BOOKING.COM HEADQUARTERS AMSTERDAM
OPINIESTRUCTUURWIJZIGING
Companies that are only concerned with making money have
no right to exist
Glenn Fogel, the
chief executive of Booking Holdings, and his top management are now
handing in salary, but that sacrifice is not part of what Dutch society is in
danger of losing. Picture Javier
Muñoz
Large, listed
companies are also knocking on the door of state aid. That support must not be
unconditional. Those who harm the public interest, such as Booking.com, should
be required to repay. Because this is the time to make the economy sustainable
and social.
Ewald Engelen, Marcia Luyten en Jeroen Smit e.a.25 april
2020, 5:00
Now that the
engine of the global economy has fallen, we have the unique opportunity to make
significant changes in the structure of our economy. This is necessary because
this crisis is the product of a global economic system that, although it has
ensured a great deal of prosperity for decades, is clearly no longer
future-proof. The climate problem is rapidly widening, biodiversity is
declining and the gap between rich and poor is becoming far too deep. A
resilient economy is sustainable and social. To achieve this, we call on the
government to make sharp choices this time.
Unlike in 2008,
the government must make it clear who can claim taxpayers' money under what
conditions. Given that it is scarce community money which – as we learned from
the financial crisis – must be raised mainly by the middle class and future
generations, aid money should go to companies that primarily serve the common
interest. Not just the interests of the shareholder. Companies that are only in
the world to make money have no right to exist.
It is
understandable and to commend that Minister Koolmees of Social Affairs reached
an arrangement as soon as possible to help companies. He said in The
Financial Daily on 18 April: 'It had to
be done quickly, which is why the scheme is very simple and stupid. It applies to all companies."
Also for a Booking.com?, the newspaper asked. Koolmees: 'I understand the
question very well socially. But because of the scale of this crisis and the
acute demand loss, I can't possibly see what you as a company have made in
recent years, whether you're neat for your employees and whether you've paid
taxes properly. You can't come up with all kinds of criteria if there's money
in the account within a week. Rather than the observation that all 5,000 people
who work there have been laid off...'
There, Minister
Koolmees paints an improper contradiction: that between required speed and
public money attached to conditions. The Emergency Measure Bridging Employment
(NOW) can very well be provided quickly and bound by criteria. This can be done
if the aid is initially provided in the form of a loan. The first tightness of
liquidity will be resolved in this way. There is no need for unnecessary
redundancies. At the same time, the government can distribute the scarce public
resources prudently and socially by setting conditions and criteria. Companies
that harm the public interest by, for example, avoiding tax, must repay the aid
received. Companies that meet a number of conditions can later stipulate that
the loan is (partly) waived.
For these
conditions, we propose three directives.
1. Companies must
have contributed their share in the last ten years (since the last crisis) at
home and abroad when it comes to paying taxes.
2. Companies demonstrate
social justice, focus on long-term sustainable
economic growth and understand that they must serve the interests of all
stakeholders.
3. The company's
products and services are increasingly contributing to a safe and sustainable
future.
The basic idea of
these directives is that companies that are accountable to all stakeholders can
count on the support and solidarity of the Dutch taxpayer.
Considerations
Which brings us
to a number of considerations. The childishly simple first directive can lead
to a simple criterion: large-scale tax avoidance is an automatic barrier. The
condition, of course, is that the government stops facilitating tax avoidance.
The need for social justice as a directive stems in part from what went wrong
after the financial crisis. In retrospect, after 2008, the bailouts show the
perverse principle of the short-term capitalism of the 21st century: profit is
privatised and loss publicly recovered. That loss was made through taxes and
cuts from lower and middle-income earners. Large companies and wealthy people
funnel their capital to real estate or tax havens.
This perverse
practice is in danger of repeating itself. The case that has had a lot to do
with in the last two weeks, that of Booking.com, clearly shows how. The listed
Booking asks the Dutch government for
support, now that 85% of its revenues have been lost as a result of the corona
measures. The travel company, part of an American holding company (Booking.com
was sold in 2005), says it wants to avoid layoffs among its 5,500 Dutch
employees. On revenue of $15 billion,
Booking Holdings made about $5 billion profit last year. However, the company
has no reserves to pay its staff for a few months. Booking
Holdings is even heavily indebted. Profits and loans have been used
since 2018 to buy up 14 billion equity and push up the share price as quickly
as possible. Of course, CEO Glenn
Fogel and his top management are now handing in salary, but that
sacrifice falls into what Dutch society is in danger of losing. If this lasts
four months and a Bookingemployee earns
an averageof 5,000 euros per month, the Dutch taxpayer would soon contribute
tens of millions of euros to those labour costs. In addition, between 2010 and
2018 The Netherlands already gave Booking a tax benefit of almost 1.8 billion
euros from the so-called Innovation
Box.
Had the company
built a reserve out of its mega profits, Booking would not have had to put its hand to the
Dutch taxpayer. Unfortunately, this practice of siphoning off profits, printing
taxes and buying up their own shares is unfortunately rife in financial
shareholder capitalism. The lender opts for the lusts and wallows the burden on
society. According to the 92-year-old, renowned Hungarian economist János Kornai,
bankruptcies are exactly what sets the capitalist economy apart from a
socialist planned economy. It is socially fair to provide the support that a
company like Booking now receives in the form of a loan that is repaid.
The Directive on
social justice is essential for the legitimacy of state aid. The handling of
the financial crisis has caused anger among the majority who have paid
forbail-out of a hyper-rich minority. That put a rich layer of humus in
resentment that populist politicians are using across Europe. For these types
of companies, bailis in theright way:
shareholders themselves pay for the risks taken. That large companies can also
go bankrupt is substantial to this free market capitalism.
The companies
that do deserve our support are socially just. In difficult times, they waive
profit distribution to shareholders (dividend), are willing to pay corporation
tax in the Netherlands and are committed to contributing their share in other
countries. They understand to their limits that paying taxes through education,
infrastructure, contributes to a good business environment and acting
accordingly.
The third
directive: sustainability. The short-term opportunism of the major stock markets is disastrous for
the long-term sustainable economy. The corona crisis is a much larger crisis:
climate and biodiversity. It is clear that our production and consumption
system has severely damaged our living environment and exposes us to risks that we can hardly control anymore. And
then there is the Netherlands also european gatekeeper in meeting the climate
goals agreed in Paris in 2015.
In this crisis,
the government is about to borrow tens of billions of euros from future
generations to protect unsustainable companies from bankruptcy. It is an
exceptional opportunity to make our economy more sustainable and to improve the
chances of our children's safety and prosperity. For this reason, government
donations should be reserved for companies that are accountable annually for
their contribution to making their primary production process more sustainable.
Of course, the
necessary money had to be used quickly. All credit to the cabinet that did not
count to assist large and small entrepreneurs. At the same time, leadership
also requires the courage to distinguish. The Government of Denmark was the
first to announce a week ago that such a selection would be applied. Companies
that pay dividends, buy back their own shares or are registered in a tax break
cannot claim the aid programmes. Even the U.S. government prohibits recipients
of emergency loans from buying up their own shares up to a year after the loan
is repaid. Following this, the Dutch government also announced this week that
companies that receive support in the second round cannot pay bonuses and
dividends as long as they enjoy that state aid.
New insights
It is not unusual
to constantly adapt design to new insights and experiences in times of
turbulence, haste and innovative products: Building the plane as we
fly it. A rapid scan, or even
non-discriminatory allocation of resources, should be accompanied by conditions
and criteria established in the second phase. The government's intention to ban
profit distributions during the period of aid is a first, but for the time
being, a small step towards a sustainable and socially just economy.
The big question,
of course, is how to determine which companies meet the conditions, what the
'good' companies are and what the 'bad', which companies contribute to making
our economy more sustainable and which just lingers behind the rowing boat like
a bucket. It is important to set up a broad-based assessment mechanism here.
We believe that
this is a task for pension funds. We are also asking them to be brave. ABP,
PFZW and many others have been working for a few years, trial and error to
achieve a classification of sustainable versus unsustainable companies. They
have to. Pension funds (with the social partners on their boards) have a
long-term obligation, they have to look beyond 2030 and beyond just a financial
return. After all, who has more money if the climate problem gets out of hand –
the consequences of this are ultimately disastrous. They also have about EUR
1,500 billion, can really make a difference with that mountain of money, not
just in the Netherlands.
When large
institutional investors determine annually, collectively, how companies score,
who should and should not repay the support now received, they also create an
incentive to put those companies to work. If you get a better rating a year
later, you will have to pay back less. This creates a flywheel, in which all
stakeholders are encouraged to make our economy circular, inclusive and
sustainable in the coming decades.
The time for
bailingout unsustainable and non-socially just companies is over. The
tax-paying citizen who has suffered the consequences of the financial crisis
will not accept this. The future generation must not be saddled with a
staggering account for companies that are compromising their security and
prosperity. This moment is unique in history for several reasons. Now what is
usually impossible can be done on the biggest buttons. Now is the time to make
fundamental adjustments, which will make us stronger out of the crisis.
Let us ensure
that our children and grandchildren not only inherit the debt of this corona
crisis, but also a sustainable, resilient and socially just world.
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