Home office
A pianist, one of the hallmarks of Nordstrom department stores, plays Debussy’s Clair de Lune, but shoppers accustomed to silk-glove treatment barely notice. The concierge at the plush Park Hotel occasionally suggests to guests that they might enjoy the short stroll to SouthPark mall — it’s only a block — but most prefer to drive. Next to the hotel stands a nearly featureless beige building, the offices on its four floors tucked discreetly behind tinted glass.
Welcome to steel country. No smokestacks belch fume, and no cranes hump rusting hunks of scrap metal. There are no roaring crucibles; no windborne soot stings the eyes. But here, not in a skyscraper but on the bottom two floors of a nondescript building in a suburban office park, is the corporate headquarters of America’s biggest steel maker. Nucor Corp. had $11.3 billion in sales last year. Andrew Carnegie would be proud. So would Harry Houdini. In Charlotte, where it moved from Phoenix nearly 40 years ago, Nucor is helping keep the myth — the illusion — of the headquarters city alive and well.
Its closest steel mill is in Darlington, S.C., 90 miles away. The only one in North Carolina is in Tunis, 235 miles northeast in rural Hertford County. It cost $500 million and employs 400 workers whose average pay is $60,000 a year. It’s also an economic magnet: At least 23 supporting companies have located nearby. Nucor has only 53 employees at its headquarters, a smaller work force than in many Queen City supermarkets. “We’re not a big-impact player in Charlotte,” admits Jim Coblin, the company’s vice president of human resources.
Nevertheless, its presence makes civic boosters swoon. Nucor is a Fortune 500 corporation, one of nine based in or near Charlotte. No other place in North Carolina comes close, they note. Nor do many cities in the country. “Headquarters bring you the brag factor,” says Carroll Gray, president of the local chamber. “Charlotte clearly has a reputation as a business city. Any headquarters we get just amplifies that assertion.”
But bragging rights don’t boost local economies. “Having a headquarters is low on my list of things important to a community,” says Mike Walden, an economics professor at N.C. State University. “It’s much more important to have a highly skilled work force, a good business climate, good infrastructure. I’d put all those ahead of it.” While corporate headquarters generate jobs, including some that pay handsomely, their number can be small, as in Nucor’s case. And though boosters argue that headquarters bring a high level of participation by high-level executives in civic affairs and philanthropy, that’s not always the case.
To be sure, nobody — including Walden — says headquarters are to be sniffed at. Bank of America Corp. and Wachovia Corp., for example, are widely credited with Charlotte’s downtown boom and bringing tens of thousands of jobs to North Carolina. But Walden points out that New York City traditionally has been home of the nation’s largest collection of Fortune 500 corporations, yet it was on the brink of bankruptcy during the late 1970s.
So what’s the true value of having corporate headquarters in a city? Is it worth the effort and incentives to recruit new ones? Nucor provides a reference point. A pioneer in decentralized management, it has wowed Wall Street with its ability to efficiently and profitably run a widespread collection of steel mills with a skeletal corporate staff. Its management style helped make Nucor one of the most profitable steel companies in history, but that same style diminished the importance of the corporate office and its impact on the home community.
“We try to spend most of our discretionary money on programs and charities in communities where we have our production facilities, which is not Charlotte,” Coblin says. “We really try to minimize our presence in Charlotte because we have so few employees here, and they tend to be some of the senior management. We’d rather put our attention where our workers are — the small rural areas.”
Others have followed Nucor’s model, planting corporate offices in places with competitive real-estate prices and decent airline connections. In effect, they are places to park high-priced executives with a way to get them quickly out of town to where the actual work is done. Charlotte’s airport, with its 534-flights-a-day US Airways hub, offers an unusual number of nonstop flights for a midsize city.
It has two types of headquarters. There are the homegrown varieties such as Bank of America, Wachovia (né First Union) and Duke Energy Corp. They have deep roots in the community, large corporate offices and wide-ranging involvement in civic and cultural affairs. At the other end of the spectrum are companies that might have big names on Wall Street but little local recognition or impact. Most — like SPX Corp. — moved here.
SPX is a $5 billion global manufacturing conglomerate that makes products ranging from electronic testing devices to cooling systems for power plants. It employs about 22,000, but only 100 or so work at its corporate headquarters in a suburban office park. SPX contributes to numerous causes but rations its donations based on the size of its local work force. “We don’t take a look at it and say, ‘Because we are based here in Charlotte we want to make a big impression here,’” spokeswoman Tina Betlejewski says. “We have employees all over the world. How do we make sure we have an impact where our employees work?”
So why doesn’t SPX put its headquarters where its workers and factories are? The answer underscores why Charlotte, with few unique attractions, manages to land as many headquarters as it does. Through acquisitions, SPX became a national, then international operation that outgrew its hometown — Muskegon, Mich., a city of 40,000 on Lake Michigan about 70 miles northeast of Chicago. Looking for a new home, it found Charlotte after acquiring United Dominion Industries in 2001. United Dominion had moved to the Queen City from Montreal in 1989, listing the airport as an important attraction.
SPX came to Charlotte because it was an easy place to get away from. Charlotte was business-friendly with affordable housing, it had a good corporate talent pool and smattering of cultural amenities, but, most of all, it had an international airport. “The No. 1 criteria for us was access to domestic and international air service,” Betlejewski says.
Charlotte has a number of other corporate headquarters that are cast from a similar mold but are not big enough to make the Fortune 500. Midrex Technologies Inc., a steel maker that moved here in 1974, runs operations around the world from a Charlotte office with 65 employees. Another industrial conglomerate, Carlisle Cos. moved here from Syracuse, N.Y., in 2001. Despite $630 million in sales last year, it’s barely known in the Queen City. MedCath Corp.’s network of hospitals and testing centers generated nearly $700 million in 2004. None are in Charlotte, where the company was started in 1988.
So why do communities crave big-time corporate bigwigs so much? Why do the three largest metro areas of North Carolina recruit corporate headquarters as part of their business-development efforts? Across the state, economic-development officials say headquarters help sell communities. Their presence creates an image that a city is a player in the corporate world, that it has the right stuff to attract high-powered, highly paid top executives, that it’s a good place to live and work. Or put another way, having a Fortune 500 headquarters is an ego trip. Conversely, losing one can be a monumental downer.
Winston-Salem has been down that road. In 1987, what was then RJR Nabisco moved its headquarters to Atlanta, taking 300 corporate jobs with it. Then-CEO F. Ross Johnson’s departing message was that Winston-Salem was too “bucolic” for a major multinational corporation like his.
Local boosters wondered how Winston-Salem would cope. It turned out, though, that it was RJR Nabisco that needed therapy. After a vicious takeover battle, the headquarters ended up in New York City. Sans Nabisco, the tobacco company’s corporate headquarters returned to the Twin City in 1999, where it operates as Reynolds American Inc., the nation’s second-largest cigarette maker.
In fact, the Triad, long the heartland of Tar Heel manufacturing, was once the state’s corporate center. Winston-Salem was not only home to Reynolds, which made the nation’s best-selling brands of regular (Camel), filter (Winston) and filter-tip menthol (Salem) cigarettes, but of Hanes Corp., which had the best-selling hosiery brand (L’eggs), and Wachovia Corp., the state’s largest bank. Greensboro was home to Burlington Industries, the world’s largest textile manufacturer, and Cone Mills, the largest producer of denim.
Burlington and Cone, both recently bought in bankruptcy, are part of International Textile Group Inc., a private company. In the late 1970s, what is now Chicago-based Sara Lee Corp. acquired Hanes in a hostile takeover. But by the end of next year, Sara Lee will spin off its apparel division — the old Hanes — which will be based in Winston-Salem and give the region its fifth Fortune 500 company. It will replace Wachovia, lost after the merger with First Union, which took Wachovia’s name. The Triad still has the state’s second-largest collection of Fortune 500 companies, with two — Reynolds and BB&T Corp. — in Winston-Salem and two — Jefferson-Pilot Corp. and VF Corp. — in Greensboro.
In its bid to stay competitive in the apparel business, VF has shut down Triad plants, shifting the jobs to low-wage foreign factories. As Don Kirkman, president of the Piedmont Triad Partnership, notes, VF “no longer manufactures much of anything in the Triad.” So is VF less important to the region than Round Rock, Texas-based Dell Inc., which is building a computer-assembly plant that will employ about 1,500 in Winston-Salem?
It’s not an either/or proposition, Kirkman insists. Dell’s arrival, along with the FedEx Express hub being built at Piedmont Triad International Airport, validates the region’s status as a manufacturing center and distribution hub. But having VF’s corporate headquarters shows it remains a viable place for top-level executives to live and work. “We’d love to have more corporate headquarters,” he says. “If you’re talking about headquarters of publicly traded Fortune 500 companies, the more the merrier.”
Traditionally, the bigger the role a corporate headquarters plays in the community, the more likely the company is based near where it was born. Charlotte is a prime example. Its downtown, the tallest and most vibrant in the Carolinas, includes a professional football stadium, professional basketball arena under construction, museums and a performing-arts center. But it would likely not have emerged without the financial investment and involvement of the city’s big three corporations: Bank of America, Wachovia and Duke Energy.
Charlotte tries to coax newcomers into following their example. Goodrich Corp., for example, housed in a generic office-park building near what once was the state’s largest landfill — it’s now a golf course — has participated in local civic efforts even though its employment base is elsewhere. The company employs about 21,000 around the world. Most work in the aerospace industry, with fewer than 200 in Charlotte. In the 2004 United Way campaign, the company pledged $261,000 from about 125 employees, who gave an average of nearly $1,200 each — pledges that the company matched. Goodrich and its employees gave more than $50,000 to the city’s Arts and Science Council last year and kicked in thousands more to other cultural and education efforts.
Raleigh is starting to experience some of that corporate largesse with the help of its only Fortune 500 company, Progress Energy Inc. Progress recently completed a 19-story downtown office tower for its headquarters, and the company is a major player in local arts and civic projects. Those efforts could have been directed elsewhere. Progress is the result of the merger of Raleigh-based CP&L Corp. and St. Petersburg-based Florida Progress Corp. five years ago.
“I can’t think of a single reason why a community would not want a headquarters office,” says Ken Atkins, executive director of Wake County Economic Development, part of the Greater Raleigh Chamber of Commerce. “I’m not sure there are any negatives. They are environmentally clean. They have some of the best compensation packages. The decision makers are part of a headquarters, and they are the same people who decide to support the arts and other community programs.”
Yet the Triangle has hardly suffered economically by lagging Charlotte in the corporate headquarters race. The region often comes out on top in measures of growth, job creation and quality of life, and it continues to show that a community can be strong economically by playing host to regional operations of major corporations.
“We are very different,” Atkins says. “We don’t really compete in the same arena as the Triad or Charlotte. Our growth has come as we leveraged university assets to bring in knowledge-based companies — pharmaceuticals, biotech, software, research and development.” Corporate envy, though, may be at work. As Raleigh has grown, business developers have become increasingly keen on adding corporate headquarters. The underlying angst is that without them, Raleigh might be vulnerable to the “bucolic” tag.
“People who make decisions on where to move company headquarters can live anywhere,” Atkins says. “They tend to live in the nicest places. If you have headquarters, it says you have a great place to live, a good transportation system, good communication systems. How does that differ from, let’s say, a community that attracts low-end manufacturing? That says your community has cheap labor. When you are talking about some of the factors attached to a very labor-intensive low-wage industry, it is not the same thing that a headquarters office is looking for.”
Plus, landing one brings highly paid executives with a lot of discretionary income to spend locally. Fortune 500 CEOs occupy most of the top spots on Business North Carolina’s annual ranking of the highest-paid executives of public companies. Tony Crumbley, vice president of research for the Charlotte Chamber, says well-heeled corporate executives invariably drop some of their cash on community organizations and spur development of arts, education and leisure offerings. “Try to get a plant manager involved in a community,” he adds. “You don’t. It is the corporate heads who drive community involvement. If you want a new arts center, it is the corporate heads who make it happen.”
Walden agrees, saying one of the major benefits of having a headquarters is the potential for tapping into the expertise and finances of the top executives. “CEOs and CFOs are often heavy hitters in fundraising and doing rah-rah things for the local community. Overall, they are helpful to have. I’d rather have more headquarters than less. But they aren’t a sufficient strategy for economic growth and development.”