On June 24, 2015, the Shareholders’ Association of the Philippines (SharePHIL) held its second summit at the Dusit Thani Hotel in Makati.
We thought the theme “Transforming Philippine Companies to Become Global Players” was fitting given the onset of the Asean economic integration.
Our keynote speakers were Ms. Tessie Sy-Coson of the SM Group of Companies and SEC Commissioner Ephyro “Eph” Amatong. Christopher Leahy of the Asean Corporate Governance Association and Ruy Moreno of the National Competitiveness Council gave special presentations on the corporate governance and competitiveness rankings of the country. They were later joined in a panel discussion by Julian Payne of the Canadian Chamber of Commerce and Joint Foreign Chambers of Commerce, Jaime Ysmael of Ayala Land Inc., Michael de Guzman of Macquarie Capital Philippines and William “Bill” Pamintuan of Meralco. Ms. Butch Garcia and Beth Lee graciously acted as masters of ceremonies and moderators for the panel discussion.
Ms. Coson, who rarely accepts public speaking engagements, gave excellent insights. One insight she shared was that the scale of tangible assets “is critical to doing business in the international markets.” Ms. Coson pointed out that for Philippine businesses to be internationally competitive, they “need the advantage of size and ample financial resources to gain market share in different industries globally.”
The reason is obvious: An “organization with substantial tangible assets can better weather the changes in the global market—changes like market shift, digital disruption, logistical concerns, overregulation, potential social repercussions and increased constraints in natural resources. Companies with a strong balance sheet can better manage risks.”
Ms. Coson observed that there were several Philippine companies that have done remarkably well in the international markets, including ICTSI, Jollibee, San Miguel, JG Summit, Ayala, Metro Pacific and Alliance Global.
She observed that they all have one thing in common—they are listed companies with large resources, revenues and market share.
Mike de Guzman of Macquarie Capital agreed, saying that based on their market capitalization, PLDT, SMIC and SMPH would even belong to the top ten companies in the Singapore Exchange.
Along this line, Ms. Coson batted for “the regulators’ understanding and the shareholders’ support so that companies [they] have invested in can be better geared to address the competition.”
Commissioner Amatong said, on the other hand, government must be an “enabler and facilitator” in making our companies globally competitive.
Amid companies doing well in the international front, Ms. Coson frankly admitted that “[c]ompanies with similar businesses in our neighboring countries have sizes much larger than many large companies in the Philippines.”
In banking, for example, Ms. Coson said that the average-sized banks in neighboring countries have bigger assets compared to our large-sized banks. As of end-March 2015, BDO, the largest bank in the Philippines, had total assets worth $41 billion. This figure pales in comparison with Asean giants like DBS Group Holdings that has assets worth $332 billion and OCBC with assets totaling $302 billion. Asia’s largest bank, the Industrial and Commercial Bank of China (ICBC), have assets worth $3.3 trillion.
We have to combine the assets of the Philippines’ top three banks just to corner a top spot in the banking industry in Southeast Asia.
Another insight that Ms. Coson shared is that “[m]arket intelligence now goes beyond the usual demographic studies.” A company now needs to adapt to the rapidly changing environment in the global market. Businesses have to stay vigilant over the changes in the economy, markets, technology, law and regulation, social norms, and even trends in the food and fashion industries.
Markets are shifting rapidly due to digital advancement. Consumers have become more discerning, armed with more knowledge through the advancement of communication. Businesses need to stay very close to the market, listen intently to customer insights, constantly innovate on better ways to better serve their customers.
They have to constantly look for opportunities to grow. Status quo these days would mean complacency.
Payne and Pamintuan talked about what concrete steps our country and companies could take to better prepare ourselves for international competition.
Along this line, Ysmael of the Ayala Group said that good corporate governance must be viewed as a “differentiator” that would make a listed company stand out from the rest of the group. It strengthens the brand, generates value and creates what he calls “governance premium” for the company.
For her part, Ms. Coson batted for the need for companies “to adopt international ideas” and “incorporat[e] best international practices” to make them globally competitive. She argued that good corporate governance must not only be treated as a “new requirement” but also an “inherent part” of business.
Commissioner Amatong reiterated the Aquino administration’s mantra that “good governance is good economics.” He said that the principle applies “equally to the private corporate sector as well.”
Leahy agreed and demonstrated through data that there was a direct correlation between good corporate governance and market capitalization.
What do all these things mean to shareholders? Commissioner Amatong put it very well: “And so I think shareholders’ organizations such as SharePHIL should demand ‘more.’ ‘More’ from the companies they invest in. ‘More’ from the exchanges that facilitate those investments. ‘More’ from the regulators that are responsible for the integrity of the financial system.”
He is correct, but we at SharePHIL want to add that it is not a one-way street. We will rise up to the challenge posed during the summit for the need for shareholders’ support so that companies can address competition issues.
As a parting note, I would like to emphasize that this is the second time in a row that controlling shareholders of our listed companies agreed to be the keynote speakers. Last year, our summit was graced by no less than Mr. Manuel V. Pangilinan. We at SharePHIL are extremely glad that key decision makers are actively supporting and participating in our initiatives.
After all, part of our philosophy is to get their “buy-in” in order to meaningfully develop a culture of corporate governance in the country.
(The author, a senior partner of Accralaw, is the incumbent president of SharePHIL. The views in this column are exclusively his. He may be contacted at francis.ed.lim@gmail.com.)