The Philippines’ top publicly listed corporations have improved their corporate governance (CG) practices over the past year but they need to work harder to catch up with peers from Singapore, Thailand and Malaysia, according to the Asean corporate governance scorecard.
The average CG scores of the top 94 Philippine corporations by market capitalization improved to 58 points in 2013 from 48.91 points the previous year, based on the latest regional scorecard—a joint initiative of the Asean (Association of Southeast Asian Nations) Capital Markets Forum and the Asian Development Bank.
Among the participating Asean countries, the mean score improved by 19 percent to 64.02 points in 2013 from 53.66 the previous year. Thailand topped the chart with 75.39 points while Singapore posted the largest improvement (29 percent year-on-year) in its mean score of 71.68 points. Malaysia scored 71.69, an improvement from the 62.29 points registered in 2012.
On the other hand, the Philippines scored slightly better than Indonesia’s 54.44 points (up from 43.29 points). Vietnam, the bottom-dweller in the study, scored 33.87 points (up from 28.42 points).
Part of the reason for the relatively low scores of Philippine corporations, the report said, was the lack of adequate disclosures compared to their regional counterparts, and the difficulty in acquiring information about a company on its website.
“There is a perception that potential investors have difficulty navigating mainly due to the variety of formats and content employed from company to company. It is hoped that these issues will be addressed by 2015 as more companies gain a greater awareness of the corporate governance scorecard and its process, and the SEC (Securities and Exchange Commission) introduces a template and common content for websites,” the report said.
Of the five CG categories, the most dramatic improvement in the Philippines’ average scores on a year-on-year basis was in the role of the stakeholders (4.85 points in 2013 compared with 2.8 points in 2012), disclosure and transparency (up to 16.03 points from 13.58 points) and responsibilities of the board (up to 19.71 points against 16.36 points of the previous year).
Average scores in all corporate governance categories improved except for rights of shareholders, which decreased slightly to 5.55 points in 2012 from 5.6 points in 2013.
While Philippine corporations were noted to be “strong” in providing the basic rights to its shareholders, there were areas for improvement identified, such as in the disclosure of the minutes of annual stockholders meeting (ASMs) and giving more opportunities for shareholders to ask questions and/or raise issues.
The report also noted that:
Some companies do not pay dividends within 30 days after being declared and approved;
Most companies do not vote by poll for all resolutions during their ASMs;
Approving, dissenting, and abstaining votes for each agenda item of the ASM are not disclosed;
Most companies do not disclose that they have appointed an independent party to count and/or validate the votes at the ASM; and,
Companies have not provided rationales and explanations for each agenda item that requires shareholders’ approval in the notice of ASM and circulars, and/or the accompanying statement.
On the category that measures fair treatment of all shareholders, there was only a slight improvement. The report pointed out how directors were not required to report their dealings in company shares within three business days. There was the lack of policy requiring a committee of independent directors to review material or significant related party transactions.
In most cases, the report said, the profile of candidates to the board does not specify directorships in other listed companies. It also added that some companies do not disclose the amount payable for final dividends in the notice of ASM and that the notices of such ASMs do not mention the company’s dividend policy.
On the category for disclosure and transparency, Philippine corporations scored better this year. But the report said most still would not mention in their annual reports details of whistle-blowing policy, training and/or continuing education program attended by each director during the year; details of remuneration of each member of the board of directors; proof of media, and analysts’ briefings.
It added that there must be disclosures on trading of directors in company shares, policies involving the review and approval of related party transactions and cross-company directorships.