With the recent enactment into law of Republic Act 10149, or “GOCC Governance Act of 2011,” the top brass of government-owned and -controlled corporations are under pressure to prove their worth if they want to keep their positions.
In an unprecedented move, the law terminated the term of office of chief executive officers and appointive directors of GOCCs effective June 30, 2011. Despite the cut, however, they can stay on the job until President Aquino names their replacements.
Meanwhile, the Governance Commission for Government-Owned or -Controlled Corporations will evaluate the qualifications of prospective appointees to the board of directors of these corporations.
The commission will submit to the president a shortlist of suitable and qualified candidates for possible appointment to such positions.
Although the principal operative act in this process is a presidential appointment, the appointee cannot take his seat in the board unless he has under his name, as required by the Corporation Code, at least one share of stock of the corporation.
The minimum one-share requirement, however, can be increased by the corporation to any number as long as it is indicated in its Articles of Incorporation.
Ownership
If the incoming director is not an existing stockholder (or if he is, does not own the requisite number of qualifying shares) and the corporation has available unissued shares in its authorized capital stock, assigning or transferring to his name the shares needed to qualify him is easy.
The corporate secretary can simply draw up a stock certificate in his name with the corresponding number of qualifying shares and register the stock ownership in the company’s Stock and Transfer Book.
In case no shares are available, an existing stockholder may be asked to divest the needed qualifying shares and assign them to the incoming director.
Under ordinary circumstances, the new kid in the board room would be content with being informed that, on record, he is the registered owner of the qualifying stocks.
A hitch may arise if he is not content with the say-so of the secretary or in simply receiving a photocopy of the stock certificate.
He may ask for the original certificate for psychic comfort (read: bragging rights) or to have a “souvenir” of his links with the company. The latter reason is often cited if the corporation is prestigious or is included in the country’s Top 50 companies.
As long as the subject director is a member of the board, the secretary will have no problem in maintaining the integrity of the company’s ownership profile.
Recovery
The secretary’s reports to the corporate regulators, creditors and auditors about the company’s stockholdings can be relied upon for accuracy.
It’s when the subject director’s term of office expires, is voted out or resigns from the board and refuses to surrender the qualifying stock certificate that may pose a problem.
If his exit was marred by recrimination, ill feeling or frustration at not being reappointed or re-elected, he may, out of pique, ignore demands to surrender the certificate without any incident.
Although feasible, going to court to compel the disgruntled director to return the certificate would not only be costly, it may generate unfavorable publicity to both parties.
For the same reason, it would not be a good idea to file an action for reconstitution or replacement of lost or destroyed stock certificates.
Unless the company is prepared to lie in court (which could invite penal sanctions), reference to the unforgivable conduct of the director cannot be avoided.
If all pleas for the peaceful return of the certificate fail, financial blackmail may be resorted to: no certificate, no payment of unpaid per diems, “retirement” benefits and conversion to monetary value of unused perks and privileges.
Solution
The success of this approach depends on the financial health of the director or the extent of his hurt for failure to wangle an extension of his stay in the board room.
Sometimes, pride is more overpowering than the need to mitigate the adverse effects of lost per diems or allowances.
To avoid having to go through this process, the forward-looking secretary would have to make a careful assessment of any request for the original stock certificate by an incoming director.
If the secretary’s gut feeling tells him, based on the director’s past conduct, that the latter might develop an enduring love affair with the certificate, it is best that he stall for as long as possible in giving the certificate.
But for this approach to succeed, it is essential that the board chair or president is informed ahead of time of the reason behind turning down the director’s request. Hopefully, the director will take the hint or get tired of following up his request.
In the alternative, what the more daring secretary can do is, at the outset, show the certificate to the director, ask him to endorse it in blank, then whisk it away from him.
With the blank endorsement, the certificate loses its character as the director’s personal property. When his term ends, the certificate is as good as cancelled or without any ownership value to the director.
Now, if the director refuses to make the endorsement or insists on getting a clean original certificate, the secretary can only pray that he would come to his reasonable senses when crunch time comes.
(For feedback, write to rpalabrica@inquirer.com.ph.)