MCIAA board: Epitomizing bad governance?

Last Wednesday, I again had the opportunity to host the annual accounting quiz, jointly sponsored by the Philippine Institute of Certified Public Accountants (PICPA) – Cebu Chapter and the Cebu Federation of Junior Philippine Institute of Accountants (CFJPIA), at the Ayala Activity Center as the event’s Quizmaster. Participated in by the best and the brightest accounting students from the colleges and universities in Cebu, it highlighted this year’s accountancy week celebration.

As the Accounting Quiz, however, concluded and the euphoria brought about by the University of the Visayas’ feat as this year’s champion in the level 2 competition subsided, I can’t help but went through the entire contest from start to finish. As I browsed through the questions once more and recalled how the contestants answered, I easily remembered one item, a question on good corporate governance. It was a question about the delineation between the Board and Management functions that was readily answered correctly by all contestants.

In my solitude, I did wonder. Despite their youth and zero hands-on experiences, these kids were able to address such a question with ease, while the supposedly men and women of proven integrity, managerial experiences, etc. could hardly understand it or say, deliberately refuse to recognize it.

Take the recent controversial severance (as the MCIAA board calls it) payout of P500,000.00 to a retired director of the Mactan Cebu International Airport Authority (MCIAA). Confirmed by the board as have been approved, they are currently defending it to the hilt as legal, and therefore, allowed based on the charter’s provisions.     

Despite all the brouhaha brought about by this incident, we shall take this issue totally devoid of biases. No matter how farcical it may have been, we shall go deeper into this fiasco with tons of objectivity. First and foremost, the most controversial of all, the severance pay of former MCIAA Director Patria Aurora Roa amounting to P500,000.00. For clarity, my Pan Dictionary defines severance pay as “the money paid to an employee by his/her employer to compensate for the loss of his/her job”.

The board, in defending its decision, has invoked the MCIAA charter, particularly, Republic Act No. 6958. In reference, the second paragraph of Sec. 6 of R.A. 6958 indicates that, “The Board shall promulgate its rules relative to meetings, quorum requirements and compensation or allowances of the members of the Board.” 

If we should go further, the Securities and Exchange Commission issued Memorandum Circular No. 6, series of 2009 (the Revised Code of Corporate Governance), which outlines among others, a list of good or ethical corporate practices.   Paragraph J, Article 3 of such Code (Remuneration of Directors and Officers), specifically states that “The levels of remuneration of the corporation should be sufficient to be able to attract and retain the services of qualified and competent directors and officers. A portion of the remuneration of executive directors may be structured or be based on corporate and individual performance.” “Corporations may establish formal and transparent procedures for the development of a policy on executive remuneration or determination of remuneration levels for individual directors and officers depending on the particular needs of the corporation. No director should participate in deciding on his remuneration.”

Clearly, in both references, there is no mention about severance pay. While both references highlighted compensation for rendered services by directors, nowhere can we find that a retiring director shall be given a severance pay for losing a job. Logically, because severance pays are given to those who are unwillingly losing their jobs.

On other hand, probably besieged by the public’s negative reactions, MCIAA General Manager Danilo Augusto Francia created a four-man investigating team to look into the supposed leak of the severance pay documents of retired Director Roa to the media. Whether he created it at the instance of the board, we do not know. Certainly, however, the creation of this team is highly questionable, and its objective is downright deplorable.   

If GM Francia isn’t aware of it, Article 8 of SEC’s revised Code of Good Corporate Governance stipulates on disclosure and transparency requirements. It says, “The essence of corporate governance is transparency. The more transparent the internal workings of the corporation are, the more difficult it will be for Management and dominant stockholders to mismanage the corporation or misappropriate its assets. It is therefore essential that all material information about the corporation which could adversely affect its viability or the interests of the stockholders should be publicly and timely disclosed. Such information should include, among others, earnings results, acquisition or disposition of assets, off balance sheet transactions, related party transactions, and direct and indirect remuneration of members of the Board and Management.”

Likewise, International Accounting Standards No. 24 (Related Party Disclosure), stipulates that compensation of key management personnel and directors (whether executive or otherwise) must be disclosed in the notes to the financial statements. 

The availability of these statutes, circulars and pronouncements, notwithstanding, the MCIAA directors and officers are still adamantly defending their beleaguered turf. In arguing that they (directors) based their decisions on the charter creating the authority, they made the State Auditors looked dumb as the latter declared as baseless their grant of severance pay by invoking the provisions of the same charter.

Amid the ruckus that this fiasco brought about, we can only surmise one certainty. Some or if not, all of them, are not aware of their roles as director. As GM Francia opined, “the board members are officers of the MCIAA because they are part of management”. This statement gives us an idea about the make up of the board. If GM Francia’s mindset is a reflection of the entire board, then lo and behold, the MCIAA is in the wrong hands. 

How I wish the contestants in the recently held accounting quiz bowl would rather be there. No matter how inexperienced they may be, at least, they certainly know the difference between the functions of the board of directors and management and why should there be a demarcation line.

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Happy birthday DLDB. It’s great to be 25. Enjoy the day to the fullest. You’ll only be 25 once in your life, cherish every moment.

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