FAIR EXCHANGE: PSE President Cayetano Paderanga

The film analogy begs the question, Is fact stranger than fiction? The BW scandal of several years back, the earlier failed corporate raid attempted on PLDT and Bonifacio Land by the Robinson’s Group, the currently controversial acquisition of the SSS shares of Equitable-PCIB by the SM/Banco de Oro Group–it seems we’ll never be short of news, scandals, shenani-gans and cases of corporate intrigues.

As a result, a segment of the general populace views the Exchange as a monolithic block of suits, a reflection of the more unsavory elements of the business community, money-grabbing and manipulating share prices with unscrupulous abandon, or regaling in their own esoteric jargon, world of figures and profit taking. And to top all this, given the intensity with which the coveted seat of president of the Stock Exchange was jockeyed for in times past, it’s a quasi-political snake pit, with factionalism and one-upmanship practiced on a regular basis. This all drives home just how far Dr. Paderanga has to go to restore a modicum of respect to the Exchange.

Unlike in Western economies and in some of the more sophisticated asean countries, it seems that the business of the Philippine Stock Exchange directly touches the lives of only a few. Institutional investors and those from the higher income bracket trade regularly; but other than these two groupings, we don’t seem to have the kind of broad cross sectional participation that the nasdaq and other bourses enjoy.

This is part of the challenge now facing Dr. Paderanga. While the activities of the listed companies do impinge upon the lives of the general population–given the scope and breadth of their activities–the notion of the stock market being a viable place to "park" one’s hard-earned cash and savings, whether it be that of ocw’s, farmers, taxi or bus drivers, is still a long way away.

Dr. Paderanga is well aware of the task at hand. "Within the pse Board, the difference of opinion can be very intense. As president, one of the priorities is to create a mission statement and project a vision that can transcend this difference of opinion. As far as the day-to-day and the character of the institution are concerned, we’ve created a game plan that encompasses the present to the future, the medium-to the long-term. While it may not be that different from what was the intent and plan of the presidents preceding me, these objectives have to be reaffirmed and, if necessary, modified, given the circumstances now facing us."

He points out that the challenges are not solely the Exchange’s. "It’s imperative to note that the Exchange only plays a part of the whole picture. The banking industry, the regulatory institutions, the corporations themselves...we’re all part of the scenario by which resources are mobilized within this economy. Whether one is talking about the market community and climate, or the presence of a level playing field, the Exchange can serve as a means for transparency to be maintained, for information to be available for investment decision-making. There is, however, a limit to the kind of information that can be communicated by the Exchange. We can’t guarantee everything or promise full information; it’s in the nature of the ‘beast’ that things like premature disclosure can sour deal-making, and so some activities will always be shrouded in secrecy until the opportune time."

The series of scandals and controversies involving stocks has, fairly or not, given the Stock Exchange a bad boy image. While acknowledging the situation, the former economics professor explains, "When one speaks of corporate shenanigans, while the Exchange can be the conduit by which these activities eventually roost and are discovered, these may not be our direct responsibility solely. The sec, the Department of Justice, they are the ones empowered with true investigative powers and can mete appropriate penalties.

"What happens though is that the Exchange is the medium by which these activities come to light or are detected, and they in turn throw a bad light on the Exchange itself. That’s where the Code of Governance, the Security Regulations Code come into play, they have to be enforced consistently and uniformly. And yet, we’ve seen so often how rules do not guarantee desired results" as a knowing, rueful smile forms on the lips of Dr. Paderanga. He may have come from academic ivory towers, but he’s been in the game long enough to have experienced numerous reality checks.

Inevitably, the specter of the coming elections would affect the business environment, and the Exchange. The business sector provides much-needed muscle for the campaign of any aspiring presidential hopeful. This early, there have already been overtures from the different camps to present a comprehensive, cohesive program to the members of the Exchange, and hopefully elicit the kind of support that moves mountains–and campaigns.

Dr. Paderanga was with the Asian Development Bank back in 2001, as Executive Director for the Philippines, Pakistan, Maldives, Marshall Islands, Mongolia and Kazakhtan. This experience allows him special insights on the Asian situation. He relates, "The Maldives are a bunch of islands, atolls, dependent on fishing and tourism; but they’ve only had something like three Presidents since 1954, so there’s a stability of policy that has to be envied. Thanks to foreign investments in the tourism and service sectors, from a per capita income of some $300 in 1981, they now stand at almost $3,000. Here in the Philippines, we’re operating at just below $1,000."

Government and politics inevitably affect the business of business, including the stock market. "The issue of national leadership is a key one for the future of our country. The leader has to possess the ability to paint a vision of our future–a vision that’s cohesive, realistic, difficult as well as easy. It has to be explained in plain terms — the sacrifices that have to be made, the priorities established, the rewards for achieving it... all this and the actions to be taken have to be properly presented. It’s inescapable that this leader will do this against a backdrop of general disappointment in the Government, that we’re jealous of our rights and oftentimes resist the space the Government needs to carry out a national objective."

Besides the pse position, Dr. Paderanga is also President and ceo of CIBI Information, Inc. a credit information data base, and is Chairman of the Institute for Development and Econometric Analysis, Inc. (idea). He jogs regularly around the Ateneo campus, while he still holds tenure as a professor of economics at the University of the Philippines.

He obtained his doctorate in Economics in 1979 from Stanford University. Being the goal-driven kind of person he is, he confessed that while jogging is something he really enjoys as a means to recharge and refresh one’s outlook on life, he avoids the treadmill and has to jog outdoors, "That way, you can always put a building or even a tree as the objective of what you have to reach, before slackening the pace."

With what spare time he can muster, he avidly peruses history books and biographies, as well as the expected business tomes. His current bedside reading material is The Seven Storey Tower, written by a professor from a small university in Massachusetts, whuch examines the role of myths as a way to forge identity and purpose in modern society.

Watching his children play their computer games of WWF Wrestling, Grand Theft Auto (Dr. Paderanga hates this one), NBA Live and Street, he was struck by the analogy of how his kids loved the Street version of basketball, and that did reflect on one of the inherent traits of the Filipinos, and our weakness.

"Street is basically no rules, all flash dunks and spectacle. The basics are no longer at a premium; and unfortunately, that is to an extent our national character. We sometimes forget the basics, the simple things that, in fact, are really crucial and important. We rely instead on appearances, on making palabas or sindak, and something is lost in the process–the fundamentals, the foundation for making this country a true haven for foreign investors."

And that’s why, for Dr. Cayetano Paderanga, whether one is talking about the Stock Exchange or the country as a whole, it’s not a matter of finding a new carrot or playing a new game. It’s more rediscovering what fundamentals we’ve missed, and excelling at them with newfound passion and commitment.