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Out of Our Minds
Wednesday, June 16, 2004 4:26 PM
Smell Test
Kevin Salwen on Business

Sometimes I find my jaw dropping over the brazenness of some business executives. You need to understand that we here at Worthwhile are VERY pro-capitalism, extremely profit-minded. But a story on The Wall Street Journal's front page makes me wonder just what the heck some of these business chieftains could be doing to the best economic system ever created.

The piece (which you can read on Reuters here, since the WSJ is a member-only pay site) says that a KPMG tax shelter that the IRS last year declared abusive generated at least $1.7 billion in tax savings for 29 of the world's biggest companies -- Delta Air Lines, Whirlpool, Clear Channel and others. While the IRS didn't declare the shelter abusive until November 2003, after the companies had bought it, 'no one purchases a shelter like this without knowing they're taking significant risks,' Stanford University tax-law professor Joseph Bankman is quoted as saying. 'It's a classic case of getting something for nothing.'

Something for nothing. That's where I can begin my three-part rant:
1. Why do companies expect something for nothing? What if their consumers had the same expectation?
2. The possibly bigger question is what on earth is KPMG -- which is one of the companies signing off on companies' financial statements to protect investors -- doing selling this kind of garbage anyway? What is their fiduciary duty?
3. Are executives really that tone-deaf? Every day, as I go about running my business -- or even in my personal life -- I live by a code of ethics that's my own personal smell test. Oftentimes, it has a simple question attached: What would happen if my neighbors read about this in the local paper, would I be proud or embarrassed? It makes decisions pretty simple. Which gives me a thought: Maybe if I packaged my smell test, sold it as a consultant and charged executives oodles, I could make a bundle.


Joan - 6/18/2004 6:11:39 PM
I appreciate Randy's add to the smell test. Win-win deals ensure fairness and abundant growth.

However, I'd stress that businesspeople I respect play by the rules because it is the right thing to do AND because the rewards outweigh the risks. It's not reasonable at all to expect any capitalist to play by the rules only because it is the right thing to do.
Randy Berlin - 6/16/2004 10:52:10 PM
'Your not cheating if you don't get caught' comes to mind immediately.

I like your smell test which I will incorporate with my current one.....If I were on the other end of the deal, would it be a good deal for me?

We need people who can play by the rules because its the right thing to do and not because the reward outweighs the risk. I think you would make $0 selling your packaged smell test. The ones who qualify in buying it already have a code of ethics and the ones who should buy it have justified the savings for themselves and their investors. How bout a packaged test for people who won't smell. We can then market it as 'The Do Not Call List' and sell it to everyone.


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