Risky relocations

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It is like trying to command a ship from the engine room. Dave Lesar, chairman and chief executive officer of Halliburton, the US oil services company, is relocating to a new headquarters in Dubai. But because Halliburton’s financial and operational management are staying in Houston, Mr Lesar will find it hard to stay in control.

Halliburton’s communication of the move has been hamfisted. It announced the opening of “a corporate headquarters office in Dubai” and the maintenance of a “corporate office” in Houston. That has upset a lot of US politicians who worry about national security and about companies moving to low-tax jurisdictions abroad. But it appears that the only thing changing is the location of the CEO’s desk.

It is easy to understand why Halliburton wants to beef up its presence in the Gulf. In 1965 North America produced about a third of the world’s oil and the Middle East about a quarter. The Middle East now produces a third of the world’s crude output – and that proportion is set to rise further.

The question is whether relocating the CEO makes a difference. It certainly symbolises commitment to the new location, although Mr Lesar’s choice of Bahrain – one of Dubai’s rivals – to announce his move sends mixed messages. Mr Lesar will be closer to the state oil companies, such as Saudi Aramco, from which Halliburton wants business, and he will be able to insist that Middle Eastern customers are well looked after. On the other hand, moving the CEO sends an equally powerful message to those left behind: that staff, customers and suppliers in Halliburton’s home market have become less important; a risky message, even if it is true.

The person with most to lose from relocating the CEO, however, is the CEO. One minute they are an all-power­ful leader, ruling the empire from an office on the 40th floor; the next they are thousands of miles away, reduced to e-mailing friends for gossip and fretting about boardroom politics.

Mr Lesar is moving to Dubai but the levers of power – finance, human resources and the like – are staying in Houston. He will be faced with a choice: either surrender some control or else run up a lot of air miles commuting back to Texas.

Those US politicians up in arms at Mr Lesar’s move can afford to relax a little: relocating the CEO is not the same as relocating the whole company. When HSBC and Jardine Matheson relocated from Hong Kong before 1997 there was a real shift of control, economic output and tax revenues.

Halliburton does not appear to have made that move, but there are few examples of a CEO leading a company from afar. It will surely end in one of two ways: either the CEO will go back to the HQ, or the HQ will go to the CEO. If the latter comes true, and Halli­burton moves everything to the Gulf, that really would be a revolution.

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