(KRON/NEXSTAR) — The Golden State has long been an epicenter for entrepreneurship — but that reputation has been threatened since the onset of the COVID-19 pandemic. A variety of economic and social forces came to a head during this time, with many major companies deciding to leave.
A 2021 report by the Hoover Institution at Stanford University in August 2021 found that 74 corporate headquarters left California in just the first six months of the year, in addition to 64 companies that moved out in 2020.
Bay Area counties accounted for five of the top 10 counties that saw headquarter migration — with the San Francisco Bay Area leading the way. Many of traditionally Californian companies are now resetting in the Lone Star State.
Who left California?
Tesla Motors: Palo Alto to Austin, Texas — No discussion of companies leaving California would be complete without discussing Tesla. The company officially relocated to the Lone Star State in December 2021, after a conflict between CEO Elon Musk and Alameda County health authorities over COVID-19 rules during the initial lockdown.
“California has been winning for a long time, and I think they’re taking it for granted,” Musk said when announcing the change.
Musk also moved his personal residence to Texas, which lacks a state income tax.
However, it appears Musk isn’t done with California as the magnate is seeking to buy San Francisco-based Twitter.
Oracle: Redwood City to Austin — Oracle, namesake of the San Francisco Giants ballpark and the former namesake of the arena that the Golden State Warriors called home, announced its move in December 2020.
Executive Chairman Larry Ellison and Chief Executive Officer Safra Catz were major supporters of former President Donald Trump, Bloomberg reported, and company leaders felt increasingly out of sync with modern Silicon Valley. The world’s third-largest software company’s leaders had also moved its annual conference, OpenWorld, from San Francisco to Las Vegas, and the company was trying to build a younger and cheaper workforce.
Hewlett Packard Enterprise: San Jose to Spring — Hewlett Packard Enterprise moved to the Lone Star State the same month, with its move announced by Gov. Gregg Abbot (R), as Nexstar’s KRON4 reported at the time.
“As we look to the future, our business needs, opportunities for cost savings and team members’ preferences about the future of work, we are excited to relocate HPE’s headquarters to the Houston region,” CEO Antonio Neri stated at that time. “Houston is an attractive market to recruit and retain future diverse talent and where we are currently constructing a state-of-the-art new campus. We look forward to continuing to expand our strong presence in the market.”
Charles Schwab Corp.: San Francisco to Westlake — The financial services company merged with TD Ameritrade in 2020, which resulted in a corporate HQ move to Westlake, a suburb of Fort Worth. The move was official on January 1, 2021.
Why?
Stanford researchers found that the regulatory climate and taxes were big reasons companies chose to make the leap east. Of all U.S. states, CEOs rated California’s tax and regulation policies the worst, including a total of 518 state agencies, boards and commissions.
“Lawmakers in Sacramento continually enact laws that expand civil liability on businesses and
property owners,” the report stated, adding that another factor is that California workers also need more money than workers in other states.
“California employees often have (or demand) elevated wages to meet the high cost of living, excessive housing prices, burdensome income tax rates, expensive utilities, and in some cases payments for private schools to avoid the failing public school systems.,” the researchers stated. “For an employer, labor costs are higher than elsewhere when comparisons are made of charges that include not only wages and salaries but employer-paid statutory benefits and fringe benefits.”
Texas is considered the most entrepreneur-friendly state, and California ranks No. 49 of 50, according to the study. Forbes reported in May that Texas is the state with the most Fortune 500 companies.
Going to Texas
Y Texas, a business resource that tracks corporate relocations to Texas, shows as many as 62 companies moved in during 2021 alone. There have been at least 14 company relocations this year.
So far in 2022, a wave of major corporations have left for the Lone Star State, including construction machinery giant Caterpillar, specialty metals producer Allegheny Technologies (ATI) and fiber sensor solutions company DarkPulse.
Data shows companies relocated from 17 other states, with popular landing sites being Austin, Irving, Houston and Dallas.