Until recently, no one outside the upper echelons of Mc-Kinsey, the consulting firm, knew what the letters “MIO” signified. But this week the Financial Times revealed that MIO (or McKinsey Investment Office Partners) refers to a $9.5bn hedge fund that manages the assets of its partners - an entity that had hitherto hidden in plain sight.
In all this, a crucial point is often forgotten: simply amassing data will not solve the problem of transparency. What is also needed is a way for analysts to track the connections that exist between companies scattered across different national jurisdictions.
There are more than 45,000 companies listed on global stock exchanges and, according to Chris Taggart of OpenCorporates, an independent data company, there are between 250m and 400m unlisted groups. Many of these are listed on national registries but, since registries are extremely fragmented, it is very difficult for shareholders or regulators to form a complete picture of company activity.
It also creates financial stability risks. One reason why it is currently hard to track the scale of Chinese corporate debt, say, is that it is being issued by an opaque web of legal entities. Similarly, regulators struggled to cope with the fallout from the Lehman Brothers collapse in 2008 because the bank was operating almost 3,000 different legal entities around the world.
Is there a solution to this? A good place to start would be for governments to put their corporate registries online. Another crucial step would be for governments and companies to agree on a common standard for labelling legal entities, so that these can be tracked across borders.
Happily, work on that has begun: in 2014, the Global Legal Entity Identifier Foundation was created. It supports the implementation and use of “legal entity identifiers”, a data standard that identifies participants in financial transactions. Groups such as the Data Coalition in Washington DC are lobbying for laws that would force companies to use LEIs.
However, this inter-governmental project is moving so slowly that the private sector may be a better bet. In recent years, companies such as Dun & Bradstreet have begun to amass proprietary information about complex corporate webs, and computer nerds are also starting to use the power of big data to join up the corporate dots in a public format.
OpenCorporates is a good example. Over the past five years, a dozen staff there have been painstakingly scraping national corporate registries to create a database designed to show how companies are connected around the world. This is far from complete but data from 100m entities have already been logged. And in the wake of the Panama Papers, more governments are coming on board - data from the Cayman Islands are currently being added and France is likely to collaborate soon.
Sadly, these moves will not deliver real transparency straight away. If you type “MIO” into the search box on the OpenCorporates website, you will not see a map of all of McKinsey’s activities - at least not yet.
The good news, however, is that with every data scrape, or use of an LEI, the picture of global corporate activity is becoming slightly less opaque thanks to the work of a hidden army of geeks. They deserve acclaim and support - even (or especially) from management consultants.