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Archive for November, 2012

The industrial revolution brought us our current model for capitalism, and it has served us relatively well for over a century. Yes, the system has had its flaws, yet somehow we have always managed to recover.

But the parameters have changed for the 21st century. From Reagonomics through the Bush era we’ve received a near lethal dose of the worst aspects of capitalism. The current level of corporate power would make even robber barons jealous. And finally America has woken up to this. Between the Occupy movement and the recent elections, the rumblings towards fixing a broken model have grown louder and gone more mainstream.

The problem with capitalism as it now stands is that large multinationals have a disproportionate influence on politics, media, the economy, the environment, and the middle class. Through their lobbyists and other tools of influence, they have slanted the tax, anti-trust, and environmental laws further in their favor, creating a class of super-wealthy where the top 1% in America hold 65% of all wealth.

Throughout time, massive income disparity between the haves and have-nots has been at the core of how civilizations collapse. Our current corporatist tendencies push us towards that brink; it’s a downward spiral that is hard to break.

This is how runaway capitalism can be our downfall, and its a hard rut to crawl out of. Since a corporation’s key goal is to maximize profits, CEOs and board members have a fiduciary responsibility to game the system through lobbyists who carve out exemptions and deductions in the tax codes.

But what if we find a way to use the forces of each CEO’s own greed to help benefit society rather than leech from it? What if tax rates vary dramatically dependent on how well a corporation treats its employees, its physical neighbors, the environment, and society as a whole through the quality of its products or services?

Sounds good, you may be thinking. But how do we get there?

The idea I’m putting out there is my model for socio-capitalism where we remake the tax code so that companies that have the most benevolent “social footprint” can get their tax rates down to 14%, while those that retain business as usual have their taxes max out at 38%. What determines which end of the spectrum they fall on is the SPI, the  Social Partner Index, which attempts to quantify and balance out the factors that lead to a corporation being a force for good not a force for greed.  The parameters that lead to a high score are:

  • fair wages for workers, middle management
  • good working conditions in US and in overseas manufacturing plants
  • worker retention, percentage of employees with benefits
  • declining percentage of jobs overseas
  • business practices in regards to fair competition
  • ecological footprint
  • footprint of their physical home office on their community
  • track record of the quality of their product or services
  • integrity and honesty in advertising

These parameters will be weighted in importance as well as over time.

Bonus points are given for:

  • high quality day care
  • job sharing without reductions in benefits for either party
  • moving manufacturing jobs back to the US
  • charitable aid in their home office community
  • paying some or all taxes that were avoided through offshore tax havens

Points are taken away for:

  • lobbying history if they have achieved a tax or monopoly advantage through corruption
  • superPAC contribution history with greater weight given the more deceptive the messaging used
  • dodging taxes through offshore tax havens
  • records of discrimination and/or sexual abuse
  • buying off and burying competing technologies

Bear in mind that all these parameters are not only judged in current time for a corporation, but also in their business practices throughout the decades. But a corporation’s dark past has a half-life. If the CEO and all board members get the boot, part of a company’s legacy can be excluded from the SPI right away. Over time less and less of its malevolent past will drag down the numbers as new evidence of change is realized. In this format the slate can be wiped clean in a linear fashion over four years – but no sooner. The ticking clock will provide additional incentive.

Still, a CEO may just decide that it’s not worth the effort to make America a better place. His company will make less money, but he’ll keep on doing just fine. This is where his greed comes into play, though:  corporate charters will be rewritten so the company’s SPI and the maximum CEO pay are directly proportional.

Those are the tools. Here are the parameters on how we can apply these policies in a transition towards socio-capitalism:

  • No businesses with an annual gross of less than $400 million are subject to these rules
  • The Society Partner Index (SPI) is created to rate how detrimental a mega-corporation’s influence is. The parameters are judged by impartial panels both inside and outside the industry, as well as by consumers doing direct business with them.
  • The tax rates of a corporation are tied directly to their SPI, AS ARE THE MAXIMUM SALARIES OF THEIR CEOs and BOARD MEMBERS.
  • Use this tax and compensation index. If a corporation has an SPI among the bottom 40% within their industry, the corporation pays a 38% tax rate and the CEO’s salary is capped at $8 million. From that level to the top 30%, a corporation’s tax rate is 32% and CEO salary is capped at $14 million. From the top 30 to the top 10%, the tax rate is 27% and the CEO maxes out at $20 million. If their SPI is within that top ten percent, their tax rate is 22% and CEO pay can reach a max of $28 million. And if they have the best SPI within their industry, their tax rate is 14%, and the CEO salary can max out at $40 million. It’s harnessing greed for good.

Do you see how greed will drive a race to the top instead of a race to the bottom? Wages, benefits, and the middle class will be strengthened. Politicians that embrace this new path will take control, and the largest American corporations will strive to become the best they can be. And being that their competitive practices will be under scrutiny with financial ramifications, small and mid-range businesses will be able to thrive, eroding inherent monopolies. Families will see a more secure future, and overseas America will again embody a model society to be admired.

Now there’s a lot that will need to be fleshed out, and opposition to overcome, in realizing this vision. And it will take a Democratically controlled House to start the wheels in motion. But let’s start the dialog and the planning now, because this end game might be what today’s college kids eventually see as the path to maximizing the implementation of their dreams.

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