• Independent directors’ loyalty



    A READER of The Manila Times commented on a Due Diligencer piece about independent directors in an email he sent on Oct. 29.

    Ben Hur Ong wrote: “Your articles on the above subject have clearly shown that the so-called ‘independent’ directors are anything but independent. They are beholden to, and are all dependent on …the majority/family stockholders.

    It is high time, I think, that we stopped calling them independent directors. What do you think would be more apt to use? Appointed directors? Or ‘delegated directors’ might be a more honest description.

    What do you think? (Ako rin [I am also], just asking)…”

    I thank Mr. Ong for reading The Manila Times. He raised a very

    timely issue because he is correct in his opinion that “independent directors are anything but independent.”

    Board membership
    I decided to reproduce here Mr. Ong’s email for the information of public investors who think independent directors represent their cause. Rather, as correctly suggested, “it is high time that we stopped calling them independent directors.”

    Why hasn’t anyone among the public been either chosen or nominated as an in dependent director? The answer is obvious. Their nominee might think independently of the management nominees inside the boardroom.

    For the information of the public, including Mr. Ong, I suggest you visit www.sec.gov.ph for the arguments put forward by former Chief Justice Artemio Panganiban in asserting his right as director of listed companies. As I have written on Jan. 11, 2015, “… the former chief justice has argued successfully that there is no difference between regular and independent directors.” In other words, from his assertion, he should not have been an independent director but one of the nominees of the majority owners.

    Legal consultants
    Why do listed companies hire lawyers as independent directors? Aren’t there enough retired executives who can contribute more to the growth of listed companies, particularly to their profitability?

    Due Diligencer has yet to do research to find the answers to these questions. Besides, nobody knows how independent directors behave inside the boardroom. Do these lawyers-turned-insiders even express their own opinion inside the boardroom?

    Of course, the question could be rephrased this way: As lawyers who have become insiders, are they allowed by the owners to express their own opinion?

    Nobody knows if anyone among these independent directors has even suggested to the board to allow the public to nominate and eventually elect their own director. If anybody has done so among those who made it to the board, that brave soul would have faced the risk of losing his pay and perks as a director.

    Anyway, to deserve their compensation, which sometimes tops P1 million a year, lawyer-directors could serve as legal consultants to the board and, ultimately, to the owners. The perception that they actually do this is true. Don’t ask anyone among these independent directors that question because they would surely tell you that they live up to the expectation that they are “independent” as they are perceived to be by the public.

    Due Diligencer’s take
    Listed companies simplify the reporting process by lumping the amount paid to the top five executives annually. They don’t break down the numbers into individual compensation packages for the top executives and “all other officers and directors as a group.”

    However, Manila Jockey Club Inc. (MJC) and MJC Investments Corp. are among the few exceptions. Both are listed on the Philippine Stock Exchange and should be commended for telling the public how much their five highest paid executives receive annually.

    The compensation reports filed by the two Reyno-controlled companies have been limited to the salaries of the top five executives. Who knows someday, MJC Investments and Manila Jockey Club might disclose, too, the individualized compensation packages received by “all other directors and officers as a group”?

    To illustrate: In 2015, Manila Jockey Club paid Alfonso R. Reyno, chairman and chief executive officer, a salary of P4.2 million; Mariza Santos-Tan, vice chairman, P1.17 million; Alfonso G. Reyno 3rd, president and chief operating officer, P3.27 million; Pedro O. Tan, treasurer, P1.17 million; and Ferdinand A. Domingo, corporate secretary, P1.62 million.

    Reyno 3rd, Tan and Domingo are also members of MJC’s 11-person board.

    So, if the listed companies of the Reynos disclose the compensation of their five highest paid executives, why shouldn’t others do likewise? How about abolishing the designation of independent directors, who, after all, act as consultants? Just asking.



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