Name: Johnson Controls' CEO Thinks the Corporate Tax System Needs an Overhaul
Uploaded: 2020-01-03
Duration: 3 min 49 s
Description: Alex Molinaroli explains why his company moved to Ireland.

 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

Leadership

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.