October 12, 2012

The Secret World of Private Companies

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Sheila Coronel directs the Stabile Center for Investigative Journalism at Columbia University.

Sheila Coronel directs the Stabile Center for Investigative Journalism at Columbia University.

You’d think that getting the names of the shareholders of a company would be fairly easy. Such information should be routinely available.

In fact in many parts of the world, it isn’t. Not if you’re talking about private companies, which have managed to elude public scrutiny even in an era of increasing transparency. To be sure, there’s a wealth of information on listed companies. But good luck researching a private firm. A recent World Bank study looked at the information stored by corporate registries in 40 jurisdictions. Its findings were pretty pathetic: Only a third of the registers required companies to release the names of their shareholders. Only one registry, Jersey, collected information on the beneficial or real ownership of a company. Everywhere else, the real owners can hide behind nominees.

Beyond ownership, registries generally collect only scant information on the finances and actual operations of private companies. Some registries don’t even requie companies to give an address or physical location. Such secrecy allows them to evade government regulation and public scrutiny. It facilitates corruption, tax evasion and other crimes.

Those who want to dig into company information can only get so far by getting into corporate registers. They’d need to triangulate information from other public records (including those from other government regulatory bodies or the courts) as well as from well-informed human sources. There are also subscription databases (see list below) that aggregate information from a variety of sources worldwide. In addition, there are some helpful guides on investigating private firms (see below).

One of my favorite sites for researching private companies is Open Corporates, which has scraped company registers in some 60 jurisdictions worldwide and put the information on some 47 million companies in a single, easily searchable database. One can type in any name in the search box and get a list of all the companies on the database that have the name listed as a director or shareholder. It’s amazing.

But the problem is that Open Corporates can only scrape the data that company registers collect. As this presentation shows, that data is scant and much of what happens in the corporate world is invisible to citizens and even to regulators. There are limits to what scraping technology can do if the information does not exist.

Thanks to Google, Facebook. LinkedIn and Twitter, it’s so much easier now to dig up information on individuals. The explosion of social media and the willingness of people to share information about themselves online has provided reporters with a digital trail with which to track down just about anyone on the planet.

Governments, too, have become more transparent. Information on public bodies has become much more accessible, with the enactment of freedom-of-information laws and governments proactively making a lot more information available online. But the disclosure of company information lags far behind. At the same time, says Open Corporates, we are seeing the emergence of “high-frequency company formation,” mostly in so-called secrecy jurisdictions.

A top secrecy jurisdiction is the United States, which doesn’t collect the names of shareholders of private companies and is unsurprisingly one of the most favored nations for hiding illicit wealth. (See, for example, this Reuters report on shell companies in Wyoming.) As Senator Carl Levin says, “It takes more information to obtain a driver’s license or open a U.S. bank account than it does to form a U.S. corporation.” Levin has introduced a bill that would end the formation of companies for unidentified persons, but that is unlikely to pass Congress.

Earlier this year, Open Corporates, released a report ranking countries in terms of open access to corporate data. It scored them in terms of allowing free online searching on company registers as well as providing information on directors and shareholders.The Czech Republic, Albania, the Slovak Republic and the UK topped the list, but the overall scores were bad – the average score was less than 50 out of 100. My own country, the Philippines, scored zero. I am not surprised. Until now, corporate records there are not digitized. While shareholder information is collected, it is not provided online. To get a company record, one has to line up for hours at the office of the Securities and Exchange Commission in Manila and wait a few more hours for the the documents to be photocopied.

It doesn’t look like the walls of secrecy built around private companies are going to be breached soon. The Open Corporates survey looked at countries that are members of the Open Government Partnership and are supposed to be at the forefront of government transparency. And yet most of them scored so badly.

Meanwhile, here are some helpful resources for getting information on private companies:

Reporting Guides

Investigating Private Companies and Nonprofits: A self-guided webinar from the Reynolds Institute for Business Reporting has recordings of lectures by Reynolds faculty as well as PowerPoint presentations and exercises.

Insider’s Guide: Researching Private Companies: A concise guide also from the Reynolds Institute, with helpful links and resources, on getting information on private companies. In the U.S., private companies are not required to make financial statements public; nor do they have to reveal their shareholders. This guide shows how you can access other public records and also use the Web to get more information on private business.

How to Do Corporate Research Online: A comprehensive guide to getting information about companies, including information on researching a company’s essential relationships (with clients shareholders, analysts, subsidiaries, etc.) and its social responsibility record (e.g. environmental compliance, campaign contributions, labor relations, executive compensation, etc.). This guide is intended for advocacy groups, rather than journalists, unlike the first two on this list.

Researching Private Companies A short guide by Free Pint, an information company. This is particularly useful for researching private companies outside the U.S., or U.S. companies that have a global presence. It has a useful case study on researching Cargill, the global food and agriculture company, which is a private company registered in the U.S.

Useful Websites: U.S. Companies

Secretary of State Corporation and Business Entity Search: Companies are registered with the Secretary of State of each state. This site is a one-stop shop that links to the business databases maintained by the secretaries of state in all 50 states.

SEC EDGAR Database: Stores annual and quarterly reports as well as other disclosures required of publicly listed companies (including executive compensation) since 1994 (pre-1994 filings are not available online).

Hoover’s Company Records: Has profiles of 40,000 public and private companies, including location, competitors and summary financials.

Reference USA: Provides information on 20 million U.S. and Canadian business, health care, and residential listings; searches can be made by company name, geographic area, business type, SIC code, yellow page listing, revenue, location, number of employees

Useful Websites: Companies Worldwide

Bureau van Dijk: a business database ran out of Belgium that has ownership and financial information on 100 million companies worlwide.

Investigative Dashboard’s Worldwide Company Data is probably the most comprehensive listing of websites and databases where information on companies in more than 150 jurisdiction can be found. The Dashboard is a project of the  nonprofit Organized Crime and Corruption Reporting Project based in Sarajevo, the International Center for Journalists in the U.S. and the Forum for African Investigative Reporters..

Open Corporates calls itself “The Open Database of the Corporate World.” It contains information scraped from online corporate registers in more than 50 jurisdictions, including offshore havens like Panama and Bermuda. The site allows searches by company name, country, director name and other keywords. So far it has records of more than 400 million companies worldwide.

The Corporate Intelligence Project has links to corporate registries in 50 states of the U.S. and 65 countries around the world. It also enables searches for U.S. government watch lists and regulatory agencies.

The UK Companies house has a useful Links Page. At the bottom of that page is a list of links to selected worldwide registers.

Rhodes-Blake Associates’ Official Company Registers has a list of corporate registers worldwide. The site provides links and explanations on what the registers contain, but is not as comprehensive as the Investigative Dashboard’s list. RBA is a private company that provides training on the use of technology to manage information.

The website of Commercial Register Office of the Canton of St. Gallen in Switzerland has a page called Company Registration around the World that links to corporate registers around the world. The list is not comprehensive but is particularly good on Europe.

Sheila Coronel is director of the Stabile Center for Investigative Journalism at Columbia University. This is reprinted from her blog, Watchdog Watcher.


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