Family-owned conglomerates

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There is a Chinese saying that “Wealth does not pass three generations.” It is often attributed to Mencius, a Chinese philosopher whose original statement was, “The influence of a gentleman lasts only five generations.” Over centuries, this evolved into the “Three Generation Rule.”

In the West, it is referred to as “the third-generation curse.” A law firm, Lowthorp Richards, pointed out on its website that “the third-generation curse is not just an anecdotal observation; it is supported by empirical evidence.

“A 20-year study by the Williams Group of 3,200 families, found that 70 percent of wealthy families lose their wealth by the second generation, and a stunning 90 percent lose it by the third generation.”

It is apparently worse in the Philippines. According to Prof. Enrique Soriano of the Wong + Bernstein Group, 87 percent of family businesses in the Philippines fail after the second generation. Only three percent survive into the third.

Interviewed a year ago by Raine Musñgi on the Bilyonaryo News Channel’s Follow the Money, Prof. Soriano revealed a worrying trend:

“Business succession is an epidemic we don’t talk about,” Soriano warned. Worse, most founders are reluctant to let go. “They say, ‘I will die with my boots on,’ but that just leads to chaos when they do,” Soriano said.

In an archipelago where nearly eight out of 10 large corporations are family-run, this quiet collapse poses a major threat. This makes succession planning and conflict resolution critical to market stability.

Iris Gonzales, my editor, wrote last week that many in the local business sector are hoping that the Lopez family will finally resolve things so as not to affect other businesses in the country.

“I heard that investors are raising concerns that the Lopez war may also happen in other family enterprises in the Philippines. Shareholders, including large foreign funds, are worried that their respective companies may also go the way of the Lopez conglomerate…”

The feud highlights how family conglomerates with unstructured management of family members involved in the business, can affect the governance of publicly listed companies. This is why advisers like Prof. Soriano advise family businesses to craft a “family business constitution” to guide transitions and protect minority shareholders.

As of May 2026, 18 of the top 20 companies listed on the Philippine Stock Exchange, based on market capitalization, are family-owned or family-controlled. This shows the dominance of family-led conglomerates in the Philippine economy. Most are now managed by second or third-generation leaders from prominent dynasties like the Sys, Ayalas, Gokongweis and Aboitizes.

Only two groups in the top 20 are generally not classified as Filipino family-owned in the traditional sense: PLDT and Meralco. While both are controlled by an Indonesian family, the Salims, their exposures are lower than that of the local families in their conglomerates.

In PLDT, First Pacific’s economic interest is 25.6 percent. In Meralco, First Pacific’s effective economic interest is approximately 23.7 percent.

But in PLDT, the Salim Group has a partnership with NTT

DOCOMO (which holds 20 percent), creating a stable voting bloc. Other big investors are the Gokongwei Group and SSS as well as Global Fund Managers like The Vanguard Group and BlackRock Inc.

Non-family-owned firms are often favored by foreign institutional investors because they tend to have more predictable succession plans and are less susceptible to the kind of internal “family quarreling” that recently impacted the Lopez Group.

Those of my age will recall other family-owned conglomerates with failed succession and have vanished today. The Soriano Group (A. Soriano Corp/Anscor) was one of the “three grand conglomerate families” alongside the Ayalas and Elizaldes.

Under Andres Soriano Sr., they built San Miguel Corp. (SMC) into an Asian giant. However, his son Andres Jr. sold the family’s controlling interest in SMC in the early 1980s. Today, while Anscor still exists, its footprint is significantly reduced compared to its mid-20th-century dominance.

The Elizalde family was once considered part of the “big three” conglomerates. The family saw their influence and vast holdings, ranging from sugar and mining to broadcasting diminish significantly compared to the rising ethnic Filipino-Chinese business families.

But even with the Chinoys, there were big names that are gone now or nearly so.

The “Big Three” of the pre-war and early post-war eras — Yutivo, Dee C. Chuan (China Bank) and Cheng Ban Yek saw their fortunes shift significantly as the economy moved from 20th-century trading and manufacturing to modern service and retail-led conglomerates.

Most interesting is what happened to Cheng Ban Yek & Co. Its main businesses, Philippine Blooming Mills (steel) and La Suerte Cigar failed to cross generations. What was left was Baguio Oil.

I can’t imagine the fall of this Chinoy conglomerate. I remember visiting the Shanghai Museum and one wing is dedicated to the private collection of priceless Chinese art of the Cheng Ban Yek Group founder.

Recognizing that they could not sustain the sprawling, capital-heavy empire built by founder Ching Banlee, the third generation divested or shuttered non-core industrial assets. This allowed them to concentrate resources on the more resilient consumer goods sector, specifically cooking oil.

The top Chinoy conglomerates today, SM and the Gokongwei Group seem to be doing quite well with the second generation. Their founders apparently found a formula for preserving generational wealth. The test will come with the third generation.

The Filipino-Spanish conglomerates, Ayala and Aboitiz, have family constitutions that govern their businesses. That has apparently differentiated them from those who failed to go beyond the second generation.

But the Koreans, I think, have the best solution by imposing one of the world’s highest inheritance tax rates (up to 60 percent). This massive tax burden often forces families to sell shares, diluting their control and making feuds more dangerous because they can lose the majority.

That’s something to think about.

Boo Chanco’s email address is [email protected]. Follow him on X @boochanco