Conflict of interest in positions of trust

The Corporation Code of the Philippines, Section 32 concerns with the “Dealings of directors, trustees or officers with the corporation”:
“A contract of the corporation with one or more of its directors or trustees or officers is voidable, at the option of such corporation, unless all the following conditions are present:

1. That the presence of such director or trustee in the board meeting in which the contract was approved was not necessary to constitute a quorum for such meeting;

2. That the vote of such director or trustee was not necessary for the approval of the contract;

3. That the contract is fair and reasonable under the circumstances; and

4. That in case of an officer, the contract has been previously authorized by the board of directors.”

The stilted syntax can confuse the message — the word “voidable” is obtrusive as it assumes the contract will have been perfected despite conflict of interest issues.
Section 32 can be perversely interpreted as allowing self-dealing of directors/trustees, provided the physical technicalities of conditions 1 and 2 are met: that the presence or attendance of the director/trustee seeking board approval was not critical to the needed quorum, and the proponent abstained in the voting for approval.
But think about it: will the self-dealing proposal even get on the Board agenda, if it has not been already approved in principle by “the old boys club” of the Board Room? The “For the Boys” divide-divide rewards might have also been assured — everybody happy? Talk of bribery and commissions or rebates hover over conflicts of interest confidently or sometimes confidentially declared, to an abetting corporate board. All in the family. Is full disclosure of conflict of interest some magic key to getting away with it?
Section 31 in the Corporation Code enumerates the conditions when a director or trustee may be held liable for damages: in allowing unlawful acts; gross negligence in running the corporation; and when “he acquires any personal or pecuniary interest in conflict with his duty as such director or trustee.”
But even if the Board chooses not to act on conflicts of interest, the issue can still be settled favorably “by 2/3 (66.66%) of the stockholders voting in a meeting specifically to decide such declared conflict of interest, as long as the contract is fair and reasonable according to the circumstances” (Section 32).
If in the exacting world of business, self-dealing can be glossed over by corporate boards themselves, what more of conflicts of interest in dealing with government? The camaraderie and bonding among politicians in power and their appointees can be closer than the real or developed kinship in corporations.
And the most saccharine sweetener to being in government service is that there are no buzzing bees hovering around while the honey is collected.
The bureaucracy created for “control” can be the very foil for the corruption of some malevolent factotums seeing opportunity emanating from the radius of their office desk to beyond. Conflict of interest opportunities can be tempting in government, where position salaries and benefits are low but power and influence are inversely high.
Is there a parallel “corporate opportunity” doctrine in public service that reins in the power and influence of government servants, who, like the trustees of corporations down to the workers, must respect the demarcations of conflicts of interest?
Section 34 of the Corporation Code, despite the proffered remedies of Section 32, calls it a disloyalty, “where a director, by virtue of his office, acquires for himself a business opportunity which should belong to the corporation, thereby obtaining profits to the prejudice of such corporation, he must account to the latter by refunding the same, unless this act has been ratified…etc.”
Last week, the government official top lawyer, Cabinet-ranked Solicitor General Jose Calida was accused by opposition Senators Francis “Kiko” Pangilinan and Risa Hontiveros of conflict of interest by currently having some P150 million in contracts with various government offices and agencies for his family’s security agency, Vigilant, in the two years that he has been SolGen (philstar.com May 28, 2018). “Did you not have undue advantage, because of your position, to bag 14 contracts with government,” anchor Pinky Webb (“The Source”) asked Calida directly, on live national television (CNN Philippines June 1, 2018).
SolGen Calida noticeably bristled, and vocally objected to the word “Bag,” used in many news headlines. “Our company went through the required bidding procedures — the Bids and Awards Committees (BAC); the Finance Department’s PhilGEPS; and followed the Government Procurement Law, which is pass or fail — and we passed,” Calida replied to Pinky.
“It is better to deal with government than with the private sector,” he said, clarifying that the government guarantees at least minimum wage, and has the money to pay (more than the small private businesses” (Ibid.).
As an aside, is not the government commonly known to have huge payables to private businesses, these past due payments having been pended because of bureaucratic disbursement procedures and the necessary Commission on Audit (CoA) review of transactions?
SolGen Calida made effort to distinguish accusations of conflict of interest on him vis-à-vis the charges of self-dealing on resigned Tourism Secretary Wanda Tulfo-Teo, who resigned because of the P60 million she paid for ad placements in her brothers Ben and Erwin Tulfo’s show Kilos Pronto, aired on PTV-4.
Calida said, “I did not commit graft,” stressing that he was not the approving authority in any of the contracts that Vigilant won for government.” I had no conflict of interest, he kept repeating, as Pinky repeatedly asked in her live interview with him, “Sir, how many were your contracts with government, compared to the 14 or so that you have now, since you became SolGen, two years running?” (Ibid.). “I do not remember,” Calida evaded (Ibid.).
SolGen Jose Calida maintains he will not give up his shares in Vigilant Investigative and Security Agency Incorporated (Rappler May 31, 2018). Calida (admittedly) owns 60 percent of the security agency, while his wife and three children own 10 percent each (Ibid.). The alleged P150 million (or P216 million by some reports) is not all profit, he emphasized to Pinky Webb and all (CNN, June 1). Pinky was good — she urged, “How much was profit, Sir, 10%, 15%?” (Ibid.).
It’s the same, for business corporations and for government — there is always the “undue advantage” for people in positions of trust to avail of ready profits for themselves beyond the moral fences of “conflict of interest.”
 
Amelia H. C. Ylagan is a Doctor of Business Administration from the University of the Philippines.
ahcylagan@yahoo.com