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Baltimore's loss: HQs go elsewhere

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.

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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.

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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.

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"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."

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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.

Baltimore nonprofits as a whole have done well because they have learned to aggressively seek other sources of money, particularly government grants. "I've really been impressed by the efforts being made here, so it's not all bleak," Salamon said.

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Perhaps a larger downside is that top executives can be community problem-solvers, and Baltimore's businesses can't seem to mobilize to solve civic challenges in the comprehensive way of a Minneapolis or a Pittsburgh, he said.

In Pittsburgh, for instance, a sizable business leadership group called the Allegheny Conference on Community Development is putting its heft behind an effort to ensure that by 2010 every 10-year-old can read, write and do math on grade level. It's measuring progress, pointing to area schools that are models and advocating for stronger standards.

"It's difficult to get that high-level engagement if you're in a corporate structure where you're a branch manager and you're here for three years," Salamon said.

That puts a pinch on the large businesses that remain. Constellation, Baltimore's lone Fortune 500 company, gets request after request for all sorts of help - including as many as 15 a day for funding.

"There is a lot of pressure," said Lindy Small, who manages corporate contributions for Constellation, the parent of Baltimore Gas and Electric Co. "The companies that are headquartered here, which are not very many, are looked at to take a leadership role in all community activities, from philanthropy to volunteerism to even the Red Cross blood drive."

Boards and gifts

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Constellation managers and executives sit on the boards of about 300 organizations, all but a dozen or so in the Baltimore area. The company is paying down a $1 million pledge to help the recently restored Hippodrome Theatre. Last year, it promised $150,000 to support the rebuilding of the B&O; Railroad Museum, which was damaged in a snowstorm. And this year, it gave $50,000 to the cash-strapped Baltimore Zoo.

A foundation it set up to manage the Constellation Energy Classic golf tournament doles out several hundred thousand dollars annually to local charities such as the Chesapeake Bay Foundation. And last year the company and its employees donated $3 million to the United Way, about three-quarters of which flowed directly to the Baltimore region.

It's little surprise that the biggest supporters of the United Way of Central Maryland, Constellation and the Johns Hopkins Institutions, are based here. But close behind them is defense contractor Northrop Grumman Corp., with a sizable presence in Maryland but headquarters in Los Angeles.

The local United Way has found that companies that are good to their hometowns are usually also good corporate citizens in their branch-office towns, though not at the same level. It eases the sting a bit for the charitable group that Rouse, a big United Way contributor, is being bought by a company with a history of being supportive.

And Rouse's impact will endure to some extent, no matter how much its successor spends: Executives engineered a $20 million donation to the Rouse Co. Foundation as part of the General Growth acquisition, quadrupling the nonprofit's size.

Not forgotten

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The impact of the "branch officing" of a community is muddled because the out-of-town concerns sometimes maintain community support.

The St. Paul Travelers Cos. Inc. of Minnesota, which acquired Baltimore insurance giant USF&G; Corp. in 1998, spent almost $1 million on charitable efforts in the Baltimore area last year. While local leaders say it doesn't seem to be quite as much as USF&G;, it's hard to tell: The year before the merger, the insurance company donated more than $1.6 million in inflation-adjusted dollars, but that was nationwide.

"We are a strong and committed funder in the Baltimore area," said Joan Palm, a St. Paul Travelers spokeswoman, pointing out that company officials also sit on 14 boards in the region.

M&T; Bank said it is spending about the same amount in Baltimore as the company it bought out - Allfirst, which was once the locally run First Maryland Bancorp. M&T; is on track to contribute more than $2.5 million a year to the area, said J. Michael Riley, who manages the company's Mid-Atlantic charitable and philanthropic activities.

M&T; increased Allfirst's pledge to the Hippodrome from $650,000 to $1 million, sponsored the Associated Black Charities' annual gala in June, helped Baltimore Mayor Martin O'Malley draft his financial plan to bail out the school system in March and put executives on scores of nonprofit boards from the Babe Ruth Birthplace and Museum to the Downtown Partnership business group.

"We aren't an outpost of M&T; Bank," said Riley, who was with Allfirst for nine years. "We're a hub."

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Time invested

Donald C. Fry, president of the Greater Baltimore Committee, can't deny the impact of locally based corporate headquarters: His business and civic leadership group was started in part by the founder of the Rouse Co. But Fry said he has seen "tremendous" investments of time and money from the branch offices in town.

He's also encouraged by the rise of relatively young movers and shakers such as Under Armour, the athletic apparel company founded by a former University of Maryland football player, and 180s, another "performance wear" maker, both fast-growing and Inner Harbor-based.

Aris Melissaratos, the state's secretary of business and economic development, said the area has a diverse economy of small businesses despite - or perhaps because of - its relatively few marquee names.

He thinks the area will get more bang for its buck focusing on work force development and high-tech start-ups than trying to coax headquarters here from other places.

Bidding wars between cities and states to lure others' corporate headquarters have cooled compared with a decade or two ago.

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"You've got to work with the hand you've been dealt," Melissaratos said, "and we're making the best of it."

Local corporate headquarters lost to other cities

August 2004: The Rouse Co., developer of malls and communities, agrees to be bought by General Growth Properties Inc. of Chicago.

March 2004: Sweetheart Cup Co., the paper cup and plate maker, is bought by Solo Cup Co. of Chicago.

2000: U.S. Foodservice, the country's second-largest food distributor, is bought by Dutch-based Royal Ahold NV.

1999: HCIA Inc., a publicly traded health data company, is bought by a subsidiary of New York-based Veronis, Suhler & Associates Inc.

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1998: USF&G; Corp., a large insurer, is bought by the St. Paul Cos. of Minnesota.

1998: Waverly Inc., a publicly traded publishing house, is bought by Amsterdam-based Wolters Kluwer N.V.

1997: Alex. Brown Inc., the nation's oldest investment house, is bought by Bankers Trust New York Corp., which is subsequently acquired by Deutsche Bank AG of Germany.

1994: Baltimore Bancorp, parent company of the Bank of Baltimore, is bought by the First Fidelity Bancorp of New Jersey.

1993: Fidelity & Deposit Co. of Maryland, an insurer, is bought by Swiss-based Zurich Insurance Group.

1993: MNC Financial Inc., once the state's largest banking company, is bought by NationsBank Corp. of Charlotte, N.C.

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1989: First Maryland Bancorp, later Allfirst Financial Inc., is bought by Allied Irish Banks PLC of Dublin.

1989: Jiffy Lube International Inc. sells a majority stake to Pennzoil Co. of Houston.

1989: Noxell Corp., manufacturer of CoverGirl cosmetics and Noxzema skin cream, is bought by Procter & Gamble Co. of Cincinnati.

1989: Maryland Casualty Co., an insurer, is bought by Swiss-based Zurich Insurance Group.

1986: The Baltimore Sun is bought by Times Mirror Co. of Los Angeles. Times Mirror is subsequently acquired by the Tribune Co. of Chicago.


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