XIAM007

Saturday, 17 April 2010

Back in February, I wondered if Apple (AAPL) might be the next Nike(NKE) because of labor problems reported at one of its big manufacturing contractors. At the time I mentioned that other high tech firms could find themselves in hot water because of what overseas factories did in their names. Two months later and it’s happened, this time to Microsoft(MSFT). High tech companies need to wake up to a PR and ethical issue that’s waiting to engulf them.

If accurate, the report by the National Labor Committee, which bills itself as a human rights advocacy group that focused on global labor abuse, is far more damning than the information that surfaced about Foxconn, which builds many products for Apple. (Apple also issued its own comprehensive report about a greater number of its suppliers.)

The list of alleged abuses at the contractor KYE — which claimsbetween 3,600 and 4,500 employees in China, depending on seasonal need — is long and damning:

workers reporting working 68 hours a week despite being at the factory for 83 hours
16- and 17-year-old students hired under the guise of work study who are put on the factory floor for 15 hours a day, six or seven days a week
workers are unable to use the bathroom during working hours
security guards that sexually harass women workers
forced living in “primitive and dirty dorm rooms,” and workers must take sponge baths rather than showers
violation of all Chinese labor laws

If true, this all put the lie to the company slogan of “Integrity Is the Best Honor.” Customers supposedly include Microsoft, HP (HPQ),Best Buy (BBY), Logitech (LOGI), and, ironically, Foxconn. Equally disturbing is the note that corporate codes of conduct “have zero impact” on KYE’s operations.

I’m not going to argue whether this report is accurate or not. The fact that something like this might be accurate should send chills down corporate spines. Monitoring conditions in a foreign factory takes dedication and significant cost and effort. The only way to know what’s really happening is to spend extensive time in a facility so management could not cover up conditions during a brief visit. A company that wants to be responsible clearly needs its own people in a facility to monitor on a continuing basis what actually happens.

But many industries, high tech clearly among them, have been happy with feelgood solutions: the annual visit and corporate labor standards for contract help. Apple’s program goes much further than those of most companies, and the company still hasn’t eliminated its problems. To avoid the embarrassment — and potential government oversight, as the political climate becomes less tolerant of sending jobs overseas — companies will have to move even more strongly. But you have to wonder whether the lure of cheap labor and the cold comfort of not knowing exactly what goes on in a factory won’t continue to win out.

GE had plenty of earnings last year - but when push came to shove, the company owed the U.S. a whopping tax bill of $0 -

General Electric filed more than 7,000 income tax returns in hundreds of global jurisdictions last year, but when push came to shove, the company owed the U.S. government a whopping bill of $0.

How'd it pull off that trick? By losing lots of money.

GE had plenty of earnings last year -- just not in the United States. For tax purposes, the company's U.S. operations lost $408 million, while its international businesses netted a $10.8 billion profit.

That left GE (GE, Fortune 500) with no U.S. profit left for Uncle Sam to tax. Corporations typically face a 35% federal income tax on their earnings. Thanks to its deductions and adjustments, GE reported an actual U.S. federal income tax rate of negative 10.5%. It got to add a "tax benefit" of $1.1 billion back into its reported earnings.

"This is the first time in at least decades that GE has reported negative U.S. pretax income and it reflects the worst economy since the Great Depression," Anne Eisele, GE's director of financial communications, said via e-mail.

But what about the $10.8 billion profit overseas? GE is "indefinitely" deferring income tax payments on those profits, Eisele said.

It may seem like accounting magic, but it's completely legit.

GE isn't the only "Top 5" company on this year's Fortune 500 list that owed no income taxes. Bank of America (BAC, Fortune 500), which suffered major losses in 2009, included a tax benefit of $1.9 billion in its annual profit.

"That's one way of escaping taxes," said Scott Hodge, president of the Tax Foundation. "Companies get to deduct their losses, so if there's no earnings, then they pay no income tax."

But GE isn't exactly escaping all tax-related pain: The company paid almost $23 billion in taxes to governments around the world from 2000 to 2009, Eisele said.

Plus, paying the accountants to crank out 7,000 tax returns can't be cheap.

And then there's all the lawyers needed to defend those returns. GE filed tax paperwork in more than 250 jurisdictions around the world last year. "We are under examination or engaged in tax litigation in many of these jurisdictions," the company dryly notes in its annual report.

GE may not owe the IRS, but it still has to file -- and its filings are epic.

In 2006, as the IRS ramped up its corporate e-filing program, the tax agency actually issued a celebratory press release when it processed GE's tax return. On paper, the return -- the nation's largest -- would have totaled a massive 24,000 pages. But instead, the IRS was able to upload the 237 MB document in under an hour.

Reading it, though, is apparently taking a bit longer. The IRS is currently auditing GE's tax returns for 2003-2007.

Saturday, 17 April 2010

South Park's 200th, litigious celebs and Mohammed: Matt Stone and Trey Parker Video -

Al Sharpton Claims American Public Voted for Socialism When Electing Obama

Microsoft's Chinese Labor Scandal - list of alleged abuses in China is long and damning -

GE had plenty of earnings last year - but when push came to shove, the company owed the U.S. a whopping tax bill of $0 -