Posted: 08/21/14 22:42
by Dave Mindeman
I'm sure you have heard the expression "corporations exist to maximize shareholder value".
Somebody should tell that to Medtronic.
Medtronic Inc. chief executive Omar Ishrak got an earful from stockholders who got their first chance Thursday to directly question the company's planned purchase of an Irish company. Medtronic's $43 billion deal to buy Covidien Inc. has drawn enormous media and political scrutiny as one of a growing number of U.S. companies purchasing firms in countries with lower tax rates, then relocating their legal headquarters abroad to take advantage of those rates. For Medtronic's shareholders, there's another issue to the deal: Its structure creates a surprise taxable event for them -- one that could cost thousands of dollars depending on how many shares they own.
Medtronic merged with Covidien in order to "disavow" American citizenship and avoid taxes on overseas holdings.
But, unfortunately for Medtronic shareholders, the completion of the sale will cause a trigger of capital gains taxes for long time shareholders. And how does that "maximize shareholder value"?
Chief executive Omar Ishrak had problems placating those shareholders at their annual meeting. And there were other concerns....
1. Inversion - this tax ploy which other corporations have looked at is now going to get the scrutiny of the Federal regulatory agencies....which, in turn, could result in new laws to prevent such blatant tax avoidance.
2. Protecting Board Members and Officers - instead of "maximizing shareholder value", Medtronic is, instead, going to work to protect its board and officers by absorbing the $65 million in excise taxes that would apply to them personally.
3. Tax Avoidance - Some shareholders even complained about the fact that US taxes were being avoided. Especially when that avoidance was going to trigger shareholder tax liability in the thousands per individual.
It is hard to justify Medtronic's actions on the basis of "looking out for the shareholder".....because this action clearly does not. The Medtronic shareholders are the victims of the corporate plot.
If Medtronic is a corporate "person" then it doesn't have many friends right now.