As the season of annual stockholders' meetings opens this month, the Philippine Stock Exchange (PSE) is urging shareholders to take an active role in asserting their rights and privileges in the companies they own.

Usually, publicly listed companies conduct their general meetings from April to July of every year.

More than just being the venue for announcing companies' profits, new products or business plans, the PSE said these meetings are the perfect opportunity for shareholders to show proactive vigilance in the conduct of the affairs of their companies.

Shareholder vigilance is widely practiced in other markets like the US, United Kingdom, Japan and South Korea, among others, the regulator pointed out.

"Shareholders have rights under the law to allow them to participate in the affairs of their company. These include the right to information, right to dividends, pre-emptive right, tender offer right, appraisal right, right to choose directors who would direct the affairs of the company, and the right to demand good governance of their company," PSE president Francis Lim said, noting that in most cases, shareholders take action only after their rights are trampled upon.

Lim explained that shareholder vigilance can take many forms. It may involve shareholders engaging companies in private meetings to discuss certain corporate actions they disagree on or attending briefings and asking intelligent questions about their companies' plans.

He noted that the creation of minority shareholder groups can also serve as an important tool to make directors and management accountable for their decisions. Shareholders can also cumulate their votes through these groups to elect representatives in their companies' boards.

"In some markets, shareholders have been known to actively seek seats on the board of companies, make directors and management accountable for their actions, ask for the removal of a poison pill or a provision in the company's bylaws that make a takeover plan difficult, or in extreme cases, ask for the removal of the CEO," Lim said.

In line with this shareholder activism campaign, Lim said the PSE has recently established a Corporate Governance Office and Corporate Governance Committee at the board level to help institutionalize corporate governance in the stock market.

The PSE also partnered with the Securities and Exchange Commission, Institute of Corporate Directors and the Ateneo de Manila Law School to run a corporate governance scorecard of publicly listed firms. The Management Association of the Philippines will also help in improving the quality of annual reports of listed companies.

Lim said they are looking to create a new listing board reserved for companies willing to subscribe to higher corporate governance standards as well as a new set of corporate governance principles and guidelines tailored for listed firms.

PSE head of corporate governance office Jonathan Juan Moreno, for his part, said minority shareholders might do well in directly engaging their companies on decisions they have issues with.

"This may be one form of shareholder activism or involvement that will put directors on their toes so that they will be more careful in exercising their business judgments. Shareholder engagement is a powerful weapon against corporate abuses and a key instrument in instilling a culture of good corporate governance in a company," explained Moreno.

Morever, PSE director and concurrent chair for the corporate governance committe, Jose Luis Javier, said: "The current global financial crisis has put the spotlight on the importance of the role shareholders play in steering the direction of a company. Empowering shareholders is consistent with good corporate governance practices as it provides balance to the power of the insiders of the company."