RSS FeedIs Tax The New Area Of Concern For Corporate Social Responsibility?
First posted on Commercial Law International on March 7, 2009 by Charles Wanguha.
In the early 1990s, Nike suffered a huge backlash from the revelation of child labour in its factories abroad. As a result, there was a drive to ensure that clothing was environmentally sound.
In early 2000, a push for carbon footprint labelling ensured that consumers were conscious of the effect of their consumption habits on the climate.
In 2009, after a Guardian expose, there has been an uproar regarding tax evasion by big corporations. These corporations, through the use of extensive webs of subsidiaries in tax havens, have managed to create a near-zero tax liability status in their country of operation. The Guardian describes it as “the triumph of technical proficiency over social responsibility”.
It is likely to spark the age-old debate about whether a corporation’s main point of existence is the creation of shareholder value. If that point of view is to be accepted, then the less tax is paid to the government, the higher the dividend or return that is passed to the shareholder.
In response, the corporations argue that in strictly legal terms they are not breaking the law or involving themselves in an illegality. In this instance, should the regulator then be blamed for the tax avoidance? And how can the regulator keep abreast of all new avoidance schemes when at the moment they face close to 200 known schemes? The corporate social responsibility debate has been pushed forward largely by the moralist argument rather than the strict legalistic interpretation of the corporate duties to society.
A corporation, like all legal persons, has a responsibility to pay taxes. In turn, the government has a duty to provide services at an acceptable level. In the example of the Johnny Walker brand, valuable royalties earned were moved from England to Holland (which had a zero rating tax on IP rights) while the production remained mostly in England. Thus, in one swoop, a huge tax gap is imposed on England tax offices. The tax gap must then be filled by the low income and small businesses who are unable to hire the services of the lawyers, accountant, and consultants that dream up these schemes.
A new incentive, similar to the carbon footprint labelling of food, has been initiated. (See more at tax ticked.) It in effect aims to reward good corporate citizenship.
If successful, the focus will return to good corporate citizenship as opposed to charitable acts easily negated by tax evasion.
Don’t Tell Mom …
After many years of hard work, Joe rewarded himself with a long, luxurious stay at an exclusive Carribean resort.
While relaxing on the beach, he was surprised to see a former high school classmate who he hadn’t seen since they graduated. His old friend had been something of a “burnout” in high school, and this was the last place Joe expected to see him.
Joe approached the man, and seized his hand. “Pete, it’s Joe. From high school. It’s sure been a long time. You look great! You must really be doing okay for yourself.”
“I am,” whispered Pete. “I am a partner with a very successful law firm. But don’t tell mother. She got the idea that I was a drug dealer back when I was in high school, and she would be terribly disappointed if she figured out how I really make my money.”
h/t ExpertLaw Law Laughs
My Day with George Galloway
George Galloway, the controversial British MP scheduled to speak in Canada this week, and parties supporting him, sought an injunction at the Federal Court today.
Although I don’t agree with everything Mr. Galloway says, his views as it relates to non-military solutions to problems largely grounded in social and economic conditions, are ones that in my opinion should be heard.
I attended the hearing at the Federal Court today, where a session was conducted via videoconference to Ottawa.
Barbara Jackman, counsel for the Applicant, noted that in her 30 years of immigration practice she had never seen a case like this, or one which so closely resembled the Supreme Court decision in Roncarelli v. Duplessis, [1959] S.C.R. 121, cited by the Applicants in their submissions.
The presiding judge, Justice Luc Martineau, also noted that unless either counsel could indicate otherwise, there was no case law on anything resembling this fact scenario.
Be Careful What You Post For
Following a trend of the erosion of privacy rights online, an Ontario couple who own a far-right website were ordered to disclose the names of eight anonymous posters related to a defamation lawsuit.
The owners of FreeDominion.ca, Mark Fournier and Connie Wilkins-Fournier, were told that they would have to reveal the names of anonymous posters who attacked Ottawa anti-hate-speech activist Richard Warman. He is suing the couple, alleging that they “falsely and maliciously published and circulated” defamatory comments about him. The Fourniers argued against the disclosure saying that posters on their site behave differently under the shroud of anonymity than as if they were publicly identified.
Ontario Superior Court Judge Stanley Kershman decided that “the defendants are under an obligation to disclose all documents in their power and control.” He cited a case from 2004 in which it was stated that privacy rights must be balanced with the public interest and the rights of others. He also cited a more recent child pornography case in which the judge found that there was “no reasonable expectation of privacy” with respect to ISP disclosure of customer information (this case is discussed in detail at LawIsCool here).
UofO professor Michael Geist disagreed on his blog with the argument that the disclosure of the posters’ information was essential to protection of the public interest:
Protection for anonymous postings is certainly not an absolute, but a high threshold that requires prima facie evidence supporting the plaintiff’s claim is critical to ensuring that a proper balance is struck between the rights of a plaintiff… and the privacy and free speech rights of the poster. … I fear that the high threshold seems to have been abandoned here.
So as the blogger wars heat up below, keep in mind while posting that you can’t always hide behind the anonymity of the Internet.
Irrational Exhuberance and the Animal Spirits
This post was created and posted in real-time, before the talk was even concluded. For a more detailed article on the same talk see the UWO Law website.
People will always act rationally, right?
That’s the assumption upon which we rest our economic decisions, and one which Dr. Robert Shiller of Yale University is questioning.
Shiller is one of the world’s most well-known economists, and a bestelling author. Several weeks ago, he received the 2009 Deutsche Bank Prize in Financial Economics.
He predicted the 2000 IT bubble burst in the first edition of his book, Irrational Exuberance.
But he also predicted the 2005 housing crisis in his second edition, and outlined a recover plan in Subprime Solution: How the Global Financial Crisis Happened and What To Do About It.
He has a new book though, co-authored with Nobel Prize winner George Akerlof, on Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism.
It was this most recent book that was the topic of his talk at the University of Western Ontario on March 27, 2009. He was working on this book for six years, but decided to released it now given the current economic situation.
John Keynes once said in 1936, in General Theory of Employment Interest and Money,
The outstanding fact is the extreme precarious of the basis of knowledge on whic our estimates of prespective yield have to be made… Most probably, our decisions to do something positive, the full consequences of which will be drawn out over many days to come, can only be take as a result of animal spirits – of a spontaneous urge to action rather than inaction.
Nobody can predict the future. There are many people who pretend that they can, however.
Most actions are affected by what people anticipate will happen, and it’s in these animal spirits that we see the root of this economic crisis.
Postponing building new factories or laying off people leads to another round of problems; they are unable to spend, they tell others of their experiences, and there are ripple effects.
As a result we get into a period of lost opportunity.
Animal spirits are contrary to the thinking of economics, who always want to look to something concrete like the central bank, but it’s usually the animal spirits that drive things.
Real cycle business theory believes that all the drivers of the economy is technological change. Although there is some validity to this like the railroads, it doesn’t explain things like the changes we see today.
Two British Engineers Charged With Espionage… Industrial Espionage That Is.
Mobile Phone Camera, a very powerful tool.
First posted on Commercial Law International on March 23, 2009.
No, no, this is not a joke, nor is it a case of a 007 mission gone awry. It is a simple case involving two British engineers; a British company and its subsidiary; a mobile phone; an American tire company’s secret equipment; and a Chinese tire company.
Oh all so simple, indeed.
The two engineers, Mr. Clark Roberts and Mr. Sean Howley, are due to stand trail in May in Knoxville, Tennessee charged with 12 offences relating to theft of trade secrets and fraud. Both men are looking at a maximum sentence of 150 years — yes, you read correctly, 150 years — and a fine of $2.75 million.
Oh all so simple, indeed.
The story of how these men found themselves in this predicament unfolds as interestingly as any spy novel — if not better. As they say: truth is often stranger than fiction.
The two men worked for Wyko Tire Technology Inc. in Greenback, Tennessee, which happens to be a member of the Wyko Group, one of Britain’s largest suppliers of engineering components. It is alleged that the pair conned their way into a Goodyear plant in Topeka, Kansas, where they took photographs which were emailed to Wyko Tire Technology in Dudley, Midlands, UK.
And what piece of sophisticated spy gear was used?
Are you ready for this? The answer: a mobile phone. Yes, a mobile phone. No, not a watch, or a pen that doubles as a camera, but an everyday, run-of-the-mill cell phone.
According to US prosecutors, after conning their way into the Goodyear plant, Mr. Roberts acted as a lookout for Mr. Howley as he proceeded to take the seven photographs. The pictures were of a piece of a top secret, specialized equipment used in the manufacturing of large off-road tires for earth-moving equipment. Later, the seven photos just so happened to end up in the hands of Wyko Tire in England. This company just happened to have a $1.2 million contract with Haohua South China (Guilin) Rubber Company — based, you guessed it, in China — to produce a very similar piece of equipment.
Both men of course deny all the charges.
Oh all so simple, indeed.
Conservative Bloggers Launch Campaign to Waste Energy
On Saturday, March 28, 2009 at 8:30 PM, people, businesses, and governments will switch off their lights to save energy for one hour. The campaign, called Earth Hour, is aimed at promoting action to address climate change. According to the campaign website:
Earth Hour is a global WWF climate change initiative. The campaign invites individuals, businesses, governments and communities to turn out their lights for one hour on one day of the year to show their support for action on climate change. The event began in Sydney in 2007, when 2 million people switched off their lights. In 2008, more than 50 million people around the globe participated. In 2009, Earth Hour aims to reach out to 1 billion people in 1,000 cities.
The initiative enjoys widespread support, even from conservatives. Earlier today, Christian Paradis, Minister of Public Works and Government Services, and Jim Prentice, Minister of the Environment announced that the Government of Canada will participate in Earth Hour by reducing lighting in all federally owned buildings.
Unfortunately, a handful of conservative bloggers didn’t get the memo. Several member blogs of the Blogging Tories are calling for a counter-campaign to waste energy in order to offset the energy reductions of those participating in Earth Hour. One of the bloggers calling for a waste energy campaign is Kate McMillan of the popular blog Small Dead Animals, which was recently named the #3 political blog in Canada.
The effectiveness and optics of a waste energy campaign are self-evident. As fellow Law is Cool contributor Will McNair (@willmcnair) tweeted, “that’s like dismissing the efficacy of the gun registry by shooting someone.”
McNair's Gun Registry Tweet
Progressive bloggers were quick to respond to the conservatives’ contrariness. Having learned how to play these situations from “opposite day” in elementary school, one leftist blogger called for a counter-counter-campaign called “Don’t Stab Yourself in the Face Hour 2009“. As of writing, no conservative bloggers have taken the bait. (Note: Law Is Cool and its contributors do not support the stabbing of any body part.)
So what does this little episode teach us? First, it puts into sharp focus the extent to which political partisans are willing to do incredibly assinine things in defence of their ideologies. Second, it reminds us that there are still a great many people who do not believe that human-induced climate change is a reality. Third, it suggests that the blogosphere is in dire need of a more, shall we say, Law-Is-Cool-esque level of discourse.
Yes, We Will Put This on Our Blog
Q:
A: We just did.
h/t Pamela Pengelley of Res Ipsa Loquitur
AIG Bonus Fiasco and Congress Response
I’m sure that by now everyone is aware of the scandal about bailout recipient American International Group (AIG) paying out more than $165M (some have put the figure at over $200M) in bonuses to its top executives. The American taxpayers are justifiably upset as they see it as their money, collected though taxes, going directly into the pockets of the people who are seen as having caused the current recession.
To cash in on this outrage, the U.S. House of Representatives recently passed a Bill that would make the bonuses subject to a 90% tax. The tax would apply to employees of bailed out companies who make more than $250,000 per year receiving a bonus after December 31, 2008. The Senate is, to use Canadian terms, is taking a minute for sober second thought.
This Bill passed by Congress does not sit well with me. Without passing judgement on whether or not I think the executives deserve the bonuses, I will say that this sets a very poor precedent in governance. The message for future lawmakers seems to be “if you don’t like someone’s compensation package, you can take it away through taxes”. If the bonuses are outlined in a contract, there should not be a reason for the government to step in and take that money away.
In the past, poor performance was handled through disciplinary action leading up to termination. I don’t see why this case should be any different. In order to do this, it requires proof of said poor performance. Let us not forget that the Bill will affect people who may have had nothing to do with financial trading. For example, if the VP of IT at AIG is a recipient of a bonus payment, that individual had nothing to do with the recession. Why should he/she be subject to this collective punishment?
Don’t get me wrong. I understand the frustration and outrage felt by people who are suffering in the recession. However, I think there are better ways to set things right when it comes to compensation. 90% taxes are not the way to go and I’m happy to see that the Senate is taking a second look at this Bill.
“Some Words for Law Students’ Parents”
Thy son or daughter wouldst a lawyer be,
And so thou worriest for thy progeny.
The road is fraught, and hardy folk have failed,
And o’er the grading curve too few prevail.
Thou fearest the expense may prove too great.
Thou hopest for thy child a different fate:
Thy son couldst yet a doctor be,
And spend his hours at golf (or poetry)!
Thy daughter might take up a useful trade –
And truth be told, she might be better paid.
Nay, few are called to burn the midnight oil
And yea, the cost is great, and long the toil;
And not all youths prove equal to the task –
But think what bounty thou wilst reap at last
With ‘Esq.’ appended to thy daughter’s name.
Consider-ye how she might then repay
Thy long investment in her stock: a car?
A cottage where her parents might retire?
Thy son’s J.D.? Think-ye your funds well spent,
His future wealth an ample dividend.
(But woe betide thee should thy daughter prove
Idealist, should she her ambitions lose.
Despair-thou of a son in Legal Aid –
Your long investment ne’er will be repaid.)
Yet, if at night thy mind remains astir,
Take heart, good Madam; worry not, good Sir;
From this take comfort in the seasons hence:
At least thou hast not spawned a grad student!
Look not upon the lowly MFA.
Revilèd Master of the Arts, away!
Tempt not our children with thy life of ease;
Their sober minds want naught of your disease.
Cur, shave thy filthy beard, and cut your hair!
Proselytise on Derrida elsewhere!
Abhorrent hipster sloth, at once begone!
A legal education starts anon!
A Guide To Investing In Recession
In January 2008, I began investing in the stock market.
I was asked to by my good friend – and fellow LawIsCool contributor – Lawrence Gridin, and I just couldn’t say no.
Except for ECON101 and a couple of books by Sachs and Krugman, I have no education in economics or finance. I understand the principles of supply and demand, elasticity, inflation, and comparative advantage. With enough effort, I can summon and apply these principles to elementary models involving apples and small integers.
But when it comes to the stock market, I tend to gravitate to those anecdotes of dart-throwing monkeys outperforming experienced stockbrokers.
In addition to my lack of training, I am not a gambling man.
I went to a casino for the first time a few months ago. In one night I lost $10 on a 5¢ slot machine. I still rue my loss to that noisy one-armed bandit.
At the time Lawrence asked me to begin investing, I had been following the sub-prime mortgage crisis closely. I am still fascinated by it.
The modern economy can express the folly of myopic greed so beautifully and measurably. A law student might even claim that it does more than reify our sins, but that it also dispenses justice, if it were not for the fact that not only the greedy now suffer.
Since January 2008, the stock market has plunged.
The S&P 500 is an index of the prices of five hundred large, publicly-traded companies in the United States. It is considered a bellwether for the American economy. It has fallen from 1468 points to a recent low of 682, or -54%.
So it was that at one of the worst times in history to invest in the stock market, I invested in the stock market.
Believe it or not, I have lost nothing.
More incredibly, ranked against 66,000 avid stock traders — the type who research, trade daily, and actually try to make money off it – I am in the 97th percentile. I beat virtually all of them. What have I gained? Since all that Lawrence asked me to invest was a bit of my time on a popular stock prediction website, I have gained nothing but a better view of the American consumer.
How did I, an uninformed novice, beat the vast majority of enthusiast traders in one of the worst markets ever? I focused on what I did know about the American economy and consumer.
I knew enough about the sub-prime mortgage crisis that it would probably infect the broader credit market. I knew that this would deepen the already existing recession by decreasing consumer spending which, in turn, would generally lower demand in the economy. I thought to myself, what do American consumers nonetheless demand when times are tough, when they’re stressed and unemployed, when property crime is increasing, when their house is foreclosed, and when uncertain political change is fast approaching ?
Answer: guns, drugs, beer, and cigarettes.
So that’s exactly what I invested in. My picks included Sturm, Ruger & Company, Smith & Wesson Holding Corp, Johnson & Johnson, Molson Coors Brewing Company, Anheuser-Busch, Reynolds American, and Altria Group.
It turns out my sardonic hunch was dead on; these companies and their ilk have defied the recession and done incredibly well over the past year, as demand for their products surges.
Will I start investing real money in my hunches? Since my conscience prohibits me from lending money to gun and cigarette makers, I’ll have to wait for now…
You can sign up at The Motley Fool – Caps to view my performance and make your own predictions. My username is ilovetogamble.
“If you don’t follow the stock market, you are missing some amazing drama.”
- Mark Cuban, American billionaire
A Google Search For “Mistrial” Yields Too Many Results
As the prevalence of internet-capable smartphones increases, so too does the rate of mistrials.
According to The New York Times,
The use of BlackBerrys and iPhones by jurors gathering and sending out information about cases is wreaking havoc on trials around the country, upending deliberations and infuriating judges.
Last week a juror in a large federal drug trial in Florida admitted to the judge that he had been doing online research on the case. The judge then discovered that eight other jurors had been Googling as well, which forced a mistrial and laid eight weeks of work by federal prosecutors and defence lawyers to waste.
In the same week, an Arkansas court was asked to overturn $12.6 million (USD) judgment, claiming that a juror used Twitter to send updates during the civil trial.
And defence lawyers in the federal corruption trial of a former Pennsylvania state senator demanded that the judge declare a mistrial because a juror had Tweeted that a “big announcement” (the verdict) was coming on Monday.
In the United States and Canada, jurors are not supposed to seek information relevant to the case outside of the courtroom. They must reach their verdict based only on the admissible evidence.
The principle behind this rule is that information presented in the courtroom must pass through a number of filters before reaching the “triers of fact.” These filters are the adversarial system, the law of evidence, and the discretion of a judge. They are intended to enhance the veracity, relevancy, and legality of information presented to jurors.
For instance, the adversarial system creates the opportunity for information presented to jurors to be responded to and challenged by both parties. The reliability of a witness’ testimony can be challenged in the crucible of cross-examination.
But neither party has the opportunity to challenge information gleaned from a juror’s Blackerry, which may be prejudicial and/or just plain false.
Now, using their cellphones, jurors can read the accused’s blog, or examine an intersection using Google Maps, thereby violating the legal system’s rules of evidence. They can also trumpet the contents of the jury’s secret deliberations to the public by Tweeting, blogging, and texting.
According to Douglas L. Keene, president of the American Society of Trial Consultants, “It’s really impossible to control it.”
Mr. Keene said jurors might think they were pursuing justice and the truth by conducting additional research and detective work:
There are people who feel they can’t serve justice if they don’t find the answers to certain questions.
But according to Professor Wellborn, co-author of a handbook on evidence law,
The beauty of the adversarial system [is lost] when the jurors go out on their own.
According to the New York Times,
In the Arkansas case, Stoam Holdings, the company trying to overturn the $12.6 million judgment, said a juror, Johnathan Powell, had sent Twitter messages during the trial. Mr. Powell’s messages included “oh and nobody buy Stoam. Its bad mojo and they’ll probably cease to Exist, now that their wallet is 12m lighter” and “So Johnathan, what did you do today? Oh nothing really, I just gave away TWELVE MILLION DOLLARS of somebody else’s money.”
See relevant Canadian law by clicking “Read more.”
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