The impact of the Chicago headquartered companies on the community:
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The city of Chicago is one of the cities in the United States with the largest number of Fortune 500 companies headquartered there. What are the reasons for this phenomenon and which people living in the Chicago city neighborhoods are impacted by these companies?
Welcome to the ELI’s Finding Chicago Global Perspectives Podcast Series for AEPP 2022.
I’m your host, Sarah Bensalem, and I’m currently enrolled in the University of Chicago’s School of Law pursuing an LL.M. degree.
Today, we will be exploring the topic of the impact of Chicago headquartered companies on the Chicago community.
Did you know that, according to the 2021 ranking of the 500 largest companies in the United States, the Chicago metropolitan area has the 4th highest number of Fortune 500 headquarters, with just over a third of them in Chicago alone? I only learned about this recently.
In fact, this number reflects a real attraction of these companies to the city of Chicago.
As an element of answer, Elizabeth Ziegler, chief executive officer of local digital startup incubator 1871, mentioned about Chicago’s hospitable environment for startups and entrepreneurs: « We don’t have it all, but we are pretty close ».
I was hence very interested in understanding the attractiveness of the city that almost has it all.
There are different elements that are mentioned to explain the attractiveness of the city of Chicago, which applies to companies in different sectors.
First of all, according to a 2001 Federal Reserve Bank of Chicago letter on the location of corporate headquarters, given the nature of their activities, company headquarters employ highly skilled professionals. Therefore, with its workforce trained by high-quality universities, Chicago is a natural hub for corporate headquarters.
In addition, according to the same letter, corporate headquarters require a highly developed communications infrastructure. For example, Rachel Potts, spokesperson for global government and business affairs for Caterpillar, a Fortune 500 company previously headquartered in Chicago, explained the move of the company’s headquarters to Chicago by the proximity to a global transportation hub as an incentive for global operations and efficiency. In addition, she explained that business travelers can get almost anywhere in one trip, instead of spending a day to reach their destination.
Finally, the relatively low cost of doing business in Chicago and low housing prices compared to cities on both coasts, both for office buildings and for employees who want an urban experience, were also mentioned as incentives for Chicago’s attractiveness.
But given the advantages for these companies, what about their impact on the Chicago community?
According to a Crain’s Chicago Business article, a 2009 national study on the impact of corporate headquarters location on philanthropy found that attracting or retaining a publicly traded company brings between $3 million and $10 million a year to local nonprofits. However, this statement needs to be nuanced since, according to the same study, most of that value do not seem to come from direct corporate giving but from wealthy individuals in the community.
According to the same article, Gillian Darlow, chief executive officer of the Polk Bros. Foundation, a local organization that provides grants to those affected by poverty, said, « Compared with other cities, Chicago’s corporate leaders are unusually tied to the philanthropic and civic life of the community ». As a consequence, for Chicago, it seems that there is an intended financial and social impact of businesses and a sense of community by companies headquartered in the city.
For instance, according to an article in the Chicago Tribune, Exelon, a Chicago headquartered company, announced that it is proud to support the Obama Foundation and the establishment of the first presidential library ever located in Chicago, as they would undoubtedly become a strong economic driver for the south side and the city they call home.
Additionally, U.S. Foods Holding Corporation, a leading foodservice distributor, announced in 2020 it is donating approximately $250,000 of food to help the Greater Chicago Food Depository, Chicago’s food bank, bringing food to communities of color on Chicago’s south and west sides which have been disproportionately affected by COVID-19 and longtime food insecurity.
Furthermore, McDonald’s longstanding commitment to the city it calls home can be seen through its grants, totaling $3.5 million, which were awarded to organizations that promote safe, healthy and thriving community support systems for young people, particularly local Black and Latin American youth, who face multiple barriers to employment and education.
Finally, as mentioned earlier, this impact sometimes rests on people within the company. As an illustration, according to a 2022 Financial Times article, Kenneth Griffin, the chief executive officer of a Fortune 500 company formerly headquartered in Chicago, Citadel, has provided more than $600 million in nonpartisan material support to organizations in Chicago, even funding the rebuilding of the city’s pedestrian and cycling path along Lake Michigan. More recently, just after announcing that Citadel was leaving the city of Chicago to establish its headquarters in Washington, D.C., he also provided $110 million to 40 organizations including universities, museums and hospitals.
Thus, inductively, it appears that corporations are taking their place and responsibility in society more and more seriously under the influence of the emerging corporate social responsibility phenomenon (which is when companies act in ways that improve rather than degrade society and the environment).
This phenomenon seems to be particularly present in Chicago. It should be noted, however, that with the recent departure of some of Chicago’s major corporate headquarters, this impact seems likely to diminish in the future, as was previously the case with the departure of the former Sara Lee company bought by Tyson Foods, headquartered in Arkansas, which is now where the donations are concentrated.
I hope that these points of reflection have provided some interesting insights regarding the impact of headquartered businesses on the community of Chicago. Thank you for listening to my podcast.