Vesting contractors with public interest
Government contractors need to be classified as corporations vested with public interest requiring the election of independent directors and the presence of audit and compensation committees.
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Government contractors need to be classified as corporations vested with public interest requiring the election of independent directors and the presence of audit and compensation committees.
Somewhere under every flood that did not recede in time, there is a corporation. Not a person, not a face the public can point to, but a legal fiction with a board, a seal, and a bank account, standing between a budget line and a barangay that never got its seawall.
The Securities and Exchange Commission now proposes to reach into that fiction and hold it to a higher standard. Under a draft memorandum circular, corporations entrusted with government contracts involving substantial public funds would be designated corporations vested with public interest — joining banks, pre-need companies, and publicly listed firms in a category the law watches more closely because the nation has more than a passing stake in how it behaves.
The proposal did not emerge in a vacuum. It emerged from a season of ghost projects and vanished seawalls, of more than half a trillion pesos in flood control spending flowing through the years, with roughly a fifth of it settling into the hands of a mere fifteen contractors.
It emerged from plunder charges, Senate inquiries and photographs of rivers rising over roads that were, on paper, already fortified against them. The scandal did not simply reveal shoddy concrete. It revealed that the corporate form, so often a shield for ambition, had also become a shield for impunity, and that no amount of engineering standards could substitute for a boardroom that actually asked questions.
This is where fiduciary duty re-enters the story. Directors, trustees, and officers do not merely owe their corporations competence. They owe active vigilance, the obligation to prevent, report, and address fraud and corruption before it hardens into headlines.
When a corporation’s business is built on public money, that vigilance ceases to be a private virtue and becomes a public necessity, because the integrity of procurement, the soundness of infrastructure, and the public’s confidence in its own government all pass through that boardroom on their way to becoming reality.
The mechanics are unglamorous but deliberate. Designated contractors would be required to seat independent directors, voices with no stake in preserving the comfortable arrangements of insiders. They would need audit committees to keep the numbers honest; compensation committees to keep self-dealing out of the payroll; and governance committees to make integrity a structure rather than a slogan.
The net is drawn wide enough to catch entities where at least a fifth of the capital is beneficially owned, even through nominees, by a government official or a relative within the third civil degree, closing the side door before anyone thinks to enter it.
What the circular is not should be said plainly, because clarity here is itself a form of good governance. It does not touch accreditation, licensing, or the technical qualification of contractors, which remain the province of the Department of Public Works and Highways and the Philippine Contractors Accreditation Board. The SEC does not build roads or inspect concrete. It builds boardrooms, and its jurisdiction begins and ends there, running parallel to the DPWH and PCAB rather than through them.
Corporate personhood has always been a kind of costume, useful for raising capital, convenient for spreading risk, and occasionally handy for hiding a face behind a corporate seal. What this initiative proposes is modest in form but pointed in aim: if a company wishes to spend the public’s money, it should first be made to answer to the public’s standards.
