THE financial filings of JG Summit Holdings Inc. (JGS) show the profitability of the group of companies owned by businessman John Gokongwei Jr. and his family. As of March 31, JGS reported consolidated retained earnings of P180.882 billion.
A footnote to the first quarter report posted on the Philippine Stock Exchange website showed the following: authorized capital stock of 18.85 billion shares divided into 12.85 billion common shares, 4 billion voting preferred shares and 2 billion non-voting preferred shares
Both common and non-voting preferred shares carry par value of P1 while voting preferred shares cost P0.01 each.
A total of 7.163 billion common shares and 40 million voting preferred shares in JG Summit’s authorized capital stock are paid-up. Thus the Gokongweis raised P30.756 billion that resulted in additional paid-in capital (APIC) of P23.553 billion, according to JGS first quarter report.
An entry under equity in the financial filings, APIC is shown to represent the total sum of money raised by a company in excess of par value.
Here is what a PSE posting says about family-owned JGS shares: The Gokongwei family beneficially owns approximately 15 percent of the outstanding share capital of the company. In addition, certain members of the Gokongwei family are trustees of the Gokongwei Brothers Foundation, which holds interest in approximately 27.9 percent of the existing outstanding share capital of the company.”
In a filing for July 2011, JG Summit listed Gokongwei Brothers Foundation as holder of 1.997 billion common shares, or 29.38 percent, and all the 4 billion preferred voting shares
With the 7.163 billion common shares and 4 billion voting preferred shares under its ownership, JGS commands 11.163 billion votes.
Gokongwei Brothers Foundation holds 1.997 billion common shares and 4 billion voting preferred shares for a total of 5.997 billion voting shares. With these holdings, the foundation exercises majority voting rights over the equivalent of 53.722 percent of JGS’s voting capital stock.
It is time for the Securities and Exchange Commission and the Philippine Stock Exchange to correct the public ownership reports (POR) of listed companies. Instead of limiting the computations to common shares, the formula should include other classes of shares.
In the case of JG Summit, its POR is based only on common shares that gives the public voting rights over 2.794 billion shares, or 39.01 percent. With this ownership, the public stockholders outside the Gokongwei group would have elected four nominees to JGS’s 11-person board.
In the past, the public did not nominate four or even elect one of their representatives to the board of JG Summit.
As far as other listed companies are concerned, the majority owners, who are mostly the families while the public is outsiders limiting to owning not even 10 percent of the outstanding capital stock.
Remember, the computation to show the effective ownership in a listed company is based only on outstanding common shares. Outstanding capital stock as used here includes all classes of shares issued by a company.
No independent director
Listed companies do not allow the public to elect anyone among them to the board, much less their nominees. The family that owns the company selects their own representatives either as regular members or as independent members of the board of directors.
Strictly speaking, an “independent director” does not exist at all. Either one teams up with the majority or gets fired or ostracized for working for the interest of the public. He or she may become insider only in name but is not tasked to work for the interest of the public.
Who among the present independent directors of listed companies are truly independent?
Many years ago, a member of the board of one listed company tried to live up to the name “independent.” He was not reelected the following year.
Note: I have been using and will continue to use “listed companies” instead of “public companies” in Duediligencer because not one among PSE-listed companies truly deserve to be called “public.”