opinion

Soriano: Out of Chaos Comes Order Last Part

May 20, 2019

Race Against Time    Our first year was quite a challenge. It was a race against time. We were confronted with irrational behavior from all sides so we shifted to one on one engagements with the two warring factions. Session after session we continued to reinforced their sense of duty by educating them regarding their respective shareholder roles and responsibilities and emphasized that family harmony energized with a commitment to continue the founder’s legacy can fuel enterprise growth and preserve their wealth.    After re-introducing the importance of having a family constitution, our team made sure we roped the social document with ownership agreements. We were confident that securing agreed upon shareholder rules and documenting them would define the foundation in building sibling confidence, enthusiasm and effectively restore trust within the family. Moreover, by clarifying their roles, the lines of communication continued to remain open. In the end, our mission was to stop the hostility at all cost.    Building and fostering mutual understanding amongst stakeholders is key to wealth preservation and growth. Every family member must understand that a majority of family businesses have failed as a result of internal factors, rather than external factors. And these internal factors included the failure to set in place owner/manager policies, a plan for succession and managing family conflicts.   Defiance to Trust to Sense of Duty   To the consulting team, our mission was to build trust and openness. After a few more sessions of getting everyone understand our governance mandate, we saw a change in attitude from sordid defiance to a deeper sense of duty in continuing the founder’s legacy. With the sessions gaining traction, the siblings soon realized that only through unity and a shared vision can the family business move forward. They also acknowledged that family unity comes with some sacrifices.  And our role was to inculcate the family member’s fiduciary role of single minded loyalty to the business. This means that family members must be willing to give up some of their own personal freedoms "for the greater good.” In summary, what objectives did we achieve in finally reuniting the family and saving the business from break up?     Objective 1: Strengthened Family Unity with a 100 Year Vision      ·Diffuse the tension ·Educate, Mediate and Pursue Governance  ·Institutionalized a Code of Conduct  ·Re-introduce the Family Constitution and Shareholders Agreement   Objective 2: Create a Communication Platform   ·Activated the family council  ·Put family policies and ideas into practice ·Enforced the polices signed by the family members  ·Prepare for possible relapse and complacency  ·Create a problem solving and conflict resolution platform   Objective 3: Improve the level of Individual Competencies                ·Require Education and Training to reinforce raw competencies covering  ·Stewardship, shareholder knowledge, In-law and Next Gen Entry and Exit Rules   For my team at Wong and Bernstein, it was a grueling two years of constantly pounding the true essence of family harmony and the significance of having open and honest communication. Our initiatives and the family members’ willingness to give peace another chance averted what would probably have been a disastrous consequence for the family and the business.  

READ MORE
The Voice of the People

May 10, 2019

As we go to the polls, here are some points to ponder. One. Let us not take our privilege to vote for granted. In some jurisdictions, the citizens do not even get to vote. Of if they do, the elections are just for show, with the results already pre-determined. Two. Election day is the great equalizer. It is only on election day where the one vote of Lucio Cruz is equal to the one vote of Lucio Tan. My good friend former journalist Bert Clemeña, however, begs to disagree. “Yes, Cruz has one vote; Tan? First he gave millions to the one he supports who in turn will protect his interests once in power but Lucio will not even care to vote. What you say is what ought to be. The sad reality is what is on the ground. Sayang. Tsk.” Three. Never before has the mudslinging between and among the candidates reached this level. It seems that good manners and civility are dead. May I just remind political supporters not to carry this too far. Don’t let political disagreements injure great friendships. Your bets may lose the election, but you don't have to lose friends because of it. For all you know, the candidates you are rooting for may not even know you exist. Cool lang! That said, I wish every one an honest, peaceful, orderly and credible election.   True election-related joke During the time of President Ramos, his administration senatorial candidates held one of their major rallies at the Alabang jeepney terminal. At that time, I was the local incumbent belonging to President Ramos’ party so I hosted the rally.   To maximize the exposure of my own local candidates running for councilor, I assigned one councilor to introduce one senatorial candidate each. Because of time constraints, each senatorial candidate was allotted only 5 minutes to speak on stage. When their turn was up, one of my re-electionist councilors, Noli Diaz, took hold of the mike to introduce Health Secretary Juan Flavier. Diaz apparently thoroughly researched on Flavier and Diaz, known in the local council for his kilometric speeches, practically narrated Flavier’s life history. In the end, Flavier stood up, took the mike and said: “Salamat Konsehal Diaz sa magandang introduction mo. Pero sa haba ng introduction mo, inubos mo naman yung 5 minutes ko. (Applause and cheers from crowd.) Flavier then gave his spiel: “Ako po si Juan Flavier. Ako po ay 4’ 11”. Ako po ay 4 lamang (holding his left hand just above his head) pero 11 naman (lowering his left hand and holding it just in front of his crotch). Kaya hindi ako naiilang sa mga kasama ko sa entablado na puro mga 6’2”. (Laughter) Ang maidadagdag ko na lang: “Lets DOH it.” (Cheering) That was the shortest campaign speech I have ever heard. Flavier did not need to give a long-winded one. His record at the Department of Health spoke for itself.   Taxi drivers’ choice On days that my car is on color-coding, I just take Grab or Uber (when it was still operating in the Philippines) whenever I need to do some errands. It has become routine for me talk to the driver and ask about the current political situation. It was immediately prior to the last presidential election and so I asked who the driver preferred among the presidential candidates. Consistent with surveys, the drivers expressed their preference for then front- running candidate (now President) Duterte. But the last driver I interviewed said otherwise: “Roxas ho ako. Disente at hindi bastos.” Just before I alighted, I asked the driver: “Saan nga pala kayo boboto?” He shooked his head: “Sayang ho. Hindi ako nakapag-biometric.”

READ MORE
Transforming lives 2

May 3, 2019

Birthright was the very first special private elementary school in Muntinlupa City dedicated to the the needs of autistic children and other children with intellectual disabilities. Its founders - Teacher Miriam del Rosario and her husband Pastor Jun - came to  my office at the Muntinlupa city hall one day and asked if I could help kick start the school which the couple wanted to incorporate as a non-profit foundation. I did not need much convincing. I immediately wrote a check for P68,000 - part of the proceeds of my annual Mayor Toting Bunye Invitational golf tournament. Instinctively,  I said to myself: This will  probably be one of the most meaningful social investments I will ever make. My instinct proved correct. Years later, I received an unexpected email from Mrs. Rhodora “Dory” Mandap. At that time,  Dory was a teacher at Itaas Elementary School. She is now the principal at the Cupang Elementary School in Muntinlupa. She wrote about Lylette, her daughter, a special child, whom I helped enroll at Birthright. “Dalagang dalaga na po si Lylette although she will forever be my baby. Continuous po pag- aaral nya sa Birthright. Nasa pre-vocational  class po sya. Accdg to teacher Miriam del Rosario, she's no longer capable of continuing through  the high school curriculum kaya life skills na ang itinuturo sa kanya. “She's a good cook now. She can also bake. Her specialty and best seller: double chocolate oatmeal cookies. At kung dati ay hindi nagsasalita....pagkadaldal naman ngayon! Thank you so much for your help.” Zherwin “Bong” Balota was one of the first four students of Birthright. More than 20 years ago, Bong was a problem boy, aged 9, with practically zero skills. Bong  used to  walk aimlessly around Parkhomes Village in Tunasan, Muntinlupa, (where Birthright is located), ringing door bells, sometimes throwing stones at passersby and sometimes pilfering  articles from sari sari stores when their owners were not watching. 2 No one ever imagined,  except  perhaps for Teacher Miriam and Pastor Jun,  that one day Bong would grow up into a responsible adult. Teacher Miriam and Pastor Jun  knew that deep within Bong was a potential which only needed to be unlocked.   Bong eventually graduated from the vocational program where he learned  to cook, do housework, and other practical skills. Bong is now a teacher aide and monitor at Birthright. There is also the case of RJ Gongora, who overcame a severe speech defect. He is now a teacher at Birthright. Melissa Tabalingcos similarly overcame initial handicaps and is now a fitness trainer for movie personalities and other professionals. Jan Christopher Hernandez who could hardly speak at 3 years old, eventually finished Bachelor of Science in Accountancy with flying colors! Beyond its classrooms in ParkHomes, Tunasan, Muntinlupa City, Birthright  has outreach programs. Birthright  started its first outreach with informal settlers along the railroad track in the RMT area of Barangay Tunasan. When the informal settlers were relocated by the government, Birthright ‘adopted’ the old dumpsite in Southside, San Pedro,  Laguna. Birthright now has three centers in San Pedro, Laguna. The first is the HALMS Center  where young children at- risk are  being prepared for school. The second is the Family Center where mothers and teen-agers congregate weekly  for values formation and life coaching.   The third - Mt. Olives Turf of Hope - is where Birthright hopes to put up its future high school. The good work done by Birthright has not gone unnoticed. Some of its projects are now undertaken  with the assistance  of generous groups like The Liliane Foundation of Netherlands, NORFIL, the Alabang Ladies international Group, a friend from Singapore,  and, of course,  the city government of Muntinlupa. Teacher Miriam dreams of a future high school and a physical rehab center. I have no doubt that Birthright will be able to attain these in the future, just as it has grown from the very  first special elementary school in Muntinlupa to what it is today. Clearly, its founders are driven and inspired by its very name, “Birthright” -  which means “natural or moral right” - to provide youths with special needs  the same opportunities to learn, develop and reach their maximum potential. It has been a privilege walking with Birthright in this very inspiring journey of hope, discovery and fulfilment.

READ MORE
Soriano: Are You Faithful?

May 2, 2019

Founders and business leaders must realize that it is the process that REALLY matters! And it is often said that when making a constitution, the process is more important than the output. Why? The process gives family members the chance to work and make decisions together, deliberate in a structured logical way about the future of the family and the business and prepare for the transition long before the founder or the key business leader retires or becomes incapacitated.   The essence is to create a certain level of shared understanding among family members, create a set of family norms of behavior, clarify roles, define rules, understand every family member’s/shareholders’ rights and responsibilities (active and passive) and institutionalize accountability.   In a Harvard Business Review article entitled “The Three Components of Family Governance” penned by noted Family Business expert, Dr. John Davies, he adeptly recommends the activation of the following critical components in the governance ecosystem immediately right after the signing of the family constitution:   ·Family must initiate periodic (annual) assemblies and  ·Activate the Family Council so issues that were not heard nor given importance during the constitution building sessions can now be thoroughly discussed and planned   Under a post constitution stage, the primary objective is to sustain the energy and the drive of the family by encouraging them to further strengthen business-family communication. Treating the family in a more formal, organizational way can feel awkward at first and asserting the value (without exception) that each family member must embrace the concept of a fair process is a sensitive, crucial and very important governance phase.   Overcoming the initial discomfort and encouraging every family member to participate in decision making is part of the journey of transformation. When they have a “voice”, when they believe the process for making a decision is fair and transparent, they will accept the outcome of that process even if it may not reflect their own personal views. The fairness principle was already introduced when family members started working together on the family constitution. That is why this frame of mind should be carried over to the family council and assembly.    Critically and through the activation of the family council, facilitators and the framers of the constitution must thoroughly spend time embracing the values and the vision as articulated by the founder’s original motives for building the family business. It is important that family members first clarify the shared beliefs, experiences and legacies that unite them in their choice of stewardship over ownership of the enterprise. These values represent the kind of business culture in which the company operates and will define how the family will work to support the business’ future success. When the shared vision is internalized, the journey towards growth can now move forward by way of family commitment and strategic thinking.   To conclude, a well-crafted family constitution (reinforced with a family council, assembly and the Shareholders agreement) that goes beyond two to three generations towards the future can perpetuate a family business for a long time. It is therefore my wish that family business members should start the process now in order to ensure the legacy of the founders and the everlasting prosperity of the family and its businesses. Having a stand-alone Constitution devoid of any collective effort is empty and a complete waste of time and resources.  

READ MORE
Soriano: Flawed Family Constitutions Everywhere

April 27, 2019

The important thing in drafting solid agreements is the journey. No matter how united the family clan is, the generational transition from founder to offspring and the complexity of the offspring to a multi-generational family where cousins with diverse interests become shareholders can invariably take its toll on the family business. That is why families embarking on this governance journey must reflect on their collective vision and mission before pursuing a well-crafted family constitution. So what constitutes a flawed Constitution? I am adding more issues with the hope that faulty documents can still be rectified and harmony restored:    ·The lack of emotional commitment by the next generation leaders either because they were not exposed to the business early or were not given the opportunity to participate.   ·The presence of a stubborn, defiant and egocentric or an ailing, weak and broken senior business leader. Both without any succession plan  ·Entitled, complacent or rebellious next generation family members   ·The contents were influenced solely by senior generation leaders’ recommendations and the information were open ended and produced more questions than real answers ·The members were left on their own to implement the rules. After the signing, they resumed their usual routine and disregarded what was agreed upon. ·Family members were confused. They didn't understand the substantial difference between family, business and ownership governance. They thought having a family constitution can produce immediate results ·Soliciting inaccurate, insufficient and worse, wrong advises from other consultants, lawyers and accountants   A good insight coming from a family member sums up the entire constitution building experience, “we signed, took selfies on our last day and then there was no one else to turn to when it was time to implement. It was obviously a waste of time.”    Ownership Governance Risk   In a book written by Gersick, Davis, Hampton, Lansberg entitled Generation to Generation: Life Cycles of the Family Business, the authors highlighted one of the thorniest issues under ownership dimension that every family agreement must incorporate and I quote “One of the most pervasive lessons we have learned is that when the legitimate interests of ownership do not have a forum for expression, issues of control and return on investment will find a way to emerge in either the family or the operating business. When those issues do come to surface in the “wrong” circle, they are almost always disruptive – and sometimes destructive.”   I couldn't agree more. During the last quarter of 2018, a significant part of our governance intervention in Asia focused on ownership issues. And the same petty issues were amplified right after a key senior leader became incapacitated or passed away. So why was there conflict despite having the family constitutions? Our collective evaluation pointed to mostly “cut and paste” stipulations on sensitive areas related to ownership and the issues pointed to the following neglected or missing components.   ·Some Constitutions were silent on provisions that favored active owners over passive shareholders. For most agreements, ownership and benefits were equalized among siblings and cousins  ·This points to the importance of having a mechanism for allowing share ownership to be consolidated and the need for such a mechanism (“Exit Plan” or a “family shareholders’ agreement”) should have been highlighted ·The possible alternative of prolonging inheritance by way of a trust agreement should have been considered ·Several conflicts started over the issue of how to value the shares in the business including a bad exit of one family shareholder that triggered a liquidity crisis immediately after she sold her portion to other sibling shareholders that stayed  

READ MORE
Think before you tweet

April 26, 2019

We live in rapidly changing times, thanks to the technological wonders of internet and social media. As fast as we can click and send, we can broadcast messages to friends, relatives and to just about anybody, anywhere in the world. This  despite the fact that Philippines remains the slowest and most expensive – in terms of connectivity – in this part of the world. Then US presidential candidate Barack Obama was among the first world leaders to realize the vast potential of social media as a platform for broadcasting campaign messages. And Obama won against a less tech savvy opponent by quite a margin. According to Twitter, Obama was for a long time the record holder of most number of Twitter followers (47 million plus) until he was overtaken by US TV personality Ellen Degeneris. Following the Obama model, then candidate/now President Donald Trump likewise tweets daily, earning himself the sobriquet & "Commander-in-Tweet". Trump has a reported following of 26.9 million Most observers, however, find disconcerting Trump’s brand of  twiplomacy.  The Vatican is not to be outdone. Retired Pope Benedict XVI became the very first Pope to use Twitter. Pope Francis I, a relative late-comer, is catching up fast with 14.1 million followers and counting.  Former President Benigno Aquino III had a reported 3.4 million followers. President Rody Duterte might not be into it personally. But his staff certainly realize the value of social media in the presidential communication program. Foreign Secretary Teddy Boy Locsin is quite active in Twitter. In homes, schools, communities, and just about any place where one has access to a computer, an iPod, or a smart phone, every Juan and Maria of practically all ages are sending and receiving messages via Facebook, twitter, instagram, viber and what have you.  The message is unmistakable. Social media is a very powerful tool for communication and is with us to stay. And here is where Uncle Ben’s  advice to  Spider-Man should always be top-of-mind: With great power comes great responsibility.  This message has been re-echoed  by Pope Francis.  While acknowledging that  “the internet, text messages, social networks  and chats are ‘a gift from God” as they can be “fully human forms of communication” the Pontiff cautions that we must “use wisely the means at our disposal”. The papal caveat arises from the very nature of the technology available.  Messages - true or not - have the potential of going viral in minutes, if not inseconds. “The speed with which information is communicated exceeds our capacity for reflection and judgment, and this does not make for more balanced and proper forms of expression, ” Pope Francis said. Social media has become a two-edged blade. On the one hand, it can be used to inform and raise awareness. But it can also be misused for spreading alternative truths and as weapons for maligning, defrauding and even harming others.   The cloak of anonymity afforded by social media has given rise to armies of trolls who derive enjoyment in disrupting/ disturbing discussions, bashing personalitiesor just simply annoying others.    Wittingly or unwittingly, careless social media participants give out personal information which expose them to identity theft, financial scams, blackmail, sexual exploitation and security threats. Because of the foregoing, do we need to give up Facebook and Twitter? Not at all. As long as we do not become prisoners in our virtual reality. And also for as long as we  follow the common-sense advice of practising responsibility in the web:  Think before you tweet. Think some more before you re-tweet, share or forward any message.

READ MORE


Subscribe Now!

Receive email updates from Business Week.