Aon has announced that it is going to relocate its headquarters from Chicago in the U.S. to London in the United Kingdom. The main reason for the move - also known as corporate inversion - is the benefit of a lower overall tax burden. According to a company statement, Aon's tax rate could fall from 30% to 26%. Only about 20 employees, including CEO Greg Case (ex McKinsey partner) and about half of the company's leadership team will pack up their things to run the insurance broker and consulting firm from across the pond. More than 6,000 other employees will remain working in Chicago.
Surprise to employees and management
According to reports in the U.S. the move has come as a surprise to many within the firm. Aon has its roots deep in the Chicago region, when Ryan Insurance Group merged with Combined International Corporation. The firm was led by founder Pat Ryan until 2005, when Ryan and the rest of the board appointed Greg Case as the new global CEO. Case worked for over 15 years at McKinsey & Company and was the global head of the Financial Services practice. Several employees, including top managers, openly criticized the firm for deciding to leave its roots. The board of directors also was not unanimous in their decision. In its Securities and Exchange Commission (SEC) filing, Aon acknowledged that it could face bad publicity because of the move and that "such negative coverage could make some of our clients, particularly those in the U.S., reluctant to do business with us."
Three reasons for relocation
In a press statement, Aon gave three reasons for the relocation. Firstly, a lower tax rate: "A reduction in our global tax rate over the long-term would allow Aon to remain competitive," Aon said. Also mentioned is that the move will improve liquidity. By relocating, Aon has access to $300 million of excess cash abroad. "If Aon moved the cash here, it would be subject to U.S. taxes" said William Henson, a tax expert. Thirdly, the move also gives Aon "greater access to emerging markets and takes better advantage of the strategic proximity to Lloyd's and the London financial market" according to Greg Case.