1. Arms Industry Transparency Eamon Surry SIPRI A presentation of a forthcoming paper on transparency in the arms industry Ninth Annual International Conference on Economics and Security 24th-25th June 2005, Bristol UK

2. Transparency in the arms industry Company reporting of the military share of their sales is rare and incomplete and the reporting of the military share of their exports and research and development is almost non- existent.

3. Criteria for Transparency Availability Reliability Comprehensiveness Comparability Disaggregation / Detail (Bauer, S., 2003)

4. This paper confines itself to a very narrow and particular aspect of ‘transparency’: the extent to which companies fully and accurately describe their involvement in the ‘military’, ‘arms’ or ‘defence’ industries.

5. The analysis of military-related financial and employment data for companies provides a firm foundation for thinking on and discussion of armaments issues, both for policy makers and the wider public.

6. Why collect company data? Because the amount, quality and comparability of arms-production data produced by governments and industry associations are extremely limited.

7. There continue to be difficulties in gathering these kinds of data, however, because how and where companies report their arms sales varies greatly between countries and over time. Data on total sales, profit and employment is generally easy to obtain, at least in the case of publicly listed companies. Obtaining an approximation of arms sales from a company is not always so straightforward.

8. Demand

9. There have been a wide variety of attempts to influence and regulate the general behaviour of transnational corporations. Some of these have taken the form of: * industry self-regulation, * multilateral initiatives, * civil-society driven corporate social responsibility initiatives.

10. Industry self-regulation The Defense Industry Initiative on Business Ethics and Conduct, for example, was established in the US in 1986. Signatories agree to draft and adhere to a written code of conduct. 47 companies had signed the initiative as of May 2003, including Boeing, General Dynamics, Raytheon and Thales.

11. Multilateral Initiatives 1976 OECD Guidelines for Multinational Enterprises Not legally binding but instead “represent standards of behaviour supplemental to applicable law.” Point 1 states that “Enterprises should ensure that timely, regular, reliable and relevant information is disclosed regarding their activities, structure, financial situation and performance.”

12. Civil-society initiatives Shareholder activism has been ‘case by case’ but most of the concerted and comprehensively organized initiatives have developed under the umbrella of the UN Global Compact, launched in 2000. The UN maintains a database of companies that have signed up to participate in the Global Compact. There is no “defence” sector but there is an “aviation” division. Examples of arms-producing companies to have pledged their participation include Dassault Aviation, EADS, Thales and Hindustan Aeronautics.

13. Supply

14. Table 1.2 A similar table appears in the Arms Production Chapter of the SIPRI Yearbook 2005

15. The low level of transparency in arms sales: some possible explanations Corporate governance model Ownership model Industry sector Accounting practices The ‘culture of transparency’

16. Conclusions Only limited information is available on company arms sales worldwide, and only limited research has been done on why this might be the case. Existing pressures on companies to report their arms sales are very weak.

17. Conclusions (con’d) Only governments have the power to compel companies to report all relevant data on arms production. The absence of reliable data makes it difficult to begin any kind of discussion on arms production issues. Eamon Surry SIPRI