Publish What You Pay (PWYP) calls for an amendment to the rules of national stock market listing authorities to require all listed oil, gas and mining companies to disclose a disaggregated breakdown of payments (taxes, fees, royalties and other transactions) made to governments for all countries of operation.
Companies wishing to raise capital or have their stock traded on national stock markets need to disclose information about their activities according to the rules set by that specific stock market regulator – the New York Stock Exchange rules, for example, are set by the Securities Exchange Commission (SEC).
A requirement for companies to disclose payments to governments as a condition of listing on regulated markets was one of PWYP’s original asks at the inception of the campaign in 2002.
The introduction of disclosure rules requiring listed companies to report payments, when applied to major stock exchanges around the world (including London, New York, Tokyo, Toronto and Berlin), would capture most of the major international extractive companies. Those companies would then be obliged to comply with specific stock market regulations where they are listed and report payments as required.
With the introduction of a stock market listing rule that would require companies to report payments to governments on a country-by-country basis and by payment type, citizens can gain in two ways; firstly by accessing the information they need to hold their governments to account for the use of national resources; and, secondly, citizens can judge whether the company payments are appropriate for the resources gained. These are the main drivers for PWYP’s interest in greater transparency of company finances.
In addition, incorporating revenue transparency requirements into stock market disclosure rules has advantages from a business perspective. Stock market listing regulations would supersede confidentiality clauses in contracts which currently hamper companies that would otherwise be able to disclose their payments. Secondly, stock market regulations would level the playing field because of the breadth of companies covered, and as such, those companies that wish to disclose because it is in their best interest, do not face a potential competitive disadvantage.
It is important to note however that stock market disclosure rules would not apply to companies that are not registered on any stock market, (such as Saudi Arabia’s Aramco). These state-owned extractive companies usually provide a significant amount of revenues to governments from resource extraction, and therefore complementary measures such as the EITI are required to ensure that such companies also publish what they pay.
11 October 2012 – The American Petroleum Institute, a lobby group representing companies such as BP, Exxon, Chevron and Shell, filed a lawsuit against the US Securities and Exchange Commission (SEC) in a bid to overturn Dodd-Frank 1504. Read PWYP USA’s reaction to the suit.
22 August 2012 – The SEC published the rules governing section 1504 of the Dodd-Frank Act, which obliges all US listed extractive companies to publish their payments on a country by country and project by project basis. You can read PWYP’s initial response to the rules.
14 July 2011 – This date marks the one year anniversary of the Cardin-Lugar amendment, a provision in the Dodd-Frank Act which obliges all companies listed in the US to publish what they pay to all the countries in which they operate. The SEC at this stage has still not released the rules which govern this provision, which it has to do before it can come into effect. In a press release, Publish What You Pay US urged the SEC to issue the final rule on oil and mining disclosure
For a Q + A on Dodd-Frank 1504, please click here
The “Energy Security through Transparency Act of 2009” was introduced on September 23rd, 2009 by Senators Richard Lugar (R-IN), Ben Cardin (D-MD), Charles Schumer (D-NY), Roger Wicker (R-MS) and Russ Feingold (D-WI). The bill would require energy and mining companies to reveal how much they pay to foreign countries and the U.S. government for oil, gas, and other minerals. Read the PWYP US press release on the bill introduction here.
The information would be included in financial statements that are already required by the Securities and Exchange Commission (SEC). This would apply to both American and international companies listed with the SEC, covering a majority of the largest oil, gas and mining companies in the world. Download a copy of the proposed Energy Security through Transparency Act of 2009 here.
The ESTT builds upon legislation introduced in 2008. The Extractive Industries Transparency Disclosure Act was introduced in May 2008 by Chairman Barney Frank of the House Financial Services Committee and in July 2008 by Senator Charles Schumer of the Senate Banking Committee.
The Financial Services Committee held a legislative hearing in June 2008 to discuss the EITD Act. Four distinguished witnesses presented industry, investor, legal and NGO perspectives. They agreed that the EITD Act will have a positive impact for all stakeholders. Watch a video of the hearing, download witness testimonies and read HFSC member statements.
View full details about the Act on the Open the Books website, developed by the PWYP US coalition to raise awareness around the issue of US listing requirements.
PWYP saw its first major regulatory campaign success in March 2004, when the European Parliament approved an amendment to the Transparency Obligations Directive (TOD), an EU Directive that defines the minimum transparency requirements for companies listed in EU member states. The new language of the TOD called on member states to promote extractive company disclosure of payments to governments listed on European stock exchanges:
“The home Member State should encourage issuers whose shares are admitted to trading on a regulated market and whose principal activities lie in the extractive industry to disclose payments to governments in their annual financial report. The home Member State should also encourage an increase in the transparency of such payments within the framework established at various international financial fora.”
As the recommendation in the TOD was written into the recital paragraph rather than the body of the Directive, it serves as a suggestion to member states rather than a requirement.
Member states were given until 20 January 2007 to transpose the TOD into national law, so as to make it effective in national jurisdictions. All member states, except the Netherlands, have notified the Commission that they have adopted the necessary national legislation transposing TOD, but they have said nothing about specific implementation measures.
PWYP seeks to tighten the soft language of the TOD – which currently only ‘encourages’ member states to promote country-by-country disclosure by extractive companies – towards making this a mandatory requirement.
Although listing regulation in the UK is mainly governed by EU rules, member states do retain the power to make their own rules. UK based PWYP members are also therefore in contact with the Financial Service Authority, the body that regulates the financial services industry in the UK, about the possibility of creating national legislation supporting mandatory disclosure of extractive company payments to governments.
In March 2006 the Alternative Investment Market (AIM), part of the London Stock Exchange listing smaller companies, introduced a new requirement for extractive companies being listed on AIM for the first time to “disclose any payments aggregating over £10,000 made to any government or regulatory authority or similar body made by the applicant or on behalf of it, with regards to the acquisition of, or maintenance of its assets.” This measure was designed to reduce the risk to investors following scandals related to mining, oil and gas companies listed on AIM. It provides snapshot data but is not a requirement to report annually on these kind of payments.
In December 2005 the Spanish Congress passed a non-binding law, agreed on by all the political parties, which supported transparency in the extractive industry by urging the government to take action in two ways:
1. To legally require all extractives companies listed on the Spanish stock market to publish all their payments made to the governments in countries where they operate (i.e. a listings requirement).
2. To introduce regulations requiring extractive companies to publish their payments made to governments in countries where they operate. The type of regulation was unspecified by the Congress.
Since the passing of the non-binding law in 2005, neither the Spanish Congress nor the Spanish government have taken steps to follow up on these transparency commitments.