IANAL but it is my understanding that if those tax reduction schemes are legal many companies are legally bound by their stock holders to exploit them, or else be found negligent in their duties.
>... if those tax reduction schemes are legal many companies are legally bound by their stock holders to exploit them, or else be found negligent in their duties.
That's not the case. There is no way a company's management could be sued for "gross negligence in tax planning".
If shareholders are unhappy about this issue, their recourse is the same one that's always available to them: elect a new Board of Directors and hire new management that will follow the board's guidance on tax evasion schemes.
I admit to be completely out of my depth, but my understanding is that it is a fiduciary duty of the directors to act in the best interest of the shareholders. Tax planning is a huge part of profit and thus shareholder value, so wouldn't such "gross negligence" represent a breach of fiduciary duty?
What if the reason big companies avoid tax is that the shareholders ensure someone values fiscal results over supporting the country they earned the finance in is in the directors chair.
If companies are duty-bound to act unethically (if legally) for the sake of share holder profits then I think that speaks to a flaw in the system driving these decisions.
This is a common misperception, but it is incorrect. There is no fiduciary duty to avoid or minimize tax, and conversely no legal duty to maximize taxes either. It is up to each company to choose how aggressively they pursue these tax-avoiding strategies.
They're only thus bound if increasing stakeholder returns over time is an explicit condition of their contract (which I imagine is the case for executive contracts in many if not most public companies, though I don't know - can anyone confirm?)
But there's nothing in the (US, at least) legal definition of a fiduciary that proscribes increasing share holder profits by any means necessary. That's simply a convenient myth spread to normalize cutthroat, profit-seeking behavior at all levels of business.
pavlov|8 years ago
That's not the case. There is no way a company's management could be sued for "gross negligence in tax planning".
If shareholders are unhappy about this issue, their recourse is the same one that's always available to them: elect a new Board of Directors and hire new management that will follow the board's guidance on tax evasion schemes.
tskaiser|8 years ago
dijit|8 years ago
What if the reason big companies avoid tax is that the shareholders ensure someone values fiscal results over supporting the country they earned the finance in is in the directors chair.
Roodgorf|8 years ago
nobodyorother|8 years ago
pwinnski|8 years ago
MaxfordAndSons|8 years ago
But there's nothing in the (US, at least) legal definition of a fiduciary that proscribes increasing share holder profits by any means necessary. That's simply a convenient myth spread to normalize cutthroat, profit-seeking behavior at all levels of business.