Posts tagged ‘corporate culture’

June 20, 2013

The double bind of sexism

Sexism is a cultural challenge that is entrenched in many Australian businesses. It is completely counterproductive, as many businesses are currently struggling to attract and retain talented people in a very competitive market.

Women outnumber men in Australia and have high workforce participation rates. The Australian Bureau of Statistics regularly calculates the sex ratio – which measures how many males there are per 100 females. In the most recent reporting period, Sydney and Melbourne’s wealthiest urban areas were shown to have some of the country’s highest proportions of women – with 94 men for every 100 women in North Sydney and Melbourne’s inner south.

Sexism can be overt behaviour by individuals, or embedded in the cultural assumptions and work practices of a business. Whether or not you directly spot it occurring in a workplace, you can certainly measure the outcomes it produces.

2012 Australian Census of Women in Leadership

2012 Australian Census of Women in Leadership
Female Executives within ASX 500 companies

The 2012 Australian Census of Women in Leadership report shows that a mere 9.2% of key management executives at ASX500 companies are women. This compares with 14% for US Fortune 500 companies, and 19% for companies in the New Zealand NZSX100. The ASX500 companies with the highest proportions of female executives are in pharmaceuticals, telecommunications, retail, and transport.

The disparity in achievement within the public sector is striking, with women comprising 35% of all directors across government boards at a federal level. 56% of ASX500 companies have no women at all on their board of directors, and 63% of ASX500 companies do not have any women in key executive roles.

It is quite clear that few Australian businesses are seriously addressing the sexism embedded in their workplace cultures.

One of the most interesting recent academic reports into the underlying factors causing the gender “glass ceiling” was published by Terrance Fitzsimmons from the University of Queensland Business School, titled “Do Australia’s top male and female CEOs differ in how they made it to the top?”. Drawing upon the results of a large number of previous academic studies, Fitzsimmons outlines the “double bind”, a core dilemma faced by female leaders who make it to a position of power.

In a nutshell, female leaders are viewed negatively by their direct reports when they are consultative, and also when they are assertive. In contrast, male leaders are perceived as more competent when exhibiting exactly the same behaviours. These perceptions can be seen played out in the daily media reporting of the federal election battle between Julia Gillard and Tony Abbott.

In response to the failure of the business community to improve female participation at leadership levels, some commentators have started openly demanding legally enforceable gender quotas for businesses. While binding targets are not likely to be introduced by any Australian government in the short term, the federal government have introduced several measures to combat workplace sexism and gender discrimination, with the most noticeable being the Workplace Gender Equality Act 2012. The main thrust of this federal legislation is to promote transparency, equal opportunity and equal pay in the workplace.

Workplace culture has a very significant effect on employee productivity, innovation, and retention. The entire organisation can greatly benefit from a culture that is more cohesive, flexible, and diverse. It is also crucial to remember that women are not the only people facing discrimination when applying for promotions within a business. People with disabilities, members of the LGBTI and Indigenous communities, and even older workers face very serious prejudice in recruitment processes.

Workforce recruitment and retention programs within many ASX500 companies are clearly failing. Business leaders need to lead by example, immediately speak out against sexism when it occurs, and take personal steps to ensure they hire, mentor, and promote a diverse range of people within their teams.

May 22, 2013

Homeless multinationals and taxing decisions

The digital economy has generated many changes in how we shop, stay in touch with friends, and manage our daily routines. Despite this, it seems that politicians around the world are only just starting to realise that the digital world has truly changed the economy.

The recent Australian federal budget was the usual mix of promises and projections. One of the more interesting facts presented was the Treasury estimate that since the 2008/2009 budget, federal government revenues from tax receipts have fallen by $170 billion dollars.

When it comes to tax revenue and government budgets, there will always be some level of political debate. It is now pretty obvious that traditional sources of government revenue are now insufficient, even when the Australian economy is powering ahead strongly. Particularly when you look at the backlog of infrastructure investments needed to keep the economy productive.

Painting by Carl Barks

Painting by Carl Barks

Whichever politicians end up running the country after the September federal election, there will be some very tough decisions to make on taxation.

In an interesting coincidence, the announcement of the shortfall in tax revenue has coincided with Treasury bureaucrats kicking off consultations regarding the tax treatment of multinationals doing business with Australians.

At first blush, the multinational taxation consultation process seems to be a rather belated reaction to major political rumblings aired in the G20 and OECD. The issue that is generating the angst is “base erosion and profit shifting” (BEPS), a rather dull way of saying tax avoidance.

BEPS is seen as a global issue worthy of the attention of the G20 for one simple reason – it is entirely legal, and can be used to avoid almost all corporate income taxes.

Businesses that are able to transact with clients online across international borders are the most likely to be able to profit from BEPS, but it is certainly not the only way corporate leaders minimise tax bills.

The UK parliament has recently been examining in minute detail how Google’s internal employee workflows have been structured to shift the legal location of a business transaction. The inquiry heard that despite employees, clients, and work occurring in the UK, Google has successfully claimed that business transactions are legally based in a foreign country.

Amazon has also recently received a huge amount of negative media attention for their UK tax affairs, which seem at face value to be far less adventurous than Google’s. Amazon is reported to have paid just £2.4m in UK corporate taxes last year on sales of £4.3b, while also receiving £2.5m in UK government grants.

But the biggest revelations to date have been thrown up by the US Senate, which recently grilled Apple CEO Tim Cook. The inquiry heard claims that a single Apple owned entity reported profits of USD $30 billion between 2009 and 2012, with no country receiving any tax on that income. Another separate Apple entity managed to pay a tax rate of 0.05% on $22 billion in revenue for 2011.

Perhaps the most important revelation has been that major entities used by Apple to conduct their worldwide business were described as “homeless” for tax purposes, with no country able to collect tax on their corporate income. This “homeless” status undermines some of the most fundamental principles underpinning the international tax and trade treaties relied upon by OECD and G20 nations.

Now business leaders are of course supposed to focus their attention on generating profits and pleasing shareholders. Minimising corporate tax bills can be an effective way to boost cash flows, profits and shareholder returns.

CEO bonuses usually depend entirely on achieving profitability targets and increasing shareholder returns. So it should be obvious that corporate leaders will structure business workflows and organisational design to maximise their bonus.

The result can be bizarre workflows spanning multiple international corporate entities and legal jurisdictions. When tax considerations trump customer service in decision making, it can make high quality customer service very difficult to deliver, and consumer rights unclear. In this digital age, corporate reputations can be quickly tarnished, and very expensive to repair. It has never been easier for the public to learn the financial affairs of large corporations.

Multinationals usually base major operational centres in locations which offer high quality infrastructure and workforces, all of which depend on a stable social environment with sophisticated government services.

If there is no government funding for infrastructure, crime prevention, education, or healthcare, then someone else will end up paying the price. There is a very good reason why there are so few successful multinationals headquartered in third world countries.

While BEPS is currently attracting media scrutiny, it remains to be seen how much impact that attention will have on actual corporate behaviour. While executive KPIs reward elaborate tax avoidance strategies, there will be little chance of corporate driven change.

On the other hand, politicians can always change the rules of the tax game. The international scale of the BEPS problem is already monumental, and politicians of all stripes are going to need corporate scapegoats to deflect inevitable community anger. Now is the time for corporate leaders to rebalance the risks they are taking with their tax affairs.

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