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Article title is misleading, they only minimize some capital gains tax on their cash and investments with the nevada entity. And they certainly have a duty to s

by hop 16y ago

Article title is misleading, they only minimize some capital gains tax on their cash and investments with the nevada entity. And they certainly have a duty to shareholders to do so. They pay hundreds of millions in income tax on their profit in California, plus everything else - property tax, payroll tax, sales tax on purchases in CA...

andrewf 16y ago
Does anyone know what percentage of Apple Inc's shares are held by California residents? I'm guessing that if Apple returned its nest egg to shareholders as a dividend, rather than investing it, California wouldn't see much out of it.
_delirium 16y ago
I don't think there is actually a "duty to shareholders" to reduce taxation by jurisdiction-shopping. At least, having done some research, I'm unable to come up with a single case where a shareholder lawsuit against a company that declined to do so succeeded.
- invisible 16y ago
  I think the "right thing to do" for shareholders is probably a better way to describe the situation. Duty so much as to reduce their costs (with taxation being a cost).
  - jbooth 16y ago
    Yeah, but that's a crappy thing to do. Lots of unethical practices are legal but we don't encourage companies to do them. Why this?
    - eru 16y ago
      We don't encourage them to do this. The shareholders elected the board that is currently minimizing the taxes. If you don't like that, you can become an activist shareholder (or just an activist) and campaign for changing this company policy. This is no question of company ethics. It might be a question of the ethics of shareholding.
      - kd0amg 16y ago
        Having been elected to a position does not absolve you of moral responsibility for the actions you take while holding that position.
        eru 16y ago
        Indeed. But the shareholders will find somebody to do their bidding. Also you could argue that doing what you were elected to do, within the legal limits, is fine. I'd say tax minimization is a patriotic duty.
        jbooth 16y ago
        Patriotic duty, heh. Making sure you never give to charity either is a mitzvah?
        eru 16y ago
        At least most charities won't start wars with your money.
      - jbooth 16y ago
        This thread is full of people who presumably aren't even significant apple shareholders clamoring for tax avoidance on principle, like it's some sort of honorable thing to do, sticking it to the man or something, and you hear the same in the real world as well. We do encourage them.
        eru 16y ago
        And why not. I am all for using loopholes while they exist, too. Just make sure you also campaign for closing loopholes.
  - _delirium 16y ago
    If there isn't actually a legal duty to the shareholders, though, then you're basically in a territory of normal ethics, with subjective tradeoffs and competing interests, aren't you? There might be some ethical concerns about being "fair" to your shareholders, even beyond what the law requires, but there's also concerns about paying a "fair" amount of taxes to the state you reside in, and all sorts of other things to balance.
    - Eliezer 16y ago
      How does having a legal duty put you outside the realm of ethics? If you have a legal duty to do something unethical, you're still doing something unethical.
      - _delirium 16y ago
        It means we're arguing different points. A duty to shareholders is one thing, which probably has a reasonably objective answer (though laws can be fuzzy). My argument is that there is no "duty to shareholders" to jurisdiction-shop in order to minimize taxes. (I might be wrong on that, but I don't think I am.) The "right thing to do" is a much fuzzier question, which can include a lot of possible concerns. Perhaps there is an "ethical duty to shareholders to jurisdiction-shop", but certainly you'd have to analyze more than just obligations to shareholders, since there are potentially conflicting ethical obligations to all sorts of other people as well. In the other direction, there might be an ethical obligation not to jurisdiction-shop, depending on your ethical precepts.
      - deleted 16y ago
        [deleted]
- hop 16y ago
  The board of directors and officers have a fiduciary duty to do what is in the best interest of the company and shareholders. If the choice is to invest our extra cash thru a CA based corp, pay more tax, have a lower return and ultimately less $ to reinvest in the company, or, to set up in the neighboring state so don't lose money, and its perfectly legal, the choice is easy. I think a better question is why have CA voters voted in so much spending and extra taxes, putting them at disadvantage to other states. Nevada actively encourages companies and individuals to come set up shop there. Capital gains tax by state - http://www.thereibrain.com/realestate-blog/2007/10/capital-gains-tax-rates-state-by-state/ http://www.thereibrain.com/realestate-blog/2007/10/capital-g...
  - _delirium 16y ago
    You assert the opposite of my claim, but do you have any evidence? "Fiduciary duty" is an actual legal term; there are some actions or non-actions which violate a corporate officer's fiduciary duty, and some which don't. Failure to set up a tax shelter, even when it would be possible to do so and it would save the company money, is not a breach of fiduciary duty. I'd welcome any evidence otherwise, but I suspect you'll have trouble finding any, because I did research this at one point, and as far as I know, no corporate officer in U.S. history has ever been found to be in breach of fiduciary duty for not setting up tax-sheltering subsidiaries. I can imagine a scenario where something like that might happen, but I think it would have to be fairly egregious, probably more something like deliberately setting up a new tax structure to increase a company's taxes (maybe because you know the mayor and want to help him out with his budget or something).
    - hop 16y ago
      Yes, you're very right. I more accurately should have said acting in the shareholders interest, which it certainly is in this type of non-shady way to lessen tax liability. If a director, maybe al gore, was against the idea for the pious sake of giving more money to support the govt, that would violate fudiciary duty.
- neilc 16y ago
  A board of directors has significant discretion in deciding what course of action truly maximizes the long-term value of a company; see the business judgement rule, for instance ( http://en.wikipedia.org/wiki/Business_judgment_rule http://en.wikipedia.org/wiki/Business_judgment_rule ). The flippant view that a board is obligated to maximize profit (especially short-term profit) is pretty simple-minded. See also http://crookedtimber.org/2008/07/24/fiduciary-obligation-vs-creative-capitalism/ http://crookedtimber.org/2008/07/24/fiduciary-obligation-vs-... and http://crookedtimber.org/2008/07/25/what-obligation-maximise-what/ http://crookedtimber.org/2008/07/25/what-obligation-maximise...
DaniFong 16y ago
Why does selling shares to the public produce a duty to do anything possible to make a profit? A share in something could be a share in any social contract. A share in a nation, for example, accords one vote and a host of other rights and duties. A share in Whole Foods implies a share in some of the profits going towards nonprofit activities. A share in Google implies only a 1/10th control over their direction -- they come along for the ride.
- yardie 16y ago
  It actually came from a quote taken out of context by Sumner Redstone 30 years ago. Wall Street took it to heart over the next few decades leading up to the financial clusterfuck we have now. When asked about that quote, he said, "it is the stupidest thing I've ever said."

by hop 16y ago

andrewf 16y ago

Does anyone know what percentage of Apple Inc's shares are held by California residents? I'm guessing that if Apple returned its nest egg to shareholders as a dividend, rather than investing it, California wouldn't see much out of it.

_delirium 16y ago

I don't think there is actually a "duty to shareholders" to reduce taxation by jurisdiction-shopping. At least, having done some research, I'm unable to come up with a single case where a shareholder lawsuit against a company that declined to do so succeeded.

invisible 16y ago
I think the "right thing to do" for shareholders is probably a better way to describe the situation. Duty so much as to reduce their costs (with taxation being a cost).
- jbooth 16y ago
  Yeah, but that's a crappy thing to do. Lots of unethical practices are legal but we don't encourage companies to do them. Why this?
  - eru 16y ago
    We don't encourage them to do this. The shareholders elected the board that is currently minimizing the taxes. If you don't like that, you can become an activist shareholder (or just an activist) and campaign for changing this company policy. This is no question of company ethics. It might be a question of the ethics of shareholding.
    - kd0amg 16y ago
      Having been elected to a position does not absolve you of moral responsibility for the actions you take while holding that position.
      - eru 16y ago
        Indeed. But the shareholders will find somebody to do their bidding. Also you could argue that doing what you were elected to do, within the legal limits, is fine. I'd say tax minimization is a patriotic duty.
        jbooth 16y ago
        Patriotic duty, heh. Making sure you never give to charity either is a mitzvah?
        eru 16y ago
        At least most charities won't start wars with your money.
    - jbooth 16y ago
      This thread is full of people who presumably aren't even significant apple shareholders clamoring for tax avoidance on principle, like it's some sort of honorable thing to do, sticking it to the man or something, and you hear the same in the real world as well. We do encourage them.
      - eru 16y ago
        And why not. I am all for using loopholes while they exist, too. Just make sure you also campaign for closing loopholes.
- _delirium 16y ago
  If there isn't actually a legal duty to the shareholders, though, then you're basically in a territory of normal ethics, with subjective tradeoffs and competing interests, aren't you? There might be some ethical concerns about being "fair" to your shareholders, even beyond what the law requires, but there's also concerns about paying a "fair" amount of taxes to the state you reside in, and all sorts of other things to balance.
  - Eliezer 16y ago
    How does having a legal duty put you outside the realm of ethics? If you have a legal duty to do something unethical, you're still doing something unethical.
    - _delirium 16y ago
      It means we're arguing different points. A duty to shareholders is one thing, which probably has a reasonably objective answer (though laws can be fuzzy). My argument is that there is no "duty to shareholders" to jurisdiction-shop in order to minimize taxes. (I might be wrong on that, but I don't think I am.) The "right thing to do" is a much fuzzier question, which can include a lot of possible concerns. Perhaps there is an "ethical duty to shareholders to jurisdiction-shop", but certainly you'd have to analyze more than just obligations to shareholders, since there are potentially conflicting ethical obligations to all sorts of other people as well. In the other direction, there might be an ethical obligation not to jurisdiction-shop, depending on your ethical precepts.
    - deleted 16y ago
      [deleted]
hop 16y ago
The board of directors and officers have a fiduciary duty to do what is in the best interest of the company and shareholders. If the choice is to invest our extra cash thru a CA based corp, pay more tax, have a lower return and ultimately less $ to reinvest in the company, or, to set up in the neighboring state so don't lose money, and its perfectly legal, the choice is easy. I think a better question is why have CA voters voted in so much spending and extra taxes, putting them at disadvantage to other states. Nevada actively encourages companies and individuals to come set up shop there. Capital gains tax by state - http://www.thereibrain.com/realestate-blog/2007/10/capital-gains-tax-rates-state-by-state/ http://www.thereibrain.com/realestate-blog/2007/10/capital-g...
- _delirium 16y ago
  You assert the opposite of my claim, but do you have any evidence? "Fiduciary duty" is an actual legal term; there are some actions or non-actions which violate a corporate officer's fiduciary duty, and some which don't. Failure to set up a tax shelter, even when it would be possible to do so and it would save the company money, is not a breach of fiduciary duty. I'd welcome any evidence otherwise, but I suspect you'll have trouble finding any, because I did research this at one point, and as far as I know, no corporate officer in U.S. history has ever been found to be in breach of fiduciary duty for not setting up tax-sheltering subsidiaries. I can imagine a scenario where something like that might happen, but I think it would have to be fairly egregious, probably more something like deliberately setting up a new tax structure to increase a company's taxes (maybe because you know the mayor and want to help him out with his budget or something).
  - hop 16y ago
    Yes, you're very right. I more accurately should have said acting in the shareholders interest, which it certainly is in this type of non-shady way to lessen tax liability. If a director, maybe al gore, was against the idea for the pious sake of giving more money to support the govt, that would violate fudiciary duty.
neilc 16y ago
A board of directors has significant discretion in deciding what course of action truly maximizes the long-term value of a company; see the business judgement rule, for instance ( http://en.wikipedia.org/wiki/Business_judgment_rule http://en.wikipedia.org/wiki/Business_judgment_rule ). The flippant view that a board is obligated to maximize profit (especially short-term profit) is pretty simple-minded. See also http://crookedtimber.org/2008/07/24/fiduciary-obligation-vs-creative-capitalism/ http://crookedtimber.org/2008/07/24/fiduciary-obligation-vs-... and http://crookedtimber.org/2008/07/25/what-obligation-maximise-what/ http://crookedtimber.org/2008/07/25/what-obligation-maximise...

DaniFong 16y ago

Why does selling shares to the public produce a duty to do anything possible to make a profit? A share in something could be a share in any social contract. A share in a nation, for example, accords one vote and a host of other rights and duties. A share in Whole Foods implies a share in some of the profits going towards nonprofit activities. A share in Google implies only a 1/10th control over their direction -- they come along for the ride.

yardie 16y ago
It actually came from a quote taken out of context by Sumner Redstone 30 years ago. Wall Street took it to heart over the next few decades leading up to the financial clusterfuck we have now. When asked about that quote, he said, "it is the stupidest thing I've ever said."