Media Recognition · May 18, 2018

Lloyd’s List: The Interview: Dr James Chao

Founder of Foremost Group and recipient of the Lloyd’s List Americas Lifetime Achievement Award explains his philosophy of education, life-time training and a commitment to always being the best

By Lambros Papaeconomou

IT WAS Dr James S.C. Chao who built Foremost Group as one of the most respected dry cargo shipping companies in the world, and who taught his youngest daughter Angela Chao the importance of striving to be the best.

Dr Chao still serves as honorary chairman, having removed himself from the company’s day-to-day operations.

Ms Chao, a Harvard-educated former investment banker, is now steering the helm of Foremost as its chairman and chief executive.

The company’s strategy is not to get big fast, but to organically grow in a “step function fashion”, and a virtuous cycle of knowing and serving all their key constituents.

Investing in people

According to Dr Chao, it all starts with how you treat, train and retain your crew on board.

“We are a shipping company and we value our [relationship with] crew members as very important. Every time a ship comes into a port in the Western Hemisphere, we send staff from our New York ofice to visit the ship.”

“Not only to just say hello. We stay there for one or two nights. We eat with them, live with them, work with them, talk with them, sing with them, plan our future with them.

“Our crew sees working for Foremost as their pride. They have the total privilege and freedom to join others, but once they come here they don’t want to leave.”

Ms Chao recalls that when Foremost celebrated its 50th anniversary in 2014, her father put in place a special recognition programme for all their crew members and staff that had been with the company for 10, 15 and 20 years.

“We had almost 200 people.”

Tailor-made ships

The second key constituent is the ships themselves. Foremost does not buy secondhand ships, choosing instead to order newbuilding vessels at dedicated shipyards in Japan and China. They are built according to upgraded specifications based on Foremost’s standards.

“Ordering newbuildings is not the cheapest way to go,” says Ms Chao.

“But for us, it is consistent with our corporate philosophy. We have a very small circle of first class charterers (the third key constituent) that we deal with, companies like MOL and Bunge. For us it is important that we maintain a consistent product and a very high level of service. Our charterers do not want to worry about offhire or underperformance.”

The company’s ships are tailor-made and they are also young since the company strives to keep the fleet modern. Foremost has operated a fleet with an average age of five years or less for the past 30 years.

Dr Chao proudly declares that when Foremost sells a ship, prospective buyers will waive the inspection and offer to buy the ship “as is where is”.

Bankers on board

The last but equally important constituent in the value chain is of course the bankers — although getting Financing for vessels that are typically tailor-made to charterers’ requirements is not difficult.

“When we build a ship we already have the business. Because of this we don’t need bank help. The bank will call us and say when you order a new ship don’t forget us,” says Dr Chao.

“They do this because they know we have a reliable business, so they want to join. Money-wise we don’t have to worry.”

Notwithstanding the financial prowess of Foremost Group, we are tempted to ask whether public companies with ambitions to grow bigger can challenge the status quo of privately-owned, family businesses in the industry.

“Although we feel very optimistic about the future, it is dangerous that there is so much public money, private money, hedge fund money coming in, because the numbers get so big,” says Ms Chao.

“It’s no longer companies ordering one or two ships at a time. Now shipyards are doing 10-ship orders and often to players that aren’t necessarily very prudent, and they are not doing in-house management.

“This is just a financial transaction for them, they are asset players and we find that very dangerous because as an industry we have such an incredible responsibility. Some 90% of world trade is carried by ships. We provide a very important service to the world and we always need to remember that we are a service industry. We are not here to just be financial asset players.”

Entrepreneurial spirit

Ms Chao confesses that she wanted to be a shipping entrepreneur ever since her father taught her the word “entrepreneur”. But she wants to make clear that that was her choice.

“I was the last of six daughters and my parents were very progressive and open-minded to encourage each one of us to find our own talents, to find our own interests, and all they told us is to be self-sufficient, not expect anything from them. Our gift and biggest and greatest inheritance from them was our education.”

Dr Chao and his late wife Ruth Mu-Lan Chu Chao always believed in the power of education.

He likes to say: “Regardless of how difficult life was, we never, ever, forgot the importance of education.”

It was the nautical education and training that allowed Dr Chao to become one of the youngest master mariners at the age of 29.

Having seen his six daughters graduating from prestigious universities and launching independent careers, Dr Chao spends much of his time on his substantial charitable work that is focused on helping higher education students in the United States and Asia.

Dr Chao will receive the 2018 Lloyd’s List Americas Lifetime Achievement Award on Wednesday March 23, 2018 in Houston.


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