Missing Servant Leaders on Corporate Tax Responsibility
We're sorely missing the servant leadership of America's CEOs on matters of corporate taxation.
As Congress contemplates trillions in budget cuts that will worsen poverty and undermine the quality of life in America, consider these findings from a new report that I co-authored, "Massive CEO Rewards for Tax Dodging," by the Institute for Policy Studies.
Last year, the compensation of 25 CEOs at major profitable U.S. companies was larger than the entire amount their company paid in U.S. corporate taxes.
These 25 include the CEOs of Verizon, Boeing, Honeywell, General Electric, International Paper, Prudential, eBay, Bank of New York Mellon, Ford, Motorola, Qwest Communications, Dow Chemical, and Stanley Black and Decker.
Average CEO paycheck for these tax avoiding companies was $16.7 million, well above last years average of $10.8 million for CEOs of the top 500 S&P companies. The gap between average CEO pay and average worker pay widened from 263 to one in 2009 to 325 to one in 2010.
To reduce their tax bills, these 25 companies spent millions lobbying for additional tax breaks and loopholes. Twenty of the 25 companies spent more on lobbying Congress last year than they paid in U.S. taxes. General Electric invested $41.8 million in lobbying and got $3.3 billion in tax refunds. Boeing spent $20 million on lobbying and got a $35 billion contract from the U.S. government, while paying $13 million in U.S. taxes after declaring $4.3 billion in earnings last year.
How do they do it? Eighteen of the 25 companies aggressively use off shore tax havens to shift profits around to avoid U.S. taxes. These 18 companies together had 556 subsidiaries in tax haven countries like the Cayman Islands, Singapore and Ireland. The offshore game works like this: companies pretend their profits are earned in low or no tax jurisdictions -- and claim losses at their U.S. operations when it's tax time.
Whatever happened to corporate servant leadership? A previous generation of CEOs would have been ashamed to be compensated so lavishly while their companies shirked responsibility for paying their fair share. They would have been embarrassed to go year after year contributing little or nothing to the commonweal that makes the US a vibrant business environment.
- The CEO of Chesapeake Energy, Aubrey McClendon, was paid $21 million while his company paid zero U.S. taxes. Chesapeake is fracking the tax code, drilling it for every possible subsidy it can extract -- while lobbying to preserve antiquated tax breaks for oil and gas industry.
- Online retailer eBay paid their CEO John Donahoe $21.4 million last year while collecting a federal tax refund of $131 million. eBay has 31 subsidiaries in nine tax haven countries including Switzerland and Singapore and moves money around the planet to dodge taxes.
- Insurance giant Marsh & McLennan paid their CEO Brian Dupperrault $14 million and also collected $90 million from Uncle Sam. They have 105 subsidiaries in 20 off shore tax haven jurisdictions, including 25 in Bermuda -- a favorite for insurance companies avoiding both taxes and regulation.
These companies happily use the privileges and advantages of doing business in the U.S. If a competitor tries to steal their product or idea, they rush to the U.S. court system and law enforcement agencies for remedies and justice.
They use the fertile ground of publicly funded research and infrastructure to bolster their own profits. They use our taxpayer-funded roads, ports, and bridges. They create new products from a foundation of Uncle Sam's investments in medical and scientific research and government-funded technologies like the internet. They hire workers educated in our school systems. In fact 16 of these 25 CEOs attended public universities, so they personally were educated with help from U.S. tax dollars.
They express their allegiance to America. But when it comes time to pay the bills, they'd rather shift it over to the next generation or the middle class taxpayer or small business down the road.
One key intervention: Congress should pass the Stop Tax Haven Abuse Act that would limit some of these tax shenanigans. In the face of growing fiscal austerity, these companies should contribute to the solution and pay their fair share of U.S. taxes.
But it would be even better if a new generation of servant CEO leaders stepped forward and publicly claimed responsibility.
Chuck Collins is a senior scholar at the Institute for Policy Studies where he directs the Program on Inequality and the Common Good. He is co-author, with Mary Wright, of The Moral Measure of the Economy (Orbis Books) and with Bill Gates Sr. of Wealth and Our Commonwealth: Why America Should Tax Accumulated Fortunes (Beacon). For more information, see Executive Excess 2011: The Massive CEO Rewards for Tax Dodging.