BRIGHTER OUTLOOK FOR CALIFORNIA : Smaller Firms Spell Exiting Aging Giants : Transition: For first time ever, with a total of 48, state is home to more Fortune 500 companies than any other.
Lockheed Corp.’s plans to shift its corporate headquarters to the East Coast as it blends into a newly merged company may sound like the latest proof that California has lost its luster for major employers.
Yet for all the fears of a corporate exodus, the truth may be surprising: Even as aging corporate citizens like Lockheed trim their ties to the region, a striking number of fast-growing enterprises are thriving.
By key measures, from the Fortune 500 ranking of industrial giants--more are now based in California than anywhere else--to surveys of swift-growing, adolescent companies, the Golden State jumps out as a popular home base for business.
The community of employers is changing dramatically, however--a transformation that is cause for hope as well as worry, according to experts.
The growing presence of firms in international trade, information and other non-defense technologies bodes well for job creation. But at the same time, the reduced role of established corporate players such as Security Pacific Bank (swallowed up by Bank of America in 1992), aerospace giant Lockheed (set to merge with Maryland-based Martin Marietta) and others is taking a toll.
The state’s corporations are becoming more anonymous and less likely to participate in the community as fully as the fading elite of corporate movers and shakers. While some anti-elitists may choose not to mourn their passing, the shift has made it harder to raise money for charity, cultural programs and other social activities.
“It is not a simple equation, and it doesn’t have a simple answer,” declares Ray Remy, president of the Los Angeles Area Chamber of Commerce.
Many different economic forces are at work--and the pressures are not unique to California. Mergers and buyouts in the 1980s removed such household names as Crocker Bank, PSA and Western Airlines from the Southern California corporate scene.
The savings and loan debacle meant the demise of such established thrifts as Columbia and HomeFed, also large presences in the region.
Corporate survivors, meanwhile, often have scaled back their spending and other community involvements, reflecting cost-cutting pressures that have spread throughout private industry in the 1990s.
This reality applies to some of the state’s most familiar corporations.
In July, for example, Arco disclosed that it was eliminating the entire staff of its company foundation, a vehicle that had been used to promote education reform, job training and other social objectives.
And long before last week’s announcement, some observers had noticed that Lockheed was edging away from its once active role in community activities as it turned inward amid the aerospace decline. Once upon a time, all you had to do was name the problem, “and Lockheed would be there,” Remy said.
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Nor was Lockheed alone. When business leaders needed to convene for a local matter, “you could call Security Pacific Bank and they would hold the event for you in the corporate dining room on the top floor. It was wonderful,” said Jack Kyser, chief economist at the Economic Development Corp. of Los Angeles County.
“You just don’t replace a Security Pacific or a Lockheed,” Kyser said. “These are major voids that are going to take years to fill in.”
Despite such laments, many big-name corporations remain in California, and other less-famous ones are joining the club.
For the first time ever, California this year was the most popular home for companies in the Fortune 500, with a total of 48, compared to Illinois’s 44 and New York’s 43. The Big Apple has its own cause for concern; this was the first time New York slipped out of its traditional No. 1 ranking.
Such established California firms as Chevron, Hewlett-Packard, Arco and Rockwell were on the list. But there were newer names, as well: Solectron, a circuit board maker in Milpitas; SynOptics Communications, a supplier of computer network equipment in Santa Clara; Cisco Systems, a computer networking equipment maker in Menlo Park, and 3Com of Santa Clara, also in the networking business.
Southern California’s contingent included Mattel, AST Research, Western Digital and others.
A separate list compiled by Forbes, which includes service companies along with industrial firms, dramatizes California’s ongoing appeal to business: In 1985, the Golden State was home to 82 of the nation’s largest public companies. By last year, that number had risen to 89 (although the share in Los Angeles dipped slightly).
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Most dramatic, however, is California’s allure for smaller, fast-growing companies. In Inc. magazine’s annual rankings of the fast-track crowd, California typically lands about 12 companies in the top 100--more than New York, Texas or Florida.
In addition, San Diego, San Francisco, Los Angeles and Sacramento are among the nation’s most popular magnets for fast-growing “gazelle” firms, according to studies by Cognetics, a research group in Cambridge, Mass.
Often, however, these smaller, surging enterprises are a very different animal from their older and larger corporate cousins.
They may trod a a quiet path, garnering little public recognition; and typically, they focus their efforts on competitive demands. Little energy is left over for community activities, such as funding a new museum or back-slapping with the traditional elite.
“They don’t have PR departments. They don’t have a vice president in charge of going to meetings,” notes Joel Kotkin, a frequent writer on the California economy. “And they don’t have a guy who sits down every year to decide, ‘How do I spend the $3 million I have for charity?’ ”
The corporate society that is emerging also may have more fragile community ties than in the past.
Jules Tygiel, a California historian and author of a recent book on the 1920s oil boom in Los Angeles, points out that an indigenous capitalist elite once had powerful roots in Los Angeles, through its interests in real estate, finance, media and other areas.
Their “livelihood and well-being really were tied to the livelihood and well-being of the Los Angeles community,” said Tygiel, a professor at San Francisco State University.
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Today, by contrast, he wonders if enterprises in such fields as technology and information--where the market is global--feel the same intense links to the local scene.
Clearly, some of the emerging magnates of industry are demonstrating a community conscience.
Irvine-based AST Research, one of the world’s largest makers of personal computers, has donated hundreds of computers to schools in Southern California. On top of that, its executives have made large donations to local colleges--including $1 million to UC Irvine by Chief Executive Safi Qureshey.
Remy hopes that such involvements will become more common as the new corporate titans mature, that “they’ll become more visible and more ingrained in the corporate community.”
The process is far from complete. In the late 1980s, Los Angeles corporations would lend some 4,000 individuals to help the United Way raise money, recalls John S. Moawad, senior vice president at the United Way of Greater Los Angeles.
Today, the number is closer to 2,800.
Similarly, a range of economic pressures--including corporate relocations--have cost the charity up to $10 million a year since the easier fund-raising days of the late 1980s.
In the new corporate world, the United Way has to rely much less heavily on an identifiable corporate elite and plunge into the more anonymous, less-understood world of mid-sized business.
“I have to go out and try to find smaller customers,” Moawad said. “I have to make more calls to get the same gross. We’ve got to get in pace with that--and we know it.”
