Meralco execs’ P519-M ‘other compensation’

Emeterio Sd. Perez

Emeterio Sd. Perez

To securities issuers and the SEC, retail bonds, or simply bonds, fall under the category of “securities.” But Due Diligencer would categorize them as borrowings that should be treated in the financial reports as debts.

AEV, of course, is not the only listed company that raises money through the capital market by issuing bonds. Take Robinsons Land Corp. (RLC), the property unit of JG Summit Holdings Inc., which, in turn, is the listed holding company of businessman John Gokongwei Jr. and his family.

In compliance with the market’s full disclosure rule, RLC submits regulatory filings listing 4.09 billion common shares and P10 billion “registered bonds payable” under “securities.”

But the more curious investor who trades on listed stocks should not stop at the early pages of RLC’s filings, but read the entire posting that explains well what really were the company’s “registered bonds payable,” which the SEC defines as securities. As reported by RLC, the bonds are actually “loans payable.”

How does the bond issuance differ from common shares issuance?

Since the SEC “permit” uses “sell” instead of “borrow,” the investors who invest in bonds become “buyers” and not “lenders.” As buyers, they are like the common shareholders who own a piece of a company by “buying” common shares.

“Buy” has become the generic term in investing in bonds and in common shares, when, in fact, there is a very big difference: At the time of the sale of the bonds, those who “buy” them already know how much they would make in interest earnings, making bonds a form of debt classified as securities. A year or two ago, for instance, an RLC bondholder earned 8.5 percent.

On the other hand, the income due the stockholders who own common shares is called dividend. When to distribute it and how much to give are decided by the board of directors. The SEC though requires listed companies to distribute dividends either in cash or in stock the amount in excess of 100 percent of their retained earnings.

Listed companies need not worry about the rule. They could easily circumvent it by appropriating more of their retained earnings for future projects and leave less for dividends.

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Note. Joe Pascual, a reader of The Manila Times, complains about the sudden increase in his monthly bill issued by Manila Electric Co. (Meralco). His letter follows:

“I write to you because I can’t seem to get any answers from Meralco regarding their November increase.

“I received my November bill on the 8th of this month, for the period covering October 6 to November 6, 2013. The rate increase was already reflected in the bill. I cannot understand, however, how the increase was applied to my electricity consumption that occurred in October.

“Given the explanation of Al Panlilio [a letter was included in the bill]that one of the primary reasons for the increase is for a maintenance activity dated November 9 to December 8, 2013, why was it then applied to my consumption for the period October 6 to November 6, 2013. It’s just so wrong.

“I am sure I am not the only consumer in this situation. Is this another way for Meralco to fleece its customers? If it was an honest mistake on the part of Meralco, how can it be fixed? My electricity bill is on credit card auto-debit.”

Due Diligencer can only sympathize with Mr. Pascual and assure him that he is not alone in his predicament. We as consumers remain at the mercy of big business. If Meralco bills you and me and the rest of its customers for what they spend for repairs and maintenance of its facilities, it is not answerable to regulatory agency.

But if Mr. Pascual is interested, probably the reason for his bloated Meralco bill is the company executives’ forthcoming bonuses that the company has to raise before the end of the year. For his information—and the other electricity users as well, the “other compensation” totaling P519 million under Meralco’s long-term incentive plan covering 2010-2012 are due this year.

Of the total, P222 million would go to the top five executives, namely Oscar Reyes, president and chief executive officer; Ricardo Buencamino, Alfredo Panlilio, Betty Siy-Yap and Ramon Segismundo, senior vice presidents. “All other key officers and directors as a group unnamed (excluding the top five)” would receive P297 million.

These bonuses are on top of the year’s salaries of P123 million for the Reyes and company, and P203 million for the other executives below them.

Joe, sorry to disappoint you but that’s the only explanation I can cite for Meralco’s maintenance expense charged to you, which may be legit. But is it moral?


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