Introduction At the apex of stock market, much Importance and approach was given to corporate governance in 1990. Companies tend to overlook corporate governance in a market where the economy is progressing. However, the significance of good governance becomes clearer when the market collapses. Companies having efficient board of directors can start to flourish during difficult times. The stock exchange Is the Icon of free market where prices are determined solely by of supply and demand and transactions are carried out on arms-length basis.
But as the scandal shows, market performance is only as good as the quality of institutions within and outside the market. In this case, the interaction of anachronistic market Institutions and political corruption in the context of a liberalized but poorly regulated market produced a crisis of unprecedented scale. BE Resources Corporation was engaged in a scandal that almost led to the collapse of the local stock market. This scandal is considered as one of the most devastating corporate scandals in the Philippines. This undistributed to the weakened private Investor confidence and stock market’s Image.
Best World Gaming and Entertainment Corporation (BEG) was formed by Dante Tan in early 1998. At the same time, Greater Asia Resources, a leisure and tourism company headed by Eduardo “Minnie” urn, changed Its name to BE Resources. Tan became the major shareholder of BE Resources In 1999 when it acquired the Sheraton Marina Square complex near Manila Bay. Rumors of a merger between BE Resources and BEG spread. Within a span of a couple of months, PASTOR announced Its intention to operate a casino in Sheraton Marina Square. BE Resources also brought In Stanley Ho, Macaw’s casino mogul.
The company’s stock price rose from PH to Phi during this time. However, shortly after Who’s visit to Manila, wherein he faced strong opposition from the Catholic Church and was accused of being a part of the triad gangsters, BE Resources’ share prices plunged to below PH, The SEC and SSE, then, began Investigations and uncovered heavy buying by Tan. He then sold shares at a discount to friends and clients. These renovations were reported on the SSE board at prices that were over twice the amount actually paid. Furthermore, half of the daily turnover circulated around 10 brokerage firms.
As a result, fines and penalties amounting to PH. 05 million from the infraction of the Securities Regulation Code (ISRC), the Corporation Code, and related laws have been enforced. In addition, as of March, the Department of Justice has charged four brokers and five individuals in relation to this case. II. Statement of Facts and Problems Relevant Facts * Dante Tan, a friend of former Pres. Joseph Strand and contributor to the latter’s presidential campaign, formed Best World Gaming and Entertainment Corporation (BEG) in 1998. In 1999, Tan became a majority shareholder of tourism and leisure company called BE Resources and BEG became a wholly- I OFF companies were able to secure gambling licenses from the Philippine Amusement and Gaming Corp.. (PASTOR). In December 1998, BEG won the exclusive contract to operate a nationwide online bingo franchise as well as the Jutting-like Quick Pick-2 gambling game. * Within one year from October 1998 to October 1999, Bow’s tock price Jumped an astounding 18,025% -? from Pop. 80 (US$O. 166) to Phi. O (US$3. 01). * The plan to operate gaming casinos was opposed heavily by the Catholic Church and Ho was accused of being a part of the triad gangsters. * Tan’s sale of his shares to friends and clients at discounted rates. These transactions were then reported to the SSE as twice the amount actually paid. Issues Stock Price Manipulation – painting the ticker, marking the close, hype and dump, squeezing the float, wash sales, and improper matched orders * Lack of rules governing the local stock market
Political corruption and financial corruption Conflict of interest is clearly evident Ill. Areas of Consideration Possible Causes * Greedy attempt to give legal control of gambling funds to a favored gambling friend. * Management’s desire to project a false picture of performance with the aim of driving up the value of the corporation in a competitive global market. * Perpetrated for the benefit of Strand and members of his family, combined elements of political corruption and financial fraud or market manipulation. * Poor regulatory framework that governs the market.
IV. Alternative Courses of Action * Efficient regulation and monitoring of SSE and SEC * Thorough investigation by the government without regular time interval * Transparent presentation of financial status of publicly listed companies * Neglect the problem Decision/Recommendation/Best Solution The best solution to the problem would be for the government to set tighter rules and regulations regarding the monitoring of SSE and SEC. Corporate governance is needed to make corporate managements more accountable, and their auditors more accurate. V. Implementation
The Philippine SEC, as a principal player in matters of corporate governance should effectively implement the Code of Corporate Governance, under resolution no. 135 penalty. The Code aims to promote corporate governance reforms that will raise investor confidence, develop the capital market and help achieve high sustained growth for the corporate sector and the economy. Disclosure is a vital and dominant theme in the Code. The more transparent the internal workings of the company and cash flows, the more difficult it will be for management and controlling shareholders o misappropriate or mismanage company assets.
