Chapter Seven: Bringing It All Together

The vast majority of Fortune 500s headquartered in Cleveland over the past 60 plus years have done remarkably well financially. The actual number recorded on the Fortune 500 list for a specific year may have fluctuated anywhere from 8 to 24 depending on the state of the economy or the financial condition of the concerns involved. Whatever the number might have been at any time, one thing stood out above all else. Local Fortune 500 enterprises prided themselves on offering a wide variety of fine quality goods and services geared for the exact needs of their many loyal consumers. Ultimately, what decided the economic fate of most establishments had very little to do with the fact that their headquarters were located in Cleveland. Those ventures remaining within that Great Lakes community knew the city’s well-earned reputation for top quality housing; multiple lines of credit, vast natural resources, acclaimed educational facilities, desirable amenities and central location. In fact, Cleveland’s numerous economic and physical attributes far outshine many other communities of similar composition and size.

If in fact that was true, then why did so many large businesses choose to leave this city? Undoubtedly, a wide range of considerations determined it. In most cases, local companies forced to declare bankruptcy had not moved quick enough to meet the many economic and financial challenges placed before them by highly aggressive rival firms. Confronting a barrage of less-than-pleasant economic and financial realities frequently prompted by such things as escalating overhead costs and plunging sales figures compelled many marginal corporations to close their doors permanently. However, closer inspection strongly suggests that acquisitions and mergers, and not so much out-and-out bankruptcies, often decided whether an enterprise remained in Cleveland or not.

The growing number of acquisitions and mergers notably in the 1970s and 1980s emboldened numerous Fortune 500s to either consolidate or expand their holdings on a fairly regular basis. An individual company’s financial situation, at an auspicious moment, usually signaled which course of action that firm would pursue in the immediate future. In many cases, conglomerate mergers or outright buyouts frequently instigated by wealthy private equity groups often decided the economic fate of many of those companies. Financially declining enterprises often took other definite steps in an attempt to avoid the bankruptcy court. They included such things as closing low volume branch stores, curtailing customer services or limiting product choices. Some on those corporations verging on bankruptcy regularly liquidated underperforming subsidiaries or sold remaining assets when, and if, the economic opportunity presented itself. Whatever the final consequences of their actions might have been struggling Fortune 500s rarely deviated from carefully proscribed business practices of their day.

Similar business advice affected a great many companies on the positive side of the financial spectrum. Following the business rules of the times enabled many prosperous Fortune 500s to achieve remarkably high returns on their investment dollars while still preserving sensible overhead costs. During the second half of the 20th century, nearly everyone involved in big business zealously believed that economic and financial fluidity engendered by a periodic expansion and contraction of present holdings represented the key to sustained economic life. However, there was also a potentially a very dark side to such economic thinking that few in the business world readily acknowledged to outsiders. Momentary economic and financial triumphs, as proclaimed by many of this nation’s biggest business principally during the tumultuous late 1980s and early 1990s, had mistakenly convinced many officials in those same corporations that their home bred business gurus could achieve nearly anything they wanted to do once they decided to act upon it.

Hoping to exploit their new found economic and financial success to the maximum led many of headstrong executives in large companies to rely more-and-more on costly acquisitions and mergers as a way of securing the upper hand over their unfortunate rivals. The idea behind their thinking was simple and direct. Those Fortune 500s were bound-and-determined to eliminate as many of their viable competitors as soon as possible. They supposed that their nimble actions would not only empower them to dictate their-own company’s economic and financial future; but also, set industry-wide prerequisites that their remaining rivals must follow if they intended to remain competitive.

Those same boastful leaders also assumed that no outsiders would ever challenge their newly attained leadership roles. They believed that they were the best in their field and everyone better recognize that fact quickly or face the negative consequences of their actions. In a perfect business world that scenario might have worked quite well with only minimal opposition from a few smaller companies on the fringe. However, the real world was vastly different from the idealistic scenario they concocted to explain their selfish actions. Any economic and financial reorientation effort of that magnitude and scope rarely occurred within a vacuum. Competing corporates not only watched each-others business actions very closely, but also, never hesitated to seize upon any economic or financial opportunities that might come their way based on what they perceived to be totally unprovoked business attacks launched against them by one or more of their closest rivals.

Those lead-in companies advocating such brazen economic activities frequently downplayed the inherent financial risks equated with such massive acquisition or merger activities. They considered their bold actions, in that regard, to be an important first step towards achieving unyielding prosperity with them in the lead position. Obviously, Fortune 500s regularly involved in such speculative ventures shouldered any additional expenses associated with such a gamble. Most of them considered those added costs as an inevitably, brief financial inconvenience, a momentary setback on the road to even greater business glory and wealth. They claimed that substantial profits were waiting for them just around the corner once their newly secured firm had been assimilated successfully into their corporate culture. Much to their dismay, those carefully calculated plans did not always guarantee future growth or profits for their many enthusiastic investors.

Amazingly, most Fortune 500s did not seem overly concerned about the amount of staggering debt that might incur from participating in such unabashed acquisition or merger activities, at least not at the onset. As stated earlier, they reasoned that much of their firm’s future growth depended on how quickly those new holdings could be integrated into their corporate mainstream. However, if those new assets failed to generate sizeable returns quick enough than those same new owners did not oppose the idea of selling them as soon as possible. In fact, selling those recent acquisitions to immobilize financial losses soon became a very tenable option for many firms principally when they faced an unexpected financial shortfall due to their recent, less than prudent business moves. That fast-paced buying and selling process was reminiscent of a traditional cat and mouse game with potentially very dire economic and financial consequences for those enterprises that failed to profit fast enough from those recently produced opportunities.

In terms of the majority of Fortune 500s forced to leave Cleveland sweeping national and international businesses changes rather than diminishing urban prestige represented the major driving force behind much of it. The sudden appearance of giant, wealthy corporations, usually from other parts of the country or overseas, most often signaled widespread acquisition and merger activity directed specifically towards dormant, local businesses. Closer examination of the conditions responsible for much of that sudden and abrupt change strongly suggests that very costly business advances; appreciable sales declines and mounting corporate debt undermined the economic well-being of those highly prized entities.

Relocating a corporate headquarters to another city or town often represented a tangible result often akin to business failure, a business failure prompted by the seeming ineptness or feebleness of that enterprise to overcome the many economic and financial vicissitudes placed before its Board of Directors. With rare exception, large corporations absorbed by even larger Fortune 500s had no other option when it came to the future location of their headquarters. They had to follow the guidelines set down by their new owners. However, those Fortune 500 firms able to escape the many economic and financial drawbacks equated with such heinous acquisition and merger activities generally remained in Cleveland. Its high quality lifestyle, superior cultural and social amenities, prime location and well trained worker force made it an ideal setting.

Some modern-day economists might want to reconsider the important business connection that often exists between Fortune 500s and the home communities that serve them, and what might happen, if and when, that long-term trust is either broken or violated. Selecting the proper site for a new corporate headquarters encompasses a meticulous evaluation process. It includes appraising the potential economic, political and social benefits of relocating to that site as well as examining the potential risks that same company might incur from moving to that community. In the final analysis, everyday conveniences, generous tax incentives, and individual cultural and social niceties unique to a specific locale may well tip the scale in favor of one community over another.

Transferring a company’s headquarters from one city to another is a major development no matter the circumstances prompting it. In truth, it symbolizes the climax of a series of economic and financial developments spread over a distinct period of time. Those crucial elements are accentuated even further by ever changing consumer preferences, fluctuating markets or the explicit needs and wants relayed by a company’s ownership. However, it does not, in itself, have to negatively impact the community that is about to lose that business especially if that area continues to appeal to other Fortune 500s who are seeking new headquarters sites in similarly endowed districts.

Cleveland’s large number of highly successful Fortune 500 enterprises dispels a complaint first lodged by a group of disgruntle business leaders in the 1970s. When asked why so many older cities such as Cleveland were losing their economic and financial edge to newer, allegedly more progressive communities in the South and West, those experts insisted that older settings, such as Cleveland, did not possess the business capacity, economic flexibility or marketing experience necessary to fulfill the new agendas being pursued by corporate giants at that time. A review of the energetic Cleveland business scene over that past six decades finally lay to rest such antiquated, closed minded thinking.