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Resilience and reincarnation

Barbara Murray is director of Family Business Solutions UK.

It would take more than a political uprising and a spate of bad fortune to dull the spirit and commitment of the Lopez family. Barbara Murray talks to chief executive Oscar about his father's legacy, social responsibility and the 'glue' holding the Lopez family together

"The Lopez family business, or the Lopez Group as we are referred to in our home country," says chief executive Oscar Lopez (pictured), "is never far from my consciousness".

It was ever thus for all members of the Lopez clan. Consciousness kept the legacy of the Lopez family alive when the martial law regime of Ferdinand Marcos dispossessed the family of its business assets and split the family onto different continents, into prison and into exile. Out of necessity comes opportunity, and during the regime Oscar was able to devote much of his time producing four volumes on the early history and genealogy of the Lopez family. This led to the family holding its first ever family reunion in 1982.
 
Unless you have had to face the trauma of losing your family business or have lived under a dictatorship, you can only try to imagine what it must have been like for the Lopez family members attending that reunion. Oscar's historical record of the family reflected on the phenomenal achievements of their forefathers and mothers juxtaposed with the absence of beloved family members. Never a family to give in, even in such dire circumstances, the Lopez family was even at this time garnering its inner resources for the time when fate would turn against the regime, and the family business would rise yet again from the ashes of greed and corruption.
 
A brief look at the history of the people and their businesses over the last 150 years shows that it is all in a day's work for the Lopez family to create and re-create new beginnings out of virtually nothing other than a sharp eye on new developments around the world, new emerging technologies and making the right connections to innovate financial solutions to grow their businesses. Although their history of successions has been a traumatic one to date, Oscar Lopez is optimistic: "It seems that, during my watch, fate may finally bless the Lopez Group with the privilege of normal succession. At least I hope so. The family motto 'We Lopezes never retire. We die with our boots on' is actually true". Oscar's father, Eugenio, died in 1975 at the age of 74 in San Francisco where he lived in self-imposed exile because he refused to come to terms with the Marcos dictatorship. Oscar's elder brother, Eugenio Jr, or 'Geny' succeeded their father and never retired from the work he resumed after his imprisonment, after the end of the regime when the Lopez family got back into business. Says Oscar: "Geny died with his boots on in 1999 at the age of 70. At 75, I have outlived both my father and brother as head of the Lopez Group. Shall I step down or will I have to be carried out?"

A special kind of Filipino
The Lopez story starts in the 1850s in the Province of Iliolo, in the central part of the Philippines. The family took advantage of the opportunities in the blooming textile, then sugar industries. The rapid and incredibly successful development of the agricultural and industrial economies of Iloilo was in large part due to the special mix of blood in the veins of the Chinese mestizo (mixed) class, who rose to a dominant and social position in the Molo-Jaro area of the Iloilo province in the nineteenth century.
 
Basilio Lopez founded the textile interests of the family. Basilio's eldest son, Eugenio (the first) stood out above the rest in terms of entrepreneurial ability, amassing thousands of hectares of land and being the first to use the latest steam-powered sugar mills. Being the first university-educated Lopez, he was a man driven by his strong philosophical beliefs. He went after those who exploited workers through debt peonage. He believed in the dignity of the common man and the redemptive value of education to uplift the lot of the common man. This duality in the character of Eugenio as private entrepreneur and a public figure with a strong sense of social responsibility would reappear again and again in future generations of Lopezes, particularly in Eugenio's line.

Towards a global business empire
Fast forward to the fourth generation. Oscar's father Eugenio (the second) and Fernando, his father's only brother, were orphaned at an early age and left in the care of his father's younger brother, Vincente. Both brothers were given the best education possible, and both studied law. Oscar's father Eugenio went abroad to Harvard Law School. Eugenio had five children: Eugenio Jr, (the third, known as Geny), then Oscar, Presy, Manolo and Roberto. Today, Oscar, his sister Presy and younger brother Manolo are still alive and involved in the family enterprise.
 
Brothers Eugenio and Fernando were very close and established a co-ownership entity in 1928. For the next 47 years whatever one brother owned was split equally with the other.
 
When the Lopez family goes into a business sector, they do so in a big way. They went into transportation, covering land, sea and air, including INAEC: the first wholly Filipino-owned commercial airline. They also went into the publishing business, reviving their father's newspaper El Tiempo, which became the number one newspaper of the city. The destruction wrought by the second world war, however, overtook all the Lopez businesses and nothing much was left after the war.

Reincarnation
The brothers started all over again. Fernando became Mayor of Iloilo in 1945 and eventually Vice-president with President Marcos for two terms from 1964-1972, until Martial Law was imposed. Eugenio went back into the airline business, making  money from the sale of Far East Air Transport to Philippine Airlines, after which he returned to his special brand of crusading journalism by buying the Manila Chronicle. In 1956, Eugenio established the Chronicle Broadcasting Network, a sister company of the Manila Chronicle, building a consolidated group called the ABS-CBN Broadcasting Corporation, the largest and most modern in the country.

Filipinisation
At certain times in everyone's lives, big decisions are needed. Perhaps one of the biggest decisions Oscar's father Eugenio made was to invest in electricity distribution in the 1960s. Eugenio put almost everything into the new venture, and led a group of Filipino investors to establish Meralco Securities Corporation for the purpose of acquiring ownership of Meraclo from General Public Utilities of the US. In 1962 the historic buyout was closed. This was the beginning of the Lopez dream to provide education and opportunities for the common Filipino so they could enjoy a better standard of living.
 
The next two decades were a golden age in which Meralco had the lowest electricity rates in Asia. Other companies came on stream including a 100km pipeline for both black and white oil products (Meralco Securities Industrial Corporation) and the Philippine Electric Corporation, which is still the unique producer of transformers, and the Philippine Petroleum Corporation, the first refinery of lubricating oil. This exciting time of expansion kept Oscar and his two brothers Geny and Manolo working at full speed with their father Eugenio. Each worked in their own domain, with Geny leading the entire ABS-CBN broadcast network and the Manila Chronicle. Manolo worked in Manila Electric Company and Oscar worked in Meralco Securities Corporation, the holding company of Meralco, as senior vice-president.

The wilderness years: the Marcos regime
As the political environment grew unstable, being a very strong and successful, enterprising family with monopolistic powers in key sectors became the family's weakness and the key liability for its businesses. Oscar recalls: "By 1971 we were confronted by an insidious and growing kleptocracy at the highest level of government. My father dared to be openly critical of the Marcos administration. This culminated in a series of articles and cartoons in his Manila Chronicle accusing Marcos and his wife Imelda of enriching themselves at the expense of the people. Marcos decided that my father and his business empire were the biggest obstacles in his quest for absolute power in the country. So when martial law was declared in 1972, Marcos ordered the closure of ABS-CBN and the Manila Chronicle, and the dismemberment of Meralco into its two components. Distribution was placed under military control and power generation was given to the government's National Power Corporation."

One can only imagine the impact this would have on Eugenio, a man of high social and patriotic conscience who had built world class businesses and created management development opportunities for Filipinos. It may have seemed to Eugenio as if continuity of the Lopez heritage was no longer viable. If only he could have known that the foundation he built was more solid than the regime could ever break, because the three central pillars carrying the Lopez legacy forward were his three sons, each dedicated to carrying the family's history and entrepreneurial flair forward. If Eugenio felt this potential in his heart, sadly he was not to live to see it. He died in self-imposed exile in San Francisco in 1975.

"For us, his children," said Oscar "the martial law era was to represent 14 years in the wilderness, separated from the business dreams and aspirations that had become a legacy from my father. My brother Geny was arrested and imprisoned on trumped up charges and used as a hostage to compel my father to surrender ownership of Meralco and Meralco Securities Corporation. Geny was in a military prison for five years until, together with his cellmate (now Senator Sergio Osmena), he escaped to the US. There they were given political asylum until the end of martial law in 1986. My younger brother Manolo and I stayed on in Manila,  running whatever was left of the family business, and I used much of my idle time doing something I had always wanted to do, which was to trace the genealogy and roots of the Lopez clan."

Reincarnation again
1986 saw the third period of corporate reconstruction and growth. The EDSA People's Revolution had kicked out the dictatorship and brought back democracy and the Philippines' first lady President, Cory Aquino, to power. Looking back on the past 20 years, in Oscar's view "it has taken a tremendous amount of entrepreneurial energy and hard work to build the business up again."

There have been three clear periods of activity. The first period, 1986-1992, saw the brothers reunited, picking up whatever pieces they could recover and nursing them back to health. Geny took the lead with ABS-CBN. Manolo focused on Meralco and Oscar took over the bankrupt First Philippine Holding Corporation (formerly Meralco Securities Corporation). Reflecting on this period, Oscar says "each was determined to honour our father's legacy by nursing the businesses he had built up back to their accustomed glory. Somehow, we succeeded."
 
By 1992, the three brothers could reasonably assert that the Lopez Group of Companies were all profitable and doing well again. Oscar feels this period was also a vindication of sorts for Geny, Manolo and himself. "Each of us had met the challenge and each of us had prevailed. Together, with Geny as primus inter pares, we had also found our own way of working together in full unity as a family, reminiscent of how my father and his brother had worked together."
 
The second period, 1993-1999, was to the brothers a veritable renaissance, a period of great optimism, great creativity and ambitious growth. As Oscar notes, "the businesses grew by leaps and bounds".
 
During these years the family went public with Benpres Holdings which diversified into Cable and Sky TV; a 300,000 landline phone system joint venture; toll-road rehabilitation and expansion; half of Metropolitan Manila Water System; two gas-fired power plants totalling 1,500 megawatts; a joint venture controlling the third largest commercial bank in the Philippines and conversion of one of Meralco's old power plant sites into a high-end commercial and residential complex. The Lopez Group had grown to 60 companies and invested more than $3 billion.

Crisis hits again
In 1997, the Asian financial crisis descended upon the region with grave consequences for the Lopez Group of Companies. The banking business was sold, the telecommunications went into court-mandated rehabilitation. TV Cable firms were merged. Negotiations started to restructure debt.
 
But the most telling blow was the loss of Geny, whose cancer, originally discovered in 1994, resurfaced in 1998 and took him quickly from his family in 1999. "His demise", said Oscar, "came at this time of crisis when a firm and decisive hand was needed. Since I was next in line to my brother I took leadership of the Lopez Group of Companies".

The present day
The third period brings the story from 1999 to the present day under Oscar's leadership mission to "restructure and consolidate". Some of their investments have come to fruition and are fulfilling expectations, especially the gas-fired power plants and the tollroad modernisation project. ABS-CBN continues to be the multimedia leader across the country. But an enforced payback of utility charges to four million customers and a return to pre-1994 power rates has been a big setback.

A planned succession
Oscar Lopez is now the elder statesman of the Lopez clan and the Lopez Group of Companies. His thoughts, views and actions will shape the succession process and the direction for the future.  Oscar's most pressing concern is the unfinished business in the holdings and operating companies: "My tenure as the head of the Lopez Group will seek its defining moment in how successfully I manage the financial restructuring of our different companies that need refinancing." All the major Lopez Companies are publicly-listed and traded companies. Says Oscar, "We try to keep a delicate balance between being a publicly-owned company and a private family-managed company.

"To maintain our entrepreneurial leadership, each of the four big public companies are headed by a Lopez CEO, but at the same time all our businesses are led by world class managers. The three Lopez CEOs meet twice a month for a sort of 'heads of state' meeting. As chairman of the Group, my job is to keep the lines of communication open".
 
Aside from assuring continuity of the businesses infrastructure with its 60 companies and 20,000 employees, the other side of the succession equation is family and ownership succession. The third generation of Lopezes contains 22 members of which 15 work full-time in the group and are being mentored to take over in due course. Says Oscar, "the invaluable training they are getting will assure that there will be continuity in the Lopez leadership in our group of companies."

Continuity of business leadership is, of course, central to business succession, but how confident can Oscar be regarding future generations of Lopezes wishing to stay as closely connected and as fully committed to the Philippines and their enterprises? These days, when families move freely round the globe and settle down in places afar, keeping the family 'glue' intact can be a challenge.
 
In Oscar's view, the answer lies in the core values which were passed to him and are being imparted now to the third generation. They are "a sense of unity in both family and business, a strong work ethic, a good education and training, and a sense of the social responsibility of wealth toward the community."

"Today", says Oscar, "my father's social philosophy has been converted into a full blown corporate social responsibility programme."

Oscar's next project is to decide who will become chairman and CEO of the group after he retires. But will he retire? Says Oscar, "Call it a sense of stewardship but when I finally step down as Lopez Group CEO, the Group must be in better shape than when I found it in 1999. I expect conditions in the group to be considerably improved in the next three to five years – so I can finally retire within that timeframe. My younger brother, Manolo, is certainly next in line, if he wants it."

It would be heartening to think that current conditions will prevail and the Lopez family and their businesses will finally have what has eluded them so far: a smooth succession. If this is the case, it is very likely that the Lopez 'consciousness', a special blend of resilience molded by a rich, patriotic history and multiple tragedies, challenges and reincarnations, will be the key ingredient of the family glue – keeping succeeding generations connected to each other as family members, investors and social philanthropists.

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