Rear Admiral Victor Emmanuel C. Martir, Commandant Officers and Gentlemen of the AFP Command and General Staff College,
A very good morning to all of you.
I am greatly honored that you have invited me to serve as your ‘Enhancement Speaker’ for this module of your program entitled “Professional Ethics for Strategic Leaders”. At the same time, I am also very humbled by your invitation. As I have witnessed several times in my lifetime, you carry on your shoulders the defense of our freedom and our democratic values. Whenever our political and professional institutions fail and anarchy threatens, it is your lives of the military that are placed at risk. It is one thing to talk about principles and ethics in normal, everyday civilian life – it is quite another to talk about them when people have to place themselves in harm’s way.
In the matter of “Professional Ethics for Strategic Leaders”, however, there may be things that we can learn from each other’s experience. What I will try to do this morning is describe our value system as a business group, how it came to be, how we live by it and the difficult decisions that we have sometimes had to take in order to be true to our values.
First of all, let me tell you what a value system is not. It is not a set of principles that is instantly crafted by corporate wordsmiths so that a corporation can create a positive spin about itself. That is the sort of value statement that often ends up in corporate advertisements. But is not worth the paper it is written on.
Nor is it a set of virtues and principles that, at the first crisis, is put aside in favor of financial expediency, or, indeed, financial survival. The most difficult thing about being true to our value system is that we are sometimes forced to risk or sacrifice a business in order to stand by our values. In such cases, the level of commitment by our leadership has to be total and absolute, because it is on the basis of that commitment that our stockholders, employees and partners will not only accept, but support, our choices.
Rather, our value system is the way we live our corporate existence and defines the way we look at our role in society, the way we set our strategies and objectives. The way we enter into contracts and commitments, measure our performance and treat our employees and customers. Our value system is the glue that binds our corporate culture. Such so that if an employee cannot buy into that value system, then he or she would not be able to function within our culture.
How, then, did our value system come into being? It took many, many years, and as is often the case, it involved the development and evolution of a business in the image and likeness of a visionary leader.
In fact we have to start out with the history of the Lopez family, a family that has been conscious of itself as a unified family going back 8 generations to a single root source, Basilio Lopez and Sabina Jalandoni, of Jaro Iloilo two centuries ago in the early 1800s.
It was an active business family that took advantage of the opportunities that opened in the world sugar industry in the mid-19th century. It was also a family that knew the value of education, and my father was one of those who took advantage of the best schools here and abroad. In his early years, he was the product of a complete Jesuit education for 7 years as a border in the Ateneo de Manila, then he went on to the University of the Philippines where he finished his law degree. Then he took his bar examination but did not wait for the results of the bar exam. He proceeded on to his next school, Harvard Law School in Cambridge, Massachusetts for post graduate work before finally coming home to immerse himself deeply into business.
In June 12, 1928, the Lopez corporate family first came into being when my father Eugenio Sr., and his brother, Fernando, established E & F Lopez, Inc. as a dual proprietorship. For the next 47 years, whatever one brother earned or owned was always split equally with the other. Unusually for family businesses and corporations, the two brothers never argued about money, and remained united until my father passed away in 1975.
Their first commercial undertaking outside the sugar-producing farms that they inherited from their parents was the revival of their late father’s Spanish-language daily newspaper in Iloilo City, called “El Tiempo”. This would be followed a few years later by an English-language newspaper called the Iloilo Times. Apart from his love for writing and from possessing the spirit of a crusading journalist, my father recognized very early the power of media and information. He loved his newspapers so much that whenever he was reminded that he sometimes spent more money on his newspapers than a prudent businessman would, he liked to say that “Man does not live by bread alone. He also has to live on certain ideas and principles.”
Throughout the rest of his life, as he became the foremost entrepreneur and industrialist of his generation, Eugenio Lopez, Sr. would always maintain substantial investments in newspapers and in the evolving media of radio and television.
My father’s rise to business prominence, from his beginnings as a sugar planter, through the many pioneering business ventures that he and his brother initiated in Iloilo, such as the Iloilo Negros Air Express Co. or INAEC which was the first airline established in the country and the Panay Autobus, the largest bus company on the island of Panay, and to the business empire he ultimately created in Manila. This would make for an altogether compelling historical narrative on its own. For our purposes here today, however, the one thing that I would emphasize about him during this period of building his businesses was that my father was intensely nationalistic in believing that Filipinos could own and manage businesses just as competently and as successfully as their American counterparts. He believed that Filipinos entrepreneurs should come first in their own country. It was this fire burning inside of him that made him dare to take on the acquisition and management of Manila Electric Company, then the country’s largest business establishment, in 1961. This was the time when the pervading colonial mentality still inhibited Filipinos from taking on roles that had customarily been reserved for their American counterparts.
At that time, we really had no formal value system or statement. What we had, however, was a very strong and visionary leader in the person of my father, a leader who, through his actions, statements and by sheer force of personality, began to forge the culture of his businesses. The corporate value system became an extension of his own.
I will now cite a number of what I consider to be the most important and defining statements that he made in regard to the way his companies should do business.
While celebrating his birthday sometime between 1958 and 1961, my father made the following statement:
“And now we want to restate a principle which we consider inviolable and sacred in our dealings with our employees: that human values are above and far superior to material values; that the right to have and enjoy the fruits of labor is paramount to profits and losses; and that our success should be measured, not by the wealth we can accumulate, but by the amount of happiness we can spread to our employees. This has been our norm of conduct.” Unquote.
During the Meralco Christmas party in 1962, he said :
“My friends, you must judge us by our actions. You must know us by our deeds. This is the reason why I very seldom make speeches which I consider useless and a waste of time. And now I want to restate certain basic policies which have always guided us in all our business enterprises. We regard these principles as of paramount importance.
We maintain that in case of doubt in a controversy arising between labor and management, this doubt must always be resolved in favor of labor. We further maintain that human values are far above and far superior to material values, and a company which does not hold the inviolability of this principle has no right to exist… The company that is prosperous and rich while labor lives in misery has neither the right to exist nor the right to claim public support.” Unquote.
Sometime between 1956 and 1961, my father had this to say on the role of business in modern society:
“The old business tenets have given way to the modern concept which is not based on profits alone but rather on the service it can render and the contribution it can make to the prosperity and progress of the nation as a whole.
We sincerely believe that a greater proportion of the earnings accrued from business should be returned to the people whether this be in the form of foundations, grants, scholarships, hospitals or any other form of social welfare benefits.” Unquote.
Mind you, my father had uttered those words in a speech given before the Business Writers Association of the Philippines at least 30 years before the concept of Corporate Social Responsibility had been articulated in the Western world.
In his time, my older brother Eugenio, Jr. or “Geny”, who headed the Lopez Group between 1986 and his untimely passing in 1999, also added his thoughts to the practical meaning of wholeness of being in a corporate or business context. In a speech that I read on his behalf at the August 25, 1997 General Membership Meeting of the Management Association of the Philippines, inasmuch as Geny was already receiving cancer treatment in the United States, these were his words:
“For those in business, it is easy to get immersed totally in a culture of profitmaking, expansion and the personal pursuit of happiness…
This is not to say that profit is not important. It is, after all, still the primary reason why anyone is in business. But if that is the only reason we are in it, we may miss out on an equally important aspect of being in business – an aspect that brings with it a greater sense of personal fulfillment…
One of the advantages of being successful in business is the opportunity it presents to render public service without being in public office. That is the reason we look for businesses that touch the everyday lives of as many Filipinos as possible, wherever they may be…
The spirit or soul of a business is found in the way our activities improve the quality of life of others. We consider that as a very important aspect of our social responsibility…
Public service – doing well by doing good. It may sound incredible, or worse still, just an ingenious public relations line. But I see it as the single compelling reason I still go to work each day.” Unquote.
In my own tenure as head of the Lopez Group of Companies, a role I assumed when my brother passed away in 1999, till I gave it up in 2010 to become Chairman Emeritus at the age of 80, I became the custodian, the keeper of our values. As the oldest member of the family today, I continue to discharge this role, even if I am already retired from the active day-to-day oversight of our businesses.
We are always conscious of the values and principles that we have inherited as the most important and lasting legacy of my father, Eugenio Lopez, Sr. Periodically, we try to update our value statement to ensure that their interpretations and meanings remain relevant in the present day. And so today, each member of the Lopez Group of Companies carries in his or her wallet a card. One side holds the Lopez Credo, which reads:
“We, as employees of the Lopez Group of Companies, believe that our primary reason for being is to serve God and the Filipino people.
Thus, we shall always conduct ourselves in a manner that is mindful of the longterm mutual benefit of the Lopez Group, and the various publics we serve.
We will be responsible stewards of all our resources, and conscious of our obligation to present and future generations.
Since 1928, and in the years and generations to follow, our commitment to the distinctive Lopez values will not change as we remain committed to serve our stakeholders.”
The other side of the card holds the Lopez Values, and reads: “In our service to the Filipino people, we will be guided by the following distinct Lopez values:
• A pioneering entrepreneurial spirit
• Business excellence
• Social justice
• Employee welfare and wellness
We know from generations of experience that it is by living according to these values that a company can be built to last.”
Living our corporate lives in accordance with the Lopez Credo and the Lopez Values is what we have come to coin as the “Lopez Way”. That must begin with me, as head of the Lopez Family, in the way I live my life and conduct myself. In the way I treat our officers and employees. In the way I shape and influence the decisions for our businesses. In the people with whom I associate and transact. No one will take our Credo and Values to heart if they see me living in any manner inconsistent with our values. Those that do, those wonderful, principled employees whom we value so much, would lose heart and may eventually leave if I were to be unfaithful to the Lopez Way. This expectation applies equally to all Lopez family members who have a role to perform in our businesses. No matter how painful it makes us feel, we practice a zero tolerance policy to any willful violation by any employee of our values.
Let me take a moment to emphasize the importance of unity. It is often said that most family businesses do not survive the third generation, because as a family grows, the disparate needs of its members begin to come into conflict. In the Lopez family, we emphasize unity above all else. There are numerous times when we have forgone business opportunities because they might possibly have caused disagreement, rancor, and ultimately, disunity within the family. Our ancestors well recognized the importance of family unity; our family seal, features a bundle of 8 sugar cane stalks, each stalk representing a major sector of the Lopez clan, bound together, unbreakable in their unity.
At this point, please allow me to take a brief respite in order to run a short video on the Lopez values in action in our businesses.
[ AV PRESENTATION ON LOPEZ VALUES ]
Prior to the short video we played, I had described what our corporate value system is and how it came to be. I had also noted my present role as custodian or keeper of our values, and what that means in terms of the way I must conduct my affairs and lead my life. Let me now say a few words about the difficult choices that we sometimes have to make in order to be true to our values.
During his time, my father was sometimes described as “intimidating” because he had the reputation for bulldog persistence and determination once he turned his attention onto something. Part of his reputation came from the fact that whenever principle was involved, there could be no compromises. He was famous for his generosity, but he was equally famous for his intolerance of dishonesty, particularly among his employees. The other part of his reputation came from the fact that he was willing to stake everything on a point of principle. It is almost axiomatic in business that, faced with an opponent you cannot beat or a fight you cannot win, then you must find a way to beat a strategic retreat so as to be able to fight another day. When he took on then President Ferdinand Marcos because he could no longer accept the latter’s appetite for ill-gotten wealth, I do not know if my father realized that taking on a sitting President could cause him to lose his businesses. Such was his belief, however, that what he was doing was right, that he did risk his businesses, and once martial law was declared, that he did lose all of them, Meralco, ABS-CBN and Manila Chronicle and my elder brother was jailed by Marcos for 5 years while my father died in exile in San Francisco, California.
After the EDSA Revolution of 1986 brought democratic rule back to the Philippines, we were fortunate enough to recover some of what had forcibly been taken away from the Lopez Family during the Marcos dictatorship. Eugenio Lopez, Sr. did not live to see his businesses come alive again; since he passed away in 1975. It took many years of painstaking effort by my brothers and I, and our officers and employees, to rebuild our businesses and to restore them to their accustomed prominence and market leadership. Now, it is also axiomatic that if you are in businesses that rely heavily on government regulation for prices or for permits, then you should not openly be critical of government. Yet, we chose to carry on the Lopez tradition of being heavily invested in media, and in critical media, at that. Call it an inherited stubbornness if you will. After all, can you imagine a society where all media is subservient to only what the ruling administration wants to say? As a result, however, particularly during the ten-year term of the Arroyo presidency, we were constantly butting heads with the sitting administration. It is my belief that, ultimately, this is what caused us to sell our control of Meralco.
I suppose that it is possible for a businessman, whose only purpose is to make money, to do so, particularly if he or she is willing to pay the price of political patronage and privilege. But is such a business sustainable? I don’t think so. I submit that a business, any business, can only survive for as long as it is able to serve the needs of society in a manner that is accepted by society as legitimate and valuable. If a business prospers only because it is allowed to unscrupulously or unfairly enjoy advantages that are not otherwise available to its competitors, then such a business will never develop the tools that will enable it compete in an even playing field. Once its patrons are replaced, or once someone else is willing to pay a higher price for patronage, or once the field is leveled, then that business is doomed. More so now, in this era of global commerce. If a business exists only for the purpose of maximizing profit, then it will not have the commitment or resilience to endure the cyclical and often unpredictable nature of any commercial endeavor.
For the Lopez Family, it has never been about the wealth or the money. Rather, it has been about having businesses that will endure and outlast us, businesses able to serve the needs of society in an honest and legitimate way. This is why we are so particular about our value system, our so-called Lopez Way. Without that anchor, without the stabilizing influence of a value system that embodies our history and the legacy of those who have preceded us, we would not be able think long term; we would not be able to think strategically. This, ultimately, is the value of ethical principles, to strategic leadership.
I hope that what I have presented to you this morning, and the parallels that you might be able to draw from the example of the Lopez Family and the Lopez Group of Companies, will enable you to better crystallize the vital place and role of ethics, or better yet, of a solid value system, in your practice of your profession as soldiers.
By way of concluding my remarks, let me take and share inspiration from words spoken by one of your own brothers in arms not here in the Philippines but in the U.S. The words speak of noble values and virtues that are universal and should apply to all of us, regardless of the profession we represent.
I would like to borrow from the words of General Charles Krulak, former Commandant of the United States Marine Corps, and specifically from a keynote speech he delivered to a Joint Services Conference on Professional Ethics in 2006. He said, and I quote:
“Integrity as we know it today, stands for soundness of moral principle and character - uprightness - honesty. Yet there is more. Integrity is also an ideal ... A goal to strive for ... And for a man or woman to "walk in their integrity" is to require constant discipline and usage. The word integrity itself is a martial word that comes to us from an ancient roman army tradition.
During the time of the 12 Caesars, the Roman army would conduct morning inspections. As the inspecting centurion would come in front of each legionnaire, the soldier would strike with his right fist the armor breastplate that covered his heart. The armor had to be strongest there in order to protect the heart from the sword thrusts and from arrow strikes. As the soldier struck his armor, he would shout "integritas", which in Latin means material wholeness, completeness, and entirety. The inspecting centurion would listen closely for this affirmation and also for the ring that well kept armor would give off. Satisfied that the armor was sound and that the soldier beneath it was protected, he would then move on to the next man.
At about the same time, the praetorians or imperial bodyguard were ascending into power and influence. Drawn from the best "politically correct" soldiers of the legions, they received the finest equipment and armor. They no longer had to shout "integritas" to signify that their armor was sound. Instead, as they struck their breastplate, they would shout "Hail Caesar", to signify that their heart belonged to the imperial personage- not to their unit - not to an institution - not to a code of ideals. They armored themselves to serve the cause of a single man.
A century passed and the rift between the legion and the imperial bodyguard and its excesses grew larger. To signify the difference between the two organizations, the legionnaire, upon striking his armor would no longer shout "integritas", but instead would shout "integer" (in-te-ger).
Integer means undiminished - complete - perfect. It not only indicated that the armor was sound, it also indicated that the soldier wearing the armor was sound of character. He was complete in his integrity ... His heart was in the right place ... His standards and morals were high. He was not associated with the immoral conduct that was rapidly becoming the signature of the praetorian guards.
The armor of integrity continued to serve the legion well. For over four centuries they held the line against the marauding Goths and Vandals but by 383 AD, the social decline that infected the republic and the praetorian guard had its effects upon the legion.
As a 4th century roman general wrote, "when, because of negligence and laziness, parade ground drills were abandoned, the customary armor began to feel heavy since the soldiers rarely, if ever, wore it. Therefore, they first asked the emperor to set aside the breastplates and mail and then the helmets. So our soldiers fought the Goths without any protection for the heart and head and were often beaten by archers. Although there were many disasters, which lead to the loss of great cities, no one tried to restore the armor to the infantry. They took their armor off, and when the armor came off - so too came their integrity" it was only a matter of a few years until the legion rotted from within and was unable to hold the frontiers...the barbarians were at the gates.
Integrity ... It is a combination of the words, "integritas" and "integer". It refers to the putting on of armor, of building a completeness ... A wholeness ... A wholeness in character. How appropriate that the word integrity is a derivative of two words describing the character of a member of the profession of arms.
The military has a tradition of producing great leaders that possess the highest ethical standards and integrity. It produces men and women of character ... Character that allows them to deal ethically with the challenges of today and to make conscious decisions about how they will approach tomorrow. However, as i mentioned earlier, this is not done instantly. It requires that integrity becomes a way of life ... It must be woven into the very fabric of our soul. Just as was true in the days of Imperial Rome, you either walk in your integrity daily, or you take off the armor of the "integer" (in-te-ger) and leave your heart and soul exposed... Open to attack.” End of quote.
This, I think, is a warning that all of us should take to heart. Once our fealty to our values is corrupted by loyalty to a single individual, then we place ourselves entirely at the mercy of the integrity of that individual. If he has no integrity, then we lose our own. Consequently, our very loyalty weakens our defenses against those forces that may threaten our safety and wellbeing.
Thank you and a very good morning to all of you. If you have any questions, or if you would like me to amplify on any point that I have raised before you, then I will do my best to provide you with answers.