Ayala‘s family affair sees no radical change for oldest company in RP

When Don Jaime Augusto de Ayala joined Ayala Corp. 49 years ago it was a conservatively run, low profile family company.

Over the last 22 years as chairman he oversaw the transformation of what was essentially a high-end property developer and banking company into one of the country’s most respected conglomerates.

In that time consolidated assets grew from P4.2 billion to P172 billion while the company’s market capitalization increased from P1.4 billion to over P120 billion.

Now the reins have been officially handed to his sons Jaime Augusto Zobel de Ayala II, 49, who replaces him as chairman and chief executive and Fernando, 48, who takes over as president and chief operating officer.

Although he turned over the day-to-day operations to his Harvard educated sons in 1995 it was not until April 7 that he called it a day, hugged his son Jaime at Ayala’s annual general meeting and said goodbye.

In a conference room on the 34th floor of its corporate headquarters overlooking the Makati business district, much of which is owned by Ayala, neither son sees any radical changes for the 172-year-old company.

"The challenge will be adjusting to the changing global dynamics," Jaime Augusto told AFP. "You can’t sit back and take things for granted especially in Southeast Asia.

"We need to build on what our father has done... building a business that is in tune with the times. That means looking for entrepreneurs or businesses we can invest in that will give us a return and carry us forward."

Ayala Corp. recently posted a consolidated net profit of P8.2 billion last year the highest in the history of the company.

Ayala Land, the country’s biggest property developer, reported a net profit of P3.6 billion for 2005 up 22 percent from the previous year.

Its banking arm, Bank of the Philippine Islands — the country’s largest bank in market capitalization and second in asset size, reported a net profit last year of P8.4 billion and expects to post a 10-percent increase this year.

The only part of the business that saw a decline in net profit was Globe Telecom which fell nine percent to P10.3 billion but with 12.4 million mobile subscribers it is one of the country’s leading mobile phone company.

Entrepreneurship is one of the keys to Ayala’s success and is seen in Globe Telecom. When Ayala took over the ailing telecoms company in 1994 it had no background in the telecoms sector.

After restructuring the company and putting in innovating managers Globe became profitable within five years and has been making money ever since.

"It wasn’t easy," Fernando says. "The first five years were very difficult. One of our strengths as a group is that we attract only the best people.

"We knew nothing about the telecoms industry when we moved into it. But we were able to put in place the right people who came up with innovating ideas like prepaid mobile phone text messaging. We are constantly developing new telecoms technologies and software.

"These factors helped change the telecoms industry fundamentally. But having said that we can’t take all the credit we did have some luck and a great deal of help from our partner Singapore Telecom."

Jaime Augusto said Ayala had built its reputation on trust and making "sound investments" that bring solid returns to shareholders.

"Trust is the key and it cuts across every aspect of what we do from our customers, staff, shareholders and partners," he said.

"Many foreign companies that want to invest in the Philippines talk to us first because of that trust.

"It is part of our corporate culture."

Twenty years ago Ayala made a conscious decision to share leadership with its partners.

"My father’s view was that we as a company should build solid relationships rather than have absolute control and those relationships have worked.

"Ayala has built up a great deal of trust and stability among its managers and workforce which enables us to plan for the long-term rather than short-term. That is one of our strengths as a group ... we can look forward."

Managers of the various Ayala core businesses such as telecoms, property banking and infrastructure have a great deal of latitude and are free to make decisions without constantly looking over their shoulders.

"We give our managers tremendous latitude," Jaime Augusto said.

"That is why we only bring in the best. Presidents of the various companies are real presidents in that they make key decisions ... we don’t try to second guess them." — AFP