By: Prof. Enrique Soriano
THIS was the screaming headline in the Business section of the inquirer the other day written by Carla Gomez. The impasse between the two warring groups prompted the labor union of the largest bus company in the country to file a notice of strike, claiming that the ongoing dispute among the owners affected the release of workers’ benefits and pay.
Officials of the 7,500-strong Mindanao Alliance of Land Transport and General Workers’ Union (MALTU), along with the Philippine Agricultural, Commercial and Industrial Workers Union (PACIWU) Vallacar Transit Chapter, gathered on Thursday to air their side on the crisis hounding the company.
“We vehemently condemn the unprecedented move of the management team as we are the most vulnerable and most to be affected by such irresponsible actions,” the labor union said in a manifesto. With 18,000 employees’ jobs on the line, the notice of strike was expected.
4,800 buses spread across the entire archipelago, the Yanson Group of Bus Companies is a big company with a big economic impact—but it is still run like a mom and pop store with limited or no governance infrastructure.
It’s never good for the company, for its reputation, to have protests. There is still time for the family to make amends. Collectively, the family must decide now how it will be governed and how it will manage its relationship with the business. The clock is ticking.
Strengthen Family Governance First
To quote Jaime Augusto Zobel de Ayala, the 8th generation successor to the Ayala Group established 185 years ago in 1834, “creating a family council and drawing up a family constitution can help define the conduct and responsibilities of family members. Governance also includes the critical task of succession in the family. It sets guidelines on board composition, leadership qualifications, and ownership. It also clearly defines the roles of family members who are chosen to lead the business, aside from the economic benefits derived by each family member from the business. One of the reasons we have endured is that family members have effectively regulated their roles as shareholders, board members, and managers”
Successful enterprises are the result of years of hard work and dedication among founders. To remain stable and continue its trajectory towards growth, governance and transparency needs to be made part of the firm’s culture. First let’s be clear on the definition, “Business Governance embeds the methodology of corporate governance and project governance with an emphasis on business process performance using the analysis, monitoring, reporting and optimization of business processes and business activities, and including process simulation and optimization of desired business outcomes by using real-time, historical and estimated data values.” Effectively the statement, “an emphasis on business process performance” holds the key to order, efficiency and profitability.
Transparency on the other hand, is one of the pillars on which the foundation to good corporate governance lies. It is the third leg in the three-legged approach of communication, accountability and transparency and they are related to each other.
Privately held family businesses like the Yanson family are often characterized as closely held businesses to indicate that decisions are the domain of a very select few. While this is a technical definition, it conveys an accurate sense of the tight secrecy under which family businesses often choose to operate. The lack of transparency within the business means the passive senior employees and sometimes even active shareholders, are often kept in the dark about what is happening within the business.
Financial opaqueness is a matter that leads to excessive speculation and untold suspicion among family members. This was likely the scenario with the Yanson group triggering a series of disagreements, altercations and opting to escalate a purely internal strife to one major body (courts) that will further exacerbate an already tense situation. This flawed action appears to be reaching a point of no return.
To be continued…
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This August 31, a Saturday, I will be sharing the stage at Manila Marriott with prominent Governance Leaders / family business owners in the biggest Family Business gathering in the Philippines. The public event entitled, “Can Family Run Businesses Last Forever? I will share the secrets in building 100-year old enterprises. Seats are limited. To reserve, please call Aira and register at 09228603186 or events@wongadvisory.com
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Prof Enrique Soriano is a Book Author, World Bank/IFC Governance Consultant, Senior Advisor of Post and Powell Singapore and the Executive Director of Wong + Bernstein Family Advisory Group, a research and consulting firm in Asia that serves family businesses and family foundations. He was formerly Chair of the Marketing Cluster at the ATENEO Graduate School of Business in Manila, and is currently a visiting Senior Fellow of the IPMI International School, Jakarta.
