In a recent paper titled “Rich corporations, poor societies: The financialisation of Apple”, the Centre for Research on Multinational Corporations (SOMO) and the Good Electronics Network have published their observations on the financialisation route that an increasing number of large electronic goods corporations are taking, and the adverse societal impact this can have while not proving sustainable for the companies themselves.
Although the paper takes Apple as its main subject of study, its observations are broad encompassing and possibly apply to many other tech giants such as Google or Amazon.
It notes how Apple is increasingly investing into financial structures for fiscal optimization rather than into tangible research and product manufacture, as a way to inflate its value for shareholders while being detrimental to the societies in which the company operates.
"An exclusive shareholder value-orientation typically comes at the expense of other stakeholders in the corporation and wider society, including workers, governments, citizens, the environment, and so forth", write the authors as a general remark, adding that "corporate profit-making increasingly occurs via financial channels, rather than through productive capacities".
The authors list some of the typical financialisation trends found in our industry, including offshoring production to low-wage countries to minimize costs and setting up Irish operations to offshore a company's 'paper trails' or aggregated revenues, that is, evading largely taxation in the countries it operates by negotiating near-zero tax rates with the Irish authorities.
They then recall how Apple's offshore affiliates exploited the difference between Irish and U.S. tax residency rules to not pay any corporate income tax to any national government on an income of USD 74 billion accumulated over the period 2009-2012.
Apple's cash pool has soared from USD 76 billion in 2011 to USD 194 billion early 2015, but this pile of cash remains pretty much locked up overseas to avoid a tax bill in the US, hence turning not so profitable to anyone.
More financial engineering comes to the rescue, through borrowing to pay out dividends to avid shareholders, seeing Apple morph into a financial enterprise managing its assets rather than making constructive and productive investments for the societies whose infrastructures it benefits from.
In their conclusion, the authors call governments to change the rules so as to curb fiscal evasion, making corporations pay their fair share in taxes, pay decent wages and invest their cash reserves in productive rather than financial assets.
Download the full paper at: http://goodelectronics.org/publications-en/Publication_4246/
Visit the GoodElectronics Network at http://goodelectronics.org/about
Visit the Centre for Research on Multinational Corporations (SOMO) at www.somo.nl
Article originally posted on EE Times Europe.