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Patricia McGuire

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Conscience at the Apple Core?

Posted: 05/10/2012 2:49 pm

Like millions of Americans, over the course of a few weekends earlier this year, I spent some quality time with my good friend TurboTax and a box of receipts as I went through the annual ritual of rendering to Caesar. I do believe that paying taxes is the price we pay for living in the greatest country on earth, but I sure don't want to leave a good deduction sitting on the table. I had some extraordinary medical expenses last year due to a family illness, so this tax season had me parsing IRS Publication 502 for medical deductions.

Silly me. While I was busy trying to find last July's receipts for a few dollars' worth of Rite Aid medical supplies, the wealthiest corporation on the face of the earth -- Apple, Inc. -- was busy stashing its copious cash in various locations where the taxman never cometh, like Ireland and Amsterdam, avoiding billions of dollars in taxes while the rest of us wrote checks to help Uncle Sam meet payroll.

Who knew that Apple was having its very own tea party out there in Silicon Valley where it has a lovely home even while its money is carefully sheltered nearby in tax-free Nevada?

"How Apple Sidesteps Billions in Taxes" is the New York Times story that dishes all the news we wish we didn't know about Apple's perfectly legal tax accounting practices. Some people may hail this news as the ultimate example of the '60s counterculture finally "getting it" about capitalism. Others shake our heads at the wicked irony of all the Occupiers lulled to sleep in their tents with soothing iTunes on their iPods while their iPads provide some light in the darkness. Better they should occupy One Infinite Loop in Cupertino.

In Walter Isaacson's brutal biography of Steve Jobs, he portrays a brilliant-but-flawed man-child whose extraordinary narcissism made him virtually incapable of empathy, which is the ability to understand the plight of others. In Jobs' bubble, his was the only plight or idea or opinion worth contemplating, and he did that exceptionally well all the time. The very idea that he might help another person -- even his own child --- seemed an annoying interruption or even an outrageous assault on his self-concept. Charity is a word that's hard to find in the Jobs' biography, a concept that requires a modicum of empathy.

If a corporation can mirror its human founder, Apple probably does that better than almost any other. Sure, corporate history is replete with the exploits of ego among the Carnegies, Mellons, Rockefellers, Fords, J.P. Morgans and other titans of industries that were the backbone of the American economy, creators of the financial strength that made the American Century possible.

Those colossal personalities of the late 19th and early 20th centuries also understood the power of their enormous wealth and social standing to transform more than their own bank accounts. The pillars of American philanthropy --- the foundations with names like Carnegie, Rockefeller, Mellon, Ford, Kresge, Kellogg and others --- emerged from the wealth of the barons of America's industrial age. With their wealth, they built art museums, universities and libraries, funded the transformation of campuses and laboratories and the essential work of research scientists. American higher education could not have become the intellectual powerhouse of the world were it not for the generosity and vision of the industrial philanthropists.

Technology is to the 21st century what the oil, railroad and banking industries were to the last two centuries, and the phenomenal amounts of money even yet to be made in the tech sector ($95 billion for the Facebook IPO?) make old John D. Rockefeller look middle class.

Some of the early technology leaders followed the industrialists by establishing renowned philanthropies. William Hewlett and David Packard founded Hewlett-Packard and left strong foundations in their respective names. America Online's Steve Case and other AOL executives created several eponymous foundations with their wealth.

With a few exceptions, however, the more recent 21st Century titans of technology have yet to establish the durable, institution-building, community-changing philanthropies that were the true legacy of the great corporate names of the industrial age.

The most notable exception is Bill Gates, founder of Microsoft, Steve Jobs' rival for primacy in the tech age. Having become the world's wealthiest person at a very young age, Gates decided to devote his considerable wealth and the majority of his time to transformative philanthropy. The Bill and Melinda Gates Foundation today is worth $37 billion, larger than the combined assets of the Ford, Kellogg, Mellon, Rockefeller and Kresge Foundations. Gates is using his wealth for the most urgent causes of our time: transformation of public education; global development and relief of poverty; eradication of tropical diseases and immunization of children.

By contrast, Steve Jobs had no apparent interest in philanthropy, and Apple, Inc. has a modest track record, at best, for charitable giving.

Does the most profitable company in the world have a conscience? By any standard of corporate social responsibility, Apple needs to do better, not only because of its own wealth, but also because Apple is the leader of a tech industry that, collectively, needs to do more to carry its fair share of social investment. According to the New York Times article that revealed Apple's tax avoidance practices, the tech sector generally pays less tax than other sectors, a phenomenon that reflects the fact that Congress devised the tax code for the railroad and oil barons whose industries were fixed by time and place and tangible products, unlike the virtual goods of the technology age. Just because the tax code allows today's tech companies to avoid taxes does not exonerate them from acting in socially responsible ways for the good of their communities.

Apple's tax shelters may be legal, but the loss of so much public revenue is unconscionable at a time of acute public need. Schools and public universities in Apple's home state (California) and across the nation are in serious trouble because of state budget cuts; countless social service agencies are in crisis because traditional philanthropies have had to cut-back and refocus grants as a result of the recession. Failing to pay its fair share of state and federal taxes in these hard economic times seems a particularly selfish, even cruel posture for such a wealthy company. Apple could make a tremendous impact for good by voluntarily reinvesting some of its profits in the most critical social needs of the community.

Apple could demonstrate that there really is a conscience at the core of the company by establishing a great foundation and challenging Google, Amazon, Facebook and the other phenoms of the digital age to follow suit. Such foundations would be far more socially useful tax shelters than the overseas accounts; tax benefits would still accrue while the earnings from investments helped important charitable causes. The companies would gain the added benefit of public acclaim for demonstrating at least some evidence of social conscience. The collective wealth of these companies, channeled through major foundations, could be at least as transformative as the philanthropies of the industrial age, if not more so because of the vast wealth available in the tech sector today.

Apple can keep stashing its cash in tax-free places as it builds the Apple brand, of course, that's its choice in this free society. Or, this company that aspires to greatness can demonstrate its real worth by helping to rebuild the American brand through the more socially responsible investment of its large profits in the future of this nation.

 

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