Im Govbusman Chapter 3 4

GOVBUSMAN
Corporate Governance, Business

Ethics, Risk Management and
Internal Control
2nd Sem 2023-2024
Prepared by:
Herbert Paul N. Guanzon

Instructor
Chapters 3 & 4: SECURITIES and EXCHANGE
COMMISSION(SEC) CODE of CORPORATE
GOVERNANCE
 SEC CODE OF CORPORATE GOVERNANCE FOR PUBLICLY-LISTED
COMPANIES (“CG Code for PLC’s)
 Securities and Exchange Commission SEC MC No. 19, Series of 2016
 On November 10, 2016, the Securities and Exchange Commission

approved the Code of Corporate Governance for publicly-listed companies.
 Its goal is to help companies develop sustain an ethical corporate culture

and keep abreast with recent developments in corporate governance.
 establish a code of business conduct and submit a new manual on

Corporate Governance that would “provide standards for professional and
ethical behavior as well as articulate acceptable and unacceptable conduct
and practices”.
CODE OF CORPORATE GOVERNANCE FOR
PUBLICLY-LISTED COMPANIES
`The Board’s Governance Responsibilities
Principle 1:
The Company should be headed by a competent, working board to foster the long-
term success of the corporation, and to sustain its competitiveness and profitability
in a manner consistent with its corporate objectives and the long-term best interests
of its shareholders and other stakeholders.
Principle 2:
The fiduciary roles, responsibilities and accountabilities of the Board as provided
under the law, the company’s articles and by-laws, and other legal pronouncements
and guidelines should be clearly made known to all directors as well as stockholders
and other stakeholders.
Principle 3:
Board committees should be set up to the extent possible tosupport the effective
performance of the Board’s functions, particularly with respect to audit, risk
management, related party transactions, and other key corporate governance
concerns, such as nomination and remuneration. The composition, functions and
responsibilities of all committees established should be contained in a publicly
available Committee Charter.
CODE OF CORPORATE GOVERNANCE FOR
PUBLICLY-LISTED COMPANIES
Principle 4:
To show full commitment to the company, the directors should devote the time and
attention necessary to properly and effectively perform their duties and
responsibilities, including sufficient time to be familiar with the corporation’s
business.
Principle 5:
The Board should endeavor to exercise objective and independent judgment on all
corporate affairs.
Principle 6:
The best measure of the Board’s effectiveness is through an assessment process.
The Board should regularly carry out evaluations to appraise its performance as a
body, and assess whether it possesses the right mix of backgrounds and
competencies.
Principle 7:
Members of the Board are duty-bound to apply high ethical standards, taking into
DISCLOSURE AND TRANSPARENCY
Principle 8:
The company should establish corporate disclosure policies and procedures
that are practical and in accordance with best practices and regulatory
expectations.
Principle 9:
The Company should establish standards for the appropriate selection of an
external auditor, and exercise effective oversight of the same to strengthen
the external auditor’s independence and enhance audit quality.
Principle 10:
The Company should ensure that material and reportable non-financial and
sustainability issues are disclosed.
Principle 11:
The Company should maintain a comprehensive and cost-efficient
communication channel for disseminating relevant information. This channel
is crucial for informed decision-making by investors, stakeholders and other
INTERNAL CONTROL SYSTEM AND
RISK MANAGEMENT FRAMEWORK
Principle 12:
To ensure the integrity, transparency and proper
governance in the conduct of its affairs, the
company should have a strong and effective
internal control system and enterprise risk
management framework.
CULTIVATING A SYNERGIC
RELATIONSHIP WITH SHAREHOLDERS
Principle 13:
The Company should treat all shareholders
fairly and equitably, and also recognize, protect
and facilitate the exercise of their rights.
DUTIES TO STAKEHOLDERS
Principle 14:
The rights of stakeholders established by law, by contractual relations
and through voluntary commitments must be respected. Where
stakeholders’ rights and/or interests are at stake, stakeholders should
have the opportunity to obtain prompt effective redress for the violation
of their rights.
Principle 15:
A mechanism for employee participation should be developed to create a
symbiotic environment, realize the company’s goals and participate in its
corporate governance process.
Principle 16:
The Company should be socially responsible in all its dealings with the
communities where it operates. It should ensure that its interactions
serve its environment and stakeholders in a positive and progressive
manner that is fully supportive of its comprehensive and balanced
INTRODUCTION
1. The Code is intended to raise the corporate

governance standards of Philippine corporations to a
level at par with its regional and global counterparts.
2. The Code will adopt the “comply and explain”
approach.
3. The Code is arranged as follows: Principles,
Recommendations and Explanations
4. The Recommendations are objective criteria that are
intended to identify the specific features of corporate
governance good practice that are recommended for
companies operating according to the Code.
INTRODUCTION
5. The Explanations strive to provide companies with additional

information on the recommended best practice.
 This Code does not, in any way, prescribe a “one size fits all”
framework. Hence, the Principle of Proportionality is considered in
the application of its provisions.
6. The Code of Corporate Governance for publicly-listed companies is
the first of a series of Codes that is intended to cover all types of
corporations in the Philippines under supervision of the Securities
and Exchange Commission (SEC).
Definition of terms
 Corporate Governance – the system of stewardship and control to guide
organizations in fulfilling their long-term economic, moral, legal and social
obligations towards their stakeholders.
 Board of Directors – the governing body elected by the stockholders the
exercises the corporate powers of a corporation, conducts all its business and
control its properties.
 Management – a group of executives given the authority by the Board of
Directors to implement the policies or has laid down in the conduct of the
business of the corporation.
 Independent Director – a person who is independent of management and
the controlling shareholder, and is free from any business or other relationship
which could, or could reasonably perceived to, materially interfere with his
exercise of independent judgment in carrying out his responsibilities as a
director.
 Executive Director – a director who has executive responsibility of day-to-
day operations of a part or the whole of the organization.
 Non-executive director – a director who has no executive responsibility and
Definition of terms
 Conglomerate – a group of corporations that has diversified business
activities in various industries, whereby the operations of such businesses
are controlled and managed by a parent corporate entity.
 Internal control – a process designed and effected by the board of
directors, senior management, and all levels of personnel to provide
reasonable assurance on the achievement of objectives through efficient
and effective operations; reliable, complete and timely financial and
management information; and compliance with applicable laws,
regulations, and the organization’s policies and procedures.
 Enterprise Risk Management – a process, effected by an entity’s Board
of Directors, management and other personnel, applied in the strategy
setting and across the enterprise that is designed to identify potential
events that may affect the entity, manage risks to be within its risk
appetite, and provide reasonable assurance regarding the achievement of
entity objectives.
Definition of terms
 Related Party – shall cover the company’s subsidiaries as well as
affiliates and any party (including their subsidiaries, affiliates and special
purpose entities), that the company exerts direct or indirect control over
the company; the company’s directors; officers; shareholders and related
interest (DOSRI), and their close family members as well, corresponding
persons on affiliate companies. This shall also include such other persons
or juridical entity whose interests may pose a potential conflict with the
interest of the company.
 Related Party Transactions – a transfer of resources, services or
obligations between a reporting entity and a related party, regardless of
whether a price is charged. It should be interpreted broadly to include not
only transactions that are entered into with an unrelated party that
subsequently becomes a related party.
 Stakeholders – any individual, organization or society at large who can
either affect and/or be affected by the company’s strategies, policies,
business decisions and operations, in general. This includes, among
others, customers, creditors, employees, suppliers, investors, as well as
the government and community in which it operates.

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GOVBUSMAN

Corporate Governance, Business

Herbert Paul N. Guanzon

 On November 10, 2016, the Securities and Exchange Commission

 Its goal is to help companies develop sustain an ethical corporate culture

 establish a code of business conduct and submit a new manual on

1. The Code is intended to raise the corporate

5. The Explanations strive to provide companies with additional

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