February 2008 Archive
February 4, 2008
The actor Wesley Snipes was convicted by a jury of failing to file his income taxes returns from 1999-2004, and may face jail time. He was however acquitted of the felony of tax fraud and conspiracy. Mr. Snipes owes taxes on approximately $ 38 million. Mr. Snipes claimed that he was misled by his accountant. His attorney Bernard Bernhoff said: "Mr. Snipes has always been committed on doing the right thing and after this trial is over he will make whatever amend is required."
The IRS and the Economic Policy Institute estimate that the amount of taxes owed but not paid is in excess of $350 billion a year. It is equal to about 15% of the total taxes owed. The IRS estimates that 17 percent of all taxpayers are not complying with the tax laws.
It is true, that it is sometimes difficult to make sure we pay what we owe and not more than what is required due to the complexities of our tax legal system.
What are the ethical values involved in the issue of the payment of taxes?
Let me list a just few:
Our tax system is based on honor. We (or our accountant) declare our income; determine how much money we owe and send a check to the IRS. The Government trusts us to be truthful and honest but does not have the means to verify all tax returns. In the U.S. only about 1.5 % of returns are audited. (In Switzerland, where I grew up, you have to declare your revenues and assets and the government determines the amount you have to pay and sends you an invoice. Which means that every return is examined.)
Our taxes allow the correction of social injustice in our capitalistic society, by redistributing wealth from the rich to the poor. When we pay taxes, we participate in making our society more just.
We are expected to be truthful in the information we give to the government on our income.
We should all pay our fair share of the tax burden imposed on all citizens and residents. It is true the wealthy have the means to exploit legal loopholes in the tax code and thus reduce their taxes. That could be considered an unfair advantage.
We should grateful that we have an income to declare and pay taxes on. There are many people in this world who do not have that privileged and who would love to be in our shoes.
Dietrich Bonhoeffer once said:
In ordinary life we hardly realize that we receive a great deal more than we give, and that it is only with gratitude that life becomes rich.
February 13, 2008
Milton Friedman's famous quote " the business of business is business" is now questioned by many.
John Plender, Chairman of Quintain-Estates PLC, and a Financial Times columnist wrote a very interesting article on January 30th entitled "Flaws in trying to moralize about capitalism." Commenting on the recent Societe General scandal he wrote: "There are huge advantages in commercial life in fostering an ethical culture that guides behavior."
An article in the January 19th issue of the Economist entitled "How good should your business be? Ethical capitalism" states that: "there is money to be made in doing good".
How exactly does ethics impact the bottom line?
The absence of ethical conduct can be very expensive for corporations, including the cost of litigation and fines. The WorldCom scandal caused the loss of 17,000 jobs and brought a company worth $100 billion to bankruptcy.
An ethical culture can engender loyalty that increases motivation and productivity, as well as reduce turnover. A good reputation will also strengthened customer loyalty and help maintained and increase market share.
A 2005 KPMG international survey on Corporate Responsibility, listed the seven most important reasons why major corporations engage in corporate responsibility activity.
1. To have a good brand and reputation
2. To be the employer of choice
3. To have and maintain a strong market position
4. To have the trust of the financial markets
5. To increase shareholder value
6. To be innovative in developing new products and services
7. To create new markets.
However ethics and corporate social responsibility should transcend the however important concern of profitability. There are essential values in our lives that cannot always be measured in financial terms, such as honor, respect and justice.
As the poet and educator William Arthur Ward said:
"Wise are those who learn that the bottom line doesn't always have to be their top priority."
February 25, 2008
A 2007 National Business Survey conducted by the Ethics Resource Center that interviewed approximately 2,000 employees in both private and public companies revealed that 56 % of employees surveyed had personally observed violations of company ethics standards, policy and even the law. Yet 42 % of those who witnessed the misconduct did not report it. Many believed that the reporting would not bring corrective action.
Why is it so difficult to report wrongdoing? Fear of both retaliation from management and fear of being perceived as a "snitch" by colleagues is a major factor. In criminal case, few people agree to be a witness for the prosecution unless they have committed a crime themselves and hope for leniency in exchange for their testimony.
When we witness wrongdoing it might be helpful to remember that we are not asked to pass judgment on the person or the action, just to report the facts.
We should also remember that the facts that we are made aware of, however insignificant they may seem to be, could be indicative of a much great problem that, if unresolved, could lead to very serious consequences. We can safely assume that if there had been earlier reporting of wrongdoings at Enron and Arthur Anderson, the demise of both companies could have been avoided. By remaining silent we could share some responsibility in those consequences.
It might also be helpful to consider that by not reporting wrongdoing we are withholding information that does not belong to us and is not ours to keep. It belongs to those in authority and those responsible for the management of the company and the wellbeing of its employees.
Reporting wrongdoing does require moral courage because of the perceived risks involved. Rielle Miller of the Ethics Resource Center in her article "Moral Courage: Definition and Development lists five components that form moral courage. They are:
1. Presence and recognition of a moral situation,
2. Moral choice,
But as Arthur Koestler once said:
"Courage is never to let your actions be influenced by your fears."