Corporate Governance

Question 1

What is corporate governance?

Answer 1

The framework of rules, systems, and processes in a corporation that governs the performance by the Board of Directors and Management of their respective duties and responsibilities to stockholders and other stakeholders.

Question 2

What are the principles that should be promoted in interpreting the Revised Code of Corporate Governance (RCCG)?

Answer 2

Transparency, accountability, responsibility, fairness

Question 3

What is the role of the Board of Directors?

Answer 3

Primarily responsible for the governance of the corporation, sets policies, provides an independent check on management.

Question 4

What are the general responsibilities of the Board of Directors?

Answer 4

Foster long-term success, sustain competitiveness and profitability, formulate vision, mission, strategic objectives, policies, and procedures.

Question 5

What is the composition of the Board of Directors?

Answer 5

At least 5 but not more than 15 members, at least 2 independent directors or 20% of the board (whichever is lesser, but not less than 2).

Question 6

What factors should be considered in determining the board seat limit for a director?

Answer 6

Capacity to perform duties diligently and efficiently, potential conflicts of interest from concurrent directorships.

Question 7

What are the qualifications for a Board of Director?

Answer 7

College education or equivalent, practical understanding of the business, membership in relevant organizations, previous business experience.

Question 8

What are the grounds for permanent disqualification of a director?

Answer 8

Conviction by final judgment of crimes involving securities, fraudulent acts like estafa, embezzlement, theft, counterfeiting.

Question 9

What are the grounds for temporary disqualification of a director?

Answer 9

Pending final judgment on permanent disqualification grounds, refusal to comply with disclosure requirements, excessive absence from meetings, dismissal for cause, excessive beneficial ownership.

Question 10

Is it recommended for the Chairperson and CEO to be the same person?

Answer 10

No, it is not recommended, but it is possible with proper checks and balances.

Question 11

What are the duties and responsibilities of the Chairperson?

Answer 11

Ensure board meetings are held, supervise agenda preparation, maintain communication between the Board and Management.

Question 12

What are the duties and responsibilities of the CEO?

Answer 12

Set and execute strategy, report to the Board, lead the executive team, oversee operations, allocate capital, represent the business, build work culture, monitor performance.

Question 13

Can the President and Treasurer or President and Secretary be the same person?

Answer 13

No.

Question 14

What is an independent director?

Answer 14

A person independent of management and free from any relationship that could interfere with their independent judgment.

Question 15

What happens if an independent director’s position becomes vacant?

Answer 15

Filled by a majority vote of remaining directors if there’s a quorum, otherwise by stockholders in a meeting.

Question 16

What is internal audit?

Answer 16

An independent assurance activity to add value and improve operations by evaluating risk management, control, and governance processes.

Question 17

What is internal control?

Answer 17

A system established by the Board and Management to achieve objectives, ensure efficient operations, reliable financial reporting, and compliance with laws.

Question 18

What are the minimum internal control mechanisms for the Board’s oversight responsibility?

Answer 18

Define CEO duties, select a competent CEO, evaluate senior management appointments, appoint qualified officers, review HR policies, conflict of interest, compensation, and succession plans.

Question 19

What is the frequency of regular board meetings?

Answer 19

Monthly, unless the by-laws provide otherwise.

Question 20

How should board meetings be attended?

Answer 20

In person or via tele/video conferencing.

Question 21

What should the levels of remuneration for directors and officers be?

Answer 21

Sufficient to attract and retain qualified and competent individuals.

Question 22

Who determines the remuneration of the Board of Directors?

Answer 22

The Remuneration/Compensation Committee.

Question 23

How is board assessment conducted?

Answer 23

Through self-rating, independent third party, or other means.

Question 24

What are the qualifications for a Corporate Secretary?

Answer 24

Resident and citizen of the Philippines, specific duties related to record-keeping, loyalty, fairness, and legal awareness.

Question 25

What are the qualifications for a Compliance Officer?

Answer 25

Rank of at least vice-president, reports to the Chairman, monitors compliance with RCCG and regulations.

Question 26

What is the role of an external auditor?

Answer 26

Undertakes an independent audit, provides assurance on financial statements, cannot provide internal audit services concurrently.

Question 27

How often should external auditors be rotated or changed?

Answer 27

Every five years or earlier.

Question 28

What are the rights of stockholders under the Corporation Code?

Answer 28

Right to vote, pre-emptive right, right to inspect records, right to information, appraisal right, right to dividends.

Question 29

What are the conditions for retaining surplus profit exceeding 100% of paid-in capital?

Answer 29

Justified by expansion projects, prohibited by loan agreements, necessary under special circumstances.

Question 30

What are the committees that the Board should constitute?

Answer 30

Audit Committee, Nomination Committee, Compensation/Remuneration Committee.