The beginning of a New Year usually finds millions of people both evaluating the year that has passed into history and pondering what awaits them around the corner.This includes revisiting old resolutions and revising appropriate benchmarks for the year ahead.
In the stock exchange Dow Jones and the S&P 500 finished the year in pretty much the same place as they started with more than a few high and low points during the 12 month trip, while monthly job reports and quarterly earnings reports served only to reinforce what most people already sensed in their gut. Stories about unemployment, deferred retirements, decreased retirement benefits and family members being forced to double up in their homes all served to confirm the daily news headlines.
The European debt crisis and the near meltdown of the Eurozone produced head of state and central banker summits on almost a weekly basis and their inconclusive results served to usher in a New Year full of anxiety. Strained relationships within the E.U. itself were accompanied by a lack of congruence between the reforms, regulations and prescriptions that London, Brussels and Washington were proposing.
Faith-based investors begin the year closely following the topics already mentioned above in view of the role that corporations, and particularly the financial services sector companies, continue to play in the midst of this post crisis malaise. They remain concerned about the lack of return on investments that they and their membership have come to rely on and the downbeat forecasted returns that professional have outlined for the coming year.
These concerns have also trained a spotlight on a debate about sustainability, growth and workings of the free market capitalist system, an issue that has surfaced frequently in the Republican Party primary selection process. Are the kinds of returns and profitability that investors have integrated into the financial planning a thing of the past? Can the environment survive the numerous assaults that the prevailing business and financial models demand? Are their teachings and principles that the faith communities need to revisit and recover in the midst of this sustained and anxiety ridden period of crisis.
Many of these truths are rooted in most religious traditions and found among the tenets of some political and social traditions. The common bond that unites us in society and the commitments that we make to one another as neighbors, citizens and members of the human family are foundational. The authority and responsibility that is entrusted to governments to protect the environment and to regulate and monitor commercial and financial activity is also common. There is also a consensus about the responsibility of society to care for the weak, the downtrodden and the poor.
The social responsibility of corporations that rely on numerous public resources and services to operate their businesses and maintain their profitability is one of the core tenets of faith based and socially responsible investors. This includes their responsibly to contribute their fare share to the public coffers that enable governments to develop the foundation and provide the services that corporations and all citizens count on to survive.
As 2012 begins, the debate about the debt ceiling and taxes continues in the U.S., while the austerity policies that many European countries have adopted begin to have an impact. The fabric of the trust and social bonds that hold societies together in the midst of such a challenging climate will often be tested.
So too will the responsibility of multinational and global corporations. As they operate in numerous jurisdictions, either sourcing raw materials or products, selling goods or providing services, they have responsibility to pay taxes in each of these places. That responsibility especially includes the country where the company has it's corporate headquarters.
In recent years the U.S. government has offered various tax amnesty schemes whereby corporations and individuals can pay their delinquent tax responsibilities and repatriate any profits that are being held overseas. They have also embarked on a new series of agreements with jurisdictions like Switzerland to address issues of bank secrecy, numbered accounts and accurate disclosure of ownership. Proposals in the U.S. Congress for repatriation tax holidays whereby corporations are allowed to repatriate profits at a substantially reduced tax rate under certain conditions, will continue to be discussed during 2012.
Shareholders, and especially faith based and socially responsible investors, will need to consider how to engage companies that are identified as the most aggressive in developing legal strategies to either avoid or evade the payment of approved taxes. The use of such tools and action that are clearly designed to profit by avoiding responsibility to contribute appropriately to the revenue streams, that are essential to the fulfillment of the government's mandate to safeguard the public welfare and protect the common good, deserves much closer evaluation and scrutiny.