THE Zobels, who control the Ayala conglomerate, may not have expected the Securities and Exchange Commission (SEC) to act against one of their nominees for independent directors to the board of one of their companies.
As the majority stockholders of one of the Philippines’s largest conglomerates, the family found one of their former executives disqualified from sitting in the board of Manila Water Co. after she has been elected.
Unfortunately, one would not say that the SEC has been late in exercising its regulatory over one of the companies listed on the Philippine Stock Exchange (PSE).
The question is why lawyer Tina Callangan, director of the SEC’s corporation finance department, did not oppose and disqualify said nominee when Manila Water filed its preliminary information statement and eventually its definitive information statement (DIS), which both contain the name of Nuesa as one of the three nominees for independent director of Manila Water.
Manila Water posted on March 20 its DIS on the website of the Philippine Stock Exchange and held its annual stockholders’ meeting on April 15 and made the proper filings with PSE and SEC.
From the tone of Callangan’s letter addressed to lawyer Jhoel Raquedan, Manila Water chief legal counsel and assistant corporate secretary, one learns a very basic policy in nominating the members of the board: listed companies should avoid nominating government officials to their board.
“Considering her recent appointment as director of the Philippine Reclamation Authority, a government agency,” Callangan told Raquedan in her letter, “she is disqualified to become an independent director.”
Raquedan did not respond directly to Callangan but informed the exchange of Nuesa’s disqualification.
“Nevertheless, despite such disqualification,” Raquedan told PSE, “Manila Water still has two independent directors out of 11 members of the board.”
Manila Water’s lawyer could have cut short his letter to the exchange. He did not. Instead, he expressed reservation about the SEC’s move against Nuesa.
“In order to protect its interest,” Raquedan wrote, “Manila Water intends to pursue the appropriate course of action under the circumstances.”
Really? What did Raquedan mean? Was he threatening the SEC as a whole?
In the first place, does Nuesa qualify to sit in Manila Water’s board as an independent director, when she has been associated and remains associated with the Zobel-controlled companies.
There is no doubt Nuesa possesses great credentials having been managing director of Ayala Corp.; MWC chief finance officer from January 2000 to December 2008; group controller and later vice president for commercial centers of Ayala Land Inc. from January 1989 to March 1999.
She has also been a member of the board of Ayala Land, Manila Water and Integrated Microelectronics Inc. probably at a time when she was still actively employed with the Ayala companies.
That the SEC, through Callangan, finally acted against an Ayala nominee to the board, is very timely. But as the regulatory agency, it is probably about time it reviews and, if possible, clarifies the qualifications of nominees as independent directors.
The nomination alone of former executives as independent directors should have alarmed the SEC, whose officials should have asked how former insiders who may still be loyal to their employers perform their role as independent directors. To whom would they be more loyal: will it be to the public investors or to the majority stockholders who have been very generous to them for the decades that they have been in their employ?
Of course, there is no prohibition against former executives from becoming members of the board of listed companies. But they should be elected as regular directors and not independent directors.
Postnote. How long does it take for a letter from Mandaluyong City to reach Quezon City? If it arrived so late, either it was sent several days after it was written or the messenger was too slow in delivering it.
Incidentally, this has happened to a letter signed by lawyer Callangan’s letter to Manila Water. Her letter dated May 15, 2013, and addressed to Raquedan reached the company’s legal and corporate governance department on June 10, which translate to a travel time of 26 days.
Since the SEC letter was marked “RECEIVED,” it was perhaps delivered by a messenger and not via the Philippine Postal Corp., formerly the Bureau of Post.
For a very important and official communication to have been delayed by so many days is unforgivable. The letter’s content had something to do with the election of Manila Water’s director, who, according to Callangan, should not have been elected.