Innovate or Abdicate – The Fortune 500, Then and Now

combined_fortune500

This is the 19th in a collection of newspaper ads written by Harry Gray, then CEO of United Technologies, that appeared in the Wall Street Journal from the late 1970s through the early 1980s. Here is the text from that ad.


Next month, Fortune will publish its 1984 list of America’s top industrial companies.
The first list came out in 1955.
Many of the big names that appeared on that first list will be missing from this year’s.
Some not-so-famous names will replace them.
Some companies just sit there and watch their markets dry up.
Others go after new markets and win them.
Resting on past results doesn’t keep you in the 500.
Remember: every day another product goes the way of the buggy whip.
So don’t abdicate.
Innovate.


I thought this ad lends itself to some analysis, comparing the changes over time in the composition of the Fortune 500.

“Fortune”-ately, most of the analysis that I had thought of doing has already been done by others, including Fortune magazine itself.

So let’s take a look at some of the interesting facts.

According to Tom Huddleston, Jr. from Fortune magazine, 57 companies from the original list have made the list for each of the 61 years that the list has been compiled, an impressive feat. His article has many other interesting facts about these 57 companies, but I’ll leave it up to you to click on the link if you would like to read those details.

Erika Fry, also from Fortune magazine, wrote an article last year about what has happened to the top 10 firms from the initial 1955 ranking. Below is a table that shows the original top 10 firms, and the current top 10 firms. Note that while there are many metrics that can be used to rank firms, the one used to rank the Fortune 500 is total sales. If a company went by a different name on the original list, that name is shown in parentheses.

Rank 1955 2015
1 General Motors Walmart
2 Exxon Mobil
(Jersey Standard)
Exxon Mobil
3 U.S. Steel Chevron
4 General Electric Berkshire Hathaway
5 Esmark Apple
6 Chrysler General Motors
7 Armour Phillips 66
8 Gulf Oil General Electric
9 Mobil
(Standard Oil Company of New York)
Ford Motor
10 DuPont CVS Health

Mark Perry of the American Enterprise Institute analyzed the original list and the 2014 list, the 60th year of the list. He found that only 61 companies that appeared on the 1955 list appeared on the 2014 list. This amounts to just about 12% of the inaugural companies. He notes that the other 88% of the firms have either gone bankrupt, merged, or simply fell from the top 500.

By the way, here is the link to the complete list of the original Fortune 500, and here is a link to the most recent listing.

It is worth noting that in 1995, after 40 years of publishing the list, Fortune decided that its list no longer reflected the top level of American business. As a result, the list, for the first time, included service corporations — banks, life insurance companies, utilities and so on — as well as industrial ones. With the change came 291 new entrants to the famous list including three in the Top 10 (Walmart, Sears, and AT&T).

One final set of facts is that of the current top 10 on the Fortune list, four of the companies did not even exist in 1955 (Walmart, 1962; Berkshire Hathway, 1955; Apple, 1976; CVS Health, 1963).

So while Harry Gray is right in noting that innovation is important if a company wants to stay on the Fortune 500, there are other factors that play into being listed, such as acquisitions, break-ups, privatization, and foreign ownership.

As a side note, the Wall Street Journal had an article today. “The Only Six Stocks That Matter“. Amazon.com Inc., Google Inc., Apple Inc., Facebook Inc., Netflix Inc., and Gilead Sciences Inc. have accounted for more than half of the $664 billion in value added this year to the Nasdaq Composite Index, according to data compiled by brokerage firm JonesTrading.

Another similar statistic is that Amazon, Google, Apple, Facebook, Gilead, and Walt Disney Co. have accounted for more than all of the $199 billion in market-capitalization gains in the S&P 500.

Despite the current success of these firms, I wonder how many will still be around 50 years.

I’m certainly hoping at least Apple and Google are around for a long time.

Apple so that I can still have an iPhone, and Google so that I can look things up for my blog as well as figure out how to get from Point A to Point B…

Published by

Jim Borden

Accounting Prof. at Villanova; happily married for 30+ years; father of 3 outstanding young men; vegan; interests: fitness, creativity, education, blogging, social media.

One thought on “Innovate or Abdicate – The Fortune 500, Then and Now”

Leave a Reply

Your email address will not be published. Required fields are marked *