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GCG MemoaarouM C|RCULAR No. 2012-07

Cooe or GoRpoRlre GoveRNntce FoR GOCCS

to the State declared policy of treating GovernmentOwned or -Controlled Corporations (cOCCs) as significant tools for economic development, and the statutorily-mandated obligation of the State to ensure that the governance of GOCCs is carried out in a transparent, responsible and accountable manner and with the utmost degree of professionalism and effectiveness, under governing boards which are competent to carry out their functions, fully accountable to the Stale as its fiduciaries and always acting for the best interests of the State, the Governance Commission for GOCCS (GCG), in the exercise of its mandate under Section 5(c) of Republic Act No. 10149, approved the CoDE oF CoRpoRATE covERr{ANcE FoR GOCCs (,,CoDE") at its En Banc meeting held on 26 April 2012lot fotmal submission to the President of the Philippines for His Excellency's approval of what would constilule as an organic document for the GOCC Sector,
WHEREAS, Hrs ExcELLENCY, PREstoENT BENTGNo approved the Code for formal promulgation on WHEREAS, pursuant

S. AaurNo lll, formally

NOW, THEREFORE, the Commission hereby formalty promutgates and implements the Code as follows:

t.

DEFtNtIoNS oF TERMS
Definition of Tetms. - For purposes of this Code, the following terms shall have the following meanings:

SEcrot{

l.

'Acf" refers to Republic Act No. 10149, and ofiicially named the "GOCC Govemance Act of 2011."

PNOYo08188

"Altiliate" rcle.s to a corporation fifty percent (50%) or less of the outstanding capital stock of which is owned or controlled, directly or indirectly, by the GOCc.'
"Appointive Directors" refer to: ('l ) in the case of Chartered GOCCS, all members of its Board of Directors/Trustees who are not ex officlo members thereof; (2) in the case of Nonchartered GOCCS, members of its Board of Directors/Trustees whom the State nominates, or is entitled to nominate, to the extent of its percentage shareholdings in such GOCC; and (3) in the

case

of

Subsidiaries

and Affiliates, members of its Board

of

DirectorslTrustees whom the GOCC nominates, or is entitled to nominate, to the extent of its percentage shareholdings in such Subsidiary or Affiliate.'? "Atlicles of lncorporatlon" refers to primary franchise of a Nonchartered GOCC that, once approved and registered with the Securities and Exchange Commission (SEC) by the issuance of the certificate of incorporataon under its official seal, commences the existence of the GOCC as a separate juridical person with a right of succession and the powers, attributes and properties expressly authorized by law or incident to its
existence.3

"Board Officers" refer to Officers whose primary task is to serve the Board or to pursue the immediate functions of the Board, such as the Chairman, Vice-Chairman and the Corporate Secretary.
"Board of Directorslfruslees" or "Board' or "Governing Board' ("Board') refers to the collegial body that exercises the corporate powers, conducts all business and controls or holds all properties, of a GOCC, whether it be formally referred to as the "Board of Directors" or "Board of Trustees" or some other term in its Charter, Articles of lncorporation or By-laws

"ByJaws" refers to the basic instrument adopted by a Nonchartered GOCC and duly registered with the Securities and Exchange Commission (SEC) for its internal government, and to regulate the conduct and prescribe the rights and duties of its stockholders or members towards the GOCC and among themselves in reference to the management of its affairs.o
.efe.S to the formal act of Congress creating GOCC and defining its franchise.
mission and core values.5 "Chief Executive Officel' ('CEO')refers to the highest ranking corporate executive who heads Management, who could be named as the President or the General N.4anager, Chairman or the Administrator of a GOCC.6

"Chaie|

Chartered

"Chaier Statemenf' refers to a statement of the GOCC'S vision,

lsec

3(a), R.A. No. 10149.

10149. 'Sec 3(g). R.A. No. 10149

r,ii.
or

R A. No lrom Secs.2 and 19, Corporation Code olthe 'Gokongwei. Jr. v. Securities and E)rchange Commission, 89 :Sec 3{3). R.A. No.

3(b). :Sec rAdoDled

10149.

Philippines.
SC RA

336 { 1979

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Code of Cotporcle Governance fot the GOCC Seclot Page 2 of 3'1

PNOY008189

"Confidential lnformation" refers to all non-public information entrusted to or obtained by a member of the Board or Officer by reason of his/her position as such with the GOCC. lt includes, but is not limited to, non-public information that might be of use to competilors or harmful to the GOCC or its customers/stakeholders if disclosed, such as: (1) non-public information about the GOCC's financial condition, prospects or plans, its marketing and sales programs and research and development information, as well as information relating to mergers, acquisitions, divestitures, stock splits and similar transactions; (2) non-public information concerning possible transactions or ventures with other companies, or information about suppliers, joint venture partners, or any information that the GOCC is under obligation to keep confidential; and (3) non-public information about internal discussions, deliberations and decisions, between and among Directors and Officers.

"Chatlered GOCC" refers to a GOCC, including a GFl, created and vested with functions by a special law.' "Directof' rcfe's to any member of the Governing Board of a GOCC, whether it be formally referred to as the "Board of Directors" or "Board of Trustees" or some other term in it Charter, Articles of lncorporation or ByLaws.

"Ex Officio Board Membef' (Ex Officio Director\ rcfe.S to any individual who sits or acts as a member of the Board of Directors/Trustees by virtue of one's title to another office, and without further warrant or appointment.B

"Executive Officel' ("Oftice/') refers to the CEO or whoever is the highest ranking officer in the GOCC, and such other corporate offlcer of the GOCC as expressly provided for in its Charter (for a Chartered GOCC) or Bylaws (for a Nonchartered GOCC), such as the Vice-President, Chief Financial Officer, Chief lnvestment Officer, and General Manager.e As distinguished from Board Officers, Executive Officers primarily form part of the Management of the GOCC.
"Extraordinary Diligence" refers to the measure of care and diligence that must be exercised by Directors and Officers in discharging their functions, in conducting the business and dealing with the properties and monies of GOCCS, which is deemed met when Directors and Officers act using the utmost diligence of a very cautious person taking into serious consideration all the prevailing circumstances and Material Facts, giving due regard to the legitimate interests of all affected Stakeholders.'0

"Fit and Proper Ru/e" refers to a set of standards for determining whether a member of the Board of Directorsffrustees or the CEO is
qualified to hold a position in a GOCC which shall include, but not be limited to, standards on integrity, experience, education, training and competence'
lsec. 3{0, R.A. No. r0r49 osec 3(i), R.A No. 10149

sAdopred from Sec 2(q). R.A No. 10149. Se Guroa v Lezama. 103 Phil. 553 (1958), Pamplora Plantalion co. v. Acosta,510 SCRA 249 (2006). roDeived from Sections 19 and 2'l ofR.A. No. 10149.

Code of Corporata Governance for the GOCC Sector':I Page 3 of 31

PNOY008190

as such standards are set forth under GCG Memorandum Circular No.
2012-05."

"Government Agency' .elets to any of the various units of the Government of the Republic of the Philippines, including a department, bureau, office, instrumentaiity or GOCC, or a local government or a distinct
unit therein.''?

"Government Financial lnstitution" ("GFrl refers to any financial institution or corporation in which the government directly or indirectly owns majority of the capital stock and which are either: (1) registered with or directly supervised by lhe Bangko Sental ng Pllrpinas ("BSP"); or (2) collecting or transacting funds or contributions from the public and places them in financial instruments or assets, such as deposits, loans, bonds and equity, including but not limited to, the Government Service lnsurance
System and the Social Security System.'3

"Government lnstrumentalities

l"GICP')I" Government Corporate Entitl' (GCE,) refer to an instrumentality or agency of the government, which is neither a corporation nor an agency integrated within the departmental framework, but vested by law with special functions or jurisdictions, endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy, usually through a Charter.'a

with Corporate Powers"

"Government-Owned or -Controlled Corporation" ("GOCC") refers to any agency organized as a stock or non-stock corporation, vested with functions relating to public needs, whether governmental or proprietary in nature and owned by the Government of the Republic of the Philippines, directly or through its instrumentalities, either wholly or, where applicable, as in the case of stock corporalions, to the extent of at least a majority of its outstanding capital stock. The term includes Governmenl lnstrumentalities with Corporate Powers ('G/CP'), Government Corporate Entities ("GCE) and Government Financial lnstitutions ("GFI'). The term also includes a Subsidiary of a GOCC.'5 "Management' refers to the body given the authority to implement the policies determined by the Board in directing the course and business activities of the GOCC.'6 "Materiat lnformation" ("Matenal Facf') refers to information which a reasonable investor, stakeholder or Supervising Agency would consider important in determing whether: (1) to buy, sell, hold or otheMise transact with the securities issued by a GOCC; or (2) to the exercise with reasonable prudence voting rights related to securities held with such GOCC, or
rrS6c.
3(i), R.A. No- 1014s. 3(m), R A. No. 10149

'?S6c 3(L), R.A. No. 10149. BSec.

'GAdopled from Art. 1(d). SEC Revised cod ol CoDorale Govemance (SEC Memorandum Circular No. 06, s. 2009)

'{Sec 3(n). R.A. No. 101a9. ''S6c qo), R.A. No. 10149.

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PNOY008191

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Code of Corpoate Govornance for lhe GOCC Seclor Page 4 of 31

relating to corporate acts, contracts and transactions which would adversely affect the operalions of the GOCC.'-

"Nonchadered GOCC' refers to under Batas Pambansa Bilang 68,

Philippines".'3

a GOCC organized and operating or "The Corporation Code of lhe

"Non-Stock GOCC" refers to a Chartered or Nonchartered GOCC which has no equity represented by shares of stock.
"Officers" refer to both Board Officers and Executive Officers."

"Per Diems" refer to the compensation granted to members of

Governing Boards of a GOCC for actual attendance in meetings.'zo

"Pertormance Evaluation System" ("PES") refers to the process of appraising the accomplishments of GOCCS in a given fiscal year based on
set performance criteria, targets and weights.'?l

"Perlormance Scorecard' refers to a governance and management tool forming parl of the performance evaluation system which consists of a set of measures, targets and initiatives that facilitate the achievement of breakthrough results and performance through the effective and efficient monitoring and coordination of the strategic objectives of the GOCC."

"Public Officials" ot "Public Officers" .efet to elective and appointive officials and employees, whether permanent or temporary, whether in the career or non-career service, whelher or not they receiye compensation, regardless of amount," who are in the National Government, and all other instrumentalities, agencies or branches of the Republic of the Philippines, including government-owned-or-controlled corporations, and their
subsidiaries.'?a

Stakeholdef' refers to any individual or entity for whose benefit the GOCC has been constituted, or whose life, occupation, business or wellbeing is directly affected, whether favorably or adversely, by the regular transactions, operations, or pursuit of the business or social enterprise for which the GOCC has been mnstituted. and which would include a stockholder, member, or other investor in the GOCC, management, employees, supply creditors, or the community in which the GOCC
"

operates.

"Stock GOCC'refers to eilher a Chartered or Nonchartered GOCC which its equity or capital is represented by shares of stock.

in

from SRC Rut 3, lmplementing Rules and Regulations to lh Sscurities Regulation Code. losec. 3ro). R.A. No. 10149 rqsec.3(q), R.a No 10149 losec. 3(s), R.A No.6713. 3(r), R.A. No. 10149 :-Sec. zzsec.3{u), R.A No. 10149. '?rsec. 3{b), R.A. No.6713. 2'Sec. e(a),

rTAdopied

n.a.lo. tOtlg.

Code of Corporale Gavernance for the GOCC Seclor

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PNOY008192

"Strategy Map" refers to an integrated set of strategic choices or objectives drawn by the governing body, the successful execution of which results in the achievement of the GOCC's vision in relation to its mission or purpose for having been created.?5 "Subsidiaty' refers to a corporation where at least a majority of the outstanding capital stock is owned or controlled, directly or indirectly,
through one or more intermediaries, by the GOCC.'?6 "Superuising Agency' refers to a Government Agency to which a GOCC is attached to for purposes of policy and program coordination and for general supervision." SEc. 2. Singu/ar Term lnclude the Plural. Unless otherwise indicated in this Code, any reference to a singular, shall apply as well to the plural, and vlce versa.

SEc.

3.

Coverage.

GICPs/GCEs and GFls, including their Subsidiaries, covered by the Act.

This Code shall be observed by all

GOCCS,

RoLE oF GOCCs

rN

NATloNAL DEvELopMENT

SEc. 4. GOCCS as the Srate's Economic Tools for Developmert. The State recognizes the potential of GOCCS as significant tools to pursue economic development, and as a means to promote groMh by ensuring that their operations are consistent with national development policies and programs.'u Under the Act, the State, acting through the GCG, is mandated to ensure that the:

(a) Operations of GOCCs are rationalized and properly monitored in order that government assets and resources are used efficiently and government exposure to all forms of liabilities and subsidies is
warranted and incurred through prudent means;x

(b) Governance of GOCCs is carried out in a transparent, responsible and accountable manner and with utmost degree of professionalism and effectiveness;s and

(c) Governing Boards are competent to carry out their functions, fully accountable to the State as its fiduciary, and always acting in the
best interest of the State.3'
qy). R.a. No. 10149. '?5sec. ssec.3(z), R.A. No. 10149.
292, 25 July 1987)

from Sec. 2, R.A. No. 10149. '?sAdootod }Sec.2(b),

rsec. zici, n.l.llo. rorls.

R.A. No. 10149

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Cr}rporate Governance fot the GOCC Sactor Page 6 of 31

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PNOYo08193

GovERNTNG BoARD

SEc. 5. Board Diectly Vested with Corporate Powers. - Having been vested directly by law with the legal capacity and authority to exercise all corporate powers, conduct all the business, and to hold all the properties of the GOCC," the Governing Board is primarily responsible for the governance of the GOCC. Consequently, it is the Board and not Management, that is primarily
accountable to the State for the operations and performance of the GOCC. SEc. 6. Eoard Duty to Properly Select and Provide lndependent Check on Management. - Concomitant with the power to elect the CEO from among their ranks and to appoint other Officers of the GOCC, it is the duty of every Governing Board to ensure that they elect and/or employ only Officers who are fit and proper to hold such offices with due regard to their qualifications, competence, experience and integrity.33 The Board is therefore obliged to provide an independent check on Management.I

sEc. 7. Mandate and Responsibility for the Gocc's Peiormance.

Although the day-to-day management of the affairs of the GOCC may be with Management, the Board is, however, responsible for providing policy directions, monitoring and overseeing Management actions,35 as articulated in its Charter or Articles of lncorporation, and other relevant legislation, rules and regulations. These mandated functions and responsibilities include the following: (a) Provide the corporate leadership of the GOCC subject to the rule of law, and the objectives set by the National Government through the Supervising Agencies and the GCG;

(b) Establish the GOCC'S vision and mission, strategic objectives, policies and procdures, as well as defining the GOCC'S values
and standards through:

. . .

Charter Statements: Strategy Maps; and Other control mechanism mandated by best business practices;

(c) Determine impo(ant policies that bear on the character of the

GOCC to foster its long-term success, ensure its long{erm viability and strength, and secure its sustained competitiYeness;

llsec

2{e), R.A. No. 1o1as.

"Adopling Sec. 23, Coeoration Code.

"Sec. 19(e), R.A. No. 10149. vAdooted from Sec. lll2Xa), SEC Codo of Corporal Govemance, Memolandum Circular No. 2' s. 2002. r5Adooted ftom Soc. l(2Xa). SEC Cod of CoDorate Govemanc, Memorandum Circular No- 2, s. 2002'
Code of Corpoate Govornance tot lho GOCC Sector Page 7 of 31

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PNOY00!194

(d) Determine the organizational struciure of the GOCC, defining the duties and responsibilities of its Officers and employees and adopting a compensation and benefit scheme that is consistent with the GOCC Compensation and Position Classiflcation System (CPCS) developed by GCG and formally approved by the
President of the Philippines;
(e) Ensure that personnel selection and promotion shall be on the basis

of merit and fitness and that all personnel action shall be in pursuit
of the applicable laws, rules and regulations;

(f) Provide sound written policies and strategic guidelines on

the GOCC'S operating budget and major capital expenditures, and prepare the annual and supplemental budgets of the GOCC;

(g) Comply with all reportorial requirements, as required in the Charter or Articles of lncorporation and By-laws, as well as applicable laws,

rules and regulations;

(h) Formally adopt and conduct annually the mandated Performance Evaluation System (PES) and the Performance Scorecard and timely and accurate report the results to the GCG; and

(i) Ensure the fair and equitable treatment of all Stakeholders and
enhancing the GOCC's relations with its Stakeholders. SEc. 8. Speclfc Functions of the Board. - ln addition to those specified in its Charter or Articles of lncorporation and/or By-laws, the Board shall perform the following functions:

(a) Meet regularly, ideally at least once every month, to

propedy discharge its responsibilities, with independent views expressed during such meetings being given due consideration, and that all such meetings shall be properly documented or minuted;

(b) Determine the GOCC'S purpose and value, as well as adopt

strategies and policies, including risk management policies and programs, in order to ensure that the GOCC survives and thrives despite financial crises and that its assets and reputation are

adequately protected;

(c) Monitor and evaluate on a regular basis the implementation of corporate strategies and policies, business plans and operating
budgets, as well as Management's over-all performance to ensure optimum results;

(d) Adopt a

a plan' professional development program, as well as a succession to ensure that the Officers oI the GOCC have the necessary motivation, integrity, competence and professionalism;

competitive selection

and promotion process,

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Code of Corporate Govemance for the GOCC Sector Page 8 of 31

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PNOY008195

(e) Monitor and manage potential conflicts of interest of Directors, Management, and shareholders, including misuse of corporate
assets and abuse in related party transactions:

(0 lmplement a system of internal checks and balances, which may be applied in the first instance to the Board; and ensure that such
systems are reviewed and updated on a regular basis;

(g) Ensure the integrity of the GOCC's accounting and financial reporting systems, including independent audit, and that
appropriate systems of control are in place, in particular, systems for risk management, financial and operational control, and compliance with the law and relevant standards;

(h) ldentify and monitor, and provide appropriate technology systems for the identification and monitoring of key risks
performance areas;

and and

(i) Adopt, implement and oversee the process of disclosure

communications;
(i)

and

Constitute an Audit Committee and such other specialized committees as may be necessary, or required by applicable
regulations, to assist the Board in discharging its functions: and

(k) Conduct and maintain the affairs of the GOCC within the scope of

its

authority,

as

prescribed

in its Charter or

Articles of

lncorporation, By-laws, and applicable laws, rules and regulation.

SEc.9. Compos,lion of the Governing Board - For Chartered GOCCs, the composition of their Boards shall be as provided for in their Charter. For
Nonchartered GOCCS, the composition of their Boards shall be as provided for in their Articles of lncorporation and/or By-laws.$

SEc. 10, Ex Officio Alternates. Ex Officio Oirectors may designate their respective alternates, who ideally should be the officials next-in-rank to them, and whose acts shall be considered the acts of their principals.3T SEc. 11. Multiple Eoard Sears. - The capacity of Appointive Directors to serve with diligence shall not be compromised. As such, no Appointive Director in a GOCC, Subsidiary or Affiliate may hold more than two (2) other Eoard seats in other GOCCS, Subsidiaries and/or Affiliates. SEc.12. Appointment of Appointive Directors.

12.1. All Appointive Directors in GOCCS and their Subsidiaries shall be appointed by the President of the Philippines from a shortlist Prepared bY the GCG.*
ssec.
13. R.A. No. 10149. 14. R.A. No. 10149.

"Sec. $Sec. tS. n-1. Ho. tOtlg.

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12.2.

selection and nomination, and shortlisting of prospective Appointive Directors shall be pursued in accordance with the rules
and criteria formulated by the GCG, which shall include the following statutorily-mandated conditions, thus: (a) The GCG shall cause the creation of the Search Committee to pursue the process of selection, nomination and shortlisting of prospective appointees;3'g

fhe

(b)All nominees included in the list submitted by the GCG to the President shall meet the Fit and Proper Rule, and such other qualilications which the GCG may determine taking into consideration the unique requirements of each
GOCC:ao

(c) The GCG shall ensure that the shortlist shall exceed by at least fifty percent (50%) of the number of Directors to be
appointed;'1 and

(d) ln the event that the President does not see fit to appoint any of the nominees included in the shortlist, the President shall ask the GCG to submit additional nominees.{'?
'12.3. Afriliates, not being within the deinition of "GOCC", continue

governed by their Articles of lncorporation and By-laws, and the nomination of Appointive Directors to their Boards shall remain within the business judgment prerogative of the Governing Boards of the Holding GOCCS in accordance with the guidelines set by the GCG. ln the preparation for the annual stockholders' meetings of the Affiliates at which the members of their Board are nominated and elected, the Governing Boards of the Holding GOCCS shall, through formal board resolulions, nominate candidates for the Appointive Directors for each Affiliate whom the Holding GOCC is entitled to nominate to the extent of its percentage shareholdings in such
Affiliates.

to be

All members of the Board, the CEO and other and Affiliates shall be qualified by the Fit and Proper Rule adopted by the GCG in consultation and coordination with the relevant government agencies to which the GOCC is attached, and approved by the President,a3 and shall include by reference the qualifications expressly provided for in the Charters or ByJaws of the GOCCS.

Officers of the GOCCs including Appointive Directors in Subsidiaries

SEc.

13. Fit and Proper. -

in coordination with the Supervising Agencies shall, subject to the approval of the qualilications and President, prescribe, pass upon and review

To maintain the quality of management of the GOCCS, the GCG,

the

3ss6c. 15, R.A. No. 10149-

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Code of Corporale Governance fot lhe GOCC Seclor Page 10 of 3'1

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PNOY008197

disqualifications of individuals appointed as Directors, CEO and other Executive Officers and shall disqualify those found unfit.'4
ln determining whether an individual is fit and proper to hold the position of an Appointive Director, CEO or Officer of the GOCC, due regard shall be given to one's integrity, experience, education, training and competence.a5

SEc.14. Term of Office of Appointive Diectors. - Pursuant to Section 17 of the Act, any provision in the Charters, Articles of lncorporation and/or By-laws of each GOCC to the contrary notwithstanding, the term of office of each Appointive Director shall be for one (1) year, unless sooner removed for cause: Providod, however, That each Appointive Director shall continue to hold ofrice until the successor is appointed and qualified.a6
14.1 . By virtue of

the provisions of Section 17 of the Act providing that "Any provision of law to the contrary notwithstanding, all incumbent CEOS and appointive members of the Board of GOCCS shall, upon approval of this Act, have a term of office until June 30, 20'11, unless sooner replaced by the Presadent,"aT and notwithstanding any provision in the Charter, Articles of lncorporation and/or By-laws to the contrary, the one (1) year Term of Office of all Appointive Directors in all GOCCs covered by the Act shall begin on 01 July of the year of appointment and ending on 30 June of the following year.

14.2. An Appointive Director may be nominated by the GCG for reappointment by the President only if one obtains a performance
score of above average or its equivalent or higher in the immediately preceding year of tenure as Appointive Director based on the performance criteria for Appointive Directors adopted for the

cocc.'3
14.3. Appointment to any vacancy shall only be for the unexpired term of the predecessor. The appointment of a Director to fill such vacancy shall be in accordance wiih the manner provided for regular oe nomination, shortlisting and appointment of Appointive Directors. SEc.15. Board Officers. - The Board Officers of a GOCC are the Chairman of the Board (who is the highest ranking of the Board Officers), the ViceChairman, the Corporate Secretary, and the Compliance Offlcer, who must all be Filipino citizens. Nonchartered GOCCS are hereby mandated to amend their respective By-laws to provide for the creation and appointment of such Board offices.

15.'l. Chaiman of lhe Board. - ldeally, the roles of the Chairman and the CEO should be with different individuals in order to ensure an appropriate balance of power, increased accountability, greater

6Sec. tZ,

nl lto. tOl+g. "Ses lasl paragraph of Sec.

17,

R.A No. 10149

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capacity of the Board for independent decision-making, and optimum capacity to exercise supervisory function over Management. Where both positions of the Chairman and the CEO are unified in the same individual, checks and balances should be clearly provided by the Governing Board to help ensure that independent, outside views, perspectives, and judgments are given proper hearing in the Board.

The Chairman shall, when present, preside at all meetings of the

Board. The Chairman's responsibilities may include:

(a) Calling meetings to enable the Board to perform its duties

and responsibilities;
(b) Approving meeting agenda in consultation with the CEO and the Corporate Secretary; (c) Exercising control over quality, quantity and timeliness of the flow information between Management and the Board; and

of

(d) Assisting in ensuring compliance with the GOCC's guidelines on corporale governance. The rsponsibilities set out above, may pertain only to the Chairman's role in respect to the Board proceedings, and shall not be taken as a comprehensive list of all the duties and responsibilities of a Chairman.

For legal purposes, the Chairman of the Governing Board shall be considered as the'Head of Agency" ofthe GOCC. ln the absence of the Chairman of the Board, the 15.2. Vice-Chairman. preside at the meetings of the Board. shall Vice-Chairman
'15.3. Corporate Secretary. The Corporate Secretary need not be a member of the Governing Board. ldeally, the Corporate Secretary must possess organizational and interpersonal skills, and the legal skills of a Chief Legal Officer. The Corporate Secrelary shall have the following functions:
(a)

Serve

as an

adviser

to the

Board Members on their

responsibilities and obligations; (b) Keep the minutes of meetings of the shareholders, the Board, the Executive Committee, and all other committees in a book or books kept for that purpose, and furnish copies thereof to the Chairman, the CEO and other members of the Board as appropriate;

(c) Keep in safe custody the seal of the GOCC and affix it to any
instrument requiring the same;

(d) For stock GOCCS, have charge of the stock certificate book and such other books and papers as the Board may direct;

(e)

Attend to the giving and serving of notices of Board and

shareholder meetings, if applicable;

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Cotporate Governance fot the GOCC Soclor Page 12 of 31

(f)

Be fully informed and be part of the scheduling process of other activities of the Eoard;

(g) Receive inslructions from the Chairman on the preparation of an annual schedule, the calling of Board meetings, the preparation of regular agenda for meetings, and notifying the Board of such agenda at every meeting;

(h) Oversee the adequate flow of information to the Board prior to

meetings; and (i) Ensure fulfillment of disclosure requirements to regulatory bodies.

The Corporate Secretary shall have such other responsibilities as the Board may impose upon him. The Board shall have separate and independent access to the Corporate Secretary. 15.4. Compliance Officer. - fhe Board shall appoint a Compliance Officer who shall report directly to the Chairman. ln the absence of such office or appointment, the Corporate Secretary, who is preferably a lawyer, shall act as Compliance Officer.s The Compliance Officer shall perform the following duties:5' (a) Monitor compliance by the GOCC of the requirements under the Act, this Code, the rules and regulations of the appropriate Government Agencies and, if any violations are found, report the matter to the Board and remmmend the appropriate disciplinary action on the imposition responsible parties and the adoption of measures to prevent a repetition of the violation;

of

(b) Appear before the GCG when summoned in relation to

compliance with this Code or other compliance issuesi and

(c) lssue a certification every 30 May of the year on the extent of the GOCC'S compliance with the government corporale standards governing GOCCs for the period beginning 01 July of the immedialely preceding calendar year and, if there are any deviations, explain the reason for such deviation.

The appointment of

Compliance Officer shall not relieve the primary responsibility vis-e-vis the State, acting Governing Board of its through the GCG, to ensure that the GOCC has complied with all its reportorial, monitoring and compliance obligations.

Circular No. 6, s. 2009). 5iAdopted 6, s.2009).

'Adopted from Art. 3(FX2)(m), SEC Revisod Code of Corporate Govemance (SEC Memorandum
from Art.3(M). SEC Revised code of Corporale Govemance (SEC irmorandum Circular No.

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SEc,16. Board Commiffees. - The creation of Board Committees and other such oversight bodies enables the members of the Governing Board to efficiently manage their time and ensure the proper understanding and resolution of all issues affecting the GOCC and the proper handling of all other concerns, and allows the Board to effectively utiiize the expertise of its Directors.
16.1. The Governing Boards of GOCCS shall therefore constitute the proper performing their duties and assist them committees responsibilities,5' providing each of the committees with written terms of reference defining the duties, authorities and the composition of the committees constituted. The committees shall report to the entire Board as a collegial body and the minutes of their meetings shall be circulated to all members of the Board.53 The existence of the committees shall not excuse the Board of Directors/Trustees of its collective responsibility for all matters that are within the primary responsibility and accountability of the Board.5n

to

in

16.2. As

minimum, the Board shall be supported by the following

specialized committees:

16.2.'1. Executive Commiftee.

Governing Board,

Committee composed of not less than three (3) members of the Board, with the Chairman of the Board being the Committee Chairman. The Executive Commiftee, in accordance with the authority granted by the Board, or during the absence of the Board,

- Depending on the size of the it may constitute an Executive

shall act by a vote of at least two-thirds (2/3) of its members on such specific matters within the competence

of the Board as may from time to time be delegated to the Executive Committee in accordance with the GOCC'S Charter or By-Laws, except with respect to:$
(a) Approval of any action for which shareholders' approval is also required;

(b) Filling of vacancies on the Board or in the Executive

Committee; (c) Amendment or repeal of By-Laws or the adoption of new By-Laws;

(d) Amendment or repeal of any resolution of the Board which by its express terms cannot be amended or
subject to repeal; (e) Distribution of cash dividends; and
t'See OECO Guidelines
Enlerprises,'p 52 51S;e -'s66 oECD OECD Guidelins

Annotalions Annotations AnnotatEns

lo "The Responsibilities of lhe "lhe lo 'The

Responsibalities ResponsrDrl[es

Eoards Boards BoaIds

of

State-Owned

Enterprises," "See Sec. 35. Corporctlon Code of ihe

p.52.

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Page 14 of 31

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(f) Exercise of powers delegated by the Board exclusively

to other committees. 16.2.2. Audit Comm,tfee.

least three (3) Directors, whose Chairman should have audit, accounting or finance background. The Committee

The Audit Committee shall consist of at

shall be responsible for the following:$

(a) Overseeing, monitoring and evaluating the adequacy and effectiveness of the GOCC'S internal control system, engage and provide oversight of the GOCC'S
internal and external auditors. and coordinate with the Commission on Audit (COA);

(b) Reviewing and approving audit scope and frequency, the annual internal audit plan, quarterly, semi-annual and annual financial statements before submission to
the Board, focusing on changes in accounting policies and practices, major judgmental areas, significant adjustments resulting from the audit, going concern assumptions, compliance with accounting standards, and compliance with tax, legal, regulatory and COA
requirements;

(c) Receiving and reviewing reports of internal and external auditors and regulatory agencies, and ensuring that Management is taking appropriate corrective actions, in a timely manner in addressing control and compliance
functions with regulatory agencies;

(d) Ensuring that internal auditors have free and full access to all the GOCC'S records, properties and personnel relevant to and required by its function and that the internal audit activity shall be free from interference in determining its scope, performing its work and communicating its results; and (e) Developing a transparent financial management system that will ensure the integrity of internal control activities procedures and throughout the GOCC through policies handbook that will be used by the entire organization.

'16.2.3. Governance Commitlee. The Governance Committee shall assist the Board of Directors in fulfilling its corporate governance responsibilities. The Committee shall be composed of at least three (3) members of Board, and chaired by the Chairman of the Board. The Committee shall be responsible for the following:

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(a) Overseeing the periodic psrformance evaluation of the Board and its committees and Management; and also conducting an annual self-evaluation of their
performance;

(b) Deciding whether or not a Director is able to and has been adequately carrying out his/her duties as director bearing in mind the director's contribution and performance (e.9., competence, candor, attendance, preparedness and participation). lnternal guidelines shall be adopted that address the competing time commitments that are faced when directors serve on
multiple boards;

(c) Recommending to the Board regarding the continuing education of Directors, assignment to Board Committees, succession plan for the Executive Officers, and their remuneration commensurate with
corporate and individual performance; and

(d) Recommending the manner by which the Board's performance may be evaluated and proposing an objective performance criteria to be approved by the
Board. Such performance indicators shall address how the Board will enhance long-term shareholder value.

'16.2.4. Nomination

Remunerations Commrtfee." - The Nomination and Remunerations Committee shall consist of at least three (3) members of the Board. The

and

Committee shall be responsible for the following:

(a) lnstalling and maintaining a process to ensure that Officers to be nominated or appointed shall have the
qualifications

and none the disqualifications mandated under the law, rules and regulations;
to

of

(b) Reviewing and evaluating the

persons nominated
require appointment by the Boardi

qualifications of all positions in the GOCC which

(c) Recommending to the GCG nominees for the shortlist in line with the GOCC's and its subsidiaries' Board composition and succession plan; and

(d) Oeveloping recommendations to the GCG for updatinq the CPCS and ensuring that the same continues to be consistent with the GOCC'S culture, strategy, control environment, as well as the perlinent laws, rules and
regulations.

5?Adopted

from Sec- 9(8Xb), SEC Memorandum Circular No. 2, s. 2002.

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16.2.5. Risk Management Commiftee. - The Risk Management Committee shall consist of at least three (3) members, with at least one member having a background in finance and investments. The Risk Management Committee shall be
responsible for the following:

(a)

Performing oversight risk management functions specifically in the areas of managing credit, market,
liquidity, operational, legal, reputational and other risks of the GOCC, and crisis management, which shall include receiving from Senior Management periodic information on risk exposures and risk management activities:

(b) Developing the Risk Management Policy of the GOCC, ensuring compliance with the same and ensure that the

management process and compliance are embedded throughout the operations of the GOCC,
especially at the Board and Management level: and

risk

(c) Providing quarterly reporting and updating the Board on key risk management issues as well as ad hoc reporting and evaluation on investment proposals;

16.3. Combining the Mandatory Committees.

preclude the Governing Board from formally combining the functions of the committees into such combinations that will best seNe the interest of the GOCC.

Nothing herean shall

16.4. Other Commiltees Requned by Law, Rules and Regulations. - ln addition to the committees required in this Code, each GOCC, when so covered, shall also establish the committees required under the corresponding and applicable rules and regulations issued by the Bangko Sentral ng Pilipinas (BSP), the lnsurance Commission (lC), the Securities and Exchange Commission (SEC) and the Philippine Stock Exchange (PSE), and other Supervising Agencies. SEc. 17. Annual Performance Evaluation of the Board. - A systematic evaluation process of the Board shall be developed as a necessary tool in enhancing its professionalism and as a useful incentive for Board Members to devote sufficient time and effort to their duties. The evaluation should also be instrumental in developing effective and appropriate induction and training programs for new and existing members of the Board.

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tv.
MANAGEMENT

SEc. 18. Ro/e of Management. - The Management of every GOCC stands as the center of decision-making for the day-to-day affairs of the GOCC. lt determines the GOCC'S activities by putting the targets set by the Board in concrete terms and by implementing basic strategies for achieving those targets. Management is responsible to the Board for implementing the infrastructure for the GOCC's success through the following mechanisms in its organization as set by the Board: organizational structures that work effectively and efficiently in attaining the goals of the GOCC; useful planning, control, and risk management systems that assess risks on an integrated cross-functional approachi information systems that are defined and aligned with an information technology strategy and the business goals of the GOCC; and a plan of succession lhat formalizes the process of identifying, training and selection of successors in key positions in the GOCC. SEc. 19. Maragement Primarily Accountable to the Board. - Management primarily accountable to the Board for the operations of the GOCC. As part of is its accountability, Management shall provide all members of the Board with a balanced and understandable account of the GOCC's performance, posation and prospects on a monthly basis. This responsibility shall extend to interim and other price sensitive public reports and reports to regulators.

- The CEO or the highest-ranking provided for in the Charter or By-laws, shall be elecled annually Executive Officer by the members of the Board from among its ranks.$ The CEO shall be subject to the disciplinary powers of the Board and may be removed by the Board for cause.u'oln addition to the duties imposed on him by the Board, the CEO shall:
sEc.20. Chief Executive Officer (CEO).
(a) Exercise general supervision and authority over the regular course of business, affairs, and property of the GOCC, and over its
employees and officers; (b) See to it that all orders and resolutions of the Board are carried into effecti

(c) Submit to the Board as soon as possible after the close of each fiscal year, and to the shareholders at the annual meeting, if applicable, a complete repori of the operations of the GOCC for the
preceding year, and the state of
ats

affairs;

(d) Report to the Board from time to time all matters which the interest of the GOCC may require to be brought to its notice; and

(e) Perform such other duties and responsibilities as the Board may
impose upon him.

*S6c. 18,

R-A. No. 10149.

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SEc.21. Other Executive Officers. - Subject to the provisions of its Charter or By-Laws, the Executive Officers shall be appointed by the Board.
21.1. Corporate Treasurer. The Treasurer shall have charge of the funds, securities, receipts and disbursements of the GOCC. Unless otherwise provided in the Charter or the By-laws, the Treasurer shall also have the following functions:

(a) Oeposit or cause to be deposited all monies and other valuable effects in the name and to the credit of the GOCC in compliance
with applicable laws, rules and regulations: (b) Regularly and at least quartedy render to the CEO or to the Board an account of the fund condition of funds of the GOCC and all of his transactions as such;

(c) Ensure fund availability on a timely basis and at the

economical means;

most

(d) Optimize yields in temporary excess funds, but at the same time ensure the implementation of appropriate risk management measures over its resourcesi
(e) Provide relevant and timely financial market information;

(f) Perform such other responsibilities as the Board may impose.

21.2 chief Finance Officer (CFO).

Treasurer, shall be responsible for the following:

- fhe CFO, who may also be the

(a) Providing

management with accurate, relevant, and timely operating and financial reports and analysis necessary for flnancial planning and strategy formulation, and monitoring actual implementation of budgets, plans and programs towards the
achievement of corporate goalsi

(b) t\4aintaining the integrity of accounting records as the basis of the financial statements and reports provided to [,lanagement for

decision making and

to

government regulatory bodies

in

compliance with statutory requirements;

(c) Promoting investor and public confidence in the GOCC

by addressing the various information requirements of the investing public and ensuring that all other legal reportorial obligations to the concerned agencies are complied with;

(d) Strengthening internal controls by monitoring compliance with policies and recommending to Management appropriate actions
and changes in systems and procedures in the exigencies of the service; and
(e) Performing such other responsibilities as the Board may impose.

SEc.22. Power of the Governing Board to Discipline/Remove Oflicers. Subject to existing civil service laws, rules and regulations, and in ensuring
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compliance with the requirements of due process, the Board shall have the authority to discipline, or remove from office, the CEO, or any other Oflicer, upon a majority vote of the members of the Board who actually took part in the
investigation and deliberation.60

V,

DUrES AND OBLTGATToNS oF DtREcroRS AND OFFTcERS

SEc.23. Fiduciaries of the State. - Directors and Officers are fiduciaries of the State in that: (a) they have the legal obligation and duty to always act in the best interest of the GOCC, with utmost good faith in all dealings with the properties, interests and monies of the GOCC;6' and (b) they are constituted as trustees in relation to the properties, interests and monies of the GOCC.6' SEc.24. Directors and Officers as Public Officials.

are also Public Officials as defined by, and are therefore mvered by the
provisions of the "Code of Conduct and Ethical Standards for Public Officials and Employees,"63 with its declared policies: (a) to promote a high standard of ethics in public service; and (b) Public Offcials and employees shall at all times be accountable to the people and shall discharge their duties with utmost responsibility, integrity, competence, and loyalty, act with patriotism and justice, lead modest lives, and uphoid public interest over personal interest.6o

Directors and Officers

SEc.25. Respect for and Obedience to the Conslitution and the Law. - As Public Officials, a Director or Officer shall respect and obey the Constitution, and shall comply, and cause the GOCC to faithfully and timely comply, with all legal provisions, rules and regulations, and corporate governance standards, applicable to them and to the GOCC in which they serve, and to act within the bounds of their Charter, Articles of lncorporation and ByJaws.
SEc-26. Duty of Diligence. - The fiduciary duty of diligence of Directors and Officers to always act in the best interest of the GOCC, with utmost good faith in all its dealings with the property and monies of the GOCC, includes the obligation
to:

(a) Exercise extraordinary diligence, skill and utmost good faith in the conduct of the business and in dealing with the properties of the GOCC, using the utmost diligence of a very cautious person with due regard to all the circumstances;65
(b) Apply sound business principles to ensure the flnancial soundness of the cOCC;"s and
esec.22. R.A. No. 10149.
5

Opening paragraph of Sec. 19, R.A. No. 10t49.

10149.

"'Sec.20. R.A. No.

es*

6rReD.

Act No.6713.

nl

H. ezrt
10149.

lg(b)combined wtlh Sec.2l. R.A. No. :lsec. *Sec l9(d), R.A. No. 10149.

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(c) Elect and/or employ only Officers who are fit and proper to hold such office with due regard to the qualifications, competence,
experience and integrity.""'

Every Director or Olficer, by the act of accepting such position in the

GOCC, afflrms and agrees: (1) to have a working knowledge of the statutory and regulatory requirements affecting the GOCC he is to serve, including the contents of its Charter, or A(icles of lncorporation and By-laws, the requirements of the GCG, and where applicable, the requirements of other Supervising Agencies; and (2) to always keep himself informed of industry developments and business trends in order to safeguard the GOCC'S interests and preserve its competitiveness.
SEc. 27. Duty of Loyalty. The fiduciary duty of loyalty of Directors and Officers to always acl in the best interest of the GOCC, with utmost good faith in all its dealings with the property and monies of the GOCC, includes the obligation to: (a) Act with utmost and undivided loyalty to the GOCC;ft (b) Avoid conflicts of interest and declare any interest they may have in any particular matter before the Board:6'oand

(c) Avoid (1) taking for themselves opportunities related to

the property, (2) information or the GOCC's business; using GOCC's position for personal gain; or (3) competing with the Gocc's business opportunities.

27

.1. Avoid Conflict of lnterest. Directors and Officers shall at all times avoid any actual or potential conflict of interest with the GOCC. Each shall also avoid any conduct, or situation, which could reasonably be construed as creating an appearance of a conflict of interest. Any question about a Director's or Officer's actual or potential conflict of interest with the GOCC shall be brought promptly to the attention of the Chairman of the Board, who will review the question and determine an appropriate course of action.

27.2. Trustee Relation to GOCC Properties, lnterests and Monies. - Except for the psr dlern received for actual attendance in board meetings and the reimbursemenl for actual and reasonable expenses and incentives as authorized by the GCG, any and all realized and unrealized profits and/or benefits including, but not limited to, the share in the profits, incentives of Directors or Officers in excess of that authorized by the GCG, stock options, dividends and other similar offers or grants from corporations where the GOCC is a stockholder or investor, and any benefit from the performance of Directors or Officers acting tor and in behalf of the GOCC in dealing with its properties, investments in other corporations, management of
67Sc 19{6), R.a. No. lol49. ssc. ,qa), R.a. No. lOl49.

u'S6c. 19(c). R.A. No. 10t49.

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Subsidiaries and other interest, are

Director
re
p

rese nted

or/oOfllcer for the exclusive benefit of the

.

to be held in trust by such

GOCC

27.3. Taking of Corporate Opporlunities. - Where a Director or an Offlcer, by reason of his being a member of the Board or an Officer of a GOCC, acquires or receives for himself/herself a benefit or profit of whatever kind or nature, including but not limited to, the acquisition of shares in corporations where such GOCC has an interest, the use the properties of the GOCC for his/her own benefit, the receipt of commission(s) on contract(s) with the GOCC or its assets, or the taking advantage of corporate opportunities of the GOCC, all such profits or benefits shall be subject to restitution pursuant to Section 24 of the Act, without prejudice to any administrative, civil or criminal action against members of the such Director or Officer. The remedy of restitution shall apply notwithstanding the fact that such Director or Officer risked his/her own funds in the venture."

27.4. Restitution.

Pursuant to Section 24 of the Act, upon the and report of the Commission on Audit (COA) determination pursuant to a Notice of Disallowance which has become final and

executory, that properties or monies belonging to the GOCC are in the possession of a Director or Officer of a GOCC without authority, or that profits are earned by the Director or Officer in violation of his/her fiduciary duty, or the aggregate per diems, allowances and incentives received in a particular year are in excess of the limits provided under the Act, the Director or Officer receiving such properties or monies shall immediately return the same to the GOCC.

Failure by a Director or Officer to make the restitution within thirty (30) days after a written demand has been served shall, after trial and final .iudgment, subject such Director or Officer to the punishment of imprisonment for one ('l ) year and a fine equivalent to twice the amount to be restituted and, in the discretion of the court of competent jurisdiction, disqualification to hold public office.7'? SEc.28.
L,,;ryrlts

to Compensation, Per Diems, Allowances and lncentives.

contrary

Pursuant to Section 23 of the Act:

(a) The Charters or By-laws of the GOCCS to the

notwithstanding, the compensation, per diems, allowances and

incentives of the Appointive Directors shall be determined by the GCG, using as a reference, among others, Executive Order No. 24, dated February 10, 2011; (b) Directors shall not be entitled to retirement benefits acting as such directorsi and
20 of R.A. No. 10149. 7lLast paraqraph oISec 19, R.A. No. 10149 24. R.A. No. 10149 "Art
7osec.

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(c) With respect to GOCCs organized solely for the promotion of social welfare and lhe common good, without regard to prorit, the total yeatly per dlems and incentives in the aggregate which the Directors may receive shall be determined by the President upon the recommendation of the GCG based on the achievement by such GOCC of its performance target(s).

SEc.29. No Gift Policy. - A Director or Officer shall not solicit, nor accept, directly or indirectly, any gift, gratuity, favor, entertainment, loan or anything of
monetary value ("Gift") from any person where such Gift: (a) Would be illegal or in violation of law; (b) ls part of an attempt or agreement to do anything in return;

(c) Has a value beyond what is normal and customary in the Goccs
business;

(d) ls being made to influence the member of Board's, or Officels,

actions as such; or (e) Could create the appearance of a conflict of interest.

Every Governing Board shall formally adopt a "No Glfr Porcy''within the GOCC and ensure its full advertisement to the community and its strict
implementation by particular set of rules.

SEc.30. Duty of Confidentiality. - Pursuant to their duties of diligence and loyalty, a member of the Board or an Offlcer shall not use or divulge confidential or classified information officially made known to them by reason of their office and not made available to the public, either: (1) to further their private interests, or give undue advantage to anyone; or (2) which may preiudice the public
interest.

vt.
OBLTGATToNs oF THE GOCC To DtREcroRS aND OFFICERS

Each GOCC shall SEc. 31. Providing for Staff Support to Directors. provide the members oI its Governing Board with reasonable support staff and office facilities to allow them to properly discharge their duties and responsibilities.

SEc.32. Obtaining of Directors and Officers Liability lnsurance (DOLI). Having imposed the highest level of responsibility and accountability on the members of the Board and Officers, 1.e., that of extraordinary diligence, it is equitable that when the GOCC itself and/or the members of the Board and Management are sued before tribunals on matters that are within the official functions and capacity and on matters where business judgment has been
exercised in good faith, that there be proper recovery of the costs of litigation and the judgment liability imposed. lt is prudent measure therefore for every GOCC to
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oblain "Directors and Officers Liability lnsurance" (DOLI) coverage for itself and the members of the Governing Board and Officers against contingent claims and liabilities that may arise from, as well as the expenses that may be incurred in prosecuting, the actions that may be filed against the GOCC arising from the actions of the Governing Board and/or Management that may cause loss or damage to third parties.

Nothing in this section shall be construed as to authorize the reimbursement or the incurring of costs, such as the payment of premiums on DOLI coverage, by the GOCC on the litigation expenses incurred and the judgment liability decreed against a Director or Officer for breach of any of his fiduciary duties or for fraud committed in the performance of his or her duties to the GOCC and/or its stakeholders.

v[.
CSR AND RELATIoNS wlTH STAKEHoLDERS
Every Director and SEc. 33. Duty to Be Responsive to Stakeholders. Officer accepts the position fully aware that he assumes certain responsibilities not only to the GOCC and its stockholders, but also with different constituencies or Stakeholders, who have the right to expect that the GOCC is being run in a prudent manner and with due regard to the interests of all Stakeholders." Consequently, members of the Board and Officers shall deal fairly with the GOCC's employees, customers, suppliers and other Stakeholders. No member of the Board or Officer may take unfair advantage ol the GOCC'S employees, customers, suppliers and other Stakeholders through manipulation, concealment, abuse of confidential or privileged information, misrepresentation of material facts, or any other unfair-dealing practice.
As an integral part of the National Government, GOCCs are inherently mandated to be socially responsible, to act and operate as good corporate citizens. The Governing Board shall recognize and perform the obligations the GOCC has towards the National Government, its majority stockholder, as well as the minority stockholders when existing, together with the employees, suppliers, customers and other Stakeholders, and the communities in which it operates.
SEc. 34. CSR Pflncrples.

The Directors, Officers and all its employees are required to abide by
ethical policies as mandated by the GCG. The protection of the reputation and goodwill of every GOCC is of fundamental importance, and Directors, Offlcers and employees should be aware of the disciplinary implications of breaches of policy.

7\aren ftom Sec. ll(2xa), SEC Cod of CoeDrais Govemance, SEC Mmoranduo Circular No. 2, s.
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promptly report any potentially illegal, improper and/or unethical mnduct that they become aware of
at their workplace or in connection with their work. Every GOCC should have an environment that enables its people to raise genuine and legitimate concerns internally. However, in the event that the people of the GOCC, and/or the stockholders believe their reporting to management may result in harassment, or undue distress, they may contact the GCG support to report such matters. The GCG provides for an opportunity for concems to be investigated and ensures appropriate action is taken to resolve the matter effectively. SEc. 35. Formal Recognition of the Stakeholders. Every GOCC Board shall, as an integral part of its Charter Statement and embodied in its Manual of Corporate Governance, identify and formally recognize the GOCC'S major and other Stakeholders, identify the nature of their interests, provide a hierarchy system of their conflicting interest in the GOCC, and providing a clear policy on communicating or relating with Stakeholders accurately, effectively and sufficiently, together with a system of properly rendering an accounting on how the GOCC has served their legitimate interests."
SEc. 36. Employees.

Every member of the GOCC is encouraged

to

Every employee in a GOCC is encouraged to

(a) Remember that the biggest stakeholder is the Government; (b) Share the vision ofthe GOCC; (c) Be accountable to the public; (d) Listen and learn from his/her co-employees; (e) Think and act as a team;

(f) Focus on the customers and strive for customer satisfaction: (g) Respect others;
(h) Communicate with stockholders and customers; (i) Deliver results and celebrate success; and
(.j)

Protect the reputation of the GOCC.

There should be employee development discussions and structured training programs for continuing personal and professional development for employees. SEc. 37. Cuslomers. lntegrity and honesly in dealings with customers is necessary for a successful and sustained business relationship. Every GOCC should operate a highly effective and efficient organization, focused on meeting customer objectives with the aim of providing services which give fair value and consistent quality, reliability and safety in return for the price paid for the same. GOCCs should operate policies of continuous improvement, of both processes and the skills of the staff, to take best advantage of advances in all aspect of society in order to ensure that it continues to add value to its customers' businesses.
?taken from Sc. ll(2xbxi), SEC Cod6 of Corporate Govemance, SEC Memorandum Circutar No. 2, s
2002.

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GOCCs should have clear and strong lines of communication which allow them to respond quickly and efficiently to customer and markel requirements, as well as the public needs, and for the customers to receive consistent service in order to successfully and consistently deliver what the GOCC is mandated to do.

SEc.38. Suppfiers. - As with other relationships with the Stakeholders, GOCCS should aim to develop relationships and improve networking with business partners and suppliers based on mutual trust. GOCCS should aim to
offer, through partnership with its suppliers, the best combination of state-of-theart technology and world class service, strong customer relations and deep industry knowledge and experience, together with the capacity to implement and deliver value-added solutions on time and within budget. Every GOCC should aim to ensure a safe SEc. 39. Heath and safety. and healthy working environment for all its employees, outside contractors and visitors. The GOCC should comply with all relevant local legislation or regulations, and best practice guidelines recommended by national health and safety authorities. The staff should be informed regarding the policies and practices of the GOCC in order to maintain a healthy, safe and enjoyable environment.

- GOCCS should consider that there are inevitable with daily operations. lt shall be the goal oI impacts associated environmental every GOCC to minimize harmful etfects and consider the development and implementation of environmental standards to achieve this to be of great importance. As such, GOCCS should strongly encourage 3 R's: "Reduce", "Reuse" , and " Racycle" .
SEc.40. Environmert.
ln the course of the operations of the GOCC, it should identify opportunities to reduce consumption of energy, water and other natural resources. GOCCS should also strive to re-use and recycle where possible and dispose of nonrecyclable items responsibly, thereby minimizing our impact on the environment. ln doing so, by adopting simple, environmentaily friendly initiatives, the GOCC shall raise awareness among the members of the communities it affects.

DrscLosuRE AND TRANSpARENcy REeUtREMENTS

SEc. 41. Transparency as the Essence of Corporate Governance. - fhe essence of corporate governance is transparency; the more transparent lhe internal workings of the GOCC are, the more difficult it will be for the Board and/or Management to mismanage the GOCC or to misappropriate its assets.'5 lt is therefore imperative that GOCCS disclose all material information to the National Government and the public, its ultimate stakeholder, in a timely and accurate manner at alltimes.
T5Adopted

ftom An. 8, Revised Code of CoDoral6 Govemance, SEC Memorandum Circutar No. 6, s.

2009.

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SEc.42. GOCC Manual of Corporate Governance. - Every GOCC, acting through its Governing Board, shall promulgate and adopt its corporate governance rules and principles in accordance with this Code,?6 and which in
addition shall contain the following items:

(a) Detailed responsibilities of members of the Board, which shall be available to all Stakeholders and to the public;"
(b) Formal Charter of expectations that each Oirector shall sign and be committed to;'3 (c) List of Disclosures to be made by Directors;7'g

(d) Statement by the Directors confirming the truth and fairness of the Statement of GOCC's financial statementse similar to Management Responsibility; and

(e) List of Fines and other consequences when Directors violate, or

omit to carry out their duties, under applicable law.6'

The Manual shall be submitted to the GCG, which shall evaluate the same and their compliance with this Code taking into account the classification and industry of the GOCC. The Manual shall be available for inspection by any of the identirled Stakeholders of the GOCC at reasonable hours on business days. SEc.43. Mandatory Website. - ln accordance with Section 25 of the Act, all GOCCS shall maintain a website and post therein for unrestricted public access:
43.1. On lnstitutional Mafters: (a) For Chartered GOCCS, the latest version of its Charter;

(b) For Nonchartered GOCCS, latest General lnformation Sheet (GlS) and brief company background including date of
incorporation, history, functions and mandate; (c) List of Subsidiaries and Affiliates; and (d)

Government Corporate lnformation Sheet (GCIS) as mandated by the GCG in its Memorandum Circular No.
2012-01.

43.2. On the Board and Officers:

(a) Complete listing of the Directors and Officers with aftached resume, and their membership in Board Committees; (b) Complete compensation package of all the board members and officers, including travel, representation, transportation
and any other form of expenses or allowances;
T6Coaorate
3'z

Govemance Principles for Businsss Enlrprises, www.6db.om/documenls/brochureY corporate oov/comoralg oov orincioles.odf., last accessed 2 March 2012. hereinafrer referred lo as 'ADB Corporale Govemance Princjples for Eusness Enterpnses.' 'ADB Comorate Govemanc PrinciDles lor Bu$nss Enrerpnss. '"ld.

!'Sec. zs1e1,

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(c) lnformation on Board Committees and their activities;33 and (d) Attendance record of Directors in Board and Commiftee meetings. 43.3. On Financial and Operational Mafters. (a) Their latest annual Audited Financial and Performance Report within thiriy (30) days from receipt of such Report;u (b) Audited Financial Statements in the immediate past three (3) years;s5 (c) Quarterly, and Annual Reports and Trial Balance;36 (d) Current Corporate Operating Budget (COB);3?

(e) Local and foreign borrowings;33

(f) Government subsidies and net lending;3s
(g) All borrowings guaranteed by the Government;$

(h) Any material risk factors and measures taken to manage such risks:'g1 and (k) Performance Evaluation System (PES). 43.4. On Governance Mafters. (a) Charter StatemenUMission-Vision Statements;

(b) Performance Scorecards and Strategy Map;"

(c) Organizational Chart;

(d) Manual of Corporate Governance;

(e) CSR Statement; and

(f) Balance Scorecard. 43.5. Such other information or report that the GCG may require.s3

SEc.44. GOCCS Must Be Active Paiicipants in the lntegrated Corporate Repoding System. - ln the pursuit of national development and providing better service to the public, and to ensure each GOCC's faithful performance of their mandate using the standards of good governance, transparency, accountability and responsibility, the National Government, through the GCG, shall develop an lntegrated Corporate Reporting System (ICRS) to provide an extensive database

&S6c.

"Sec ss6c.
37sc

25{a), R.A. No. 10r49. 25{b). R a. No lol4g. 25{c), R.A. No. 10t49.

R.a. No. 10149. :^Adopled from the OECD Gudolines "Sec.25(g), R.A. No. 10149. "Ssc.25(i). R.A. No. 10149.

ss6c. 25{0. R.A. No 10149. "Sc.25(h). R.A. No. 10149. *S6c.25{i),

25id).

RA No

t0149.

-Transparoncy and Disclosure.' V-E{ 3). p. 16.

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and comprehensive information on GOCCS, pursuant to the

parameters:

following

44.1. The ICRS shall provide a platform for the electronic submission by GOCCS of various reportorial requiremenls such as financial statements, list of directors and officers, compensation, operating
budgets and performance commitments;

44.2. Reports provided under the Disclosure and

Transparency Requirements in the Ownership and Operations Manual for GOCCS and the government corporate standards governing GOCCS shall also be incorporated into the System;

44.3. The ICRS shall also be linked initially to National Government Agencies with GOCC dealings, such as with the Commission on Audit (COA), Department of Finance (DOF), the Deparlment of Budget and Management (DBM), and eventually to the Public Financial Management System and the Government lntegrated
Financial Management lnformation System (GlFMlS);'g4 and

44.4. Every GOCC, acting through its Board and [,1anagement, shall ensure that it becomes an active and responsible member and contributor to the tcRS.

SEc.45. Mandatory Reporls. - The Board shall regulady submit, as may be required by the GCG and other Government Agencies, the following:
(a) Performance Scorecards; (b) lmplementation of the audit recommendations of COA; and

(c) Compliance with commitments on servicing loans to,

borowings guaranteed by, the National Government. SEc.46. Other Repotlorial Requiremenls.

and

All GOCCs shall also submit to the GCG periodically in electronic form to the GCG the following:

(a) Common Form financial statements based on annual audited financial statements within thirty (30) days from receipt of the repo(i (b) Dividend computations and payments in accordance with
Republic Act No. 7656, also known as "The Dividends Law;" (c) Cash and investment balances;

(d) For GFls, actual and projected Statement of Cash SurpluVDeficit;

(e) Capital expenditure program; (f) Statement of Financial Operations;
eNEDA Philippine oevelopmenr Plan 2011-2016, s0 (2011).

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Code of Corporalo Governance for lhe GOCC Sector Page 29 of 31

(g) Acquisition or disposition of assets; (h) Off Balance Sheet transactions; and

(i) Reports for the annual corporate budget call such as but
limited to the following:

not

(1) Physical and Financial Performance reports (the immediately preceding three (3) years); and
(2) Sources and Uses of Funds (the immediately preceding three (3) years) and the proposal for the coming year.

SEc. 47. The format and schedule of submission for the various reports shall be provided by the GCG in consultation with the Department of Finance (OOF), Department of Budget and Management (DBM), Commission on Audit (COA) and other Government Agencies as may be proper.

tx.
HtcHEST STANDARDS PRtNctPLE'gs
SEc. 48 . Public service being construed AS:

a public trust, nothing in this Code shall be

48.1. Corporate Government Standardsr Relieving

or excusing GOCCS, their Oirectors and Officers, from complying with more rigorous
standards of corporate governance as those required by regulatory agencies having jurisdiction over their business enterprises or the industry in which they operate, such as the Philippine Stock Exchange (PSE) or the Securities and Exchange Commission (SEC) for GOCCS that are listed companies or public companies as provided for in the Securities Regulation Code, the Bangko Sentral ng Pilipinas (BSP) for GOCCs that are banking institutions, and the lnsurance Commission (lC) for GOCCS which are insurance companies or insurance intermediaries.$

48.2. Reponorial Requirements:

waiver of the separate reportorial requirements mandated by the regulatory agencies that have

jurisdiction over the GOCC and its business operations.

48.3. Administrative and Criminal Liabilities; A waiver of the administrative or criminal liabilities imposed by existing laws, rules and regulations, such as the Anti-Graft and Corrupt Practices Act,'g7 and the Code of Conduct and Ethical Standards for Public Officials and Employees for Government Officials,$ for offenses or breach of ethical standards committed by Directors, Officers and employees of GOCCs.

rrom Sec. s(c). R.A. No. 1014e. lladopred $Sec.

Acl "Reo e8Rep.

5(c), R.A. No. 10149. No. 30 19. Acl No. 6713.

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MtscELLANEous PRovtstoNS Sec.49. Amendmenrs. - This Code may be amended by the GcG through the issuance of a memorandum circular duly published in the GCG's website and copy formally submitted to the UP Law Center.
SEc.50. Effectivity. - This Code shall be effective fifteen ('15) days after it is published in the GCG'S website and from the date formal copy is received by the UP Law Center. ADOPTED this
day of November, 2012.

Chairman

CE ISIMA Secretary, Department of Finance (DOF)

006271
GE

@t---*2 FLORENCIO B. ABAD Secretary, Department of Budget and Management (DBM)

RAINIER B. BUTALID Commissioner

---oOoDISAPPROVED:

U,L"
PRESIDENT
NOV 2

NO S. AQUTNO
2012

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