Disclosure of Beneficial Ownership after the Panama Papers

Lex Research Topics in Corporate Law & Economics Working Paper No. 2016-3

49 Pages Posted: 11 May 2016

See all articles by Mark Fenwick

Mark Fenwick

Kyushu University - Graduate School of Law

Erik P. M. Vermeulen

Tilburg University - Department of Business Law; Signify (formerly known as Philips Lighting) - Legal Department; Tilburg Law and Economics Center (TILEC); European Corporate Governance Institute (ECGI); Kyushu University - Graduate School of Law

Date Written: May 8, 2016

Abstract

The publication of the so-called “Panama Papers” has focused public interest on how elaborate corporate structures and offshore tax havens can be used by politicians, celebrities and other elites to conceal their beneficial ownership of companies and obscure their personal assets. Rather than taking the Panama Papers as an indication of the need for more and stricter disclosure and reporting rules, however, this paper advocates an alternative approach. We need to start by acknowledging that many companies are currently experiencing “disclosure and reporting fatigue”, in which the constant demand for “more” and “better” transparency and reporting is having the unintended effect of promoting indifference or evasiveness. Disclosure and reporting is widely perceived as an obligation to be fulfilled and not as an opportunity to add value to a firm.

This is confirmed by the findings of an empirical study that examines how disclosure rules operate in practice across various jurisdictions. The key takeaway of this empirical study is that – even in those jurisdictions that have a robust disclosure regime – the majority of firms engage in “grudging” or “boilerplate” compliance in which ownership and control structures are not adequately revealed in an accessible way and – perhaps more importantly – the impact of these ownership and control structures on the governance of a company are obscured.

Rather than focus on introducing more stringent and mandatory disclosure rules, the paper advocates an approach based on the current communication strategy of a minority of firms in our sample. Interestingly, a small number of firms engage in what we characterize as “open communication” in which information on control structures and its effect on governance are presented in a direct, accessible and highly personalized manner. Such firms seem to recognize the commercial and other strategic benefits to be gained from open communication, and the paper explores the implications of such an approach for both business and regulators.

Keywords: beneficial ownership, communication, corporate culture, corporate governance, disclosure, family businesses, investor relations, Panama Papers, scandals, state-owned enterprises, theory of the firm, transparency, trust

JEL Classification: D21, D22, G32, K22, L22, M14, O16

Suggested Citation

Fenwick, Mark and Vermeulen, Erik P.M., Disclosure of Beneficial Ownership after the Panama Papers (May 8, 2016). Lex Research Topics in Corporate Law & Economics Working Paper No. 2016-3. Available at SSRN: https://ssrn.com/abstract=2777152 or http://dx.doi.org/10.2139/ssrn.2777152

Mark Fenwick

Kyushu University - Graduate School of Law ( email )

6-19-1 Hakozaki,
Fukuoka
Japan

Erik P.M. Vermeulen (Contact Author)

Tilburg University - Department of Business Law ( email )

Signify (formerly known as Philips Lighting) - Legal Department ( email )

Amstelplein 2
Amsterdam
Netherlands

Tilburg Law and Economics Center (TILEC)

Warandelaan 2
Tilburg, 5000 LE
Netherlands

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Kyushu University - Graduate School of Law ( email )

6-19-1, Hakozaki, Higashiku
Fukuoka, 812-8581
Japan

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