TRANSPARENCY INTERNATIONAL SRI LANKA
Q: What is the Transparency in Corporate Reporting Assessment (TRAC) and why was it crucial to cover it in Sri Lanka?
A: Transparency International Sri Lanka (TISL) is a local non-government organisation affiliated with Transparency International (TI) – the global movement against corruption. TISL’s mission is to contribute to the collective effort to eradicate corruption in Sri Lanka.
The Transparency in Corporate Reporting Assessment – a.k.a. TRAC – is an independent assessment of corporate disclosure practices, scoring and ranking companies on three different thematic areas crucial to fighting and preventing corruption.
Locally, the private sector is usually seen as an enabler of corruption and there is no mandatory requirement to publish information on companies’ community contributions, corruption mitigation strategies or organisational structures.
Committing to being fully transparent is an important step that demonstrates a company’s level of accountability and social responsibility, which is why the TRAC assessment aims to ascertain and encourage transparency in corporate reporting.
Q: So how are corporates faring in regard to transparency and accountability?
A: While Sri Lanka’s private sector largely consists of small and medium enterprises (SMEs), the TRAC 2021 report only assessed the top 75 companies listed on the Colombo Stock Exchange (CSE) – based on market capitalisation on 1 June 2021 – on their levels of transparency in the disclosure of information.
On average, companies were ‘Moderately Transparent’ in corporate reporting with a score of 6.93 out of 10 (0 being ‘Least Transparent’ and 10 ‘Fully Transparent’). While all companies are, at the very least, ‘Partially Transparent’ in corporate disclosure, only one obtained the full score for transparency.
Out of the 16 industries assessed, telecommunication services, insurance, banking, and consumer goods and apparel were deemed ‘Significantly Transparent.’
Companies have also shown a slight improvement in their overall score compared to the TRAC 2020 Report. As companies do not need to disclose information on certain areas assessed in the research, this marginal improvement can be considered positive, given that they’re disclosing information voluntarily.
Q: How did TISL assess the top 75 listed companies?
A: Companies were scored based on publicly available information in three areas – viz. reporting on anti-corruption programmes, transparency in organisational holdings and key financial information on domestic operations.
Data was sourced from the latest annual reports (2020 or 2020/21), corporate websites and other available documents published by companies.
Companies received one point for full disclosure and 0.5 for partial disclosure, and scored 0 if the information was either unavailable or unclear. The final rank was obtained by taking an average of the individual scores that companies obtained for each of the three sections. Companies that scored evenly were ranked equally and ordered alphabetically.
The TRAC report does not assess the implementation of companies’ anti-corruption policies or programmes. Therefore, a low score does not necessarily mean that a company doesn’t have strong anti-corruption programmes; nor does it indicate any wrongdoing. Likewise, a high score may illustrate robust disclosure systems but not necessarily reflect operational and implementation success.
Q: What role should corporate leaders play, and how should organisations fight bribery and corruption?
A: In the fight against corruption, it is imperative for leaders to set the tone from the top. Company leadership should demonstrate support for anti-corruption practices and policies, and actively promote a zero-tolerance approach to bribery and corruption.
The leadership should drive the creation of strong anti-bribery and corruption policies in their company that would apply to all.
In addition, the leadership should ensure these policies and practices are adopted through mandatory training Ñ substantial corporate disclosure results in greater transparency and accountability to stakeholders.
In the meantime, corruption can reduce investor confidence in an economy, eventually affecting individual companies.
Companies should have strong incentives to resist corruption. Corruption costs money and can lead to an unpredictable operational atmosphere, resulting in a blow to their bottom lines. Corruption can lead to extortive practices and reduce opportunities for business.
The TRAC 2021 report provides detailed recommendations for companies on how to improve their disclosure practices. It highlights the importance of regulatory change with recommendations to the government on amending relevant regulations to strengthen disclosure and anti-corruption practices.
Q: What does TISL intend to do with the findings of the TRAC 2021 report?
A: The TRAC 2021 assessment was conducted for the second consecutive year, and intends to continue the conversation on better transparency and accountability within the corporate sector.
While congratulating the top ranked corporates and most improved companies, we hope that all those assessed will use this as a catalyst for continued improvement, turning disclosure practices into operational norms.
