Independent directors and their millions



THE owners of listed companies should tell us if they consider the public investors as co-owners, or if they have issued shares to them only to save on income taxes.

If at least 10 percent of their companies’ outstanding common shares is owned by the public as required under market rules, they should have allowed their public stockholders to elect at least one nominee to the board. Because they don’t, the final question is why.

Will anyone among company owners provide the public investors the answers? The family-owned listed businesses pay much less income taxes even if they listed only few and not all their outstanding shares on the Philippine Stock Exchange (PSE).

I have already written here about the PSE being an exclusive club of the rich based on the comments of a reader of The Manila Times. The exclusivity of the stock market could be the reason the public investors, though also rich but may not be as rich as the Sys or the Gokongweis, are being taken for granted by the majority stockholders. This should not be allowed to recur because without the public investors as stockholders, company owners would not have gotten their businesses’ listed shares traded daily, or at least occasionally.

Board seat
The public investors are responsible for an active stock trading, which is what the PSE is all about. Yet, the boards of listed companies do not reflect their participation in the ownership of the business for obvious reason: they don’t want outsiders to learn their business secrets and the secrets of their success in business.

A company becomes public only when its owners allow its public stockholders a nominee in the board. Not even one among 300 or so listed companies qualifies in this criteria. Instead of recognizing the right of public investors to board representation, the owners “nominate and appoint” independent directors (IDs).

“Nominate and appoint” go together when the phrase refers to IDs who are never elected but are nevertheless paid handsomely. Because of their subservience to the majority, they get “nominated and appointed again and again.” Who among them would contradict the owners? When they do, they don’t get “re-nominated and re-appointed.” And when they are out of the board, they lose their millions.

The use of “again and again” is for emphasis because the board is a union of owners. Ask the IDs about their role and you will be told that, like the regular directors, they go along with the majority. These policies usually deal with profitability.

Has anyone among these IDs ever stood up against the majority stockholders? No one would dare risk losing their well-paying jobs.

IDs’ compensation
These IDs have every reason to keep their loyalty to the majority stockholders: they receive pays and perks that regular directors also get. Read about their compensation in the annual reports and in definitive information statements. From these filings, you will learn how much each of them is paid in a year under “all other officers and directors unnamed.”

To illustrate, here is the payroll of a listed company.

On its PSE web page, GMA Network Inc., which owns GMA7, listed nine members of the board, namely, Felipe L. Gozon, chairman; Gilberto R. Duavit Jr., Gilberto M. Duavit Sr., Joel Marcelo G. Jimenez, Felipe S. Yalong, Anna Teresa M. Gozon-Abrogar and Laura J. Westfall, regular directors; and Artemio V. Panganiban and Dr. Jaime C. Laya, independent directors.

A compensation filing showed that in 2015 it paid the board a total of P61.75 million. Translated, each of GMA Network’s nine directors was paid P6.861 million for what is supposed to be only part-time work.

Incidentally, GMA Network’s disclosure grouped the directors with “all other officers.” It did not detail the paychecks of the members of the board, but disclosed the information in the general information sheet which GMA7 submitted to the Securities and Exchange Commission and posted on the PSE website.

Will the millions of pesos in compensation make IDs truly independent? Just asking.


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