My origanal rant was a moral argument and not a legal argument, convaluted as it was, yet before I cede match point: I would like to ask a few questions based on your response!
Perfectly understandable. I too, am very disturbed about a number of moral issues, not the least of which are those surrounding the federal laws that are forcing corporations and individuals to choose expatriation as their only option.
But, as an avid student of history, I am acutely aware that the single most important factor that assures that we each have the freedom to live according to our own moral standards, is the Constitution of the United States, that established the underlying laws meant to prevent any subsequent government from taking those freedoms from us. Every time a bill is passed and signed into law that violates the intent of the Constitution, regardless of how good that bill might be, it weakens the Constitution and, subsequently, the protections guaranteed us by the Constitution.
There have been several times over the last decade or two that I have even agreed with the need for such laws. But, that's why the Constitution included a provision for amendment. The founding fathers knew that things would change and wanted to make certain that the Constitution could change with the changing needs of the people. But in recent years, politicians on both sides of the aisle have taken to using emotional arguments to justify passing laws that violate the intent of the Constitution. Whether it is the Columbine shootings that the Democrats used to justify more anti-gun laws or the terrorist attacks that the Republicans used to justify more anti-privacy laws, the result is the same. They weaken the Constitution.
Like you, I too, have many moral concerns with the things that are going on today and I find it very difficult to avoid a purely emotional response to issues that demand a deeper, more rational look at how my emotional response, if it were adopted, might further weaken the Constitution. I fully understand where you are coming from.
Why isn't every company rushing to exploit these loopholes in the tax law?
Each company has it's own individual set of fiscal and other circumstances that might or might not lead to such a decision. One very significant factor might be the amount of foreign business that they do and in what countries. In general, the more product or service that a company sells in other countries, the more significant the profit might be in corporate expatriation. On the other hand, if most of that business is done in high tax countries like Germany and France, then such savings might be substantially reduced. Another consideration might be whether their product or service is a retail item or a B2B item. Companies that deal primarily in retail items might be more likely to suffer consumer backlash in such a move, than companies that deal mostly with other businesses. The percentage of foreign vs US stockholders might even play a small role, although a larger percentage of US st3ockholders does not reduce director liability.
Actually, the reasons are virtually endless. These were just a few of the most obvious.
Which legislation allowed for foriegn firms to gain a majority shareholder advantage?
Actually, I am not aware of any legislation that would prevent that, in the first place. In fact, it is very important for our economy to have a significant amount of foreign investment. It keeps dollars in circulation. Since you have studied macroeconomics, you are certainly aware that the more times a dollar is turned over in a given period of time, the better the economy will be. It does no good to have US dollars sitting in a vault or earning interest in foreign investments. In fact, our government often goes to great lengths to encourage the return of foreign earned US dollars.
It's widely believed that one of the reasons for the stock market climb during the klinton administration, was the fact that the klinton administration had an unofficial policy of looking the other way, when Colombian drug lords invested their hoards of cash in the Colombian markets, who then turned around and invested in the US market, putting all that money back into circulation. Of course, the klinton policy for looking the other way, is also largely responsible for the corporate scandals that we are seeing today. I guess that I should be glad that Dubya isn't looking the other way. But, in his quest for maintaining high poll numbers, he has become so aggressive in pursuit of a handful of corporate crooks, that his actions are actually making investors nervous and making a bad matter worse, hurting the market for thousands of honestly managed companies.
Are corporations patriotic who go off shore even if their officers live and work in the US? What is the cut off point? Is it 70% of the board are US domiciled?
I'm not sure that I understand the question. When corporations expatriate, it requires a vote of the stockholders. The officers only present that option to the stockholders, for their consideration. Like I said in an earlier post, if the savings is significant enough, the directors would be in violation of their fiduciary responsibility to the stockholders, if they failed to give the stockholders the chance to vote on such a move. However, since directors are generally heavily invested in the company and stand to gain a lot, if the company moves, they often go on record as recommending the move. But, when all is said and done, it is the stockholders who must make the decision.
As for where the officers live, I am not sure of the answer, since all of the US companies that I am aware of have US officers.
I can tell you from experience, that any company that is involved with secret government contracts, cannot have foreign directors. A company that I used to work for, that had many contracts involving various levels of secrecy, was sold to a Japanese company and in order to keep those contracts, the Japanese company had to appoint an intermediary board of directors, through which all information and instructions flowed. As I recall, most of those officers were retired US military types. But, the important thing here, is that the Japanese directors were not allowed to directly control a US company involved in secret government work. (Incidentally, the Japanese company kept the division that they really wanted and sold off the portion of the company involved in security work to a US company, in short order.)
My original problem is that coporate officers care less and less for the firm and if they can improve their numbers, stock related, they get the big bonuses.
I must agree with you on this point, at least in part. The profit motive is a very strong incentive and the bonuses can be very lucrative. But on the other hand, most corporate officers are heavily invested in the company and a large part of those bonuses are usually in company stock, as well. Furthermore, they are required, as insiders, to register any sales of their stock. This means that the profit motive works in favor of the corporation. If they don't do good for the company and should decide to start selling their stock, they could actually cause the stock to drop to artificial lows, long before they could get their money out. Granted, that it does not always work that way. In the case of Enron, Ken Lay had actually registered his sales of stock, as required. But, since many investors (outside of employee investment plans) were so enamored of Enron, they chose to ignore that portentous warning sign and paid the price. But, most corporate officers can't expect such faithful investors.
Also consider that some of the companies that have nominally expatriated in recent years, might not have been able to survive against their foreign competition for many more years, had they not expatriated. In that case, even the profit motive would take a back seat to corporate survival. After all, a corporate officer, who has watched his company go down the tubes, is not likely to get either a bonus or such a lucrative job in the future. Then, add to that, the threat of litigation, should they fail to offer the stockholders the chance to vote on something that might mean a significant enough savings and you have what might be considered an irresistible force.
On the other hand, the whole problem could be avoided by eliminating the corporate income tax on foreign earned income, like almost every other country in the world. But instead, Congress and the President are making matters worse, by enacting and threatening to enact, even more oppressive legislation, which is making companies that might never have considered expatriation, nervous enough to consider it. Conversely, just one positive statement from Dubya, urging caution and that we allow the existing laws to work, would be enough to make many companies that are considering expatriating, put those plans on hold and, at the same time relieve investors, giving the market time to breathe.
But, since that would probably make his poll numbers drop to around 60%, don't hold your breath. Unfortunately, it seems that the one place where Dubya and klinton are alike, is that they both care more about their poll numbers, than doing the job they were sent there to do. At least, IMHO, that's the way it looks and I have seen no evidence to indicate otherwise. Unfortunately, if such evidence does exist, it is drowned out by the emotional rants of those who see no need to provide rational arguments.
I appreciate your considered approach and I hope that I have made my point without seeming too emotional. I just believe that the simple matter of a candidate calling himself Republican, is not enough. So much damage has already been done to the Constitution, by our elected officials on both sides of the aisle, that we must now demand higher standards of our candidates and elected officials, before it is too late. The measure must be the original intent of the Constitution.