contributjons that either prohibits

such contributjons or if it does not, requires such contributjons to be publicly disclosed?

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• III. Country-by-Country Reportj

tjng (Sectj tjon ‘CBC’)

• 22. Does the company disclose its revenues/sales in country X?
• 23. Does the company disclose its capital expenditure in country X?
• 24. Does the company disclose its pre-tax income in country X?
• 25. Does the company disclose its income tax in country X?
• 26. Does the company disclose its community contributjon in country X?

The TRAC-methodology provides further instructjons as well as scoring-criteria for every questjon to ensure consistent applicatjon by the researchers.

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• 10. Scores per company

ACP: Antj-corruptjon programmes. OT:Organisatjonal transparency. CBC: Country-by-country reportjng.

Sectjons: * ACP OT CBC Average Company Responded BEL20 AB Inbev 85% 75% 0% 53% Ageas 58% 25% 0% 28% Ackermans en van H. 0% 75% 0% 25% Bekaert 73% 75% 10% 53% Bpost 15% 75% 20% 37% Y Cofjnimmo 65% 100% 10% 58% Colruyt 8% 75% 10% 31% D’ieteren 23% 75% 0% 33% Engie 77% 31% 10% 39% GBL 0% 75% 0% 25% KBC 92% 100% 60% 84% Proximus 31% 75% 0% 35% Y Solvay 88% 75% 40% 68% Y UCB 77% 75% 0% 51% Y Umicore 50% 75% 0% 43% Average 50% 72% 11% 44% Euronext Barco 62% 75% 0% 46% CFE 0% 75% 0% 25% CMB 54% 75% 0% 43% EVS 0% 75% 0% 25% Exmar 81% 75% 0% 52% Greenyard 0% 75% 10% 28% IBA 46% 75% 0% 40% Lotus Bakeries 4% 88% 30% 40% Y Nyrstar 58% 19% 0% 25% Ontex 31% 100% 0% 44% Y Picanol 0% 75% 0% 25% Sioen 15% 75% 0% 43% Sipef 0% 75% 10% 28% Y Ter Beke 8% 75% 10% 31% Vande Velde 0% 75% 0% 25% Average 24% 74% 7% 35% Average 37% 73% 9% 39%

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