April 24, 2017

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Not If, But When: Apple And Tax Reform

Apple dodged a bullet when Tim Cook told a humanizing story of the company under fire. But will it last?

Erik_wohlgemuth

By Erik Wohlgemuth, Chief Operating Officer, Future 500

At Future 500, our team has a saying, “Not if, but when” to describe market leading companies who are well positioned for public attack from stakeholders. 

From mainstream leaders like Nike, to Wal-Mart and General Motors, to celebrated sustainability brands like Body Shop and Patagonia, our team explores a company’s vulnerability and deliberates how, if we were activists (and many of us were), we would frame a campaign against a company.

We do this to anticipate issues that should be rectified now before they become the focus of a campaign. We forge the strategic corporate-NGO engagement core to our work that leads to root cause analysis and implementation of systemic solutions to benefit the company and NGO(s) -- and ultimately society and natural systems. 

We also do this to see how often our predictions are right. It's a terrifically fun exercise. 

Apple’s Secrecy Invites Scrutiny

So it was with celebrated halo brand Apple who we sought to engage before their litany of issues -- taxes, human rights problems both domestic and abroad, tax evasion, lack of transparency, Appleaggression in protecting its IP -- hit the mainstream press.

As with all companies who have had their brand dragged through the mud, Apple seemed arrogant. We heard from a number of stakeholders who loved their Apple products, that they had tried to reach out to the company on a range of issues but could get no traction.

Our eventual meeting with an Apple sustainability executive was in their cafeteria, a corporate policy to ensure visitors can’t spy. Secretive companies invite scrutiny. We saw a company with a halo brand, understandably beloved for its superior products, but that was on a march to become the market leader in two years (and did so) and would face increasing demands to leverage that market power to effect positive change.

In a digital world (which Apple helped create) that demands radical transparency of companies, Apple seemed unwilling to commit to the same transparency of its peers for competitive reasons.

Apple’s Testimony Told A Story 

So it was no surprise that Tim Cook was called to appear before Congress to testify on the newest issue facing the company, the hullabaloo that Apple's aggressive use of offshore ghost companies enabled it to avoid paying billions in taxes.

At a time of economic stagnation for the 99 percent, this issue could explode, with Apple the new poster child of corporate abuse. Given Apple's culture of secrecy, I anticipated that Apple's CEO would Apple CEO Tim Cooklikely struggle with the transparency demanded of him by Senators in what was Cook's “coming out party.” But I was wrong, and was pleased to be so.

Cook took a human approach, saying, “It’s important to tell our story, and I’d like people to hear directly from me.” 

This is a key lesson we impart to executives when facing crisis: humanize your company. You must do this to shatter the image of a mechanistic, profit driven behemoth. Once humanism is achieved, a company’s executives are positioned to point to the complexity of the issue and its root cause and invite the opposition (e.g., Senators) to explore potential systemic solutions. 

Cook did this by being “especially disarming,” reframing the hearing from a potential lynch mob into “a constructive conversation about the problems with the business tax code and how it could be improved.” 

Unfortunately, the tax code has not kept up with the digital age,” [Cook] said. “The tax system handicaps American corporations in relation to our foreign competitors who don’t have such constraints on the free movement of capital.”

Tim Cook's measured performance has certainly helped forestall the inevitable fall from grace we predict. By the hearing's end, Senator McCaskill echoed the apparent sentiment of many in the room: “I love Apple. It's a huge part of my life.” 

Kudos to Cook for his performance.

Now let's see if he can leverage his Congressional gravitas to integrate a revenue neutral carbon tax into corporate tax reform.

About the Author:

Erik Wohlgemuth joined Future 500 in 2001 and is now Future 500’s COO, responsible for the organizational management. He oversees the financial planning, strategic marketing and development, and serves as a strategic advisor on various projects.

Wohlgemuth has worked with a broad range of industries – chemical, energy, consumer products, automotive, high-tech, clean tech, biomaterials – and numerous NGOs focusing on a range of social and environmental issues. He is adept at seeing and cultivating opportunities to connect organizations and bring people together to advance innovative approaches toward solving complex sustainability challenges.

Wohlgemuth sits on the Agenda Committee for The SRI Conference and is active in alumni affairs for the Yale School of Forestry & Environmental Studies.

The opinions, beliefs and viewpoints expressed by CSRwire contributors do not necessarily reflect the opinions, beliefs and viewpoints of CSRwire.

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