Dilution by issuance of voting preferred shares

Emeterio Sd. Perez

Emeterio Sd. Perez

Pays and perks. Globe Telecom Inc. projects the salaries of “all other officers as a group unnamed” to top P1 billion this year at P1.058 billion. In addition, it places the group’s pays and perks, or bonuses, this year at P679 million. As in the past, the total compensation of P1.737 billion may even hit P2 billion, as the actual payout typically exceeds estimates.

In a compensation filing, Globe said the group received P1.60 billion in 2013 – salaries, P976 million, bonuses, P624 million; and P1.366 billion in 2012 – salaries, P837 million, bonuses, P529 million.

Globe classifies its chief executive officer and four other top executives as “most highly compensated executive officers”. It named them in a filing as follows: Ernest L. Cu, president and CEO; Alberto M. Larrazabal, chief financial officer and treasurer; Rebecca V. Eclipse, head, office of strategy management; Gil B. Genio, head, business customer facing unit and president of Innove Communications Inc.; and Renato M. Jiano, head, human resources.

As a group, Globe estimated the pays and perks of Cu and company at P170 million – salaries, P88 million, bonuses, P82 million. It said the group received P158 million – salaries, P82 million, bonuses, P76 million – in 2013 and P142 million – salaries, P75 million, bonuses, P67 million – in 2012.

These figures translate to an average compensation of P34 million each in 2014; P31.60 million in 2013; and P28.40 million in 2012.

* * *

IF you go only by the number of outstanding common shares in deriving the 60-40 ratio of ownership in companies that should be controlled by Filipinos, then foreigners would end up as the majority stockholders of Globe Telecom Inc. Based on Globe’s 132.670 million outstanding common shares, the 85.885 million common shares owned by foreigners would be equivalent to 64.74 percent.

Would this make Globe a violator of the 40-percent foreign ownership limit since the telecom company is engaged in an industry that requires at least 60 percent Filipino ownership of outstanding common shares? The answer, of course, would be yes because, based on Globe’s own computation, foreigners control 64.74 percent of its outstanding common shares.

But then, the ownership profile that Globe reported in a recent filing contained not only common shares but also 158.515 million preferred shares which are all held by Asiacom Inc. and are voted by the Zobels, who are its majority owners, during the annual stockholders’ meeting and, more importantly in the election of the members of the board.

By including preferred shares in the computation, Globe becomes a Filipino-controlled corporation, diluting foreign ownership of 85.885 million shares to 29.49 percent of 291.185 million voting shares.

In the final tabulation of ownerships, Asiacom is at the top of the list with 158.515 million preferred shares, or 54.44 percent; Singapore Telecom International Pte. Ltd., 62.646 million common shares or 21.51 percent; Ayala Corp., 40.328 million common shares or 13.85 percent; and PCD Nominee Corp., which holds 23.231 million common shares, or 7.98 percent, for foreigners.

Long before the Supreme Court ruled in 2011 on the case involving foreign ownership in Philippine Long Distance Telephone Co., foreigners were already the majority or controlling stockholders of Globe’s common shares but their ownership was effectively diluted by the issuance of preferred shares.

The big difference, though, between PLDT’s preferred shares and those issued by Globe to the Ayala group is that the former were held by subscribers only as creditors and did not enjoy any voting rights in the election of directors.

On the other hand, the Zobels, thru the Ayala group, retained their control and majority ownership of Globe because of the preferred shares that are voting, which means that as holders of such shares, they are entitled to elect their nominees to the board. As preferred shareholders, their ownership gives them the power to vote against any resolution that could adversely affect their interest as creditors.

In short, the majority owners can be both stockholders and creditors, as the Zobels are in Globe, and protector of board control, as in the case of the First Pacific group in PLDT by depriving a significant stockholder – PLDT Beneficial Trust Fund – nominees for directors.



Please follow our commenting guidelines.

Comments are closed.