Lost 'Fortune'

Walk the streets of downtown Baltimore, and you might feel the presence of its corporate ghosts. On Gay Street, perhaps you'll meet Alexander Brown, the Irish immigrant who started the nation's first investment firm here more than 200 years ago.

Head to Light Street, and you'll come upon skyscrapers that housed the USF&G insurance company and, a couple blocks north, Maryland National Bank, whose familiar gold-topped tower remains long after the state's then-largest banking company was sold and sold again.

And over at 750 E. Pratt is Constellation Energy, new and glassy but already poised to join the cast of this chilly tale: corporations that through various mergers and acquisitions have packed up their headquarters and left town.

Is Baltimore now the kind of city depicted on television in "The Office," home to a branch rather than main office of the Dunder Mifflins of the world?

There's an "ego element" to the list for cities that are home to some of those headquarters, said economist Mark Vitner of Wells Fargo, the giant San Francisco financial services company. "Fortune 500 companies are large, they're visible and they add to the big-city feel of an area." "

The announcement this week that Chicago-based Exelon Corp. has struck a deal to take over Constellation came as something of a psychic blow to the city. If the $7.9 billion deal passes regulatory hurdles, and the parent of local utility BGE is absorbed by its out-of-town suitor, then Baltimore will lose its sole remaining Fortune 500 company headquarters.

Just two years ago, the region was home to three such headquarters. But then Black & Decker was acquired by a Connecticut company in March 2010 and folded into Stanley Black & Decker, and Legg Mason's revenue was hit so hard by the financial meltdown that it fell off of the list.

Meanwhile, when Maryland tried to attract a trophy company, such as Northrop Grumman, those efforts failed. Ironically enough, Constellation CEO Mayo A. Shattuck III was enlisted to help woo the Fortune 100 defense contractor but Team Maryland lost to Virginia.

On Thursday, exactly one year and one day later, Maryland learned it could lose Constellation as a home-grown, free-standing entity.

Already, the soul-searching is beginning, with some rueing yet another diminishment of Baltimore's prestige, even as some argue that the Fortune 500 listing is no longer the be-all marker of a local economy's vitality.

"I have mixed views. I own a couple hundred shares [of Constellation stock], so I'll do all right. But from a Maryland point of view, we're going to miss having that headquarters," said Aris Melissaratos, the state's former secretary of economic development.

"But it's still a sad day," he said. "This will continue to be a fine city, but it won't be the same not having Mayo down the street."

Maryland has long fought the image that its tax rates and regulatory climate drive out existing businesses and scare away new ones.

"You can listen to all the arguments coming out of Annapolis, how business-friendly Maryland is, but in the business world, there is a perception — right or wrong, the perception's certainly there — that Maryland is not business-friendly," said A.B. "Buzzy" Krongard, former chairman and chief executive of Alex. Brown.

Krongard thinks the long line of corporate headquarters to exit the area isn't so much a statement about the city as about the state, and its proximity to particularly business-welcoming ones.

"When you have states like Delaware and Virginia right next to you that are perceived as very pro-business or business-friendly, the odds are against you," he said.

Melissaratos, now special adviser for enterprise development to the president of the Johns Hopkins University, said he's seen a shift in the city's corporate culture: In the past, companies here tended to be the ones that acquired other businesses; now it's the other way around.

"We can't even keep Ed Hale in business," he said wryly, referring to the chairman and CEO of Baltimore's largest locally owned bank, 1st Mariner, who is stepping down as part of a deal with a New York investment company to shore up its capital.

While corporate headquarters remain valuable to cities, they need to focus more on jobs which, these days, are more likely to come from newer and small- or medium-sized companies, some experts said.

Joel Kotkin, an author and consultant on urban trends, said the number of corporate headquarters is "an important measurement, but it doesn't determine everything about a city." Kotkin, a fellow in urban futures at Chapman University in Orange, Calif., and whose books include "The City: A Global History," said the question should not be why corporations are leaving town as much as what, if anything, is taking their place.

"The problem is Baltimore isn't generating the new companies the way cities like Houston or Seattle are," Kotkin said. "You don't create new companies, but you're losing the old ones."

Christian S. Johansson, Maryland's secretary of business and economic development, says he indeed is wrestling with such questions. How, for example, will the state shrink the gap between these two rankings: It is No. 1 in the amount of sponsored research, but only 37th when it comes to entrepreneurship, he said. The answer lies in such things as increasing access to venture capital and taking down any barriers, perceived or real, to a speedy permitting and licensing process for startups.

"I'm not going to sugarcoat what it feels like to have a major company acquired," he said. "But the biggest driver for how successful economies are is the ability to invest and grow new young firms."

Even as, Johannson says, everyone wants to encourage the next MedImmune or Under Armour, the growing Baltimore-based athletic apparel company, no one is dismissing the still powerful pull of the history-laded corporation, based in its hometown. The appeal of corporate headquarters is such that cities and states get into bidding wars or extend generous packages to lure or keep a company much as they would sports franchises.

It can give those who remain leverage. Asked about the business climate in the state, spice giant McCormick & Co. offered this statement: "We support efforts to make Maryland a more pro-business state. There is room for improvement."

The Sparks-based company has fielded anxious questions over the years, from both government and news media, about whether it plans to stay put. "What we've historically said is, we've been here since 1889, we employ about 2,400 people locally and we've invested hundreds of millions of dollars in recent years into our Maryland facilities," spokesman Jim Lynn said. "But … there are no absolutes, and a company has to do what's in its best interests to meet its growth goals."

Jurisdictions often open up the public coffers to land star companies — Chicago and Illinois came up with $63 million in incentives to win a 2001 bidding war for Boeing's headquarters even though it would only bring 500 administrative employees to town, and most were expected to transfer from Seattle. But the prestige, ripple effects on nearby businesses and charitable and civic activities that flow from the corporations and their employees tend to make it worthwhile, some say.

Like other cities Baltimore has had a long line of corporate executives who have proved vital to the city's growth and development, starting, of course, with Alexander Brown, who actually brought running water to the previously well-dependant city, up through those who partnered with the late William Donald Schaefer, such as USF&G's Jack Moseley, in creating the so-called downtown renaissance.

"I'm a Maryland booster, for sure, and I have tried to help on any number of fronts to get companies here and to build a larger employee base," Shattuck said.

Shattuck, who was also part of the Alex. Brown executive team when it was swallowed up by Bankers Trust and then Deutsche Bank, says he'll split his time now between Baltimore and Chicago. He will serve as executive chairman of the merged energy company.

Like others, he observed that the role of the corporate headquarters has changed in today's fluid, globalized economy.

"I think the thing we all recognize in today's corporate world is the title of corporate headquarters can be a man and his dog in Delaware," he said. "What really matters is the substance of what you're doing, where your employee base is, what [business] you're driving."

Baltimore's big business executives largely zipped their lips on Constellation's loss and what it means for their community. Officials from Legg Mason, T. Rowe Price and Under Armour declined to comment for this story.

There are also those who would argue that the Standard & Poor's 500, which is made up of large companies based on market capitalization, financial stability and other factors, should be considered as a benchmark of a city's economic success. The Baltimore region, by that standard still is something of a player, with Constellation, Legg, T. Rowe and McCormick among that particular group of 500.

But to the layperson, few titles have the resonance of the Fortune 500, the latest of which will be released Friday. Take it from someone in another city that has had its own experience with headquarters leak.

"It hurts in a lot of different ways," said John P. Blair, an economics professor at Wright State University in Dayton. "It really eats away at a community."

Dayton lost its last member of the 500 in 2009, and its power company is also currently in the process of being bought out.

Acquisitions by out-of-state companies and outbound relocations are a blow to image, but that's just the beginning, he said. Decision-makers leave, replaced by regional executives who have less authority and are likely to relocate in a few years to bigger and better things. Charitable donations fall. Fewer movers and shakers are available to sit on nonprofit boards and push for civic improvements.

Even cities that have been more successful at retaining corporate headquarters, though, say that much of their value is in the intangibles — the symbolism, the history they represent.

Pittsburgh, for example, still has a skyline shaped by a steel and oil past that no longer exists, says Chris Briem, a regional economist at the University of Pittsburgh's University Center for Social & Urban Research.

"We have an iconic skyline. We have what we call the [U.S.] Steel building, but the biggest tenant is UPMC, our health care system." He said. "The Gulf Building is part of the skyline, but it's just another office building now."

Similarly, Briem said, Steelers fans watch neon "ketchup" flow on the scoreboard whenever the home team drives into the "Heinz Red Zone."

"There is no Heinz ketchup being made in Pittsburgh any more," he said.

All of which is to say that having corporate headquarters in town — Pittsburgh has five Fortune 500 companies — helps shape how a community views itself, but may not be as valuable as a manufacturing plant.

"Would we trade a headquarters for a large bunch of jobs? I suspect a lot of people would take that trade-off in a heartbeat," Briem said. "From an economic growth perspective, the lost of the core jobs is far and away more important than having the headquarters."

Richard Clinch of the University of Baltimore's Jacob France Institute, which conducts business and labor research, would agree.

"The lesson of Pittsburgh may be that keeping the fortune 500 companies does not insulate you from long-term decline," said Clinch, coincidentally a Pittsburgh native.

The city and state has strong fundamentals — workforce, education, quality of life and the like — but has "squandered a period of growth and prosperity because of a lack of common vision and action," Clinch said..

"The last time the city and state, business and government, worked cohesively was the Schaefer years," Clinch said of the late mayor and governor.

"I think the city can do more and the region can do more. And hopefully this is one of the things that can rally people."

Baltimore Sun reporter Gus G. Sentementes contributed to this article.

Fortune 500 farewell

The number of Fortune 500 companies headquartered in the Baltimore region will shrink to zero if Constellation Energy completes a deal to sell itself to a Chicago power company. Two other regional companies also dropped off the list since 2009, Legg Mason as a result of falling revenue and Black & Decker to an out-of-state acquisition.

Overall, Maryland ranks in the middle for Fortune 500 headquarters — with a number far below the top states.


Fortune 500 in Maryland, 2010

Lockheed Martin of Bethesda, No. 44

Constellation Energy of Baltimore, No. 149

Coventry Health Care of Bethesda, No. 168

Marriott International of Bethesda, No. 213

Black & Decker of Towson, No. 435

Host Hotels & Resorts of Bethesda, No. 492


Fortune 500 in Maryland, 2009

Lockheed Martin of Bethesda, No. 54

Constellation Energy of Baltimore, No. 125

Marriott International of Bethesda, No. 208

Coventry Health Care of Bethesda, No. 226

Black & Decker of Towson, No. 408

Host Hotels & Resorts of Bethesda, No. 449

Legg Mason of Baltimore, No. 500


Top states for Fortune 500 headquarters, 2010

1. (tie) California — 57

1. (tie) Texas — 57

2. New York — 56

4. Illinois — 31

5. Pennsylvania — 25

21. Maryland — 6