A Contrarian View
This was in the St. Louis Post Dispatch on 6/11/07. Dr. Meyer spoke this afternoon at my LLI class. I don't agree with his opinion on Wachovia, but he was very interesting.
St. Louis Post-Dispatch
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St. Louis Post-Dispatch (MO) June 11, 2007 Do corporate headquarters matter? Yes. And contrary to most reports, St. Louis is doing exceptionally well at getting them. |
In Warner Bros.' animated movie "Happy Feet," a penguin named Mumble hatches from his egg and starts dancing:
"Whatcha doin' there, boy?" asks his dad, Memphis.
"I'm happy, Pa!""Whatcha doin' with your feet?"
"They're happy too!"
St. Louis could learn something from Mumble; in the wake of Wachovia Corp.'s acquisition of A.G. Edwards, we should be dancing.
Is this delusional? Absolutely not. A study last year by Thomas Klier, senior economist at the Chicago Federal Reserve Bank (published in Economic Development Quarterly, 2006), shows that over the decade of the 1990s, St. Louis did exceptionally well in the growth of the number of large corporations headquartered here.
If that sounds contrary to what you've been hearing, it's because Klier's data are not restricted to the narrow confines of the Fortune 500 list. Local leaders too often focus on those companies and decry the decline of locally headquartered firms from 11 to 7 since 2000.
Klier's far more comprehensive study looked at all corporations employing 2,500 or more people. In that universe, St. Louis ranked 12th in the nation in 2000 - up one notch from 1990. That is far above St. Louis' rank of 18th in regional population.
Here's a more subjective issue: Does it matter? Unless the addition or loss of a corporate headquarters involves substantial numbers of jobs, should we care how many are here? I think it does matter and that we should care.
Corporate headquarters inject a special vibrancy into the St. Louis business community. Their senior executives comprise a pool of citizens available to serve as talented community leaders. The heads of companies wield strong influence over and sometimes make final decisions about how businesses or their related foundations bestow charitable gifts that easily can reach into the millions of dollars annually.
In addition, corporate headquarters - along with large divisional headquarters, such as Boeing's - generate demand for high-level business support services in law, accounting, management consulting and other areas that locally based firms or branch offices can supply. Providing these services supports even more high-level business employees.
One especially encouraging factor about St. Louis' headquarters gains during the 1990s: The metropolitan region ranked fourth in the nation in the rate of generation of new, large, local corporations. This points to future vibrancy.
Some examples:
Build-A-Bear Workshop was founded in 1997. In 2000, it employed too few people to qualify for ranking in Klier's data. But by 2006, it employed 6,350 people and had $437 million in sales.
In 1999, Panera Bread was reconstituted from another firm and located its corporate headquarters in St. Louis. By 2006, it had 7,200 employees and $829 million in sales.
Monsanto disappeared as an independent corporation and became a subsidiary of another in 2000. In 2002, however, it became an independent firm again with headquarters in the St. Louis region. It employs 17,500 and had sales of $7.3 billion in 2006.
These are just three prominent examples of new large corporations that St. Louis has gained as headquarters since 2000. Wachovia's purchase of A.G. Edwards takes away one large corporation headquartered here, but if Klier's data covering the 1990s are any indication, we are generating many more new, large corporations.
A very good case also can be made that St. Louis may gain more from Wachovia's purchase than if A.G. Edwards had remained independent. Our region will become the divisional headquarters of one of the three largest brokerage firms in the nation - New York being the headquarters for the other two. As a recent Post-Dispatch business story reported, with Wachovia Securities headquartered here along with Edward D. Jones & Co., Stifel, Nicolaus & Company and Scottrade, this solidifies us as a leading center for the retail brokerage industry.
Danny Ludeman, the chief executive of Wachovia Securities, along with the division's chief financial and operating officers, are relocating here from Richmond, Va., where the division is headquartered now. This senior management team will oversee almost 15,000 brokers who handle some $1.1 trillion of assets, putting them on par with officers of a huge global corporation.
We can expect Wachovia Securities to look increasingly to St. Louis firms and branch offices to provide the business support services it needs - given that neither Richmond nor Charlotte, N.C, home to Wachovia's corporate headquarters, possesses the sophistication and range of services available here.
Maybe St. Louis should invite Savion Glover, the Tony-Award-winning dancer who choreographed Mumble's "happy feet" and who has appeared here often, to create some steps celebrating the corporate headquarters in our city. We have a right to say "We're happy."
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David Meyer is a visiting professor at the Olin Business School of Washington University in St. Louis.
