CMDC wants majority shareholders to have delicadeza

The Capital Market Development Council (CMDC) wants stern prohibitions to keep majority shareholders in any company from voting on corporate decisions where there would be a conflict of interest.

According to the CMDC, further amendments to the Corporate Code are necessary to provide effective exclusion of majority shareholders from exercising their power to vote on DOSRI and related-party transactions.

In its Corporate Governance Reform Program, CMDC stated that majority shareholders and related parties should not be allowed to exercise their voting rights on items where they have a conflict of interest.

To implement this, for instance, the CMDC said the calculation of either majority or 2/3 voting should exclude the shares of the major shareholders with a vested interest in those transactions.

Too often, CMDC said transactions that create conflicts of interest could be easily prevented if there were specific and clear guidelines on how to exclude the interested party from the voting process.

Aside from this provision, CMDC said the code should specifically prohibit any take-over devices that shield management from accountability.

CMDC said there should be a prohibition against excluding minority shareholders from offers to purchase shares of the corporation that benefit them significantly.

It said the mechanism should require the vote of minority shareholders whose vote exceeds a threshhold specified by the by-laws.

These devices and poison pills could be adopted only under very stringent and limited conditions following international best practice, the CMDC said.

"On the whole, all shareholders have the right to their equitable share in the profit and other benefits of ownership of the corporation," CMDC said.

Earlier, the CMDC proposed the creation of an association of minority shareholders to draw up protective mechanisms with the help of regulatory authorities and public interest corporations.

The CMDC said the Philippine Stock Exchange (PSE) has already agreed in principle to provide initial funding support to the proposed association.