BDO is not more public than others



BDO Unibank Inc. belongs to the SM group, which is owned by businessman Henry Sy Sr. and his family. Its definitive information statement (DIS) showed the bank has outstanding capital stock of 4.882 billion shares, divided into 4.367 billion common shares and 515 million preferred shares.

As the majority stockholders, the Sy family exercises total ownership control of BDO through various companies that they also own. These corporate stockholders have combined holdings of 2.284 billion common shares, or 52.29 percent of 4.367 billion outstanding common shares. These are SM Investments Corp. (SMIC), with 1.751 billion common shares, or 40.09 percent; Multi-Realty Development Corp., 291.513 million common shares; and Sybase Equity Investments Corp., 241.06 million common shares.

In addition, the Sy family also owns BDO’s 515 million outstanding voting preferred shares. These are held by Sybase Equity, 391.4 million preferred shares, or 76 percent of 515 million outstanding preferred shares; and SMIC, 123.6 million preferred shares, or 24 percent.

5 independent directors
When added, the Sy-owned 2.799 billion shares are equivalent to 57.333 percent of BDO’s 4.882 billion outstanding capital stock. With these holdings, the family elects 11 directors. Sy Sr., the family patriarch, is the 12th member but sits only as chairman emeritus.

How come the Sys control the entire board of BDO when they own only the equivalent of 57.333 percent of 4.882 billion outstanding capital stock?

A family’s power to choose all directors of a listed company is not impossible. In the case of BDO, the Sys also own BDO Securities Corp. (BSC), which, as of March 8, held 633.072 million common shares, or 12.97 percent, which when added to 57.33 percent equals 70.303 percent.

By getting the BSC-held shares votes, the Sys elect all of BDO’s regular directors and appoint five independent directors.

By the way, one of the five independent directors carries the distinct title of “lead independent director,” whatever this means to the bank and to the public.

As with all other listed companies, the question is, how independent are BDO’s independent directors when they share equally the bank’s executive compensation.

Executive compensation
From 2015 to 2017, the five highest paid executives of BDO Unibank are Nestor V. Tan, president; Walter C. Wassmer, and Jaime C. Yu, senior executive vice presidents; and Rolando C. Tanchanco and Lucy C. Dy, executive vice presidents.

Tan has been BDO president since 1998. The bank’s DIS showed he also is vice chairman of various subsidiaries such as BDO Leasing and Finance Inc., BDO Capital & Investment Corp., BDO Insurance Brokers Inc., BDO Life Assurance Holdings Corp., which is formerly Generali Pilipinas Life Assurance Co., BDO Private Bank Inc., BDO Remit (USA) Inc., and SM Keppel Land Inc.

In addition, Tan is also chairman of BDO Strategic Holdings Inc., One Network Bank, Inc. (a Rural Bank), BancNet, Philippine Dealings System Holdings Corp. and RBB Micro Finance Foundation.

In 2015, as a group, Tan and four other BDO executives received P170.75 million, of which P113.99 million was their salary and P56.76 million their bonus. The bank raised their pays in 2016 to P177.27 million, divided into salaries of P118.16 million and bonuses of P59.11 million.

With a little more than six months to complete 2017, BDO estimated the compensation of Tan and company at P184.36 million. This is divided into salaries of P122.89 million and bonuses of P61.47 million.

Due Diligencer’s take
If the public investors were to rely only on public ownership reports (POR) of listed companies, they would be misled into believing that BDO, like other listed companies, is more public than others.

As matter of fact, a POR does not paint the true ownership profile of what are supposed to be public companies because it is based only on outstanding common shares.

Where are BDO’s 515 million voting preferred shares?

As of March 31, the Sys attributed the ownership of 1.961 billion common shares, or 44.91 percent, to BDO’s public stockholders. As the owners, the Sys control 2.383 billion common shares, or 54.58 percent, while the rest of outstanding common shares are owned by company insiders such as directors and executives.

By the way, the true measure of how much the president of a company makes is not shown either in annual reports or DIS. The public investors should read the report of the Bureau of Internal Revenue on the tax payments of the bank’s top executives.

Unfortunately, the BIR lists only the top 500 income taxpayers and only for taxable year 2014. How come their taxable income is missing? Just asking.


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