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Independent directors should be pro-public

APC Group Inc. reported in a consolidated financial filing under “equity” an accumulated deficit of P7.787 billion as of March 31, 2018.

As consolidated, APC Group’s disclosure posted on the website of the Philippine Stock Exchange (PSE) included the financial performance of five subsidiaries, such as Aragorn Power and Energy Corp. (APEC), PRC Magna Energy Resources Inc., APC Cement Corp., APC Energy Resources Inc. and APC Mining Corp.

APC Group said in the same financial report that APEC is “still in the pre-operating stage.” Its PSE posting also showed it directly owns 90 percent in Aragorn and 83 percent in APC Mining and 100 percent in APC Cement and APC Energy. It indirectly owns 85 percent in PRC Magna.

In the first quarter of 2018, APC Group reported a net loss of P1.478 million, against a net loss of P7.946 million in the corresponding period in 2017.

APC Group’s total equity remains positive despite its pile of losses because of, among other entries, outstanding capital of P6.388 billion and additional paid-in capital (APIC) of P1.614 billion.

APIC refers to issuances of shares above par value. In the case of APC Group, it raised a total of P8.002 billion from 6.388 billion outstanding common shares, computed at a par value of P1 per share. This means the company grossed P1.253 per common share from outstanding capital stock of 6.388 billion common shares.

Ownership profile

An amended general information sheet (GIS) for 2017 showed APC Group had 595 stockholders, who owned 7.512 billion APC Group common shares. Of the total, 590 were Filipinos and five were foreigners, who held 6.799 billion, or 90.51 percent, and 713.127 million, or 9.49 percent, APC Group common shares, respectively.

In the same PSE posting, APC Group listed Belle Corp. as holder of 3.5 billion APC Group common shares, which it said were equivalent to 46.64 percent. It credited PCD Nominee Corp. with 2,177 billion APC Group common shares, or 29.01 percent.

Including PCD Nominee and “others,” APC Group said it had 21 stockholders as of 2017. The question that the public should ask is, “Who owns PCD-held common shares?”

PCD Nominee acts only as a record stockholder for the real or beneficial owners of securities. Who among these stockholders fall under “others”? The public should also have asked this of APC Group because inside parentheses are the words “indicate the number of the remaining stockholders.”

Apparently, like other listed companies, APC Group also violated the requirement that it should have provided the public the names of whoever it had included as “other” stockholders.

APC Group completed the GIS by attributing to “others” 47.792 million APC Group common shares, or 0.64 percent.

Belle’s owners

In a public ownership report (POR) as of April 4, 2018, Belle Corp. listed four companies as principal or substantial stockholders, which owned 5.501 billion Belle common shares, or 52.4 percent.

As listed, Belle’s majority stockholders were – and still are – Belleshares Holdings Inc., with 2.605 billion Belle common shares, or 24.81 percent; Sysmart Corp., 1.63 billion Belle common shares, or 15.52 percent; SM Development Corp., 735.554 million Belle common shares, or 7.01 percent; and Sybase Equity Investments Corp., 531.321 million Belle common shares, or 5.06 percent.

All these holdings, plus those held by Belle insiders, sum up to a total 56.56 percent, making the public owners of 4.561 billion Belle common shares, or 43.44 percent.

If the public stockholders of Belle really own 43.44 percent of Belle outstanding common shares, they should have controlled the same percentage of the company’s 12-person board, or at least five of the directors.

Instead of the public, Belle, which is a unit of SM group of companies owned by businessman Henry Sy Sr. and his family, nominated four independent directors and eight regular directors.

Belle’s regular directors are Emilio S. De Quiroz Je., chairman; Willy N. Ocier, vice chairman; Elizabeth Anne C. Uychaco, vice chairperson; Arthur L. Amansec, Manuel A. Gana, Jacinto C. Ng Jr., Jose T. Sio, and Virginia A. Yap.

The independent directors are Cesar E.A. Virata, who, according to the PSE website, is “lead independent director.” The other IDs are Gregorio U. Kilayko, Amando M. Tetangco Jr. and Federico C. Dybuncio.

Due Diligencer’s take

Who would stand up to the majority stockholders? Rephrasing this, who would go against the owners who control both the board and the ownerships of listed companies?

As a matter of fact, the Securities and Exchange Commission (SEC) should change its definition of “independent directors” (ID). Its officials, instead, should come up with what IDs do and why they agree with the owners.

Could these independent directors contradict the wishes of the owners?

Definitely not.

To go against the majority, or the owners, an ID would be taking the risk of losing his board directorship.

Perhaps, SEC officials should take a more courageous stand by defining the responsibilities of IDs. Who do they represent on the board?

The boards of listed companies do not need IDs who could only be perceived to be directors because of their alliances with the owners. Is there really independence inside the boardrooms?

How about making the board more transparent by requiring the disclosure of what it has taken up and the individual stand taken by each of these directors, including those who are supposed to be independent? Just asking.


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