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Did the CEOs let us down in the big picture of: Make America Great Again?
My perspective is that I'm disappointed in what they have done and I'm thinking they did let us down making tax reform harder. But, I would like to hear what others think as well.
Responding briefly -- and reserve the right to quit the discussion at any time if I feel it's going off the rails into political noise.
I think the first few CEOs that quit the WH council did the right thing based on principle -- certainly the Merck CEO. Those that did it later in the week as the furor built seemed to be doing what they thought looked good on them and their companies, but to me it came across as a series of too-late "me too!" actions.
Big-picture wise, CEOs are looking out for their companies' reputations with customers and shareholders along with their profitability in the marketplace -- in turn, that would help deliver on the campaign slogan you cited. If they do that correctly they don't need to associate with consistently controversial figures and run the risk of being tarred in the public eye as a result, which could endanger their reputations and financial health.
That said, regardless of who's in the Oval Office, such executive advisory councils rarely provide anything more than high-profile photo-ops for all involved while allowing everyone in the room -- and especially the president -- to say "we're addressing the concern-du-jour" while not leading to many if any actual policy initiatives or tangible results that can support the aforementioned campaign cry. I've seen this kind of cycle repeatedly on technology policy items since the late '90s, which is my area of expertise.
IMO, I think those who led the CEO exodus did the right thing.
@Sven The talk of the U.S. having the highest corporate tax rate is intentionally misleading. It is the effective tax rate that matters more than the statutory rate. Here's a link to a study from the U.S. Government Accountability Office on the effective rate from 2006 through 2012: https://gao.gov/products/GAO-16-363 From the GAO's summary:
In each year from 2006 to 2012, at least two-thirds of all active corporations had no federal income tax liability. Larger corporations were more likely to owe tax. Among large corporations (generally those with at least $10 million in assets) less than half—42.3 percent—paid no federal income tax in 2012. Of those large corporations whose financial statements reported a profit, 19.5 percent paid no federal income tax that year. Reasons why even profitable corporations may have paid no federal tax in a given year include the use of tax deductions for losses carried forward from prior years and tax incentives, such as depreciation allowances that are more generous in the federal tax code than those allowed for financial accounting purposes. Corporations that did have a federal corporate income tax liability for tax year 2012 owed $267.5 billion.
These reasons also explain why corporate effective tax rates (ETR) can differ substantially from statutory tax rates. ETRs attempt to measure taxes paid as a proportion of economic income, while statutory rates indicate the amount of tax liability (before any credits) relative to taxable income, which is defined by tax law and reflects tax benefits built into the law. The statutory tax rate on net corporate income ranges from 15 to 35 percent, depending on the amount of income earned. For tax years 2008 to 2012, profitable large U.S. corporations paid, on average, U.S. federal income taxes amounting to about 14 percent of the pretax net income that they reported in their financial statements (for those entities included in their tax returns).
@old_skeet. They did not let us down as you suggest. They made us proud. One hundred years from now when historians write about this time, those who had the opportunity to fight this disaster and did not will be condemned as traitors for eternity.
The me-toos were not leading so much as making calculated business decisions.
Note also that tax cuts, which (along with reduced regulations) seem to me what the CEOs were most interested in, do not constitute tax reform. Here's a lighthearted but informative column (not news article) in Forbes about that:
Tax reform is a "nice to have", not a necessity. (The last real tax reform was in 1986.) The immediate need is for an increase in the debt ceiling. The disbanding of advisory councils will have no effect on that.
If they disagree and leave the council(s) how can they argue for change or let their thoughts, ideas and opinions be heard. Should have stayed. Agree with Skeeter on this one.
To some extent, damned if they do / damned if they don't.
As representatives of specific companies, they have an obligation to do no harm to those companies. As individuals, they have an obligation to disassociate themselves from political or ethical circumstances with which they may strongly disagree.
Given the current state of affairs, they may have judged that their input would be given little weight, and ultimately that they would be merely used as tools by the administration. And of course some probably didn't have a major problem with the setup, but just cut and ran for cover when the dishes started flying.
This is a damn difficult question that has no single simple answer. I agree with Old Joe. It depends on the specific circumstances of each individual investor.
So, regardless of anyone else's answer, I'll default to a more modern US Army saying that is applicable for most investors: simply "Embrace the Suck". Options are limited.
Comments
I think the first few CEOs that quit the WH council did the right thing based on principle -- certainly the Merck CEO. Those that did it later in the week as the furor built seemed to be doing what they thought looked good on them and their companies, but to me it came across as a series of too-late "me too!" actions.
Big-picture wise, CEOs are looking out for their companies' reputations with customers and shareholders along with their profitability in the marketplace -- in turn, that would help deliver on the campaign slogan you cited. If they do that correctly they don't need to associate with consistently controversial figures and run the risk of being tarred in the public eye as a result, which could endanger their reputations and financial health.
That said, regardless of who's in the Oval Office, such executive advisory councils rarely provide anything more than high-profile photo-ops for all involved while allowing everyone in the room -- and especially the president -- to say "we're addressing the concern-du-jour" while not leading to many if any actual policy initiatives or tangible results that can support the aforementioned campaign cry. I've seen this kind of cycle repeatedly on technology policy items since the late '90s, which is my area of expertise.
IMO, I think those who led the CEO exodus did the right thing.
https://cbpp.org/research/federal-tax/actual-us-corporate-tax-rates-are-in-line-with-comparable-countries
I agree with rforno. There was hope of reducing regulations that would increase corporate earning (and bonus).
https://gao.gov/products/GAO-16-363
From the GAO's summary:
http://www.latimes.com/business/technology/la-fi-trump-ceo-defections-20170816-htmlstory.html
"Leaders of consumer brands expressed concern about how their images could be tarnished ... The increased activism among CEOs could reflect well on the companies, as a generation of consumers emerges that cares more about corporate values than their predecessors."
The me-toos were not leading so much as making calculated business decisions.
Note also that tax cuts, which (along with reduced regulations) seem to me what the CEOs were most interested in, do not constitute tax reform. Here's a lighthearted but informative column (not news article) in Forbes about that:
Tax Reform For Dummies: 2017 Edition
Tax reform is a "nice to have", not a necessity. (The last real tax reform was in 1986.) The immediate need is for an increase in the debt ceiling. The disbanding of advisory councils will have no effect on that.
they haveTrump has done and I'm thinkingtheyTrump did let us down making tax reform harder.I believe "they" followed a moral compass which is much more valuable than a little extra money in our pockets.
investopedia.com/articles/taxes/120616/trumps-tax-plan-would-hit-single-parents-hardest.asp
As representatives of specific companies, they have an obligation to do no harm to those companies. As individuals, they have an obligation to disassociate themselves from political or ethical circumstances with which they may strongly disagree.
Given the current state of affairs, they may have judged that their input would be given little weight, and ultimately that they would be merely used as tools by the administration. And of course some probably didn't have a major problem with the setup, but just cut and ran for cover when the dishes started flying.
I don't think that one size fits all on this one.
This is a damn difficult question that has no single simple answer. I agree with Old Joe. It depends on the specific circumstances of each individual investor.
So, regardless of anyone else's answer, I'll default to a more modern US Army saying that is applicable for most investors: simply "Embrace the Suck". Options are limited.
Best Wishes
Thanks to all who made comment. Notice the different perspectives. Indeed, tough times appear ahead "Embrace the Suck" as MJG writes.
Skeet