Lopez Holdings


Honored Guests, Ladies and Gentlemen:

I thank the chairman of the Institute of Corporate Directors, Dr. Jesus Estanislao, for the privilege of representing the Philippine private business community in speaking on the subject of good corporate governance. In this regard, I have been asked to enlighten all of you assembled here today on how far we, the private business community, have progressed in strengthening corporate governance in the Philippines over the past ten years; what is being done today and in the immediate future; and where we should be moving over the next ten years.

Let me start by making the observation that for those seriously committed to the pursuit of world-class corporate governance, particularly since the Enron fiasco elevated the need for uniformly high standards of governance as a global, not local, concern, the Philippines has not lagged behind. I offer, as Exhibit A, the very fact that we have an Institute of Corporate Directors that is passionate and single-minded in its advocacy of the highest international standards of corporate governance. The collaboration between the ICD and pertinent government regulatory agencies resulted in the introduction of a Corporate Governance Scorecard for publicly listed companies, one that calls for a systematic self-assessment by companies against a list of best practices developed by the ICD, whose results are then subjected to independent verification by ICD. Quite a few listed companies who had already embraced the principles of performance excellence took on the challenge of submitting themselves to assessment, and the scores quickly became a matter of bragging rights. Today, it has become mandatory for all publicly listed companies to rate themselves against the scorecard. I fully expect that in the not too distant future, if a company wants to have access to the capital and debt markets, here at home and at the international level, it will have to demonstrate the robustness of its corporate governance against the scorecard developed by ICD.

Let me share with you a little bit of history about the Lopez Group of Companies and an overview of our portfolio.

My family has been in Philippine business across two centuries. Our businesses started in the textile industry in the central part of the Philippines, in the city of Iloilo. We moved to sugar, transportation, newspapers, and then to large scale industries of power generation and distribution, radio & TV broadcasting, and manufacturing here in Manila after the second World War.

In 1972, however, Martial Law was declared. We were stripped of our companies because we fought a corrupt regime and paid a dear price for it. All our big businesses were taken away, my elder brother was held in military prison for 5 years on trumped up charges, And only after 14 years, after the EDSA Revolution did we return into Philippine business in 1986. By that time, we found all of our companies in a battered state. We practically had to rebuild from scratch. With only modest financial resources, we realized that we still had one great intangible that was never taken away: it was our good name and reputation – a track record of credibility, entrepreneurship, and integrity to convince investors and creditors to join us in the rebuilding process of our group of companies. This, in essence, is where the roots of our corporate governance practice stems from: our values. The essence of business goes beyond how much profits are made or how large it has become. Rather, it is our purpose to make a positive difference to the nation, to improve the quality of life in the communities that we serve. Profits are just a way of keeping score on our public service businesses.

When I assumed the headship of the Lopez Group of Companies after the passing of my older brother Geny in 1999, I drew the rest of our companies into a systematic pursuit of world-class performance excellence. I realized that we had to do something in order to stand up to global competition even in our own home markets, as traditional barriers to trade began to be dismantled. At one level, we sought technical partners with whom we could benchmark product design, production techniques and supply chain management. At another level, we embraced the principles and tools of performance excellence, adopting ISO 9000, ISO 14000 and OHSAS 18000 for all our companies; superimposing a rigorous Environment, Safety and Health program and annual evaluation on top of those certifications; by introducing Six Sigma and Lean Manufacturing techniques where applicable; by formalizing continuing management education and corporate wellness programs; and finally, by adopting the U.S. based. Malcolm Baldrige system in its entirety as a unifying framework for all these initiatives. It was in the gradual evolution of the Baldrige criteria that we first encountered the emergence of good corporate governance as an essential facet of world-class performance excellence.

To a certain extent, we have successfully integrated these initiatives into the way we manage and measure performance at both corporate and individual CEO level. For this reason, many of our companies have been recipients of the various recognition programs of organizations that espouse business and performance excellence.

And so, this morning, I speak on behalf of the Lopez Group of companies and of other private business corporations in the Philippines that take corporate governance seriously. There are already 17 of us in the gold and silver categories of ICD’s Corporate Governance Scorecard, and with sufficiently high scores to be invited to form part of the Philippine Companies Circle. Those of us in this Circle believe that corporate governance is not just good, but essential for our business. We understand that to compete globally for markets for our products, and for funding for our businesses, we must meet the ever increasingly rigorous standards of good governance. While governance rules and regulations emanating from official regulators are necessary, we believe that corporate governance is much more about what we strongly believe in and about what we are committed to observe in all our corporate decisions and actions. It is about being world-class.

I am particularly pleased that three of the companies within the Lopez Group are among the 17 top scorers in the Corporate Governance Scorecard for 2008. For 2009, I have challenged all our 6 publicly-listed companies to make it to the top ten scorers. We are thankful for the guidance and awareness about modern corporate governance that the official regulators and institutions like the ICD have provided. We have been happy to comply with the requirement for us to formulate our own Corporate Governance Manual; at First Philippine Holdings, we formally adopted our manual on January 1, 2003. We amended our corporate by-laws to provide that, pursuant to good corporate governance, our Board of Directors is governed by the Corporate Governance Manual, which is now suppletory to our By-Laws. We have also adopted a Manual of Anti-Money Laundering and a Corporate Code of Conduct that reinforce the values and principles instilled by our founder and maintained by the Company. Our Board has constituted a full set of standing committees from among its ranks which exercise the duties and functions provided in the Manual for Corporate Governance. These include a Nomination and Election Committee, a Compensation and Remuneration Committee, a separate committee to review the Chairman’s compensation and remuneration, an Audit Committee and a Risk Management Committee. Where the law required two independent directors, First Holdings has five such directors, plus an independent observer on its Board. We have likewise started board level strategic planning sessions to fully engage our directors in the value-creation process.

Each company, led by its board of directors, should take on the challenge to be explicit about its corporate governance charter. This should embody the declarations of, and therefore the firm commitment to, core values, business mission and vision over the next 5 to 10 years. This should become the basis for the formulation of the corporate strategy map, governance scorecards, and ultimately a governance culture imbued with corporate core values and universal norms of ethics and social responsibility.

Our experience in the Lopez Group shows that it is not easy to adopt a strong governance system. It takes much more than what the regulators require of us. I feel that it is not just in our best interest but in the interest of the entire economy that we stay the course. I find from my interaction with at least a few others in the private business community, that in their own way and according to their best lights, they too are traveling on the same path.

But I would also like to sound a word of warning to all of us here who are serious about good governance and who are serious about making ourselves globally competitive, and more than just that, making ourselves truly world-class. There is a presumption, of course, that we should be able to compete in an even playing field, where the rules of engagement are clear and impartially apply to everyone. But we all know that is often not the case and that we find that we are often pressured to act in ways we deem unbecoming. Even in our own home market, the playing field is often not even, where political patronage determines the winners and the losers, where graft and corruption constantly lurks below the veneer of acceptable governance. To resist, to stay faithful to our values and vision, can be very costly. I should know. At least twice in my life in the Lopez Group, we have lost dearly by standing up to an abusive regime. And even as we have stood our ground, others looked away and kept quiet, afraid that they too, might suffer. That is the challenge all of us face here today.

Thank you and a very good morning to you all.

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Lopez Holdings Corporation 
16/F North Tower, Rockwell Business Center Sheridan, Sheridan St. corner United St., 1550 Bgy. Highway Hills, Mandaluyong City, Philippines

  • Trunkline: (632) 8878 0000
  • Fax: (632) 8878 0000 ext 2009