Corporate governance and the issue of transparency continues to hover over the corporate dispute involving the majority and the minority shareholders of listed firm Philippine Racing Club Inc. (PRCI).

The internal wrangling in the board that has reached the courts provides an interesting study on the corporate-governance standards practiced by listed companies in the Philippine Stock Exchange (PSE). For PRCI, the tit-for-tat between the warring shareholders has assumed emotional dimensions since the dispute involves Malaysian shareholders, who are in the majority coalition, and Filipino shareholders in the minority group.

The issue of shareholders’ rights has, time and again, been raised in several listed companies. This is especially true for corporate actions that raise questions on their transparency and on whether the moves of the listed firm have the interests of the shareholders. This is what is said to be at the root of the ongoing intracorporate dispute involving the shareholders of PRCI. For now, there is an impasse at the PRCI as the possible resolution of the dispute continues to be in limbo. As military strategist Sun Tzu posits, an impasse is a bad thing to happen in the conduct of war.

What provides an interesting sidelight to the dispute involving the warring majority and minority directors of the board is  the protection of shareholders’ rights. Can the shareholders, for instance, raise the acknowledgment of their rights in questioning a corporate action? This has proved to be a contentious issue as the minority members of the board have raised what are reported to be legitimate issues insofar as the future of PRCI and, by extension, its shareholders is concerned.

The PRCI intracorporate conflict began when some Filipino shareholders asked the PRCI board to disclose the details of what they say is an alleged lopsided swap deal that would have transferred the P10-billion Sta. Ana racetrack to a P25-million firm called JTH Davies, also a listed company. The faction of the board of directors of the PRCI led by the tandem of Wincorp’s Santiago Cua Sr., also known as Cua Sing Huan, and the Malaysian-Thai-Chinese Datuk Surin Upatkoon, later on branded the Filipino shareholders led by lawyer Brigido Dulay as  “a noisy minority” and “obstructionists.”

It would seem that the Cua Sing Huan-Surin Upatkoon group probably forgot, many thought, that in this country, there is a Code of Corporate Governance that makes management and directors accountable to shareholders, both majority and minority. We recall that the Filipino shareholders did what was within their rights: go to court and stop the consummation of the deal. It is within their right to raise questions on a matter concerning their shareholding.

The Filipino minority raised the following issues: first, that the Malaysian-led group recently bought a company that is perceived by many as “moribund”. JTH Davies Holdings then was  practically a leftover shell after it divested itself of its business assets and investments. It even publicly admitted that it incurred major losses after its divestments and announced that it has downgraded its authorized capital stock from a decent P200 million to a miniscule P25 million.

They also questioned why the Malaysian-led group wanted to swap stock certificates of that P25-million firm with the title of ownership to the priceless Sta. Ana race track. Many thought that the PRCI row should not have gotten out of hand had the Malaysian-backed faction respected the principle of transparency -- that access to corporate information is not just a privilege but also a right of a shareholder.

Perhaps the conflict could have been avoided had the Malaysian-backed faction fully disclosed to the Filipino shareholders the plan and the wisdom behind the purchase of a firm perceived as less than healthy, and told them the logic and business model behind the swapping of a valuable piece of real estate with stock certificates of a shell corporate entity.

Since the dispute erupted in the open, the Makati Regional Trial Court and the Court of Appeals have uphold the Filipino minority shareholders’ position and, therefore, effectively stopped the Malaysian-backed faction from consummating the swap deal. However, the Supreme Court, through Associate Justice Minita Chico-Nazario, issued a temporary restraining order (TRO). This means the issues on corporate governance and transparency on the matter of the PRCI dispute will remain in limbo.

Parañaque’s dynasty issue

There is a looming issue of dynasty that Parañaque City Mayor Florencio Bernabe Jr. may have to contend with, something that the business sector may find unpalatable given the renewed activism from entrepreneurs and businessmen on good governance. We understand that Tuesday Club member Rep. Roilo Golez may have to stage a breakaway of sorts due to the dynasty issue that is now being leveled at Bernabe. Bernabe is being accused of lack of political will for his seeming inability to control his relatives’  political plans. What the people of Parañaque City are hoping their mayor would do is to stop his relatives from seeking electoral posts.

Parañaqueños who believe in Bernabe’s style of governance are now afraid that the issue of “Pamilya Inc.” could be his Waterloo in the 2010 polls. His adversaries claim he is about to transform the city into one big Bernabe Family kingdom. Rep. Eduardo Zialcita voiced this claim in a recent privilege speech. Bernabe is said to be fielding a brother in the congressional contest for the city’s first district while his son is seeking a berth in the second district’s councilor slate. Another son is an incumbent official of barangay BF.

Bernabe’s move is definitely eroding his hold on his believers. It has also brought together other prominent political personalities in the city against him.

Golez is reportedly “quietly irked” by the grand “Pamilya Inc.” scheme since it effectively takes him out of the future political equation in Parañaque. Is the mayor preparing for Roland Bernabe’s—or his son Benjo’s—succession to City Hall? That is the big worry of the Golez camp.

If Mayor Bernabe does not rethink his “Pamilya Inc.” strategy, he might lose Golez and other supporters to the strong alliance of Zialcita and former Laguna vice governor Edwin Olivarez, who already left his province mates to capture the seat being vacated by Zialcita. Minus the support of other political personalities, Bernabe will only have his relatives to count on. He might not have enough kapamilya to help him keep his hold on City Hall. Which is disheartening, indeed, after the success of  his initiatives for Parañaque.

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