Steve Reinemund: Chairman, PepsiCo

A We’ve defined our business most simply as one focused on convenient foods and beverages, but at the end of the day, we’re looking to provide consumers and retailers with the same thing: innovative solutions. Whether that means packaging, flavors or entirely new food and beverage platforms, it’s all about innovation and it’s about insights into the consumer’s and retailer’s world.

It’s fair to say economic trends around the world affect our business, as they would any global enterprise. Whether they’re regional or macro trends, we’ve got to address them, anticipate them as best we can, and learn from them. That’s because economic trends have clear ties to consumer trends.

For example, as nations across the globe address the issue of health and wellness, they’re looking at economic impact and public policy, among many other things. We think PepsiCo can be there with solutions that provide consumers with choices that contribute to healthier lifestyles, so while I wouldn’t say economic trends have required us to rethink how we define ourselves, they certainly influence how we think about the opportunities they present.

Q Education: What do you believe this country has to do to retain the economic and political advantage that it has enjoyed for so long? Do you have to offer educational or remedial training now that you once did not have to?

A Continuous education is vital to our country’s future. To succeed as an organization, we must continually improve our capability to serve customers and operate the business efficiently. As a result, virtually all of our associates are engaged in some form of training on an ongoing basis.

For example, currently over 18,000 Frito-Lay sales associates and managers are being trained and certified in the use of new hand -held computers. They’ll learn state-of-the-art technology and how to leverage the data it provides to grow our customers’ businesses.

Another example: In Frito-Lay operations, 18,000 associates on average spend 46 hours a year developing skills such as root- cause problem solving, process improvement, teamwork and diversity and inclusion. Obviously, this training helps us perform better as an organization. In addition, some of our in-house training qualifies for college credit, which gives us an edge with employees who want to build their business knowledge and skills.

In the past, people went to school and then to work. Now, we recognize the need for lifelong learning.

Q Taxes: What limits business development most right now? What encourages development most right now? What sort of tax legislation would you like to see put before Congress?

A There are two legislative changes PepsiCo believes would provide tremendous economic benefit and encourage business development. The first is simple and straightforward: a reduction in the U.S. corporate tax rate. The U.S. has one of the highest overall corporate income tax rates (35 percent federal; 39.3 percent combined federal and state) among all countries in the Organisation for Economic Co-Operation and Development (OECD). In contrast, the OECD trend has been to reduce corporate rates. A lower corporate tax rate would allow businesses to operate in a more efficient manner, enhance certainty for business-planning purposes and ensure that strategic decisions are driven by productivity, profitability and growth concerns, as opposed to the preferences and obstacles of the tax code.

The second is more complex, but is equally important: reform of the U.S. international tax rules. With over 95 percent of the world’s population living outside the United States, reform of the U.S. international tax rules is needed in order to protect and enhance the global competitiveness of U.S.-based businesses. The global success of U.S. businesses provides real benefits in terms of economic growth and jobs in the United States. An international tax system would allow U.S. multinationals to invest overseas in a tax-efficient manner in order to grow their businesses. At the same time, a revision to the international tax rules would remove the barrier or disincentive to repatriate earnings to the U.S. for investment here at home. These changes would help enhance the competitiveness of U.S. businesses and contribute to the continued growth of U.S. businesses and the U.S. economy as a whole through increased capital investment and increased U.S. jobs.

Q Consumer technology: How is your company integrating Internet-based new media in your marketing, employment and product development areas?

A There’s no question that new media continues to become an increasingly important tool for us. Whether it’s through promotions that award consumers, more efficient ways of allowing job seekers to apply for positions or more effective internal collaboration on our intranet, the value we see in online technology to support our business is critical. And this is true not just for each brand or business, but across the company we’re learning what works in one country or geography can work in many more. So clearly, e-based technologies are critical to helping us share what we learn, and accelerate what we can do in the marketplace.

Beyond individual electronic applications, what we’re really going after these days are more fully integrated systems that allow us to collect data more efficiently, and share it with our businesses faster so they can make better decisions at increasing speeds. We’re currently going through a multi-year SAP implementation designed to help us do just that, and we view it as a priority that will transform our business.

Q What is the most important resolution you have made about your business as we go ahead into fall?

A I can’t say there’s a new resolution to introduce that’s specific for the fall, but I would say that we’re very much focused on a recipe that has been working for us, and it’s not so much a business resolution as it is a fundamental part of how we aspire to operate.

Balancing the short term with the long term is one of the most basic, and at times most difficult, priorities we face. Executing our plans for the short term, while building new capabilities for future growth, is the ultimate challenge for any company. It can be exceedingly difficult when you must deliver an aggressive plan, yet carve out precious time, energy and dollars for the promise of a future capability where important bets have been placed.

Q Health care: What would you propose as starting points for the upcoming crucial discussion on how American citizens would like to have their health care delivered?

A A good starting point to the discussion on health care is how we can better use today’s technology.

A key priority is to expand the use of information technology to improve the safety and quality of the health care system, and to help ordinary citizens make good health care decisions.

Electronic medical records, for example, have been shown to reduce medical errors, improve patient safety and improve operating efficiency. Government and employer groups are working to speed their adoption by hospitals and other caregivers.

Second, Americans are becoming much more involved in making decisions about their health care, which doctor or hospital to use, which treatment to receive, even which drug to purchase. So another big opportunity is to leverage technology to put more and better information in the hands of consumers to help them make these decisions.

Consumer information on health care should include quality and cost, and needs to be accessible, simple and actionable. When consumers have good information, they are engaged in and capable of making good decisions about their health care.

This could be a positive starting point to this important discussion.

Q Tort reform: How much does the present tort law add to your business or business sector costs each year? What needs reforming first?

A The randomness of tort claims in state and federal courts places an incredible strain on our nation’s economic health. The President’s Council of Economic Advisors, in 2002, noted a study by Tillinghast-Towers Perrin that calculated our nation’s tort system as costing about $180 billion annually. In 2005, just three years later, the Tillinghast-Towers Perrin study estimated the annual cost to be $245 billion. This is an incredible rate of increase. The U.S. Chamber of Commerce estimates the U.S. tort system to be the most expensive in the world with the largest share of this burden borne by small businesses. And only 20 percent of this annual cost is directly related to a victim’s injury — the balance of which includes attorneys’ fees, legal defense costs, noneconomic damages and administrative costs.

There are many reforms needed to bring a sense of order to our nation’s legal system. Some of the reforms that apply to our industry include national labeling uniformity, limiting the liability of food manufacturers from frivolous obesity-related lawsuits, reforms to state and federal consumer protection laws, enacting laws that allow for reasonable noneconomic or punitive damage awards, limiting attorney’s fees and tightening laws that govern the qualification of experts who provide testimony. American businesses and individuals alike are entitled to a judicial system that rests upon modern science and the expert opinion of qualified specialists.

Good science is critical to allowing consumers to make informed decisions about the products they buy and consume. That’s why we strongly support uniform food-labeling laws. Uniform food labeling standards would provide for a single set of science-based labels by which consumers can make informed decisions. We also support legislation limiting the liability of food manufacturers from frivolous obesity-related lawsuits that are grounded neither in fact or law. Finally, excessive punitive damage awards and unreasonable attorneys’ fee awards further undermine the U.S. legal system by enticing lawyers to bring dubious lawsuits with the hope of winning a big settlement.

Justice should be reliable, not a lottery system. The randomness of outcomes rendered by our nation’s legal system is bad policy and it’s having negative impacts. The unpredictability of the system has lead to a pervasive fear of liability that is affecting our public health. For example, opportunities for children to exercise in playgrounds have been dwindling in recent years by fears of liability if a child is injured. States can help fight childhood obesity trends by protecting the well-intentioned public school, community-based organization or volunteers who help build and maintain playgrounds or exercise equipment from unreasonable liability. Real progress against childhood obesity rates will require a national commitment to get and keep our kids active from their earliest years.

Q Safe and reliable energy supply: Will the demands of your business sector lead to more energy requirements? How would you like our government to deal with this? What do we need to do to ensure energy independence or sovereignty for this country in the future?

A The government’s role in improving energy and water efficiency should be to ensure that the field of competition is level for all involved. There should be uniform regulations on the interstate transmission networks for both electricity and natural gas that ensure reliable service and true price discovery through competition. The government should encourage the research and development of innovative technologies that can help to reduce our consumption of precious natural resources with the goal to achieve a scale and efficiency that allows effective competition in the marketplace.

As long as the U.S. is dependent upon fossil fuel, it is difficult to foresee energy independence. Increased use of the solar, wind and bio-mass that is available in abundance in the United States will not only help to reduce our dependence on foreign energy sources, but will also help to preserve the natural environment for generations to come.

Companies like PepsiCo must assume a measure of leadership here. Our challenge is to achieve growth with minimal impact on the environment, including the use of energy and water. We are making great strides in improving the energy and water efficiency of our processes. For example, PepsiCo’s Frito-Lay division was recognized this year by the EPA Energy Star Program as a Partner of the Year. The program put in place at Frito-Lay has driven a 22 percent reduction in energy consumption per pound of product since 1999. In 2005, Frito-Lay manufactured and sold 20 percent more salty snacks than it did in 1999, but used less energy and water in doing so. Another example is Gatorade, where we have begun to rinse bottles with air instead of water. Our resource conservation program is now in place for all of our business units and forms a central plank in our sustainability strategy.

Q Terrorism and security: Will this challenge your business or business sector in the coming year?

A There’s no question that terrorism and security issues do, and will, impact business , whether it’s this year or, quite frankly, any year. It requires companies to assess the biggest threats, prioritize and take appropriate action to prepare for them. That’s simply said, but not easy to do.

Sometimes the challenges are not the high-profile security issues that are making the headlines. For example, I think the avian flu is a good example of a potential threat to a global business like ours. We’ve pulled together resources at PepsiCo to help prepare for the possibility of a pandemic. With more than 150,000 associates across the globe who make and deliver our products in more than 200 countries every day, we’ve got a lot to think about for the safety of our people and continuity of our business. The biggest challenge is doing it in a way that shows we’re being thoughtful and thorough, without creating anxiety or panic within the organization or with our retailers and suppliers.

It means we’ve got to allocate resources today for planning, and have the right tools and policies in place to respond quickly if the threat materializes. Done well, we can minimize the down side; done poorly, we can have more significant issues to address with our people and for the business. We try to address all our security issues in a similarly thoughtful way.

Q Pension obligations: What does this country need to do to manage the financial challenges to pension funding.

A At PepsiCo, we sponsor a traditional defined-benefit pension plan and have always had a “pay as you go” approach to funding the plan. We believe we should fund the promises we make and not make promises we can’t keep.

I think that’s one objective of the U.S. pension legislation that was recently passed. It will help ensure that the pension promises companies make are funded rather than pushed off to the future.

At the same time, we need to make sure that the pendulum doesn’t swing too much in the other direction, to where the requirements for these plans result in so much complexity and volatility that companies walk away from them. Historically, employer-sponsored traditional pension plans have provided a retirement safety net for millions of Americans. I’d like to see the government do more to support them by providing more flexibility and control to companies that have been responsible in their funding practices.

My five tips for young people for success

1 Have passion for what you choose to do; it’s a powerful emotion that should shape your vision and take you to places you’ve never gone before.

2 Don’t underestimate the power of perseverance; it provides you with mental toughness and tenacity — and helps you realize your vision.

3 Gain perspective. When you have a broad view of the world, you can see beyond the immediate concerns of what you’re doing, and see how your idea fits the bigger picture.

4 Hold your principles close to you. The moral and ethical standards you embraced are your set of core beliefs and should never be compromised. They’re the code you live by, the moral compass that helps you preserve your integrity: your “True North.”

5 Never forget the power and importance of people. Do everything you can to cultivate and nurture people.

Part of Examiner's The American Economy series.