GOVERNANCE, BUSINESS ETHICS, RISK company's many stakeholders, such as shareholders,

management, customers, suppliers, financiers, government and

MANAGEMENT AND INTERNAL CONTROL the community.
GOVERNANCE Purpose of corporate governance
Governance refers to a process whereby elements in society wield The purpose of corporate governance is to facilitate effective,
power, authority and influence and enact policies and decisions entrepreneurial and prudent management that can deliver long term
concerning public life and social upliftment. success of the company.
Governance therefore means the process of decision-making and the Objectives of corporate governance
process by which decisions are implemented (or not implemented)
through the exercise of power or authority by leaders of the country 1. Fair and equitable treatment of shareholders
and / or organizations.
A corporate governance structure ensures equitable and fair treatment
CHARACTERISTICS OF GOOD GOVERNANCE of all shareholders of the company.

1. Participation - by both men and women is a key cornerstone, of 2. Self-assessment

good governance. Participation could be either direct or through
legitimate institutions or representative. It is important to point out Corporate governance enables firms to assess their behavior and
that representative democracy does not necessarily mean that the actions before they are scrutinized by regulatory agencies.
concerns of the most vulnerable in society would not be taken into
3. Increase shareholders wealth
consideration in decision making.
2. Rule of law - good governance requires fair legal frameworks that Another corporate governance main objective is to protect the long-
are enforced impartially. It also requires full protection of human term interests of the shareholders.
rights, particularly those of minorities.
3. Transparency - means that decisions taken and their 4. Transparency ad full disclosure
enforcement are done in a manner that follows rules and
regulations. It means that information is freely available and Good corporate governance aims at ensuring a higher degree of
directly accessible to those who will be affected by such decisions transparency in an organization by encouraging full disclosure of
and their enforcement. transactions in the company accounts.
4. Responsiveness-good governance requires that institutions and Basic principles of effective corporate governance
processes try to serve the needs all stakeholders within a
reasonable timeframe. 1. Transparency and full disclosure
5. Consensus oriented - good governance requires mediation of a. Does the board meet the information needs of investment
the different interests in society to reach a broad consensus on communities?
what is in the best interest of the whole community and how this b. Does it safeguard integrity in financial reporting?
can be achieved. 2. Accountability
6. Equity & Inclusiveness - ensures that all its members feel that a. Does the board clarify its role and that of management?
have a stake in it and do not feel excluded from the mainstream b. Does it promote objective, ethical and responsible decision
of society. making?
7. Effectiveness & Efficiency - good governance means that
processes and institutions produce results that meet the needs of 3. Corporate control
society while making the best use of resources at their disposal.
a. Has the board built long term sustainable growth in
8. Accountability - is a key requirement of good governance. Not
shareholder's value for the corporation?
only governmental institutions but also the private sector and civil
b. Does is create an environment to take risk?
society organizations must be accountable to the public and to
their institutional stakeholders. Corporate governance responsibilities and accountability
Corporate Governance Many of the characteristics of good governance are relevant
to both SME's and large listed public companies. As an organization
• Corporate governance means to steer an organization.
grows in size and influence, these issues become increasingly
Governance comes from the Latin word "gubanare" which means
important.
"to steer."
• Corporate governance is the system of stewardship and control However, it is also important to recognize that good corporate
to guide organizations in fulfilling their long-term economic, moral, governance is based on principles underpinned by consensus and
legal and social obligations towards their stakeholders. continually developing notions of good practice.
• Corporate governance is a system of direction, feedback and
control using regulations, performance standards and ethical Relationship between shareholders/owners and other
guidelines to hold the Board and senior management accountable stakeholders
for ensuring ethical behavior - reconciling long-term customer
While shareholders/owners delegate responsibilities to various parties
satisfaction with shareholder value to the benefit of all
within the corporations, they also require accountability as to how well
stakeholders and society. (SEC Code of Corporate Governance)
the resources that have been entrusted to management and the board
• Corporate Governance is a set of relationships between a
have been used. For example, the owners want accountability on such
company's directors, its shareholders and other stakeholders. It
things as:
also provides the structure through which the objectives of the
company are set, and the means of achieving those objectives 1. Financial performance
and monitoring performance, are determined. 2. Financial transparency - financial statements that are clear with
full disclosure and that reflect the underlying economics of the
Corporate governance: An overview
company.
• Corporate governance is defined as the system of rules, practices 3. Stewardship, including how well the company protects and
and processes by which business corporations are directed and manages the resources entrusted to it.
controlled. It basically involves balancing the interests of a 4. Quality of internal control

1
5. Composition of the board of directors and the nature of its It is where SEC addresses specific segments of the corporate sector,
activities, including information on how well management which may be differentiated on the basis of company type, size, access
incentive systems are aligned with the shareholders best interest. to public funds and risk profile, among others. Smaller companies may
decide that the costs of some of the provisions outweigh the benefits
Parties Involved in Corporate Governance: Their respective or are less relevant in their case.
board role and specific responsibilities.
The Code is designed to allow companies some flexibility in
PARTY BROAD ROLE establishing their own corporate governance practices.
Provide effective oversight through election of Comply or Explain
board members, approval of major initiatives such
Shareholders
as buying or selling of stock, annual reports on • Under the "comply or explain" operative principle, compliance with
management compensation, from the board the Code is not mandatory. But it is mandatory to submit to SEC
the company's annual corporate governance reports and disclose
The major representative of stockholders to any deviations from the Recommendations of the SEC. Such
Board of ensure that the organization is run according to reports that shall be available to the public, including the
Directors the organization's charter and that there is proper company's shareholders and other stakeholders.
accountability. • Voluntary compliance with mandatory disclosure.
• The Code is principles-based which allows company to implement
Non-
alternative corporate governance practices, which are justified in
Executive or The same as the broad role of the entire board of
particular circumstances.
Independent directors.
• When a Recommendation is not complied with, the company must
Directors
disclose and describe this non-compliance, and explain how the
Operations and accountability. Manage the overall Principle is being achieved. The alternative should be
organization effectively, provide accurate and consistent with the overall Principle.
Management
timely reports to shareholders and other
Underlying Principles
stakeholders
The board's governance responsibilities
Audit Provide oversight of the internal and external audit
Committees function and the process of preparing the annual • Establishing a competent board
of the Board financial statements as well as public reports on • Establishing clear roles and responsibilities of the board
of Directors internal control • Establishing board committees
• Fostering commitment
Set accounting and auditing standards dictating
• Reinforcing board independence • Assessing board
Regulators underlying financial reporting and auditing
performance
(a) Board of concepts; set the expectations of audit quality and
Accountancy • Strengthening board ethics
accounting quality
Disclosure and transparency
(b) Securities
Ensure the accuracy, timeliness and fairness of
and • Enhancing company disclosure policies and procedures
public reporting of financial and other information
Exchange • Strengthening the external auditor's independence and
for public companies
Commission improving audit quality
• Increasing focus on non-financial and sustainability reporting
Perform audits of company financial statements to • Promoting a comprehensive and cost-efficient access to
External ensure that the statements are free of material relevant information
Auditors misstatements including misstatements that may
be due to fraud Internal control system and risk management frameworks

Perform audits of companies for compliance with • Strengthening the internal control system and risk
Internal company policies and laws, audits to evaluate the management systems
Auditors efficiency of operation and periodic evaluation and
tests of controls Cultivating a synergic relationship with shareholders/members

• Promoting shareholder/member rights

Securities and Exchange Commission (SEC) Code of Corporate Duties to stakeholders

Governance
• Respecting rights of stakeholders and effective redress for
SEC Code of Corporate Governance violation of stakeholder's rights
• Encouraging employees' participation
Publicly listed companies - Publicly listed companies shall cover • Encouraging sustainability and social responsibility
only those companies whose equity securities are listed on the
Philippines Stock Exchange. Establishing a Competent Board

Public company - Public company refers to a company with assets of The company should be headed by a competent, working board to
at least P50 million and having 200 or more shareholders holding at foster the long-term success of the corporation, and to sustain its
least 100 shares of equity securities. competitiveness and profitability in a manner consistent with its
corporate objectives and the long- term best interests of its
Registered issuer - Registered issuer refers to a company that (1) shareholders and other stakeholders. This can be achieved by
issues proprietary and/or non- proprietary shares/certificates; (2) implementing the following Recommendations: The Board should-
issues equity securities to the public that are not listed in an Exchange;
or (3) issues debt securities to the public that are required to be 1. be composed of directors with a collective working knowledge,
registered to the SEC, whether or not listed in an Exchange. experience or expertise that is relevant to the company's
industry/sector.
Principle of Proportionality 2. be headed by a competent and qualified Chairperson
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3. provide a policy on the training of directors
4. have a policy on board diversity Director Hours Topic
5. be assisted by a Corporate Secretary and a Compliance Officer
Corporation's business and
Competent Directors corporate structure, vision and
mission, corporate strategy,
It is the shareholders' duty to elect competent board of directors and
First-Time Governance Codes and Policies,
remove those who failed to maintain their qualifications. Orientation Articles,
8 hours By-Laws, Company's
Director Program Manual of Corporate Governances,
Basis of Qualification
the Charters, the SEC mandated
The Revised Corporation Code prescribed the legal qualifications of a topics on governance matters and
director. In addition, the corporation may provide in its By-laws other matters essential for the
additional directors' or trustees' qualifications consistent with the good effective performance of their duties
corporate governance practices. and responsibilities.

The corporation shall also provide grounds for disqualification of

AnnualCourses on corporate governance
incumbent directors.
Incumbent matters relevant to the company,
Example of Qualification 4 hours Continuing including audit, internal controls,
Directors risk management, sustainability,
A director of a company shall have the following qualifications: Training and strategy.
• A college graduate or have at least 5 years of experience in
business
• Adequate competence and understanding of the fundamentals of Board diversity
doing business or sufficient experience and competence in
managing a business to substitute for such formal education; The Board should have a policy on board diversity.
• Integrity, probity and shall be diligent and assiduous in the Diversity is the variation of social and cultural identities among people
performance of his functions; existing together in a defined employment or market setting.
• attended a seminar on corporate governance conducted by a duly
recognized private or government entity or must have issued an A board diversity policy considers diversity in gender, age, ethnicity,
undertaking to attend such a seminar as soon as practicable culture, skills, competence and knowledge.

Chairperson Expertise Description

The Board should be headed by a competent and qualified
Chairperson. The Chairman shall possess all the qualifications and Industry Mix of directors siting as members of the BOD in
none of the disqualifications of a director. Expertise Energy, Electric Retail and Power Generation
companies realty, media, medical, insurance and
Function of the Chairperson other companies

The following are the primary functions of the Chairman of the Board:
Management or Mix of directors sitting as members of BOD or
• Facilitate the operations and deliberations of the Board; and Operations officers of electric supply, energy, power
• Ensure the performance of the Board's functions and generation, retail, banking, telecommunications,
responsibilities
Corporate Director with membership in Shareholders
Training of Directors Governance Association of the Philippines, Fellowship in ICD,
The Company should provide a policy on the training aimed to promote Former Governor of Philippine Stock Exchange
effective board performance and continuing qualification of the
directors in carrying-out their duties and responsibilities. The training Technology or Mix of directors who are likewise directors,
shall include Digital Media advisors or consultants of media, technology or
Expertise telecommunications companies
- orientation program for first-time directors
- relevant annual continuing training for all directors.
Retail, Sales or Mix of directors who are likewise directors,
Marketing advisors or consultants of media,
telecommunications, banking,
Expertise telecommunications, realty, media, medical,
insurance and retail companies

Academic Mix of directors who have degrees in Finance and

Institutions Commerce, Business Management, or who are
member of Board of Overseers, Board of Trustees
of colleges or business schools, or graduate of
International Management Development Program

Advocacy Directors with membership in environmental and

Groups or socio-civic advocacy groups and foundations
Foundations

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 ESTABLISHING CLEAR ROLES AND RESPONSIBILITIES OF
Professional Directors with membership in Integrated
THE BOARD
Organizations Bar, Philippine Bar Association, and
The fiduciary roles, responsibilities and accountabilities of the Board
Inter-Pacific Bar Association, Philippine
as provided under the law, the company's articles and by-laws, and
Stock Exchange
other legal pronouncements and guidelines should be clearly made
known to all directors as well as to stockholders and other
stakeholders.
Corporate Secretary
It leads in establishing the tone and practices of good corporate
The Board should be assisted in its duties by a Corporate Secretary, governance at the top by exercising the following responsibilities:
who should

- be a resident and citizen of the Philippines.

- not be a member of the Board of Directors
- be a separate individual from the Compliance Officer
- annually attend a training on corporate governance
- have a working knowledge of the operations of the Company
- possess appropriate administrative, interpersonal and legal
skills, Fiduciary Duty
- be aware of the laws, rules and regulations necessary in the
performance of his duties or responsibilities, and The Board members should act on a fully informed basis, in good faith,
- have at least an understanding of basic financial and with due diligence and care, and in the best interest of the company
accounting matters. and all shareholders. Elements of Fiduciary Duty:

Compliance Officer - duty of care (which includes the duty of obedience and duty
of diligence)
The Board should ensure be assisted in its duties by a Compliance - duty of loyalty.
Officer. The Compliance Officer should
Duty of Obedience
- not be a member of the Board of Directors
- should annually attend a training on corporate governance. Duty of obedience requires compliance with law, rules, and court
- have a rank of Senior Vice President or an equivalent position orders. The directors or trustees elected shall perform their duties as
with adequate stature and authority in the corporation prescribed by law, rules of good corporate governance, and bylaws of
the corporation. Directors, trustees, and officers have the duty to act
Roles and Duties intra vires and within authority.

Duty of Diligence

Under duty of diligence, directors, trustees, and officers are required

to exercise good faith and due care in the performance of their
functions, otherwise, they shall be held liable.

The following directors or trustees shall be liable jointly and severally

for all damages resulting therefrom suffered by the corporation, its
stockholders or members and other persons:

• Those who willfully and knowingly vote for or assent to patently

unlawful acts of the corporation or
• Those who are guilty of gross negligence or bad faith in directing
the affairs of the corporation.

Duty of Loyalty

The duty of loyalty mandate that directors/trustees should not give

preference to their own personal amelioration by taking the opportunity
belonging to the corporation.

The director/trustee or officer owes loyalty and allegiance to the

corporation, hence, he should not acquire —

• any personal or pecuniary interest in conflict with his duty as such

director or trustee or
• any interest adverse to the corporation in respect of any matter
(1) which has been reposed in them in confidence and (2) upon
which equity imposes a disability upon themselves to deal in their
own behalf

Strategic Direction and Corporate Performance

The Board should oversee the development of and approve the

company's business objectives and strategy, and monitor their
implementation, in order to sustain the company's long-term viability
and strength.

According to the OECD, the Board should

4
• review and guide corporate strategy, major plans of action, risk
management policies and procedures, annual budgets and
business plans; set performance objectives;
• monitor implementation and corporate performance; and
• oversee major capital expenditures, acquisitions and divestitures.

Succession Planning

The Board should be responsible for ensuring and adopting and Selection, Nomination and Election of Board Members
effective succession planning program for directors, key officers and
The Board should have a formal and transparent board nomination
management.
and election policy. The policy should —
Retirement Age Policy

Succession planning program includes adopting a retirement age

policy or directors and key officers.

Directors Management

Retirement age for directors The retirement age for

can be set at eighty (80) years Management shall follow the
old subject to al and global compulsory retirement age Related Party Transactions
trends and practices, stature prescribed under the Labor
and strong qualifications of a Code of the Philippines. The Board should have the overall responsibility in ensuring that there
director is a group-wide policy and system governing related party transactions
(RPTs) and other unusual or infrequently occurring transactions,
• Some companies do not set retirement age for directors as particularly those which pass certain threshold of materiality.
the law prohibits discrimination by age, as such directors
cannot be removed solely by reason of age. The following are suggestions for the content of the RPT Policy:
• Some companies recognize the fact that chronological age is • Definition of related parties;
not the main factor in determining effectiveness of the • Coverage of RPT policy;
director in discharging its duties and responsibilities. Rather, • Guidelines in ensuring arm's-length terms;
the Board will lose valuable wisdom from the senior directors. • Identification and prevention or management of potential or actual
conflicts of interest which arise;
• Adoption of materiality thresholds;
Remuneration and Other Incentives • Internal limits for individual and aggregate exposures;
• Whistle-blowing mechanisms, and
Directors shall not receive any compensation, as such, except for • Restitution of losses and other remedies for abusive RPTs.
reasonable per diems, unless such compensation is provided in the
Bylaws or granted by a vote of the stockholders representing at least Selection of Executive Management Team and Annual
a majority of the outstanding capital stock of the Company. The Performance Evaluation
Directors shall not decide on their own compensation, other than per
The Management is primarily accountable to the Board for the
diems.
operations of the Company. It is the responsibility of the Board to
Per Diem/Compensation appoint a competent management team and to exercise management
oversight.

Management Oversight

This includes the power to

• select and appoint the CEO and other Officers;

• monitor and assess the performance of Management led by the
CEO based on performance standards set by the Board and
Management that are consistent with the Company's strategic
Setting Remuneration
objectives;
In setting the remuneration of key officers and board members (if • oversee Management's implementation of business strategies,
granted), the Board should align such remuneration with the long-term plans, policies and budgets;
interests of the company. Compensation must be set at an optimum • oversee Management's adoption of human resources policies,
level in order to including compensation plans and professional development
programs for Officers an succession plan for Management;
• to attract and retain qualified and competent individuals prevent • conduct a regular review of the Company's policies with the
conflicts of interest promote a sound risk culture Management Team.
• encourage employees to act in the long-term interest of the
company as a whole, rather than for themselves or their business Fit-and-Proper Standard
lines only
In this regard, the following shall be considered:
Fixed vs. Variable Compensation
• integrity,
• probity,
• physical and mental fitness,
• competence,
• relevant education or training;
• possession of competencies relevant to the job,
5
Executive Management Team risk tolerance and providing oversight over its risk management
policies and procedures.
The Board shall appoint the executive officers who are the
The Board should oversee that a sound enterprise risk management
• President or the Chief Executive Officer, (ERM) framework is in place to effectively identify, monitor, assess and
• the Vice-Presidents (or their equivalent roles in the Company manage key business risks. The risk management framework should
structure), guide the Board in identifying units/business lines and enterprise-level
• the Treasurer and/or the Chief Finance Officer (CFO), risk exposures, as well as the effectiveness of risk management
• Chief Risk Officer, strategies.
• Chief Compliance Officer,
• the Corporate Secretary, and Board Charter
• Chief Audit Executive.
The Board should have a Board Charter that formalizes and clearly
Chief Executive Officer states its roles, responsibilities and accountabilities in carrying out its
fiduciary duties.
The CEO shall be the overall-in-charge for the management of the
business and affairs of the Company governed by the strategic ESTABLISHING BOARD COMMITTEES
direction and risk appetite approved by the board of directors.
The Revised Corporation Code allows the Board to create Executive
He shall be primarily accountable to the board of directors in Committee and other special committees, which it can delegate its
championing the desired conduct and behavior, implementing functions but not its responsibilities.
strategies, and in promoting the long-term interest of the Company.
The Board may establish the following committees:
Vice Presidents
• Audit Committee
The Company shall have such number of Vice Presidents as may be • Corporate Governance Committee
required by the operational requirements of the Company. The Vice • Board Risk Oversight Committee
Presidents shall assist the CEO in the performance of his functions • Related Party Transactions Committee
and shall exercise such other functions as may be provided in the By- • Nomination Committee
Laws or delegated by the Board. • Remuneration Committee
• Committee of Inspectors of Ballots and Proxies
Treasurer/Chief Finance Officer • Finance Committee
• Technology Strategy Committee
The Treasurer shall be in charge of the funds, securities, receipts and
• Technical Support to Committees
disbursements of the Corporation.
Executive Committee
The CFO, who may also be the Treasurer of the Company shall be
responsible for operating and financial reports and analysis necessary If the bylaws so provide, the board may create an executive
for financial planning and strategy formulation, integrity of accounting committee.
records, promoting investor confidence, and internal control.
In the absence of a provision in the by-laws, the board, by itself, cannot
Effective Performance Management Framework create an executive committee. If the executive committee was not
validly constituted, the members thereof maybe considered de facto
The Board should establish an effective performance management
officers.
framework that will ensure that the Management, including the Chief
Executive Officer, and personnel's performance is at par with the Composition
standards set by the Board and Senior Management.

Results of performance evaluation should be linked to other human Directors Non-members of the Foreigner
resource activities such as training and development, remuneration, board
and succession planning.
Executive Yes, provided that Yes, in proportion
Internal Control committee must there are at least three to the foreign
The Board should oversee that an appropriate internal control system be composed of (3) members of the shareholdings in
is in place, including setting up a mechanism for monitoring and at least three (3) board who are the corporation
managing potential conflicts of interest of Management, board directors, members of the
members, and shareholders. committee.

The Board should also approve the Internal Audit Charter.

In the performance of the Board's oversight responsibility, the Power of the Executive Committee
minimum internal control mechanisms may include overseeing the Executive committee may act, by majority of vote of all its members,
implementation of the key control functions, such as on such specific matters within the competence of the board, as may
• risk management, be delegated to it in the bylaws or by majority vote of the board.
• compliance and internal audit, However, executive committee cannot act on the following:
• reviewing the corporation's human resource policies,
• conflict of interest situations, • approval of any action for which shareholders' approval is also
• compensation program for employees required;
• management succession plan. • filing of vacancies in the board;
• amendment or repeal of bylaws or the adoption of new bylaws;
Enterprise Risk Management • amendment or term is not amendable or repeal able; and
Risk management policy is part and parcel of a corporation's corporate • distribution of cash dividends to the shareholders.
strategy. The Board is responsible for defining the company's level of • the exercise of powers delegated by the Board exclusively to
other committees, if any.

6
Audit Committee The Nomination Committee shall be primarily tasked with the duty of
implementing a formal and transparent board nomination and election
The Board should establish an Audit Committee to enhance its policy that should include how it accepts nominations from the
oversight capability over the company's financial reporting, internal shareholders, including minority and non-controlling, and how it
control system, internal and external audit processes, and compliance reviews the qualifications of nominated candidates.
with applicable laws and regulations.
Composition
Composition
The Nomination Committee shall be composed of at least three (3)
The committee should be composed of at least three appropriately non-executive directors as members, all of whom shall be independent
qualified non-executive directors, the majority of whom, including the directors, including the Chairman.
Chairman, should be independent.
Remuneration Committee
The Chairman of the Audit Committee should not be the chairman of
the Board or of any other committees. The Remuneration Committee is primarily tasked with the
establishment and implementation of a formal and transparent
Expertise procedure and policy for determining the remuneration of directors and
officers that is consistent with the Company's culture and strategy as
All of the members of the committee shall preferably be with
well as the business environment in which it operates.
accounting, auditing, or related financial management expertise or
background, knowledge, skills, and experience commensurate with Committee of Inspectors of Ballots and Proxies
the size, complexity of operations and risk profile of the company.
The Board shall appoint three (3) persons (who need not be
Corporate Governance Committee stockholders) to act as the Committee of Inspectors of Ballots and
Proxies which shall be empowered to pass on the validity of proxies.
The Board should establish a Corporate Governance Committee that
should be tasked to assist the Board in the performance of its Finance Committee
corporate governance responsibilities, including the functions that
were formerly assigned to a Nomination and Remuneration The Finance Committee shall have the principal oversight
Committee. responsibility with respect to the company's capital allocation process,
financial operation, and its treasury-related activities and policies. The
Composition Finance Committee shall define its own charter and fix its own rules of
procedures.
It should be composed of at least three members, all of whom should
be independent directors, including the Chairman. Technical Support to Committees
Function The Corporation shall, as appropriate, provide directors, including
independent directors, with technical support staff to assist them in
The Corporate Governance Committee is tasked with ensuring
performing their duties for such committees. Directors may, when
compliance with and proper observance of corporate governance
necessary, also request and receive support from executives,
principles and practices.
employees or outside professionals such as auditors, advisers and
Board Risk Oversight Committee counsel to perform such duties.

Subject to a corporation's size, risk profile and complexity of The Corporation shall cover the reasonable expenses of providing
operations, the Board should establish a separate Board Risk such support.
Oversight Committee (BROC) that should be responsible for the
Committee Charters
oversight of a company's Enterprise Risk Management system to
ensure its functionality and effectiveness. All established committees should be required to have Committee
Charters stating in plain terms their respective purposes,
Composition
memberships, structures, operations, reporting standards for
The BROC should be composed of at least three members, the evaluating the performance of the Committees. It should also be fully
majority of whom should be independent directors, including the disclosed on the company's website.
Chairman. The Chairman should not be the Chairman of the Board or
The Committee Charter clearly defines the roles and accountabilities
of any other committee. At least one member of the committee must
of each committee to avoid any overlapping functions, which aims at
have relevant thorough knowledge and experience on risk and risk
having a more effective board for the company. This can also be used
management.
as basis for the assessment of committee performance.
Function
FOSTERING COMMITMENT
The BROC has the responsibility to assist the Board in ensuring that
To show full commitment to the company, the directors should devote
there is an effective and integrated risk management process in place.
the time and attention necessary to properly and effectively perform
Related Party Transaction Committee their duties and responsibilities, including sufficient time to be familiar
with the corporation's business.
Subject to a corporation's size, risk profile and complexity of
operations, the Board should establish a Related Party Transaction Directors are required to attend meetings and to limit directorship in
(RPT) Committee, which should be tasked with reviewing all material other companies.
related party transactions of the company.
Board Meetings
Composition
The Board shall hold regular meetings on the date and time schedules
Should be composed of at least three non-executive directors, two of in the by-laws. Otherwise, the meetings shall be held monthly. The
whom should be independent, including the Chairman. Board shall convene for special meetings when required by business
exigencies.
Nomination Committee
Place
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Meetings of directors or trustees of corporations may be held
Executive director Non-executive Independent
anywhere in or outside the Philippines, unless the bylaws provide
is a director who director is a director director is a person
otherwise.
has executive who has no who is independent
Notice responsibility of executive of management
day-to-day responsibility and and the controlling
Notice of regular or special meetings stating the date, time and place operations of a part does not perform shareholder and is
of the meeting must be sent to every director or trustee at least two (2) or the whole of the any work related to free from any
days prior to the scheduled meeting, unless a longer time is provided organization. the operations of business or other
in the bylaws. A director or trustee may waive this requirement, either the corporation. relationship which
expressly or impliedly. could, or could
The nonexecutive reasonably be
Attendance directors shall perceived to,
constitute at least materially interfere
Attendance and participation in meetings may be in person or via a majority of the
remote communication such as videoconferencing, teleconferencing, with his exercise of
Board to promote independent
or other alternative modes of communication that allow them the independent
reasonable opportunities to participate. judgment in
oversight of carrying out his
Directors or trustees cannot attend or vote by proxy at board meetings. management by responsibilities as
the board of a director.
Absence directors.

The absence of a director in more than fifty percent (50%) of all regular
and special meetings of the Board during his/her incumbency is a
ground for disqualification in the succeeding election, unless his Rules on Independent Director
absence is justified. • The board of the following corporations vested with public interest
Quorum shall have independent directors constituting at least twenty
percent (20%) of such board
A valid corporate act requires at least a majority of the directors o Corporations covered by Section 17.2 of Republic
constituting a quorum. Quorum is the majority of the directors stated Act No. 8799
in the articles of incorporation, unless the articles of incorporation or o Banks and quasi-banks, NSSLAs, pawnshops,
the by-laws provides for a greater quorum. corporations engaged in money service business,
preneed, trust and insurance companies and other
financial intermediaries
o Other Corporations engaged in business vested
Multiple Board Seats
with public interest
Independent and non-executive directors may concurrently serve in • The Board of publicly listed companies should have at least three
Boards of other companies, provided, at any given time, it will not independent directors, or such number as to constitute at least
exceed one-third of the members of the Board, whichever is higher.
• The Board public companies or registered issuers should have at
• Five publicly listed companies, least two independent directors, or such number as to constitute
• Ten public companies and/or registered issuers, or at least one-third of the members of the Board, whichever is
• Five public companies and/or registered issuers if the director higher.
also sits in at least three publicly listed companies
Qualification of Independent Director
REINFORCING BOARD INDEPENDENCE
An independent director shall have the following qualifications as
The Board should endeavor to exercise objective and independent prescribed in SEC Memorandum Circular No. 16 Series of 2002.
judgment on all corporate affairs.
• He shall have at least one (1) share of stock of the corporation;
Independence • He shall be at least a college graduate, or he shall have been
engaged or exposed to the business of the corporation for at least
Independence of the board rests on 5 yea rs;
o the proper mix of executive and non-executive directors, • He shall possess integrity/probity; and He shall be assiduous.
o the separation of the positions of Chairperson and Chief Term of a Director
Executive Officers, and
o the proper disclosure of adverse interests of directors affecting the Elected members of the Board serve for a one-year term and until
corporation. their successors are elected. A director may be re-elected without
limit.
Directors
Term of an Independent Director
Executive Non-Executive Independent
• The Board's independent directors should serve for a maximum
cumulative term of nine years.
• After which, the independent director should be perpetually barred
from re-election as such in the same company but may continue
to qualify for nomination and election as a non-independent
director.
• In the instance that a company wants to retain an independent
director who has served for nine years, the Board should provide
meritorious justification/s and seek shareholders' approval during
the annual shareholders' meeting;
• Reckoning of the cumulative nine-year is from 2012.
8
Lead Director • contract is not fraudulent
• contract is fair and reasonable
The Board should designate a lead director among the independent
directors if the Chairman of the Board is not independent, including if There is an interlocking director when one of the directors in one
the positions of the Chairman of the Board and President and CEO are corporation is also a director in another corporation.
held by one person.
If the interest of the interlocking director in one (1) corporation is
Function of a Lead Director substantial and the interest in the other corporation or corporations is
merely nominal, the rules on self-dealing directors shall apply.
The Board-designated lead independent director shall, among others,
have the following functions: Stockholding exceeding twenty percent (20%) of the outstanding
capital stock shall be considered substantial for purposes of
• Serves as an intermediary between the Chairman and the other interlocking directors.
directors when necessary;
• Convenes and chairs meetings of the non-executive directors; Doctrine of Corporate Opportunity
and
• Contributes to the performance evaluation of the Chairman, as Doctrine of Corporate Opportunity, unless ratified by stockholders, a
required. director shall refund to the corporation all the profits he realizes on a
business opportunity which:
Chairman of the Board and President/CEO
• The corporation is financially able to undertake;
The position of Chairman of the Board and President/CEO shall be • From its nature, is in line with corporation's business and is of
held by separate individuals, who are not related to each other, and practical advantage to it; and
each shall have clearly defined responsibilities. • The corporation has an interest or a reasonable expectancy.

The Chairperson's primary responsibility The President/CEO is ASSESSING BOARD PERFORMANCE

responsible for is for leading the Board and ensuring its running the
Company's business. effectiveness The best measure of the Board's effectiveness is through an
assessment process. The Board should regularly carry out evaluations
If the positions of Chairman and President/CEO are unified, the proper to appraise its performance as a body and assess whether it
checks and balances should be laid down to ensure that the Board possesses the right mix of backgrounds and competencies.
gets the benefit of independent views and perspectives.
Assessing Board Performance
Status of Contract with Self-dealing Directors
The Board should conduct an annual self-assessment of its
The contract of the corporation with a self-dealing director/trustee, his performance, including the performance of the Chairman, individual
spouse, or relative within fourth civil degree of consanguinity or affinity members and committees.
is voidable.
For publicly listed companies, the annual self-assessment shall, as
Requisites to be Valid practicable, be supported by an external facilitator every three years.

The contract is perfectly valid if all the following conditions are present.

• The presence of such director or trustee in the board meeting in Scope of Assessment
which the contract was approved was not necessary to constitute
a quorum for such meeting; • A review of the Board and Committee Processes and Meetings
• The vote of such director or trustee was not necessary for the (conduct of meetings, work of committees, quality of written
approval of the contract; documentation)
• The contract is fair and reasonable under the circumstances; • Compliance with the responsibilities and functions of the Board
• In case of corporations vested with public interest, material and Committees
contracts are approved bv at least a majority of the independent • Performance measurement in terms of the standards it has
directors voting to approve the material contract; and established, financial criteria, and nonfinancial criteria relating to
• In case of an officer, the contract has been previously authorized individual directors.
by the board of directors. • Board-Management Relationship
• Assessment of the board's role in the organization (dealing with
Stockholders' Ratification problems, communicating with stakeholders)
Even if the corporation decides to annul the contract, the • Board Member Self Evaluation
stockholders/members can ratify the contract with self-dealing Criteria
director/trustee:
• Adequacy, frequency, duration and scheduling of Board
• by stockholders representing at least two-thirds (2/3) of the meetings per year
outstanding capital stock or of at least two-thirds (2/3) of the
• Attendance to the Board meetings
members in a meeting called for the purpose
• Adequacy of materials for meetings of the Board
• full disclosure of the adverse interest of the directors or trustees
• Involvement of the Board in the determination of the Company's
involved is made at such meeting and
strategic initiatives and direction
• the contract is fair and reasonable under the circumstances
• Effectiveness of the Board in monitoring of management's
For contracts with self-dealing officers, stockholders/members implementation of corporate strategy
ratification is not required. It is within the power of the board to ratify • Effectiveness of the Board in handling crisis situation
the subject contracts. • Clear understanding of the delineation between the roles of the
Board and the key officers/management
Status of Contract with Interlocking Director • Inclination to disclose any conflict of interest.
The contract is valid or shall not be invalidated on the sole ground of • Avoidance of any situation where a Director may be placed in a
interlocking directorship; provided that: conflict of interest
• Active and objective participation in the Board discussions
9
 ENHANCING COMPANY DISCLOSURE POLICIES AND STRUCTURED VS. UNSTRUCTURED
PROCEDURES
Structured
The company should establish corporate disclosure policies and
procedures that are practical and in accordance with best practices • An annual report using SEC Form 17-A within one hundred five
and regulatory expectations. (105) days after the end of the fiscal year, or such other time as
the Commission by rule shall prescribe;
The board must have a policy on disclosure covering the following • Three (3) Quarterly Reports, within forty-five (45) days from end
corporate matters: of the first three (3) quarters of the fiscal year, the SEC Form 17-
Q format shall be used. Issuers must include a schedule of aging
• financial condition, results and business operations of accounts receivables in their SEC Form 17-Q submitted to the
• dealing in securities by directors and officers Exchange.
Reportorial Requirements • Other Periodical Reports Prescribed by the Commission: Such
other periodical reports for interim fiscal periods and current
All corporations are required to submit to SEC the following reportorial reports on significant developments of the Issuer as the
requirements (SEC Memorandum Circular No. 2, series of 2020): Commission may prescribe as necessary to update and keep
current information on the operation of the business and financial
General Information Sheet condition of the Issuer.
• within 30 calendar days from date of the actual annual Unstructured
stockholders' or members meeting;
• If foreign corporation, anniversary date of the issuance of the Unstructured continuing disclosures are communications of corporate
SEC License. developments as they occur and are intended to update the investing
public with any material fact.
Audited Financial Statements stamped "Received" by the BIR
Publicly listed companies must disclose such material information
• 120 calendar days after the end of the fiscal year, as indicated within ten (10) minutes from the receipt of such information. Disclosure
in the Financial Statements must be made to PSE prior to its release to the news media.
• On or before April 20 — May 22, based on the last numerical
digit of their SEC registration or license number in Unstructured: When to Disclose
accordance with the schedule set by SEC, for companies
The standards and tests in determining whether disclosure is
who use calendar year (fiscal year ends on December 31,
necessary are as follows:
2019.
• Where the information is necessary to enable the Issuer and the
Annual Corporate
public to appraise their position or standing;
• beginning May 30 and every five years thereafter • Where such information is necessary to avoid the creation of a
false market for its securities;
Governance Report • Where such information may reasonably be expected to
materially affect market activity and the price of its securities.
• This is in lieu of the Corporate Governance section in the
Annual Report (SEC Form 17-A), which was deleted by SEC Website Disclosure
Memorandum Circular No. 5, series of 2013
All structured, unstructured and corporate governance reports
In addition to the SEC requirements, publicly listed companies are submitted to the Exchange and SEC must be uploaded to the listed
required to comply with the PSE Disclosure Rules. companies' respective websites.

Annual Corporate Governance Report Companies must only upload the disclosures submitted to the
Exchange to their web sites upon receipt of the approval email from
Annual Corporate Governance Report is intended to be a the Exchange or upon posting of the disclosures in the Exchange's
comprehensive report containing all of the company's pertinent website. (Guidance No. 13, PSE Memorandum No. 2008-0182)
corporate governance information.
Personal Trading Policy
• A policy on disclosure of all relevant and material information on
individual board directors and key executives to evaluate their The Company should have a policy requiring all directors and officers
experience and qualifications and assess any potential and/or to disclose/report to the company any dealings in the company's
actual conflicts of interest that might affect their judgments as shares within
prescribed under Rule 12 Annex C of the SRC;
• Board and executive remuneration, as well as the level and mix • Five business days for public companies or registered issuers
of the same; • Three business days for publicly listed companies
• Accurate disclosure to the public of every material fact or event
PSE Disclosure Rules
that occurs in the company, particularly on the acquisition or
disposal of significant assets, which could adversely affect the Under the PSE Disclosure Rules, publicly listed companies must
viability or the interest of its shareholders/members and other disclose to PSE the direct and indirect ownership of its directors and
stakeholders, which includes policy on the appointment of an principal officers in its securities within five (5) Trading Days after:
independent party to evaluate the fairness of the transaction price
on the acquisition or disposal of assets; • The Issuer's securities is first admitted in the Official Registry of
• The non-audit work, if any, of the external auditor, the non-audit the Exchange;
fees paid to the external auditor in relation to the total fees paid to • a Director is first elected, or an Officer is appointed; or
him and to the corporation's overall consultancy expenses; • any acquisition, disposal, or change in the shareholdings of the
• The attendance record of the company's directors for the previous Directors and Officers.
year; and
Manual on Corporate Governance
• Other information that the Commission or other regulatory
agencies, may, from time to time require disclosure of.

10
Publicly listed companies should fully disclose all relevant and material INCREASING FOCUS ON NON-FINANCIAL AND
information on individual board members and key executives to SUSTAINABILITY REPORTING
evaluate their experience and qualifications and assess any potential
conflicts of interest that might affect their judgment. The company should ensure that material and reportable non-financial
and sustainability issues are disclosed.
According to best practices and standards, proper disclosure includes
directors and key officers' qualifications, share ownership in the The Board should have a clear and focused policy on the disclosure
company, membership of other boards, other executive positions, of non-financial information, with emphasis on the management of
continuous trainings attended and identification of independent economic, environmental, social and governance (EESG) issues of its
directors. business, which underpin sustainability.

It is Recommended that publicly listed companies disclose Sustainability Reporting Guidelines

remuneration on an individual basis. However, big companies have
Companies should adopt a globally recognized standard/framework in
serious concerns on this Recommendation given the possible adverse
reporting sustainability and non-financial issues.
security issues and poaching of talents by competitors in the industry.
On February 15, 2019, SEC issued the Sustainability Reporting
Hence, these companies opted to disclose the remuneration figures
Guidelines for Publicly Listed Companies (Memorandum Circular No.
on a consolidated basis only citing best interest of the respective
4, series of 2019).
companies.
Chief Sustainability Officer
STRENGTHENING THE EXTERNAL AUDITOR'S INDEPENDENCE
AND IMPROVING AUDIT QUALITY To strengthen the Corporation's sustainability campaign, a Chief
Sustainability Officer may be appointed who will communicate
The company should establish standards for the appropriate selection
sustainability concerns and initiatives from the management to the
of an external auditor, and exercise effective oversight of the same to
Board through the President and CEO.
strengthen the external auditor's independence and enhance audit
quality. PROMOTING A COMPREHENSIVE AND COST-EFFICIENT
ACCESS TO RELEVANT INFORMATION
Audit Committee
The company should maintain a comprehensive and cost-efficient
It is the responsibility of the Audit Committee to
communication channel for disseminating relevant information. This
• recommend the appointment, reappointment, removal, and fees channel is crucial for informed decision-making by investors,
of the external auditor stakeholders and other interested users.
• assessing the integrity and independence of external auditors Company Website
• disclose the nature of non-audit services performed by its external
Companies should have a website, at the very least. A company
Financial Statement Audit website should contain, among others, the
Financial Statements covered by SRC Rule 68 shall be audited by • Manual on Corporate Governance,
independent auditors who are duly registered with the Board of • Annual Corporate Governance Report,
Accountancy (BOA) of the Professional Regulation Commission
• Board Charter,
(PRC) in accordance with the rules and regulations of said
• Committee Charters,
professional regulatory bodies.
• Company's Code of Business Conduct and Ethics.
Appointment of External Auditor
Media and Analysts' Briefings
The appointment, reappointment, removal, and fees of the external
Publicly listed companies should include media and analysts" briefings
auditor should be recommended by the Audit Committee, approved by
as channels of communication.
the Board and ratified by the shareholders.
Other Modes
The Audit Committee should monitor the independence of the External
Companies may also utilize participation in investor conferences, ad
Rotation of External Auditor
hoc briefings, roadshows, conference calls and one-on-one meetings;
Companies covered by SRC Rule 68 shall strictly enforce the policy of and timely official disclosures via PSE EDGE.
rotating the lead engagement partner of the External Auditor every 5
The Corporation may also use other available media channels to
years. A two-year cooling off period shall be observed in the
extend communication to stakeholders, as applicable.
reengagement of the same signing partner or individual auditor.
STRENGTHENING THE INTERNAL CONTROL SYSTEM AND
Role of External Auditor
RISK MANAGEMENT SYSTEMS
• performs fair audits independently from the Company, its
To ensure the integrity, transparency and proper governance in the
management and controlling shareholders, so that shareholders
conduct of its affairs, the company should have a strong and effective
and other users may maintain confidence in the Company's
internal control system and enterprise risk management framework.
accounting information;
• checks whether any fact conflicts with the audit results in the Internal Control System
information disclosed regularly with the audited financial
statements, and demand correction, if necessary; An effective internal control system embodies management oversight
• attends the annual stockholders meeting and answer any and control culture; risk recognition and assessment; control activities;
questions on audit reports and on themselves, their work and their information and communication; monitoring activities and correcting
remuneration; and deficiencies.
• performs such other functions as may be approved by the Audit
Independent Function
Committee in the engagement of the external auditor, provided,
however, that non-audit work shall not be in conflict with its The Company should have in place an independent internal audit
functions as external auditor. function that provides an independent and objective assurance, and
11
consulting services designed to add value and improve the company's Risk Management Function
operations.
• Defining a risk management strategy;
A company's internal audit activity may be a fully resourced activity • Identifying and analyzing key risks exposure relating to economic,
housed within the organization or may be outsourced to qualified environmental, social and governance (EESG) factors and the
independent third-party service providers. achievement of the organization's strategic objectives;
• Evaluating and categorizing each identified risk using the
Function of Internal Auditor
company's predefined risk categories and parameters;
• Provides an independent risk-based assurance service to the • Establishing a risk register with clearly defined, prioritized and
Board, Audit Committee and Management, focusing on reviewing residual risks;
the effectiveness of the governance and control processes in • Developing a risk mitigation plan for the most important risks to
1. promoting the right values and ethics, the company, as defined by the risk management strategy;
2. ensuring effective performance management and accounting • Communicating and reporting significant risk exposures including
in the organization, business risks (i.e., strategic, compliance, operational, financial
3. communicating risk and control information, and and reputational risks), control issues and risk mitigation plan to
4. coordinating the activities and information among the Board, the Board Risk Oversight Committee; and
external and internal auditors, and Management; • Monitoring and evaluating the effectiveness of the organization's
risk management processes.
• Performs regular and special audit as contained in the annual
Board Oversight Committee
audit plan and/or based on the company's risk assessment;
• Performs consulting and advisory services related to governance Subject to a corporation's size, risk profile and complexity of
and control as appropriate for the organization; operations, the Board should establish a separate Board Risk
• Performs compliance audit of relevant laws, rules and regulations, Oversight Committee (BROC) that should be responsible for the
contractual obligations and other commitments, which could have oversight of a company's Enterprise Risk Management system to
a significant impact on the organization; ensure its functionality and effectiveness.
• Reviews, audits and assesses the efficiency and effectiveness of
the internal control system of all areas of the company; Chief Risk Officer
• Evaluates operations or programs to ascertain whether results are
In managing the Company's Risk Management System, the Company
consistent with established objectives and goals, and whether the
shall have a Chief Risk Officer (CRO) who is the ultimate champion of
operations or programs are being carried out as planned;
Enterprise Risk Management (ERM).
• Evaluates specific operations at the request of the Board or
Management, as appropriate; and Function of Chief Risk Officer
• Monitors and evaluates governance processes.
• Supervises the entire ERM process and spearheads the
Chief Internal Auditor/Chief Audit Executive development, implementation, maintenance and continuous
improvement of ERM processes and documentation;
The Board shall appoint a qualified Chief Internal Auditor to carry out
• Communicates the top risks and the status of implementation of
the audit function and shall require the Chief Internal Auditor to report
risk management strategies and action plans to the Board Risk
to the Audit Committee that will allow the internal audit function to fulfill
Oversight Committee;
its responsibilities without impediment.
• Collaborates with the CEO in updating and making
Function of CAE recommendations to the Board Risk Oversight Committee;
• Suggests ERM policies and related guidance, as may be needed;
• Periodically reviews the internal audit charter and presents it to and
senior management and the Board Audit Committee for approval; • Provides insights on the following:
• Establishes a risk-based internal audit plan, including policies and o Risk management processes are performing as
procedures, to determine the priorities of the internal audit activity, intended;
consistent with the organization's goals; o Risk measures reported are continuously reviewed by
• Communicates the internal audit activity's plans, resource risk owners for effectiveness; and
requirements and impact of resource limitations, as well as o Established risk policies and procedures are being
significant interim changes, to senior management and the Audit complied with.
Committee for review and approval;
• Spearheads the performance of the internal audit activity to PROMOTING SHAREHOLDER/MEMBER RIGHTS
ensure it adds value to the organization;
• The company should treat all shareholders fairly and equitably,
• Reports periodically to the Audit Committee on the internal audit
and also recognize, protect and facilitate the exercise of their
activity's performance relative to its plan; and
rights.
• Presents findings and recommendations to the Audit Committee
• It is the duty of the Board to promote stockholder rights, remove
and gives advice to senior management and the Board on how to
impediments to the exercise of stockholder rights and provide
improve internal processes.
effective redress for violation of their rights.
Enterprise Risk Management
Disclosure
The Board should oversee that a sound enterprise risk management
The Board should ensure that basic shareholder rights are disclosed
(ERM) framework is in place to effectively identify, monitor, assess and
in the Manual on Corporate Governance and on the company's
manage key business risks. The risk management framework should
website. It is the responsibility of the Board to adopt a policy informing
guide the Board in identifying units/business lines and enterprise-level
the shareholders of all their rights.
risk exposures, as well as the effectiveness of risk management
strategies. Shareholders' Rights
Subject to its size, risk profile and complexity of operations, the • Right to participate in the management (Voting Right)
company should have a separate risk management function to identify, • Appraisal Rights
assess and monitor key risk exposures. • Right to income and assets of the corporation

12
• Right to protect/transfer ownership The votes required to approve a particular corporate act shall be
• Right to information deemed to refer only to stocks with voting rights. Such corporate acts
• Remedies for infringement of Shareholder rights such as may include:
individual suit, representative suit, derivative suit, or alternative
• Declaration of stock dividends
dispute resolution
• Management contracts
Voting Rights • Fixing the consideration of no-par shares
• Fixing the compensation of directors
• Each outstanding share is entitled to one vote unless a preferred
share is expressly denied voting entitlement. There shall be a Power of Non-Voting Shares
class or series of shares with complete voting rights.
• No delinquent stock shall be voted be voted for. Holders of nonvoting shares shall nevertheless be entitled to vote on
• Treasury shares shall have no voting right as long as such shares the following matters:
remain in the Treasury. • Amendment of the articles of incorporation, which includes the
How Exercised power to (1) Extend or Shorten the corporate term, (2) Increase
or decrease capital stock.
The right to vote of stockholders or members may be exercised in • Adoption and amendment of bylaws.
person, through remote communication or in absentia. • Sale, lease, exchange, mortgage, pledge, or other disposition of
all or substantially all of the corporate property;
In Absentia • Incurring, creating, or increasing bonded indebtedness;
Voting in absentia may be done by sending out to each stockholder • Increase or decrease of authorized capital stock;
ballot with a proxy form, which should be submitted within the • Merger or consolidation of the corporation with another
prescribed period. The votes in the ballot would be counted even if the corporation or other corporations;
stockholder does not attend personally or by proxy. • Investment of corporate funds in another corporation or business
in accordance with this Code; and
Right to Elect Directors • Dissolution of the corporation.
Automatic membership in the Board is not allowed. Directors/trustees Right to Attend Stockholders' Meeting
shall be elected by stockholders or members from the list of qualified
nominees. The Board should have a formal and transparent board To promote transparency and goodwill, it is a good policy to encourage
nomination and election policy, which should be properly disseminated the attendance of all its stockholders, including minority and
to the stockholders. noncontrolling, and institutional investors, at the stockholders' meeting
of the Company.
Manner of Voting in Election of Directors
Notice of Meeting
Straight Voting
The Board should encourage active shareholder participation by
Vote such number of shares for as many persons as there are directors sending the Notice of Annual and Special Shareholders' Meeting with
to be elected. sufficient and relevant information within the period provided by the by-
laws
For example, if there are 5 candidate directors, and a stockholder has
100 shares, he can give each stockholder 100 votes each, Content of Notice of Meeting
Cumulative voting • The agenda for the meeting;
• A proxy which shall be submitted to the corporate secretary within
Cumulate said shares and give one (1) candidate as many votes as
a reasonable time prior to the meeting;
the number of directors to be elected multiplied by the number of
shares owned. • When attendance, participation, and voting are allowed by remote
communication or in absentia, the requirements and procedures
In the same example, such stockholder is entitled to 500 votes (5 to be followed when a stockholder or member elects either option;
candidates x 100 shares), He can give one candidate all his 500 votes. and
• When the meeting is for the election of directors or trustees, the
Distributive voting requirements and procedure for nomination and election.
Distribute them on the same principle among as many candidates as Minutes of Meeting
may be seen fit. In this kind of voting, a stockholder can give two or
more candidates his votes. The Minutes of the Annual and Special Shareholders' Meeting should
be available on the Company website within five (5) business days
300 for the first candidate, then, 200 for the second candidate. from the end of the meeting.
Removing Directors Contents of the Minutes of Meeting
Stockholders representing at least 2/3 outstanding capital stock or at • A description of the voting and the vote tabulation procedures
least 2/3 of the members can remove directors or trustees with or used;
without cause. Directors elected by minority stockholders can only be • the opportunity given to shareholders to ask questions, as well as
removed with cause. a record of the questions and the answers received;
Right to Approve Certain Corporate Acts • the matters discussed, and the resolutions reached;
• a record of the voting results for each agenda item;
In addition to the right to elect directors, the Revised Corporation Code • a list of the directors, officers and shareholders who attended the
also granted shareholders to approve certain corporate acts. The vote meeting; and
required under this Code to approve a particular corporate act shall be • dissenting opinion on any agenda item that is considered
deemed to refer only to stocks with voting rights. significant in the discussion process.
Power of Voting Shares

13
 The Secretary reported that the following Resolution No, S- Preemptive right shall not extend to shares issued
03-2021 had been approved by the stockholders based on
the preliminary tabulation of votes: • in compliance with laws requiring stock offerings or minimum
stock ownership by the public; or
Resolution No. s-03-2021 • to shares issued in good faith with the approval of the
stockholders representing two-thirds (2/3) of the outstanding
RESOLVED, to ratifr each and every act and capital stock in exchange for property needed for corporate
resolution, from April 22, 2020 to April 21, 2021 (the purposes or
ofthe Board Of Directors (the •Board") and the
• in payment of previously contracted debt.
Executive Committee and other Board committees
exercising powers delegated by the Board, and Right to Information
each and every act, during the Period, of the officers
of the Corporation m accordance with the The shareholders, including minority shareholders, shall have access
resolutions or the Board, the Executive Committee to any information relating to matters for which the management is
and other Board committees exercising powers accountable.
delegated by the Board and with the By-laws of the
The shareholders, including minority shareholders, shall be granted
Corporation.
the right to propose items in the agenda of the meeting, provided the
As tabulated by the Inspectors Of Proxies and Ballots items are for legitimate business purposes.
Committee and validated by SGV. the votes for the ratification
of the acts of the Board of Directors and offteers of the Power of Inspection
Corporation, and for the adoption of Resolution No, S-03- All shareholders shall be allowed to inspect corporate books and
2021 are as follows; records including minutes of Board meetings and stock registries in
accordance with the Revised Corporation Code, and shall be furnished
with annual reports, financial statements, without costs or restrictions.

Alternative Dispute Mechanism

Appraisal Right
The Board should make available, at the option of a shareholder, an
Any stockholder of a corporation shall have the right to dissent and alternative dispute mechanism to resolve intra-corporate disputes in
demand payment of the fair value of the shares in the following an amicable and effective manner. This should be included in the
instances: company's Manual on Corporate Governance.

• In case an amendment to the articles of incorporation has the Investor Relations Office
effect of changing or restricting the rights of any stockholder or
class of shares, or of authoring preferences in any respect The Board should establish an Investor Relations Office (IRO) to
superior to those of outstanding shares of any class, or of ensure constant engagement with its shareholders. The IRO should
extending or shortening the term of corporate existence; be present at every shareholders' meeting.
• In case of sale, lease, exchange transfer, mortgage, pledge or RESPECTING RIGHTS OF STAKEHOLDERS AND EFFECTIVE
other disposition of all or substantially all of the corporate property REDRESS FOR VIOLATION OF STAKEHOLDER'S RIGHTS
and assets as provided in this Code;
• In case of merger or consolidation; and The rights of stakeholders established by law, by contractual relations
• In case of investment of corporate funds for any purpose other and through voluntary commitments must be respected. Where
than the primary purpose of the corporation. stakeholders' rights and/or interests are at stake, stakeholders should
have the opportunity to obtain prompt effective redress for the violation
Right to Dividends of their rights.
Shareholders shall have the right to receive dividends subject to the Identification of Stakeholders
discretion of the Board of Directors. The Board of Directors has the
discretion to declare dividends subject to the following requirements: The Board should identify the company's various stakeholders and
promote cooperation between them and the company in creating
• Unrestricted retained earnings wealth, growth and sustainability.
• Resolution of the board
• In case of stock dividends, the decision of the Board is subject to Fair Treatment and Protection of Stakeholders
the approval of the stockholders representing 2/3 of the
The Board should establish clear policies and programs to provide a
outstanding capital.
mechanism on the fair treatment and protection of stakeholders.
Delinquent Stocks
Fair, professional and objective dealings as well as clear, timely and
Delinquent stocks are entitled to dividends provided that: regular communication with the various stakeholders ensure their fair
treatment and better protection of their rights.
• cash dividends due on delinquent stock shall be first be applied to
the unpaid balance on the subscription plus costs and expenses Non-Proprietary Right Holders
until their unpaid subscription is fully paid These holders have no participation in the management of the affairs
• stock dividends shall be withheld from the delinquent stockholders and assets of the corporation, but they have rights over the use and
until their unpaid subscription is fully paid enjoyment of the property of the company subject to the agreed terms
Pre-emptive Rights and conditions.

All stockholders of a stock corporation shall enjoy preemptive right to • Rights over the use and enjoyment of the corporate property
subscribe to all issues or disposition of shares of any class, in subject to terms and conditions as may be provided in the articles
proportion to their respective shareholdings, unless such right is of incorporation, by-laws and membership certificates;
denied by the articles of incorporation or an amendment thereto. • The right to be informed of any material transaction or undertaking
by the company, which may substantially affect the use and
Exception
14
 enjoyment of the corporate property over which the member holds direct access to an independent member of the Board or a unit created
non-proprietary rights; and to handle whistleblowing concerns.
• The right to seek redress for any violation of the aforementioned
rights. • Confidentiality
• protection from retaliation
Stakeholder Engagement • direct access to either an independent director
The Board should adopt a transparent framework and process that ENCOURAGING SUSTAINABILITY AND SOCIAL
allow stakeholders to communicate with the company and to obtain RESPONSIBILITY
redress for the violation of their rights.
The company should be socially responsible in all its dealings with the
It is crucial for the company to maintain open and easy communication communities where it operates. It should ensure that its interactions
with its stakeholders. This can be done through stakeholder serve its environment and stakeholders in a positive and progressive
engagement touchpoints in the company. manner that is fully supportive of its comprehensive and balanced
development.
Stakeholder Engagement Touchpoints
Sustainable Development
• Investor Relations Office,
• Office of the Corporate Secretary, Sustainable development means that the company not only complies
• Customer Relations Office, and with existing regulations, but also voluntarily employs value chain
• Corporate Communications Group. processes that takes into consideration economic, environmental,
social and governance issues and concerns.
Whistle-blowing channels and other convenient social channels may
be provided to stakeholders.

ENCOURAGING EMPLOYEES' PARTICIPATION Stockholders, investors, employees,

creditors, customers and suppliers,
A mechanism for employee participation should be developed to and other stakeholders
create a symbiotic environment, realize the company's goals and
participate in its corporate governance processes.

Policies and Programs for the Benefit of the Employees Oversight Function

The Board should establish policies, programs and procedures that

encourage employees to actively participate in the realization of the
company's goals and in its governance. Senior Management, Operation
Management
• Health, safety and welfare
• Training and development
• Reward/compensation for employees

Health, Safety and Welfare

Occupational health and safety of the employees and related external

constituencies, workplace free from discrimination and all forms of
physical, sexual and psychological abuse including harassment,
bullying and intimidation.

Training and Development

Various in-house programs such as orientation program for new hires,

regular training, job specific training courses, management and
leadership training programs to enhance the knowledge, working skills
and managerial ability of its employees.

Reward/Compensation for Employees

Active participation is further fostered when the company recognizes

the firm-specific skills of its employees and their potential contribution
in corporate governance. The employees' viewpoint in certain key
decisions may also be considered in governance processes through
work councils or employee representation in the board.

Anti-Corruption Policy

The Board should set the tone and make a stand against corrupt
practices by adopting an anti-corruption policy and program in its Code
of Conduct. Further, the Board should disseminate the policy and
program to employees across the organization through trainings to
embed them in the company's culture.

Whistleblowing Policy

The Board should establish a suitable framework for whistleblowing

that allows employees to freely communicate their concerns about
illegal or unethical practices, without fear of retaliation and to have

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