corporate transparency

{{Main|Customer engagement}}

Corporations may be transparent to investors, the public at large, and to customers.

Opening up the customer support channels may mean using a feedback tool which allows users to publicly vote on new developments, having an open internet forum, or actively responding to social media questions.{{Cite news|url=https://www.theguardian.com/media-network/media-network-blog/2012/mar/02/customer-service-social-rules|title=The new, social rules of customer service|last=Norris|first=Jon|date=2012-03-02|newspaper=The Guardian|language=en-GB|issn=0261-3077|access-date=2016-10-01}}

{{main|List of European Union directives#NFRD}}

Standards concerning corporate transparency in European Union are scrutinized under Directive 2014/95/EU, referred to as Non-Financial Reporting Directive (NFRD). Under this legislation companies have to disclose information regarding employed practices related to environmental protection, social responsibility and treatment of employees, respect for human rights, anti-corruption and bribery and diversity on company boards (in terms of age, gender, educational and professional background). By 2018, companies are required to include non-financial statements in their annual reports. It was found that 60% companies disclose their non-financial information in their annual reports in contrast to 40% favoring a separate document in 2019.{{cite news |url=https://www.allianceforcorporatetransparency.org/assets/2019_Research_Report%20_Alliance_for_Corporate_Transparency-7d9802a0c18c9f13017d686481bd2d6c6886fea6d9e9c7a5c3cfafea8a48b1c7.pdf |publisher=Alliance for Corporate Transparency |title=The Alliance for Corporate Transparency Research Report 2019 |year=2019 |accessdate=2020-04-25}}

Businesses with an obligation to publish such information are large public-interest companies with more than 500 employees, which amounts to approximately 6000 companies across European Union. Companies enjoy great flexibility how to disclose relevant information as they can either use international, European or national guidelines. For instance, they can use the UN Global Compact, the OECD guidelines for multinational enterprises or ISO 26000.{{cite web |url=https://ec.europa.eu/info/business-economy-euro/company-reporting-and-auditing/company-reporting/non-financial-reporting_en|title= Non-financial reporting |publisher=European Commission|access-date=24 April 2020}} Despite enclosed suggestions for guidelines, none is referred to by more than 10% of companies. To better understand the situation, companies are expected to describe their business model in relation to sustainability and strategic risks. This might not be reality as only nearly a half of companies mentioned at least one strategic risk related to sustainability and only 7.2% further described how those risks were being addressed in 2019. The most frequently listed risks where related to climate change (24.9%), environmental challenges (23.9%) and labour issues (23.8%).

As of 20 February 2020, the European Commission launched a public consultation on the review of the NFRD.

In 2008, researchers found that value maximization might not be the ultimate goal of Chinese listed companies as a result of the Chinese government being the major shareholder of state-owned enterprises (SOE). Comparing listed companies in different markets, it seems that those with sound corporate governance practices tend to showcase relatively good performance, which was in contrast to the situation in the Chinese market. It was believed that implementation of new reforms would result in higher corporate transparency of Chinese firms.{{cite journal |last1=CHEUNG |first1=Yan-Leung |last2=JIANG |first2=Ping |last3=LIMPAPHAYOM |first3=Piman |last4=LU |first4=Tong |title=Does corporate governance matter in China? |journal=China Economic Review |date=September 2008 |volume=19 |issue=3 |pages=460–479 |doi=10.1016/j.chieco.2008.01.002 }}

In 2002, the China Securities Regulatory Commission (CSRC) issued a code of corporate governance affecting practices and structures employed by Chinese firms. One year later, the CSRC allowed qualified foreign institutional investors (QFII) to enter the Chinese stock market. It was found that QFIIs have greater control over state shareholders in state-owned companies than domestic mutual funds and are more prone to act as unbiased monitoring body.{{cite journal |last1=Huang |first1=Wei |last2=Zhu |first2=Tao |title=Foreign institutional investors and corporate governance in emerging markets: Evidence of a split-share structure reform in China |journal=Journal of Corporate Finance |date=June 2015 |volume=32 |pages=312–326 |doi=10.1016/j.jcorpfin.2014.10.013 |s2cid=3366775 }}

Institutional ownership has positive effect on both, corporate governance transparency and accounting information transparency. However, there is not sufficient amount of evidence to support the claim that higher levels of corporate transparency lead to higher levels of institutional ownership in China.{{cite journal |last1=Liu |first1=Ningyue |last2=Laing |first2=Elaine |last3=Cao |first3=Yue |last4=Zhang |first4=Xiaofei |title=Institutional ownership and corporate transparency in China |journal=Finance Research Letters |date=March 2018 |volume=24 |pages=328–336 |doi=10.1016/j.frl.2017.12.001 }}

Corporate transparency in Taiwan is assessed using Information Disclosure and Transparency Ranking System (IDTRS) launched in 2003 by Securities and Futures Institute. Whole process is on voluntary basis with evaluation executed annually in two-stage process where the ranking committee and companies with possibility of expressing their opinions participate.{{cite journal |last1=Luan |first1=Chin-Jung |last2=Tien |first2=Chengli |title=The Roots of Corporate Transparency: A Mediated Moderation Model to Predict Foreign Institutional Investment |journal=Emerging Markets Finance and Trade |date=19 September 2019 |volume=56 |issue=5 |pages=1024–1042 |doi=10.1080/1540496X.2019.1658066 |s2cid=204441663 }}

Capital markets in Taiwan evolved over the recent decades from ones with insufficient protection of shareholders and stock market instability to markets with plausible transparency practices. Establishing IDTRS has increased the level of corporate transparency and information disclosure by Taiwanese companies. Their motivation is driven by the likelihood of their transparency ranking being made public and possible consequences of such action. Disclosing more information mediates information asymmetry, prevents moral hazard and can lead to higher liquidity and lower cost of capital. Ultimately, IDTRS has been successful in stimulating companies to disclose more information, increasing firm value and improving quality of forecasts of firm's performance in stock market.{{cite journal |last1=Chu |first1=Chien-Chi |last2=Ho |first2=Kung-Cheng |last3=Lo |first3=Chia-Chun |last4=Karathanasopoulos |first4=Andreas |last5=Jiang |first5=I-Ming |title=Information disclosure, transparency ranking system and firms' value deviation: evidence from Taiwan |journal=Review of Quantitative Finance and Accounting |date=25 September 2018 |volume=53 |issue=3 |pages=721–747 |doi=10.1007/s11156-018-0764-z |s2cid=254985205 }}

The United Kingdom government undertook consultation exercises in 2020 concerning proposed improvements to the quality and value of financial information on the UK companies register, the powers of the registrar and a ban on companies having corporate directors. It then issued a white paper on Corporate Transparency and Register Reform in February 2022,Department for Business, Energy and Industrial Strategy, [https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1060726/corporate-transparency-white-paper.pdf Corporate Transparency and Register Reform White Paper], published February 2022, accessed 5 August 2023 which sought to reflect the government's responses to these consultations.Department for Business and Trade and Department for Business, Energy and Industrial Strategy, [https://www.gov.uk/government/publications/corporate-transparency-and-register-reform Corporate transparency and register reform], published 28 February 2022, accessed 5 August 2023

The Corporate Transparency Act (CTA), part of the National Defense Authorization Act for Fiscal Year 2021, introduced "beneficial ownership information reporting requirements" for companies in the United States.[https://www.govinfo.gov/link/plaw/116/public/283?link-type=uslm William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021] as enacted, section 6403, accessed 20 July 2023 The law requires businesses to disclose their beneficial owners to the U.S. Department of Treasury in an effort to curb illegal economic activities. On December 3, 2024, Amos Mazzant, Federal Judge for the United States District Court for the Eastern District of Texas, enjoined the Government from enforcing the Corporate Transparency Act and its Implementing Regulations, including the beneficial ownership information reporting requirements.[https://polsinelli.gjassets.com/content/uploads/2024/12/cta-v-garland-district-court-opinion-preliminary-injunction.pdf Memorandum Opinion and Order] The U.S. Court of Appeals for the Fifth Circuit affirmed the nationwide injunction.{{Cite news |last=Jackson |first=Herb |last2=Woolley |first2=John |date=December 27, 2024 |title=Corporate Transparency Act Blocked by US Appeals Court Again (3) |url=https://news.bloombergtax.com/daily-tax-report/corporate-transparency-act-blocked-by-us-appeals-court-again |access-date=January 23, 2025 |work=Bloomberg News}} On December 31, 2024, the U.S. Department of Justice appealed to the U.S. Supreme Court, seeking to stay the injunction.{{Cite news |last=Wilson |first=Quinn |date=December 31, 2024 |title=US Asks Supreme Court to Unblock Corporate Transparency Act |url=https://news.bloomberglaw.com/litigation/us-asks-supreme-court-to-unblock-corporate-transparency-act |access-date=January 17, 2025 |work=Bloomberg Law}} On January 23, 2025, the Supreme Court ruled that the Government can enforce the CTA while the Fifth Circuit Court reviews the law.{{Cite news |last=Navera |first=Tristan |date=January 23, 2025 |title=Supreme Court Allows Corporate Transparency Act Enforcement (1) |url=https://news.bloombergtax.com/daily-tax-report/supreme-court-allows-enforcement-of-corporate-transparency-act |access-date=January 23, 2025 |work=Bloomberg News}} In March 2025, the U.S. Department of Treasury announced that they would halt any enforcement or penalties on domestic businesses and make further adjustments to focus primarily on foreign reporting companies.{{Cite web |date=March 2, 2025 |title=Treasury Department Announces Suspension of Enforcement of Corporate Transparency Act Against U.S. Citizens and Domestic Reporting Companies |url=https://home.treasury.gov/news/press-releases/sb0038 |website=U.S. Department of Treasury}}

Countries with multi-party legislatures are associated with higher levels of corporate transparency. Furthermore, when a country transitions to multi-party legislature, opacity is expected to decrease.

Comparing democracies and authoritarian regimes, we can expect that firms are more transparent in democratic countries. Levels of corporate transparency are decreasing as we go from democracies to countries with semi-competitive authoritarian regimes. Lastly, firms in countries with non-competitive authoritarian regimes display the greatest opacity.

When a regime changes from non-competitive authoritarian one to semi-competitive, corporate transparency tends to improve. However, this trend does not hold if a country transitions from a semi-competitive authoritarian regime to democracy.{{cite journal |last1=Carney |first1=Richard |last2=Guedhami |first2=Omrane |last3=El Ghoul |first3=Sadok |last4=Chen |first4=Ruiyuan |title=Political Institutions and Corporate Transparency in Emerging Economies |journal=Academy of Management Proceedings |date=1 August 2019 |volume=2019 |issue=1 |pages=13061 |doi=10.5465/AMBPP.2019.300 |ssrn=3135771 |s2cid=201349701 }}

• Open business
• Radical transparency
• Corporate governance
• Transparency Report

{{reflist}}

• [http://www.transparency.org/news/feature/shining-a-light-on-the-worlds-biggest-companies Transparency International report on corporate transparency]
• [http://www2.standardandpoors.com/spf/pdf/equity/gamma_eng_2.pdf GAMMA: An Introduction to Corporate Governance Scoring]
• [http://public.kenan-flagler.unc.edu/faculty/bushmanr/bushman_jar_transparency.pdf Journal of accounting research]
• [https://web.archive.org/web/20040707223313/http://www.icanz.co.nz/staticcontent/AGS/corptrans.cfm Corporate transparency]
• [https://web.archive.org/web/20060823203315/http://www.cgfrc.nus.edu.sg/download/CTI/BT_CTI_June06.pdf CTI Index]
• [https://web.archive.org/web/20061005152128/http://www.cgfrc.nus.edu.sg/download/CTI/RevisedBT_CTIScorecard2006.pdf CTIScorecard2006]
• [http://www2.standardandpoors.com/portal/site/sp/en/ap/page.product/equityresearch_gamma/2,5,13,0,0,0,0,0,0,1,1,0,0,0,0,0.html Standard & Poor's Governance Scores]

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Category:Corporate governance

Category:Management cybernetics