A comparative analysis of the two companies' rankings on three parameters reveals why ONGC slipped in ranking
India’s largest private sector petroleum explorer Reliance Industries (RIL) pipped its state-run counterpart Oil and Natural Gas Corporation (ONGC) on transparency within two years through 2014, according to reports published by Transparency International (TI).
The Berlin-based anti-corruption watchdog had earlier this month published its report “Transparency in Corporate Reporting: Assessing the World’s Largest Companies” listing the world’s 124 largest publicly traded companies with a combined market value of $14 trillion.
RIL was ranked at ninth position with a score of 5.6 out of ten while ONGC was at 26th place having scored 4.8 among the 124 companies list. This was based on their reporting of the measures taken to prevent corruption (Anti-corruption programmes or ACP), information about subsidiaries and holdings (Organizational Transparency or OT) and key financial information about overseas operations (country-by-country reporting or CBC).
However, an earlier version of the same report published in 2012 had ranked ONGC at the 39th position with a score of 5.4. RIL was ranked 54th in that report with a score of 4.7 out of ten among the 105 companies in the list then. So, while ranking improved for both the companies, RIL overtook ONGC by inducting transparency at a faster pace.
A comparative analysis of the two companies’ rankings on the three parameters – ACP, OT and CBC – reveals why ONGC slipped in ranking as compared to RIL between 2012 and 2014. ONGC had gained over RIL in 2012 mainly owing to its 46 per cent score in ACP against RIL’s 23 per cent. The two firms had obtained similar score on the other two parameters (see table). However, in 2014, ONGC’s score on ACP slipped to 38% even as RIL scored 62 per cent.
| How rankings of ONGC and RIL shifted between 2012 and 2014 | |||||||
| (I) | 2012 Report | 2014 Report | |||||
| ONGC rank | 39 | 26 | |||||
| RIL rank | 54 | 9 | |||||
| (II) | Break-up of rankings | ||||||
| 2012 report | 2014 report | ||||||
| ACP | OT | CBC | ACP | OT | CBC | ||
| ONGC | 46 | 100 | 16 | 38 | 75 | 30 | |
| RIL | 23 | 100 | 18 | 62 | 75 | 30 | |
| ACP: Anti-Corruption Programmes | |||||||
| OT: Organizational Transparency | |||||||
| CBC: Country-By-Country reporting | |||||||
| Source: "Transparency in Corporate Reporting: Assessing the World’s Largest Companies" | |||||||
A senior ONGC executive attributed ONGC’s high ranking on transparency when compared with global firms to a spate of reforms undertaken in its tendering process post 2006. “ONGC was the first Indian company to sign a Memorandum of Understanding (MoU) called Integrity Pact with TI in 2006. Since then, transparency has become ingrained in all ONGC tenders of above Rs 1 crore value. This has been possible mainly due to the start of the transparent e-tendering process in 2007,” he said.
After e-tendering, ONGC achieved second major milestone on transparency with the launch of reverse auction process for bidding. The innovative method enabled ONGC to collect and compare price and bid information of suppliers in a real-time, open-bidding environment. “ONGC was again the first PSU to introduce reverse auctions in 2008.
This ensured transparency in bidding process and helped generate confidence among the bidders,” the ONGC executive said, adding the process added speed to the process of procurement and led to cost savings of nearly 10%. A third factor further boosted ONGC’s efforts at transparency – appointment of a panel of Independent External Monitors (IEMs) to keep an eye on bidding and award of contract as mandated under the Integrity Pact.
Transparency International told Business Standard key reasons why ONGC figured in the transparency list is the publication of financial data of all of its subsidiaries and minority holdings. “While this is a common practice for most Indian companies due to legal requirements, it is often not the case for companies incorporated in other countries. This is the point which puts Indian companies high in Organizational Transparency and Country-by-Country-Reporting rankings,” TI said in an email response, adding the firm improved reporting on ACP.
ONGC and RIL performed almost equally on the second and third parameters (organisational transparency and country-by-country reporting) both in 2012 and in 2014. Their performance on the first parameter, reporting on Anti-Corruption Programmes (ACP), made the difference. In the ACP section in 2012, ONGC performed better than RIL.
In 2014, RIL improved its performance considerably while ONGC’s performance was relatively weaker. RIL improved its performance from 23% upto 62%. “This was mostly due to the publication of its Code of Business Conduct & Ethics for Employees (Corporate Governance Manual), which was still not publicly available back in 2012,” TI said.
The slight drop in ONGC’s performance was mostly due to lack of public information about company’s confidential reporting channels. For the previous report, this information was found in the Global Compact (COP 2009) but for the 2014 report this information was not found as the new COP was issued only in autumn 2013 after the data collection period. Communication on Progress (COP) is a public disclosure issued by companies around the world to stakeholders on progress made in implementing the ten principles of the UN Global Compact and in supporting broader UN goals.
