Behind their current display of charity, it’s business as usual for multinationals

Behind their current display of charity, it's business as usual for multinationals

Demonstrators wave masks of Jeff Bezos, CEO of American retail giant Amazon and the richest person in the world. One of the five most powerful digital multinationals of this century, Amazon has been widely criticised for its tax evasion practices. Seattle, October 2018.

(AP/Elaine Thompson)

By coming to the rescue of governments which are incapable of quickly and effectively protecting their citizens, have the planet’s largest multinationals made themselves immune to all criticism?

Since the beginning of the coronavirus pandemic, which has paralysed the world and raised the spectre of major health, economic and social damage, the world’s richest tech billionaires, already elevated to celebrity status, have been in a philanthropic arms race to help hospitals, researchers and the economically disadvantaged. Bill Gates, CEO and founder of Microsoft, has so far committed US$250 million of his foundation’s money to the fight against coronavirus. Most of this money is dedicated to helping countries in Africa and south Asia, as well as the most vulnerable communities in the United States. Part of this sum is also devoted to research for a vaccine. Through their foundation, Facebook founder Mark Zuckerberg and his wife Priscilla Chan have also contributed, albeit with a more modest sum of US$25 million, to scientific research.

Not to be outdone, Twitter founder Jack Dorsey has pledged to spend US$1 billion of his personal fortune through a transfer of shares to tackle the crisis. This money will in fact go into a limited liability company (LLC) called Start Small, where only an unspecified share will be earmarked for the fight against the fallout of the virus. The LLC’s remaining funds could be allocated to Dorsey’s other priorities, such as girls’ education and establishing a universal basic income.

Even controversial figure Jeff Bezos, CEO of Amazon and the richest person in the world, has joined the fight with a US$100 million contribution to Feeding America, an association that coordinates a network of 200 food banks throughout the United States.

The examples don’t stop there. The government of South Korea was able to count on the help of Samsung, the flagship company of its economy, which made a donation of 30 billion won, roughly US$24.6 million. In France, the LVMH Group, the country’s most prolific business, is helping the government as it struggles to procure medical masks and supply hospitals with hydroalcoholic gel. Tim Cook, CEO of Apple, has done the same in the United States.

“While as a normal human being you celebrate someone buying a lot of masks quickly and donating them where an American state might take longer to get that done,” says Anand Giridharadas, American essayist and critic of billionaire philanthropy, in an article on the American news website Vox, “it’s really important to ask why the crisis has hit us the way it has and the weaknesses it’s exposed….A lot of those people stepping up are responsible for the underlying conditions of weakness.”

Tax avoidance and deteriorating health systems

In 2019, the World Health Organisation (WHO) published a report linking tax avoidance and the state of health systems. In an op-ed published in French daily Le Monde, several French economists including Thomas Piketty, author of the seminal Capital in the Twenty-First Century, take up this point. Referring to multinationals, they write: “These companies and their shareholders have taken advantage of tax competition to evade taxes, which has contributed the deterioration of public services, significantly those needed in this health crisis.”

This is the case of the GAFAM (Google, Apple, Facebook, Amazon and Microsoft) companies, whose ultimate goal of tax optimisation is written into their DNA. French luxury group LVMH, a partner of the French government in the current crisis, is no different; according to the NGO Oxfam, the group has 284 subsidiaries located in tax havens.

So what is behind this outpouring of generosity in the face of COVID-19? Arthur Gautier, researcher and executive director of the Philanthropy Chair at ESSEC Business School in Paris, views it as “a kind of sacred union in the face of something that affects everyone.” But, as he explains, it could also be an expression of one of the main factors motivating the philanthropy of corporate CEOs: “When you are part of this circle of heads of major companies, there is a level of rivalry which could help to explain this type of behaviour.”

Alexis Spire, a French sociologist whose works include Résistances à l’impôt, attachement à l’État. Enquête sur les contribuables français (Resistance to taxes, attachment to the state: a study of French taxpayers, Seuil, 2018), has also analysed this philanthropy. According to him, it represents a “communication strategy for giving a seal of moral authority to entrepreneurial action”. This is perfectly embodied in the words of Lee-Jae Yong, vice president of Samsung Electronics, when he states: “We have grown with the people’s support, and have to share with society at such a difficult time.” This may come across as amusing coming from a man convicted of corruption involving the government of his country, who heads a company where anti-union practices are something of a religion.

Similarly, Jeff Bezos’ philanthropic commitments to the most vulnerable Americans threatened by hunger should not obscure the way in which his company, Amazon, is running its business during the pandemic.

At various sites in the United States, employees have organised strikes to demand more safety measures to protect them from the virus and to request that deliveries be limited to essential products. Amazon has fired several of the organisers of these strikes, much to the dismay of unions. Strikes have also taken place at sites in Italy and in France, where on 14 April the courts forced the company to limit deliveries to “essential” products.

Amazon appealed and the decision was upheld. This should hardly put a dent in the company, for which the current pandemic has been very profitable: Amazon has hired 100,000 new employees and plans to hire an additional 75,000 in response to “increased demand as our teams support their communities,” as the company stated in a blog post. According to the American think tank Institute For Policy Studies, Jeff Bezos has seen his personal fortune increase by US$25 billion since 1 January 2020.

Libertarianism or manipulation?

“The charity of these corporate heads can also be seen as the reflection of a certain ideology, a rather libertarian one,” explains Spire, which “challenges the state’s monopoly on public interest. They insist on choosing the amounts from which they will separate themselves, how they are going to invest, in which areas.” Gauthier agrees: “I think there’s an idea shared by many corporate heads that taxes aren’t fair and charity is a better way of directing their money to causes that we consider to be priorities and more important than others, all while maintaining control. Some people believe that these foundations and associations are more capable than the state.”

French sociologist Monique Pinçon-Charlot, who along with her husband Michel has dedicated her career to studying the world of billionaires, particularly in France, has a harsher take. According to her, this display of generosity is nothing but “Machiavellianism, perversion and manipulation,” by the leaders of an economic system that bears blame for the current pandemic, specifically with regard to health system capacities. Several scientific studies have also highlighted the responsibility of profit motives for the emergence of pandemics, through the pressure placed on ecosystems. According to Pinçon-Charlot, “we should expect nothing” from these major corporations in the construction of the “world after.” As she puts it, “the virus of money is their only driving force.”

Some outrageous examples currently taking place would seem to prove her right. In order to prepare for economic recovery, large corporations are receiving state aid while continuing to pay dividends to their shareholders. These include several major German auto manufacturers, central to the country’s economy.

BMW, Volkswagen and Daimler, which have placed 200,000 of their employees on short-time work subsidised by the state, nonetheless plan to distribute €7.5 billion in dividends. In the United Kingdom, retail group Tesco plans to pay £1 billion in dividends to its shareholders over the year, while at the same time benefitting from a £585 million tax break.

Several other large companies have refrained from such behaviour, however. Some have heeded the opinion of regulatory institutions such as the European Central Bank, which has called on 117 banks to freeze dividends. Several countries have also set conditions for receiving public aid. France, for example, has made state aid conditional on the non-payment of dividends, with the Confédération française démocratique du travail (CFDT, or French Democratic Confederation of Labour) calling for a year-long freeze on the payment of dividends. The French government has announced that it will follow the lead of Denmark and Poland and exclude companies registered in certain offshore tax havens from their bailout packages. However, this bold plan, outlined by the French Minister of the Economy and Finance on public radio broadcaster France Info, was skilfully and discreetly walked back in a subsequent circular.

Responsibility and liberty

Other companies, including French groups Total and L’Oréal, have decided on their own initiative not to accept any aid from the state. The oil giant invoked its “spirit of solidarity” with France, while the cosmetic group spoke of its “duty as a responsible employer and citizen company of France” to not “burden the public accounts.” At the same time, this will leave them free to distribute dividends to their shareholders. According to the site BFM Bourse, Total’s shareholders are expected to receive €7 billion in dividends while L’Oréal’s are expected to receive €2.4 billion.

While the two companies are not directly seeking aid from the French government, a look at what’s happening behind the scenes reveals another picture. The French Association of Private Enterprises (AFEP), which represents the country’s largest corporations, including L’Oréal and Total – whose two CEOs sit on its board of directors – are hoping that government authorities will not interfere in their activities once the pandemic is under control. In a memo addressed to the European Commission, made public on 14 April by the website Contexte, the lobby calls for a postponement of several European Green Deal measures already voted on, which are intended to reorient the EU’s economy to better respond to the challenges of climate change.

The AFEP also calls for updates to the directive on industrial emissions to be postponed, for talks on the sustainable governance of finance, which they say is “not a priority in the context of the current crisis,” to be suspended for a year, and for free quotas and state aid allowing for taxes to be paid on the carbon emissions of imported goods to be maintained. This comes on top of a request for the postponement of a new directive planned for the second half of 2020 intended to reform this taxation, in order to avoid “increasing the competitive disadvantage between the EU and third countries who are likely to boost their economies by easing their climate ambitions.”

This easing can already be seen in the United States, where Donald Trump has softened environmental standards in order to minimise the economic impact of the COVID-19 pandemic.

In China, the government is preparing to step up its investment in coal in order to jumpstart its economy. In France, several NGOs (Greenpeace, Friends of the Earth and Oxfam) are troubled by the government’s decision to grant €20 billion to several companies considered strategic – including €7 billion to Air France – without attaching social or environmental conditions. In a press release, the three NGOs argue that the government is “using this health crisis as a pretext for legitimising its unfailing alliance with the lobbies, at a moment when citizens are demanding a robust society and a future oriented toward public interest.”

A huge challenge for politicians and citizens

While Frans Timmermans, vice president of the European Commission, stated before the EU Environment Committee that “governments have the option of introducing state aid conditional on environmental commitments,” the financial aid that airlines have received from the EU with no environmental conditions attached reveals the difficulty of actually building a new, more virtuous economic system.

In Le Monde, Piketty argues for “a just taxation system and a global financial register so that the most rich and the largest companies can pay the necessary amount.” For almost a year and a half, the implementation of an international GAFA (Google, Apple, Facebook and Amazin) tax, designed to remedy the tax evasion employed by the tech giants – which are taxed at 9 per cent as opposed to 23 per cent for traditional companies, according to the European Commission – has been at a standstill. Initially debated amongst the EU’s member countries, four of them – Ireland, Sweden, Finland and Denmark – opposed it in late 2018.

Since then, under the aegis of the OECD, 137 countries have been discussing the outlines of a possible tax capable of adapting to the borderless digital economy.

On several occasions, the timidity of the countries and Donald Trump’s threats of economic reprisals have slowed progress. Bowing to this pressure, the French government earlier this year suspended its national GAFA tax, voted in July 2019. On 4 May, Le Monde reported that the deadline would be further delayed due to the coronavirus. The OECD announced that the presentation of its final project, initially planned for July 2020, would be postponed until October. By that time, will the shock wave of the global coronavirus pandemic be enough to revive stalled international tax cooperation?

In order to create a more just post-pandemic world, we need trickle-up solutions from the workers themselves, who risk their health to provide essential services to communities, and who are at the same time indispensable to the ability of these large corporations to continue to make a profit. If labour law infringements are exacerbated in this current period, trade unions in several countries plan to take action to ensure that the value of the services they provide is recognised, in order to regain a position of strength and propose a true alternative for a different future.

This story has been translated from French.