Guns don’t kill people, the old saw goes. People do. By the same token, corporations don’t dodge taxes. People do. The people who run corporations. And these people — America’s CEOs — are reaping awesomely lavish rewards for the tax dodging they have their corporations do. A report from the U. S. Institute of Policy Studies shows that 25 major U.S. corporations last year paid their chief executives more than they paid Uncle Sam in federal income taxes.
Some of the corporations have raised questions about the methodology used by the Institute. The Institute’s response is here. Interestingly, one of the issues raised by the corporations is that the tax results are the results of “accounting adjustments and settlements.” In rebutting this, the Institute argues that clearer corporate tax reporting is in the interest of all.
The need for clearer corporate reporting in New Zealand has also been raised today by Brian Gaynor in a Herald article titled “Changing the scores unfair to investors” .
Company directors are beginning to look like golfers who go around in 85 but put a 76 on their card because that is what they normally shoot.
There can also be serious conflicts of interests if senior executives are paid on the basis of normalised, rather than audited profits. There is clearly a strong incentive for executives to focus on the higher normalised profits if their bonuses are based on these figures.
Nine of the 19 companies had normalised earnings higher than their audited figures.
Telecom reported normalised profits of $388 million, 133.7 per cent higher than the audited figures of $166 million.
That might explain Reynolds’ pay.
Also in an article in today’s Guardian discloses that the previous year’s report indicated that some of the best paid CEOs are the ones that lay off the most workers. The authors calculated that the CEOs of the 50 companies that laid off the most workers since the onset of the economic crisis took home 42% more pay in 2009 than their peers on the Standard & Poor’s 500 index.