Reclaiming the vision for the Philippine corporation

Growing resentment over corporate greed in the US and around the world has triggered street protests in New York’s financial district aptly called “Occupy Wall Street”. A growing number of Americans are extremely disappointed that after the massive bailouts of financial institutions using public funds in the wake of the sub-prime mortgage crisis of 2007, jobs are still nowhere to be seen. It doesn’t help that many executives earned whopping bonuses despite bringing their institutions to virtual bankruptcy.

To many Americans, the worsening economic inequality in their country is the clearest sign that corporate misbehavior is out of control and is not being checked by government. The New York Times reported that the top 1 percent of Americans possess more wealth than the entire bottom 90 percent. Furthermore, 65 percent of economic gains under the Bush administration from 2002 to 2007 went to the richest 1 percent.

Related protests have sprung up in more than a hundred other places including Hong Kong, Sydney, London, Frankfurt among many others, and, not surprisingly, Manila. Why not? The Philippine situation is a deplorable case of worsening inequality. The Asian Development Bank reports that the country is the only one in Southeast Asia to have an increasing absolute number of poor despite continuous economic growth in the last decade. From the mid-1990s to today, the corporate capital in the stock market increased from about one trillion pesos to about 8 trillion pesos now.

How is it possible for economic and corporate growth to co-exist with the persistent poverty in the country? Looking into the leading causes of poverty, the ADB report explained that “the basic problem of the poor is not so much lack of employment as the low incomes derived from employment [and] this has to do with both low wage rates and the phenomenon of underemployment”. In the corporate sector, the quality and security of most jobs for the poor simply do not measure up to the task of alleviating poverty.

Even for those with jobs, the troubling and relentless trend towards contractualization and lower pay is a constant threat. Many large Philippine corporations practice labor cost reduction methods, often indiscriminately. Worse, such low-cost labor strategies have become the centerpiece of corporate financial growth strategy and have been copied by other companies and industries as “best practice”. As a result, a lot of corporate growth in the country has been subsidized by labor through low wages and lack of security. Surely, no one can argue that this is a sustainable value-adding strategy for business success.

It wasn’t supposed to be this way. The corporation was intended to be an engine for economic growth and the promotion of the common good. Records of the proceedings of the Interim Batasang Pambansa reveal the intent of the Corporation Code which the old US-inspired Corporate Law in 1980. When the bill was presented in 1979, its rationale was explained this way: “… the proposed Code … seeks to inspire confidence in the value of the corporate vehicle in the economic life of society. … Corporations are not mere business organizations exclusively intended to serve the personal interests of shareholders or managers but are social institutions in which all sectors of society have an interest. While inanimate, they can not be without moral values or ethical concerns; nor can they be bereft of social and civic responsibilities. Thus, as an assurance of a welcome place in society, while the code does not directly mandate the performance of specific social and civic obligations, it encourages and provides corporations with every means of becoming valuable social institutions.”

The reasoning behind the Corporation Code shows the progressive vision and principles that should inspire local corporations. Let’s remember that this came way before the advocacies on CSR and stakeholder management now common around the world. If more Filipino business corporations adhere to such principles, I don’t see why growth in the corporate sector will not lead to prosperity for more Filipinos.

Yet, the “best practice” of cheapening labor continues. The case of Philippine Airlines’ program to outsource more and more of its workers is only one visible sign of this trend. Corporations shouldn’t go down this path if we are to beginning closing the yawning gap between the rich and the poor. Atty. Estelito Mendoza, counsel for PAL, should know this more than most people. As member of the Interim Batasang Pambansa, he made the above remarks when he sponsored the bill in 1979.

Can the corporation be saved from the corrupting effect of greed? Will the growing protest movement have to occupy the streets of Philippine business districts before practices change? Or can those who run corporations ensure that they become the “valuable social institutions” they were intended to be? Our choice should be obvious.

Dr. Benito Teehankee is the Chairman of the Management and Organization Department of De La Salle University. He may be emailed at