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The Changing Headquarters Landscape for Fortune Global 500 Companies

Nov. 17, 2020, 8:00 AM

The headquarters of the world’s largest companies by revenue continue to shift away from the U.S. and other G7 countries, driven largely by China’s growth in the world economy. Specifically, the number of Fortune Global 500 (FG500) companies—the 500 largest companies by revenue in the world—that are headquartered in the G7 (Canada, France, Germany, Italy, Japan, the U.K. and the U.S.), declined from 420 in 2000 to 273 in 2020.

A significant driver of the FG500 changes in headquarters’ locations is the growing presence of China. Between 2000 and 2020, the number of FG500 companies with their headquarters in China grew from 10 to 124. Notably, in 2020, China for the first time surpassed the U.S. and had the highest number of FG500 headquarters. Much of this is due to the growth of China’s state-owned enterprises (SOEs), 84 of which were in the FG500 in 2020 compared to nine in 2000.

Many factors can affect a company’s choice of headquarters location, such as a country’s regional economic growth and stability, local infrastructure, regulatory environment, labor availability and productivity, transportation and other input costs, and tax policies. Table 1 compares how headquarters’ locations and the top statutory corporate income tax rates have shifted from 2000 to 2020, during which time there have been significant changes in countries’ statutory corporate income tax rates.

Notable trends include:

  • The number of FG500 companies headquartered in the U.S. declined from 179 (36% of FG500 headquarters) in 2000 to 121 (24% of FG500 headquarters) in 2020 amid a global trend of statutory corporate income tax rate reductions.
  • The average statutory corporate income tax rate that countries imposed on non-US-headquartered FG500 companies declined from 39.2% in 2000 to 26.6% in 2020, including both national and subnational corporate income taxes.
  • A number of large economies reduced their top statutory corporate income tax rates significantly between 2000 and 2020.
    • The top statutory corporate income tax rate in these five large economies declined by the following amounts: Germany (22.1 percentage points), Canada (16.8 percentage points), Japan (13.6 percentage points), the U.K. (11.0 percentage points), and the Netherlands (10.0 percentage points).
    • Japan reduced its top statutory corporate income tax rate from 43.3% in 2000 to 29.7% in 2020. Although Japan was still home to the third-highest number of FG500 companies in 2020, the number of FG500 companies headquartered in the country fell from 107 to 53 during this period, in part due to years of slow economic growth.
  • Before the Tax Cuts and Jobs Act (TCJA) was enacted at the end of 2017, the top US statutory corporate income tax rate had remained essentially unchanged since 2000 at approximately 39% (including both the federal rate and a weighted average state corporate income tax rate). The TCJA reduced the top federal rate to 21% and the top combined federal-state rate to 25.8%.
  • Countries participating in the Organization for Economic Cooperation and Development (OECD)/G20 Inclusive Framework on Base Erosion and Profit Shifting are considering an approach that may apply the reallocation of taxing rights under Amount A of Pillar 1 of the “Two-Pillar Approach to Address the Tax Challenges Arising from the Digitalisation of the Economy” (which allocates a fixed share of residual profits to market jurisdictions). To provide a sense of the geographic distribution of the largest companies that might be affected by this approach, this analysis lists the headquarters location for the 100 most profitable companies. Overall, the U.S. has the greatest number (49) of the top 100 most profitable companies. It is followed by Germany (9 companies), Japan (7 companies) and China (6 companies) (excluding SOEs, financial services, and extractive industries).

Table 1. Headquarters locations of FG500 companies, 2000 and 2020

*The U.S. is excluded from the calculations of the “Top 10” and “Global 500” tax rate averages to facilitate comparing each grouping to the U.S. Note: The top 10 locations are sorted by total number of headquarters in 2020. “Corporate income tax rate” is the top statutory corporate income tax rate, including both national and subnational corporate income taxes. Tax rates for the “Top 10,” “Other,” and “Global 500” groupings are all averages weighted by the number of FG500 companies headquartered in each location.

Sources: : Fortune Global 500; EY Worldwide Corporate Tax Guide; Organization for Economic Co-operation and Development; EY analysis.

As shown in Figure 1, a significant driver of the change in headquarters locations for the FG500 is the growing presence of China. Between 2000 and 2020, the number of FG500 companies with their headquarters in China grew from 10 to 124. During the same period, the number of FG500 companies headquartered in G7 jurisdictions declined from 420 to 273. Similarly, the number of FG500 companies headquartered in OECD member jurisdictions declined from 480 in 2000 to 344 in 2020, and the number in the U.S. declined from 179 to 121.

The OECD member jurisdictions are Australia, Austria, Belgium, Canada, Chile, Colombia, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Israel, Italy, Japan, South Korea, Latvia, Lithuania, Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Poland, Portugal, the Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Turkey, the U.K. and the U.S.

A notable share of the decline in company headquarters in G7 and OECD jurisdictions between 2000 and 2020 is attributable to declines in the U.S. (a decline of 58 headquarters) and Japan (a decline of 54 headquarters). These two countries accounted for 112 of the 147 headquarters lost in G7 jurisdictions and 112 of the 136 lost in OECD jurisdictions from 2000 through 2020.

Figure 1. Headquarters locations of FG500 companies, 2000and 2020

Note: Each bar sums to 500. Other G7 is comprised of G7 jurisdictions excluding the U.S. Other non-G7 means non-G7 jurisdictions excluding China. Other OECD is comprised of OECD jurisdictions excluding the U.S. Other non-OECD means non-OECD jurisdictions excluding China.
Source: Fortune Global 500; EY analysis.

Figure 2. Headquarters locations of FG500 companies globally, 2020

AUS: Australia, BRA: Brazil, CAN: Canada, CHN: China Mainland, HKG: Hong Kong, IND: India, JPN: Japan, MYS: Malaysia, MEX: Mexico, RUS: Russia, SAU: Saudi Arabia, SGP: Singapore, KOR: South Korea, TWN: Taiwan, TUR: Turkey, USA: United States of America Note: Number of headquarters for HKG also included in CHN.
Source: Fortune Global 500; EY analysis.

Figure 3. Headquarters locations of FG500 companies in Europe, 2020

AUS: Australia, BRA: Brazil, CAN: Canada, CHN: China Mainland, HKG: Hong Kong, IND: India, JPN: Japan, MYS: Malaysia, MEX: Mexico, RUS: Russia, SAU: Saudi Arabia, SGP: Singapore, KOR: South Korea, TWN: Taiwan, TUR: Turkey, USA: United States of America Note: Number of headquarters for HKG also included in CHN.
Source: Fortune Global 500; EY analysis.

Industry compositionof FG500 companies

Figure 4 compares the industry distribution of FG500 companies in 2000 and 2020. In 2020, 24% of FG500 companies were in the financial and professional services industries, which include banks and insurers. This is down from 27% in 2000. The following industries also experienced declines in their shares of FG500 companies: retail and consumer products (four percentage points); energy, utilities, and chemicals (two percentage points); industrial products (three percentage points); and “other,” a catchall category (five percentage points). Increases occurred in: technology, communications, and entertainment (two percentage points); wholesale/trade (seven percentage points); and natural resources (six percentage points).

Figure 4. Industry distribution of FG500 companies, 2000 and 2020

Note: Bars are sorted by the share of the total in 2020. Bars sum to 100% for 2000 and 2020. Figures may not sum due to rounding.
Source: Fortune Global 500; EY analysis.

State-owned enterprises comprise 20% of FG500 companies, helping explain China’s ascendance

As shown in Figure 5, 110 of the FG500 companies are SOEs in 2020. This is a significant increase from the 27 SOEs in the FG500 in 2000. China accounts for a majority of these SOEs. Eighty-four of the 110 SOEs (76% of SOEs) were headquartered in China in 2020. By comparison, in 2000, only 9 of the 27 SOEs (33% of SOEs) were headquartered in China. Outside of China, SOEs in the FG500 are split between OECD (12 SOEs) and non-OECD (14 SOEs) countries. SOEs account for $8 trillion, or 24%, of the $33.3 trillion in 2020 FG500 company revenue.

Figure 5.Headquarters locations of FG500 SOEs, 2000 and 2020

Source: Fortune Global 500; EY analysis.

Location of FG500 headquarters within the U.S.

As shown in Figure 6, 121, or 24%, of the FG500 headquarters are located in the U.S. in 2020. The US states with the most FG500 headquarters are: (1) New York (19 headquarters), (2) Texas (16 headquarters), (3) Illinois (12 headquarters), (4) California (11 headquarters) and (5) Ohio, Minnesota, and Massachusetts (tied for fifth with six headquarters each). These states account for 76, or 63%, of the 121 of FG500 headquarters located in the U.S. Of the 50 states plus the District of Columbia, 23 have no FG500 headquarters (46% of states), nine have one FG500 headquarters (18% of states) and five have two FG500 headquarters (10% of states).

The US cities with the most FG500 headquarters are: (1) New York City (16 headquarters), (2) Houston (six headquarters), (3) Atlanta (four headquarters), (4) Chicago (four headquarters) and (5) Deerfield, IL (three headquarters). These cities account for 33, or 27%, of the 121 FG500 headquarters in the U.S.

Figure 6. Headquarters locations of FG500 companies in the U.S., 2020

Note: Number of FG500 headquarters across the 50 US states (plus the District of Columbia) sum to 121.
Source: Fortune Global 500; EY analysis.

OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (IF)

Working within the IF are more than 135 countries and jurisdictions that, according to the OECD, are collaborating on implementing measures to “tackle tax avoidance, improve the coherence of international tax rules and ensure a more transparent tax environment.” Currently the IF countries are developing a blueprint for the reallocation of profits and taxing rights to market jurisdictions (under what the OECD proposal calls Amount A of Pillar 1). (See EY Tax Alert 2020-0327 for a discussion of the IF and the OECD proposal). This amount allocates a fixed share of residual profits to market jurisdictions and will likely exclude financial services, commodities and extractive industries.

Figure 7 displays headquarters locations of the top 100 most profitable companies, excluding SOEs, financial services, and extractive industries, to provide a sense of the geographic distribution of the largest companies that might be affected by the OECD proposal. This differs from the ranking of companies for the FG500, which is based on revenue as opposed to profitability.

Overall, the U.S. has the highest number (49) of the top 100 most profitable companies, followed by Germany (9 companies), Japan (7 companies) and China (6 companies).

Figure 7. Top 100 most profitable companies, by headquarters jurisdiction

Note: Excludes SOEs as well as financial services, commodities and extractive industries.

Source: S&P Capital IQ; EY analysis.

Closing thoughts

Company headquarters’ locations have been in flux for the past 20 years. Changes in location reflect a variety of factors including tax considerations, the rise and fall of national economies, changes in financing arrangements, changes in transportation and production technologies, changes in supply chains and changes in consumer tastes, to name a few. At a time when a pandemic is generating new sources of global economic uncertainty and governments are responding with major economic and tax policy changes, companies, industry groups and policymakers need to be keenly aware of the many factors that can play into headquarters location decisions and consider the implications of significant shifts of large headquarters into or out of their local economies.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

Author Information

Bob Carroll is a principal, James Mackie is an executive director, and Brandon Pizzola is a senior manager in EY’s Quantitative Economics and Statistics group.
The views expressed are those of the authors and are not necessarily those of Ernst & Young LLP or other members of the global EY organization.

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