The Securities and Exchange Commission (SEC) and the organizations that collaborated with it in the production of the newly-released Code of Corporate Governance are to be commended for having brought forth a fine piece of work. As its name suggests, the Code has brought together, in coherent and comprehensive fashion, all the regulations and issuances intended to make this country’s corporations operate in a lawful, fair and transparent manner.
The Code could not be more essential. Despite all government efforts – legal as well as administrative—to bring it about, good corporate governance remains the exception rather than the rule in this country. Most Corporations regularly commit violations of laws and regulations governing their relations with their stakeholders—the government, their stockholders, their creditors and the communities in which they operate. Through manipulations of books of account, failures to disclose, misrepresentations, manipulations of all sorts and outright falsehoods, most corporations have cheated and deceived their stakeholders.
These corporate transgressions the Code of Corporate Governance seeks to prevent. The rules on disclosures have been tightened; corporations are now required to provide written explanations for acts that appear to be questionable. Independent directors now have to meet higher standards. And reporting requirements—especially to the government and to stockholders —are now tougher.
If strongly enforced, the Code will go a long way toward establishing good corporate governance in this country. A body of laws and regulations, no matter how well crafted, will not amount to much if it is not strongly enforced. The Code of Corporate Governance is concededly a good piece of regulatory draftsmanship. But it is only half the battle; the other—and ultimately the more important—half is reinforcement.
Unfortunately, it is on the field of enforcement that the corporate-governance battle—like almost all regulatory battles in this country—is likely to be lost. The SEC does not have a record of consistently strong performance in the enforcement of Philippine laws and regulations governing corporate governance; in fact, if the truth must be told, its record is rather dismal. How often has the media reported that this or that business entity has, upon investigation, been shown to be unregulated or to not have filed reports with the SEC for years or to have grossly misrepresented its financial situation? And how about the series of scams that over the years have fleeced hundreds of thousands of Filipinos because of the SEC’s inability to do a good job of supervising corporations and their incorporators?
Why has the SEC not been doing a good job of supervising its corporate flock? The answer was given by current chairman Teresita Herbosa in her testimony before the Senate committee investigation into the Janet Lim-Napoles scam, which brought out the fact that almost all of the recipients of the PDAF (Priority Development Assistance Fund) money were bogus and address-less entities. The SEC was grossly understaffed—I cannot recall the number of employees that was stated, but that number struck me at the time as being ridiculously low—she said, and it consequently was not in a position to closely supervise the approximately 25,000 corporations registered with it. How, indeed, can the SEC do a perfect job of keeping the nation’s corporations toeing the line with grossly inadequate manpower and facilities?
Just as there is no such thing as a semi-pregnancy, so there is no such thing as a half-won battle. A battle either is won or it isn’t. With the issuance of the Code of Corporate Governance, the battle to raise the level of corporate governance in this country is half-won. The other half of the battle will be won only when Chairman Herbosa and her SEC folk are given all the tools they need to effect full enforcement of the Code.
E-mail: rudyromero777@yahoo.com
