Lopez Holdings


Keynote Remarks of First Philippine Holdings chairman and CEO Federico R. Lopez at the 3rd Annual Summit of the Shareholders’ Association of the Philippines on June 17, 2016
Mayuree Ballroom, Dusit Thani Manila Hotel, Makati City

The legendary Richard Redwood Deupree, the first non-­‐family head of Procter & Gamble who led the company through the turbulent period encompassing the Great Depression and World War II, liked to say this about the company he led:

“If you leave P&G’s money, its buildings, its brands, but take away its people, the business will be in real jeopardy. But if you take away the money, the buildings, the brands, but leave the people, it will build a comparable business in as little as a decade.”

I understand precisely what he’s saying as I’ve seen it happen many times in our history as a corporation and as a family. It isn’t people per se that allow this to happen but it’s when they’re galvanized by both purpose and values that the combination becomes extraordinary.

My Lolo (Eugenio Lopez Sr.) had to rebuild from the ashes several times in his life: in August 1928, when a powerful typhoon destroyed 60% of his sugarcane crop and almost wiped him out financially. Then again in 1941, during World War II when all the aircraft of his pioneering airline INAEC were bombed by the Japanese, and all the buses of his Panay Autobus were commandeered by the United States Armed Forces in the Far East (USAFFE) for use in the war. However, each time he rebuilt, he would always accept his circumstances with great composure and proceed to reconstruct with not a trace of bitterness or rancor. In fact, he would do so only with the same infectious zeal and enthusiasm like he was at it for the first time.

He lost everything yet again in 1972, to the Marcos dictatorship when ABS-­‐CBN, The Manila Chronicle, PCIBank, Meralco, and Meralco Securities Corp. (the precursor of FPH) were handed over to cronies of the dictator. This was the consequence of Lolo’s intransigence, exposing Marcos’ corruption and hidden wealth through his newspapers way before they came to light a little over a decade later. He was made an example to instill fear in any of the business elite wanting to challenge the power of the new regime. Lolo died of cancer three years later in 1975, financially broken.

A few years after the crony takeover in 1972, MSC was renamed First Philippine Holdings Corporation. It later embarked on a massive diversification into failed ventures like oil exploration, coffee trading, financial services, credit cards, and an ill-­‐timed expansion of its transformer manufacturing capacity. To fund these, they took on considerable dollar-­‐denominated debt that brought FPHC on the brink of collapse with the onset of the Dewey Dee crisis and the turbulence caused by the 1983 assassination of Ninoy Aquino.

When the family returned to FPHC after Marcos fled the country in 1986, my dad returned to a company that was adrift, practically bankrupt, and in danger of keeling over. Yet he acted with the same equanimity and resilience displayed by his own father at various times in his life decades earlier. It’s like that phrase in Rudyard Kipling’s timeless poem “If”, that I’m sure inspired many of us in this room as we were growing up which says, “if you can watch the things you gave your life to broken, and stoop to build them up with worn out tools”. Seeing the elders before me fight for certain principles, soldier on, and rebuild even as they saw the things they gave their lives to, broken, is an image that cannot easily be erased in my own mind.

It’s uncanny how although the cast of characters involved in our businesses have changed through many generations, there’s a constancy of purpose and a consistency in the values guiding our decisions like a genetic code. Roy Disney, a nephew of founder Walt Disney, likes to say, “It’s not hard to make decisions when you know what your values are”. For many of us in the Lopez group, it determines the people we attract and whom we ultimately work with. Purpose and values energize our lives in many respects, and more importantly they guide our decisions through tough times and difficult junctures, showing us where our true north lies.

Why have our values been consistent over time? They were not deliberately taught but for me it was through the power of stories. As far back as I can remember, we always grew up enthralled by stories about our elders. What they did, what they stood for, and the kind of persons they were. But my dad, with a keen sense of history, consciously deepened our knowledge of the family’s past when he commissioned the late Raul Rodrigo to meticulously research and interview many keepers of these stories inside the family and out before they passed. Raul’s 14 years of research resulted in countless insights into how the family weaved in and out of our country’s history. This resulted in a series of nine books on the Lopez family and our various companies.

The stories were always set during interesting times: the founding of the Philippine sugar industry in Iloilo by British national Nicholas Loney, the opening of frontier sugar lands in Negros Occidental, the founding of Asia’s first airline, the Japanese occupation, the carpet-­‐ bombing of Baguio, the post-­‐war economic rebuilding of the country, Marcos’ dictatorial rule, to name a few. They were always colorful, ranging from a Lopez forebear heroically selling an hacienda to feed a starving town, to hunger strikes, daring prison escapes, business acquisitions, empires rising, falling, staging dramatic comebacks, turnarounds, political battles, assassination, betrayal, corruption, even alleged terrorist in-­‐laws. All were the stuff of novels with family members taking positions on key issues in the history of our country. I was in a conversation with Dr. John Ward, one of the most prolific authorities on family businesses, and he had this to say: “In all my dealings with business families around the world I have only rarely come across one with a history as rich and colorful as yours.”

Stories show values in action; and through the years we have had plenty. Former British Prime Minister Benjamin Disraeli liked to say, “the legacy of heroes is the memory of a great name and the inheritance of a great example”. The benefit of having so many documented “great examples” before us is that it keeps us thinking constantly of how we will continue our part of the tapestry, the threads we will hand down, how we will be remembered, and whether we leave a hero’s legacy as well.

Yet another way my dad deepened our sense of shared purpose and ideals was to lead the Lopez group seven years ago through the exercise of identifying the key values that we treasured most. This wasn’t a mere wordsmithing exercise but one that involved looking back, introspection, deliberation, and lots of thought about the values that brought us here and whether any of them had a place in our future. That’s how we identified the seven Lopez values, namely: Pioneering Entrepreneurial Spirit, Business Excellence, Unity, Nationalism, Social Justice, Integrity, Employee Welfare and Wellness. Yet among these seven, one stuck out like a sore thumb. Many, including the professionals, were wondering whether a business group should be including Social Justice as one of its core values. Was there an irreconcilable conflict between having a tough fighting social conscience and the goal of profits in a developing country like the Philippines? After much deliberation and introspection, we recognized that Social Justice in the broadest sense, that of doing right for society and the world around you, has always been at the core of our Group’s DNA. It carried enormous risks, as when we lost everything during the Marcos martial law years, but one fact is clear: we would never sacrifice those principles at the altar of profits or political expediency.

We see this today in how ABS-­‐CBN assumes its role in society of “speaking truth unto power”. Of course, they’re neither perfect nor infallible, but as an institution bent on protecting democratic freedoms and governance, their role is unmistakable.

Social Justice also emerges in the way we approach our geothermal business. You can manage it in an extractive way where you just mine the use of the concession’s steam resource and then walk away when the usable steam and heat are depleted; or you can nurture it as a renewable resource which lives sustainably, with its reservoirs continuously recharged through a forest that’s cared for and healthy. We’ve taken the latter approach and constantly reforest within our 250,000 hectares of concession areas. We’ve gone a step further, however, by carefully studying the biodiversity around our plants and reforesting with endemic tree species that strengthen the surrounding ecosystems. In the process, we’ve discovered species previously unknown to science. Today, our people see it not as a resource to be exploited but also as home to many amazing plants and animals.

My father has long dreamed of reforesting the country and once told me on a flight from Cagayan de Oro to Davao that he wished he could drop seeds from the plane and have them magically grow into forests. Well, now he has our geothermal platform as the perfect excuse to do this and to date, that platform has already planted, nurtured, and guarded more than 14 million trees.

Another instance where Social Justice was put to the test was during Typhoon Yolanda. Our geothermal plants and our people in Leyte were at the center of the world’s most powerful storm on historic record, and sustained considerable corporate and personal damage. However, what inspires me most is that many of those same employees, despite being victims, and still without complete roofs over their heads, immediately bounced back to become the backbone of dramatic relief efforts on the island.

Under the leadership of no less than EDC President Ricky Tantoco, we formed a Crisis Committee with 20 top officers of the company from every discipline to coordinate every facet of company operations and relief during this critical period, working very closely with the local government units of Kananga and Ormoc City on identifying critical needs.

Five gensets and more than 22,435 liters of fuel were brought in to power two hospitals, the municipal halls of Ormoc and Kananga, and the water district facilities of Ormoc, restoring water service to more than 80% of the city. We also mobilized and hired jet aircraft, heavy-­‐ lift helicopters and a handful of the largest capacity landing barges in the country in what was probably the most extensive logistical relief and rescue effort ever mounted by a private sector entity.

Our logistical backbone mobilized relief goods, supplies (such as tarps, tents, mosquito nets, blankets, insect repellent, candles, aquatabs, solar lights and chargers), and medical assistance from EDC, ABS-­‐CBN’s Sagip Kapamilya, and the DSWD that would ultimately provide more than 10.7 million meals to more than a million affected lives in the weeks immediately following the storm.

But more than sheer numbers, I like to tell our people that our group’s ability to have mobilized a well-­‐oiled logistical operation in the air, at sea, and on the ground in the early days after Typhoon Yolanda was priceless and provided hope to a devastated community precisely when they so needed it most.

In retrospect, I believe these early actions were absolutely critical in giving locals confidence that their LGU’s were working and in control, preventing what could easily have been a downward spiral into chaos and desperation.

But in the aftermath of something so terrible and devastating as Yolanda, even when survival needs are overwhelming, it was just as important to warm people’s hearts, inspire and get them dreaming again. To do this we organized a surprise concert led by ABS-­‐CBN stars for some 10,000 people at the still devastated Ormoc Superdome a week before Christmas. I will never forget how moved I was that day just seeing the people of Ormoc and Kananga touched, laughing again, even for just an hour, like Yolanda never happened.

Of course, behind the high drama of rescue and relief efforts, management and employees at EDC quietly and completely restored 530 MW of available capacity in our Leyte geothermal plants with the help of a massive worldwide procurement for necessary spares and three chartered 747 flights from Houston to Cebu to bring it all in. All this, completed five months earlier than scheduled.

Our experience being in the eye of the storm and seeing its effects on lives and the community left its deep imprint on everyone in EDC. We recognize that we’re part of that community, and they a part of us. Beyond numbers and statistics, we can no longer ignore the real humanitarian costs of such disasters and that the majority of Filipinos are not ready to face such calamities already happening each year because of human-­‐induced climate change. When many ask us why we did what we did, I just have one answer: it was but human to do so. It’s been three years since Yolanda and the experience continues to guide how we move forward as a business group.

Almost no one today doubts that climate change is exacerbated by human activity. Global average temperatures are rising and this is leading to more severe weather occurrences throughout the world. According to the US-­‐based National Oceanic and Atmospheric Administration (NOAA):

  • The year 2015 is now the hottest year on historical record globally and has edged out the previous record of 2014 by a wide margin (+0.16°C, to be precise)
  • Fifteen of the sixteen hottest years on record globally have occurred after the year 2000.
  • January 2016 was the hottest January on record; February 2016 was the hottest February, and March 2016 was, likewise, the hottest March ever recorded;
  • April 2016 was also the hottest April on record; it’s the 5th consecutive month that the global monthly temperature departure from average has surpassed 1.0°C;
  • In the latest global climate report released yesterday, May 2016 is also the hottest May on record and the 13th consecutive month that a monthly global temperature record was broken—the longest such streak in the 137 years of record keeping.

So, it should come as no surprise if 2016 shatters 2015’s record as well.

The world is now 1°C warmer than it was in pre-­‐industrial times (the mean global temperature then was 13.7°C), which means we only have 0.5° -­‐ 1°C to go before we exceed the Paris COP 21 commitment of restraining the average global temperature rise to less than 2°C from what it was in pre-­‐industrial times. Beyond this threshold, scientists acknowledge that the world becomes extremely dangerous for its inhabitants and Yolanda will be nothing compared to what we will see then. It is now undeniable that human-­‐induced climate change is here and just this slight one-­‐degree change has already produced a highly disrupted, extreme–weather world.

What’s even more disturbing is that our country and millions of less fortunate Filipino families are bearing, and will continue to bear, a disproportionate share of the devastation being wrought on the planet by climate change. In the annually released Global Climate Risk Index, the country that’s suffered the most weather-­‐related disasters during the twenty-­‐year period 1995-­‐2014 was none other than the Philippines that recorded 337 events (followed by Vietnam -­‐ 225, Bangladesh -­‐ 222).

As far back as 1981, then NASA Climatologist James Hansen was already advocating that the earth’s atmospheric concentration of CO2 should not go beyond 350 parts per million (ppm) if we are to maintain the stable climate that human civilization has been accustomed to over the last 11,000 years. But in 1986, when global CO2 concentrations breached this number, the target was reset to 450 ppm and a maximum temperature rise of 1.7°C from pre-­‐ industrial times. His view then, shared by many other scientists and being borne out by what we are seeing in the news everyday, is that a 1.7 or 2°C target is already a “disaster scenario” which will bring us back to conditions that existed 125,000 years ago where sea levels were 4-­‐6 meters higher than today.

Many experts believe that even if all the COP 21 targets are met, we’re still headed for a world that’s 2.5-­‐3°C warmer. This is probably why the charismatic Christiana Figueres, who led the Paris climate talks, believes that despite its rousing success, COP21 is only the first step; much, much more still needs to be done.

This April, carbon concentration already stands at 407.57 ppm and we’re no longer likely to see it go below that in our lifetimes. The world has already used up 90 percent of that grudgingly revised carbon budget and, at current accelerating emission rates, we will likely use up the rest by 2020 or shortly thereafter. Yet the energy infrastructure being built today still threatens to “lock-­‐in” these deadly carbon emission patterns decades into the future. CO2 stays in the atmosphere for thousands of years. The later we all take action in reducing carbon emissions, the more difficult, drastic, and impossible those reductions will be. Much of the warming already occurring will trigger widespread tipping points and feedback loops on ecosystems that cannot be reversed and will exacerbate climate change even more. The world has much less time to act than previously believed.

The Philippines performed a crucial role in the recent Paris COP 21 climate talks, chairing the Climate Vulnerable Forum (CVF)-­‐-­‐-­‐an international partnership of countries highly vulnerable to climate change, and the V20-­‐-­‐-­‐the group of finance ministers representing twenty of the most vulnerable nations in the world. Both the CVF and the V20 provided the much-­‐needed emotional plea for a decarbonized world and although the agreements reached in Paris were dramatic, experts know they are still not enough. The world is still in dire need of more such voices to turn the tide in time to avert a global catastrophe. Sadly, however, the country’s credibility was built on the backs of thousands of Filipino lives, homes, and livelihoods that have already been lost and destroyed by climate change. The power of that voice grows only if we show the will and a credible pathway towards decarbonizing our own economy. Conversely, that power dies when our actions are not consistent with that voice, we choose to ignore inconvenient truths, and just mollify our consciences with symbolic relief efforts. We have no choice but to start walking that talk if we want the rest of the world to heed those urgent calls.

This is why just a few weeks ago we made public our group’s stance that we would no longer consider building, developing, or investing in coal fired power plants despite the fact that every other business group and bank in the country is doing so, like there’s some kind of gold rush. We’re making it our mission to help the country navigate the challenging transition toward a cleaner decarbonized future. I have no doubt it can be done. The feasibility to do this is already here, it’s simply our mindsets and our conversations that need to change.

If there’s any single issue in the world today that embodies all our seven values, it is the threat of climate change, adapting to it, and changing how we power our lives and economies fast enough so we don’t leave a dangerous and catastrophic planet to our children and grandchildren. Dealing with it correctly as well as profitably will require every “heart, nerve, and sinew” in the organization coming together to overcome something that today seems inescapable. But our values tell us that many harsh realities throughout history also seemed so-­‐-­‐-­‐like slavery, apartheid, even the divine right of kings-­‐-­‐-­‐ but like all these, anything brought about by humans can also be changed by humans. It just needs a dash of moral courage. As Robert F. Kennedy liked to say:

“Few men are willing to brave the disapproval of their fellows, the censure of their colleagues, the wrath of their society. Moral courage is a rarer commodity than bravery in battle or great intelligence. Yet it is the one essential, vital quality for those who seek to change a world which yields most painfully to change.”

Today, our world moves faster than ever in history. The exponential doubling of the price/performance of computers every 18 months over the last fifty years has likewise spawned simultaneous innovations in so many interrelated fields touched by the digital world:

  • Computing Networks, Sensors, Virtual Reality/Augmented Reality
  • Robotics & Artificial Intelligence
  • Nanotech & Digital Manufacturing
  • Synthetic/Digital Biology, Medicine, Neuroscience, just to name a few.

In turn, many breakthrough products and services are disrupting traditional industries everywhere including those we’re in: in media, energy, telecoms, manufacturing, transport, music, retail, health, food, hotels, banking, remittances, insurance, even pawnshops, etc. Disruption today is everywhere; in fact, there are supercomputers that can diagnose cancer more accurately than doctors. Even the medical and legal professions will not be spared. This is probably one of the main reasons why the average life of a Fortune 500 company has plummeted from 67 years in the 1920’s to less than fifteen today. Although our lives have improved tremendously because of disruptive technology, it’s made a living hell for many running big corporations today who now must have the ability to see through walls, and around corners just to understand the forces at work that can sink them.

With such massive disruption, how will those at the helm of our companies continue “uplifting lives” as previous generations have done? That question keeps me up at nights, anxious at times, but more often than not it’s because I’m excited and brimming with ideas. Because it’s precisely at challenging junctures like these where opportunities are created and won. To survive and even capture these opportunities in today’s fast-­‐paced environment, we will need to build a living company that never stops learning, is boundlessly curious, and has a culture that empowers the best and the brightest talent to work creatively and innovatively in fulfilling our mission well into the future. When your culture is strong and well defined, the organization will naturally attract and promote the best people who are aligned with those values. That’s when such values acquire a life of their own and become self-­‐perpetuating for generations to come. And when leadership is no longer limited to the family’s narrow gene pool, it paves the way toward a truly world-­‐class, professionalized company capable of competing in today’s exponentially disruptive environment.

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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