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 responsibilityâ€.
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, Â 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.
Small carbon footprints in the shoe making business eh? (I’m sure that was intentional?)
What is often forgotten, is the “do-gooders” often cause more harm than they claim to cure. Some poor folks in Indonesia, Viet-Nam, or other 3rd world country are now out of work because of the “lefties” in developed countries trying to impose their values abroad. Sounds good in theory, but rarely works in reality.
$4 bucks a day to make shoes!!!!!!
The OUTRAGE. We must (We, being the do-gooders) put a stop to this child labour/slavery.
Of course, what is rarely mentioned or realized is that to some folks, $4 a day will put food on the table for a day. Without this job, people go hungry. As well, what is $4 a day in comparison? Is it similar in quantity to a Canadian making minimum wage? More? Less?
The fact is, you cannot judge these countries by our standards. If a family with two parents and 4 or 5 kids has no other choice but to work in a foreign factory for what we consider poverty wages, then what are they to do? Do they stop working for the factory some some NDP-er in Ontario gets to feel better about him/herself?
Sounds like the efforts of the WWF to buy up the Rain forest one acre at a time to “Save the Planet.”
What is forgotten however, is that in that case, “Saving the Planet” often means “Starving the inhabitants”
It’s very easy for us to condemn some Brazilian peasant for burning down an acre or two of Rainforest to clear enough land for him to grow food for his family, but then again, many of the “activists” who demand we protect the rainforest don’t consider the people who depend on it, in fact, it is people who are seen as the problem. Maybe we should just cut to the chase. Let’s cut down the Brazilian peasants…..that will leave plenty of forest for the “Activists” won’t it?
If you want better wages for the workers who actually make the shoes/shirts, etc….then you need to be willing to pay the extra price. And if NIKE starts charing an extra $25 per pair of already overpriced shoes….less people will buy them (Though they will shoot you for a pair in certain regions) and fewer people will be working.
No easy answers…..but simply blaming “Greedy Corporations” is the lazy way taken by NDP-er types.
And by the way…Corporations ARE in the business of providing for Shareholders. If the shareholders demand Corporate reponsibility…then so be it. If not….it’s up to the consumer to make the judgement with their purchasing power. That’s how it works. Mess with it….and you skew the market.