Chap 3 - SEC Code of Corp Gov Part 1

Question 1

The Code of Corporate Governance is intended to

Answer 1

raise the corporate governance standards of Philippine corporations to a level at par with its regional and global counterparts. The latest G20/OECD1 Principles of Corporate Governance and the Association of Southeast Asian Nations Corporate Governance Scorecard were used as key reference materials in drafting this code

Question 2

The code will adopt the

Answer 2

comply or explain approach. This approach combines voluntary compliance with mandatory disclosure. Companies do not have to comply with the code, but they must state in their annual corporate governance reports whether they comply with the Code provisions, identify any areas of non-compliance, and explain the reasons for non-compliance.

Question 3

The code is arranged as follows:

Answer 3

Principles, Recommendations and Explanations. The Principles can be considered as high-level statements of corporate governance good practice, and are applicable to all companies

Question 4

The recommendations are

Answer 4

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

Question 5

Alternatives to a recommendation may be justified in

Answer 5

particular circumstances if good governance can be achieved by other means.

Question 6

When a recommendation is not complied with,

Answer 6

the company must disclose and describe this non-compliance, and explain how the overall principle is being achieved.

Question 7

The alternative should be consistent with

Answer 7

the overall principle. Descriptions and explanations should be written in plain language and in a clear, complete, objective, and precise manner, so that shareholders and other stakeholders can assess the company’s governance framework

Question 8

The explanation strive to

Answer 8

provide companies with additional information on the recommended best practice

Question 9

This code does not, in any way, prescribe a

Answer 9

“one size fits all” framework. It is designed to allow boards some flexibility in establishing their corporate governance arrangements. Larger companies and financial institutions would be expected to follow most of the Code’s provisions.

Question 10

The ___________________ is considered in the application of its provisions

Answer 10

Principle of Proportionality

Question 11

The Code of Corporate Governance for publicly listed companies is

Answer 11

the first of a series of Codes that is intended to cover all types of corporations in the Philippines under supervision of the SEC

Question 12

The system of stewardship and control to guide organizations in fulfilling their long-term economic, moral, legal, and social obligations towards their stakeholders

Answer 12

Corporate Governance

Question 13

Is a system of direction, feedback, and control using regulations, performance standards and ethical guidelines to hold the Board and senior management accountable for ensuring ethical behavior - reconciling long-term customer satisfaction with shareholder value - to the benefit of all stakeholder and society

Answer 13

Corporate Governance

Question 14

Its purpose is to maximize the organization’s long-term success, creating sustainable value for its shareholders, stakeholders and the nation

Answer 14

Corporate Governance

Question 15

The governing body elected by the stockholders that exercises the corporate powers of a corporation, conducts all its business and controls its properties

Answer 15

Board of Directors

Question 16

A group of executives given the authority by the BOD to implement the policies it has laid down in the conduct of the business of the corporation

Answer 16

Management

Question 17

A person who is independent of management and the controlling shareholder, and is free from any business or any relationship which could, or could reasonably be perceived to, materially interfere with his exercise of independent judgment in carrying out his responsibilities as a director.

Answer 17

Independent Director

Question 18

A director who has executive responsibility of day-to-day operations of a part of the whole of the organization

Answer 18

Executive Director

Question 19

A director who has no executive responsibility and does not perform any work related to the operations of the corporation

Answer 19

Non-executive Director

Question 20

A group of corporations that has diversified business activities in varied industries, whereby the operations of such businesses are controlled and managed by a parent corporate entity.

Answer 20

Conglomerate

Question 21

A process designed and effected by the BOD, 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.

Answer 21

Internal Control

Question 22

A process effected by the BOD, senior management, and all levels of personnel, applied in 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

Answer 22

Enterprise Risk Management

Question 23

shall cover the company’s subsidiaries, as well as affiliates and any party, that the company exerts direct or indirect control over or that exerts direct or indirect control over the company

Answer 23

Related Party

Question 24

A transfer of resources, services or obligations between a reporting entity and a related party, regardless of whether a price is charged.

Answer 24

Related party transactions

Question 25

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.

Answer 25

Stakeholders

Question 26

Principle 1

Answer 26

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

Question 27

Principle 2

Answer 27

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 to stockholders and other stakeholders.

Question 28

Principle 3

Answer 28

Board committees should be set up to the extent possible to support 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.

Question 29

Principle 4

Answer 29

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.

Question 30

Principle 5

Answer 30

The Board should endeavor to exercise objective and independent judgment on all corporate affairs.

Question 31

Principle 6

Answer 31

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.

Question 32

Principle 7

Answer 32

Members of the Board are duty-bound to apply high ethical standards, taking into account the interests of all stakeholders.

Question 33

Principle 8

Answer 33

The company should establish corporate disclosure policies and procedures that are practical and in accordance with test practices and regulator) expectations.

Question 34

Principle 9

Answer 34

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

Question 35

Principle 10

Answer 35

The company should ensure: that material and reportable non-financial and sustainability issues are disclosed.

Question 36

Principle 11

Answer 36

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 interested users.

Question 37

Principle 12

Answer 37

To ensure the integrity, transparency and proper governance in the conduct of its affairs, the company should base a strong and effective internal control system and enterprise risk management framework.

Question 38

Principle 13

Answer 38

The company should treat all shareholder. fairly and equitably, and also recognize, protect and facilitate the exercise of their rights.

Question 39

Principle 14

Answer 39

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.

Question 40

Principle 15

Answer 40

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

Question 41

Principle 16

Answer 41

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 it fully supportive of its comprehensive and balanced development.