Message from Michael W. Lamach, Chairman and CEO- Ingersoll Rand. August 28, 2014
Dear U.S. colleagues,
Last week, I was visiting our Washington state locations and an employee asked me about our status as an inverted company and if what he was reading in the news about us was true.
Corporate inversions have recently become a favorite media and political topic – showing up everywhere from The Wall Street Journal and Fortune to Jon Stewart’s The Daily Show – and from my perspective, what’s played out in the media is not really accurate. I never want you to feel unclear about what’s going on in our company. Let me take a minute of your time to share some background on the topic.
An inversion occurs when a U.S.-incorporated company becomes incorporated in another country or becomes part of a smaller company that is incorporated in another country. In our case, 89% of our shareholders voted 13 years ago to incorporate elsewhere, and today we are in Ireland where we have substantial operations. Interestingly, if we were to ever consider a corporate domicile in a place other than Ireland, our shareholders would need to approve this by a majority vote. My opinion, based on conversations with many large shareholders, is that our shareholders overwhelmingly support the current corporate domicile in Ireland. And therefore, to be perfectly clear, this is not an option under current consideration.
Many of the media articles have accused companies like ours of being unpatriotic and one went so far as to include my photo and state, “…CEO Michael Lamach says one place Ingersoll Rand gets its engineering and technical talent is “our U.S. military veteran recruiting program.” The company, whose brands include Thermo King, Trane, and Club Car golf carts, subsequently moved to Ireland.” Is this statement trying to say that American Veterans are better off being punished with unemployment as opposed to being given a good paying job by a global, Irish-domiciled company? I was stunned at the absurdity of that implication. Our Veterans Employee Resource group knows and shares my passion for thanking returning veterans for their service – and providing jobs where we can. I am proud that we have increased our veteran’s hiring 50% year-over-year from 2012 to 2013, and we’re on track to do that again in 2014. You should also know that Ingersoll Rand is a Commemorative Partner with the U.S. Vietnam War Commemoration and our Veteran’s employee group is working to get our volunteer plans in place for commemorations over the next few years.
Does our incorporation in Ireland mean we are unpatriotic or anti-American? No, just the opposite. We pay all applicable U.S. taxes. We employ 22,000 people and have 22 manufacturing facilities in the U.S. Our heating, ventilation, air conditioning units, transport refrigeration units, compressed air systems, power tools, fluid management and material handling equipment and Club Cars are all made in America for our U.S. customers, as well as some customers around the world.
One of those customers is the U.S. government. We estimate as much as a billion square feet of government office space is cooled with a Trane air conditioner – everything from veteran’s hospitals and military bases to buildings like the White House and the Environmental Protection Agency (EPA) headquarters. We have long-term energy savings projects at 16 federal properties that guarantee savings of $500 million annually to the federal government. They choose us for the same reasons other customers do – we are known for energy efficiency, superior engineering, fair pricing and customer service. That’s important because without us, they could face higher costs and lower energy efficiency.
You may ask then, why did the company go through the process of inversion 13 years ago?
The U.S. tax system hinders the ability of American companies to compete in the global economy. The U.S. tax rate of 35% is the highest among industrialized countries and the U.S. has one of the last worldwide tax systems. That means U.S. multinational companies pay taxes of 35% on everything they earn in the U.S. and on whatever they earn elsewhere in the world. Multinational competitors based outside the U.S. pay only the lower local country tax rate on the income they’ve earned outside the U.S., instead of the higher rate paid by U.S.-based companies.
To avoid this, many U.S.-incorporated multinational companies don’t bring money they earn in other places back to the U.S. and that can limit investments in their U.S. operations. In contrast, our shareholders decided Ingersoll Rand’s management team and Board of Directors are in the best position to determine how to invest our global earnings and should not be placed in a situation where we either had to pay increased taxes or not use money earned elsewhere for growth in the U.S. So they voted to incorporate outside of the U.S. to give us flexibility to invest where we see fit, including in our U.S. employees and facilities.
The need for comprehensive business tax reform is the real issue and Congress is not addressing it. It is frustrating for me to watch and read stories that skirt the fundamental problem and paint corporate America as unpatriotic for making sound, legal and strategic business decisions. As I told the team in Washington state, if you want to take action in some way, I encourage all of our employees to get involved in the political process and urge your legislators to take up real tax reform.
Thank you for taking time to read this letter. I hope it helps to clarify any misunderstanding about Ingersoll Rand and our commitment to the U.S. I am available to take your comments and answer any questions you may have. You can send them to the Office of the CEO.
Chairman and CEO, Ingersoll Rand