George Will's column today is such a piece. It provides you all the ammo you need to obliterate any Freedom-Hater's argument that there is something morally wrong - even unpatriotic, in the Most Equal Comrade's formulation - about companies making the best use of their capital by merging with overseas firms.
He starts with the observation that business globalism works both ways. Maytag may move a big chunk of its operations to Mexico, but there are a whole lot of Honda plants in America:
Obama, who thinks ATMs and airport ticket kiosks cost America jobs, gave a speech last year regretting that Maytag workers in Illinois lost their jobs when the plant moved to Mexico, but rejoicing that more Honda cars “are made in America than anyplace else” and that Airbus was “building new planes in Alabama.” Maytag moved partly because in Illinois, which is not a right-to-work state, the price of unionized workers made Mexico a sensible choice. And Airbus is in right-to-work Alabama because capital, being mobile, goes where it is wanted and stays where it is treated well.
Alabama, and the Honda manufacturing states (Alabama, Georgia, North Carolina, South Carolina, Indiana and Ohio; all but Ohio are right-to-work), attracted these jobs by practicing “entrepreneurial federalism ” — tailoring tax and regulatory policies to gain competitive advantages against other states. Progressives deplore this as a “race to the bottom.” Conservatives call it a rationality competition.
Perhaps the money paragraphs in it all are these:
A publicly held corporation’s responsibility is to its shareholders; its fiduciary duty is to maximize the value of their holdings. If businesses supposedly have other responsibilities, who decides what they are? Presumably politicians such as Sen. Dick Durbin, the Illinois Democrat, who must have learned economics from the nursery story “Rumpelstiltskin.”
When the Illinois-based Walgreens retail chain planned an inversion, Durbin sent the company’s chief executive a letter noting that “its stores are a staple in our communities” — as though inversion would have closed the stores. Durbin warned that Walgreens’s “financial success was built on programs and infrastructure provided by the U.S. government,” particularly filling Medicare and Medicaid prescriptions.
This is the progressive premise in action: Because government provides infrastructure (roads, etc.) affecting everyone, and because government-dispensed money flows everywhere, everything is beholden to the government, and more or less belongs to the government, and should be subordinated to its preferences, which always are for more control of the nation’s wealth. Walgreens retreated, costing its shareholders, employees and customers billions.
And the money line appears toward the end: "The sensible corporate tax rate would be zero."
Do read the whole thing.
Cattle masses cower when their overlords declare marijuana a dangerous narcotic. Cattle masses say hell yes, we will go when drafted into an inane "conflict." Rebels and individualists stand their ground and, guess what, they lose wars (according to neo-cons) and get conscription dismissed and get a relatively benign psychoactive plant totally legalized (to little or no ill affect whatsoever so far) in 2 states and available for a multitude of physical ailments and/or decriminalized in over 20 states so far. Homos still did what homos do, despite the state's efforts to even outlaw it at some junctures. These all do not sound like mindless cattle at all to me. Many have refused the state's plea to war some more. They have often gone ahead anyhow to largely disastrous results since 1950. Cattle? Refusing to absorb the fears of the mongers? You and your ilk champion corporate freedom, not individual freedom. If we aren't part of and/or don't cooperate with the corporate agenda are we cattle masses?
ReplyDeleteActually, from what I've seen of the corporate workplace, it's there that you will find the cattle masses.
ReplyDeleteAren't you breathing a sigh of relief that 4 Bil is still on the table for defense? All the corporate big wigs, the well-paid pharmacists and stockholders might have been richer spreading that 4 Bil around but they got richer being protected from foreign attack, at least during the Bush administration. I know, you'd probably repeal Medicare to compensate for the loss of the 4 Bil to the tax rolls. Switzerland is smart though. They never even began to think that they could engineer world affairs. From their mountaintops, all this fussing and fighting, bomb dropping, arguing about should we go in or not, all that is quite beneath them. Hence, their defense budget is comparatively miniscule. I do not know about you, but I worry about what corporate fraud may come, what bubble bursts next, because these dastardly MBA and their lawyers are constantly working on ways to pad their coffers, and they are not bound by the law, if they can evade it, or if they do not get caught. Ever notice how there aren't hardly any mom and pop pharmacies around any longer? Ever heard of the Rite Aid Accounting scandal in the early years of this century? I do know a bit about their money slinging. Those execs at those companies sling a lot of cash around amongst themselves. How can they do this? They got a pretty huge cash cow with the insurance (including governmental) cash flow. Hell, we both know they can add any tax burdens onto their retail prices. They dont have that much competition here stateside any longer.
ReplyDeleteDixon, Ill., where company founder Charles Walgreen lived before he launched the drugstore chain, many residents say he would have disapproved of plans to move the headquarters overseas. This year, several major U.S. companies — including AbbVie, Medtronic and Mylan — have announced plans to shift their headquarters overseas in an effort to trim their corporate tax rate, which hovers around 35% in the U.S. and is among the highest in the world. None has as high a profile as Walgreens, which touts itself as "the pharmacy America trusts."
ReplyDeleteNell Geiser, of the activist group Change to Win, which has been pressing Walgreens to remain headquartered in the USA, said the decision not to complete an inversion is shadowed by turmoil in the company's leadership ranks. Walgreen announced Monday it replaced its chief financial officer, Wade Miquelon. The CFO's departure follows Kermit Crawford, Walgreens' president of pharmacy, health and wellness, announcing last month that he would retire after spending 31 years with the company "If reports are accurate and Walgreens will not leave America to avoid taxes, this has been an unnecessarily drawn-out and secretive process to arrive where Walgreens should have been from the start: An inversion is not in the interest of America and not in the interest the company's stakeholders," Geiser said.
read more @ http://www.usatoday.com/story/money/business/2014/08/05/walgreens-tax-inversion-overseas-headquarters/13630235/
You're absolutely correct that I'd repeal Medicare to make sure defense was properly funded. I'd repeal Medicare period.
ReplyDeleteMarijuana policy is of so little consequence that it does not merit discussion.
We haven't had a draft since the 1970s. It was absolutely necessary to winning World War II.
If those former Walgreens executives don't possess the basic economic understanding to see that keeping HQ in the US diminishes the company's profitability, the company is better off without them.
You don't need to worry about corporate fraud. It is not now nor has it ever been a driver of the economic health level of our society. Most American businesses are run with high levels of integrity and deliver great products at prices the public finds fair - and, most importantly, they show their shareholders a solid ROI.
Regarding corporate fraud, I wish I had your confidence in the virtue of selfishness (title of an Ayn Rand book).
ReplyDeleteDerivatives and credit default swaps ignited the tinder of affirmative housing and the fire raged worldwide. Some predict that this will happen again over student loans and auto financing. We shall of course find out, should we choose to stay.
ReplyDelete"This paper deviates from the traditional concerns that arise in the presence of accounting fraud,
ReplyDeletesuch as corporate governance problems and other costs in financial markets. This paper takes a
different perspective on the effects of fraud. While this effect is not expected to be equivalent in
all cases (depending on the industry), it is an important aspect to study. An illustration of the
possible cost of fraud as presented in the paper shows that the effects of fraud on the industry can
be economically significant and can have a serious adverse effect on the market."
Read more at https://www0.gsb.columbia.edu/mygsb/faculty/research/pubfiles/2134/G_SADKA.pdf
George Will wants us to weep for the 4 Bil the shareholders, employees and (even) customers lost when Walgreen's backed-out of relocating to Switzerland. What about the man and woman on the street affected by a pervasive and ongoing trend towards tax incentives which it are widely known to be broken as frequently as illicit office romances?
ReplyDelete"A Times investigation has examined and tallied thousands of local incentives granted nationwide and has found that states, counties and cities are giving up more than $80 billion each year to companies. The beneficiaries come from virtually every corner of the corporate world, encompassing oil and coal conglomerates, technology and entertainment companies, banks and big-box retail chains.
The cost of the awards is certainly far higher. A full accounting, The Times discovered, is not possible because the incentives are granted by thousands of government agencies and officials, and many do not know the value of all their awards. Nor do they know if the money was worth it because they rarely track how many jobs are created. Even where officials do track incentives, they acknowledge that it is impossible to know whether the jobs would have been created without the aid."
Read more at http://www.nytimes.com/2012/12/02/us/how-local-taxpayers-bankroll-corporations.html?pagewanted=all&_r=0
In the "We Shall See" Department, consider Robert Reich's facebook post today (yes, I realize you love to hate him):
ReplyDelete·
"I’m not predicting an imminent collapse of the stock market but I am sounding an alarm. Consider: Retail sale are flat, median real wages are flat, nearly half the revenues of large U.S. companies come from foreign sales but markets abroad are going nowhere, and the ratio of stock prices to company earnings is higher than it's been since before the 2008 crash.
The only reason stock prices continue to advance is they’re being pumped up temporarily by (1) corporate stock buy-backs and mergers, (2) anticipated tax reductions through “inversions” (companies planning to desert the U.S.), (3) low bond yields that continue to drive pension funds and other institutions into stocks, and (4) capital flows from the rest of the world, for which the U.S. stock market is a safe haven compared to tumult and uncertainty abroad. But this can’t go on much longer. Watch your wallets."
Anticipated tax reductions through "inversions?" What does that mean? If they don't get their way, the markets will collapse? There is an alarming lack of creativity in the corporate world. One piss tests, and they all do it. One drops pensions and they all do it. One offshores, others follow. I guess it comes from that robust quality called competition. They all look to the competition and if it doing better than they are, they copy it. It is all pretty predictable. The bottom line rules. Also, companies often tranform into radically different entities than their original founders intended. I'd wager that is what happens when the MBAs and the lawyers take over.
ReplyDeleteThere is an undeniable set of problems that arises when organizations structured as corporations reach a certain size. They get cozy with the world of finance, which is peopled with the kind of pointy-heads that have peopled this regime. They attract biz-school grads steeped in "green" hooey and "diversity" hooey. They become impossibly bureaucratic, with their own jargon and even behavioral norms. Still, they are nothing but makers of goods and providers of services for which there is a demand.
ReplyDeleteWhat I think you often lose sight of is that that level of it is the thinly populated top echelon. Most businesses have staffs in the 2 to 500 range and bust their asses to make a profit and do right by the teams they've assembled.
Man do we ever bust our collective asses to make a profit.
ReplyDelete"Statistics reports that the average American employee now works 160 hours (one month) more each year than in 1976. And job-related stress contributes to absenteeism, lost productivity, and health issues, and these factors cost businesses approximately $344 billion annually."
Above stat found at http://www.forbes.com/sites/tanyamohn/2013/08/13/paid-time-off-forget-about-it-a-report-looks-at-how-the-u-s-compares-to-other-countries/
ReplyDeleteThe gist is that "U.S. law and U.S. employer behavior still lags far behind the rest of the rich countries in the world.”