It’s not taxing, just be true to the brand
Have some sympathy for Kris Engskov. I would imagine the beleaguered managing director of Starbucks UK spent most of his weekend devising an explanation for why his company has apparently paid virtually no tax in this country despite its 10-figure corporate revenues.
By Mark Ritson
My guess is that it came down to a) Starbucks used its international structure to legally avoid paying as much tax as possible or b) the company was so crap that after more than 10 years and over a billion in sales he could still not make any money. It’s a strategic Hobson’s Choice that even the finest PR agency would shy away from: rotten or rotten at business.
There is a reason why Starbucks is suddenly the poster child for tax avoidance schemes despite the fact that the finger could just as easily be pointed at Vodafone, Ikea, eBay, Facebook or a host of other giant brands being criticised for alleged tax avoidance. That reason is brand.
Starbucks chief executive Howard Schultz succeeded in revitalising his brand by spreading the message that his company believed in more than just brewing coffee. “It is no longer enough to serve customers, employees and shareholders,” said Schultz. “As corporate citizens of the world, it is our responsibility – our duty – to serve the communities where we do business”.
Well I have a community for Schultz that needs some serving. It’s called Britain. It has a wonderful system that allows big companies like Starbucks to support its needy citizens using what we like to call Her Majesty’s Revenue and Customs. Rather than elaborate corporate structures that involve complex sales tariffs paid to an American parent company, beans bought in Switzerland (that famous coffee producing nation) and roasting conducted in Holland – would it not have been more consistent with Starbucks’ community spirit to just calculate what the brand was actually making from its British operations and pay 30 per cent of it in tax?
To be fair, Schultz and his British team were probably not anticipating that his public statements about communities would collide so clumsily with Starbucks’ very private tax operations. But if there is an enduring lesson to be taken from corporate branding it is the inevitable damage that occurs when internal operations contradict externally made promises – the greater the contradiction, the more damage is done.
That same internal/external dichotomy is being felt over at Abercrombie & Fitch, but not because of tax. Rarely has a brand been built so effectively around such a clear target segment of the young and the beautiful. But now CEO Mike Jeffries is under the spotlight after an upcoming court case revealed the goings on inside his corporate jet.
A 47-page “aircraft standards” manual written by Jeffries and his partner Matthew Smith, mandates that their all-male flight crew, recruited from local modelling agencies, can only wear A&F polo shirts, boxer shorts and flip-flops. The five passenger seats on the jet are reserved for the couple and their three dogs – Ruby, Sammy and Trouble.
It might be a bizarre way to travel but none of this is particularly off-brand for Abercrombie – especially the young studs in boxers. The big problem is the final detail. According to the manual, as the plane begins its take-off the Phil Collins easy-listening classic Take Me Home must be piped over the PA system at full volume.
If you want to lead a brand like Abercrombie, you can be outrageously camp, but you cannot be old, ever. And if you look up old and uncool in the dictionary (at least in the one that college kids read) there is a picture of a 68-year-old man singing along to Phil Collins with a poodle on his lap.
Then there is the tragic tale of Goldman Sachs. The brand was once more than just the most successful investment bank in the world, it was also the one with the highest standards. Snigger if you must, but for much of its 142-year history Goldman was famed for making money more for its clients than for itself. Many of its 14 core principles, on which the firm is meant to be founded, speak explicitly of “integrity” and “reputation”. Its first principle states clearly that: “Our clients’ interests always come first”.
But, as the new tell-all book Why I Left Goldman Sachs by former-employee Greg Smith suggests, this ethos was rejected during the heady days of the pre-global financial crisis period. Smith claims Goldman traders openly referred to their clients as “muppets” and gloried in selling them duff deals. Other investment banks my have behaved in similar fashion but the strength of the Goldman Sachs brand meant that the damage to its reputation and business will be much worse.
The lesson from these three disparate case studies is the same. The walls between internal policies and external promises are paper thin and liable to collapse under even the faintest bit of scrutiny. The only way to ensure that behaviour matches brand is to align them from the outset. Inside is the same as outside, and outside the same as in.
