Board Perspectives
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team play - why board diversity makes good business sense
For Jaime Augusto Zobel de Ayala, chairman of Ayala Corporation, a diverse board is a crucial element of effective leadership, especially in these uncertain times.
According to Jaime Augusto Zobel de Ayala, chairman of Ayala Corporation in the Philippines, respected board member of Temasek Holdings, and self-described introvert – the rapid and unpredictable changes roiling the world today present corporate leaders with an opportunity to do better, not just by the companies they lead, but also by the greater communities in which they do business.
In such times, an important leadership trait, he insists, is the ability to recognise and marshal a range of abilities and strengths from the corporate ranks – be it gender, age, background, experience – so that different and diverse viewpoints can be put on the table and sound commercial decisions made quickly and effectively.
For the Manila-based Harvard alumnus, if the past few years have taught us anything, it is that companies and their leaders also need to be more sensitive to the effects of their business operations on the community, country and environment and to be better corporate citizens, at the same time they must balance the need to be, as he puts it, “a little bit hard-nosed” about the business.
The key, Mr Zobel says, referencing a quote from Singapore’s first prime minister, Lee Kuan Yew, is to keep moving forward, adjusting to the times and staying relevant, even at the cost of making mistakes along the way.
Here, the Council for Board Diversity sat down with Mr Zobel – who was recognised as a United Nations Sustainable Development Goals Pioneer in 2017 for his work in sustainable business strategy and operations – to gain his insights into effective leadership and how this pillar of corporate governance intersects with more recent notions of gender equality and diversity.
What is your personal leadership style?
I am a great believer in the idea that there is no specific leadership type. You’ve got to encourage different characteristics, different skill sets, and also people who are suited to the issues and the position of the industry at that point in time.
I’m an introvert and to a certain extent, I get my strength from being alone. But in life, you have to interact, so I like to empower individuals and work in teams. The catalytic quality of bringing a group of people together and solving a problem together is very powerful.
Some of my best ideas have come in dialogue with others. And sometimes that dialogue has to be in an informal setting rather than a formal one. If the setting is too structured, people tend to clam up and be a little bit closed.
But when you get a crisis, as we’ve had in the last couple of years, that style has to shift. You have to lead in a tighter way. There has to be an immediacy in decision-making even if you have imperfect information.
But generally I like to work with teams, I like to empower people. And I like to work with individuals who have a sense of independence. And I like that the smarter they are the better. And, and I like people who challenge me as well in my thinking. And that’s the way I like to work.
That catalytic quality, particularly at board level, is so important isn’t it?
I don’t think there’s any industry that stays static within itself, so it’s important to have on the board some members that are comfortable with change because change is just the fundamental paradigm that we’re dealing with now. At the same time, you have to have board members that are interested in the long-term success of the institution alongside short-term thinkers to give a sense of immediacy to the way decisions are made. If you can get that combustion to take place, and if as a chairman, or as a leader of that board you can create a dynamic tension that is constructive, and that allows people of different ages and genders to think out of the box and to speak freely. But more than anything, you have to create an environment that is open to listening to new ideas.
But achieving that is not easy. In the fast-changing world we’re in now, where businesses change overnight, people become irrelevant so fast. As a leader, you have to create an environment at the board level that helps managers see different angles to a situation. You can’t predict what the right answer is, so, at the very least, if you can get ideas on the table, you hope that creativity and independent thinking will allow the best possible answer to come out of any given situation.
That balancing act becomes even more tricky when we encounter a black swan event like COVID-19.
Global forces shift so quickly today. Black swans, global pandemics, energy crisis, and geo-political tensions all come into play. So, you really need to be quite agile in the way you move and the way you adjust. I have had to change my leadership style. COVID-19 was a crisis that had no playbook.
So, what is the ideal board mix?
You can’t get perfect boards all the time, but you need a board that is comfortable with judiciously taking up some risks to test out new ideas and projects. There will be failures, so there has to be some tolerance for that as well. If one becomes too intolerant, then nobody takes risks. But that risk-taking has to take place within the context of making sure that your balance sheets stay strong, and you never put the company in danger.
Does gender diversity bring something different to boardroom discussions?
You need to look at diversity in its broadest context to include not just genders but also age and experience. That said, generally, I find women have more empathy, and are better at communicating and building consensus. They bring a different sensibility to any solution. Males have a different style about them. Bringing these two dynamics together and making them work so that people feel comfortable with each other can lead to the kind of combustion you need to make the right decisions.
On the sustainability front, do you think it drives competition or strengthens cooperation?
Issues of climate change and inclusivity cannot be addressed by one individual or a company, or even a country. We need collaboration on a much bigger scale, with countries aligned on a common theme. And all of us in private institutions must get involved. Anything that encourages the private sector to address, through a for-profit model, the pain points we face in society is a sustainable economic model that will be good for the world and which will have a lasting value. I love the way capitalism is moving in that direction.
Clear link between board diversity and corporate performance