Brazenness of a corporate injustice
November 21, 2001 | 12:00am
On November 7, exactly three weeks ago, amidst the cool, crisp and sparkling air of Baguio City, a corporate injustice, hot to its very core, was inflicted upon stockholders of the Baguio Country Club (BCC), a matter that should be critically brought before the attention of the Securities & Exchange Commission. Dr. Romeo Echaus, chairman of the Filipinas Retirement Paradise, Inc., and the venerable founder of the 40-year-old Standard Insurance, Inc., when we discussed the matter just a couple of days ago, had still not recovered from the extremely arbitrary manner the elections for the BCC board of directors were conducted during its annual stockholders’ meeting. Dr. Echaus, lawyer and businessman, who has sat on the boards of a great number of companies and participated actively in stockholders’ meetings throughout his long and extensive career, was horrified!
Equipped with his one BCC share and being a stockholder of good standing, he was not prepared for the arbitrariness and injustice he witnessed during the stockholders’ meeting. When he inquired about the specific purposes of the meeting, not having received the agenda beforehand nor even during the meeting, he and other complaining stockholders, got no answers. When he persisted with his complaint that he could not just be deprived of his right to vote – having in fact attended in person, traveling to Baguio for the purpose – he was bluntly and curtly told that the BCC was following the so-called "cumulative voting system" and the "proxy rule." Shocked because he was there in person as a legitimate member of the BCC and had not given his proxy to anyone, he could not believe that this was indeed actually happening before his very own eyes, something he probably had never witnessed in his 40 years of corporate experience.
When Dr. Echaus insisted that even if he had only one share, he had a right to vote his share, he was given the unbelievably insulting response: "Do you think your vote will change the outcome of the elections?" This was a retort as unprincipled as it was funny but certainly very telling about the disgraceful conduct of the proceedings.
There were other stockholders present who took the floor after Dr. Echaus. They insisted on their rights having likewise attended the meeting in person. They had asked why the elections appeared to be over when they should have been allowed to cast their votes personally because they had not given away their proxies, and were told that the BCC used the cumulative voting system.
So what if such cumulative system was utilized? Was the presiding official referring to that provision in our Corporation Code where the stockholder may vote his share/shares "for as many persons as there are directors or he may cumulate said shares and give one candidate as many votes as the number of directors to be elected multiplied by the number his shares shall equal..."? But if indeed this was what the presiding officer was referring to, it cannot by any means be interpreted to deprive a stockholder of his right to cast his vote in person.
When finally Dr. Echaus was allowed to cast his vote after being told that his one vote would not be able to alter the election results, there was no ballot with which to cast his vote. In fact, there had been no ballots available for the stockholders present with which to cast their votes. Isn’t this an anomalous situation? You can’t just say that the proxies were by themselves used as the ballots. I know for certain that it is a violation of the very clear provision located in the same section providing for cumulating one’s share or shares, where it is provided that the elections must be "by ballot" and every stockholder entitled to vote shall have the right to vote in person or by proxy the "number of shares of stock standing at the time fixed in the by-laws in his own name on the stock books of the corporation."
The "proxy rule?" What did the presiding officer mean by this? Personal presence has always prevailed over a proxy previously given. What makes it even more glaring is the fact that Dr. Echaus and some of the others had not given away any proxies. The above mentioned provisions of the Corporation Code in fact are supposed to enhance and/or explain a stockholder’s basic right to vote his shares of stock in the corporation. Instead of belittling one share of stock, the rights pertinent to even just one share, should be held sacred. The "proxy rule" – what kind of a ridiculous nonsensical excuse is this?
There were other grave and serious substantive issues the stockholders and their lawyers endeavored to raise but were so swiftly brushed aside. This was the fate precisely of a TRO over the election proceedings presented by counsel, which had been obtained from the Regional Trial Court of Makati. The response from the presiding officer: the TRO is being honored, but there being a quorum, the meeting can validly proceed. This is what I call outrageous doublespeak!
One serious concern had to do with the process of validation of proxies, which took place on November 5, two days before the stockholders’ meeting. No notice whatsoever was given to the opposing forces. It was only in the very early morning of the day of the stockholders’ meeting, at 3 a.m., mind you, that the latter were informed of their invalidated proxies. But why? And if the proxies by themselves were made the very ballots for the election count, wasn’t this a very critical part of the electoral process which required due process and notice? But worst still, can this be done, just like that – can this be legally done? It was certainly necessary for the rule of law, if not for basic transparency and decency to allow counsel for any of the opposing forces to know the identities of the proxies that had been validated. And, which is even more important, the names of those whose proxies had been invalidated...possibly a formidable bloc of 463 shares and another 376 shares. Was this the majority vote that could not be counted at all costs?
It is also vital and necessary to take a look at the reasons why a couple of stockholders were physically barred by a cordon of security guards to enter the premises. Can you imagine this? Too brazen...too bold!
I certainly fully understand the great disappointment and concern of Dr. Romeo Echaus and the other stockholders over the arbitrary conduct of the stockholders’ meeting and the elections of the BCC. Principled and experienced in the corporate world, highly respected by his associates, he will never give away the proxy of his conscience on this matter. Neither will he and the other principled stockholders allow a shameful transgression of a basic right in the corporate world, a failure of integrity, a hideous lurid corporate injustice, to prevail.
Equipped with his one BCC share and being a stockholder of good standing, he was not prepared for the arbitrariness and injustice he witnessed during the stockholders’ meeting. When he inquired about the specific purposes of the meeting, not having received the agenda beforehand nor even during the meeting, he and other complaining stockholders, got no answers. When he persisted with his complaint that he could not just be deprived of his right to vote – having in fact attended in person, traveling to Baguio for the purpose – he was bluntly and curtly told that the BCC was following the so-called "cumulative voting system" and the "proxy rule." Shocked because he was there in person as a legitimate member of the BCC and had not given his proxy to anyone, he could not believe that this was indeed actually happening before his very own eyes, something he probably had never witnessed in his 40 years of corporate experience.
When Dr. Echaus insisted that even if he had only one share, he had a right to vote his share, he was given the unbelievably insulting response: "Do you think your vote will change the outcome of the elections?" This was a retort as unprincipled as it was funny but certainly very telling about the disgraceful conduct of the proceedings.
There were other stockholders present who took the floor after Dr. Echaus. They insisted on their rights having likewise attended the meeting in person. They had asked why the elections appeared to be over when they should have been allowed to cast their votes personally because they had not given away their proxies, and were told that the BCC used the cumulative voting system.
So what if such cumulative system was utilized? Was the presiding official referring to that provision in our Corporation Code where the stockholder may vote his share/shares "for as many persons as there are directors or he may cumulate said shares and give one candidate as many votes as the number of directors to be elected multiplied by the number his shares shall equal..."? But if indeed this was what the presiding officer was referring to, it cannot by any means be interpreted to deprive a stockholder of his right to cast his vote in person.
When finally Dr. Echaus was allowed to cast his vote after being told that his one vote would not be able to alter the election results, there was no ballot with which to cast his vote. In fact, there had been no ballots available for the stockholders present with which to cast their votes. Isn’t this an anomalous situation? You can’t just say that the proxies were by themselves used as the ballots. I know for certain that it is a violation of the very clear provision located in the same section providing for cumulating one’s share or shares, where it is provided that the elections must be "by ballot" and every stockholder entitled to vote shall have the right to vote in person or by proxy the "number of shares of stock standing at the time fixed in the by-laws in his own name on the stock books of the corporation."
The "proxy rule?" What did the presiding officer mean by this? Personal presence has always prevailed over a proxy previously given. What makes it even more glaring is the fact that Dr. Echaus and some of the others had not given away any proxies. The above mentioned provisions of the Corporation Code in fact are supposed to enhance and/or explain a stockholder’s basic right to vote his shares of stock in the corporation. Instead of belittling one share of stock, the rights pertinent to even just one share, should be held sacred. The "proxy rule" – what kind of a ridiculous nonsensical excuse is this?
There were other grave and serious substantive issues the stockholders and their lawyers endeavored to raise but were so swiftly brushed aside. This was the fate precisely of a TRO over the election proceedings presented by counsel, which had been obtained from the Regional Trial Court of Makati. The response from the presiding officer: the TRO is being honored, but there being a quorum, the meeting can validly proceed. This is what I call outrageous doublespeak!
One serious concern had to do with the process of validation of proxies, which took place on November 5, two days before the stockholders’ meeting. No notice whatsoever was given to the opposing forces. It was only in the very early morning of the day of the stockholders’ meeting, at 3 a.m., mind you, that the latter were informed of their invalidated proxies. But why? And if the proxies by themselves were made the very ballots for the election count, wasn’t this a very critical part of the electoral process which required due process and notice? But worst still, can this be done, just like that – can this be legally done? It was certainly necessary for the rule of law, if not for basic transparency and decency to allow counsel for any of the opposing forces to know the identities of the proxies that had been validated. And, which is even more important, the names of those whose proxies had been invalidated...possibly a formidable bloc of 463 shares and another 376 shares. Was this the majority vote that could not be counted at all costs?
It is also vital and necessary to take a look at the reasons why a couple of stockholders were physically barred by a cordon of security guards to enter the premises. Can you imagine this? Too brazen...too bold!
I certainly fully understand the great disappointment and concern of Dr. Romeo Echaus and the other stockholders over the arbitrary conduct of the stockholders’ meeting and the elections of the BCC. Principled and experienced in the corporate world, highly respected by his associates, he will never give away the proxy of his conscience on this matter. Neither will he and the other principled stockholders allow a shameful transgression of a basic right in the corporate world, a failure of integrity, a hideous lurid corporate injustice, to prevail.
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