Why Do CEOs Get Fired?

I’m providing this because it’s interesting. None of the info is mine. I’ve credited the sources in the body. Statistics determined that 52% of CEO’s were fired, 48% resigned.

Enjoy.

52% of CEOs were fired. 48% resigned.

LinkedIn study of 4000

First jobs of CEOs were

  1. consultant,
  2. software engineer,
  3. analyst,
  4. sales manager,
  5. project manager,
  6. account manager,
  7. manager,
  8. founder,
  9. associate &
  10. software developer

Forbes study of 1087 Board members of most common function before becoming CEO.

That were they doing?

  1. Biz dev, sales,
  2. engineering,
  3. info tech,
  4. consulting,
  5. finance,
  6. entrepreneurship,
  7. operations,
  8. markets

What were they doing before becoming CEOs?

  1. 72% were directors before becoming CEO.
  2. 20% were promoted internally
  3. 80% promoted externally

Why were the fired?

  1. Poor business performance
  2. Board relationship
  3. Lack of key skill set
  4. Alienating the management team

Forbes – 1087 board members

  1. Mismanaging change
  2. Ignoring customers
  3. Tolerating low performers
  4. Denying reality
  5. Too much talk, not enough action

Why the board pulls the trigger

  1. They lose the board
  2. Being in the middle of scandal
  3. Not meeting expectations
  4. Not having majority control
  5. A new buyer
  6. Fire themselves (resign)
  7. Lose influence over their team
  8. Company outgrows their abilities

How to Prevent Getting Fired

  1. Know you can get fired
  2. Grow sales
  3. Pour into team
  4. Develop new leaders
  5. Bring on new customers
  6. Bring new partnerships
  7. Create alliances
  8. Prevent mismatch
  9. (From Patrick Bet-David on You Tube)

Two Tax Systems

The 16th amendment created two tax systems.

Back to the first article in this chain: In order to get people to vote for the 16th amendment, Congress, by means of newspaper ads,  promised the American public that they would tax only profits. Other additions came by way of litigation.

Congress promised to tax only profits.

This was codified in Section 162 in 1954. It was ratified by the Supreme Court, also in 1954. Economic substance & valid business purpose we added later by litigation.

Today, this is where we stand.

There shall be allowed as deductions all the ordinary, reasonable & necessary expenditures made in pursuit of profits in a legitimate business undertaking as long as it meets the economic substance & a valid business purpose tests.

Who decides to deduct an expenditure? You do. Not the IRS. There are no limitations on that. All you have to do is prove it’s ordinary, necessary & reasonable in pursuit of profits and meets the requirements of economic substance and valid business purpose.

If the IRS wants to disallow a deduction, they have to prove it in a court of law, or you have to agree. But they’re not bashful about challenging deductions, so dot your i’s and cross your t’s.

It was quickly established that wages were pure profits, so this applies only to businesses and business like enterprises, such as rental activities.

This is the foundation of modern tax practice.

The 16th amendment singlehandedly created the modern tax system in which every business files it’s taxes differently from every other business. Those with the best tax advisers will pay the legal minimum, taking advantage of every deduction and other legal maneuvers, but those with lesser tax advisers will pay more tax than the law requires. Do that long enough and you’re out of business. It boils down to a talent issue.

This concept  puts a lot of burden on the taxpayer. It’s up to the business owner to take all the deductions available. If you miss some, it’s nobody’s fault besides your own. It’s absolutely shameful that 98% of businesses pay more tax than the law requires. GAO.

98% if businesses pay more tax than the law requires; more tax at higher rates than the Global 500.

The IRS normally has three years to audit, measured from the return due date or filing date, whichever is later. But, the three years is doubled if you omitted 25% or more of your income. Even worse, the IRS has no time limit if you never file a return. What’s more, the IRS also has no time limit on fraud.

Tax Burden on Private Businesses

Statistics tell us that privately owned businesses pay more tax than the law requires. Privately owned businesses also pay more tax at higher rates than the Global 500. Because their tax professionals are better than yours.

We agree with those statements because it jives with our experience, that’s cause for alarm for every CEO out there. 98% of our clients were paying more tax than the law required when we picked them up.

Here is the primary reason from my perspective. Professional Performance.

“The best tax professionals (or best performers in any profession) are 100 to 1000 times more competent then average performers. A few outliers outperform the entire population by leaps & bounds. There is so much difference, top performers and average performers can’t even understand each other. It is not unlike IQ in that regard.”

A tiny businessman bends over as he attempts to support a huge stone sphere that sits on his back.

CEOs Out

Every CEO has to deal with risk. It is ultimately his or her responsibility to manage any and all potential hazards to the business, whether internal or external. In fact, you could easily call him or her the chief risk manager. That’s consistent with former Intel chief executive Andy Grove’s mantra that “only the paranoid survive.” In other words, CEOs should be constantly concerned about identifying and solving for material threats to the business. Per SmartBrief.com).

Here are some CEOs who have proved the truth of that maxim recently.

NEW YORK (AP) — The CEO of eBay is stepping down as online retailer attempts to sell or spin off some of its major assets. CFO Scott Schenkel will become the interim chief executive as the company seeks a permanent replacement for CEO Devin Wenig.

The CEO of Juul Labs has been ousted, and the e-cigarette company has suspended advertising as it remains embroiled in a crisis over its vaping products. Kevin Burns, who had apologized for the nation’s teen vaping epidemic, resigned effective immediately, Juul announced Wednesday. Juul investor Altria Group, maker of Marlboro cigarettes, said it was a “decision by Juul” for Burns to go. The e-cigarette maker will suspend all of its advertising.

WeWork CEO resigns amid investor revolt.  Saying “too much focus has been placed on me,” Adam Neumann has agreed to step down as CEO and give up majority control of the company. Tuesday’s announcement came shortly after the workspace startup company — whose $47 billion valuation was reportedly slashed more than 50 percent — delayed its initial public offering, thanks to investor concerns over corporate governance and profitability. The 40-year-old has also come under scrutiny for his hard-partying lifestyle.

New York (CNN Business) The outspoken CEO of online home goods retailer Overstock.com resigned Thursday, days after he issued a press release entitled “Comments on Deep State” that claimed he helped the FBI carry out “political espionage.” The strange post from longtime Overstock chief Patrick Byrne triggered a steep decline in Overstock’s stock price last week. The company’s stock price later recovered, and it surged more than 10% Thursday on news of Byrne’s exit. In a letter Byrne issued Thursday, he stated that he is “already far too controversial to serve as CEO” and chose to step away after 20 years so that his presence wouldn’t affect Overstock’s business.

 

Good News About Tax Audits

Good news on the tax audit front for most taxpayers, but bad news on the penalty front.

The IRS trend of auditing fewer & fewer tax returns continued last year with an enormous leap forward. The IRS audited only 900,000 returns out of a total of 150 million individual tax returns filed. That amounts to only 0.06%. In 2011, they audited 12.3% of returns. Let’s face it. That’s not very many audits. That’s good news.

The IRS has been shifting its focus for raising funds from tax audits to penalties & fees for the last several years. As the audit rate has dropped, IRS penalties have become noticeably more expensive. It started with penalties of hundreds of thousands or millions of dollars for failure to report foreign assets. 1099’s have become a cesspool of penalties. But the most noticeable result is the declining audit rate for most taxpayers.

Nobody that we prepare tax returns for needs to worry about a tax audit anyway. In the first place, we absolutely won’t help anyone cheat. Life is too short for both of us to play that game. In the second place, we’ve never had a bad result in a tax audit. Sometimes, there is a disagreement on an audit, and we have to fight. (We absolutely will.) Sometimes, we have to push the issue all the way to the courthouse steps. But, so far, the IRS has always capitulated. Once they capitulated in the hallway in front of the court room. That was a case of a very disagreeable appeals agent.

Some people think the strategies we use are a little risky. Let me disabuse you of that impression. We don’t go anywhere near the dreaded gray areas. We stay right smack dab in the middle of the tax code. Everything we do is completely litigated. But we are not afraid of doing things that are not commonly done by privately owned businesses and their owners. In fact, most of the things we do fall into that category. Multinationals are subject to the same tax code you are subject to. We can do anything they do and many things that are impossible for them to do. Privately owned businesses like you are sitting in the sweet spot. Within reason, the sky is the limit. Unfortunately, it’s been my experience that most tax practitioners spend all their time & effort on preparing your tax return. We spend a good deal of our time trying to find ways to cut your tax, legally.

Here’s a couple of charts to clarify things.

Individual Income Tax Returns Examined in Fiscal Year 2018
by Size of Adjusted Gross Income
Size of adjusted gross income (AGI)* Percentage of returns
filed in Calendar Year 2017**
Percentage of returns examined in
Fiscal Year 2018***
No adjusted gross income 1.68% 2.04%
$1 but less than $25,000 35.59% 0.69%
$25,000 but less than $50,000 23.65% 0.48%
$50,000 but less than $75,000 13.44% 0.54%
$75,000 but less than $100,000 8.66% 0.45%
$100,000 but less than $200,000 12.41% 0.44%
$200,000 but less than $500,000 3.72% 0.53%
$500,000 but less than
$1 million
0.58% 1.10%
$1 million but less than
$5 million
0.25% 2.21%
$5 million but less than
$10 million
0.02% 4.21%
$10 million or more 0.01% 6.66%

From the New York Times, here’s the trend. Trending down.

That’s a little small. Who knew? But you can see the trend from 2011 at it’s highest to 2017. Quite a drop.

There you go. Enjoy.

Good news on the tax audit front for most taxpayers, but bad news on the penalty front.

 

The IRS trend of auditing fewer & fewer tax returns continued last year with an enormous leap forward. The IRS audited only 900,000 returns out of a total of 150 million individual tax returns filed. That amounts to only 0.06%. In 2011, they audited 12.3% of returns. Let’s face it. That’s not very many audits. That’s good news.

 

The IRS has been shifting its focus for raising funds from tax audits to penalties & fees for the last several years. As the audit rate had dropped, IRS penalties have become noticeably more expensive. It started with penalties of hundreds of thousands or millions of dollars for failure to report foreign assets. 1099’s have become a cesspool of penalties. But the most noticeable result is the declining audit rate for most taxpayers.

 

Nobody that we prepare tax returns for needs to worry about a tax audit anyway. In the first place, we absolutely won’t help anyone cheat. Life is too short for both of us to play that game. In the second place, we’ve never had a bad result in a tax audit. Sometimes, there is a disagreement on an audit, and we have to fight. (We absolutely will.) Sometimes, we have to push the issue all the way to the courthouse steps. But, so far, the IRS has always capitulated. Once they capitulated in the hallway in front of the court room. That was a case of a very disagreeable appeals agent.

 

Some people think the strategies we use are a little risky. Let me disabuse you of that impression. We don’t go anywhere near the dreaded gray areas. We stay right smack dab in the middle of the tax code. Everything we do is completely litigated. But we are not afraid of doing things that are not commonly done by privately owned businesses and their owners. In fact, most of the things we do fall into that category. Multinationals are subject to the same tax code you are subject to. We can do anything they do and many things that are impossible for them to do. Privately owned businesses like you are sitting in the sweet spot. Within reason, the sky is the limit. Unfortunately, it’s been my experience that most tax practitioners spend all their time & effort on preparing your tax return. We spend a good deal of our time trying to find ways to cut your tax, legally.

 

Here’s a couple of charts to clarify things.

Individual Income Tax Returns Examined in Fiscal Year 2018
by Size of Adjusted Gross Income
Size of adjusted gross income (AGI)* Percentage of returns
filed in Calendar Year 2017**
Percentage of returns examined in
Fiscal Year 2018***
No adjusted gross income 1.68% 2.04%
$1 but less than $25,000 35.59% 0.69%
$25,000 but less than $50,000 23.65% 0.48%
$50,000 but less than $75,000 13.44% 0.54%
$75,000 but less than $100,000 8.66% 0.45%
$100,000 but less than $200,000 12.41% 0.44%
$200,000 but less than $500,000 3.72% 0.53%
$500,000 but less than
$1 million
0.58% 1.10%
$1 million but less than
$5 million
0.25% 2.21%
$5 million but less than
$10 million
0.02% 4.21%
$10 million or more 0.01% 6.66%

From the New York Times, here’s the trend. Trending down.