It is extremely important to reflect on the five insights shared by my colleague, Prof. Danny Barrenechea. When embraced by every family member, these values will form part of a family business’ collective aspirations. They will serve as a reminder to all family businesses embroiled in disputes with both sides, in a state of heightened acrimony, that there will never be a clear winner in any family conflict.
- A healthy and stable business but ready to explore opportunities;
- A healthy and harmonious family, free from any major conflict;
- A family business that thrives on professionalism, excellence, and meritocracy;
- A family business that will transition to a family-inspired business run by professional leaders, and finally;
- A family business that embraces governance and stewardship so it will continue from generation to generation.
As Family Business advisors, we know we’ve successfully played our roles to our utmost capabilities when family members internalise these aspirations and reinforce it with Governance and Succession. In the words of Louis Farrakhan, an American political leader, “ united we can solve our problem and divided we have nothing.”
Danny Barrenechea is not a stranger to the complicated reality of family business dynamics. He belonged to the family that was behind the pioneering Cosmos Soft Drinks brand in 1918 when his grandfather, Wong Ning, a native of Kwantong Province, migrated to the Philippines and established the Manila Aerated Water Factory along Misericordia Street in Manila.
Unfortunately for this founder, World War II broke out and he found himself incarcerated by the Japanese Army because of his affiliation with the Kuomintang government. Wong Ning later died in prison, leaving behind seven children.
After The Manila Liberation
Henry, the eldest son of Wong Ning and Danny’s father, naturally assumed the responsibility of managing the family business as dictated by tradition and it turns out that he was the perfect man for the job. Henry was a well-educated professional armed with a PhD but most importantly, he exhibited great leadership skills, was both honest and fair, and had the vision and foresight for the company which earned the obedience and respect of his brothers and sisters.
Soon, the Cosmos Brand grew as local players disappeared one by one. At their peak, Cosmos became a challenge to renowned local players, Coke and Pepsi. As the business reached greater heights, Danny was being groomed to succeed his father. After graduating from Xavier School in 1961 as a Salutatorian, he was sent to the U.S. to complete his college education.
He fondly relates this memory during one of our exchanges. He said: “My father got me into UCLA and after graduation, he sent me to the University of San Francisco for my MBA. My father followed a succession plan and he was sort of preparing me to help in the business since I was the eldest boy. He even assured me that if I do well, I will take over the top spot.”
The Unexpected Event
However, the seemingly well-oiled plan stumbled upon a serious problem. Danny recalled that fateful day in 1970: “while attending the graduation of my other brother in the U.S., Papa suffered a stroke which was caused by a tumor in his brain. The stroke paralyzed half of Papa’s body. He was devastated! After the operation, the verdict was malignant. All the dreams of Papa went down the drain.”
Continuing with the story, he said: “Papa was given only six months to live but we were afraid to tell him for fear of making matters worse for him. We didn't want to aggravate his current state and all the while he was hoping for a full recovery.”
Any family member can agree that it would be painful and difficult to inform the patriarch about his debilitating condition, but by opting not to disclose his state of health, the family business would end up being compromised. On the other hand, by disclosing to Henry, the family members could have worked their way towards the succession process and Henry, despite being incapacitated, would have given instructions to family members to prepare the leadership transition to the next generation.
Danny went on to share: “The day before Papa died, he could barely breathe. His second brother Hubert visited him in his hospital bed. Papa, with a frail voice, just told him: ‘Bahala na kayo (Please take care of things)’. The next morning, he was dead.”
Papa is Dead! Now What?
Henry’s death, caused by a malignant tumor, was a major setback for the family business. It was extremely unexpected as Henry, even at the age of 53, was at the peak of his entrepreneurial career having led the turnaround of Cosmos Bottling Corporation from a state of stagnation to a major player right after WWII.
That seemingly normal day in 1970 has been stamped in Danny’s brain forever. His father just attended his brother’s graduation and the next thing they knew, doctors were saying that he only had months to live. It was surreal and obviously, questions surfaced as Danny narrated: “I even asked myself these questions…Why him? He did not smoke! He did not drink! He ate healthy food! He played golf for his exercise! And why so unexpected!”
Without their leader, the stockholders, composed of Henry’s three brothers, a cousin, a nephew, and Danny, met after the burial to decide who will succeed Henry as the president. Following Chinese tradition, the members of the immediate family would always have preferential status over the secondary families which meant that Danny could be next in line.
What’s Next Now That Dad Is Dead?
If tradition was followed, Danny would find himself as the business’ successor but he was barely one year in the business. After finishing his MBA in the U.S., his father requested that he return home to learn the intricacies of running the operations of the enterprise. Danny had the right qualifications but he did not have the experience so expectedly, an outsider was chosen to lead the business.
Danny understood and respected this decision. In his own words, “due to the inadequate experience on my part, and my relatively young age, the triad (uncles) had no choice but opted for an ‘outsider’ to run the company. His name was William Ma Padua.” It was a choice that Danny respected because he knew full well that he was still “wet between the ears” and lacked the necessary experience to lead a big organization.
He said: “Uncle William empowered the younger executives to make decisions and encouraged them to learn from their mistakes. He set the guidelines and we worked within the guidelines. The business grew and we continued our expansion. Uncle William was actually a cousin of Papa who worked with him from the very start. He had the experience, was educated, and a very devout Christian.”
Yet Another Unexpected Crisis
After ten years of continued growth, William, in one of his visits to the U.S., suffered a mild heart attack and immediately decided to “call it quits”. With the vacuum created by this untimely resignation and to avoid the tricky situation of choosing one nephew over the other, Danny’s uncles decided to let Uncle Hubert, the second eldest brother who was the Chairman at the time, assume the presidency. Danny was bypassed again and this time, he refers to the decision as not only “unfair but clearly an emotional one.”
Danny went on to share his frustrations about Uncle Hubert, saying that: “Can a person without a college degree, did not succeed in business, lacked human relations skills, stubborn, and who believed that he was always right but afraid to make important business decisions, run a family business made up of people from different families? My uncle was all of the above!”
This shift in control had demoralized the management, especially the family members that worked at Cosmos. Instead of solving relationship problems, Hubert would challenge family members to quit or sell out if they can find a buyer if they did not like the way he ran things; and that is what the other family members did!
With squabbles happening almost regularly and disputes continuing with increasing acrimony, not to mention shouting accusations during board meetings, the situation unsurprisingly reached a boiling point that prompted family members to entertain the idea of selling to outside parties. So when offers came, the disgruntled members grabbed the opportunity and sold the majority shares of the company. For Danny, what happened was: “Cosmos was sold for the wrong reasons and for the wrong price!”
The eventual transfer of ownership to Joey Concepcion of the RFM Group concluded the end of the Wong Family’s ownership of the Cosmos Bottling Company after three generations. If the Cosmos family business had not died under the failed leadership of the second and third-generation family members, they would have celebrated their 102th year in business this 2020.