Restatements in financial filings

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EMETERIO SD. PEREZ

EMETERIO SD. PEREZ

NUMBERS change, especially when these concern money. In filings posted on the website of the Philippine Stock Exchange, these changes are called restatements, which are intended to correct what is defined as “material inaccuracy.”

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To show you such restatement in financial filings, Duediligencer reviewed the executive compensation of Ayala Corp., which amended some PSE postings. The amendments deal with executive compensation. Why these changes don’t affect AC’s net profits in a given year is not included in this piece.

Let me start with AC’s definitive information statement back in 2013. In it, the Zobel-controlled holding company did only an estimate of the 2014 compensation of the members of its management team, who are divided into the five-highest-paid executives and “all other officers as a group unnamed.”

Executive compensation
In a compensation estimate, AC said it expected to pay in 2014 the top five executives as a group P306 million divided into P213 million as salary and P93 million as bonus. The “other officers as a group unnamed,” according to AC, “were to be paid P631 million consisting of salary, P436 million and bonus, P195 million.”

Luckily for the five executives, AC surprised them with P390 million compensation in 2014 from 2013 estimate of P306 million. That’s P84 million more, most of which, or P82 million, beefed up the group’s bonus while only P2 million went to their salary.

AC’s generosity to its managers was reflected in a DIS, which AC filed in connection with the stockholders’ meeting in 2015.

Then came a DIS for 2016 annual stockholders’ meeting. It contained the “restatement” of P358.47 million as the compensation of “CEO and most highly compensated officers” in 2014. The amount is divided into salary of P198.32 million and bonus of P160.15 million. As a result, the five executives “lost” P31.53 million of their 2014 actual compensation of P390 million.

‘All others’ got more
In contrast to the five highest paid executives, the restatement of AC’s financials slightly benefited “all other officers as a group unnamed.” As projected, the other executives were to receive salary of P436 million and bonus of P195 million for total of P631 million in 2014 but got more. By the end of the year, they got P778 million, beating the expected compensation by P147 million. When restated, they got P778.49 million, or P490,000 more.

An AC’s compensation filing showed how profitability influences the majority stockholders’ generosity.

By paying what’s due its executives, AC’s is not engaged in an act of charity. The members of the company’s management team also recognize the contribution of the rank-and-file workers to its consistent profitability. In the last three years, AC reported consolidated net profits of more than P94.694 billion that resulted from revenues of P551.354 billion.

By year, AC’s P38.295 billion net income in 2015 translates to P33.89 earnings per share; P32.275 billion in 2014 to P29.83 per share and P24.125 billion in 2013 to P20.53 per share.

SM group
In 2015, SM Investments Corp. (SMIC) paid its “CEO and four most highly compensated executive officers” salary of P77 million in salary, bonus of P13 million and other annual compensation of P3 million.

The total compensation of P93 million went to Harley Sy, president; Jose T. Sio, executive vice president and CFO; Elizabeth Anne C. Uychaco, SVP—corporate services; Franklin Gomez, SVP— finance; and Frederic C. Dybuncio, EVP—investment portfolio.

Also in 2015, SMIC paid “all other officers and directors as a group unnamed” P174 million – salary, P144 million, bonus, P24 million, others, P6 million.

In an explanatory note, SMIC said only the chairman of the eight-person board “receives P20,000 per diem for each board meeting attended.”

JG Summit
As chairman emeritus of JG Summit Holdings Inc., businessman John Gokongwei Jr. remains chairman emeritus of the family-owned holding company. He is also one of JG Summit’s five highest-paid executives. The others, who are also members of the Gokongwei family are James Go, chairman and CEO; Lance Gokongwei, president and COO; Patrick Henry Go and Robina Gokongwei-Pe, members of JG Summit’s 11-person board.

In 2015, JG Summit paid Gokongwei and company P134.871 million divided into salary, P130.816 million; bonus, P3.5 million; and other pays and perks, P555,000.

JG Summit also said in a compensation filing that “all other officers and directors as a group unnamed” received P188.542 million in salary; P6 million in bonus; and P802,500 in other compensation for a total of P195.345 million.

“Other than payment of reasonable per diem,” JG Summit explained in the compensation posting, it does not provide the members of the board other pays and perks.

Duediligencer will analyze these compensations in next piece to show the need to overhaul the presentation of the wealth and poverty profile of the Philippines’ more than 100 million population as I suggested in the last paragraph of “Pnoy’s advisory on freedom.”

esdperez@gmail.com.

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