Baltimore's loss: HQs go elsewhere

Drain has an impact on city's image, level of philanthropy, pool of talent

August 29, 2004|By Jamie Smith Hopkins | Jamie Smith Hopkins,SUN STAFF

Constellation Energy Group Inc. has more than 80 offices and plants around the world, from Los Angeles to London to Seoul, South Korea. But almost all of its nearly $5 million in charitable donations last year ended up in a single metro area.

Baltimore.

That's the power of having a huge corporation headquartered in the community. Unfortunately for this region, it keeps losing them.

The Rouse Co. of Columbia, the influential and philanthropic developer of malls and communities, was the latest in a long line when it agreed about a week ago to sell itself to an out-of-state competitor, General Growth Properties Inc. of Chicago, for $12.6 billion in cash and assumed debt.

At least 15 major companies in Baltimore and its suburbs have been transformed from world headquarters to branch offices in the past generation, not counting the ones, such as homebuilder Ryland Group Inc., that picked up and left without being bought out.

Each loss has been a kick in the ego for Baltimore, cementing its image as a second-tier city that can't make it to the big time. The metro area claims fewer than 60 publicly traded companies, compared with Washington's 158, according to the Greater Washington Initiative.

Years of hand-wringing aside, no one has tried to quantify how badly the area is affected by its headquarters leak.

Philanthropy experts say experience and national studies show that companies give more money and time to the communities in which they're based, using their clout as captains of industry to help their hometowns navigate choppy waters.

Could be worse

But Baltimore civic groups insist the abrupt end of locally managed institutions hasn't been as dire as it could have been because many of the takeover companies have continued to spend and volunteer here in a substantial way.

For example, M&T Bank Corp. - the Buffalo, N.Y., bank that bought Allfirst Financial Inc. last year from an even more distant out-of-town concern, Ireland's Allied Irish Bank - paid to put its name on Ravens Stadium.

Local angst over Baltimore being an acquisition target isn't new, however. The city has played that role since the Civil War ended and John D. Rockefeller went on the hunt for bargains in the oil refinery business.

"The trusts, the monopolies ... descended on Baltimore with a vengeance," said Matthew A. Crenson, a political science professor at the Johns Hopkins University. "It's why we've always been a branch-office town."

Satellite offices typically need fewer people, and cuts almost always follow headquarters losses, which might explain why Baltimore's employment hasn't grown as fast as the nation's in the past two decades.

Since 1984, the number of jobs in the country has grown by about 40 percent, but by only 25 percent during that span in the Baltimore area, according to the U.S. Department of Labor.

"If you don't have the people in the community who are in the position to make the deals ... then that sort of secondary activity, including spinoffs and innovation funded by venture capitalism, can tend to wane as well," said Virginia L. Carlson, associate professor of urban planning with the University of Wisconsin-Milwaukee.

Headquarters envy is hitting other cities as consolidations alter the corporate landscape. More than 7,000 merger or acquisition deals were brokered in the United States last year, according to FactSet Mergerstat LLC.

"Baltimore is among the most significantly impacted by this trend, but it's by no means alone," said Richard P. Clinch, director of economic research for the University of Baltimore's Jacob France Institute. "This has happened in most of the cities that are midsized."

The area lost several locally owned financial institutions to mergers in the 1990s, including Alex. Brown Inc., the nation's oldest investment house and a major driver in the development of the city. But the array of industries affected extends far beyond banking and insurance.

Pennzoil Co. of Houston bought a majority stake in Jiffy Lube International Inc. in 1989 and moved the Baltimore company to Texas shortly thereafter. Noxell Corp., manufacturer of CoverGirl cosmetics and Noxzema skin cream, was purchased by Cincinnati-based Procter & Gamble Co. the same year. Sweetheart Cup Co. Inc., the Owings Mills maker of paper cups and plates, was scooped up by a Chicago competitor in March.

The Sun, founded by printer Arunah Abell in 1837 as one of the nation's first "penny press" newspapers, was acquired by Los Angeles-based Times Mirror Co. in 1986, which in turn was bought by the Tribune Co. of Chicago in 2000.

Nonprofits compensate

Lester M. Salamon, director of the Johns Hopkins Center for Civil Society Studies, believes it is no coincidence that Minneapolis, Cleveland and Pittsburgh - similar-sized cities, but with more corporate headquarters - have higher rates of philanthropic contribution than Baltimore.

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