Charities Among Victims of L.A. Corporate Pullouts : Business: Firms' headquarters tend to focus locally. Moves and mergers eliminate both jobs and major donors.

By MICHAEL A. HILTZIK

Oct. 24, 1995 12 AM PT

TIMES STAFF WRITER

When Security Pacific National Bank reigned as the largest financial institution headquartered in Los Angeles, local philanthropies reveled in its reflected glory: The community-minded corporation contributed an estimated $7 million to $10 million a year to Los Angeles-based charities.

Then came Security Pacific’s 1992 takeover by the parent of Bank of America. Today, San Francisco-based Bank of America remains a generous contributor to nonprofit organizations around the region, but not on Security Pacific’s scale: Bank of America’s 1994 charitable budget of $24 million, covering 10 Western states, includes $4 million for recipients in Los Angeles County.

The Security Pacific case shows just one side of what happens when a community loses a major corporate headquarters. It’s a phenomenon that has struck Los Angeles again and again over the last 10 years, as mergers, selloffs and business failures have, in the opinion of many local leaders, impoverished the city and county’s business community.

“This community is still feeling the aftereffects of the Security Pacific merger,” said Jack Kyser, chief economist for the Economic Development Corp. of Los Angeles County.

Now history may be repeating itself. San Francisco-based Wells Fargo Bank’s nearly $11-billion bid for First Interstate Bank means that First Interstate, which assumed Security Pacific’s mantle as Southern California’s largest financial institution, is very likely to disappear as an independent Los Angeles-based entity.

First Interstate would thus join a long list of banks, airlines, oil companies, aerospace companies, retailers and others whose headquarters have vanished from the local scene.

“We have a very short list of major business presences,” said Daniel Flaming, president of the Economic Roundtable, a nonprofit Los Angeles-based business group. Not many years ago, Flaming recalls, the group could summon 30 locally based corporate economists and chief executives to its regular meetings.

“Now that list is decimated,” he said, with participation having shriveled to perhaps half that many.

Flaming and others suggest that the lack of a cadre of large mainstream corporate headquarters may contribute to Los Angeles’ difficulties in coming to grips with its natural and social crises.

“There’s an absence here of a center of gravity in the business community that can speak for business, lead it, or provide a civic identity in trying to address the community’s problems,” he said.

In truth, not all of the movement of corporate headquarters has been out of the Los Angeles area. Rockwell International, one of the region’s largest employers, relocated to El Segundo from Pittsburgh in 1988 and subsequently consolidated its executive offices in Seal Beach. Los Angeles lost Carnation Co. when that food company was purchased by Switzerland-based Nestle in 1985--but Glendale gained the headquarters of Nestle U.S.A.

Other big companies, such as Burbank-based Walt Disney Co., have stayed and are expanding. Disney, for example, is acquiring New York-based Capital Cities/ABC, making the Los Angeles area the home of a major television network.

Moreover, this region has always boasted a larger population of entrepreneurial small- and medium-sized companies than large ones. These companies, in such industries as entertainment and technology, are adding jobs and vitality to the local economy.

“The business community here is not static,” said Ray Remy, president of the Los Angeles Area Chamber of Commerce. “It’s equally important to look at what’s growing. L.A. has a lot of favorable things going on, even though in the near term they certainly don’t replace what we’re losing.”

Moreover, Los Angeles’ losses have paralleled what has happened in other large cities. In the 1970s and 1980s, New York City lost a string of major corporate headquarters to its suburbs and elsewhere as high taxes and a host of urban ills drove General Foods, Pepsico, American Airlines and other big companies away. The city stemmed the outflow only by offering costly tax breaks and other incentives.

But Southern California started with a smaller group of old-line industrial giants than New York, Chicago and heartland cities such as Cleveland and Pittsburgh. Thus, the dwindling of an already scanty corporate core may hurt more.

And while the growth of emerging entrepreneurial firms will offset some of the loss of big corporations, these smaller companies tend not to be involved in civic and philanthropic life until they are older and more established.

The decade-long shrinkage of Los Angeles’ corporate world has many roots. One is the wave of consolidation that has hit two major local industries, finance and aerospace. Calabasas lost the headquarters of Lockheed Corp., for example, when that aerospace company merged last year with Martin Marietta and consolidated its headquarters staff in Bethesda, Md., where Martin was located.

Of two major passenger airlines once located here, Western Airlines vanished into a merger in 1987 with Atlanta-based Delta Air Lines, and Continental Airlines was acquired in 1982 by Houston-based Texas Air. When Continental emerged from Texas Air’s bankruptcy as an independent company its headquarters remained in Houston. A third local airline, cargo carrier Tiger International, ceased to exist after it was bought by Memphis-based Federal Express in 1988.

Tough economic times and the financial leveraging craze of the 1980s contributed to the disappearance of a number of Los Angeles-based retailers, including Bullock’s, a Los Angeles fixture since the Canadian immigrant John G. Bullock opened his first Downtown store in 1907, and the Broadway, once the flagship of Los Angeles-based Carter Hawley Hale, which filed for bankruptcy protection.

Both chains were acquired by Cincinnati-based Federated Department Stores--Broadway was sold only this year. Federated has announced plans to eliminate both brand names and convert the stores to Macy’s and Bloomingdale’s outlets. A similar, if less drastic fate, befell Robinsons, a Los Angeles-based retailer sold in 1984 to St. Louis-based May Department Stores Co., which later merged its Robinsons and May chains.

Other names vanished from the roster of companies calling Los Angeles home because of business failure. First Executive Corp. and Columbia Savings & Loan were onetime high-fliers whose crashes were linked to the Michael Milken junk-bond scandal. Torrance-based Ashton-Tate, which rode its dBase database program to a ranking as the world’s third-biggest software manufacturer and then crashed under the weight of a series of marketing missteps, was taken over in 1991 by Borland International, a software maker headquartered in the Silicon Valley.

Business observers say the impacts of the headquarters drain fall into several categories.

One is direct job losses. These can range from modest to major, depending on the industry. Lockheed’s headquarters employed 150 to 200 people, for instance; Security Pacific’s had a payroll of thousands.

Moreover, corporate headquarters tend to buy a lot of outside services, meaning more employment in accounting, legal services, public relations and advertising, among other businesses.

But “losing a corporate headquarters, whether it’s Lockheed or Security Pacific, has an impact that’s not just jobs,” said Chamber of Commerce head Remy. “There’s a whole range of impacts that comes from having a chief executive officer here.”

One major impact is on philanthropy. A recent survey by the New York-based Business Committee for the Arts revealed that 93% of all grant-making corporations allocated a majority of their money to local communities where they have an operating or headquarters presence.

Where to spend that money is a decision almost always made at the headquarters level by executives sensitive to their own stature in the local community.

“If a headquarters moves, it’s safe to assume that even if there’s a still significant presence here, contributions will diminish and diminish significantly,” said Lon Burns, executive director of the Southern California Assn. for Philanthropy.

That was the case when Los Angeles-based Getty Oil Co. was taken over by Texaco in 1984.

“Getty used to make $4 million to $6 million a year in grants locally,” said Jack Shakely, president of the California Community Foundation. “When it was purchased by Texaco, that dropped to less than $1 million.”

Headquarters interest in corporate giving tends to ripple through the corporation.

“Communities that have corporate HQs tend to have the highest levels of giving to the United Way,” said Joseph V. Haggerty, president of United Way of Greater Los Angeles. “Where the executive staff lives they tend to be more involved, so having a headquarters in the community is a big plus.”

Shakely added that there is no substitute for a corporate chief executive officer taking a personal interest in a local charity. After the Los Angeles Public Library was struck by two arson fires in 1986, its $10-million Save the Books restoration campaign was headed by Lodwrick Cook, then the chairman and chief executive of Atlantic Richfield Co.--whose corporate headquarters were across the street from the damaged landmark. Cook kicked off the successful campaign with a $1-million Arco donation of cash and rent-free space.

“People in New York would have been only vaguely aware there even was a library here,” Shakely said.

* TAKEOVER BID: Wells Fargo will seek federal approval to start buying First Interstate stock. D1

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Still Here

Here are the 10 largest publicly traded Los Angeles-area-based companies, ranked by 1994 revenue (in billions of dollars):

Company: Revenue

1. Atlantic Richfield Co.: $16.5

2. Rockwell International Corp.: $11.1

3. Walt Disney Co.: $10.6

4. Occidental Petroleum Corp.: $9.2

5. Fluor Corp.: $8.5

6. SCE Corp.: $8.3