Sharing prosperity with stockholders

Sharing prosperity with stockholders

On Nov. 5, 2020, at the height of the COVID-19 pandemic, the Management Association of the Philippines (MAP), as lead organization, launched the Covenant for Shared Prosperity as the response of the business community to the poverty and inequality which continues to plague Philippine society even before and after the pandemic.

To quote the Covenant “We support the vision of the government articulated in ‘Ambisyon Natin 2040’ which states that the Philippines shall be a country where all citizens are free from hunger, have equal opportunities, enabled by a fair and just society that is governed with order and unity. A nation where families live together, thriving in vibrant, culturally diverse, and resilient communities.”

The Shareholder’s Association of the Philippines (SharePHIL) was one of 26 organizations, together with MAP, which pledged and committed to six action points.

As an organization whose mission is to protect and promote the interest of minority shareholders and retail investors, SharePHIL envisions a nation where every Filipino enjoys a quality life and financial security supported by a fair, accessible, and sustainable capital market system. Indeed, this vision is aligned with the 6th action point in the Covenant: “deliver reasonable and just returns to and fair treatment of our controlling and non-controlling shareholders.” SharePHIL’s contribution in this respect is to provide investors with financial literacy and investor education programs, and be a steadfast advocate of investor rights through its four pillars namely: Educate, Equip, Empower, and Engage.

To implement these pillars, SharePHIL organizes seminars and conferences, publishes research and advocacy papers, participates in policy dialogues and consultations, and establishes partnerships and collaborations. Two key projects in the process of implementation are Project RISE: “Retail Investor and Shareholder Empowerment” which seeks to educate and empower the Filipino investor to develop the confidence and make well-informed decisions to take control of their future, and “Investor Relations Circle,” which seeks to professionalize the Investor Relations profession, given its significant role in bridging the communication between the investors, particularly the retail investors and the Publicly Listed Companies or PLCs.

Fast forward to Nov. 28, 2023, three years since the launch of the Covenant, when MAP convened the Summit on Shared Prosperity to craft a Blueprint for Shared Prosperity which will contain a roadmap of how the commitments can be realized and implemented. SharePHIL, which I represented, provided the background for the discussion on shareholders with a suggested metric of a percentage dividend rate in compliance with regulations.

While current Securities and Exchange Commission (SEC) and Philippine Stock Exchange (PSE) regulations do not prescribe a dividend rate which PLCs should follow, the SEC monitors compliance with the regulatory requirements for dividend declarations in the Securities Regulation Code, ensuring that dividends are declared out of unrestricted retained earnings, and that this must not impair the corporation’s ability to meet its financial obligations. On the other hand, the PSE monitors PLCs’ compliance with the Consolidated Listing Disclosure Rules which prescribe, among others, the disclosure of dividend policy by listed companies.

For Government-Owned and -Controlled Corporations (GOCCs), under RA 7656 or the Dividend Law, such corporations are required to declare and remit at least 50% of their annual earnings as cash, stock, or property dividends to the National Government.

How can we encourage companies to declare dividends that will deliver fair and reasonable returns to stockholders? Some suggestions that emerged from the discussions are the following:

• Enhance public participation by encouraging consultation, advocacy and sharing of views and opinions;

• Educate and empower shareholders to influence dividend policies, demand transparency and file complaints of irregularities;

• Develop strong mechanisms for investor relations to provide accurate and timely information that will increase and sustain stockholder confidence;

• Promote good governance by having more independent-minded boards who can steer companies to establish clear and transparent dividend policies;

• Benchmark dividend policies with industry averages and best practices, and incentivize companies with notable dividend policies through proper recognition, such as awards and citations;

• Review and reform tax laws on dividends to align with public interest, as appropriate.

The payment of dividends reflects positively on a company’s image and reputation, and helps maintain investor trust. Thus, a high dividend rate, for example, indicates that the company is performing well and has generated good profits. Paying dividends sends a powerful message about a company’s future prospects, and its willingness and ability to pay steady dividends over time provides a solid demonstration of financial strength. Companies may not realize that such payouts are a means to thank investors and incentivize them to continue holding their stocks.

Importantly, for the small stockholders, dividends matter as such distributions directly translates to income and return on their investments. Investments in stocks, which pay dividends, is a way to build wealth as part of a long-term investment strategy. Dividends contribute to overall portfolio risk and volatility, by mitigating the risk resulting from a price decline. In addition, dividends help preserve the purchasing power of capital due to the effect of inflation on investment returns.

Businesses that share their prosperity with their stockholders will help the Filipino investing communities build their wealth, and thus is a powerful tool to reduce the persistent inequality in society. We need not wait for 20 years to make this happen.


Ma. Aurora “Boots” D. Geotina-Garcia is vice-chair of the MAP Committee on Private-Public Partnership and a member of the MAP Committee on Diversity, Equity & Inclusion. She is chair of SharePHIL, and president of Mageo Consulting, Inc., a corporate finance advisory consulting firm.