ARE officials of the Securities and Exchange Commission (SEC), led by Chairperson Teresita Herbosa, serious in suggesting that they may require an increase of the minimum public ownership of listed firms to 15 or 20 percent from the present 10 percent if the market could accommodate it?
Is this good news or bad news?
This is definitely good news if the intention of Herbosa and the four SEC commissioners in raising the minimum public ownership (MPO) in listed companies is to further expand their ownership base. If that is so then they are in the right direction. With more ownership participation from the public, the stock market will become more active and trading will become as lively as other markets in Asia, if not in the world.
For the bad news: If the five members of the SEC’s regulatory body will review the MPO rules, then their findings may make them change their mind about raising the minimum public ownership to either 15 percent of even 20 percent. The truth is most, if not all, of the companies that claim to be public are not public because they remain almost 100-percent owned by the same family, or group or groups of companies after their initial public offerings. Nobody, not even the SEC, has ever bothered to properly monitor the public stock sale if this is in accordance with the 10-percent MPO.
It is very easy for SEC officials and their monitoring teams to find out who violate the MPO rules. Due Diligencer is simplifying the task for them by suggesting that they instruct the observers they assign to attend the stockholders’ meeting of listed companies and take a special interest in the election of the members of the board. From the nomination alone, the SEC observers would learn if the nominees were ALL chosen by the management—meaning the controlling or majority stockholders. If this happens, then it is time for the SEC to find out what happens to the interest of the minority and the public who are supposed to own at least 10 percent. Who is their nominee, if they deserve to name even one?
This is the irony: Listed companies, under market rules, should also be public but in truth they are not. If you were to go by the public ownership filings, you would know that such and such group or families control only so much but elect all the members of the board. Of course, there is also the stupid rule requiring the election of independent directors who are not independent at all. If they are, then they would not last one day more after one board meeting.
Even SEC insiders may be divided over the presence of independent directors in the board of listed companies. Why favor these outsiders whose qualifications to be on the board is their selection by the majority. Remember, nominees for independent directors should be acceptable to the controlling stockholders. Any opposition would send the nominating party looking for replacements, who would then be subject to approval by the majority.
By the way, there is another way of finding out if a listed company is also public. If SEC officials would only scrutinize the list of top 100 stockholders and the public ownership filings, they would know what to ask the filers: How are the corporate stockholders related to the majority owners? Then group them according to their affiliations. Back in their SEC offices on EDSA Avenue in Mandaluyong City, trace their ownerships to determine if they have common stockholders.
Only when SEC officials act on these suggestions will they realize that researching private companies based on their computerized filings takes time. The layers upon layers of holding companies would lead researchers to believe that the intricacies of ownerships are intended to hide the REAL owners behind their nominees.
This is the system of corporate ownerships in this country that, at the end of your research, you will realize there is no end in sight to your search for truth, unless, of course, you go to the Cayman Islands for a change of research venue.