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Monday, August 26, 2013

Ramon S.Ang: Is San Miguel Corporation really transparent?

San Miguel’s 2010 annual report states the firm’s view: “The company recognizes that the most cogent proof of good corporate governance is that which is visible to the eyes of its investors,” it says. Bloomberg News
"We always follow the rules!" Ramon S. Ang
SMC Corporate Governance (From SMC Website)
San Miguel has had a long-standing commitment to good corporate governance practices and taking a leadership role in instituting and maintaining practices that represent strong business ethics. These practices provide an important framework within which the Board of Directors and management can pursue the strategic objectives of the Company and ensure its long-term vitality for the benefit of stockholders.

"People keep on shouting the transparency issue because our competitors and copycats keep pushing us to divulge what we will buy and what we will do,” he says. “It’s driven by envies."
Ramon Ang
San Miguel’s change in corporate ownership may cloud investors’ ability to assess the company, says Christopher Leahy, a member of the secretariat of the Hong Kong-based Asian Corporate Governance Association, which represents investors who manage about $12 trillion of assets.
Last year, San Miguel agreed to be taken over by Top Frontier Investment Holdings Inc., where Ang is chairman.
The Philippines-based holding company is controlled by San Miguel directors, including Roberto Ongpin and Inigo Zobel. Both have ties to the Marcos era: Ongpin was the dictator’s trade minister from 1979 to 1986; Zobel’s father sold his family’s San Miguel stake to Eduardo Cojuangco in the 1980s.
In last year’s deal, San Miguel bought 49 percent of Top Frontier. As of March 31, Top Frontier owned 67.2 percent of San Miguel common shares, according to the company’s share sale prospectus in April.
“This is not a structure that lends itself necessarily to transparency and good corporate governance,” Leahy says. “While they are good at running their business, they are not running it with the interest of minority shareholders at heart. If they were, they’d be more transparent.” Bloomberg News

For Leahy, San Miguel’s limited transparency points up a larger concern: The Philippines has the worst governance scores among 11 Asian nations, according to a September 2010 report called “CG Watch 2010” by his association and Hong Kong-based brokerage CLSA Asia-Pacific Markets.
“The issues of governance break down in the Philippines sometimes,” Leahy says.
Many securities laws in the Philippines lag behind international and regional best practices, according to the report.
For instance, under the Philippine Securities and Exchange Commission’s revised corporate governance code, companies are required to appoint two independent directors, or a number that represents at least 20 percent of their board.
“We may also lower the (Philippine) ratings if problems at one of the large conglomerates impair investor confidence, or if political developments cause the government to veer from its commitment to improving governance.” S&P
Standard & Poor’s has its own beefs with San Miguel. It downgraded the firm’s debt-rating outlook to negative from stable in May. The rating company said San Miguel underestimated debt by not adequately reflecting the financial lease payments of its new power business, SMC Global Power Holdings Corp. San Miguel also counted some preferred shares as equity, rather than debt, S&P said. From Bloomberg News