Conglomerate Control Top 100 List Companies
BUSINESS INSIGHT MALAYA
By Paul Icamina
July 20, 2010
Conglomerates account for most of the revenues of the country's top 100 publicly listed companies, and they are concentrated in a narrow range of industries, according to a new study released recently by the Asian Institute of Management (AIM).
Ownership is concentrated, in fact, in 41 of the 100 companies, as reflected in the second annual study of corporate governance trends, following last year's study that covered 2002-2007.
This time, AIM reviewed the 2008 annual reports of the top 100 out of 246 listed companies.
The ownership concentration continued to remain high, but there was a shift in percentages owned in each company. The number of companies with one individual or family owning or controlling more than 80 percent of the shares was 24 in 2008 compared to 15 in 2007.
The number of companies with one shareholder owning or controlling 50.1 percent to 80 percent increased to 45 in 2008 from 38 the previous year.
In 2008, only one top 100 company had its largest shareholder owning less than 25 percent of its shares, compared to 11 in 2007.
Ten conglomerates controlled 41 of the companies which accounted for 80 percent of the total gross revenues.
These conglomerates were the Lopez Group (15.47 percent of revenues), Ashmore Group (14.15 percent), Ayala Group (9.9 percent), San Miguel Group (8.88 percent), First Pacific Group (8.82 percent), SM Group (7.79 percent), Lucio Tan Group (5.55 percent), JG Summit Group (5.28 percent), Metrobank Group (2.3 percent) and Alliance Global Group (1.91 percent).
The other companies accounted for 19.96 percent of revenues.
Ownership concentration becomes even more pronounced when the holdings of the five largest shareholders per company were considered.
In 85 companies, the five largest shareholders owned or controlled more than 80 percent of the shares. There was no company in which the five largest shareholders together owned less than 35 percent of the shares.
Ownership concentration among the top 100 companies was higher in 2008 than in 2007, the last time the annual AIM survey was made.
In 41 companies, one shareholder owned or controlled more than 65 percent of the shares, compared with 30 companies in 2007. In only one company did the largest shareholder own or control 25 percent or less of the shares, compared to 11 companies in 2007.
The top 100 companies were not highly diversified. Sixty-three belonged to just five industry sectors: 19 in food, beverage and tobacco; 13 in banking; 12 in holding firms; 10 in electricity, energy, power and water; and nine in property.
According to the AIM study, the global financial crisis did not seem to prompt the companies to focus more on internal controls and risk management.
The 84 companies that reported a separate audit committee in 2008 were down from the 93 companies with audit committees in 2007.
The number of companies reporting a separate risk management committee decreased as well to 20 in 2008 from 21 in 2007, and the number reporting a corporate governance committee increased only slightly to 21 from 18 in 2007.
The top 100 companies were slow in performing evaluation systems for their boards and top management, with only 59 companies reporting a performance evaluation system in place.
A notable development in 2008 was that three of the top 100 companies disclosed the compensation amounts on an individual basis of their CEOs and highest paid officials.
In 2007, while all top 100 companies disclosed compensation amounts for top executives, they did so in the aggregate.
Board composition was predominantly male in 2008.
"Thirty six companies had no woman director at all," said lawyer Angela G. Garcia, executive director of the AIM Ramon V. Del Rosario Sr. - C.V. Starr Center for Corporate Governance which made the study.
"No company had more than five women directors in the board," she said, adding women comprised only 10 percent of all directors, down from 12 percent in 2007.
Indeed, 36 companies did not have a single woman director, and only seven companies had a board with more than 30 percent women.
Another trend is the separation of the roles of chairman and CEO. In 2008, 70 companies reported having different individuals serving as chairman and as CEO, compared to 65 companies in 2007.
Perhaps of equal significance, 51 of these 70 companies had a CEO with no known family relationship with the chairman, compared to 39 out of 65 companies in 2007. Only five companies, however, had independent directors as chairman in 2008.
In conformity with the Securities and Exchange Commission (SEC) Code of Corporate Governance, no company had fewer than five or more than 15 board members, with most of them having eight to 11 members.
Majority continued to appoint two independent directors to their boards, from 26 companies in 2002 to 65 by 2008.
Three companies reported having no independent board directors. One claimed exemption from the SEC requirement because of the number of government officials on its board.
Only three had boards with at least 50 percent independent directors. There were 227 independent board seats occupied by only 1741 individuals. Seventeen percent of all independent director positions had been held by the same individual for six to 10 years.
None of the companies reported a limit on the number of years independent directors can serve. Long tenures were common, with 30 percent of the independent board seats occupied by the same individual for six years or more.