With numerous exposes and scandals in recent years, good governance is seen to be the prescription to remedy the problems of abuse and corruption. Both government and the private sector have actively initiated efforts to promote good governance.
Many have acknowledged the value and virtues of good governance, adopted the concept and even incorporated it into their corporate policies and operating manuals. But sad to note, at the end of the day, many only pay lip service to good governance.
While aggressively holding others to account, many exempt themselves when put on the line. Double standards are often practiced by corporate personalities justifying their veiled actions when confronted; rationalization, stalling or disguise reasoning is offered for non-compliance. Reasons like confidentiality, privileged information or security are often heard. None, however, squarely confronts the issue of stockholder rights.
Transparency is the cornerstone of good governance!
Many, me included, have experienced the difficulty and frustration trying to exercise the basic rights of a stockholder to corporate information. These stockholder rights are clearly articulated in both the Corporation Code of the Philippines and the SEC Rules and Regulations. Yet, only a handful of good governance advocates actually comply with the requirement of the law.
Not even government agencies and their functionaries truly appreciate the importance to uphold the right of the stockholder to gain access to corporate information. When issues are brought to their attention, they are all too often lenient in their interpretation of board directors’ compliance obligations. They are very quick to accept the excuses offered by the accountable individuals and corporate representatives and yet, they do not offer any resolution to the concern. The burden of proof is placed on the stockholder to show good faith in his request; immediately assuming the stockholder’s request to have malicious intent (allowed reason for denial of access to corporate documents, under the law).
This leaves an independent stockholder frustrated and with no other recourse but to seek legal remedies to secure his basic right to corporate information. Few independent stockholders are in a financial position to consider this path. On the other hand, the responding accountable corporate personalities generously spend corporate funds to defend their position at the expense of the stockholder’s interest, which they claim to represent and protect.
The Securities and Exchange Commission (SEC), a key player in the promotion of good governance whose job is to protect and insure a level playing field in the securities market, is unfortunately soft in holding companies and their directors accountable on matters of transparency and observance of good governance practices, especially when it comes to defending stockholder’s right to corporate information.
Narrow regulatory compliance seems to be SEC personnel’s only concern when it comes to good governance. This posture has allowed many companies to stray from the SEC set objective, as an antidote to board director abuse and corporate corruption, to instill good governance practices in corporations and the securities market.
Although government offices, like SEC and the courts, subscribe to and may even champion principles of good governance, the majority of their officers and functionaries are still to internalize and appreciate the significance to society and economic growth the practice will contribute to the nation. The nuances of good governance are too often dismissed as trivial or petty by government enforcers. While there are exceptions, SEC personalities in the discharge of their duties to call corporations to account, sadly, do not uphold the ideals, objectives and spirit of good governance. They are still stuck in the past!
So to address the concern that good governance is merely paid lip service and to build on the momentum gained in promoting the practice of good governance, more particularly good corporate governance, a group of shareholders has banded to form the Shareholders Association of the Philippines (SharePHIL) with the expressed objective to guide investors, particularly the small or minority shareholders, on their rights, duties and obligations.
SharePHIL intends to help educate investors to promote fairness, transparency and good corporate governance as key to attracting more independent investors in local companies. With increased corporate transparency, along with better informed stockholders, SharePHIL believes that it will encourage better understanding and cooperation among shareholders, minimizing corporate disputes, and increasing trust and cooperation between management and shareholders.
SharePHIL, through education, will work to arm shareholders with the proper tools to participate more actively in shareholder meetings: to raise proper questions, to be more vigilant of their rights to level the playing field giving small people voice so that any Juan or Maria will have the confidence to invest in corporations. They, the small independent investors, can be a very significant contributor or a prime mover and engine of growth for our economy, as in the developed economies of the world.
On 27 June 2012, SharePHIL will be officially launched over lunch at Dusit Thani Manila in Makati City. Our Special Guest of Honor and Speaker for the occasion is Mr. David Gerald, the Founder, President and CEO of Securities Investors Association (Singapore) or “SIAS”. Mr. Gerald founded SIAS in 1999 to successfully contest the freezing of shares owned by 172,000 Singapore investors in Malaysian companies by the Malaysian Government.
Today, SIAS has about 70,000 members. SIAS, the voice of retail investors in Singapore, actively promotes investor education at all levels in the community, as well as undertakes investors rights programs. SIAS tracks annually the listed companies for their adherence to corporate governance practices. And together with analysts and fund managers, SIAS also tracks the transparency performance in listed companies and works closely with the financial journalist to keep the public informed.
The author is a member of the Board of Trustees of SharePHIL, Chair and President of BNL Management Corp., and former Administrator of the National Food Authority. Feedback at [email protected] For previous articles, please visit www.map.org.ph.