Philippine commerce is replete with stories of failed family businesses that in their time reigned supreme.
We can wax nostalgic, travel through time and be awed by how these companies were embraced and looked up to by millions of Filipinos. There were Ang Tibay and Elpo shoes, both owned by the late Don Toribio Teodoro; Halili Beer of the late former Bulacan Gov. Fortunato Halili; Cosmos Bottling Corp. of the late Henry Wong. Then, there were, Ang Bayani Soft Drink Co., Good Earth Emporium, Glenmore Shoes, Arcegas Department Store…the list goes on. The long and short of it is that most of these businesses were gobbled up by competitors, while many flopped due to complacency and neglect by the heirs of these trailblazing Filipino firms.
Perhaps the remarkable permanence of Japan’s—and the world’s oldest (based on available records) —family-owned commercial empire, Kongo Gumi, a construction company founded 1,400 years ago, could never be replicated here and elsewhere. Until today, it continues to build and refurbish religious temples and administer general contracting from its Osaka headquarters. It is believed that just a third of businesses last into the second generation of a family, let alone for over half a millennium. The oldest Filipino companies Destileria Limtuaco (1852) and Ayala Corp. (1834) (although publicly listed) of the Zobel-Roxas clan have centuries ahead to prove their longevity in relation to Kongo Gumi’s.
According to Matthew Fleming of Stonehage Fleming: “No financial legacy, business or otherwise, can survive through the generations, without addressing key issues around a family’s culture, values and the purpose of wealth.”
Could this be the case of the 1923-born Panay Electric Co. (Peco), which has lost its grip on a business that many have considered the Cacho family’s birthright?
Peco has been Iloilo’s lone electricity provider since its founding. The company was incorporated by Don Esteban de la Rama; Jose Ma. Arroyo, a former senator; lawyer Mariano Jalbuena; Emiliano Lizares; Jose Lopez-Vito; Modesto Ledesma; Marcos Alfaras; Jose Tiongco; Yap Seng; Eulogio Hernandez; Jose L. Jalbuena; Jose G. Paramos, and GM Saul. They sold it in 1927 to Candelaria Ditching Cacho who converted Peco into the first 100-percent Filipino-owned private enterprise in the province. The company then was managed by Don Mariano M. Cacho.
What happened between 1923 and 2019?
The heirs could have fallen into complacency, probably unsure of the company’s values and purpose of wealth. The Cacho family wasn’t even prepared when Congress stripped it of its franchise after complaints piled up against the poor service provided by the company and the exorbitant rates they were charging. House Bill 8032 granted More Electric Power Corp., a company owned and controlled by business tycoon Enrique K. Razon Jr., the legislative franchise to distribute electricity in Iloilo City.
The harsh truth is that it is Peco’s own customers who have condemned it for bad service, high electricity rates, old and dilapidated equipment, and a penchant for overbilling its customers. Its purpose of wealth from their customers’ view point has been making money at the expense of the people they were supposed to serve, and at the government’s behest. In a rare public statement, Razon decried Peco’s practice of declaring annual dividends in the hundreds of millions of pesos, instead of investing such funds to improve its transmission facilities.
The Cacho family did not take the loss of their franchise sitting down. Perhaps embarrassed at losing their prime business through a congressional act, they launched a legal battle to stall More’s takeover of its distribution assets. The Cachos sought their own franchise, thinking that Congress would gloss over the law it passed to rationalize the power industry 15 years ago. The law prevents uneconomical and political-largesse type of electricity distribution businesses in the country.
Peco’s tax arrears have also risen steadily since 2006 when the City Treasurer’s Office first directed the company to pay real-estate tax on the land where its estimated 30,000 electricity poles around the city nestle. The city government rebuffed Peco’s settlement package and instead demanded full cash payment of its P89-million realty-tax arrears. While Peco is questioning the legality and accuracy of the tax assessment before the Local Assessments Board, the Iloilo government has scheduled on December 12 an auction of Peco’s distribution assets.
Peco’s operations would be threading on thin ice for the next one-and-a-half years. Its interim permit from the Energy Regulatory Commission stays valid only as long as the city’s new distribution utility has yet to fully take over the city’s electricity distribution assets. If Peco loses ownership and control of these distribution assets in the December 12 auction, including the 30,000 electricity poles that dot the city’s streets, the company would have no reason to continue operating, although the law provides it with a one-year allowance to redeem these assets.
Unless the company is able to stop the auction, settle its tax arrears or redeem within one year its auctioned-off assets, Peco could land itself ignominiously in the history of the country’s failed family businesses.
For comments and suggestions, e-mail me at mvala.v@gmail.com