This good news comes from the French oil giant Total, ranked as one of the globe’s top 10 oil companies by revenue. The company has been complying since 2016 with a European Union directive requiring European-listed extractives companies to publicly report every year their payments to governments in the poor countries where they operate. (Canada has the same reporting requirements.) This global regime is the same as the 2016 implementing regulation for the Cardin-Lugar anti-corruption amendment, Sec. 1504 of the Dodd-Frank bill, which aims to combat resource-related corruption in developing countries.
In a filing with the SEC last week, Total calculated all its extra expenses for compiling and reporting the numbers. The figure: $200,000 a year. For a company that rakes in billions upon billions of dollars annually, that’s a rounding error. It’s probably less than the salary of a single mid-level executive. With the money Michael Bloomberg purportedly spent for a one-minute Super Bowl ad, Total could finance its reporting costs for the next 50 years.
The figure is not only good news, it’s big news. Until now, none of the hundreds of oil, gas, and mining companies in Europe and Canada have complained about the costs of doing the revenue reporting. A few have said it’s a minor or negligible expense. Authoritative government reviews in Britain and Canada both found the reporting system is working well with no major problems for the companies. But this is the first time a major international player has put out a specific dollar figure. (Total is cross-listed on the New York Stock Exchange and would be covered by the U.S. rule.)
The U.S. oil companies, who have stymied the implementation of the Cardin-Lugar regulation, have thrown around all kinds of fanciful cost-of-compliance figures, including one for an astronomical $590 million. The 2016 regulation was nullified in early 2017 by Congress and President Trump at the behest of the oil lobby. One of the main objections: the alleged big expense of meeting the rule’s requirements.
Of course, compliance costs should be considered in any rule-making. In its new proposal, the SEC changed provisions from the 2016 rule--letting the companies keep more payments secret, adding new exemptions from reporting, extending reporting deadlines, requiring far less detail, etc.--out of concern for possible expensive compliance costs. Now it’s clearer than ever that concern was way, way overblown.
“The SEC’s current cost analysis relies on uncited, inaccurate, and outdated estimates,” said Kathleen Brophy, director of the U.S. branch of Publish What You Pay (PWYP-US), an anti-corruption coalition. “They are using these overblown estimates to justify a severely weakened rule that deviates significantly from the global standard now being implemented in over 30 countries. Accurate compliance costs matter, and the SEC should take this statement from Total seriously, since it is based on the company’s real reporting experience, rather than hypothetical estimates.”
According to PWYP-US calculations, the French supermajor’s expenses account for just .0007% of its 2019 operating costs of $28 billion. It’s an even teenier percentage of its total annual revenue.
That should be good news for the SEC, too, and its chairman, Jay Clayton, when it goes back to the drawing board at the end of the comment period in a few weeks to review its proposed regulation. In announcing the proposed rule, Clayton, a political independent, affirmed that one of the SEC’s jobs is to help fight overseas corruption, as it has been doing for decades with its enforcement of the Foreign Corrupt Practices Act. The current watered-down proposal is too weak to do that effectively.
But now the independent agency can issue a robust final regulation that conforms to the international standard and reasserts American leadership in the anti-corruption fight, confident that it won’t unduly burden U.S.-listed oil, gas and mining companies. In fact, as some of the SEC commissioners themselves point out, issuing a rule that aligns with the European and Canadian regulations would actually lower reporting expenses for many large U.S. drillers that are cross-listed. They could file the same reports in other jurisdictions.
So let’s hope the U.S. oil companies take this good news for what it is: a chance to drop their objections to a strong Cardin-Lugar rule, level the international playing field and join the European and Canadian (and Russian and Chinese) oil, gas and mining companies in a straightforward transparency regime that aims to combat bribery and corruption.
They could even take Total’s $200,000 figure as a challenge. American businessmen often suggest that French companies are not cost-efficient, required as they are to provide employees with cushy work rules, job protection, long vacations, paid maternity and paternity leave, etc. The American oil companies, instead of whining about fictitiously high compliance expenses, could try to outdo their French competitor by using good old American know-how to bring their costs down to an even lower figure. Rather than putting their energy into defeating a good regulation, they could put it into making the rule work even better.