First of all, I would like to add my congratulations to the new President of MAP, Ricardo Pascua and to the new Board of Directors. I would also like to thank the previous President Johnny Santos and his Board for having chosen me as Management Man of the Year 2000. I also congratulate them in their achievements for year 2000, which included taking a strong stand on matters of national interest.
Scarcely more than a year ago, I came before you to accept the Special Award for Management Excellence that you posthumously conferred on my brother, Geny.
Today, I come before you again, this time to accept the Management Man of the Year award that you have chosen to bestow upon me. It is a signal, if unexpected, honor for which I am very grateful, because nothing is more significant and appreciated as an award that comes from one's peers.
When I took over the leadership of the Lopez Group upon the untimely death of my brother Geny just a little over a year and a half ago, I knew that nothing less than an award winning performance was expected of me. But frankly, I didn't expect to be given this coveted and prestigious award so soon.
But I presume the award you are giving me today is as much a statement of faith in the enduring accomplishment of the Lopez Group as it is a personal recognition of what I might have done as a management professional.
I would like to accept this award therefore, not just for myself but on behalf of all the other Lopez entrepreneurs and professional managers responsible for making our group of companies what it is today. Let me call out some of their names, and I would like them to stand up and be recognized: my brother Manolo, President of Meralco and now Vice Chairman of the Lopez Group; my sister Presy and her husband, Steve Psinakis. Presy is President of Sierra Tours and director of many of our corporations; while Steve is senior adviser to the Lopez Group; my nephew Gabby Lopez, who is Chairman of ABS-CBN that did a tremendous job in covering the Impeachment Trial and the EDSA 2 Revolution and head of our Communication Sector; there are also many other budding entrepreneurs and managers among the 3rd generation Lopezes. Can I ask all of them to stand up as a group and be recognized.
Among our top professional managers are: Peter Garrucho, our managing director for the energy sector and a former president of this Management Association of the Philippines; Freddie Garcia, president of ABS-CBN, our top earner in the Group; Chris Monsod, our chief strategist for the Group; Nestor "Tong" Padilla, president of our very successful Rockwell Center; Raffy Alunan, president of Maynilad Water System; Jose "Ping" de Jesus, president of our Manila North Tollways project; Eckie Gonzales, our top investment officer of the Group; Nonoy Ibanez, President of First Philippine Holdings Corporation and now concurrently my chief of staff.
But after my father's death and after the EDSA Revolution, much of the credit for the tremendous growth of the Lopez Group must go to my late brother Geny, who was our "primus inter pares", who provided the leadership to make the Lopez Group grow in size and scope way beyond where it was before martial law.
Behind the brothers was, of course, my father, the founder of our group of companies. But for the sake of historical accuracy, it must be pointed out that before my father's time there were at least 3 more generations of Lopez entrepreneurs who helped shape the entrepreneurial culture of the Lopez clan.
Ours is therefore a Filipino entrepreneurial family whose roots go back not to Spain nor to China but right here in the Philippines to a small town called Jaro in the province of Iloilo, Panay Island.
Within the historical context up to the mid-19th century, the Lopezes of Jaro were mainly engaged in the native textile industry and in trading. But with the opening of Philippine ports to world trade in the mid 1850's, the native textile industry suffered a disastrous decline since it could no longer compete with the cheap mass produced clothing materials from the mechanized factories of Manchester, England.
This was probably our first taste of the severe impact of globalization on our country and in order to cope with its consequences, the Lopez family was forced to refocus its attention on a new industry --- sugar production for the export market. The family was able to take advantage of the world sugar boom in the latter half of the 19th century. By the early 1930's, the extended Lopez family had accumulated more than 5,000 hectares of sugarland and established 3 centrifugal sugar mills, the 2 provinces of Negros Occidental and Iloilo.
It was at this point that my father, who was fresh from graduate studies at Harvard Law School and newly married, and his brother Fernando decided to shift the family business from agriculture to industry. This was a momentous decision in the history of the Lopez family business.
A distinctive aspect of the business relationship between the two brothers, which was formalized in a co-ownership agreement on June 12, 1928, was that whatever one brother owned was always split equally with the other.
In a development unusual for family corporation, the two brothers never argued about money, a legacy which this present generation of Lopezes is trying to emulate.
When you follow the course of the Lopez family business during the 70 years - from 1928 to the present time, you realize that there were many peaks and valleys in that business, and twice in its history the family lost practically everything ---- the first time was during World War II, when al the airplanes, buses, ferry boats, printing presses which constituted the hard assets of the Lopez transportation and newspaper businesses developed during the decade of the 1930's were completely destroyed during the 3 years of war.
The second time was during martial law, when most of our businesses such as ABS-CBN, Manila Chronicle, Meralco and its holding company, Meralco Securities Corporation now called First Philippine Holdings Corporation, were either shut down or taken over by the government or the cronies of the Marcoses, mainly due to the strong stand which my father and his newspaper, the Manila Chronicle, took against the graft and corruption of the Marcos regime.
And yet, after each major debacle, the family business managed to come back bigger and stronger than ever.
In fact, a two-volume book on the saga of the Lopez family from 1800 to 2000 has just been published authored by Raul Rodrigo entitled 'Phoenix'. The word 'Phoenix', in the title of the book, refers to that mythical bird that has the ability to rise from the ashes to go on to greater glory than before.
I do not mean to suggest that I expect us to be burned to cinders anytime soon. But given the current condition in the country, the entire local business sector may in fact be in the process of undergoing this severe test. Only those that are so organized so as to survive such a test are expected to come out of this strengthened by the experience. And who are those companies? Those are the companies which are, as the title of a best-selling business book puts it, Built to Last.
The executives of the Lopez Group know that I practically use this book entitled, "Built to Last" by James Collins and Jerry Porras, as a kind of bible to benchmark our companies with the successful habits of visionary companies mentioned in the book like G.E., IBM and Sony. I was so attracted to this book because I thought, or would like to believe, that the reason the Lopez Group has been so resilient through two centuries of its history but especially in the past 70 years, is because we do have the kind of corporate values that go beyond the mere earning of profits.
Put another way, war and its devastation, Marcos and martial law, and impeachment trial will come and go, but the Lopez Group will live on because it believes in certain basic values and principles that guide its existence beyond mere bottomline results.
Do not get me wrong, profits are always important because they enable us to do what we are doing. But as my late brother Geny loves to tell everyone, "render public service to our people, to our customers and the profits are guaranteed to follow".
I am sure any survey of the Lopez Group, especially among the senior ranks of its executives, will come out with the conclusion that they are with us not just because of the pay and the benefits. They are with us because they feel they are part of a group out to create, in the words of Collins and Porras, something bigger and more lasting than themselves, something enduring, a great company.
At the core of all these, is what Collins and Porras describes as a set of timeless core values. Forty years ago, this made possible the takeover of Meralco by a group of Filipino entrepreneurs and managers led by my father who firmly believed in the ability of Filipinos to run this large and complex company as well as its previous American owners and managers. And we did.
Martial law brought us down but we had the confidence that enabled us the 2nd generation Lopezes to build up the business again because of these values.
The test of the true and effective manager of a company that is built to last starts when the questions "what do we stand for" and "why do we exist" are asked.
I would like to take this occasion to reaffirm our commitment to the core values that have sustained us through many difficult times in the past.
First and foremost is our commitment to family and corporate unity. In essence this means that the family must, relative to its businesses, move as one and with one voice. We also maintain certain rituals aimed at continually communicating and building consensus within the family. Corporate unity is nurtured in much the same fashion as we nurture family unity. Hence there are rituals to be observed, geared towards promoting consensus- building across the Group. In both Benpres and First Holdings, I hold bi-weekly meetings of chief executives and operating officers. At least once a year, usually during budget time, we hold a more formal forum for all CEOs and Operating Officers of all the Lopez companies and affiliates, to inform each other of how we did the previous year and what we expect to do the coming year.
Our second most important core value is our commitment to our employees. My father said it well in a speech to Meralco employees:
"Human values are above and far superior to material values . our success should be measured not by the wealth we can accumulate, but by the amount ofhappiness we can spread to our employees".
But his most quotable quote was the following :
"in case of doubt in a controversy arising between labor and management, the doubt must always be resolved in favor of labor"
By living up to this principle, he never had any strikes in any of his companies. And our companies continue to live and abide by this principle.
Our third core value is public service. A passion for public service in effect is the core ideology that drives the Lopez group. My late brother Geny articulated public service as business philosophy in a speech he prepared but which I delivered here at the MAP meeting in August of 1997. He said :
"our reason for being in business is to render public service. Public service - doing well by doing good . Profits are not the only reason we go to work each day. There is the fulfillment of being able to give back value to others who deserve the best for their money."
Our fourth core value which my father constantly stressed is education and the concept of continuous learning and improvement in our companies. My father firmly believed that young talent must be nurtured by the best education possible, perhaps because as a young man, he went to the best schools here and abroad (Ateneo, U.P. School of Law, and Harvard). He also saw to it that Geny and I went to Ateneo and Harvard.
Later on, he sought to provide other young Filipinos the opportunity for a Harvard-quality business education by donating the edifice of the Asian Institute of Management here in Manila.
We, his children, have decided to institutionalize this learning process within our Group of Companies by establishing the Eugenio Lopez Development Center in the hills of Antipolo in 1997 in what was originally to be my father's retirement mansion. This Center is dedicated to the continuing professionalization of our management staff.
At this point I would like to digress briefly from my topic to talk about current events, because we businessmen do not operate in a vacuum. Today, the biggest challenge is what happens after EDSA 2.
The lesson of EDSA 2 is that people, especially the young, are sick and tired of corruption and moral turpitude in government. The Impeachment hearing confirmed their worst fears about shenanigans in high places and impelled them to take a direct hand in effecting change. The trial enabled us to see more clearly that morality in government is directly related to our country's economic health.
As the Dean of the U.P. School of Economics, Prof. Raul Fabella, observed in a recent paper, "without the rule of law and the institution of morality, there is no decent and civilized life, let alone a market economy."
The Swedish economist, Gunnar Myrdal, long ago talked about the "soft state" a description that fits many developing countries like ours, where there is rampant buying and selling of rules and enforcement.
In a soft state, the principal source of wealth is not created value but extracted value based on power over rules and enforcement, the usual results being are bad infrastructure, poor revenue collection, higher cost of doing business, poor investment allocation, and slow economic growth.
Clearly, we have to change if we are to prosper, and it is significant that our new President, Gloria Macapagal Arroyo, has recognized EDSA 2 as primarily a moral revolution. If so, then we have to follow through the logic of that moral revolution.
It has been pointed out, and rightfully so, that if EDSA 2 happened, it is because EDSA 1 failed to achieve its main purpose. And EDSA 1 failed because the main culprits were allowed to leave the country and go unpunished, and that no new moral order ensued from EDSA 1.
Will all this happen again in EDSA 2? We hope not but President Arroyo must realize that she was put in power by the people, not to conduct government and business as usual, such as the distribution of spoils of office to political allies, but to create the conditions to make the moral revolution possible, which includes first and foremost throwing all the rascals in jail, and then recasting the bureaucracy to reflect a system based on merit rather than political patronage and creating a much more efficient tax collection system that will at the same time go after the big tax evaders.
Unless all these things and more are done, EDSA 3 may not be too far behind EDSA 2.
Finally, in the spirit of the times, I view and accept this award as a reminder to those of us in the practice of management that we must put our businesses in the service of the Filipino, first and foremost, assured that no good deed ever goes unrewarded by a grateful people.