We're a hawk on the issues.

Market May Have Overreacted to Walgreens’ Economic Patriotism

It is a common point made in political campaigns, that businesses are sending jobs overseas. What’s even more common, rarely mentioned in politics but a ubiquitous business reality, is for prominent American companies to move their headquarters overseas to lighten their tax burden. However according to President Obama, if corporations are people then these companies are “corporate deserters” who are “technically renouncing their U.S. citizenship.”

Walgreens* purchased a 45 percent stake in a European pharmacy retail chain, Alliance Boots in 2012. They had an option to get the remaining stake in the company which they exercised this week. While these sort of overseas mergers happen all the time, what makes this noteworthy is that Walgreens will keep its headquarters here in the U.S.

When an American company merges with an international one, the company can lessen their tax burden through corporate inversion, moving their “headquarters” to the other country. Walgreens decided not to do this, which led to their stock price falling about 15 percent. According to Forbes, “Walgreens believes that the potential risks of the possible tax inversion could have put the company in a significantly worse position, such as a protracted controversy with the IRS and possible litigation” lasting more than ten years. There is also a potential for consumer backlash.

Nonetheless, this move was criticized greatly by the “investor community,” who see the decision to pay more taxes than Walgreens might otherwise less as patriotism and more gross negligence. According to Mediaite.com, Fox Business host Charles Payne said “essentially, the CEO of Walgreens destroyed capitalism, shareholder rights” and called it “one of the most shameful moves I’ve seen a CEO do in a long time.”

While Payne is more of a cartoon-person than business analyst, the point he was overstating is that this decision could arguably make Walgreens’ shareholders less money than they’d make with corporate inversion. Yet, that is what makes their act of economic patriotism so compelling. If the smart-money move was to stay in the U.S., everyone would do it. By facing the ire of the investment ilk, Walgreens has made a powerful nationalist statement.


Photo by Mike Mozart via Flickr


*Full disclosure: I have done some copywriting for a company subcontracted by Walgreens about photography.

About the author

Joshua M. Patton is a father, veteran, and writer living in Pittsburgh, PA. Along with news and current events, he writes about parenting, art, and personal stories. His serial fiction story "The Prophet Hustle" is available at JukePop.com and a forthcoming independent ebook about the cam-modeling industry "Dirty Little Windows" will be available later this summer.