Business: Impact 50

Three corporate leaders — CVS Caremark Corp., Hasbro Inc. and Textron Inc. — dominate the stage on which Rhode Island companies sell stock to the public.

All three companies developed in Rhode Island and have found ways to compete and expand while changing their businesses. Decades after their founding, their strategies have propelled them to the top of their sectors.

CVS, the country’s biggest drugstore company in number of stores, has pushed into pharmacy benefits. Hasbro, the second-biggest toy maker, has evolved into an entertainment company that sells electronic and traditional products tied to popular movies. Textron, a leading defense contractor, also has boosted sales by selling business jets in emerging markets overseas.

Rhode Islanders benefit from the big three’s presence here. Whenever CVS, Hasbro or Textron is mentioned in the national media, or by business consultants, so is their headquarters’ location in Rhode Island.

That sends a message. The companies may no longer manufacture in the state, but they prove a headquarters can be run from Rhode Island that employs thousands of white-collar workers.

That’s a strength the state can promote.

At the same time, however, the big companies also expose weaknesses in Rhode Island’s economy. After the three multi-billion corporations, none of the dozen other publicly traded companies here has sales above $400 million.

That leaves a huge gap that emerging public companies in the knowledge-based industries — biotechnology, technology, information technology, and life sciences — should be filling. But there are few of those homegrown public companies and job creators that the state can show off.

Sure, two technology companies, GTECH Corp. and American Power Conversion Corp., are still here. They are among the leaders in their industries and are big local employers. But they are respectively owned by Lottomatica, based in Italy, and Schneider, based in France. The top executives here report to their bosses overseas.

Rhode Island’s sector of publicly traded biotechnology companies is represented by Amgen, a California company with a plant in West Greenwich, and Alexion, a Connecticut company that is opening a plant in Smithfield.

There are smaller, private companies and start-ups trying to find their footing here. Many benefit from locations near the innovative thinkers at the state’s colleges and universities. One day they may offer stock to the public, climb the list of publicly traded companies with headquarters in Rhode Island and earn a national reputation.

But they have high hurdles to clear.

Rhode Island needs a more hospitable business and tax climate that encourages relocations and expansions. The environment has to be changed to attract venture capitalists with the money to support emerging companies. There has to be an end to the insider, corrupt network of public and private officials that pushes away outsiders and their money. And there has to be a progressive public policy that makes investment a priority, especially in targeted industries and education.

There are pending proposals at the State House to help meet the capital needs of newer, intellectual-property based companies and to expedite the state’s cumbersome permitting process. That will help Rhode Island compete with states seeking the same companies and jobs.

But it’s not enough. There has to be a cultural shift that embraces a new way to do business, rather than falling back on the tired old ways of a dying, industrial era.

Rhode Island’s challenge is to change its story.

Other industrial states have changed theirs, pushing them ahead.

So where will Rhode Island’s next big, public companies come from? The development of the big three may offer some lessons.

CVS, already a leading drugstore retailer, is fast becoming a force in the health-care industry after its $27-billion acquisition last year of Caremark Rx Inc., making CVS one of the country’s largest pharmacy benefits managers. The merger catapulted CVS Caremark’s sales in 2007 to $76 billion, five times larger than any other public company based in Rhode Island.

CVS Caremark now operates about 6,250 stores in 40 states and fills more prescriptions at more pharmacies than any other drugstore operator. The pharmacy benefits side of the company offers managed-care drug programs to insurers, employers and other health-care providers. Last month, CVS trumpeted winning the business of AT&T’s 500,000 plan participants.

The company has come a long way from its early days when it emerged from the old Consumer Value Stores in Massachusetts, and later the Melville chain. Through acquisitions of other regional drugstore chains and internal growth, CVS has grown into one of the United States’ top 20 corporations. Many are watching how its managers will meld the drugstore and pharmacy benefits business.

“CVS is really a one-of-a-kind company,” Tom Ryan, 55, chairman, president, and chief executive officer, told shareholders at last month’s annual meeting at company headquarters in Woonsocket.

For the future, the company also plans to expand its MinuteClinic health clinics in retail stores and develop a strategy to open stores outside the United States.

While CVS has expanded its reach and reputation nationally, it has been dogged locally by a corruption scandal at the State House and the ongoing federal trial of two former CVS executives. The local issue has not affected the company’s stock price and financial performance.

Like CVS, Hasbro also has a long history here.

Since its founding by the Hassenfeld family 85 years ago as a pencil-box manufacturer in Pawtucket, Hasbro has made successful management transitions and changed its products mix to keep pace with changing customer tastes. Now, it’s in the middle of another one.

Brian Goldner, 44, took over last week as chief executive officer from Alfred Verrecchia, who holds the title of chairman. Alan Hassenfeld, former CEO and chairman, remains on the board of directors.

Goldner plans a continuing evolution of the traditional toy maker into electronic devices and entertainment-related products. Hasbro has opened an office in Los Angeles, staffed with movie-industry veterans, to strengthen ties to the film industry. Last year, the Transformers movie generated nearly $500 million in licensing revenue for Hasbro. The company plans a Transformers sequel, a Trivial Pursuit television show, and a live-action movie based on G.I. Joe.

Hasbro last year avoided the lead-paint scare, which frightened buyers who learned that some toys made in China had dangerous levels of lead. The scandal marred the performance of Hasbro’s top competitor, Mattel, the California-based toy company that had to issue several recalls of toys made in China.

Hasbro had sales of $3.8 billion last year, and earned $333 million.

Textron also has been transformed after being founded as a textile company in the 1920s by conglomerate builder Royal Little. In fact, the name, Textron, was coined in the 1940s to reflect the use of synthetics in textiles when the company was making parachutes for the U.S. military.

From its headquarters in downtown Providence, Textron has grown into an international company perhaps best known as a defense contractor that sells weapons, systems and aircraft, such as the V-22 Osprey aircraft, to the U.S. military.

The company actually has four operating segments: industrial, which makes golf carts, tools, pumps and fuel systems; Bell, which includes Bell Helicopters and Textron Systems weapons, and surveillance systems; Cessna, which makes business jets; and finance, which provides commercial loans.

Cessna and Bell have been the brightest spots on Textron’s balance sheet.

Lewis B. Campbell, 61, chairman, president and chief executive officer, told shareholders at the annual meeting in Providence that 2008 would be “another banner year” for business jets. The company in April upgraded its 2008 earnings forecast to between $3.80 and $4 a share from continuing operations.

Sales in 2007 were $13.2 billion, up 15 percent from $11.5 billion in 2006.

All three Rhode Island-based companies, CVS, Hasbro and Textron, have widely different businesses. But they have all made changes over the years to be successful. Their stories are worth repeating.

jkostrze@projo.com