The Inclusion of General Counsel in Top Management and Tax Avoidance

Beng Wee Goh, Jimmy Lee, Jeffrey Ng
2015 Social Science Research Network  
We examine whether the inclusion of general counsel in top management is associated with a firm's tax avoidance. We find that firms with general counsel as part of the top management team have lower GAAP effective tax rate, more uncertain tax positions, a higher likelihood of engaging in tax shelter activities, and more tax haven countries in which the firm reports a significant subsidiary, relative to firms without a general counsel in top management. In addition, we find that among firms with
more » ... at among firms with general counsel in top management, tax avoidance is greater when (1) the general counsel has tax-related expertise, (2) the firm hires an external auditor with tax expertise or purchases more tax services from its external auditor, and (3) the CEO has more power over the general counsel. The Inclusion of General Counsel in Top Management and Tax Avoidance "Positioned as an officer within a corporation, a general counsel who is an influential member of its senior management cohort may help shape the corporation's activities and policies in directions that are highly desirable, exercising influence that may extend beyond the bare bones of ensuring legal compliance. A general counsel also may be uniquely well positioned to champion a transformation of the organizational culture that shapes how the corporation addresses its relationship with law and regulation." (DeMott 2005, 955-956)
doi:10.2139/ssrn.2538292 fatcat:s2zcy3s4zvchdcduofswphwnae