In recent years, Tupperware has seemed to epitomize the American Dream. Seven decades ago, Earl Silas Tupper stumbled on the idea of using rubber seals for plastic boxes. And from those humble origins, a direct sales giant emerged, with those “Tupperware parties” selling plastic to millions of housewives. But these days those air-tight boxes come with a twist. Four decades ago, 90 per cent of the company’s sales were in the United States. Now, however, 90 per cent are outside the United States. Yes, you read that right: Tupperware Brands Inc. might look as American as apple pie; its headquarters are even in Orlando, Fla., near Walt Disney World.
But it is not American consumers who are now driving the group’s success, but those in Indonesia or South Korea or Germany. And the company is structured accordingly. It has shifted much of its production overseas and only 1,000 of its 13,600 employees are in the United States.
“Our No. 2 [executive] is English, our head of manufacturing and sourcing is Belgian, our head of human resources is German, our head of tax is Czech, one of our group presidents is a Swede, the other a Colombian,” observes Rick Goings, Tupperware chief executive officer. “We may be based in America but not a single piece of our DNA today is that of a purely American company.”
Washington should take note. As America gears up for the 2012 election, endless rhetoric is being tossed around about what “American” business needs from Washington. Politicians have been anxiously debating, for example, what might prompt business to create American jobs or invest their estimated $2-trillion (U.S.) of spare cash. Pundits have asked how “American” companies will react to fiscal gridlock. And when U.S. President Barack Obama recently suggested that American business should be grateful for America’s social infrastructure, it had the blogosphere buzzing.
But this discussion is overlaid with contradictions. As Tupperware shows, many successful “American” companies are no longer particularly American. Never mind the well-known exodus of manufacturing jobs or the fact that large companies now hold about 60 per cent of their cash outside the U.S., according to a JPMorgan study. What is less widely appreciated is that the corporate dynamos are becoming less tethered to their “domestic” market for demand, too.
Just look at the data. According to figures assembled by FactSet, information technology companies in the S&P 500 draw 54 per cent of their revenues from outside America, up from 42 per cent a decade ago. In the materials, consumer goods and manufacturing sectors, those ratios have also risen by about 10 percentage points in this period to 45 per cent, 35 per cent and 34 per cent. And for some companies, the proportion is far higher: just look at Texas Instruments Inc. (89 per cent), Bristol-Myers Squibb Co. (82 per cent) and Intel Corp. (79 per cent). As Richard Haas, head of the Council for Foreign Relations, says. “More and more American companies have passed a tipping point where more than half their earnings comes from outside America.”
This swing is good news for shareholders. After all, it has helped to shield these corporate giants from the American downturn.
But while Washington might welcome this wider corporate success in general, there is a darker side to this pattern. As large American companies become less tethered to the U.S. economy, their dance with the domestic political game becomes more ambivalent. To be sure, few business leaders will openly admit this. On the contrary, most have actually increased their U.S. political donations and lobby expenditure in recent years to ensure that their interests are protected.
Defensively paying for lobbyists, though, is easy; the costs in time and money are relatively low for a large company. What most corporate executives are notably not doing today, is getting actively engaged in promoting wider policy change. Some exceptions do exist. David Cote of Honeywell International has called on CEOs to push for a fiscal deal. Jeffrey Immelt of General Electric has been advising the White House on competitiveness and jobs issues. But for every CEO who is engaged, many more remain silent. Some blame this on the nature of their day job (that is, a fear that political involvement would not serve shareholders) or the daunting challenge of doing business in Washington. Others argue that it is tough for a CEO to justify being involved in the U.S. political debate when their staff is multinational. But behind this there is a bigger cost-benefit analysis: Although CEOs might grumble about the shortcomings of U.S. policy, they are not sufficiently desperate to act. They simply do not have enough skin in the game to make the pain of political engagement worthwhile.
It is little wonder, then, that recent earnings calls have been replete with complaints about Washington – but notably short of practical policy ideas. Nor that U.S. business leaders will maintain a low profile at the political conventions. Or, for that matter, that men such as Tupperware’s Mr. Goings say that “we tend not to get involved in American politics.” That does not mean that Tupperware is disengaged from the wider world. On the contrary, it pours huge energy into laudable projects promoting women’s rights and entrepreneurial issues. But these are global, not national, in scope.
“A lot of what we are doing transcends what governments used to do,” Mr. Goings says. “It is across borders.” Therein lies the strength of American business; and Mr. Obama’s and Mitt Romney’s great challenge.