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In Exaltation of Saint Mike

(Article published in the Feb 25, 2009 issue of Manila Standard Today)

 It had heretofore been a mystery to me how San Miguel Corporation, roughly translated in English as “Saint Mike Corporation” (and in any case hereinafter referred to as “SMC”)  the regulated, could openly insist on its own construction of  the disclosure rules of the Philippine Stock Exchange (PSE), the regulator.

 In fairness, it must be emphasized that SMC made no bones about its intent to “comply” with the disclosure obligations under the law and its contract with the PSE, of a publicly listed company. But, it is just as clear that SMC intended to comply only on its own terms.

 On 12 January 2009, PSE asked SMC to provide the former “copy/ies of all agreements duly executed that are relevant to” the Option agreement entered into between SMC and Sea Refinery Holdings B.V. (“SEA BV”) to acquire the purchase from SEA BV up to 100% of its interest in Sea Refinery Corporation.” 

 SMC replied the following day.  But SMC did not, through it was requested so politely, furnish PSE with any copy of any agreement relating to the transaction.  What it did was simply describe the transaction. On specific issue of the Option Agreement, SMC claimed that “the parties are bound by the confidentiality agreement…”  This is clearly an adamant refusal to show the agreement itself since the January 12 letter of PSE categorically took the view that “the confidentiality agreement between the parties did not bind the regulator.”  Up to this day, to the best of my information and belief, PSE is denied a look, or even just a peek, at the Option Agreement.
 










     

It is not very apparent to a plain blunt man on the street, like me, what the relationship is between SMC and PSE. On the one hand, the SMC website does not mention the PSE as one of its “partners.” But, on the other, the PSE nevertheless admits, in its own website that SMC Retirement Fund is a “strategic investor,” It is not clear, though, in accordance with whose strategy the investment was for. 

At any rate, the PSE announces in its website that in 2001, “the PSE was reorganized and transformed from a non-stock, member-governed organization into a shareholder-based, revenue-generating corporation.” If one were to read between the lines, then it ought not be surprising that in the PSE boardroom what is followed is the Golden Rule, namely, “he who has the gold, rules.”

 In short, what we have at the PSE is not a market that, like the talipapa, is intended for the public good; what we have is an exchange that is meant to raise revenues and to espouse the good of its shareholders.  Never mind that the good of PSE shareholders is not in all cases the common good nor the good of the investing public.

 But still, to someone who grew up with the now apparently obsolete idea that the Exchange was for the benefit of all, including non-member and non-shareholder investors, it was still disturbing to see that a member of the Exchange able to impose its wishes not only on the group but also on the outsider-investors whose trading is the members’ source of wealth.

 But, last Thursday, last week, on 19 February 2009, was the day of Revelation.  The front and business pages of the morning broadsheets sang “Gloria” in their reportage of the visitation by the still President of the Republic to the Holy of Holies of that spirit-filled corporation.  As a consequence, what was once a dark mystery was made a shining truth.

 The secret has been revealed: SMC is the land of promise.  We are told by the media that on the heralded occasion of the visit of the Chief, SMC promised that, having acquired GSIS’s 27% voting rights in MERALCO, it will, under the guidance of Ang, Ramon (if tagalogized, means The Wise Protector), help lower the electricity costs borne by Filipino consumers.

 And, like a winner in the inane quiz shows of American TV, the Chief was told that was not all.  She was also promised the creation of 10,000 new jobs.  This is the expected consequence of the ordained expansion of SMC’s food group in the production and sale of chicks, pork, feeds, and fat-based concoctions called ice cream. 

 And there was more committed.  SMC also committed to further help the Filipino consumer by making broadband and high-speed internet more accessible to Filipinos using Meralco’s “broadband over power lines” initiative.  How SMC could commit the use of Meralco’s initiatives after acquiring only 27% of Meralco’s voting rights is not reported to have been told the Chief.  If SMC did tell her how it would be accomplished with not even a blocking minority vote in the equity of Meralco, then the President could be keeping it a secret. 

 SMC also promised to provide stable and sufficient water supply to 25 million people in the Greater Manila Area though the proposed Laiban Dam project.  The key word is “proposed.”  All that SMC had done, according to its press release on 09 February, was to simply submit an unsolicited proposal to the Metropolitan Waterworks and Sewerage System (MWSS).  The proposal is still to be accepted by MWSS by agreeing to be SMC’s joint venture partner pursuant to the National Economic and Development Authority’s Guidelines and Procedures for Entering into Joint Venture Agreements.

 Is the mention of this project to the Chief a non-verbal message to MWSS to get off its butt and accept the proposal pronto?  So, what happens to the 3,500 families of upland farmers, dumagats and Remantados, who depend on the area’s forest, rivers and farm lots?  Dam them?

 Finally, SMC is reported to have committed to provide more affordable gas and petroleum products to Filipinos. Obviously, SMC will be able to deliver on that promise on account of Petron.

 At Petron, SMC is admittedly “represented” by three directors.  “Represented” is in quotes because SMC, to the best of my knowledge and belief, does not own a single share in Petron.  What its does own is an option to acquire and purchase from SEA BV up to 100% of the latter’s interests in SEA Refinery Corporation which, in turn, owns a total of 51.1% of the outstanding shares of Petron Corporation.

 How a mere option holder can be entitled to have three directors now in the board of a corporation it still is thinking of buying into up to 51% within the next two years is for ordinary sinners like us a deep mystery that our feeble minds cannot fathom. 

 All that we can do, in these days of suffering penance (not all of which is voluntary), is to trust in SMC’s patron saint and invoke his holy name.  So, please repeat after me, “Saint Michael the Archangel, defend us in battle, be our protection against with wickedness of ….”
 

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