Rogue | August 2014
Crown and Country
by Manuel L. Quezon III
As we say goodbye to our current leaders, we greet their next-in-lines. From Imelda to Bongbong, from JPE to Jackie, can succession plans really go the distance?
AUGUST is a month which reminds us that the problem with revolution (ours began in August, 1896 against Spain), dictatorship (the beginning of the end for Marcos was Ninoy Aquino’s assassination), or unprecedented political leadership (Cory Aquino and Manuel L. Quezon both died on August 1, Quezon and Ramon Magsaysay were born on August 19 and 31 respectively) is, as one lawyer recently told me, “it never has an exit plan.” A revolution, by its very nature, destroys the old and finds it difficult to turn what is new into some- thing permanent: hence a revolution devours its own children. A dictatorship built on the argument that the dictator is the indispensable man considers a succession plan a dangerous sign of weakness—leaving the only possible exit plan, as in a revolutionary situation, a matter of execution or exile.
Marcos had a succession plan, which as one of his advisers put it to me, consisted of a secret decree naming a committee whose members were then expected to fight it out to see who would end up on top. From time to time to stir the pot, Marcos would hint to allies as to who comprised the committee, all the better to see the jockeying unfold. Quezon, Roxas, and Magsaysay all cultivated successors, but only Quezon actually successfully designated his political heir; Roxas and Magsaysay died in their first term, unable to finish their expected tenure and build up a successor. Cory Aquino during her lifetime got some credit for helping elect Ramos, but was more successful in blunting the ambitions of her successors: a reactive veto.
Then there are those who occupy the intersection of politics and commerce: enjoying political as well as business clout. One wonders what Juan Ponce Enrile felt, as his motorcade wound its way to Camp Crame early in July, about his political and commercial aspirations. Surely all the struggle was about a legacy greater than Delimondo canned goods? Looming over Ayala Avenue remains the stump of his unfinished Jaka Center, started 20 years ago as the tallest building in the country. Back then, it was a symbol of the self- made man, built on the former lot of the Elizalde Building, a symbol of the old tycoons giving way to the new. Now, Enrile has no building, and too many copies of his autobiography—filled with self-made pride, and meant to boost the prospects of his son—are gathering dust in the bookstores because the book opened up more questions than it answered. What was meant to be at the very least a political exit plan—his serving out his last years in the senate in the company of his son and heir—has been reduced to the son chatting with ANC as he rode in the convoy to deliver his father to detention.
The exit plans that seem to work are those that involve two things: a conscious decision by the one making the exit to leave the scene, and a plan to make sure the heirs are kept from screwing up.
Frederick Law Olmstead, the landscape designer of Central Park, noticed he was not only going senile but developing dementia. He told his sons to take over and take him out of the business. While Olmstead ended up dying in an insane asylum, the firm he established lasted a hundred years. The best-laid plans can go awry even if they start off well. Henry Ford had established the Ford Motor Company in 1903 and by 1918 (then only aged 55), he handed over the presidency of the company to his son, Edsel. But Edsel Ford died in 1943, and Henry made a comeback—senile, paranoid, and al- together incapable of running his great corporation.
John D. Rockefeller, the oil tycoon, had his son, John D., Jr., enter the Standard Oil Company in 1897. He left the company in 1910 to focus on philanthropy; when the Standard Oil monopoly was broken up, it ironically resulted in ballooning Rockefeller’s fortune—which he then systematically transferred to his son. John D. Rockefeller Jr.’s fortune then passed into trusts controlled by his five sons. But these Rockefellers ended up feuding, in large part due to the political career of Nelson Rockefeller who at one point became an appointed, and not elected, Vice President of the United States: the Senate hearings for his appointment led Nelson Rockefeller to disclose the full extent of the family fortune, which revealed it was no longer as vast as popularly believed, a reduction of family prestige his brothers found unforgiveable. Then the third generation faced a revolt from the fourth generation, which persisted until the 1990s, when the fourth and fifth generation of Rockefellers, plentiful in number, shifted from “wealth preservation” to expanding to new enterprises to keep their individual and family net worth up.
William Randolph Hearst created a trust for his heirs composed of a board of 13: five family members, and the rest executives from his corporations. The trust in turn invests and then makes annual payments to Hearst’s heirs. The trust has been so successful that it has made the transition from the previous to the current century not only intact, but has greatly expanded its value and clout, with 20 percent of ESPN, and the Hearst publications among its crown jewels.
Even a notorious attempt by the ex-wife of John Randolph Hearst Jr. to deprive her husband of his fortune (a long time girlfriend who had married him after he had a stroke allegedly proceeded to transfer his assets to herself), which resulted in a settlement to prevent the case breaking the seal of secrecy on the details of the Hearst Trust imposed after Patty Hearst was kidnapped in 1974 (secrecy was imposed so that other heirs would not become targets), failed to break up the trust.
Unlike the Rockefellers and the Hearsts, other succession plans fail because of the heirs themselves.
Jay Pritzker, founder of the Hyatt hotels fortune, had placed a trio of heirs—including Penny Pritzker, now President Obama’s Secretary of Commerce—in charge of the family trust. Other Pritzker heirs eventually challenged the trio, arguing they were overcompensating themselves at the expense of the other heirs. The result was that Penny Pritzker and the others in charge of the family trust had to basically liquidate the family fortune, and parcel it out among all the heirs— including Penny’s two brothers with whom she stopped being on speaking terms.
The generation of the first Taipans are now in the departure lounge; now part of the establishment, they will face the same succession problems the old mestizo commercial families faced. And what is true for business applies to politics, as well: the current era of reform ends in 2016.
To the delight of those who find it inconvenient, there is the prospect of a return to the old ways after that (enter Madame Marcos, complete with flower tiara, proclaiming the presidentiability of her son); and to those who feel it’s meant something, there is the horrifying prospect of the reforms being rolled back.
At the back of everyone’s mind, then, is this: is there an exit plan two years hence?