A group of responsible investment institutions have managed to get a shareholder resolution concerning Google’s tax strategies onto the agenda of the Internet search giant’s forthcoming annual shareholder meeting.
The proposal calls on the company’s board to “adopt a set of principles to address the impact of Google’s tax strategies on society, with particular focus on Google’s employees, customers and suppliers”. It also calls for Google to publish annual reports to shareholders discussing implementation of these principles, beginning December 2014.
The resolution has been filed by the Domini Social Equity Fund, the Missionary Oblates of Mary Immaculate, Canadian mutual fund group NEI Investments, private shareholder Robert Burnett, and Investor Voice, the shareholder engagement specialist.
They argue that Google’s “complex” tax arrangements may result in misallocations of capital and “mask the true sources of long-term value” and that the scrutiny Google’s tax practices have faced in the UK and France has led to “regulatory pressures and reputational damage”.
The investors continued: “When multinational corporations exploit differences in national tax codes to reduce their taxes, they undermine democracy and rule of law.” Large-scale corporate tax avoidance also “exacerbates systemic risks”.
“A set of principles to address misalignments between Google’s tax strategies and its commitments to employees, communities, shareholders and the environment would help protect long-term corporate value.”The motion will be voted on at Google’s AGM on May 14 in California. The company is advising its shareholders to vote against the proposal – but said it has already offered its support for tax reform.
Executive Chairman Eric Schmidt told the Financial Times last year that tax rules are “fiendishly complicated, and everyone would benefit from a simpler, more transparent system”. Despite this, the company’s board believes it would not be advisable to adopt a set of principles as laid out by the investors.
Google said: “Our board of directors believes that we have structured our operations in a manner consistent with all applicable tax laws and that we are thereby satisfying our fiduciary duties to our stockholders as well as our legal obligations in each of the countries in which we operate and conduct business.”
Google is also facing four other shareholder proposals at the AGM, all of which it opposes:
- Lobbying disclosure (proponent: Walden Asset Management and others)
- Majority voting for directors (Kansas City Firefighters’ Pension System)
- Independent chairman (Massachusetts Laborers’ Pension Fund)
- One vote per share (John Chevedden)