TWO Singaporean shareholders of a canned tuna manufacturer based in General Santos City have called for better corporate governance and transparency in the Philippines after earlier exposing alleged corporate wrongdoings in Alliance Select Foods International Inc.
Dr. Albert Hong and Hedy Chua, along with other minority shareholders, have engaged officials of Alliance Select in a series of legal battles, the latest of which was to file a petition for review of the dismissal by the Pasig Regional Trial Court (RTC) of their case against the listed firm.
In August, the minority shareholders had asked the Pasig RTC to restrain Alliance Select from carrying out its planned stock rights offering of P1 billion before its annual stockholders meeting scheduled in October, but their petition was denied by the court.
The court said the group “failed to show that it had a clear and unmistakable right that was or would be violated by the conduct of annual stockholders’ meeting after the stock rights offering.”
Chua said the apparent failure of regulators to enforce existing laws protecting corporate investors in a timely manner only puts the country in a negative light, especially among potential foreign investors.
“What this investment has shown us is that the levels of corporate governance and transparency in the Philippines are not what investors would expect. Too much is left to the discretion of management, and the levels of regulatory oversight and enforcement have been disappointing. The pace of seeking redress through the courts is a huge challenge and parties can use all sorts of measures that effectively delay the process,” Chua says.
Chua says their personal experience highlights some of the weaknesses that need to be addressed if the country is to create a competitive business environment that can attract foreign investments.
“Regulations, to be meaningfully effective, need to have teeth,” Chua says. “We would welcome serious and committed [efforts]in ensuring compliance and enforcing the regulations, imposing punitive measures for breaches and violations of the regulations and laws; they should be more vigilant and active in protecting shareholders and the investing public to ensure that listed companies especially are accountable to their shareholders and the public,” she adds.
“Corporate laws and by-laws should be fair, proper and aligned with SEC [Securities and Exchange Commission] regulations and followed by the board and management. Directors should bear more responsibility for breaches and violations,” she continued.
“Regulators should encourage regulatory frameworks for prudent and effective controls to promote transparency and accountability,” Chua says.
While it would be easy to write off their investment in Alliance as a one-time loss, Hong says letting these abuses go unpunished would only perpetuate and encourage bad corporate practices in the country to the detriment of small shareholders and ultimately the economy.
“We believe that governance, transparency and integrity should know no borders and that no one should be above accountability for wrongdoing. Viewed in that way, we had no choice but to seek legal redress, as other alternative ways were always resisted. Being in the minority, the majority’s dismissal of our requests for information, calls for transparency and questions over related party transactions were effectively overruled at every turn,” Hong said.
Nonetheless, both Hong and Chua still hold out hope for the Philippines eventually becoming a safe and fair investment destination especially for foreign businessmen.
“I’m certain that the benefits of transparency and good governance are firmly grasped and sincerely advocated in the Philippines by most of those that talk about it. But there remains a gap between the policy and the practice,” says Hong.
“Only if this gap is closed can the benefits be realized to its full potential. Achieving good standards of corporate governance and transparency in companies can only be done in the context of a concerted commitment to ensure their implementation and compliance.
Government agencies, the legal system and private regulators each have a major role in ensuring that companies behave and act responsibly and honestly to their shareholders and the investing public, and should be willing to enforce compliance to these laws and regulations,” Hong says.