by Chris Reed | November 19, 2018 8:54 am
California could be on the brink of one of its biggest corporate defections yet with the signs that McKesson Corp. – the pharmaceutical giant that is sixth on the Fortune 500 list – is preparing to move its headquarters from San Francisco to the Dallas area.
Apple is the only California company that’s bigger than McKesson, which has 75,000-plus employees and had $198 billion in annual revenue last fiscal year.
McKesson saw its profile increase greatly in 2017 after a joint investigation by the Washington Post and CBS “60 Minutes” alleged that the company had played a central role in the national opioid epidemic by failing to report “suspicious orders involving millions of highly addictive painkillers.” Yet it’s long been considered one of the 10 biggest companies “you’ve never heard of” by the InvestorPlace website and other business trackers.
Now, according to a connect-the-dots report by the San Francisco Business Times, its days in the Golden State may be numbered. McKesson officially denied it was looking to move. But the newspaper noted a number of seemingly linked developments:
Given how much cheaper it usually is for a company to own rather than lease a large headquarters, the sale looks in retrospect like a warning sign to city leaders that their richest company was preparing to move.
Nonetheless, besides Mayor London Breed, the city’s political establishment offered relatively little pushback to a successful tax measure on San Francisco’s Nov. 6 ballot that will take its single biggest toll on McKesson – at least if the company stays in the city.
To fund increased programs for the homeless, Measure C imposes a gross receipts tax on San Francisco-based companies which have $50 million or more in annual revenue. With $198 billion in fiscal 2017, McKesson is by far the highest-grossing San Francisco-based firm. Measure C is expected to generate $300 million a year, boosting the $380 million that City Hall now spends on homelessness.
If McKesson does leave, it will join the more than 1,700 companies whose decisions to abandon the Golden State have been documented since 2008. The traditional corporate complaints about California having high taxes and heavy regulations have been expanded in recent years to include concerns about the high cost of housing making it difficult to attract and retain workers.
Among the most prominent departures: Toyota moved its U.S. headquarters from Torrance to the Dallas suburb of Plano; energy giant Occidental Petroleum moved its headquarters from Los Angeles to Houston; and the Nestle USA food conglomerate moved its headquarters from Glendale to Rosslyn, Virginia, in the Washington suburbs.
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