Smart people (and their companies) will flee a socialist tyranny... a free man will vote with his feet.
I would assume that ANY Southern state has less confiscatory taxation than Connecticut. Of course, the idea for Stanley might be to avoid the confiscatory federal taxes and regulations as well. More power to you, Stan!
DWG
How the eff do you write legislation preventing this?!?!?
"You vill continue to manuvacture products in zee Fatherland. If you do not, zings vill get very... complicated."
Thu May 9, 9:03 AM ET
By DAVID CAY JOHNSTON The New York Times
NEW BRITAIN, Conn., May 8 Over the last 159 years Stanley Works has come to dominate this central Connecticut town, producing tools with the yellow logo that has made it a brand well known in every other American town. But if its shareholders approve a proposal in a vote on Thursday, Stanley will become a Bermuda company in address only, with its legal residence in Barbados.
The company says its plan will slash its income tax bills by at least 28 percent $30 million a year and predicts that the resulting higher cash flow could by itself raise its stock price by 11.5 percent. Tax experts say the saving could be much higher.
That does not sit well with a lot of people here and elsewhere with workers, residents and even some large investment funds. Such critics hope to turn this vote into a referendum on whether the growing number of American companies with proposals similar to Stanley's should be allowed to promote the interests of shareholders without also considering the interests of the nation and the companies' home communities.
"This is really about the future of the corporation in America," said Stephen Sleigh, director of strategic resources for the machinists' union. "Are companies going to stay loyal to our country and grow jobs here, where they made their money? The notion that stock price is the only measure of a company's value is shortsighted."
It is unclear whether Stanley will win this vote the proposal requires the approval of two-thirds of all shareholders to be passed. But Stanley's proposal has a lot of support.
The company says it has no choice, and its situation says a lot about the struggle of American businesses to remain globally competitive and satisfy their shareholders. In the past, many chief executives said they had obligations to a number of constituencies not just to shareholders, but also to customers, employees and their communities. But Stanley's chief executive, John M. Trani, is one of a number of executives who, under pressure from Wall Street, have narrowed that definition.
Mr. Trani says his obligation is to his shareholders. "At the end of the day," he told The Hartford Courant in 1997, "it's the final score that counts. In this stuff, I'm paid to make money for the shareholders." (He declined to be interviewed for this article.)
The 57-year-old son of a Brooklyn longshoreman who grew up in Italy, Mr. Trani played recreational tackle football without pads or a helmet when he was a student at the Polytechnic Institute of Brooklyn in the 1960's. He worked briefly as an analyst on Wall Street and later joined General Electric, where he was among 10 or so rising stars thought to have a shot at the chief executive job, then held by John F. Welch Jr.
Mr. Trani has learned to talk tough and play tough. He says Stanley's plan is not just legal, but ethical. And he says it is necessary because his competitors from Taiwan metal-forging companies to Ingersoll-Rand, which itself became a Bermuda company last year benefit by paying lower taxes.
But even some big investors that own Stanley stock and would, in theory, benefit from the plan say they will vote against it. Among them are the state pension plan here in Stanley's home state as well as those in New York and California, and various union pension funds.
Sarah Teslik, executive director of the Council of Institutional Investors in Washington, which represents 110 pension funds and other institutional investors, said the group was studying how to advise members during an unexpected wave of such plans.
"We have a lot of members who are disturbed by these moves," Mrs. Teslik said, "because they do benefit shareholders through higher stock prices, but they also affect jobs and everyone's taxes."
Here in New Britain, a city of 71,000 where Stanley has its headquarters, it is hard to find anyone who favors the plan not the mayor nor the president of the Chamber of Commerce (news - web sites) nor Stanley workers. While the company will still pay some property taxes here, some who understand the details of the Bermuda plan worry that it will lead the company to ship more jobs abroad.
Under Stanley's proposal, the company would not actually move its headquarters to Bermuda; it would merely incorporate there. That requires only a mailing address. Stanley would also register as a corporate resident of Barbados, where it would need to hold only one meeting a year to qualify as "centrally managed and controlled" from there.
Under this plan, Stanley would no longer owe United States income taxes on profits earned abroad. (Bermuda has no income tax.) More significantly, profits earned in the United States could be shipped abroad and, under a treaty with Barbados, turned into tax deductions. All Stanley would owe on those profits would be a 1 percent tax in Barbados.
Five Houston companies, including Nabors Industries and Weatherford Industries, are asking their shareholders to approve the same move later this year.
Executives of companies that have gone to Bermuda or plan to go say that such proposals will become more common unless Congress fundamentally changes the way corporations are taxed because some profits may be double-taxed and rivals in tax havens pay little or no tax.
Mr. Trani has some important backers. Institutional Shareholder Services, which advises pension funds and other large investors, supports approval of Stanley's plan because lower taxes should mean a higher share price. The organization warned that "there is already fierce and credible opposition" in Congress, though it discounted the threat that Congress might undo the move.
Opponents of such plans make several points. Some say it is just not patriotic to stop paying income taxes and leave the burden to others. Mayor Lucian J. Pawlak of New Britain said, "We will be a much poorer city and America a much poorer country as companies move out jobs and machinery, pay less in taxes and take away the jobs that hard-working people without much education used to get their kids into college."
Senator Charles E. Grassley, Republican of Iowa, has said in Congressional hearings that Stanley "has its heart in Bermuda" and its behind in America. Together with Senator Max Baucus, Democrat of Montana, he has introduced legislation to remove the tax savings in such deals, calling them unpatriotic in a time of war.
Others, like Connecticut's treasurer, Denise L. Nappier, and New York's comptroller, H. Carl McCall, say the plan is unfair because it reduces shareholders' rights, like the ability to enforce American court orders. (They do not plan to sell their states' Stanley shares if they lose the vote, however.) The company says the changes are minor.
Still others say the plan will encourage Stanley and other such companies to ship more jobs and money abroad. Once profits are shipped to Barbados, they can be invested tax free in factories abroad, but if the money is returned to the United States, it becomes taxable again.
Many people in New Britain are worried because in the past decade Stanley has eliminated 90 percent of what had been 5,000 blue-collar jobs here, replacing union machinists with less expensive workers in China, Mexico and other countries.
Donald D'Amato, president of a machinists union local representing the last 500 production workers here, said: "Trani said he will always go to the lowest-cost producer, and that means he is out of the U.S. because we can't compete with China." Union wages in New Britain are $10 to $20 an hour, he said.
At a small grocery across from City Hall, the owner, Iftekhar Siddiqui, said his business had declined as Stanley eliminated jobs.
Mr. Siddiqui, who has a master's in business administration, said people here were angry because they thought Stanley's manipulation of tax and labor laws could spell economic ruin for themselves but riches for the 10 percent of Americans who own 86 percent of all stocks.
"The C.E.O.'s job is not just profit," Mr. Siddiqui said. "He has to think about the welfare of society. You have to have a country that is healthy to have profits. If Stanley does this, a lot of other companies will follow, and they will invest the money they made here in China, and a lot of our labor force in this country will become unemployed. Fewer and fewer people will have disposable income. You have to have balance."
Over on Broad Street, Gregory Adamski, who came from Poland 18 years ago and runs the Cracovia Restaurant, said, "When Stanley Works moves out, they ship the machinery to China, and that means our taxes will increase so they can pay less."
Herb Holter, who owns a hair-cutting salon, said that when he arrived in 1957, at 16: "New Britain was a buzzing place, and everybody was working to get ahead. Now Stanley just wants to make a lot of money for shareholders and the C.E.O. Soon there'll be no jobs, and then who is going to buy Stanley tools?"
Mayor Pawlak said he would be surprised if anyone in New Britain spoke favorably about the company, which he said had seemed focused only on its stock price since Mr. Trani took charge five years ago.
"All those guys walking around with missing fingers and hunchbacks made Stanley," the mayor said, "but Trani doesn't want to hear that."
Why don't we outsource the Federal government to Switzerland. I bet they could do a much better job for a small percentage of the cost!
They still manufacturing things in the North East?
Won't be too much longer before northern factories go the way of the horse and buggy.
They do that and the companies will leave even faster ..... restards.