I don’t think the Philippines can be faulted for human rights violations or even in the matter of labor standards the way some of our neighbors are clearly culpable. But we are guilty as hell in the matter of poor financial and legal transparency. In other words, Enron-like danger exists here and investors who still come here do so at some considerable risk.
Is Calpers the first of the big foreign investors to pull out because among other things, the financial reporting of our corporate sector cannot be trusted? The Americans are introducing post-Enron reforms. We can’t be left behind.
I received two e-mails from the current president of the Financial Executives Institute or Finex in reaction to my columns on the need to adopt post Enron reforms in our corporate financial reporting rules. Dr. Conchita L. Manabat informed me that studies have been made on the matter and they have found good evidence that reforms are indeed, urgently needed.
But, she lamented, the major players in the accounting profession are apparently not too interested when the studies were presented, as late as 1998 in the annual convention of PICPA in Cebu. I have requested for a copy of the studies. The good news is, the SEC chairman appears interested. When self regulation fails as it did in the case of Enron, government regulators must step in. This is just as well since these studies must not be allowed to just gather dust. They spent good money to get them done.
To get a flavor of Dr. Manabat’s e-mails, here are some portions.
Financial reporting is very much a Finex concern. The issue is really too close to home that Finex has continuing initiatives to address such concern long before the Enron scandal surfaced.
In 1997, Finex commissioned a study, Assessment of Financial Reporting Practices of Publicly-listed Companies. It covered 122 firms listed in the Philippine Stock Exchange (PSE) for the period 1991-1995. It unfolded a number of financial reporting violations by the companies studied. All of them committed at least one violation.
In general, the study concluded that Philippine firms tended to comply only with the basic financial statement disclosure requirements of the generally accepted accounting principles (GAAP). Among the recommendations given is the need to strengthen the financial reporting control system.
Finex caused a symposium to discuss the results of the study with the heads of the Securities & Exchange Commission (SEC), PSE, Bangko Sentral ng Pilipinas (BSP), Professional Regulation Commission (PRC) thru the Board of Accountancy, the Philippine Institute of Certified Public Accountants (PICPA) and other regulatory agencies invited. Finex also joined SEC in exposing the results of the study to the listed companies. The study was funded by the Capital Markets Development Project, an initiative spearheaded by Finex.
The study paved the way for other studies where Finex had its dimension. In the April 1999 issue of Technical Notes, a publication of the Development Center for Finance (DCF) [a non-profit, non-stock organization established by the Finex Foundation & the University of the Philippines College of Business Administration], Debugging Holding Company Reports by Arthur S. Cayanan was featured.
It was based on a survey of the annual reports of 16 listed Philippine holding companies from 1995 to 1997. The study reveals the low compliance rate of holding companies to financial reporting rules and regulations, especially as regards disclosure of summarized information for significant affiliates. This indicates a weak monitoring system. This concern was previously raised in the 1997 study.
I appreciate your keen interest in proper financial reporting practices. I used to be the chairman of the Board of Accountancy and I also lead an accounting practice in the country. I caused the study’s exposure to the membership of PICPA during the 52nd annual convention in Cebu in 1998.
However, the major players in the accounting profession then, were apparently not too receptive.
Last Feb. 13, 2002, Finex had a dialogue with the SEC Commissioners on the issues of financial disclosures, accreditation of external auditors, concerns on credibility of financial statements, and other related matters. Finex has offered assistance to the SEC in addressing the monitoring concerns over the filed audited financial statements with the said agency.
The dialogue is merely the start of more encounters in the future.
Hopefully, something comes out of these initial efforts. We need to clean up our act in the corporate sector if we are to attract the investors we need to get our economy going. I guess if we closely monitor developments, breathe down their necks, things will move.
This is from the Washington Post Style Invitation, in which it was postulated that English should have male and female nouns. Readers were asked to assign a gender to nouns of their choice and explain their reason. Here are some of the best submissions:
SWISS ARMY KNIFE: Male, because even though it appears useful for a wide variety of work, it spends most of its time just opening bottles.
KIDNEYS: Female, because they always go to the bathroom in pairs.
TIRE: Male, because it goes bald and often is over-inflated.
HOT AIR BALLOON: Male, because to get it to go anywhere you have to light a fire under it...and, of course, there’s the hot air part.
SPONGES: Female, because they are soft and squeezable and retain water.
WEB PAGE: Female, because it is always getting hit on.
SHOE: Male, because it is usually unpolished, with its tongue hanging out.
COPIER: Female, because once turned off, it takes a while to warm up. Because it is an effective reproductive device when the right buttons are pushed. Because it can wreak havoc when the wrong buttons are pushed.
SUBWAY: Male, because it uses the same old lines to pick people up.
HOURGLASS: Female, because over time, the weight shifts to the bottom.
HAMMER: Male, because it hasn’t evolved much over the last 5,000 years, but it’s handy to have around.
REMOTE CONTROL: Female...Ha!...you thought I’d say male. But consider, it gives a man pleasure, he’d be lost without it, even as he doesn’t always know the right buttons.
(Boo Chanco’s e-mail address is bchanco@bayantel.com.ph)