A director’s duty

There goes Joker Arroyo again, shooting his mouth off. In his typical cavalier, shoot first, ask questions later manner, Joker is asking for the heads of the government’s seven nominees in the board of San Miguel Corp. His reason: They voted in favor of a move that would allow Southeast Asia’s biggest food, beverage and packaging conglomerate to pursue growth. Joker needs to understand that the government’s nominees to corporations where it has a stake are not merely drones or robots or "delegates with instructions."

They have the responsibility to protect not just the interests of the specific bloc they represent but, more importantly, the interests of everyone with a stake in the company. In other words, it is the duty of the directors to ensure that the company in whose board they sit on remains profitable.

This is a duty that carries more weight than simply executing the orders of their principal. This makes a lot of sense because, if the company continues to make money, then everyone is happy, including the government. This is what is known as "fiduciary responsibility."

In a 1989 decision involving the same corporation, the Supreme Court had the occasion to discuss the duty of a director when it held that while it is conceded that the director (delos Angeles) in this case sits in the SMC board of directors by the grace of the PCGG, it does not follow that he is legally obliged to vote as the PCGG would have him do that he cannot legitimately take a position inconsistent with that of the PCGG. No less than the High Tribunal emphasized that it is the director’s duty to vote according to his own independent judgment and his own conscience as to what is in the best interest of the company. SMC is embarking on a stock rights offering.

To cut through the technical mumbo-jumbo, this basically means that the company is issuing more stocks so it can raise funds, in this case over $280 million, to finance its growth and expansion plans. San Miguel has certainly been on a roll. It has been acquiring companies abroad to fuel its drive to become a $10-billion company by 2007.

These are not mom-and-pop operations, mind you.

These are themselves industry leaders in their home countries.

Take the case of Australian dairy giant National Foods Ltd., for instance. Just recently, San Miguel bought Singapore ice cream maker King’s Creameries Pte. Ltd.

Last year, it acquired Thai Amarit for $102 million and entered into a joint venture with the Thai Life Group to build a distillery and bottling plant in Thailand. Yes, the 115-year-old San Miguel is certainly turning into the Philippines’ first truly multinational corporation.

With this much activity, the company certainly needs all the resources it can lay its hands on, and a stock rights offering is a perfectly legitimate way San Miguel can raise cash and still remain flexible enough to pursue its goal of becoming a regional powerhouse. And here you have Joker asking for the heads of the government’s seven nominees in San Miguel because they voted to allow the stock rights offering. Come on.

Instead of screaming high treason, he should be commending these people for recognizing a good investment when they see one.

For comments, e-mail at [email protected]