• Using the public to become a listed company

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    EMETERIO SD. PEREZ

    EMETERIO SD. PEREZ

    IT is up to the officials of the Securities and Exchange Commission (SEC) to use their regulatory powers to apply the rules on preemptive rights. As the signing authority in approving amendments to the corporate charters of listed companies, they could withhold their imprimatur on any and all changes in a company’s Articles of Incorporation and Bylaws, and more so if these changes might “disenfranchise” the public.

    Perhaps SEC Chairperson Teresita Herbosa and her four fellow commissioners know that without the public, there would have been no Philippine Stock Exchange (PSE) for them to regulate. Even if the PSE already enjoys self-regulatory status, Herbosa and company should be able to protect the investing public from being taken advantage by those who control the boards of corporations.

    It is unfortunate that family-owned companies are only using the public for them to be able to get listed. Having become public which, of course, is a misnomer, and finding no use for public investors anymore, the majority stockholders use the boards that they dominate to buy the public out. The practice called share buyback literally means taking a company private again.

    No board seat for public
    By the way, it is about time the SEC initiate a study of listed companies to determine if they are also public as they claim to be. If the public really own at least 10 percent of a company’s outstanding shares, how come they are not represented in the board? Instead, those who control the board select the independent directors, who do not own enough number of shares to entitle them to a directorship and the compensation and other benefits that go with their selection.

    Have Herbosa and her four associates in the five-man commission ever bothered to ask the beneficial owners of the shares held by PCD Nominee Corp.? How about the corporate stockholders of listed companies that give their addresses somewhere else? SEC officials should be able to form a group of their expert securities examiners to identify the owners of all these offshore companies for the information of the public.

    It seems that depriving public investors of their preemptive rights is not the only problem that ails the Philippine stock market. The 10-percent minimum public ownership rule could even be worse than depriving the public of their rights to the issuance of additional shares. How can this very small percentage of ownership qualify a listed company to become public?

    Herbosa’s commission
    Incidentally, Herbosa could have become the chief securities regulator that she is perceived to be had she followed the directive of the Supreme Court in the case involving foreign ownership in Philippine Long Distance Telephone Co. (PLDT). Instead of investigating PLDT as the high court had suggested in its ruling, the SEC, led by Herbosa, simply allowed the company to issue 150 million voting preferred shares that are also voted by the Indonesian group.

    The stock issuance was intended to dilute the holdings of foreigners in PLDT, such as the Indonesian-owned First Pacific Co. Ltd. which is based in Hong Kong, and NTT Group of Japan. These two stockholders hold a total of 99.2 million common shares, or 45.92 percent.

    Why not revisit the SC ruling in the PLDT ownership case? Was allowing the issuance of 150 million voting preferred shares full compliance of the SC directive for the SEC to look into the foreign ownership issue in PLDT, “and if there is a violation . . . to impose the appropriate sanctions under the law”?

    Apparently, the Herbosa-led five-person SEC regulatory body cleared PLDT of any equity ownership violation. This despite the SC’s ruling that, as provided for in the 1987 Constitution, the term capital “refers only to shares of stock entitled to vote in the election of directors, and thus in the present case only to common shares and not to the total outstanding stock (common and non-voting preferred shares).”

    esdperez@gmail.com.

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