Board seat for public stockholders

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“BOARDS should reflect public float – Purisima,” was the title of a business story written by Kristyn Nika Lazo which appeared on December 14 in The Manila Times.

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The quote came from Finance Secretary Cesar Purisima, who must have observed how the boards of listed companies used the public investors to qualify them to also become public.

The report said it was not difficult for him to conclude the lack of representation of the public on the boards of listed companies.

After all, having been the chairman of SGV and Co. before joining the cabinet of the Arroyo administration, Mr. Purisima must be well-informed about listed companies. It is even safe to presume that he knows who the controlling stockholders of listed companies are.

Even without Purisima identifying who owns what in such and such a company, it is easy for the public to know who controls businesses in this country, particularly those who are the majority stockholders of companies whose shares – not necessarily the entire outstanding capital – are listed on the Philippine Stock Exchange (PSE).

Not yet public

However, to define companies as listed even if they own at least 10 percent of the outstanding capital stock is wrong. As Mr. Purisima correctly noted, the boards of these so-called listed companies have yet to reflect the 10 percent public ownership. He must have reviewed the compositions of the boards of a number of listed companies that pretend to be public.

Making the board public, however, is much easier to imagine and say than to implement it for a number of reasons. Mr. Purisima needs the assistance of the five-man regulatory body of the Securities and Exchange Commission (SEC) to define what the 10-percent minimum public ownership (MPO) really means. Is it accepting as gospel truth anything that the public ownership reports (POR) posted monthly by listed companies on the PSE website contain?

If Mr. Purisima were to judge listed companies by their POR, then he would easily be misled into believing that all of them are public. It is wrong for him to rely solely on these filings. Instead, he may want to dig deeper into the ownership profiles of listed companies by identifying the beneficial owners of shares held by PCD Nominee Corp. which acts only as a stockholder on record.

Unnamed stockholders

For instance, how would Mr. Purisima know the true owners of 21.6 million shares, or 76.5 percent, in Central Azucarera de Tarlac Inc. held by PCD Nominee Corp. for Filipinos and 499,294 shares, or 1.77 percent, for foreigners?

As far as the public investors are concerned, PCD Nominee acts only as a stockholder on record stockholder for the beneficial owners of listed shares. It even identified in the list of CAT’s top 100 stockholders BDO Securities Corp. as holder of 20.172 million CAT shares, or 71.395 percent. Does this make said stockbrokerage company the owner of such big block of CAT shares? If so, then such ownership should have ousted the Lorenzos, who areW the new majority owners, from the seven-man board of the sugar central.
Who then are BDO Securities’ nominees? None, of course.

Mr. Purisima is right in seeking the representation of the public stockholders in the board of listed companies. His suggestion may not be enough for CAT and other listed companies to become public but it would be a good start in allowing investors outside the majority to participate in charting corporate growth.

SEC’s turf

As the securities industry regulator, the SEC, led by Chairperson Teresita Herbosa may want to adopt the suggestion of Mr. Purisima. Anyway, there would be no need for new rules to require listed companies to elect the nominees of the public to their boards.

After all, if the public investors really own at least 10 percent of outstanding common shares, they should be allowed to vote their own nominee entitled to the boards. SEC officials to make Mr. Purisima’s suggestion a reality.

The SEC live up to its assigned task as a regulatory agency by taking up Mr. Purisima’s challenge to them to make truly public the boards of listed companies. It is about time its officials start digging into the ownerships of listed shares by requiring the full disclosure of the identities of corporate stockholders including offshore companies that are listed as significant owners.

Full disclosure of material facts is what the public need to be able to chart their stock investments to know if any of their placements is making them win.

esdperez@gmail.com.

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