US business looks less to Washington as operations go global

BUSINESS OPINION:IN RECENT years, Tupperware has seemed to epitomise 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 US. Now, however, 90 per cent are outside the US.

Tupperware might look as American as apple pie, and its headquarters are even in Orlando, near Disneyworld. But it is not American consumers now driving the group’s success, but those in Indonesia or 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 US. “Our number two 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.

Washington should take note. As the US 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 $2,000 billion of spare cash. Pundits have asked how “American” companies will react to fiscal gridlock. And when Barack Obama recently suggested American business should be grateful for the US’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 large companies holding about 60 per cent of their cash outside the US, according to a JPMorgan study. What is less widely appreciated is that corporate dynamos are less tethered to the “domestic” market.

Just look at the data. According to figures assembled by FactSet, information technology companies in the SP 500 draw 54 per cent of their revenues from outside the US, 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 (89 per cent), Bristol Myers (82 per cent) and Intel (79 per cent).

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, there is a darker side. As large American companies become less tethered to the US 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 US political donations and lobby expenditure to ensure that their interests are protected.

Defensively paying for lobbyists is easy, though; 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 has called on chief executives to push for a fiscal deal.

Jeff Imelt of General Electric has been advising the White House on competitiveness and jobs issues. But for every chief executive 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 it is tough for a chief executive to justify being involved in the US political debate when their staff is multinational. But behind this there is a bigger cost-benefit analysis: although chief executives might grumble about the shortcomings of US 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 short of practical policy ideas. Nor that US businesses keep a low profile at political conventions.

Or that men such as Goings say “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. “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 US business; and Obama’s and Mitt Romney’s great challenge.