(Continued from Wednesday)
IN justifying the recent Supreme Court decision on the Philippine Long Distance Telephone Co. (PLDT), which dealt a devastating blow to the country’s policy of economic nationalism, Justice Alfredo Benjamin Caguioa, who wrote the decision, declared that if there is a breakdown of nationalism in a company–if it serves foreign interests mainly–it is not the Court’s fault but that of the firm’s Filipino directors and officers. Caguioa is the Court’s most junior justice, the last to be appointed by his college buddy, former President Aquino.
In his closing paragraph in that November 22, 2016 decision, Caguioa wrote: “If the safeguards (against alien foreign control) fail, then that is not the fault of the Constitution.
What a desperate attempt by Caguioa to relieve himself of any responsibility in writing and voting for a decision that would allow foreigners, mainly the biggest and controlling stockholder Indonesian magnate Anthoni Salim, to continue using corporate artifices to skirt the Constitution’s 40 percent limit on foreign control of a public utility.
The Supreme Court back in 2011, by a vote of 11 to 2, ruled that PLDT had skirted the 40 percent limit. In 2012, it issued a resolution to clarify its decision: Foreign-owned shares should not exceed 40 percent for each class of shares. Both rulings were written by the most senior justice, Antonio Carpio.
Securities and Exchange Commission Chair Teresita Herbosa had issued in 2013 a draft memorandum that complied strictly with the Court’s resolution, that is, that foreign ownership should not exceed 40 percent for each class of shares. However, after pressure from PLDT and the stock market, she issued a new one that ruled that foreign ownership should be computed on the basis of the total number of all kinds of shares, combined.
This allowed PLDT to skirt the 2011 Court decision, since it issued 150 million “voting preferred shares” worth P150 million, to its employees’ pension fund. The fund of course was classified as a Filipino entity, its beneficiaries being PLDT’s employees, even if it is controlled ultimately by the Indonesian tycoon, as its biggest single stockholder.
That these voting preferred shares make up an artifice to skirt the Court’s decision is obvious in the fact that while its value, P150 million, was insignificant compared to the common shares’ P430 billion, its number—150 million—was more than half of the 216 million common shares.
PLDT then computed the foreign ownership on the basis of the 366 million shares (the sum of 150 million preferred and 216 million common stocks) and, as if by magic, the Filipino pension fund was portrayed as the biggest stockholder. In this absurd calculation, foreigners were portrayed as having only 32 percent of PLDT, not 74 percent, which is their share of its common stock.
A petition was filed in 2013 asking the Court to rule that the Herbosa memorandum did not implement the Court’ s 2011 decision. This recent Court decision ruled eight to five denied the petition, that nothing was wrong with the SEC ruling memorandum.
Its reasons for doing so? That the Court’s 2011 decision had a definition of “capital” which the SEC followed, and this takes precedence over the 2012 ruling (which gave a clear procedure to compute foreign ownership), since the latter was only a “Resolution,” not a decision.
And anyway, the recent decision pointed out, the 2012 resolution stated that the Court’s 2011 ruling was final and no further pleadings would be entertained, which the petition questioning the SEC memorandum was.
Confusing? Certainly, and this 2016 decision will go down in our legal history as a clear example of conceptual contortions and absurd argumentation to favor foreigners’ interests.
The Court ruling even swallowed hook-line-and-sinker a study by a foreign bank (the German Deutsche Bank) warning of financial disruption if the SEC memorandum is rescinded and the method for computing foreign ownership as stipulated in the Court’s 2012 resolution is followed.
The Court quoted the Deutsche Bank study that if the Constitution’s 40 percent ceiling on foreign capital is complied with, it is not only PLDT whose foreign stockholders would have to sell P103 billion of its shares to Filipinos. Foreign shareholders in Globe Telecom, Ayala Land, and two other big public-utility firms would have to sell P70 billion of their shares to Filipinos too. The study claimed that the local stock market couldn’t absorb such sales.
What kind of Supreme Court do we have that is so gullible as to believe in such a study and conclusion of a foreign bank?
Filipino big businessmen can very easily buy off such foreign shares, if foreigners are required to dispose of them. Not only will they be buying these shares at bargain prices (because they will be required to sell) but they will simply raise funds by borrowing from banks and using these blue-chip shares as collateral.
More importantly though, what kind of Supreme Court do we have that allows the Constitution to be hostaged by a business situation created by violating the country’s fundamental law?
Foreigners have been violating the constitutional 40 percent foreign-ownership limit, and the Court claims now that their shares are too huge to be sold to Filipinos so that it cannot implement the Constitution’s provisions? What kind of Court is this?
With foreigners allowed by this SC decision to continue their control of a public utility which the Constitution clearly forbids, the Court’s role in killing nationalism is so crystal clear.
It has been PLDT’s biggest and controlling stockholder Salim (purportedly in consultation with the second largest shareholder the Japanese NTT group) who has been determining the telecom giant’s board of directors. Aside from Salim’s own executives – chairman Manuel V. Pangilinan, his main counsel Ray Espinosa, and Albert del Rosario – the Indonesian has been clever in putting in the board such big businessmen as Jollibee owner Tony Tan Caktiong (though replaced last November by Convergys chair Marife B. Zamora) and sugar magnate Pedro Roxas. An indication of the change in political weather was the appointment of President Duterte’s SSS Chairman Amado Valdez in the board to replace diehard Benigno Aquino man Juan Santos.
PLDT certainly represents a breakdown in economic nationalism since foreigners are allowed—because of the SEC memorandum and then this recent Court decision—to contravene the Constitution’s categorical provision that aliens cannot control a public utility and cannot hold more than 40 percent of its capital. (A clear indication of the breakdown of economic nationalism there is the fact that the foreign entities hold 74 percent of PLDT’s common stocks so that they have been able to remit, to their Hong Kong offices mainly, a total of $7 billion since 2000. The Filipino owner of those “voting preferred stocks,” PLDT’s pension fund, which PLDT claims owns 41 percent of the firm, in contrast received just $1.5 million.)
Yet Caguioa in the decision he wrote is in effect saying that this assault on economic nationalism would not be the government’s fault but that of Pangilinan, Espinosa, Del Rosario and other “Filipino directors and Filipino officers of that corporation.”
Caguioa is so very wrong.
As demonstrated in all countries in the world since nationalism became a force for building nations and their economies, it is the State which undertakes the means to foster nationalism. This it does through a legal infrastructure, whether through its Constitution or strong regulatory bodies, to reserve the country’s resources for its nationals; through rituals such as National Days and the singing of the national anthem; in most countries, the banning of dual-citizenship status; and in extreme cases even military service.
But looking at the list of PLDT’s directors, Caguioa may in fact be correct, to some extent.