This article is about Caterpillar and how they used their offshore subsidiaries to avoid U.S. taxes. It was said that between 2000 and 2009, the company saved about $2 billion. Daniel Schlicksup, tax strategy manager at Caterpillar from 2005 to 2008, filed a lawsuit against the company in 2009. He claims that Caterpillar moved his job to one that has less promotional opportunities because he brought up the fact that the structure in Switzerland does not follow the tax rules in the U.S. The job that he was moved to he knew nothing about, was paid less, and there was a smaller bonus. He wants to get his old job back, prevent any further retaliation from the company, and seeks stock options that were wrongly withheld from him.
The company’s spokesman, Jim Dugan, said that Caterpillar has not broken any laws and that Schlicksup’s move was not a demotion. He stated that “Caterpillar complies with applicable tax laws and regulations.” It has been shown that Caterpillar’s effective tax rate is 26%; 35% being the top federal corporate income tax rate. Caterpillar has also stated that they “pay more tax to Switzerland and less tax to the United States than it would have without” the strategy.
“Schlicksup’s lawsuit, which is in the evidence-gathering phase, alleges that the Swiss structure is improper because it has no legitimate business purpose beyond cutting Caterpillar’s U.S. tax bills.” In September of 2008, Schlicksup boss, CIO John Heller, drafted an agreement stating that Schlicksups would “stop accusing Caterpillar of any “unlawful, unethical or improper conduct”. To this day, Schlicksup still remains employed at Caterpillar and ended up receiving a raise of $14,292. There is now a trial date set for January 16, 2012.
This is a great example of unethical leadership for two reasons. First, at this point, Caterpillar can be seen as making their decisions based on ethical egoism. This is because the decisions were made to have offshore sites to minimize their taxes by $2 billion had their own selfish interests in mind. The company made the decisions with the mindset of maximizing profit by minimizing taxes in the U.S. The leaders at Caterpillar are also being dishonest. It seems that Caterpillar has offshore sites to reduce taxes, not to maximize profits through that site. If they were being honest about their procedures, they would not be in the lawsuit that they are in right now.
A few questions for thought and discussion:
· -Do you think that what Caterpillar is doing is unethical?
· -Do you think it was fair to “demote” Schlicksup?
· -Why do you think people customarily punish whistleblowers instead of rewarding them for bring unethical behavior to others’ attention?
-Danielle Huff
-Danielle Huff
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ReplyDeleteI would have to agree that Caterpillar is making decisions based on ethical egoism and it is unethical. They were acting in the company's self interest and didn't care if they were breaking the law. I am not sure if they are breaking the law or not since the trial hasn't concluded yet but it does seem kind of "fishy" that they have an offshore bank account in Switzerland. I don't see why Caterpillar can't keep all of their money here in the U.S. where it can be regulated by the government as it should be. They are said that they saved almost 2 billions dollars in taxes over the years, so if that is true then they are acting unethically.
ReplyDeleteI don't think it was fair to "demote" Schilcksup because he was only bringing attention to the company that they might be breaking the law. If the company didn't know they were breaking a law, Schilcksup would have gotten a promotion and been thanked by the company that a legal suit didn't come against them. Caterpillar obviously knew that they were breaking the law when Schilcksup informed them so they had to demote him so they could keep him quiet. Caterpillar had to know they were in the wrong here since in the end they gave Schilcksup a raise and he is still working there. Most whistleblowers lose their job very quickly.
I think that people get punished for whistleblowing because the people who are doing the unlawful acts know that they are wrong. Since they know they are doing something wrong they can't have one of their employees also knowing that their company is doing illegal business. Whistleblowing is not good for a company and the way CEOs and owners of companies fix the problem is by firing or punishing these people. It is wrong that this is how our society works but there is nothing that can be done.
-Daniel Itami
Danielle,
ReplyDeleteI do believe that Caterpillar’s decision to follow the Swiss structure had no purpose other than to maximize their profits and avoid U.S. law. I also believe that Caterpillar’s decision to demote Daniel was a direct retaliatory move and would not have occurred if he did not speak up about the unethical manner in which Caterpillar was doing business in. Daniel has good reason to sue the company because of this and bring light to the way they are conducting business. Caterpillar is a strong U.S. company and the fact that they are operating in Switzerland just to save on taxes shows that they do conduct their business in an ethically egotistical way. I think that punishing whistleblowers is common because businesses hold profit at a higher weight than doing the “right thing” sometimes.
Faith Gephart Elmore
I would have to agree with all of you about how Caterpillar is conducting in unethical business. They had a person, Schlicksup, who picked up on that Caterpillar was indeed cheating the tax system so they tried to "shut him up" by offering him a deal. He could have saved Caterpillar but now this lawsuit is being conducted and he may have screwed himself over because none of this was reported earlier and he did not quit. Caterpillar was to worried with filling their pockets. I feel that greed is always the underlying factor for unethical practices and leadership.
ReplyDelete-Dave Harbeck