PSE president was asked to resign due to a conflict of interest

Former Philippine Stock Exchange chairman Vivian Yuchengco has accused outgoing PSE president Cayetano Paderanga of breach of contract for maintaining concurrent positions in PNOC Development & Management Corp. (PDMC) and CIBI Information Inc.

In an interview with the The STAR, Yuchengco admitted that she, along with PSE broker-directors Ismael Cruz and Francisco Villaroman, raised the issue of conflict of interest between Paderanga’s PSE position and his two other private-sector positions.

Paderanga is currently president and chief executive of PDMC, a sister company of publicly-listed PNOC Exploration Co., and president of CIBI, a credit information bureau that collates business information for the private sector and publishes the top 5,000 firms with the Securities and Exchange Commission.

Under the Securities Regulation Code, the PSE president should not be a member and should not be associated in any capacity, directly or indirectly, with any broker, dealer or member, or listed company of the bourse.

Yuchengco, a director of the PSE, said Paderanga made the board believe that he had already relinquished his post at PDMC as required by the terms of his employment with the PSE. "We were not aware of his two other jobs until we saw his letter to the Philippine STAR, explaining that he has been in a holdover status with the PDMC for the last six months because they could not find any suitable replacement for him. We all presumed that he already resigned because he was directed by the board to give up his position in PDMC. What’s worse is he did not disclose to us that he had renewed his contract with PDMC when he was again elected in March,"Yuchengco said.

"He violated his contract with the PSE. If he could not resign at once from PDMC, he should have at least delayed his start as PSE president. I remembered that when he assumed his position as president of the exchange, he assured us that he would be able to discharge his functions to the fullest extent with no conflicting responsibilities elsewhere," Yuchengco said.

"Had we not raised this, he would have stayed on. The PSE is more than a 24-hour job. He could not have other CEO jobs. As president of the PSE, he is required to concentrate all his resources on the exchange which is one of the most important financial institutions in the country," Yuchengco said.

She said she would not allow the exchange "to suffer from a president who attends to his job for only two hours."

"How can we hire him on a full-time basis when he only stays at the exchange for two hours, " Yuchengco said.

Paderanga, who resigned from his post as PSE president Wednesday after a six-month stint, maintained that he had disclosed his two private sector positions to the exchange’s board of directors.

"I have done nothing wrong. I think I have disclosed everything to them prior to taking this PSE position.

I have also disclosed that I could go back to my teaching job in UP anytime," Paderanga said.

Paderanga said the board will go through a selection and election process for the new board president. "We are now working on the guidelines for the selection of the new president because we don’t want to increase investors’ worries and we want to ensure the smooth operations of the exchange," Paderanga said.

He said while there will be a selection committee to pre-assess the candidates’ qualifications, it would still be up to the PSE board to name his replacement.

Paderanga is confident that the exchange would still pursue the much-needed reforms to attract more investors into the equities market.

SEC chairman Lilia R. Bautista, for her part, said the commission would not interfere with the PSE’s internal problems and just wait for the bourse to name a new president. "We’re sorry that he resigned. We heard that he just wants to devote full-time to his teaching position in UP. But actually he’s giving up a lot because he’s being paid well at the PSE.

Problem is he’s holding concurrent positions in a subsidiary of PNOC and CIBI. I was made to understand that he was asked to choose between PSE and his position in PNOC," Bautista said.

"We will not interfere. It’s their business and organization. But I was assured that they will look for a good president. They said that they will have one soon. They must have somebody. We can only hope they choose a good one," Bautista said.

Bautista said at least three people are being considered for the position but refused to name them as some of them have yet to be consulted by the PSE board.

Sources, however, said former Social Security System head Renato Valencia, a former broker and an investment banker, is among those being considered to fill in the post of PSE president.

Yuchengco said she was hoping to get someone who had no tarnished reputation. "I’m looking for someone who is an administrator, a former broker and has integrity."

She said that she even called up former Finance Secretary Jose Isidro Camacho to ask whether he was interested in the position. "I called him up but he said he was not interested," Yuchengco said.

Yuchengco also said she has not endorsed veteran banker Peter Favila because she knew that he was more interested in taking a position in government.

Yuchengco also clarified that her move to question Paderanga’s presidency had nothing to do with her tiff with PSE chairman Alicia Arroyo. "As you all know, Alice and I are not in good terms but let me just tell you that this issue with Paderanga had nothing to do with Alice," Yuchengco said.

Paderanga is identified with Arroyo, under whose term the exchange had fulfilled its promise to list its shares by end-2003. As much as 40 percent of the PSE’s shares were sold to private investors during her leadership but this was widely criticized by brokers, led by Yuchengco, Filomeno Francisco and Ismael Cruz saying it was done in undue haste and was disadvantageous to the exchange since the shares were sold at a very "low" price.

Prior to his election as president, Paderanga served as an independent director or non-broker director of the PSE for the past three years. He was also a member of the Monetary Board of the Bangko Sentral ng PIlipinas and an executive director of the Asian Development Bank.

Paderanga vowed to help improve investor perception of the Philippines and continue implementing reforms in the local bourse.

He also committed to improve the infrastructure and the processes" in light of new procedures introduced with the enactment of the country’s anti-money laundering law and the emergence of new corporate governance rules all over the world.