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Doing the right thing: Business and ethics can co-exist
Doing the right thing: Business and ethics can co-exist
By Manuel V. Pangilinan
 
Chairman, Philippine Long Distance Telephone Co.

(Acceptance speech during the Management Association of the Philippines (MAP) awards ceremony on Jan. 31, 2006 at the Mandarin Oriental Hotel, Makati City.)


MAP 2005 president Mon Paterno and 2006 president Evelyn Singson, members of the selection committee especially its co-chairman Nick Jacob, members of the MAP, honored guests — good evening.  Kung hei fat choi to everyone!

An organization reveals itself by the men it honors, the people it remembers.  In its entire 38 years of giving this award, the MAP has bestowed this privilege to only 27 men.

Indeed, no one could fail to be moved by a tribute such as this, coming from a profession I have served so long, and from peers I most respect.

Many have made this award possible tonight — but it is difficult to name them all.  To my father, who instilled discipline and my love for sports. To my mother, who softened that paternal rigor with her gentle love. To my brother and sister, companions to my life’s journey. To Anthoni Salim, who has been a friend these past 28 years.  And to all the men and women of First Pacific, PLDT, and Smart — thank you most sincerely.

Kaya’t tinatanggap ko ang inyong parangal ngayong gabi, para sa lahat ng mga taong tumulong sa akin.  At — higit sa lahat — para sa ating mga kabataang nagmamahal sa ating bayan, na balang araw — isa sa kanila ay tatayo din dito, upang tanggapin ang inyong malaking karangalan.


The First Pacific story

One of the many blessings I’ll always be thankful for are the lessons I learned as we built First Pacific. 

The story of First Pacific — and that of PLDT — rest on the very basic prescription that you can succeed by "doing the right thing," even in an awkward environment like the Philippines. It also does mean that business and ethics can co-exist in this country.

Ethics in business

Yet the concepts of "business" and "ethics" do not easily sit together in our country.  One local journalist has said that "business ethics" is an oxymoron — like "jumbo shrimp", or that wonderful military expression —, "friendly fire".

To be sure, there is the dilemma about "doing the right thing".  Because ethical behavior is not always rewarded, and unethical behaviour is rarely punished.

One of the object lessons of my First Pacific experience was that those who choose to conduct business in an ethical way will, in the long run, perform better than those who don’t.

The First Pacific values

A few years back, I was asked to return to the Ateneo to make the commencement address in its centennial year. I found myself talking about my past and the young graduates’ future. And I had to let them in on the greatest secret of all — that when it comes to success, there are no secrets.

I told them that success can only spring from old-fashioned values, values that are transcendent, and endure well beyond the context and circumstance of our time.

Those principles are as fundamental as being honest and truthful — especially with yourself.  Being diligent, committed, and hard working will also serve you well in the long-term.

The growth of any institution — especially a corporation — cannot be sustained without the commitment, talent and industry of its people. That’s why it is always our aim to create a team of the best people available to manage our businesses.  After all, quality decisions are made by quality people.

As an important corollary, we make our managers, owners of their businesses because as managers and investors, they will commit themselves more to the company’s success.

Although our form is corporate, our attitude is collegial. This promotes an open and honest style. Openness breeds fresh ideas and enables the organization to renew its vigor, the ability to relate and communicate is important to us — we don’t like surprises.

Finally, the challenge to management must be to create a corporate culture that encourages and rewards integrity as much as entrepreneurship. Management — especially the CEO — must not only be exemplary stewards of corporate assets, they must also serve as the moral compass of the company. A CEO must actively encourage his team to be open and truthful in their decision-making processes and in their internal and public disclosures. We believe that the best insurance against the perils of crossing the ethical divide is transparency.

Lessons from the First Pacific and PLDT experiences

You may ask — how does the First Pacific experience correlate with our investment in PLDT?

First Pacific made its investment in PLDT seven years ago, in 1998. Whilst the macro environment then was stable, the telecoms industry was approaching a tipping point. International accounting rates were falling fast, severely reducing international revenues. The cellular business was expanding exponentially, but eroding growth in fixed lines. Texting volume was growing faster than the avian flu, and eating away at our voice business. Competition was intense, and very competent.  On the horizon, we could see emerging the trends towards convergence: between telecommunications and computers, between voice and data, between video entertainment and information.

So only seven years ago, PLDT had the habits of a monopolist.  It was big, fat, and slow in an industry where changes were accelerating, with a bureaucracy and culture not different from government’s — for example, employees start to queue for lunch at 11:30 a.m., and lights went out at lunch time. Our revenues were under pressure, costs bloated, debts too large, cash flows tight, and credit rating downgraded. Doesn’t all this sound familiar — PLDT looking just like government?

So what did we do when we took over?

First, we stabilized the company’s fiscal situation.  This meant getting hold immediately of the vital functional areas of finance — to ensure that we had access to all records and obtained a full and accurate view of the financial position; purchasing — we established transparent processes in our procurement; and most importantly, we acquired the position of chief executive.

Second, we defined a clear vision for PLDT.  I thought that convergence — where telecoms, media, and information technology will merge onto a single platform provided a long-term conceptual beacon for the business, and a sturdy anchor for our future strategy.

Third, we proceeded to put flesh on this skeletal blueprint by identifying our most serious problems, and prioritizing them as to which should be tackled first. Cash flows were critical because debts were high — this meant revenues and collections had to grow, costs had to be reduced, and capex managed prudentially.

Fourth, it was essential to transform the organization’s mindset from being engineers to becoming marketing and customer-centric managers.  For instance, when I first reviewed the PLDT budget in December 1998 for the incoming year 1999, I was surprised that the first item for discussion was not sales or revenues — but capital expenditures for equipment!  You can probably infer the reason why.

On Feb. 27th, PLDT will report its results for the year 2005. Our net profit number is likely to lie north of P30 billion — another historic high for PLDT, and for any other Philippine corporate. In this regard, let me just say this — that I wish we’re not alone — because this country needs more PLDT’s, reporting world class numbers and performance, and attracting the attention of global markets.

It’s also necessary to put our profit number in a broader context. For the past seven years, our consolidated capex spend has aggregated approximately $2.7 billion — manifesting categorically our commitment to this country’s future. In 2005, we returned a significant amount of cash by way of dividends to our thousands of shareholders — more than P15 billion — but only after sacrificing four years of dividends, so that our debts could be reduced, and moneys invested for expansion. PLDT is likely to be the company which pays the largest cash dividend in the country for 2005.  Our taxes paid to local and national treasuries — income taxes, VAT, franchise taxes and the like — will amount to about P18 billion in 2005, and are certain to increase significantly in the coming years as our profits continue to rise. In the seven-year period spanning the years 1999 through to 2005, our consolidated tax bill has reached P85 billion.

At this time, PLDT finds itself approaching another tipping point. The onset of new and disruptive technologies that are Internet-based and broadband, are starting to enter the mainstream, and to undermine the current business models that have built and sustained the wireline and wireless businesses of telecom companies throughout the world.  But this demands new investments — in next generation I/P network, in 3G cellular, in WiFi/WiMax, in IP/TV, in mobile video, in mobile commerce — that will breed new products and services, new revenue streams, and entirely new businesses. What the great German statesman Bismarck once said may be relevant to PLDT reinventing itself yet again —  "great changes do not come upon us with the even speed of a railway train. Instead, it moves forward in spurts, but with irresistible force."

Seen in the context of the future, our strong financial results are in fact critical in underpinning the next round of significant investments required for the next generation in infrastructures.

Nonetheless, I must admit that it took years, time, and pain for PLDT to get to where it is today.  And as to First Pacific, our track record has been checkered by the occasional failures.  The abiding message must be that your past successes teach you that you can succeed again and, with your failures, lessons can be learned that enable you to move on.

Ultimately, however, whether in private or public life, the essentials for successful leadership are not altogether different:

• First, possessing a clear and focused vision on what needs to be done.

• Second, admitting that problems do exist, identifying and prioritizing them, developing options to solve them.

• Third, just do it!

Passion, sports, and management

I’ve been asked a number of times about what comprise good management?  First of all, I say that business leadership is the more proper term. Secondly, I note that it has three basic elements:  competence, integrity, and passion. And amongst this trinity, I regard passion as the most important.  

Why so?

Bill Bradley could not have put it any better when he wrote, "I play basketball for the joy of it — there is no feeling comparable to feeling passionate about sport. That moment of beautiful isolation, the result of the correct blending of human forces at the proper time and to the exact degree. With your team, before a roaring crowd, one inhabits a private world — where no one else but you — can sense the supreme delight of the moment."

It is passion — which all of you in this room must have felt when Manny Pacquiao won recently — that finds its roots in basic values, and connects to a purpose higher than one realizes.  One such purpose is national unity — witness the Philippine Daily Inquirer headline a day after Pacman’s victory — "One Nation In Jubilation!"

Conversely, I believe our tragedy today is our apathy. This is a problem of the spirit. We must learn to believe in ourselves and in our future. At PLDT, the optimists have it, not because they are right but because they are positive.  That is the way of achievement, of improvement, and of success. Pessimism can only offer the consolation of being right — but what’s the point of being right without producing any benefit?

There’s also a saying in Africa which goes like this — "The hand that receives is always lower than the hand that gives."  This tells us that the best path to welfare comes from within, and that no other empowerment is as effective as self-empowerment.

This brings me back ab ovo — to my initial thought tonight that this award celebrates people who are passionate about their work and about their lives, and who excel in them.

Conclusion

I’d like to close by noting what Napoleon once wrote, that leaders must be "merchants of hope." Let me now leave you with my own hopes:

I hope for a great future for our country — a future in which we can match our strength with our morals, our wealth with wisdom, our power with purpose.

I hope for a Philippines that steadily raises the welfare of, and enlarges the opportunities for, all of our people, without regard to privilege or pedigree.

I hope for a Philippines which protects its natural environment, rewards fulfillment in sports, and recognizes achievements in business and in arts.

And I hope for a Philippines that commands respect throughout the world, not only for its people, but also for its culture and history as well.

Kaya’t magiting natin harapin ang ating kinabukasan. Gawin ang ating tungkulin ng matapang at mahusay. Ipaglaban kung ano ang tama sa gawa at sa salita. At higit sa lahat, huwag tayong maduduwag sa mga hamon — moral man o pisikal, dito o maging sa labas ng bansa — sapagka’t tanging sa tunay at maalab na pamamaraan, natin nakakamit ang ating pangarap na kadakilaan ng bayan.  Nawa’y masabi sa atin, sa dilim man ng gabi o liwanag ng umaga, sa mga salita ng isang usong awitin ngayon — "Pinoy Ako"–


Pinoy ikaw, Pinoy

Ipakita sa mundo, kung ano ang kaya mo

Ibang-iba ang Pinoy

Wag kang matatakot, ipagmalaki mo

Pinoy ako, Pinoy tayo.

Maraming, maraming salamat. Mabuhay ang MAP! Mabuhay ang Pilipinas! 




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