Johnson Controls

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Global business is back. After limping through a worldwide financial crisis and economic slowdown, the 500 largest companies ranked by revenues shattered all sorts of performance records in 2013: They racked up combined revenues of $31.1 trillion, up 2.5% from 2012, and profits soared 27% to nearly $2 trillion. China’s 95 companies (up from 89 last year) posted $5.8 trillion in revenues. The U.S. has four fewer companies on the list than last year but remains (for now) the country leader, with 128 corporations on the list—including No. 1 Wal-Mart Stores—reporting $8.6 trillion in revenues. 

Wal-Mart stayed on top as its sales crept closer to half-a-trillion dollars. Apple moved into the top five. And UnitedHealth Group continued its steady climb. 

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CEO George Oliver says he has the technology to create buildings with net zero emissions.

Johnson Controls tells CEOs "Act Now" to solve the climate crisis

Leadership

Johnson Controls tells CEOs "Act Now" on climate crisis

Johnson Controls tells CEOs "Act Now" to solve climate crisis

George, thank you so much for joining us to talk about johnson controls and climate change. Recently, you played a very active role in the United Nations climate Summit in Glasgow, and the headlines were encouraging governments and corporations around the world reaching an agreement to cut greenhouse gas emissions. But the big question that many people were asking is that are all these promises and pledges going to lead to meaningful action, what can we expect, what's your take on all this? I'm extremely encouraged, I think, um you know, when you look at the problem, we're trying to solve, it is big, it is global and it does require all constituents to come together and be aligned and how the problem is going to be solved. And I think what has changed here over the last, it's really been the last 12, months where not only our government stepping up and making commitments to achieving their goals and in supporting the paris accord and ultimately the overall commitment to climate change, but I think what I've seen is is that combined now with companies and corporations stepping up and understanding that the problem is real. It's it's, you know, the there needs to be urgency and how we're solving the problem. I'm gonna have to be solved. Looking at ecosystems where you look at the, the overall, you know, front and back, um, you know, supply chains and overall industries, and I think there's a genuine commitment now to solving the problem. I think now it's it's more about the, how, you know, how the problem can be solved. How, how all of the different constituencies come together and then develop a roadmap and then begin to execute, I'm sure you heard that there were a lot of experts who are saying that this agreement was a compromise. They wanted bigger, bolder cuts and more money to do the job. What do you say to that? I think, you know, when you look at the overall commitments, I think they are bold across the board and I think at the end of the day there's there's real understanding of the problem and I think now demonstrating the bold commitments and how we're going to go about solving the problem because it is going to require, you know, the the right amount of regulation and over from a policy making standpoint, the right policy combined with the, you know, the right um innovation and technology and new business models and like I say, you know, full front to back, you know, solutions that ultimately solve the problem. I understand there were a lot of Fortune 500 ceos at this meeting, one of them Scott Kirby of United Airlines was a strong advocate for all the things that you're talking about. What were other ceos telling you at the meeting, this full commitment across the business community and ultimately what we're setting out to do. And I think we all recognize that the business community plays a huge role uh and how the problems are solved. And I think it's built on not only the making sure we're getting the right re investment in innovation and technology and in developing new solutions, but then working with all of our customers so that as we look at the problem, we're balanced, you know, with the approach and how we we go about solving the problem so that we can obviously minimize the economic impact or while we're solving the problem, be able to generate positive economic impact. So clearly all of these developments are good for your company and the business here in tell our viewers exactly what does johnson controls do? Johnson controls is a global leader in smart, healthy, sustainable building technology solutions. We've been in business for over 130 years and we've got about 100,000 employees globally that are very passionate about what we do for our customers, were very much focused on sustainability and it has been part of our business for for decades. We've made incredible progress over the last two decades, reducing our our uh Carbon emissions by up to about 70%. Um and a lot of what we do is actually invest in technology and innovation that allows us to be able to take the multiple systems within the building, bring those together into one platform and then utilize the data to be able to create new outcomes. So with all this new interest and passion to reduce carbon emissions. I bet your phone is just ringing off the hook with new customers. What's in the reaction? Absolutely. You know, we just did our recent earnings and we communicated that we have a backlog that's up double digit where we're getting good traction with the new technologies and new solutions that we're bringing into the market. We've got a lot of excitement around the company relative to what we're doing and so what I would also tell you Suzie is that we're maybe historically buildings have been served at a lower level has been more viewed as a cost or balance sheet item within our customers. It has now become much more strategic and so as health of that, the engagement that I'm having at the most senior levels within our customers, engaging in what the future is for their buildings and how do they get to net zero carbon emissions and how do they make their buildings the healthiest and safest buildings? Um, yes, those engagements are have significantly accelerated. I was surprised to hear you mentioned this statistic to investors recently that buildings represent about 40% of global greenhouse emissions and you said that we really can't tackle climate change without making substantial investment in buildings. Well, you know, that's a tall order for many companies who want to be environmentally responsible. But just the whole idea that you have to redesign and Dick carbonized an existing building. It just is overwhelming in terms of cost and in terms of complications how do you get ceos on board to take this on? We have the technology today and we're deploying that technology successfully to be able to solve the problem that this is a big headache for our customers when you look at the order of magnitude of the problem. But actually with the inefficiency that exists within a building today, we can go in, we can upgrade retrofit, we can deploy our digital platform, we can begin to put the data to work and ultimately change the outcomes and reduce energy by 50%. And so we have the ability now to create Net Net zero buildings as a service, including financing that over a period of time, we can ultimately deploy a solution and get an economic return for our customers. So although it seems like a big problem to solve that, we have the capabilities in the business models today to work with our customers to ultimately achieve that end result. So we're working hard to get our customers educated and ultimately begin to deploy Now, this combined capability that I believe is going to fundamentally change the game. And to what extent do you think that the recent signing of the infrastructure bill will also motivate many members of the business community to get on board with making these environmental changes. I think it's a huge catalyst I think with the resource deployment through this bill is focused on the in the right areas which are buildings and infrastructure where we can not only upgrade the infrastructure but make it much more sustainable and being able to achieve, achieve our climate goals pretty much across the board. So this is a huge catalyst, who to really begin to act George Besides being the ceo of johnson controls, you're also the chairman of the Business Roundtable's Committee for Energy and Environment, so you're in a position that many business leaders look to you for guidance and advice on all of these kinds of issues. What is the single most important thing that you say to them, especially the ones that are on the sidelines and, you know, just kind of in a cautious wait and see mode, what do you say to them so that they'll take action? So I would say move now, what I would say, there's a genuine opportunity to refresh your business, energize your teams, it's creating a lot of momentum across the globe, um that most businesses, I think the businesses that take a leadership position and get to the solution first are going to be the ones that are going to be advantaged. It's going to be great for the planet. It's going to be good for the bottom line. So there's really no reason to wait. I like to encourage that the idea of, of acting now is gonna position you in a much better place in a much better competitive place on a go forward basis, no matter what industry that you're in

 So you're going to continue as CEO of the newly merged Johnson Controls and Tyco for the next 18 months. What would you say is the most important thing you need to do as a leader? What's most important is that everyone feels like they're part of this new company, that this new company that we've formed is not the old Johnson Controls or the old Tyco. It's the new Johnson Controls. And I think as quickly as we can to get to that place, and I think it shows up in how I present myself, and how my leadership presents itself. I think we'll just all be better off. Well, how do you motivate employees to believe that they're all in this together and to follow your lead? I think first, you have to be able to create a vision that says, this makes sense. What we're doing makes sense. And not only doesn't make sense. I can see that we're doing something bigger than myself, and I want to be a part of that. And so the fact that people can see that vision, can see themselves in that vision, and it just makes sense for our customers, and for them, I just think it makes it easy. So we just need to be able to articulate that. So Tyco's CEO George Oliver is going to take over from you in 2018, right? That's correct. OK. So any advice that you're going to have for him? Well, I'm sure I'll have lots of advice, but he's going to have lots of advice for me, too. I think the thing that I would say to George is really no different than what I would say to anyone else that's coming to be a part of this new company. I think the most important thing is for us to look for the good in each company and each individual, because there's going to be so much good. And not get distracted by any of the distractions or any other things that are surrounding this whole event that can get in the way of us looking forward. You've spent your entire career at Johnson Controls, more than 30 years. And I'm sure you've had a lot of mentors along the way. What would you say was the best leadership advice that you ever got and that really stuck with you as you became CEO? A long time ago, the first time I had an opportunity to lead people, I had all the answers, as we all do when we're young. I was telling people what it is I thought they should do, and I couldn't get things done, and things just didn't happen. And I had a gentleman pull me aside, and was observing what I was doing. And he said, you know, if you spent a little more time listening about people what they were trying to accomplish and what motivated them, you might get a little more done. He was right. If you spent a little bit of time listening, a little less time telling, sometimes you get a lot further along. And that's something that has stuck with me for a long, long time. 

How Johnson Controls' CEO Plans to Unite Two Giant Companies

Alex Molinaroli explains how he will lead his company into a new era.

So you're gonna continue a CEO of the newly merged Johnson Controls and Tycho for the next 18 months. What would you say is the most important thing you need to do as a leader? What's most important is that everyone feels like they're part of this new company. That this new company that we've formed is not the old John's controls of the old Taeko. It's the new jobs controls, and I think as quickly as we can to get to that place. And I think it shows up in how you know how I present myself, how my leadership presents itself. I think we'll just all be better off. Well, how do you motivate employees to believe that they're all in this together and to follow your lead? I think you first you you have to be able to create a vision that says, This makes sense. What we're doing makes sense and not only doesn't make sense, I can see that we're doing something bigger than myself, and I want to be a part of that. So the fact that that people can see that vision can see themselves in that vision, and it just makes sense for our customers and for them. I just think it makes it easy. So I just need to go to articulate. So, uh, Tyco CEO George Oliver is going to take over from you in 2018 driver. Okay, so, um, any advice that you're gonna have for him? Well, I'm sure I'll have lots of advice. You'll have lots of advice for me, too. I think that the thing that I would say that George is really no different than what I would say anyone else that's coming to be a part of this new company, I think the most important thing is for us to look for the good in each company in each individual, because there's going to be so much good and not get distracted by any of distractions or any other things that are surrounding this whole event that can get in the way of us looking for you've spent your entire career at Johnson controls more than 33 years, and I'm sure you've had a lot of mentors along the way. What would you say was the best leadership advice that you ever got? And that really stuck with you and you became you a long time ago when I was the first time I had an opportunity to lead people. I was I had all the answers is we all do when we're young. I was telling people what it is I thought they should do, and I couldn't. I couldn't get things done. They think just didn't happen. And I had, um, Gentlemen pulled me aside and was observing what I was doing. And he said, You know, if you spent a little more time listening about people, what they were trying to accomplish and what motivated them, you might get a little more done. He was right. You know, if you spent a little bit of time listening a little less time telling, sometimes you get you get a lot further along, and that's something that has stuck with me for a long, long time.

 Alex, congratulations on pulling off this huge merger with Tyco. I'm sure you're very excited about it. But it's also stirred up a lot of controversy after all your moving your headquarters from Milwaukee to Ireland. So what do you say to all this criticism? First off, the strategic sense of us coming together is what's most important. It's an opportunity to grow. It's an opportunity to create new value for our customers and for our shareholders and for our employees. That's most important. But if you have two companies that come together-- one's domiciled in Ireland and one's in the US, one has a 12 and 1/2% tax rate and one has a 35% tax rate-- I think that from a shareholder perspective just to do my duty, it makes no sense not to take advantage of the tax situation. We get it. I mean, Ireland has one of the lowest corporate tax rates in the world. The US just the opposite, one of the highest. But a lot of people dislike these so-called inversions, whether it's Donald Trump or Hillary Clinton, Barack Obama. What's the solution? Fix the tax system. I mean, I think the tax code needs to be fixed. I mean, I'm not looking to leave the United States. That's not what this was about. But if we have a tax system that is fair, that doesn't punish someone to be a global multi-industrial, doesn't disadvantage a US domiciled corporation competing with other multi-industrials, then I think that you wouldn't see this. I mean, I think the answer is maybe politically not easy, but I don't think it's difficult. So let's say that US taxes were super low. Would it still have made sense to do this deal? Of course. It really didn't-- this was not about taxes. The fact that we merged and became an Irish company is part of the deal. But it's not why we did the deal. If the US tax system was different and we weren't encouraged to move overseas, we'd still do the deal. We just would have a different domicile. So let's talk a little bit more about the merger between Johnson Controls and Tyco. What do you want this new company to be? From my viewpoint, if you think about what it is that we are as two companies, we have a very successful battery business, but in the building space, we are the leader in building controls and HVAC systems. Tyco is the world leader in security and fire alarm systems. And you think about what's happening with technology and everything that we do, get to commercial building space, we are the leader. You put us together, we're going to have an unbelievable opportunity to create value for our customers. Both companies have been scaling down. Johnson Controls is going to be spinning off its auto parts unit. Tyco has been slimming down. Where do you see growth coming from? Infrastructure in buildings is no different than the infrastructure that's in your home, in your car, in your pocket with your iPhone or your smart devices. Think about buildings becoming smart. Think about the opportunity. Well, if you have that infrastructure with fire alarm systems, security systems, and building control systems, we'll be in a position to provide that promise that really hasn't been seen yet within the commercial building space. Alex, we've seen a lot of companies that are getting smaller or splitting up. Dow and Dupont are going to be splitting up. Hewlett-Packard has done its own split. Companies like General Electric have been selling off units. Why did it make sense for Johnson Controls to get bigger? I just would not think about the size of what we do as it relates to what we do and how we do it and where we do it-- number one in fire alarm systems, number one in security systems, number one in building control systems. Bringing those technologies together for building owners is what's going to make us unique. The fact that we happen to already be the largest of each one of these categories, that just makes it even better. 

Johnson Controls' CEO Thinks the Corporate Tax System Needs an Overhaul

Alex Molinaroli explains why his company moved to Ireland.

Alice, congratulations on pulling off this huge merger with Tyco. I'm sure you're very excited about it, but, you know, it's also stirred up. Ah, lot of controversy. After all, you're moving your headquarters from Milwaukee Toe Ireland. So you know, what do you say to all this criticism? First off, the strategic sense of us coming together is what's most important is an opportunity to grow its opportunity to create new value for our customers and our shareholders. And for our employees, that's most important. But if you have ah, you know, tooth companies that come together ones, ones domiciled in Ireland, ones in the U. S. One has the 12 and 1/2 percent tax rate and one has a 35% tax rate. I think that from a shareholder perspective just to do my duty, it it makes it makes no sense not to take advantage of the taxes. We get it. I mean, Ireland has one of the lowest corporate tax rates in the world. The U. S. Just the opposite, one of the highest. But there's a lot of people dislike that the so called inversions, whether it's Donald Trump or Hillary Clinton, Barack Obama. What's the solution? Fix the tax system. I mean, I think the tax code needs to be fixed. I I'm not looking toe leave the United States. That's not what this is about. But if we have a tax system, that is, that is fair. That doesn't punish someone to be a global, multi industrial doesn't disadvantage jus domiciled corporation competing in the multi and with other multi industrials. Then I think that you wouldn't see this. I mean, I think the answer is maybe politically not easy, but I don't think it's difficult. So let's say that U. S taxes were super low. Would still have any sense to do this deal. Of course it wouldn't. It really didn't. This was not about taxes. Um, the fact that we merged and became an Irish company is part of the deal, but it's not why we did the deal. If the U. S tax system was different and we weren't encouraged move overseas, we'd still do the deal. We just would have a different domicile. So let's talk a little bit more about the merger between Johnson Controls and Tycho. What do you want this new company to be? And from my viewpoint, if you think about what it is that we are as two companies, we have, ah, very successful battery business. But in the building space, we're are the leader in building controls and h p A C systems. Taeko is the world leader in security and fire alarm systems, and you think about what's happening with technology and everything that we do get to commercial building space. We are the leader. You put us together, we're gonna have an unbelievable opportunity to create value for our customers. Both companies have been scaling down Johnson controls is going to be spinning off its auto parts unit. Tyco's been slimming down. What do you think growth comes from? Infrastructure in buildings is no different than the infrastructure that's in your home. In your car, in your pocket with your iPhone Are you're, uh, you're you're smart devices. Think about buildings becoming smart. Think about the opportunity. Well, if you have that infrastructure with fire alarm system, security systems and building control systems will be in a position to provide that that promise That's really hasn't been seen yet. Within the commercial building space else, we've seen ah lot of companies that are getting smaller or splitting up, Dow and DuPont are gonna be splitting. A Hewlett Packard has done its own split. Companies like General Electric have been selling off units. Why did it make sense for Johnson controls to get bigger? I just would not think about the size of what we do is relates to what we do and how we do it and where we do it. Number one in fire alarm systems, number one in security systems under number one and building control systems. Bringing those technologies together for building owners is what's gonna make us unique. The fact that we happened to already be the largest of each one of these categories, that just makes it even better.

You spent your entire career at Johnson Controls, at one company. What was it like to go from a senior executive at the company where you've been your whole career to being CEO? You know I think it's like boiling a frog. I've been there for 32 years. I never saw myself as CEO. I don't even think about it everyday. I think about it's a privilege to lead a company that I've That's a big part of my life. I mean this is not just a job for me, it's a big part of my life. And as I think about my career, looking back at it and thinking about how I got here, it's been an incremental process. But a process of learning, a process of engaging, a process of working with people that I enjoyed being with. And so I feel like I've been preparing for this job for 31 years. You made a big announcement that's gonna affect the company, gonna basically split it in half. Mm- hm. Sad to say you're gonna probably drop out of the Fortune 100, at least temporarily. Yeah. But how do you communicate that culturally? How do you lead a big organization? You've got many thousands of employees, and how do you communicate, we're gonna make a big change and here's how it's gonna go, and this is the right way to go, this is the right decision? Yeah. Well, I think I do have one advantage. I think the fact that I have been here for 32 years and that I'm a known quantity and that I'm not someone that's coming outside of the company and looking at it from an external view and saying " what we have doesn't work ." I've tried very hard to get the organization aligned around the strategies, understanding what it is that we're trying to accomplish. And so that hopefully the steps that we've made, including this last step, makes sense. Whether everyone would agree or do it exactly the same way. Obviously we'd all do things differently. But what I hope is that people understand why. I hope that we've been transparent in the process. We communicate and we try as much as we can to communicate. As open and honestly as possible in an environment we work in. And you know, what I believe is that people understand that we're doing this for the right reasons. What would be the one best piece of leadership advice or just advice that you've gotten in your career? I think the most important thing is to try not to put your values and your beliefs and imprint them on other folks. When you listen to people, try to be as empathic as you can and try to understand your perspective. You know, that I may be talking about something that's based on my experiences You may have a whole different set of experiences, I'm sure you do. I try as best I can to make sure that I try to understand people's perspectives. So that I can hopefully communicate more effectively. [ BLANK_AUDIO ]

Alex Molinaroli discusses leadership through the process with Fortune’s Assistant Managing Editor Brian O'Keefe.

Johnson Controls CEO on splitting up the company

Alex Molinaroli discusses leadership through the process.

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