Jaime Zobel de Ayala on the ‘Ayala way of doing things’

Unarguably a paragon among corporate executives, Jaime Augusto Zobel de Ayala II is often said to be to the manner and hierarchy born, albeit trained in exceedingly rigorous manner as to eventually merit his current position as president and co-vice chairman of Ayala Corporation.

Presumably, the commanding view from his office at the 35th floor of Tower One on Ayala Avenue reminds him daily of the scope of vision and pro-active business conduct that the storied House of Ayala, now known as the Ayala Group of Companies, has translated into concrete form through the decades.

Below his command post sprawls the central business district of Makati, a city that the far-seeing Zobel de Ayalas jumpstarted half a century ago, and continues to nourish and nurture through constantly evolving shapes and forms.

The strength of tradition remains, however, as fundamental a fountainhead as the essence of sustained captainship of finance and industry with which the Ayala Corporation has become synonymous, let alone turned into an acknowledged model for our times.

At the core of the empire are a paramount vision, a pioneering spirit balanced by conservatism, and perhaps most importantly, that ingredient long acknowledged to characterize the Zobel de Ayalas’ way of doing business – integrity.

Jaime Augusto Zobel de Ayala II, or JAZA as he is known in the company, shares his view on the subject.

"Integrity means adhering to a core set of values that you have defined for yourself. Having integrity means living by the principles that you have set out to live by. And that’s the hard part. It’s one thing to espouse principles, but another thing to live up to them. That’s where integrity comes in."

Integrity is of course recognized as more of an individual trait that may or may not entirely envelop a company in its business conduct. There is still a leap and a bound, and then some, before personal integrity is successfully converted, within a business entity, into full adherence to corporate ethics.

"Essentially, corporate ethics is an integral component of a corporation’s reason for being," Jaime Augusto continues. "It’s the basis for the way you behave, the way you work. It’s the foundation for the values which the corporation stands by, for its character and its role in the community, for the vision that sets the parameters within which a corporation works. All of this is intertwined with the whole world of ethics, this value system that drives an organization."

Does this personal view correspond with the company’s own?

"Very much so," he replies in his usual genial manner. "Personally, I would feel uncomfortable in a company that does not work along the same ethical lines that I would like to live by. At the same time, it’s an issue that I’d like to make clear internally too, because I would not like employees to find themselves in an ambiguous situation, where they’re not clear on what the company stands for. So it’s a two-way street. When it’s clear what it is the company stands for, it helps define everything for the executives and the employees."

The Ayala Way Of Doing Things

Most successful companies are known to live by the now-popular vision and mission statements, which are in turn backed up by codes of conduct that officers and employees alike take pains to know by heart. With Ayala Corporation, the subject of ethical considerations has been defined and re-defined through the years, so that these have become the very rationale for its existence, as well the source of its distinctive culture.

Jaime Augusto recalls the time when Ayala Corp. took the trouble of pinpointing the core values behind what had already been accepted as a company slogan.

"There is a value structure that we try to live by. Ayala as you know has been around for quite a while, and to some extent, there has always been a kind of belief in an ‘Ayala way of doing things.’ We kept saying and believing that, but we never really defined it, so one day, back in 1993, we decided maybe we should define it, rather than just assume it’s there.

"So what we did was an unusual thing. Rather than do a top-down approach on this, we did a bottom-up, and we took all the employees and put a structure in place for them to be able to define it. We said, ‘Help us define what it is, this intangible that you call the Ayala way of doing things.’ So we did a bottom-up approach, and essentially it finally got distilled to five core values which we were very comfortable with, as a definition of what was important to Ayala.

"The first core value was integrity and the primacy of the person. Another was the dignity of work. The third was pride in excellence. The fourth was commitment to national development. And the fifth was concern for others.

"These are not ethics in and of themselves, but a value structure that is driven by certain ethical standards. It’s the way we try to create shareholder value, which fundamentally is our main reason for being. Within that element of creating shareholder value, we try to live by those five core values that are in a way inextricably linked."

A Value Structure As Building Blocks

On a personal level, Jaime Augusto’s early training involved initial cognizance of the primacy of ethical conduct. He believes that while it is important to get a headstart in this area of human development, reinforcement can and should happen during one’s period of maturation through involvement in institutions other than home, family, religion and school.

"Much of the core foundation of ethics goes back to your own upbringing. You can have a fairly good feel of individuals by their background, their reputation, the way they behaved in the past, their educational structure, their beliefs. And it gives you a good barometer of the way they’ll behave. So, fundamentally, I’d say that a lot of these are developed early on.

"However, in the same breath I’d like to add that a lot of these do get reinforced later on by the institutions you become a part of. It can get broken down, disseminated or strengthened, depending on the kinds of institutions you work with. These institutions you become associated with – in your schooling, and then in your work environment – do reinforce that value structure. I guess it’s a kind of building-block process that takes place."

Does this value structure also have to adapt to the socio-political environment as one rises up the corporate ladder?

"As much as possible, a value structure should be solid. It should not waver depending on the environment. This is something Ayala has tried to practice over time.

"I do believe that the institutional foundations of the country are still in the process of maturing. These foundations are not yet strong in many fronts. So, one has to be even stronger in the ethical and values foundations that you have in the corporate setting, because they have to be able to withstand a looseness in the surroundings. There is even more reason to have a strong set of values, because they’re constantly being tested in an environment like ours. Otherwise you may end up being as loose as the environment around you. And that, ultimately I believe, spells disaster for a corporation.

"I think corporations succeed not so much by their financial acumen or affinity with the field. It is basically a measure of trust that you build with your constituency, the people who buy your products and services. And trust is built when the people know what you stand for. When people feel you’re malleable, that you move with the wind with respect to values and ethics, then that trust breaks down. You may win a couple of battles here and there, but in the end, if you lose your constituency’s trust, then you’re not adding value to the institution.

"Here in Ayala, we’ve been a prime believer through the years that building trust is a core component of how we want to be regarded."

Sticking To Principles

Jaime Augusto is also of the firm opinion that a code of ethics should govern the way one behaves in whatever country one finds himself working in.

"As an institution and as individuals," he stresses, "if you believe in certain things, it should not matter where you are. At times there may be a conflict between your desire to follow a set of rules and procedures and the value systems in the environment you find yourself in. I can see that dilemma happening. But success comes by sticking to principles.

"Depending on a value structure is distinct from having to be flexible in the business environment. While I think that one should be a little bit nimble and open to change, that is a different issue altogether. Values are the core of what makes a company the way it is, and I believe these should resist any change of circumstance.

"There are certain parameters that govern competition in any environment. I am a big believer in the institutional foundations of justice and the rule of law. These define the way one conducts business, and are incredibly important in creating the kind of atmosphere that would result in an economic environment that would augur well for the country and for the consumers in the end. So those foundations should not be played around with.

"Now, within those parameters, one still has to be imaginative, nimble, and competitive, and be ready and willing to change depending on circumstances. Whenever it’s called for, one should think differently, put himself in a different paradigm. One should not be too stolid or set in his ways. Otherwise, it’s a recipe for disaster, especially in this day and age when everything is moving so much more quickly.

"However, that should fall short of beginning to play around with the rules and regulations that govern behavior as defined by the laws of the country. And I think those are the parameters that our own code of ethics and our value system should indicate.

"The capitalist system has succeeded in adding value to a community of people precisely because of a set of rules that also govern the way it works. If you start allowing people to bribe others, for instance, then there is a misallocation of resources that won’t result in the capitalist system working for the betterment of society. The free-market model is one that should result in added value for our country. It can’t be the way the whole world viewed countries like ours, say, 20-30 years ago, when basic rules and regulations were bent by large corporations. That’s a misallocation of resources that would not augur well for the economic growth of the country, let alone the moral paradigm."

Leadership For The New Millennium

Voluble and articulate Jaime Augusto may be, but the transformation seems to happen only when he is drawn out to speak his mind. Otherwise he seems shy and naturally modest, preferring to listen, smile and banter along. Anyone in conversation with him becomes easily convinced, however, of his sincere interest and concentration, and one almost hears his mental gears clicking effortlessly as he stays focused on whatever subject comes up.

He strikes you as the ideal corporate executive for the new millennium – aware of everything happening around him, extremely well-informed through good reading habits, and earnestly impassioned when it comes to causes and issues that colleagues suffering from tunnel vision would probably gloss over.

Tailor-fit Jaime Augusto obviously is to lead the Ayala Group of Companies into the far future. Typical text from an Ayala Corporation Annual Report bears this out. An introductory paragraph speaks of transformation in this wise:

"Ayala thrives on purposeful change. Far from being content to endure and survive whatever crises may arise, Ayala continually forges ahead, priming its strategies and anticipating the demands of tomorrow – a tomorrow that carries with it certain imperatives and key aspects that will define the economy and the community of the new millennium. Ayala believes that the seeds of these aspects are inherent in the Filipino culture. And, for the country to make the vital transition from natural ability to global capability, these seeds need only to be nurtured and developed. It is this essential evolution that will enable Ayala, not just to move into – but to shape, build, and create – the future."

With its manifold interests in banking, insurance, real estate and hotels, telecommunications, food, electronics and information technology, automotive, infrastructure, and international operations, the Ayala Group of Companies has long been acknowledged as the leading Philippine conglomerate.

That it is assured of quality leadership in the years to come is easily assumed upon hearing the 42-year-old Ayala Corp. president expound on his views on the past, present and future.

"The world is moving toward an increasingly transparent system of accountability. For a country to grow, you have to have access to capital markets, which are beginning to be judged by similar rules, whether you work in Europe or Asia, or anywhere. A set of rules has to govern a globalized environment where money flows quickly from one system to another. And if you don’t play by those rules, then you will miss out on that movement of funds. Since information is now moving so quickly, and barriers are coming down, there is an overarching set of rules beginning to govern the way capital is attracted to a given entity. In any kind of environment, those rules are increasingly becoming standardized, and so it really no longer matters where you do business.

Jaime Augusto acknowledges, however, that there are realities in the Philippine environment which make it necessary to apply even stronger measures for strengthening a business institution.

"There is some tension in the Philippine situation, I must admit, but it is a kind of tension one has to live with.

"It is important that the process of institution-building continues. While the institutions remain weak, there will be a tension between a global standard – a standard like, say, a corporation like Ayala would like to aspire to and move toward – and the environment one faces. That’s the reality. It’s really a bit of a challenge, I must admit. Challenge is a strong word, but maybe it’s appropriate.

"The dilemma is whether you stick to the standard that you believe in, irrespective of the lack of institutional support you sometimes receive within the framework that defines the territory in which you compete.

"As for our company, we would like to see the Ayala of the future as a company with Filipino roots but which measures itself along global standards."

Commitment To National Development

Should ethical conduct be deemed as part and parcel of corporate responsibility with regard to nation-building?

"A corporation is an organism, an entity, that is a very important component in society. Corporations must be a part of the value structure that gives strength to society rather than weakens it. And because of the access they have to funds, because of the number of people that work with them, because of their influence on society, they do have the responsibility of helping create the kind of environment that would be positive.

"In developed countries, institutional support is already there, coming from many sectors of society, as well as from the government. And the corporation is left with just one task: to create value for shareholders. That’s its reason for being. I believe that in developing countries such as ours, there is a broader responsibility that corporations must take.

"I will give you the reasons why. Number one, in countries like ours, corporations, particularly the larger ones, have access to resources, to technology, to educated manpower in more ways than other institutions.

"Corporations have in many ways a distinct advantage in being able to pool a small amount of what little there is of capital, of educated people, of the technology, to serve a corporate need. Since you have access to that broader capital, be it manpower or monetary, I do believe that if the foundations are not yet there to provide that equal opportunity of access throughout the country, you do have a broader responsibility to help out in some way.

"If the government could cover all the needs of society, then I would say you move toward your natural goal. But I don’t think that’s the case in countries like ours. In order to build trust, and in order to participate in and contribute to a broader community, you have to go beyond the shareholder value concept. It means partly getting involved in areas that are not your traditional constituency.

"Now, how do you define that? It’s a gray area. There are no clear-cut rules. Defining it internally is a matter of continuing to build trust, becoming part of a society and living in it in a broader sense, and not just providing products and services for financial gain.

"Among our core values is commitment to national development. And so we try to encourage it in broader ways. We encourage volunteerism within the corporation. There are people with skills that can be shared outside the corporation. And we do participate in NGO work all over the country. I do believe that corporations ought to have a greater sense of responsibility."

Toward A Broader Responsibility

Ayala Corporation’s commitment to social development is carried out primarily by the Ayala Foundation, Inc., which supports programs in the arts and culture, community development, and entrepreneurship training, apart from actively implementing programs geared toward support for children and the promotion and enhancement of civil society.

Together with his father, Don Jaime Zobel de Ayala, the company chairman, and younger brother Fernando, co-vice chairman, Jaime Augusto takes a direct hand in manifesting the broader responsibility that has been a hallmark of Ayala’s corporate culture.

"I have been reading in the foreign press that even in developed countries, corporations are beginning to understand this. It’s something new for them. But it’s not new here. For example, there’s more emphasis now on the environment than on the corporation’s job to obtain profit for shareholders. There are core issues with respect to the environment, with respect to standards of living, that are now important.

"Such issues used to receive less emphasis in developed countries, where there is less social friction, and where governments usually find ways to channel resources coming from corporations, say, through taxes. These are given back to help the broader population, in an effective way, or as effective as you’d find in any modern system.

"In our type of environment, resources are limited, and there is some concentration of wealth around the corporate sector because of its ability to attract the best minds, to attract technology, and to use resources for offering products and services in a more efficient way.

"That’s not a bad thing, but I believe that corporations have a broader responsibility while a country is developing, if only because they do have access to resources. So I feel the need is more acute here. It’s been happening in a different way abroad only because in the past, shareholders demanded that the leaders of publicly held companies do not get involved in an area that has nothing to do with their investment. They say, ‘Look, if you want to spend on whatever, on saving the whales, then you give me the money and I’ll decide.’ But I’m exaggerating.

"It’s a tricky issue in developed countries. Your mandate as a leader, as a CEO, is different. Here, I do believe, and I’ll argue this openly, there has to be a broader commitment to participating in a community and to building trust. And you cannot do that just by focusing on profit.

"Philanthropy in the bigger, broader sense of corporate responsibility must be part of the make-up of corporations in the Philippines. How you define it is left to the leadership, but it must go beyond the shareholder value goal, because by creating trust, you also create value for your environment."

Areas Of Social Concern

On the matter of philanthropy, we ask Jaime Augusto to identify the major areas of concern where Ayala Corporation has shown a strong commitment.

"Let me start with education, which is always important. The only way for the country to progress is for the basic educational system to move forward. There is no way for Ayala to address all the needs of the country, but we feel that we have to do something to contribute in this field in a significant way.

"So we decided to focus on one specific area, which is to establish CENTEX or Centers of Excellence at the primary level – just to help, so we can allow some children with ability, but would not have the oppportunity given the circumstances, to have that chance to develop.

"We’re involved in scholarships. We support local educational institutions by establishing chairs. So there is a broader commitment to education that all of us at the top of the company fundamentally believe in.

"The second area is I guess another personal thing for me as well as my father – it has to do with the environment. We have been quite involved in supporting the World Wildlife Fund, which is an institution that is respected around the world. And we want to help the country address its many environmental concerns. I believe that part of the country’s core strength is its environment. It’s something that unfortunately is not realized until maybe it’s too late. Our country has tremendous beauty, and that beauty can be translated into so many positive ways, tourism and the like. So we’re involved in the environmental issue, mainly on the marine side. We give it some support, and try to increase similar awareness in the corporate sector.

"The third area of concern is the youth sector, which is partly linked to education. The future of the country lies in the youth, so our focus is on trying to provide some basis for leadership in the future. Our youth is a huge sector of the population, increasingly so, but leadership has been lacking in our country, and by leadership I don’t mean just getting good grades. So we have taken time off to contribute resources, gather potential leaders of the country, bring them together so they can build unity among themselves, as peers. Because ultimately, that’s part of the game. You must have access to each other. So we give them some foundation in leadership that will help them make a difference in the country.

"So those are the three areas where we exercise corporate responsibility, in the main: education, the environment, and the youth sector."

Defining The Value Structure

We ask Jaime Augusto how the "Ayala way of doing things" can serve as a corporate model in convincing other corporations to keep abreast of rapid changes in the international business environment.

"We are living in a global environment where people are being judged increasingly by universal standards. The ability of people up in Scotland to get information about your corporation in the Philippines is equal to that of the person living across the street from you. And capital is going to be an important element in how one grows as an institution.

"As capital becomes more mobile, and information becomes more global, there is a chance to define broader universal standards. Because of the Internet and the way information moves, large multilateral institutions are able to set the tone across the world in a more defined way. There is a move toward a more universal understanding when it comes to accepted modes of behavior. If a country or its corporations refuse to accept that and refuse to adjust, then you become a pariah on the world stage. Countries that do not conform will be left out. Everyone has to understand what those forces are and move as quickly as possible to adjust to them and stay ahead in the game. You have to make yourself part of that global environment if you are to compete successfully. Those who decide that it’s not the way for them will lose out in the battle to attract capital. They will not be successful as a corporation.

"With Ayala, we try to remain solid, irrespective of the kind of environment we find ourselves in. But there is a bit of a dilemma. The leadership of our country sets the tone, precisely because our institutions are weak. Unfortunately, there is an inordinate amount of emphasis on leadership to itself define what the ethical standards are. It should not be that way. If we had strong institutions, there will be no need for the leader to arrive at the definition. It can simply ask for reinforcement. Unfortunately, we often go through this seesaw of leaders having to define it themselves.

"And the corporate sector, again unfortunately, is by nature a malleable entity that adjusts to circumstances. So there is this wavering that takes place. Within our setting, you have to create a clear foundation, irrespective of that seesaw. Ideally, over the long term, it has to be the institution to define the value structure, and the leadership can just strengthen it."

Given his station, and singular opportunity to lead where others may follow, in what direction would he forge ahead? His final reply is typically modest. But there’s no doubting the determination to serve as a paragon for ethical behavior and corporate responsibility.

"I think the best one can do is to set an example. If you are a large institution, you are looked upon as an example. That is part of the responsibility that comes with growth. In the end, people will judge the way you behave. If people see that you are successful and can move forward while adhering to a certain kind of conduct, then I think that sets the tone for others to emulate. We do try to set up a path where our behavior leads to success, and we become an example for others."