Building empires that last

In the 1920s, the man who would become the country’s first pre-war tycoon put up a business in the Philippines.

His name is Ching Banlee, a migrant from China. He was born in 1899 in Fujian, according to the book “The Liangtuxuan Collection of Paintings and Calligraphy Donated to the Shanghai Museum by the Ching Family.”

He came to the Philippines at the age of 18 and in 1920, he put up Cheng Ban Yek & Co., a sprawling conglomerate with a lot of businesses.

Banlee is the man behind Philippine Blooming Mills, a steel company; La Suerte Cigar, the cigarette firm who originally had the license to sell Philip Morris and Marlboro brands in the Philippines; Blenda Margarine, Baguio Oil and Pioneer Insurance.

Like the tales of the post-war tycoons, Banlee also built his empire from scratch and it grew big.

“At 16, he graduated from the village school with exceptional marks and having earned the high regard of the principal, himself became a teacher in the school. At 18, he followed my grandfather in the Philippines to begin a new livelihood. There, in an arduous half-century of unspeakable hardship, he built his fortune with his bare hands. All the businesses he founded had to do with providing the daily necessities of clothing, food and shelter: for example, vegetable oil, soap, tobacco, textiles, steel, insurance and trade in commodities,” his son Alfredo Ching narrated in the book.

Lessons from Ching Banlee’s empire

Big as it was, Ching Banlee’s empire was not able to cross generations and most of his businesses collapsed years after he passed away in 1965 except for Baguio Oil, still a leading brand in the market today.

In 1965, after visiting the World Fair in New York, Banlee suffered a sudden heart attack and died at age 66.

Rachel Renucci-Tan, his granddaughter told The STAR that while his business empire was greatly reduced in scale today, his biggest legacy would have been the family’s donation of 262 paintings from the Ming, Ching and Tang dynasties to the Shanghai Museum.

“He is the only Filipino-Chinese to have made a donation of this scale to China,” RenucciTan said.

Nevertheless, the question begs to be asked. How come the empire did not last?

It was a combination of failure in succession and many domestic and global factors, sources familiar with Ching Banlee’s businesses told The STAR.

The second generation heirs were not able to pass on the torch to the third generation and some members of the third generation did not really know the value of hard work, sources said.

For Philippine Blooming Mills, troubles started in 1974 during the construction of the Philippine International Convention Center for an international beauty contest.

The company became the source of most of the iron bars used for the building works, but the company did not receive payment right away. It encountered financial troubles and had to borrow from the Philippine National Bank, said a former employee.

“After the EDSA Revolution, the peso crashed and since all the raw materials for the steel factory of PBM were imported, the business went into receivership,” said another source familiar with the matter.

For the cigarette business, La Suerte started in 1949. American cigarette company Philip Morris licensed the company to introduce its products in the Philippine market, the first agreement outside the US, according to La Suerte’s published history.

Its flagship brands, Marlboro and Philip Morris, were produced at La Suerte’s manufacturing plant.

However, by the end of 2002, Philip Morris ended its 47 years of partnership with La Suerte.

This, plus competition from other cigarette firms such as the late Wong Chu King’s La Campana and Lucio Tan’s Fortune Tobacco caused La Suerte’s market share to shrink. Succession

It is thus important for business empires to have a succession plan and successors who can adapt to the market and have the long-term vision to enable the business to survive through generations and amid changing times. The curse of the third generation

Many of these business conglomerates

believe that the curse of the third generation is not impossible to break or demystify.

The Sy empire, for instance, already employs 18 members of the third generation assigned in its different companies.

Henry “Big Boy” Sy Jr. believes that the third generation Sys can rise to the occasion because they are open to new ideas and are not emotional.

“It’s time for the third generation to shine,” said Big Boy, who is chairman of SM Prime Holdings.

He said the second generation are old school and sometimes do not want to change ways. They get hurt when told to change their ways. The third generation, on the other hand, are free from emotional baggage and are open to new ways of doing things, he said. Professionalizing the business

Helen Yuchengco-Dee, who heads the Yuchengco Group of Companies, said it is indeed good to train the third generation at a young age and expose them to the business.

But she said, if they are not interested, the companies can also hire professionals.

“It is good to start training family members, while they are young to get their hands dirty in the processes of the business. However, today the young have their own minds, and many times, do not want to get involved in family businesses.

Instead, they should be trained to understand business and balance sheets to be able to sit as knowledgeable board members,” Dee told The STAR.

In this case, Dee said professional managers could be hired, which is the case in many multinational conglomerates. Going public

Michael Tan, son of Lucio Tan, shared the same view and stressed the importance of having companies run professionally.

“I learned from professionals. I learned from them that our company has to be run professionally. The system has to be there. I also learned that this does not exclude family members as long as you behave as a professional -- you think, act, and work as a professional, as what is expected of you. So later on as we evolved, I told my father that other conglomerates that have lasted generations have gone public,” Michael said during the recent Family Business Conference organized by the ASEAN Business Advisory Council Philippines, together with Go Negosyo and the Singapore Management University.

He cited as an example the Aboitizes and the Ayalas.

“They’re into their seventh generation now,” he said.

Thus, the Tan Group went public and listed LT Group, now

headed by Michael as president and COO.

“So we took the company public. This is also to instill more transparency. You have your quarterly reportorial meetings and shareholder meetings. You have to have your monthly board meetings so everybody is informed. It sets the tone for the future generations also on how to run the business and what to expect from the ones running the business,” said Michael. Experts’ advice: Don’t spoil the COOs (children of owners)

Joel Tan-Torres, dean of the University of the Philippines College of Business Administration, said it is also important for the next generation of leaders to be imbued with the mindset of the culture of the founders and the passion of innovation for the future.

Cesar Buenaventura, former country chairman of Pilipinas Shell and a well respected independent director of many listed companies, said it is important to inculcate proper work ethic and values of the founder to the children and to develop professionals from outside the family.

He also said the founder must be fair and not play favorites.

“No child or family member must feel entitled...In other words, don’t spoil the kids,” Buenaventura told The STAR.

Joey Concepcion, Go Negosyo founder and presidential adviser for entrepreneurship said it is indeed important for founders to ensure that their companies last beyond their lifetime.

“The aspiration is really to see that the business goes beyond many lifetimes,” he said during the Family Business Conference.

John Ward of Northwestern University’s Kellogg School, who co-founded the Family Business Consulting Group, said in his book Keeping the Family Business Healthy that only 13 percent of successful family businesses last through three generations.

His conclusion was based on a research of 200 randomly selected Illinois manufacturers from 1924 to 1984.

Will this apply to the Philippine empires founded by the six ethnic Chinese-Filipino taipans who migrated to the country before World War II -- John Gokongwei Jr., Andrew Gotianun, Henry Sy, Lucio Tan, George Ty, and Alfonso Yuchengco? Will their businesses last through many lifetimes and many generations? Only time will tell. One thing is certain – should any of these empires suddenly collapse now because of failure in succession, it will not just be a small sari-sari store that will close shop or a small family business that will go down in ruins. Instead, it will be a sprawling conglomerate and the impact on the economy – from employees, to creditors, to consumers – will be just as big.