Friday, 30 June 2006
Doing Charity by Killing People: The James Hardie Way
The Guardian’s columnist Simon Jenkins has declared 21st century to be “the age of charity”. This optimism seems to have been triggered partly by the unprecedented courage and leadership shown by Warren Buffett, the world’s second richest man, to donate to charities 80 per cent of his wealth. However, the age of charity may not turn out to be an unqualified good, for 21st century might also see totally uncharitable activities being passed on as charity.
Take, for example, the case of James Hardie. To sum up the saga, several companies of the James Hardie Group manufactured and distributed asbestos products in Australia for several decades in the 20th century. These products led to deaths and prolonged illness, and consequent fears of unknown liability. In order to limit (and to some extent preempt liability), James Hardie restructured its business and established a trust fund to compensate victims of asbestos-related diseases. The under-funding of the trust culminated in the Jackson Inquiry. Finally, in view of a robust naming and shaming campaign run by the asbestos victims groups and ACTU, Hardie accepted its ‘moral’ responsibility towards the victims and signed a Final Funding Agreement on 1 December 2005. A Special Purpose Fund (SPF), which will be making compensation payments over a period of at least 40 years, was established under the agreement. This funding agreement was, however, subject to several key pre-conditions. One of the pre-conditions was a tax exemption of the SPF as well as James Hardie’s contributions to it under the Australian tax law.
Recently, the Australian Taxation Office ruled that the SPF is not entitled to the tax exemption as a charity. But it agreed to treat Hardie’s annual contribution to SPF tax exempt under a revised “blackhole expenditure” law enacted in April 2006. James Hardie as well as other stakeholders reacted strongly to the first ruing of the taxation office. Hardie immediately asserted that no-grant of a charity status to SPF would undermine the viability of SPF. Victims group, on the other hand, felt disappointed and considered such ruling as ‘obnoxious’.
Leaving aside what law considers as a charitable activity for taxation purposes and why, are we not going too far in labeling James Hardie’s creation (SPF) and action (contributions) as charity? Knowingly exposing workers and others to asbestos hazards, restructuring and under-funding the trust fund, and then fleeing out of the reach of victims’ legal mechanism are not, if at all, healthy symptoms of a charitable deed. What people should be getting as rightful entitlements (but for an infirmity in law) is presented to them as a token of compassionate charity. Are there no sustainable differences between what many corporations did in the aftermath of the Tsunami and Hurricane Katrina on the one hand and what James Hardie is proposing to do for the asbestos victims? One could find commonalties between the two scenarios, but there are fundamental differences too. Owning responsibility and paying for one’s wrongs does not and should not become a charity merely because of legal loopholes. This is a difference too obvious to be ignored.
Take, for example, the case of James Hardie. To sum up the saga, several companies of the James Hardie Group manufactured and distributed asbestos products in Australia for several decades in the 20th century. These products led to deaths and prolonged illness, and consequent fears of unknown liability. In order to limit (and to some extent preempt liability), James Hardie restructured its business and established a trust fund to compensate victims of asbestos-related diseases. The under-funding of the trust culminated in the Jackson Inquiry. Finally, in view of a robust naming and shaming campaign run by the asbestos victims groups and ACTU, Hardie accepted its ‘moral’ responsibility towards the victims and signed a Final Funding Agreement on 1 December 2005. A Special Purpose Fund (SPF), which will be making compensation payments over a period of at least 40 years, was established under the agreement. This funding agreement was, however, subject to several key pre-conditions. One of the pre-conditions was a tax exemption of the SPF as well as James Hardie’s contributions to it under the Australian tax law.
Recently, the Australian Taxation Office ruled that the SPF is not entitled to the tax exemption as a charity. But it agreed to treat Hardie’s annual contribution to SPF tax exempt under a revised “blackhole expenditure” law enacted in April 2006. James Hardie as well as other stakeholders reacted strongly to the first ruing of the taxation office. Hardie immediately asserted that no-grant of a charity status to SPF would undermine the viability of SPF. Victims group, on the other hand, felt disappointed and considered such ruling as ‘obnoxious’.
Leaving aside what law considers as a charitable activity for taxation purposes and why, are we not going too far in labeling James Hardie’s creation (SPF) and action (contributions) as charity? Knowingly exposing workers and others to asbestos hazards, restructuring and under-funding the trust fund, and then fleeing out of the reach of victims’ legal mechanism are not, if at all, healthy symptoms of a charitable deed. What people should be getting as rightful entitlements (but for an infirmity in law) is presented to them as a token of compassionate charity. Are there no sustainable differences between what many corporations did in the aftermath of the Tsunami and Hurricane Katrina on the one hand and what James Hardie is proposing to do for the asbestos victims? One could find commonalties between the two scenarios, but there are fundamental differences too. Owning responsibility and paying for one’s wrongs does not and should not become a charity merely because of legal loopholes. This is a difference too obvious to be ignored.
