February 8, 2016 | By Richard C. Longworth

HQ Moves—Maybe Better to Pack Light

ConAgra Foods production facility is seen in Oakdale, California. In October 2015, ConAgra announced it was moving its corporate headquarters to Chicago. REUTERS/Fred Greaves

Once upon a time, corporate headquarters stayed where they started, rooted in their native soil. But if a headquarters did move, most employees moved with it.

That’s changing, and it’s ignited a debate about the value of these headquarters. Cities are throwing big money at companies to move their headquarters, even though the move these days usually involves a relative handful of executives, with most employees left behind in the old home town.

Is this worth it? Do these HQ moves bring any value to their new home? Some recent articles say no. But the argument here is that, yes, these moves are a plus for the city that gets them. What’s more, moving all the employees might do more harm than good.

A recent article in Crain’s Chicago Business listed companies that have moved headquarters to Chicago, some from the suburbs, some from other states or countries. These are corporate headquarters that “arrive from afar but pack light,” the author, Claire Bushey, said in a nice turn of phrase. “These headquarters represent the pinnacle of the corporate pyramid, snapped off and relocated, free of jobs tied to operations and often midlevel HQ functions…”

Bushey cited GE Transportation, which moved 150 headquarters jobs to Chicago, leaving 4,750 behind in Erie, Pennsylvania. Or ConAgra, which moved 700 jobs to Chicago but left 700 office jobs and 900 factory jobs in Omaha, Nebraska.

Her prime example was Archer Daniels Midland (ADM), the global agribusiness firm, which moved its HQ and 70 executive and white-collar jobs to Chicago from downstate Decatur, Illinois, in 2013. ADM, however, kept its 4,200 jobs in logistics and production jobs in its massive plant on the edge of Decatur.

Chicago dangled $30 million in tax breaks over 20 years to lure ADM to town. Was it worth it? For only 70 jobs? Sure.

Aaron Renn, an urban expert at the Manhattan Institute, says such moves “get you something, but in a city the size of Chicago, that’s not what it used to be.” But the impact, as Renn notes, is bigger than just those jobs.

Most global corporations have trimmed headquarters staff drastically over the years. Once these HQs employed their own lawyers, accountants, and other experts. But the global economy is so complicated that these firms have outsourced these business services to globally-connected law offices, accounting firms, consultants, and other firms. This has increased the demand for these services, and they have become the driving force behind the growth of global cities.

This is because corporate executives want to be next door to their lawyers or consultants and want to have lunch with them. This happens in global cities, not Decatur. In the process, this increases the demand for these services, creating high-skill, high-pay jobs that, by their very presence, draw more corporate HQs to the city.

There’s another plus for the city. These executives become leaders of their new home town and support its institutions, including the arts. The departure of Amoco and other big corporate headquarters from Chicago hurt the institutions, such as the Chicago Symphony, that depended on the philanthropy and board service of their executives. The arrival of ADM and other headquarters fills that gap.

But wouldn’t it be great if Chicago also got those other 4,200 ADM jobs in Decatur, or the 4,700 GE Transportation jobs still in Erie, or the 80,000 jobs that Boeing left behind in Seattle when it moved its HQ and 400 jobs to Chicago in 2001? Well, yes. Every city needs all the jobs it can get.

But remember that none of these are new jobs, just jobs that moved somewhere else. They may help a local economy, but do nothing for the overall economy.

And one city’s gain is another’s loss. Getting 4,200 ADM production jobs would be a nice bump for Chicago. But losing those 4,200 jobs would be a devastating blow for Decatur which, like most Midwestern manufacturing towns, has been losing jobs and people (20 percent of its population) in the global economy.

In this economy, corporations will keep on moving headquarters and executives to global cities, to be near big airports and top-drawer business services. But production jobs will stay in the hinterlands, where they’ve always been.

And maybe that’s the way it should be.

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The Chicago Council on Global Affairs is an independent, nonpartisan organization that provides insight – and influences the public discourse – on critical global issues. We convene leading global voices and conduct independent research to bring clarity and offer solutions to challenges and opportunities across the globe. The Council is committed to engaging the public and raising global awareness of issues that transcend borders and transform how people, business, and governments engage the world.

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