One of the problems that plagued the Philippine Stock Exchange (PSE) over many years was the lack of companies becoming publicly listed on the stock market. While that situation has improved in recent years, there are still many household-name firms that are still in private hands. And these are large corporations that are significant enough in the local economy that should have some public ownership.
The PSE has made a valiant effort to increase initial public offerings both through encouragement and qualifying the advantages of being listed on the PSE. The stock exchange has worked with the Securities and Exchange Commission to make it easier with a more streamlined process. Yet, the products and services of firms that we use everyday are not part of our stock market.
While no one wishes to speak of it, one major reason that these companies are not publicly owned is because of the rigorous transparency that is required to be a listed corporation. The moment private owners begin even to think of going public, they must also begin thinking like a public company. That means full, thorough and totally honest financial transactions and records.
With the auditing requirements that go with being listed, no longer can there be one set of books for the taxing authorities and one set of “real” books for the owners. One important reason that so many large firms are publicly listed is that foreign lenders and investors have more confidence in the financial reality of listed firms that must have continuing audited statements. No accounting firm is going to put their seal of approval on the records of a public company the way they might for a privately held corporation.
The relationship that a private individual or company has with the “financial truth” is between them, their god and the Bureau of Internal Revenue. However, a public company is held to a different standard.
The act of corruption perpetrated by public officials is only the start. It is keeping the ill-gotten or undisclosed funds secret that is the heart of the matter. The annual Statement of Assets, Liabilities and Net Worth, commonly known as SALN, is submitted under oath.
But realistically no person or government agency verifies the SALN until a potential fraud comes to light. Wouldn’t it be interesting if a candidate and elected official’s SALN was subject to an independent audit? We would not question the truthfulness of a candidate’s sworn statement any more than we would question the truthfulness of a company’s financial report.
However, there would be great comfort in reading that “we have audited in accordance with Philippine Standards on Auditing, the consolidated financial statement of elected/appointed official Juan de la Cruz for the year ended December 31, 2016. In our opinion, the financial statement presents fairly in all material respects, the true and accurate financial position”. Both the face and quality of the Philippine government would be changed forever.