Is PH too obsessed with scorecards, BDO’s Tan asks

by DORIS DUMLAO-ABADILLA, Philippine Daily Inquirer, 26 Nov 2019

Veteran banker Nestor Tan, the 2019 MAP “Management Man of the Year” awardee, yesterday urged the business community to rethink whether the western standards for corporate governance and fair competition suited the local market.

“We all accept that governance is important, almost indispensable for sound management, however, the adherence to global standards has taken on a turn toward compliance to global prescriptions,” Tan said, citing universal principles of fairness, integrity, accountability and transparency.

“But universal prescriptions may not apply to all markets. Worse, we may even get addicted to scorecards and awards [that are] mostly based on checklist against generic prescriptions,” said Tan, the president and chief executive of the country’s largest lender, BDO Unibank.

In developed economies where corporate ownership is dispersed, for instance, Tan said having independent directors was a good way to create proper checks-and-balance and temper management and management-nominated directors.

“In our environment, we forget that majority shareholders share the same desire to ensure management propriety. We place too much reliance and burden on independent shareholders at the expense of majority shareholders,” said Tan.

“Let’s focus on the output, not on who’s doing the work,” he said, noting that independent directors and majority directors actually shared the same objectives.

Tan also posed the question on whether the principles of fair competition as adopted locally were considered boon or bane to the economy.

“I would venture to say that the US and European models may not be the best for a country like ours. Should we follow more the Korean model where they nurture national champions in different industries so they can compete regionally or globally? Besides, how do you define proper competitive landscape? It is local, national, regional or global? I would say that in the banking industry, it’s all of those, but we should be cognizant that everybody is in a global playing field,” he said.

Tan said western practices often tilted toward the achievement of short-term gains, rather than value creation. He noted a saying in New York that it’s mostly people who ride the subway who tell the people who ride the limousines what to do—meaning it’s the analysts and investors who tell the CEOs what to do.

“Much emphasis has been placed on quarterly profits and share gains but not enough on long term investments, market share or franchise growth,” Tan said.

On the other hand, Asian investors, primarily family business owners, tend to look at improving the value of the business for the next generation, he said. “In Asia, majority of shareholders are brands that have withstood several generations. Let’s not lose sight of those values.”

The Management Association of the Philippines (MAP) honored Tan for “steering BDO to being concisely ranked by the global financial community as among the best-managed banks in the Philippines,” among others. —