|
|
|
A Timely Volte Face
|
Business New Haven
8/5/2002
By: BNH
|
Timing was everything for the top dogs at the New Britain-based Stanley Works, the toolmaker.
In May the company announced a plan to reincorporate in Bermuda, a move Stanley Works executives said could save it some $30 million annually in U.S. taxes.
By incorporating in Bermuda, Stanley calculated that it would no longer have to bring profits from its foreign subsidiaries into the United States, where those profits would be subject to taxation. Even after the move, however, the company would have continued to pay U.S. taxes on profits generated by American operations.
As the Enron and Worldcom scandals placed corporate behavior under a microscope, the Stanley Works announcement drew heavy fire almost immediately.
On July 30, state Treasurer Denise L. Nappier sent letters to Stanley directors asking them to convene a special meeting to reconsider the Bermuda move. The following day, the AFL-CIO staged a rally in Boston at the headquarters of Fidelity Investments, the nation's largest mutual-fund firm and second-largest Stanley shareholder. The union has made Stanley's reincorporation plan the centerpiece of its “No More Business as Usual” corporate responsibility campaign.
Meanwhile, the U.S. Senate, in a July 31 voice vote, approved a ban on U.S. Department of Defense contracts with companies that move their headquarters to tax havens. Even President George W. Bush, whom Democrats flay as a handmaiden of Big Business, weighed in on the issue, saying, “I think American companies ought to pay taxes and be good citizens.”
For a company that generates some $2.6 billion in annual sales, $30 million is not a great deal of money. And although it's difficult to quantify, Stanley Works probably had far more than $30 million in damage done to its reputation as it was portrayed as the latest poster boy for corporate greed and irresponsibility. Worse, the move was viewed as simply unpatriotic.
Once in a blue moon, public pressure actually works, and in a special meeting August 1, Stanley Works directors reversed their decision and voted to scrap the Bermuda reincorporation plan.
CEO John Trani was candid in acknowledging that his company was influenced by the pressure from legislators and the public. He also expressed optimism that Congress would enact comprehensive tax reform to reduce or eliminate the tax inequities that place American companies at a disadvantage to foreign competitors - “leveling the playing field,” as he put it, for companies like the Stanley Works.
“We have honored their request,” said Trani, “and the ball is now in their court. We sincerely hope that Congress will agree to a solution.”
What's best for Connecticut can also be best for the Stanley Works.
|
Go FirstGo PreviousGo
NextGo LastGo
to Index
|
|
