Corporate Responsibility in the Absence of the SEC’s Resource Extraction Disclosure Rules

Corporate Responsibility in the Absence of the SEC’s Resource Extraction Disclosure Rules

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February 07, 2017

Last Friday, President Trump signed an executive order mandating a broad review of financial regulations in light of seven “core principles,” thereby laying the groundwork for an anticipated rollback of at least some portion of 2010’s Dodd–Frank Wall Street Reform and Consumer Protection Act. With respect to one of that law’s provisions, Congress decided not to wait.

Dodd–Frank’s Section 1504 (“Disclosure of Payments by Resource Extraction Issuers”) isn’t the most prominent of the Act’s provisions, nor has it been the most heavily covered. It directs the SEC to issue rules requiring extractive-industry companies to disclose payments made “to a foreign government or the Federal Government for the purpose of the commercial development of oil, natural gas, or minerals.” The SEC issued its rules in 2012, but court challenges and subsequent rewrites delayed their final adoption until June 2016. That left the rules subject to the Congressional Review Act, which gives Congress the ability to nullify any sufficiently recent regulation of which it disapproves.

The purpose of the disclosure rules was not to prohibit any particular government-directed payments. Rather, by requiring disclosure by the paying companies, the rules would give stakeholders critical information about such payments—making sure they’re for the benefit of the country and its people, not for the enrichment of kleptocrats.

Opponents of the rules have expressed their commitment to transparency in the extractive industries, but have shown a preference for a voluntary, government-based approach to disclosure, such as the one advocated by the Extractive Industries Transparency Initiative. As with laws prohibiting the payment of bribes to foreign officials, the point is to address on the supply-side what cannot yet be addressed on the demand-side.

Inspired by Section 1504’s directive, a number of other jurisdictions—including the European Union, Canada, and Norway—have already implemented this sort of supply-side measure, requiring disclosure of government-directed payments by members of the extractive industries. The effort by companies in those jurisdictions to gather the required information has other value as well. Not only is there a degree of overlap with other compliance issues (including anti-bribery and human trafficking), but a company that develops a more complete understanding of the payments it is making—and how and why they are being made—might also expect to reap a certain commercial advantage from its improved intelligence, over and above what it is required to disclose.

Disclosure remains an indispensable tool for addressing corruption. With the demise of the SEC’s disclosure rules, U.S.-based extraction companies now have the opportunity to make their commitment to that endeavor clear—both to shareholders and to the public—by making such disclosures voluntarily


U.S. House Passes Resolution to Kill Extractive Anti-Graft Rule
Senate votes to repeal transparency rule for oil companies
EU Draft Legislation: Increased Reporting Requirements for European Institutions
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