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CEO Daily Brief – Feb. 16, 2011

A Case for Lowering Corporate Tax Rates President Obama is looking to change corporate taxes. In a recent commentary in …

A Case for Lowering Corporate Tax Rates

President Obama is looking to change corporate taxes. In a recent commentary in The Wall Street Journal, economist Martin Feldstein notes that while Obama has talked about lowering corporate tax rates and improving “the treatment of profits earned abroad by American companies” he seems to have a focus on eliminating "loopholes."

Feldstein says that the federal U.S. corporate tax rate is 35%. It increases to 39% when the average state corporate tax is added in. Feldstein says compare that to the average rate in other nations in the Organization for Economic Cooperation and Development (OECD) – which works out to 25%.

Even if every loophole were eliminated, the Office of Management and Budget said it would lead to generating lower than $60 billion in 2011. That would decrease the federal-state corporate rate to 35%. That percentage still puts the U.S rate 10 percentage points higher than the average in other industrial OECD countries, Feldstein said.

High corporate rates lead to uses of capital that do not lead to increased productivity or real wage increases, says Feldstein. High tax rates lead companies to use too much debt for financing, he argues.

Higher corporate taxes also lead U.S. companies to locate their facilities overseas and cause foreign companies to avoid locating in the United States, he said.

Higher corporate taxes lead to higher prices on products – making them less competitive in the global marketplace, he adds.

Feldstein concludes that negative impact from corporate taxes can be lessened if the rates mirror those in other industrialized nations. It would lead to more capital flowing to the United States and increased productivity, he said. That would lead to new revenue which would counter the revenue lost by a lower corporate tax rate, he adds.

For more from Martin Feldstein about corporate taxes, as reported by The Wall Street Journal, please click here.


Why Hold Conversations Instead of Meetings

Tony Golsby-Smith, the founder and CEO of 2nd Road, said a good way to encourage thinking is to have conversations rather than typical business meetings. Meetings are formal. They have PowerPoint presentations filled with data. Real issues are often ignored. The focus is on nit-picking and criticism. He says that:

  • Conversations are informal. Discussion goes from one topic to next. Conversations have spontaneity and are interesting.
  • Conversations do not follow agendas. Participants look at issues, come up with solutions, and get through “messy circumstances.”
  •  During a conversation the process is democratic. Participants work together to work out solutions or come up with ideas.

In the next conversation among employees, here are a couple of suggestions from Golsby-Smith to make it more useful:

  • Have new employees take part. They can be from across the organization and include those lower in the business hierarchy — such as younger employees.
  • Focus on questions rather than an agenda. Focus on questions “that don't have easy, right/wrong, yes/no answers, and that ask for positive rather than negative or critical responses.”
  • Work in smaller clusters rather than around a conference table.
  • Use a white board to present ideas found in a conversation.

For more about holding conversations rather than meetings, as reported by the Harvard Business Review, please click here.


Handling Employee Activism

Much of the world came to respect Wael Ghonim, a Google manager who helped to organize the revolt in Egypt. Ghonim helped to manage Web pages that let activists communicate and stay informed, using his company’s product.

But many U.S. companies would have been concerned about such employee activism. Companies don't want to alienate host governments. Controversy is often best avoided.

Google may be different than other companies. The employee used the product to show its potential on a global scale. And Google co-founder, Sergey Brin, has stopped operations in some locations because the government was censoring searches.

Ghonim was acting as an individual not for Google. Not every country is like the United States, where a company can't prevent an individual from pursuing his/her personal interests.

Human rights activism has been kept a distance away by many U.S. companies working in foreign countries. It’s OK to help in education. If anything, they say lead by example. Run a company based on meritocracy. Have local leaders and employees watch and learn.

In the case of Egypt, there were some unique circumstances where the efforts by a Google employee worked well. It also fit with the corporate mission.

For more about employee activism overseas, as reported by The Wall Street Journal, please click here. 

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