Many Americans see no redeeming value in the current presidential campaign. But almost in spite of itself, this race has usefully brought certain issues into sharper focus.
An example that’s highly relevant to business: the matter of “fiduciary responsibility.”
When the New York Times disclosed Donald Trump reported a $916 million loss in the mid-1990s that could allow him to avoid paying personal income taxes for nearly 20 years, the Republican nominee’s campaign responded that he had “a fiduciary responsibility to his business, his family and his employees to pay no more tax than legally required.”
The problem with this rationale, as numerous observers pointed out, is that fiduciary responsibility does not apply to oneself. Paying as little personal income tax as possible is a choice, not a duty.
Fiduciary responsibility does exist in business. It is a legal obligation to act in the best interest of others—most commonly, management working on behalf of shareholders. But that does not mean companies always must put reducing their taxes above all else.
In a Times op-ed, Norman Eisen and Richard W. Painter—who served as ethics counsel to President Barack Obama and former President George W. Bush—wrote that “even in large public companies, the argument that there is a fiduciary duty to shareholders to structure deals to minimize taxes is false. … The law does not require corporate officers and directors to avoid taxes, much less to aggressively take advantage of strategies to eliminate them for years to come.”
Fortunately, many companies understand this.These firms realize their own interests are advanced by serving not just shareholders but also employees and the communities in which they operate. In Rochester, Wegmans Food Markets Inc. and others exemplify this principle.
Responsible businesses pay their fair share of taxes to support common needs such as education and infrastructure. Defining a “fair” tax burden can be tricky, but for a profitable enterprise, it ought to be more than zero.
10/14/2016 (c) 2016 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email firstname.lastname@example.org.