2014 Business Leaders Forum - Thomas Falk

🎥 Oct 01, 2014 📺 Marquette Business ⏱ 43m 👁 534 views

CEO of Kimberly-Clark speaks on "The Sustainable Enterprise"

About Thomas Falk

In a 2014 discussion on sustainable enterprise, Thomas Falk, then Chairman and CEO of Kimberly-Clark, described the company's environmental efforts, noting that about 40% of its sales came from products designed to be recycled, reused, or more environmentally respectful. He stated that while consumers would not pay more for environmentally friendly products, they were increasingly willing to choose them if performance was equal. Falk also discussed corporate culture, saying the company believed "people are the heart of what we do." He referenced winning the Catalyst Award, explaining that for him the award was not about fairness or equity but about having "the very best talent," and he used the analogy of picking an all-star team to illustrate the value of diversity in talent selection. Falk also addressed ethical conduct, recounting an incident in the company's Korean operation where an employee acted inappropriately. He said the remediation plan involved having that team lead training for the rest of the region, using their experience as a learning example. He emphasized that it had taken Kimberly-Clark 140 years to earn a reputation as an ethical company and that it could be lost quickly with a single mistake.

Source: AI-verified profile updated from Thomas Falk's recent appearances. Browse all interviews →

Transcript (20 segments)

Mark Epley0:09

Okay, welcome everybody. On behalf of the College of Business Administration at Marquette University, I'd like to welcome you to the 2014 Business Leaders Forum. This is a marquee year for a marquee event, as this is the 15th year that we are running the Business Leaders Forum. The first Business Leaders Forum was in 2000; the speaker was Wayne Sanders, CEO of Kimberly Clark. This year it's totally fitting that 15 years later, on the 15th anniversary, the current CEO of Kimberly Clark, Tom Falk, is here to be the keynote speaker. Tom will be speaking on how Kimberly Clark built a sustainable enterprise. Tom is only one of eight CEOs who have served at Kimberly Clark. By the way, I'm Mark Epley, I'm interim dean of the College of Business Administration and Bell Chair in Real Estate. Today I'd like to start with a couple of quick thank yous. The thank yous first go out to the folks who have made this luncheon possible. First, I'd like to thank the folks in the College of Business who make me look good and the College of Business look good. In particular, I'd like to thank Deb Reader and the special event staff in the College of Business. Let's give them a round of applause. Importantly, I'd also like to thank the Toth family, Kathleen, Frank, and Michael, for their financial support of this event. Without their financial support it would not be possible. Let's give it up for the Toth family. So, I'm going to quickly run through today's schedule. Today's schedule: after the invocation by Father Ron Bowski, we'll have about 25 minutes to enjoy our lunch and those around our table. At 12:30 I will return to the podium for a short update on the College of Business. I'll then welcome President Mike Lovell to the podium and he'll give you a bit of an update on the University and we'll introduce our 2014 Business Leader Forum leader, Tom Falk. Tom has agreed to also engage you in a question and answer session at the end of his discussion, so please be prepared. Additionally, as is always the case, we have students who have classes, so they'll be milling about in about another 45 minutes going back to class, so please know that they're leaving for a good reason. At this point, I would like to welcome Father Ron Bowski, Society of Jesus, English professor and chaplain for the College of Business Administration, to give the invocation.

Ron Bowski3:11

Ron, this Business Leaders Forum meets to consider the sustainable enterprise. Such an enterprise pursues the capacity to endure, to maintain well-being and continued growth of the essentials for a better future. That kind of project needs a sure grounding for the sake of a better future, a grounding easily found in the Judeo-Christian faith. Psalm 23 provides that foundation when it prays: 'Lord God, be my rock of refuge to which I may continually come, for you are my stronghold, my hope, my trust, my rock.' Such a sure footing serves Ralph Waldo Emerson in his vision for the American Scholar, whom he identifies as the authentically original American thinker. And the first influence for the American Scholar is nature. Emerson wrote: 'Every day the sun, and after sunset night and her stars, ever the winds blow, ever the grass grows, every day men and women conversing, beholding and beholden. There is never a beginning, there is never an end to the inexplicable continuity of this web of God, but always circular power returning to itself. Therein nature resembles the Scholar's own spirit, so entire, so boundless.' A more specific vision comes from the Jesuit poet Gerard Manley Hopkins. He wrote: 'The world is charged with the grandeur of God. It will flame out, like shining from shook foil. But generations have trod, have trod, have trod, and all is seared with trade, bleared, smeared with toil. And for all this, nature is never spent. There lives the dearest freshness deep down things, because the Holy Ghost over the bent world broods with warm breast and with bright wings.' And so, in gratitude for the ever-sustaining rock of faith, for the Holy Spirit's bright wings, let us bow our heads and pray. We thank you, Creator God, for the goodly heritage you offer us, from green downland to the deep salt seas, and for the abundant world we share with your creation. Lord, grant us the wisdom to care for the earth and till it. Help us to act now for the good of future generations and for all your creatures. Help us to become instruments of a new creation, founded on the covenant of your love. Finally, Heavenly God, we thank you for the food your bounty gives us. Grant that we may freely give to others what you have so generously given to us, and that we all may share in the banquet of heaven. We ask this through Christ our Lord, and let us all respond by saying amen.

Mark Epley6:13

Amen. Thank you, thank you. Say, prior to welcoming President Lovell to the stage, I'd like to give you a brief update on a few things that are happening in the College of Business. I've been allocated 3 minutes to do it, so here goes. First off, we're welcoming 397 new freshmen and transfers to the College of Business this year. That's about 20% of the incoming class, and it's been that way for a number of years. We had about a class of 2,000 this past year. Interest in taking business courses in the College of Business continues to increase. Over the last four years, the Graduate School of Management and the College of Business more broadly grew by 9.7% credit hours over the last four years. And we couldn't be more proud of our 2013 graduating class. Within six months of graduation, 90% were either placed in military service or went on to graduate school, and that importantly includes a 96% reporting rate. And for those of you who are concerned about them working at McDonald's or other fast food restaurants, we actually give you all the employers right on our web page as well. And one of the reasons why we did so well with our placement is 88% of our students take up internships. So thank the many of you out there for the internships you provide for our students, and more than 30% have two or more internships. This College of Business also has maintained a top 100 ranking in both the U.S. News and World Report ranking of business schools as well as the Bloomberg Businessweek rankings. Additionally, and kind of excitingly, in the College of Business we have 10 new faculty members this year. That's more than we've seen in decades. In part, we've had a couple of departures, but we've had a number of folks retire. We're delighted with their energy, their passion, and their talent, and we're really happy to have them on board. I'd like to give you a quick update. We talked about this last time we were here on the Day One vision for business. What we really want to do in the Day One vision is to teach business and build character. And when it comes to the teaching business piece, we really have two things I want to talk about. The first is that we've prototyped a course called Business Day One, and what that's about is teaching students how businesses create value and make money. They will be taking it in their first semester when they get on campus. We're going to be teaching business on day one. That's one of the important things, and one of the things that allows us to be distinctive within our own space because what we have is we have direct admittance to the College of Business, different from some of our Big Ten competitors in the area. So they start taking business courses on day one. We're moving our curriculum in business earlier as well. This year we have 800 students in accounting. In other words, our first accounting class is being taken by the sophomores and the freshmen as we move that forward. The reason why we're moving the business curriculum earlier in their coursework is it allows them to take a course in their chosen field in their sophomore semester and then have a meaningful sophomore semester internship or sophomore summer internship, and then even a better junior summer internship as well. And additionally, if you take your first course in your field in your sophomore year, we can teach intermediate courses in the junior year and upper level courses in the senior year. There's a real virtuous cycle that we feel by moving this curriculum around, it will help us a whole lot. A second piece of what we're really trying to do from the business side is really work on our applied programs. It's one of the things we're noted for. I think we've got excellence in our applied programs. There's a number of them, and there's good news on two fronts there. The first thing is AIM, AIM is the Applied Investment Management program. Some of you may have heard about that program. It's where the students actually invest about two million of the University's endowment. Yeah, they really do that, President Lovell, in securities. And what we've done is we've expanded that program from just the Applied Investment Management to a private equity track as well, and that's been very well received. Once again, expanding where we have pockets of excellence and really expanding on the applied side of things. A second thing I want to talk about briefly is our supply chain program continues to do excellent things and was recently ranked number 16 by Gartner, which is a great ranking from the supply chain folks. I'll hold off on the character thing, but know that that's coming in future discussions with you. So before I introduce President Lovell, I'd like to acknowledge and ask for our students, our faculty, and our administrators to stand up and be recognized. They're really here, and so I'd like to give them a big round of applause. Please stand up, let's give them a round of applause. Great, thank you all for everything that you do for Marquette. I greatly appreciate it. And now it's my great pleasure to introduce a man who after only three months on the job is likely familiar to you all. Please welcome the 24th president and the first lay president of Marquette University, Dr. Michael Lovell.

Michael Lovell12:03

Well, thank you Mark. And first I want to welcome all those guests that we have here today, as well those of you who are not part of our campus community. We really are thankful that you've taken time out of your day to spend it with us. And one of the things I really like about this program is that we're making a concerted effort here at Marquette University to turn the talents and the resources of the university to help improve the greater Milwaukee community. And one of the ways we can do that is by bringing people to the campus that we can all learn from, great leaders from all sectors of life. And we are really blessed today to have Tom Falk here speaking to us from Kimberly-Clark. And I think it's also good to get a perspective about the organization that he's running. Marquette has a 133-year history, and you've heard I'm the 24th president. Kimberly-Clark is 140 years old and they've only had eight CEOs. So you want to talk about continuity in leadership, that's always a sign of a really strong organization. And you know, Tom has been with the company for 30 years. He was elected CEO and chairman in 2002, CEO and chairman in 2003. There are 57,000 employees worldwide and they have operations in 35 countries, so they are a very large and complex organization. Tom has an M.S. in management from Stanford University, was a Sloan Fellow, and he has a B.S. in accounting from Madison, but we won't hold that against him. Now, for those of you who study leadership, you know that organizations take on the personalities of those that are running them. And you can always tell a lot about organizations by the way that others recognize them. So in the past year alone, and we go back every year, there have been awards given to Kimberly-Clark. Just last year alone, it was chosen as being among the world's most ethical companies for the third consecutive year. It was recognized with a Catalyst Award for proven measurable results that address recruitment, development, and advancement of women. And it was number six among the world's best multinational workplaces, and there were over 6,200 companies involved in that competition. So obviously we have a great leader among us that is running a fantastic organization. I think we can all learn from what he's going to have to say today. So will you all please help me welcome to the Marquette College of Business Administration Business Leaders Forum luncheon, the chairman of the board and the Chief Executive Officer of Kimberly-Clark Corporation, Thomas Falk.

Thomas Falk14:49

Thank you everyone, good afternoon. It's great to be back on campus, and fall is such a fantastic season in Wisconsin, isn't it? I mean, come back to the crisp air and the leaves turning, Packers are winning, it's great. We all know how to spell the word 'relax' everybody, that even made its way to Texas this week, that was big news. So I've got great connections here at Marquette. As they mentioned, Wayne Sanders was my predecessor and he's a Marquette alum. Wayne's way funnier than I am, so you know I can't do stand-up like Wayne can do. I'll do my best to be entertaining here and that will take a few questions. So Wayne's a great connection. Father Rer, who was one of the presidents of Marquette, was on the Kimberly Clark board of directors. So when I was a young financial guy coming up through the ranks, Father Rer was on the audit committee and put me through my paces. So I remember the clear impression I got then of what a Jesuit education could do for you. He definitely could use a ruler even in those days on the audit committee. And my son Michael is a Marquette alum. Michael graduated with a degree in athletic training and went to work for the Green Bay Packers as an athletic trainer for the last couple of seasons, and he's back now working toward his clinical doctorate in physical therapy here at Marquette. So lots of great connections. Even though I did not wear my Badger tie today, I wore the Packer tie, so I'm representing here. I figured somebody here would cut it off if I showed up in a Badger tie. And even more in the fall, we're back in the recruiting season, so we're back on campus recruiting at Marquette. Some of our recruiting team are here and looking to have our shot at the very best talent that Marquette has to offer, because in the end that's what keeps global companies great and winning awards, is when we can get the very best people to want to come and build their careers and have their dreams come true at our company. So we talk a little bit about Kimberly Clark. You've heard the headlines: we're a 21 billion dollar company, we sell our products in 175 countries, we make them in 35 countries. And when Wayne used to stand up here, he would say the best introduction he ever had was that someone in England one time introduced him and said, 'Here's Wayne Sanders from Kimberly Clark, and they're in the business of bodily excretions.' And you know, that's a lunch and speech I would never say that to you. So I would instead say, who here has ever worn a diaper? Come on, raise your hands. Ever in your life, somewhere back in the day, you might not remember it. Okay. So but what you might not know is where we started. We've been around for 142 years. We were founded in 1872 in Neenah, Wisconsin, by our founders. Their first product was newsprint. So if we were still making newsprint, I probably wouldn't be up here today giving you a speech. You know that business didn't turn out to be a terrific business. And you know, we built our first paper mill in the Fox Valley. We did our first global expansion building a newsprint mill in Canada in the 1920s. Began launching consumer brands like Kleenex and Kotex in the 1920s and grew from there. But the key thing is that we adapt and changed and grew.

In fact, when I joined Kimberly Clark, you know we had an airline, some of you may remember Midwest Express that we founded. I know I miss it too. Yeah, it's a different business now out there, it's a tough world they live in. You know, we were the world's largest cigarette paper manufacturer back in those days. So we've been in a lot of businesses that were profitable and successful at the time, and the key is to stick around for 140 years you've got to change and adapt and grow. And that's really what a sustainable enterprise is all about. If you think about 140 years ago, sometimes those are numbers on a page, but if you think about what doing business was like then, 140 years ago there were no telephones, not just no cell phones for the students in the audience, no telephones at all, hadn't been invented yet. The electric light bulb had not been invented yet. The automobile had not been invented yet. And so that was a very different kind of a company to operate in those days. And so, you know, to stick around and be able to adapt and change and think about how do you remain relevant and competitive in a global workplace is a little bit what I want to talk about. And if you think about this from a life expectancy standpoint, ever since the Fortune 500 list came out in 1955, by 2011 87% of those companies were gone from the Fortune 500 list. So if you think about that, there's not many of us left. We're one of the few that's made the Fortune 500 every year since it's been around since 1955. And so my challenge is to keep that record growing and hand it off to the next generation. So sometimes when we use the term sustainability, people think of sustainability as, 'Well, he's going to give us a speech about environmental stuff.' But to me, sustainability is more than that. It's about how do you keep the enterprise fresh, relevant, how do you make sure that you can sustain that business for the long term so that we can keep continuing to take care of our customers and serving our consumers and providing great jobs to the next generation of the workforces around the world. So I don't think that our founders could have ever understood where this company was going to go. But if you look, we went public actually in 1929. That probably wasn't a great time actually, it was right before the market crashed. But if you had bought one share of our company when it went public, which would have been around $50 the initial share price, today it would be worth $530,000. Now if you had been able to buy the equivalent of the S&P 500 on that date and held that, today that would be worth about $100,000. So $530,000 versus $100,000, so a 5x return. And so that's the power of compound interest.

And continuity for all those that are in the market, to see what making those little increments of improvement over the years and investing shareholders' money wisely and earning a return better than they can deliver over the long term, it required the leaders of the company in those days to focus on what businesses were they going to be in and what businesses were they going to get out of. You know, exiting the cigarette paper business, exiting the paper mills and shifting over to consumer products. We launched Huggies in 1978 after we had failed twice before in the diaper category. So we had Kleenex diapers, we had Kim diapers, those didn't make it. Pampers was the giant. And Darwin Smith made a big bet to go back into the diaper category and compete with the best companies in the world. And so I think that's an interesting approach to leadership, that you've got to be willing to make those key decisions, those strategic choices that will keep a business on a path. Now when I joined Kimberly Clark, I had worked for three years as a CPA and joined KC as an internal auditor. And I was trained early on that there were three things that you had to do to be successful in business. The first thing you had to do is take good care of your customers. So whoever benefits from whatever work you do, you got to take good care of them so they want to do more business with you. So that's number one. Number two, you got to find a way to grow. So you've got to be able to see what's that next opportunity. If you're in a business that's declining, you got to figure out a way to either shift it, innovate it, invent something new that can keep your business relevant and growing. And the third thing is you got to develop people. You got to have people that are coming up to take the business forward into the future. I've always said that great people will push you up the ladder, you don't have to worry about climbing it, they'll be driving you forward. And so if you take care of customers, find a way to grow, and you develop people along the way, you'll be successful in whatever business you're in. And we brought those same principles to bear in how we run Kimberly Clark every day.

I became CEO in 2002 and 2003. We started to look at our strategy and our portfolio. We made some decisions to exit some businesses. We were the world leader in fine writing paper, and not many people use that anymore. We're all sending emails. You know, the handwritten note is a beautiful thing now, you'll appreciate that, but in those days it was a big deal to be the world leader in that. We also were the world leader in annual report paper. Well, those are mostly done electronically now. So we made the decision to spin some of those businesses off. And so one of the things that I've been working on is trying to understand where the growth is going to come from, and emerging markets for us has been a big part of what I've spent a lot of time on. So if we look today, we serve essentially 1.6 billion people every day out of the seven billion people that are on the planet. But in the next 10 years, another billion consumers are going to enter the middle class and be able to afford our products in just four key markets: Brazil, Russia, India, and China. So we can almost double the size of the consumer base that we're going to go after in the next 10 years as those markets industrialize. And I think doing that is part of how you deliver continuity. Over the years, we've paid a dividend every year for 80 consecutive years. We've increased our dividend now for 42 consecutive years. So we're making those investments in those other markets, finding ways to bring the cash back home and make sure our shareholders get the benefit of that. Critically important, we got to find a way to grow our sales, grow our profits, continue to invest in the business, continue to maximize value for our shareholders. Those are sort of the basics. But these days, so much more is expected of corporations. So social responsibility is something that you also hear the best companies doing. It's one of the ways you win awards, as companies get caught doing things right. And we find that the workforce of the future, the next generation, they want to work for companies that are doing things right. They care a lot about the values of the company. And so I'm here to tell you that we were involved in those types of things before social responsibility and sustainability was cool. Kimberly Clark was founded in 1872 on three principles: quality, service, and fair dealing. So they talked about making a quality product, about providing great service to customers, and dealing fairly with suppliers in the communities where our employees lived and worked. Pretty simple stuff. We've always been able to give back where we operated. We've tried to be responsible, good corporate citizens wherever we were around the planet. Even more importantly, we looked at sustainability in a different way. We were cutting down trees in Canada to make newsprint. Well, in Canada, it takes about a hundred years to grow a tree to cutting height. So somewhere back 140 years ago, our forefathers said, 'If we cut a tree down, we're going to plant two more, so we'll never run out of trees.' Well, fast forward five or six years ago, we spun those forest lands off. We don't operate up there anymore. The operator of that forest land just won an award for sustainable forestry because someone in Kimberly Clark a hundred years ago planted trees to make sure that forest was going to be evergreen and was going to continue to produce. And so that's the kind of sustainability that we're talking about: doing the right thing today so that we'll continue to have resources to run the business into the future.

You know, one of the things that we're now focusing on is how do we expand that beyond the environment. We're doing some great things in communities to replace the water we use in our manufacturing processes with an equivalent amount of fresh water so that the community continues to have the fresh water that they need. We're also working on projects. There's more than a billion people in this world, mostly in Africa and India, that don't have access to sanitation. So we're working to provide sanitary toilet facilities. And that's not just a nice thing to do, but that helps reduce disease. And interestingly, it helps the education process. We find that young girls quit going to school if there is no sanitary toilet facility in the school that they're at. So about the time that they reach puberty and begin to have their period, they stop going to school if there's no sanitary toilet facility. And so we find those simple things like that, if we can unlock that and work with some not-for-profits in those areas to get those things going, that's a fantastic opportunity. We're also working hard on our diaper business in this country, making sure that every mother that has a need for diapers has access to them. So Huggies has a program called Every Little Bottom that makes sure that every baby in the country has access to diapers. And so we're working with diaper banks around the country in a strategic way to make sure that those products are available where they're needed. We're also looking around the world where maybe there's a different set of issues in other markets. I was in Africa this summer, and there malaria is the number one killer of infants in countries like Kenya. So we're working with NGOs like Malaria No More to find ways to eradicate malaria like it was eradicated in this hemisphere a number of decades ago. So great opportunities for companies to do well by doing good and build our brand around the right values, where we're doing the right things in emerging markets. We're also doing some things around the planet. We're actively measuring and reducing our greenhouse gases and trying to do that by reducing our carbon footprint. And I would be the last person to get up and tell you that I can predict with certainty what's going to happen with global warming, but all I know is that if I use less of something, that's got to be the right direction to go. So how can we use less energy in our processes? How can we reduce energy per unit of output? How can we actually net have a reduction of 5% in the greenhouse gases that our Kimberly Clark factories produce? That's got to be a step in the right direction, and we can do that and deliver cost savings to the business at the same time. We've also looked at reducing the water that we use in our processes, not just replacing fresh water, but reducing the water that we use by 25%, and we've seen that have a big opportunity. We're focusing on our manufacturing plants so that 100% of our manufacturing waste is diverted from landfill and goes into alternative uses and is recycled, something that's beneficial for society, and that we don't wind up landfilling waste from our factories. We're working on having 100% of the fiber that we use to go into our wonderful Kleenex, Cottonelle, and Scott products come from sustainable sources, so that all our suppliers are practicing sustainable forestry and that they're out there doing the right thing every day and making sure that they're preserving the forest for the future. So when we do all those things, we're going to make sure we're not only delivering the quality products that our consumers, our moms, love and expect everywhere around the world, but we're going to do it in a right way, that the right kind of company is standing behind it. And I think when we do all those things, we know that it has a big impact. I was in Nairobi recently and talking with some moms about malaria, and it's their number one fear about what can happen for their baby. And when they see your brand be a part of solving that problem, that's a huge opportunity for you.

So, one of the things maybe wrapping up, just talking about people. We're here obviously recruiting, and we want to make sure we get the very best people that want to come to Kimberly Clark. And I think the world of corporations these days is changing. So when I joined Kimberly Clark, we were a North American company and very North American centric. And you know, today of our 57,000 people, 20,000 of them are in the US and 40,000 of them are outside the US. And we make pretty much everything that we sell in the US market. We make everything that we sell in the China market. Our products don't ship real well. So it's a fact of life that more than half our sales today are outside the US, and that part of the business is growing double digits. And so we are spending a lot more time trying to make sure we've got a diverse global team that thinks about things from a global perspective, and really are citizens of the world and understand things in a very broad context. And it was great to see, I spoke to one of the business school classes this morning, to see the diversity that's here on campus at Marquette. I think that's a real strength for universities and one that we need to see even more of. You know, we're building an engaged workforce, and having sustainability as a part of that is key for them. Most new employees want to work for a company with a great reputation. We engage all of our employees in communities where they can share ideas on their own personal sustainability journey. Our Scott brand has partnered with some other local companies to try to get people to bike to work. And they have me go up to Neenah every summer and we bike. They offer me the 10-mile, the 20-mile, and the 50-mile ride, and I always do the 10-mile ride. But I show up every summer and we'll get four or five hundred employees that'll ride around the Fox River Valley for a morning to kind of reinforce that. And we're well on track to deliver on our 30 million mile goal across the country. So when you look at how that plays out, being a sustainable enterprise means you got to be flexible and be willing to change. That means you got to be able to answer those three questions: Are you taking good care of your customers? Are you finding ways to grow? And are you developing your talent along the way? And when you do those three things consistently over time and compound that over time, you'll deliver on the promise of a sustainable enterprise. And it's my hope that someone standing here 140 years from now talking about the 300th anniversary of Kimberly Clark would be a real treat. So it's been great to be with you today on campus, and I look forward to taking some questions. There's a couple microphones here, you're welcome to do that, or if you want to stand up and shout, I'll repeat the question if we don't hear.

Yeah, so the question was if I look at growth over the last 10 years, how much was organic growth of your existing categories, how much was acquisition, and how much was new markets. And I'd say we've done very little M&A, and so we've had enough organic opportunities across the business that we've done it virtually all organically. I'd say probably two-thirds to three-quarters of it has been growing in emerging markets. And so that's really it's partly category penetration. So today, for example, a mom in Vietnam might use one diaper per day, so she uses it for overnight to get a good night's sleep, and they may use cloth or other things during the day. In the US, they're using five or six diapers a day. If I can get the mom in Vietnam to go from one diaper a day to two diapers a day, I double the category. And so there's a huge penetration opportunity. So she may be in the category but she isn't fully present. It's not that she doesn't want to do it, she just doesn't have the income to be able to do it.

Yes, inversions. Yeah, yeah, that's this question a lot. I mean, and you know, I see lots of companies doing it. I guess I would rather we fixed our current tax code so that companies don't have to look for things like that. I testified in front of the Senate Finance Committee several years ago, along with Mike Duke, the CEO of Walmart at the time, and Larry Merlo, who was the CEO of CVS. And interestingly, from different businesses, we all had the same message: make our rate globally competitive with other countries, 25% or less instead of 35 as it is today. Make it be a territorial system so we pay tax on our economic activity in this country. On our worldwide activity, the US is the only country in the modern world that does it that way. And then third, push all the incentives in the pile to pay for it. So there's a lot of incentives that people take advantage of that brings the marginal rate down a bit, but it complicates the code. And so we said you'd come up with a much simpler, more competitive, fairer system if you did it that way. And businesses make decisions on the marginal rate, not the average rate. And there have been some signs of hope in that yard. Dave Camp, House Ways and Means, had a bill on this in that vein that came out of committee last year. We'll see what happens after the midterm if the next legislature gets on that. But I would much rather fix that for the long term than to try to build walls to stop inversions from happening.

Audience Member35:51

Got one at the microphone. All right, first of all, I grew up in the Fox Valley, knew a lot of people that worked at Kimberly Clark, and uniformly said what a great employer Kimberly Clark was and how it cared for its employees. And I know a lot of the great stuff you've done in the Fox Valley with the hospital and everything, so I commend you for doing that. My question is, Naomi Klein contends, and she wrote 'Shock Capitalism' and sustainability, that capitalism cannot save the planet or cannot stop raping the environment as she would put it. And I know you don't agree with that. I know you have views on how capitalism can make for a sustainable planet and for a sustainable environment, and I would like to hear some of what you have to say about that.

Thomas Falk36:40

Yeah, I think it's a pretty broad question, we could probably talk the whole lunch hour about that one. One of the things that I think corporations can do, one of the things that we did several years ago is, you know, I'd say when I became chief executive, we tended to think as a corporation we knew all the answers and that we knew what was the right thing to do for the environment and that we would set about doing that, and we didn't really want to take advice from any of the non-government organizations. You know, if Greenpeace wanted to talk to you, they were clearly bad and you didn't want to listen to them. And so what we did over the last probably seven or eight years is I formed an outside sustainability advisory board. So we picked a handful of people that think differently than we think, that live in different places than we live, that are heavily involved in a wide variety of environmental issues facing the planet, everything from global warming to water consumption to how you deal with poverty in emerging markets. And we ask them to look at what we're doing and give us feedback on whether they think we're doing enough or whether we're pushing hard enough in the right areas. And we have those uncomfortable conversations where there's conflict, where they push you and push your thinking. And I bring my whole management team together and we have dinner with them, so we have kind of a cordial social time where we get to know each other, share a meal together, and then the next day we let them pound on us for a little while. And it's a good thing to do. And I think by forcing yourself to listen to people that don't think the same way that you do, it shapes your perspective. You don't agree with every single thing that they say, but I would say over the course of time it does open your mind to other points of view and I think it helps us make better decisions.

Audience Member38:23

Yes, your reference to energy efficiency and how you are possibly generating electricity?

Thomas Falk38:48

Yeah, so the question was broadly on energy sourcing and how we use it, maybe how we've transitioned that. And I'd say we're pretty much plain vanilla down the middle of the road. So we use a lot of natural gas to dry tissue, and we use some electricity to run manufacturing equipment. And so I would say broadly we've tried to work at diversifying some of our electricity input. So like our Dallas headquarters is 100% sustainable or renewable energy source, and things like that. We get a lot of our office buildings LEED certified. So you're doing those kinds of things. On the production equipment, which is where we really use most of the energy, we've tried to find some creative partnerships. So in Beach Island, South Carolina, for example, we have a big tissue operation that burns a lot of natural gas. There's a local landfill that was close by that was venting a lot of methane. Methane is a very bad actor from a carbon dioxide perspective. So we built a small pipeline to bring the methane into our plant and burn it instead of burning natural gas. So we used a bad actor, converted it into something better, with cost savings for the business because you didn't have to buy gas, and you had to pay for the cost of the pipeline, and we looked at the ROI and it was a good spend. So what we do for each of our plants now is we do an energy productivity review so that every plant manager has a list of all the various capital projects that they could do that would improve energy in that facility, and they rank and stack those. They know what the payback is, and they track energy pricing and see where it's going. We've got a plant in Italy where energy is very expensive, it's highly regulated. We put active solar on the roof. We've got a biomass boiler in the parking lot that's generating steam and electricity for that facility. So we generate a portion of our own power in that facility, but it's a payback relative to what we'd have to pay buying it from the grid, and it's a lot more reliable. So there's a combination of factors in each individual country and market, what the conditions are and what you can do in those.

Audience Member41:05

Yes, Tom, disruptive technology provide dramatic growth for some and for others, what keeps you up at night regarding disruptive technologies in your business?

Thomas Falk41:17

Yeah, no, that's right. The question is disruptive technologies can really blow up businesses. And I was talking to the grad students this morning, and I was in Nairobi earlier this summer and was watching consumers buy products directly with their cell phones. And retail stores, and the cell phones are not linked to a bank account or to a credit card or a debit card. So they preload money on their phone, and they have an account on the phone that's kept through Safaricom, it runs a system called M-Pesa. And you don't need a bank account. And so that's a great example of disintermediation. You know, most of our products are for pretty essential bodily functions, so diapers, bath tissue, etc., are things that consumers are going to need every day. On the other hand, we're looking to see what are there new materials, are there things that we can do that are biodegradable or diversify in ways that would give us competitive advantage in some of those areas. So fortunately we haven't been disintermediated yet, but we keep watching for that.

You guys are too easy on me.

Mark Epley42:52

Right, say I want to thank Tom Falk personally for coming down here and sharing some of his wisdom with our professionals in the area as well as our students. And on behalf of the Toth family and the College of Business Administration, want to present him with the golden eagle as a token of our appreciation. Thank you again, Tom. Thank you very much. And that concludes the event, thank you for coming.