And just like that, Raytheon is moving its corporate headquarters from Massachusetts to Virginia.
At least on the surface, the announcement barely caused a ripple — a noticeable shift from the past, when the threat of a Raytheon decampment triggered a special targeted tax cut, designed to convince the company to stay here. But times have changed. Boston and environs have morphed into a hot biotech and innovation hub, turning the big companies of yore into yesterday’s news. Raytheon also lowered the anxiety level by saying there are no workforce reduction plans for Massachusetts, although time will tell if that holds true.
Still, the “why” of this HQ exit matters, especially as the Massachusetts economy adjusts to life after a pandemic. The loss of a corporate headquarters is a hit to prestige, as well as a potential hit to a corporation’s level of civic engagement. As Raytheon goes, will other companies follow? And what about the vaunted Massachusetts workforce? How long before the cost of living drives the talent pool elsewhere? These are matters Massachusetts will have to address if it wants to stay competitive.
With about 12,000 workers, Raytheon is one of the state’s largest employers. The defense company said it received no incentives to relocate its headquarters from Waltham to Arlington, Va.; the decision to do so was attributed mainly to a desire to be close, like its competitors, to the source of their business: the US government. But moving any headquarters still says something about the corporate environment left behind. “I am sure this decision was made strategically, including an assessment of financial/tax implications. That’s a head wind for us and one that I worry about,” said James Rooney, president and CEO of the Greater Boston Chamber of Commerce.
The head wind cited most often by business leaders is a proposed constitutional amendment on the November ballot that would set a new surtax on household income over $1 million. But even without that, living here is expensive, and that affects not only business decisions but also personal choices. Employers have always been attracted to the smart people who live here. In a mobile business world, where smart workers can now do their jobs remotely from anywhere, will some choose to relocate to a place where the living is easier and the housing more affordable? That, said Eileen McAnneny, the president of the Massachusetts Taxpayers Foundation, is a real worry. The mantra for business is “go where the talent is. . . . If we don’t have the talent, then we do run a risk,” she said.
Not surprisingly, Steve Tocco, the chairman of the lobbying firm ML Strategies and a former secretary of economic affairs under Governor Bill Weld, sees a direct connection between tax policy and corporate enthusiasm for doing business in Massachusetts. It was in 1995, during the Weld years, that Massachusetts passed the law granting tax breaks to manufacturers, which was specifically aimed at keeping Raytheon in Massachusetts. To get the tax benefit, companies had to promise to keep 90 percent of their payroll and 90 percent of their property in this state. In the aftermath, there were accusations, which Raytheon denied, that it wasn’t living up to its end of the bargain.
The Raytheon experience tells us that, in the end, a company always does what’s best for the company, and that includes decisions about geographic locations. There was a time, said Rooney, when the headquarters and functional or manufacturing units were all in the same place. But not anymore. For example, the automotive industry has located its manufacturing operations in various states, not just in Detroit. Corporate headquarters are also smaller operations than they used to be, and not as significant. Massachusetts competed for Amazon’s HQ2 and lost, but a 2,000-employee Amazon facility just opened in the Seaport. Massachusetts is the biotech capital of the world, with nearly all the major biotech companies having a strong presence here, but not all locating their headquarters here.
From that perspective, “We’re not losing our edge at all,” said Jim Brett, president and CEO of the New England Business Council.
When a headquarters goes elsewhere, we may lose some bragging rights. We lose our edge when we lose something more valuable: our smart workforce.