Did you notice that Apple CEO Timothy Cook sounded a lot like Mitt Romney when he faced a grilling over Apple’s taxes? Both Cook and Romney faced tough questions about their aggressive tax-minimization strategies. Cook and Apple emerged unscathed from the ordeal, while Romney’s candidacy suffered a blow from which it never recovered. Why?
Cook’s appearance before the Senate finance committee had all the makings of a textbook Congressional inquisition: a damaging investigative report leaked in advance, a prime-time televised hearing and stern-looking Senators with well scripted questions. But Cook disarmed the critics by stressing Apple’s compliance with the law and by being candid about Apple’s desire to minimize taxes without being abusive.
Here’s the sound bite from Cook’s testimony that made it into most every media report:
“We pay all the taxes we owe, every single dollar. We not only comply with the laws we comply with the spirit of the laws. We don’t depend on tax gimmicks.”
Sounds familiar, right? Here’s Mitt Romney using pretty much the same line when discussing his taxes in a Republican primary debate in January 2012:
“I pay all the taxes that are legally required and not a dollar more,” he said. “I don’t think you want someone as the candidate for president who pays more taxes than he owes.”
But Cook’s appearance was judged a success, and while Apple’s reputation was dented a little by the tax revelations, there appears to be no lasting harm. The Financial Times captured it well:
“Casting Apple’s history as an innovator and a creator of American jobs, the 52 year old turned the potential persecution into a promotional opportunity. Mr Cook called for a lower US corporate tax rate to encourage Apple to repatriate $100bn of offshore funds. He made Apple’s Irish subsidiaries, where profits are taxed at just 2 per cent, simply seem like a rational response to the flaws of the US tax code.”
Mitt Romney, on the other hand, was judged very harshly, and controversy about his personal taxes dogged the campaign throughout the race.
The big difference was that Cook called for an overhaul of US corporate taxation and expressed a willingness to pay more tax if the system were simplified. By advocating for sweeping tax reform, Cook moved the focus away from Apple’s tax payments and web of offshore entities, where he was more likely to appear defensive and uncomfortable.
Mitt Romney never took this step. He was largely silent on tax reform, aside from a vague pledge to cut taxes, which many voters found unappealing. And he never advocated a simplified tax system that might result in higher taxes for the wealthy.
Sure, it helped Cook that Apple is an iconic, immensely valuable brand. Romney’s personal brand was not nearly as strong when he was dealing with the tax issue. And Apple’s accounting practices, while complicated, are publicly disclosed in its regulatory filings. Romney failed to disclose much, which fueled speculation and led everyone to assume the worst.
But the lesson from Cook’s appearance is that a good sound bite is a good first response, but to win the day you need more substance to your response. Taking some risk and addressing a bigger issue as Cook did, is the best way to navigate through a storm.