The Ten Commandments to be observed for running a Family CorporationBy Lance Gokongwei

This item was discussed by Lance Gokongwei in a forum wherein he shared his father/s secrets inrunning a successful conglomerate and in effectively transitioning from a company that is basically family-ownedto one publicly-owned and listed.

At an Ateneo forurn, the younger Gokongwei said that during his father's generation, his aunts (marriedto his dad's brothers) and his mother were involved in the business, but the elder Gokongwei soon discoveredthat this was not always ideal."There were situations where sorne of the marriages did not work. Loyaltieschange. Sometimes relationships between the different in-laws from the second generation became strained.Feelings get hurt. lt is tricky deciding which in-law is more deserving, which is smarter, which would do a betterjob," he said. And so for the second generation, led by Lance, the rule of no in-laws was instituted

- with

some exoeptions.

The second commandment is no moonlighting. Lance said the family rule is that if cne is working for JGSummit, one can only own a passive assets that do not require their attention such as propefi, shares, bondsand the like. "lf you work for the companyr you must be either fully in the business or completely out. ln runningthe business, you must be actively involved, with full-time commitment and focus," he explained.

No conflict of interest is the third commandment. As a family member, one cannot set up businessinvolved in supplying or transacting with the JG Group of Companies. '?round 20 years ago, my family learnedthis lesson. ln one of the family manufacturing companies we acquired, one sibling was involved in an outsidebusiness supplying the company. Another was involved in a business that sold the final product for eommission,and another was involved in a business that sold the scrap. As each party was concerned with his own interests,nobody was thinking of the interest of the farnily business." Lance said.

The fourth commandment is "no work, no pay from the company."The family member must work toreceive a salary There should be no fake pay. You must have a real, full-time position in the cornpany. ln myfamily, we do not received allowances after graduating from college. lf as a parent you want to give your childmoney from your own salary or dividends, that's your prerogative. But the family is not going to pay for this," hepointed out.

Fifth is that personal assets should be kept separated from company assets. Lance said thatpersonal should be paid from one's own pocket

- including personal travels via the family-controlled Cebu

Pacific and personal hotel stay at the family-owned RLC hotels, and even shopping at the Robinsons retail stores.

Sixth is pay must be based on contribuUon to the business. ll,e said that in order for the familymember to live and think independently, the family business must :pay the right salary for the right job, but thepay must be adequate enough so that the family member will not be dependent on the parents for support."The amount you will receive is based on merit and not who you are in the family totem pole," Lance added.

The seventh commandment of the Gokongwei group is that being family is no guarantee ofemploymenl '"There comes a time when there is not enough;iobs for everyone in the family. Oftentimes,professionals may even be better in running day to day operatio,m," he said.

Eight is avoiding working directly under one's parents, specifically at the start of a career. "When Ifirst started, I did not report to my father. I worked for my uncle and another manager. lf you are too close tothe person, you usually won't get good feedback. The parent might spoil the child or he may be too harsh. Thereis also danger of bringing issues and arguments horne," he noted.

Ninth is "giue the next generation wings." Also part of this rule is "have a fixed retirement age"for the business. "l have seen many families where the patriarch passed on the responsibilities to the nextgeneration successfully and some passed it on too late," Lance cited.

The tenth and the most important rule is that "there can only be one boss." He explained that thisrule is related to succession. The role of ttle family and owners is to prepare a board to appoint a successor.'You must establish a process to appoint the leaders. My dad and his brothers established a clear process onwho can decide who the next leaders will be. They created an outside board whose role is to appoint and firethe CEO. This is critical so that a business can smoothly pass on from generation to generation, and achieveIongevity." Lance stressed.