1. COSCO SHIPPING SUMMIT
Keynote Speech by Angela A. Chao Senior Vice President, Foremost Group World Shipping (China) Summit Tianjin, China November 02, 2007
Good morning! It is a great honor and a great pleasure for me to be with such a distinguished audience and among such wonderful panelists here this morning. Thank you for having me.
I have been asked to speak about “Family Business Development in an Ever-Changing World”. I think it’s a great topic, one that is actually quite interesting in today’s business environment, and one which is of course, quite close to why I do what I do, and why I enjoy so much what I do.
There is no doubt that our world is changing, and it is changing faster than ever before. Technology has transformed the way we communicate with each other and our ships and the pace at which we do so. Globalization and international trade have bound us to one another closer than ever before. International regulations – whether they be with regards to safety, security or environmental protection – are daily concerns which our businesses must confront and address. New financing structures and sources have provided liquidity and abundant cash in our capital intensive business. Information flows have changed the expectations people set for themselves, as well as for the generations that will come afterwards. These are all incredible

2. changes to our businesses, our business environment, and the entire world. Change – it is inevitable. So the question begs: how does the old-fashioned, traditional model of the family business fit into this brave, new world?
In the United States, most companies of all types and sizes fail within 20 years of their creation. Even among family companies—which are a heartier breed—less than 30% survive into the second generation, barely 10% make it to the third, and only about 4% to the fourth.
So what makes the family business special? Why are the chances for longevity greater for a family business than otherwise?
I believe that what the family business represents - accountability, honor and pride in one’s work and one’s company – has never been more relevant. These are ideals that are embodied in family businesses that should be treasured and transferred to all companies and businesses.
We live in an environment where governments around the world are trying to legislate corporate responsibility and business ethics, and we are being reminded time and time again how woefully lacking the letter of the law can be if people want to ignore the spirit of the law. In the United States in particular we have had scandals like Enron and WorldCom that shook the public’s faith in corporate America and our stock market and resulted in Sarbanes-Oxley, a still very controversial piece of legislation that is still met with skepticism as to whether it can prevent the next Enron. The development of the family

3. business in this environment when the time honored traditions of pride in one’s work and a sense of honor still mean something, is indispensable.
This is especially true in shipping, especially ocean shipping. Shipping is a highly cyclical business with huge upfront capital investments, and we are inherently international. We were global before the term became part of the common parlance. We transact in a world that is cross-border, practically by definition. Our industry moves too fast, even with the faster modes of communication available to this generation, to wait for legal papers to make it around the world. Our word is our bond. Our reputation is what counts.
I consider it an honor to hail from a family business. My parents started this company over 40 years ago as they embarked on a new life in America. They faced hardship and difficulty in those early years. Instead of surrendering to the fact that certain career paths and job opportunities were closed to them, my parents persevered to create their own reality and opportunities. That they did so in a land whose language and culture were completely new to them is awe-inspiring to me. The business which they built provided security for their family while staying true to their values and life philosophy – the bottom line was never to make money for money’s sake. The goal was to provide a service that was needed. My father would say, don’t pursue something because it makes money – provide something someone needs, and you will be compensated for it.

4. I work every day with the knowledge and the pride that this is a company which my parents built. It gives me direction, strength and inspiration.
So now how do we preserve these time-honored traditions and ethics of the traditional family company to the world in which we live. After all, there are downsides of family companies. There are the succession issues and often a desire to “keep the business in the family” whether or not there is someone capable and competent within the family to do so.
And that is where I think the “development” part of the family business topic comes into play. Family businesses can
So no matter how fast shipping changes, and in fact I would argue, the faster that shipping does change, the more relevant the values and ethics that a family business embodies remain. That we work for something larger than ourselves and that we work always mindful not to bring shame or dishonor to ourselves or the company is an important ethic that cannot be underestimated in today’s current environment.

5. Shipping has enjoyed the most extraordinary of markets in the last few years. Everyone has prospered in ways unimaginable for generations past. But that does not mean we have shifted into a new paradigm and that loss-making spot rates will never ail the industry ever again. Counter party risk has never been higher. So who do you want on the other side of your table? Someone who can walk away, who is simply a representative for a faceless conglomerate, or someone whose name and reputation is not just his or her own, but the hard work and sweat of generations before.
Visiting the ships, knowing your captains, chief engineers and crew, and keeping a hands-on approach is something that I think is valuable and should be preserved, especially in a business where ships are trading worldwide and
The shipping industry has a bit of what is often referred to as a “public relations” problem. In the United States, when I say I am in shipping, people often think I am referring to Federal Express! Without strong domestic contingencies, our industry is the scapegoat for government bureaucrats who face domestic pressures to take quick action because of environmental incidents or security breaches.
Of course, not all family businesses live up to this ideal. If you surf the web and type in “family businesses”, most of the hits that come up have to do with succession planning. But that’s not what family businesses should be about.

6. Recent years have been kind to shipping, as have the public equity markets. Using “other people’s money” has always given rise to the so-called “agency cost”. How do you align the interests of management with that of those who are putting up the money?
It was not a public company with investor scrutiny or pressure to deliver immediate and ever increasing earnings growth. Ours is a company that can plan for the future, making short-term sacrifices for long-term gains, and which has a heart and soul.
I am not saying that these values can only be preserved in a family business – these values can and should be preserved in whatever corporate form or ownership structure is chosen.