THE Supreme Court has ruled that the “term capita refers only to shares of stock entitled to vote in the election of directors . . . and not to the total outstanding capital stock (common and non-voting preferred shares).”
With this definition as provided for in the 1987 Constitution, the high court “directed” the Securities and Exchange Commission (SEC) to determine “the extent of allowable foreign ownership in respondent Philippine Long Distance Telephone Co.”
Under the law, foreign ownership in companies engaged in certain industries such as services and natural resources is limited to 40 percent of outstanding voting capital.
The SC’s ruling should have guided SEC Chairperson Teresita Herbosa and the four other SEC commissioners in 2012 in reviewing PLDT’s ownership structure.
Herbosa and company defied the high court despite the order for them to implement its ruling against PLDT and that “if there is a violation of Section 11, Article XII of the Constitution, to impose the appropriate sanction under the law.”
Did the use of “if” by the high court make its ruling conditional?
The SC’s definition of capital does not cover only common voting shares but also other stocks that make up the outstanding capital. In the case of PLDT, it would mean 60 percent of voting and non-voting preferred shares.
The question was, and still is, the reason why the Herbosa-led five-person commission failed to find PLDT in violation of the 60-40 constitutional ownership ratio in favor of Filipinos. Instead of computing the SC-ordered monetary fine, they allowed PLDT to issue 150 million voting preferred shares to effectively dilute foreign ownership of its capital stock.
From PLDT lawyer to SEC head
Under Herbosa’s leadership, the SEC may have lost its decisiveness as the securities industry regulator. I have been told by certain readers of The Manila Times that the SEC chief has been very kind to PLDT because she was reportedly a former external legal counsel of the company while still a practicing lawyer.
Herbosa must have forgotten that as SEC chief, she has ceased to be a paid legal counsel of PLDT or of any other company for that matter. She should fight for the law that she is mandated to implement without fear of any influential member of the board of any listed company.
(I wrote a piece on PLDT’s ownership profile and that of Globe Telecom Inc. two years ago. In said Due Diligencer piece, I analyzed the effect of the issuance of 150 million voting preferred shares to the company’s beneficial trust fund. Ironically, the Indonesian-owned First Pacific Co. used the voting preferred shares in electing its nominees to the board. See The Manila Times issue of July 3, 2014 for the analysis of the ownership structure of PLDT and Globe Telecom Inc.)
When will the SEC regain its status as an assertive regulatory agency that it was once but which it has lost under the present leadership? I do not have the answer yet. Perhaps, it is time to restructure the composition of the five-person commission by reducing it to only three members.
After Congress took away its quasi-judicial functions and transferred these functions to the regular courts, the five-person regulatory body has become “overpopulated.” The SEC can even perform its task as the main depository of corporate files even with an executive director heading it. Why pay more people at the expense of taxpayers’ money?
To determine that the SEC does not need an SEC chairman and four commissioners, the next national leadership has only to undertake a performance audit of the commission. This, in fact, should be at the top of the list of priorities so that the next administration would be able to save money that it should better allocate for public service.
In 2014, a report of salaries received by government officials showed Herbosa received P7.45 million; Manuel Huberto B. Gaite and Antonieta F. Ibe, P4.96 million each; Ephyro Luis B. Amatong, P3.2 million; Blas James G. Viterbo, P2.9 million; Juanita E. Cueto, P2.2 million; and Eladio M. Jala, P1.9 million. Camilo S. Correa, the SEC’s general counsel, received P2.28 million.
(Note: The COA’s salary report listed seven commissioners because it included the new appointees who replaced those whose terms have expired. The SEC did not even have a general counsel.)
Why waste P29.85 million on all these officials? With only three or even only one, the SEC would still function efficiently.
I surfed www.sec.gov.ph but found no posting on penalties the SEC imposed on PLDT.
Still, I am giving Herbosa the benefit of the doubt. In my next piece, I will compute the SC-ordered monetary fine against the telecom company since I could not find it on the SEC website.