Shut Up & Pay Your Taxes
A great quote from Carl Rhodes, professor of organisational studies at the University of Technology, Sydney.
Every Monday, The Australian newspaper business section runs a Media feature (not just media, broadly covers marketing and advertising). An entertaining read for a contrarian - most articles would not be out of place in a University undergraduate publication in which idealism trumps reality, versus experienced practitioners most of whom have been mugged by reality at some point in their career.
Brands must have a Purpose, lead the way on diversity, inclusion and help old ladies cross the road.
Last week one article stood out, a piece by Catherine King, chief strategy officer at Leo Burnett. In a polite manner she questions brand activism, asking should the corporate sector set society’s moral compass. With the widespread introduction and importance of a company’s ESG score, business now seems to be engaged as much in social engineering as they are in their commercial activities.
Hundreds of years ago, Robber Barons were common, but for many years now, businesses, and the people who run them, have been actively engaged in all manner of “good works”.
This may come as a surprise to many of the younger marketing and advertising professionals – corporate Australia has been active in “doing good” for generations – every significant Not for Profit (NFP) organisation has and still does rely on corporate support for their existence. Youth suicide, substance abuse, domestic violence, homelessness – if a corporate is looking for a “worthy purpose”, the list is huge. But what do corporates know about say, substance abuse, domestic violence or any of the major social problems which are the raison d’etre of specialist NFPs?
The head of one of Australia’s most effective NFPs for disadvantaged youth (virtually all of whom have suffered physical and sexual abuse) said:
“There is nothing more dangerous than an enthusiastic amateur.”
But according to the marketing manager of one of Australia’s largest retailers “Purpose and profit must coexist for ultimate growth”.
A corporate ESG score is supposedly an indicator of how good they are as a corporate citizen. According to Deloitte:
The importance of environmental, social and governance (ESG) issues in driving value creation continues to accelerate across the Australian corporate and private equity landscape.
What an ESG score does not measure is how much tax a company pays, or should I say, avoid?
It is wonderful if a company has excellent environmental, governance and social credentials – “look at me, aren’t we a thoroughly modern and progressive business? But don’t ask about how much tax we pay (or avoid)”.
A high ESG score won’t build more hospitals, schools, roads, Medicare, and the huge array of social programmes such as the NDIS and social security.
A lovely bit of camouflage to say how well the company does on ESG, but pays bugger all tax, the income that makes Australia a 1st world country.
What should be added to the ESG score is a measure of how much tax a company pays. It would not be hard to do. Public companies have to report turnover and tax paid. Of course, this would not provide a complete picture, but we see many multi-national companies with turnover in the billions, and tax paid of less than $50 million (one company who I cannot name for fear of being sued, shoots its mouth off about its ESG credentials, but paid only $7 million tax on turnover well over $1 billion.).
It is pretty easy – head office charges the local company a “fee”, which takes a big chunk out of profit declared and tax paid on e.g., an operating profit of say $100 million. Head office in London, New York etc. charges a “licensing fee” of $90 million and tax is then paid on $10 million.
What’s that saying – an inconvenient truth?
The catalyst for this post was a Monday’s Media edition in the Australian, in which the lead story ran under the headline of
“Brands must push diversity in every aspect of their work – lead the charge in pushing boundaries when it comes to diversity and inclusiveness.”
This from the chief marketing officer of Diageo. I wonder, before shooting off her mouth, how much she knew about Australia? A country in which some 200 languages are spoken. It is the most diverse, multicultural country in the world, where marriage across cultures tops any other country.
Instead of lecturing us on the need for diversity, can she please provide the turnover of Diageo Australia and tax paid in the last financial year? This tells us far more than any ESG score.
The biggest danger of ESG scores is their impact on a company’s capital raising.
We have a generation of new business leaders who claim to be “progressive”. Ironic that much of the progressive agenda is Neo-Marxism in a populist package.
An old saying, which goes back decades and decades prior to “purpose”. As mentioned, no Not for Profit of any significance would be able to operate without corporate support. But this support comes in areas which these businesses operate – financial, marketing, operational, IT etc. Areas in which the corporate supporters offer genuine value and help.
Social engineering, which is really what ESG is about, is not the role of the corporate sector.
So, just shut up and pay your taxes – money that goes to the services such as education and health. Unfortunately, the loudest mouths tend to be the ones who put the most effort into reducing the tax they pay. (And to add insult to injury, the fees these businesses pay to their accountants and lawyers, are tax deductable.)
