Hiring Independent Directors Not Enough, Listed Firms Told
CORPORATE NEWS, BUSINESS WORLD
By: Neil Jerome C. Morales
July 15, 2012
CORPORATE GOVERNANCE among the country's top listed firms has improved considerably but more pressing issues such as high ownnership concentration need to be addressed, a study released yesterday said.
The top listed firms should hold board meetings more often and disclose individual compensation, the study by the Ramon V. del Rosario, Sr. - C.V. Starr Center for Corporate Governance of the Asian Institute of Management said.
It noted that corporate governance in the top 100 publicly listed companies in the Philippines in terms of revenues has improved as more firms have hired independent directors.
Efforts to improve corporate governance bring advantages like higher investor trust and lower cost of funding, industry officials said yesterday.
The report "2008 Corporate Governance Trends in the Largest Publicly Listed Companies in the Philippines" was a follow-up to the first study that covered 2002-2007 data.
"Fewer companie, however, are going beyond the minimum required by [the Corporate Governance Code of the Securities and Exchange Commission]. The number of companies with three or more independent directors dropped to 26 in 2008 from 32 in 2007," the study read.
Only three companies had boards in which 50% to 60% were independent directors, and none above 60%.
A total of 65 companies appointed independent directors in 2008, up from 57 in 2007 and 26 in 2002.
However, ownership concentration was higher. In 2008, 41 companies had one shareholder owning or controlling 65% of stocks, up from 30 companies in 2007. "Ownership concentration becomes even more pronounced when the holdings of the five largest shareholders per company are considered," the study said.
In 2008, five top shareholders in 85 companies controlled more than 80% of the stocks.
"[T]he vast majority of the Top 100 Companies continue to fare poorly [in] the frequency of their board meetings," the stucy said. In 2008, 76 companies did not disclose information on board meetings, up from 73 in 2007.
Of the 24 that disclosed meetings, only 10 companies had eight meetings or more, down from 12 firms in 2007.
The study reminded listed firms of the benefits of enhancing corporate governance.
Good corporate governance allows companies to have access to the "deeper financial market, lower cost of capital, and better investors," Mike Lubrano, managing director for corporate governance of Cartica Capital LLC, said in a briefing.
The Philippine Stock Exchange is set to introduce the "Maharlika Board" late this year. It will include companies with "high corporate governance standards."
"We need world-class corporate governance. It will help us bring investments up from the unacceptable 14% [of gross domestic product] to a higher rate so the economu will grow fast enough to lift people out of poverty," Finance Undersecretary John Phillip P. Sevilla said during the forum.
For its part, the Finance department is creating a scorecard for government-owned-and-controlled corporations (GOCCs). The department is reviewing the performance of GOCCs to be able to peg reasonable financial targets.