Khanna_These25CompaniesAreMorePowerfulThanManyCountries_.pdf

http://foreignpolicy.com/2016/03/15/these-25-companies-are-more-powerful-
than-many-countries-multinational-corporate-wealth-power/

Parag Khanna

These 25 Companies Are More Powerful Than Many
Countries
Going stateless to maximize profits, multinational companies are vying with governments for global power.
Who is winning?

FOREIGN POLICY, APRIL 15, 2016

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At first glance, the story of Accenture reads like the archetype of the American dream. One of the world’s
biggest consulting companies, which commands tens of billions of dollars in annual revenues, was born in
the 1950s as a small division of accounting firm Arthur Andersen. Its first major project was advising
General Electric to install a computer at a Kentucky facility in order to automate payment processing.
Several decades of growth followed, and by 1989, the division was successful enough to become its own
organization: Andersen Consulting.

Yet a deeper look at the business shows its ascent veering off the American track. This wasn’t because it
opened foreign offices in Mexico, Japan, and other countries; international expansion is pro forma for many
U.S. companies. Rather, Andersen Consulting saw benefits—fewer taxes, cheaper labor, less onerous
regulations — beyond borders and restructured internally to take advantage of them. By 2001, when it went
public after adopting the name Accenture, it had morphed into a network of franchises loosely coordinated
out of a Swiss holding company. It incorporated in Bermuda and stayed there until 2009, when it
redomiciled in Ireland, another low-tax jurisdiction. Today, Accenture’s roughly 373,000 employees are
scattered across more than 200 cities in 55 countries. Consultants parachute into locations for
commissioned work but often report to offices in regional hubs, such as Prague and Dubai, with lower tax
rates. To avoid pesky residency status, the human resources department ensures that employees don’t spend
too much time at their project sites.

Welcome to the age of metanationals: companies that, like Accenture, are effectively stateless. When
business and strategy experts Yves Doz, José Santos, and Peter Williamson coined the term in a 2001 book,
metanationals were an emerging phenomenon, a divergence from the tradition of corporations taking pride
in their national roots. (In the 1950s, General Motors President Charles Wilson famously said, “What was
good for our country was good for General Motors, and vice versa.”) Today, the severing of state lifelines
has become business as usual.

ExxonMobil, Unilever, BlackRock, HSBC, DHL, Visa—these companies all choose locations for
personnel, factories, executive suites, or bank accounts based on where regulations are friendly, resources
abundant, and connectivity seamless. Clever metanationals often have legal domicile in one country,
corporate management in another, financial assets in a third, and administrative staff spread over several
more. Some of the largest American-born firms — GE, IBM, Microsoft, to name a few — collectively are
holding trillions of dollars tax-free offshore by having revenues from overseas markets paid to holding
companies incorporated in Switzerland, Luxembourg, the Cayman Islands, or Singapore. In a nice
illustration of the tension this trend creates with policymakers, some observers have dubbed the money

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“stateless income,” while U.S. President Barack Obama has called the companies hoarding it America’s
“corporate deserters.”

It isn’t surprising, of course, when companies find new ways to act in their own interest; it’s surprising
when they don’t. The rise of metanationals, however, isn’t just about new ways of making money. It also
unsettles the definition of “global superpower.”

The debate over that term usually focuses on states—that is, can any country compete with America’s
status and influence? In June 2015, the Pew Research Center surveyed people in 40 countries and found
that a median of 48 percent thought China had or would surpass the United States as a superpower, while
just 35 percent said it never would. Pew, however, might have considered widening its scope of research —
for corporations are likely to overtake all states in terms of clout.

Already, the cash that Apple has on hand exceeds the GDPs of two-thirds of the world’s countries. Firms
are also setting the pace vis-à-vis government regulators in a perennial game of cat-and-mouse. After the
2008 financial crisis, the U.S. Congress passed the Dodd-Frank Act to discourage banks from growing
excessively big and catastrophe-prone. Yet while the law crushed some smaller financial institutions, the
largest banks — with operations spread across many countries — actually became even larger, amassing
more capital and lending less. Today, the 10 biggest banks still control almost 50 percent of assets under
management worldwide. Meanwhile, some European Union officials, including Competition
Commissioner Margrethe Vestager, are pushing for a common tax-base policy among member states to
prevent corporations from taking advantage of preferential rates. But if that happened (and it’s a very big
if), firms would just look beyond the continent for metanational opportunities.

The world is entering an era in which the most powerful law is not that of sovereignty but that of supply
and demand. As scholar Gary Gereffi of Duke University has argued, denationalization now involves
companies assembling the capacities of various locations into their global value chains. This has birthed
success for companies, such as commodities trader Glencore and logistics firm Archer Daniels Midland,
that don’t focus primarily on manufacturing goods, but are experts at getting the physical ingredients of
what metanationals make wherever they’re needed.

Could businesses go a step further, shifting from stateless to virtual? Some people think so. In 2013, Balaji
Srinivasan, now a partner at the venture-capital company Andreessen Horowitz, gave a much debated talk
in which he claimed Silicon Valley is becoming more powerful than Wall Street and the U.S. government.
He described “Silicon Valley’s ultimate exit,” or the creation of “an opt-in society, ultimately outside the
U.S., run by technology.” The idea is that because social communities increasingly exist online, businesses
and their operations might move entirely into the cloud.

Much as the notion of taxing a metanational based on its headquarters’ location now seems painfully
antiquated, Srinivasan’s ultimate exit may ring of techie utopianism. If stateless companies live by one rule,
however, it’s that there’s always another place to go where profits are higher, oversight friendlier, and
opportunities more plentiful. This belief has helped nimble, mobile, and smart corporations outgrow their
original masters, including the world’s reigning superpower. Seen in this light, metanationals disassociating
from terrestrial restraints and harnessing the power of the cloud is anything but far-fetched. It may even be
inevitable.

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0 COMPANY 0 COMPANY 0 COMPANY 0 COMPANY 0
WALMART EXXON MOBIL ROYAL DUTCH SHELL APPLE GLENCORE
BIO BI O BIO BIO BIO
RETAILER OIL AND GAS OIL ANO GAS COMPANY TECH COMPANY COMMODITY
HEADQUARTERS COMPANY HEADQUARTERS HEADQUARTERS TRADING AND MINING
BENTONVILLE , HEADQUARTERS THE HAGUE , CUPERTINO , COMPANY
ARKANSAS IRVING , TEXAS NETHERLANDS CALIFORNIA HEADQUARTERS
ANNUAL REVENUE ANNUA L REVENUE ANNUAL REVENUE ANNUAL REVENUE BAAR, SWITZERLAND
$486 BILLION (2015) $269 BILLION (2015) $265 BILLION (2015) $234 BILLION (2015) ANNUAL REVENUE

$221 BILLION (2014)

COMPANY 0 COMPANY 8 COMPANY 0 COMPANY 0 COMPANY 0
SAMSUNG AMAZON MICROSOFT NESTLE ALPHABET
ELECTRONICS BI O BIO BIO BIO
BIO E-COMMERCE COMPANY TECH COMPANY FOOO AND BEVERAGE TECH CONGLOMERATE
TECH COMPANY HEADQUARTERS HEADQUARTERS PRODUCER HEADQUARTERS
HEADQUARTERS SEATTLE, WASHINGTON REDMOND, HEADQUARTERS MOUNTAIN VIEW,
SUWON, SOUTH KOREA ANNUA L REVENUE WASHINGTON VEVEY, SWITZERLAND CALIFORNIA
ANNUAL REVENUE $107 BILLION (2015) ANNUAL REVENUE ANNUAL REVENUE ANNUAL REVENUE
$163 BILLION (2015) $94 BILLION (2015) $93 BILLION (2014) $75 BILLION (2015)

COMPANY -COMPANY G) COMPANY e COMPANY 0 COMPANY G UBER HUAWEI VODAFONE ANHEUSER-BUSCH MAERSK BIO TECHNOLOGIES BIO INBEV BIO
RIDE-HAILING SERVICE BI O TELECO HM UN ICATI ONS BIO SHIPPING COMPANY
HEADQUARTERS TELECOMMUNICATIONS PROVIDER BEVERAGE COMPANY HEADQUARTERS
SAN FRANCISCO, COMPANY HEADQUARTERS HEADQUARTERS COPENHAGEN,
CALIFORNIA HEADQUARTERS LONDON, ENGLAND LEUVEN , BELGIUM DENMARK
VALUATION SHENZHEN , CHINA ANNUAL REVENUE ANNUAL REVENUE ANNUAL REVENUE
$62 . 5 BILLION ANNUAL REVENUE $60 BILLION (2015) $47 BILLION (2014) $40 BILLION (2015)
(DECEMBER 2015) $60 BILLION (2015)

COMPANY 0 COMPANY G COMPANY 0 COMPANY G) COMPANY 0
GOLDMAN SACHS HALLIBURTON ACCENTURE MCDONALD’S EMIRATES
BIO BI O BIO BIO BIO
INVESTMENT MULTINATIONAL CONSULTING FIRM FAST- FOOD AIRLINE
BANKING FIRM CONGLOMERATE HEADQUARTERS RESTAURANT HEADQUARTERS
HEADQUARTERS HEADQUARTERS INCORPORATED HEADQUARTERS DUBAI, UNITED ARAB
NEW YORK, NEW YORK HOUSTON , TEXAS IN IRELAND OAK ASSIGNMENT GURUH, ILLINOIS EMIRATES
ANNUAL REVENUE ANNUAL REVENUE ANNUAL REVENUE ANNUAL REVENUE ANNUAL REVENUE
$34 BILLION (2015) $33 BILLION (2014) $31 BILLION (2015) $25 BILLION (2015) $24 BILLION (2015)

COMPANY G COMPANY G) COMPANY -COMPANY -COMPANY G FACEBOOK ALIBABA BLACKROCK MCKINSEY & COMPANY TWITTER BIO BI O BIO BIO BIO
SOCIAL HEOIA COMPANY E-COMMERCE INVESTMENT CONSULTING SOCIAL MEDIA COMPANY
HEADQUARTERS COMPANY MANAGER FIRM HEADQUARTERS
MENLO PARK , HEADQUARTERS HEADQUARTERS HEADQUARTERS SAN FRANCISCO ,
CALIFORNIA HANGZHOU, CHINA NEW YORK , NEW YORK N/ A CALIFORNIA
ANNUAL REVENUE ANNUAL REVENUE ANNUAL REVENUE ANNUAL REVENUE ANNUAL REVENUE
$18 BILLION (2015) $12 BILLION (2015) $11 BILLION (2014) $8 BILLION (2014) $2 .2 BILLION (2015)

Top 25 by David Francis

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Parag Khanna (@paragkhanna) is the author of the forthcoming book
Connectography: Mapping the Future of Global Civilization.

David Francis (@davidcfrancis) is a senior reporter for Foreign Policy.

A version of this article originally appeared in the March/April 2016 issue of FP under
the title “Rise of the Titans.”

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