Introduction and Definition of Terms

Question 1

The latest _________ Principles of Corporate Governance

Answer 1

G20/OECD1

Question 2

This is used as key reference material in the drafting of this Code.

Answer 2

Association of Southeast Asian Nations Corporate Governance Scorecard

Question 3

What approach will the code adopt?

Answer 3

“comply or explain” approach

Question 4

This approach combines
voluntary compliance with mandatory disclosure

Answer 4

“comply or explain” approach

Question 5

T of F. Companies are required to comply with the code.

Answer 5

F, not required

Question 6

T or F. 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 noncompliance, and explain the reasons for non-compliance.

Answer 6

T

Question 7

The code is arranged as:

Answer 7

Principles, Recommendations, and Explanations

Question 8

These are considered as high-level statements of corporate governance good practice, and are applicable to all companies.

Answer 8

Principles

Question 9

These 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.

Answer 9

Recommendations

Question 10

T or F. When a Recommendation is not complied with, the company must disclose and describe this non-compliance, and explain how the overall Principle is being
achieved.

Answer 10

T

Question 11

T or F. The alternative should not be consistent with the overall Principle.

Answer 11

F, should be

Question 12

T or F. 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.

Answer 12

T

Question 13

They strive to provide companies with additional information on the
recommended best practice.

Answer 13

Explanations

Question 14

This Code does not, in any way, prescribe a __________ framework.

Answer 14

“one size fits all”

Question 15

It is designed to allow boards some flexibility in establishing their corporate governance
arrangements.

Answer 15

“one size fits all” framework

Question 16

T or F. Larger companies and financial institutions are not expected to follow most of the Code’s provisions.

Answer 16

F, would generally be

Question 17

T or F. Smaller companies and financial institutions would generally be expected to follow most of the Code’s provisions.

Answer 17

F, larger

Question 18

T or F. Larger companies may decide that the costs of some of the provisions outweigh the benefits, or are less relevant in their case.

Answer 18

F, smaller

Question 19

It is considered in the application of its provisions.

Answer 19

Principle of Proportionality

Question 20

This 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).

Answer 20

Code of Corporate Governance for publicly listed companies

Question 21

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

Answer 21

Corporate Governance

Question 22

The four obligations of organizations towards their stakeholders.

Answer 22

economic, moral, legal and social

Question 23

It 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 longterm customer satisfaction with shareholder value – to the benefit of all stakeholders and society.

Answer 23

Corporate Governance

Question 24

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

Answer 24

Corporate Governance

Question 25

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

Answer 25

Board of Directors

Question 26

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

Answer 26

Management

Question 27

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 be perceived to, materially interfere with his exercise of independent judgment in carrying out his responsibilities as a director.

Answer 27

Independent director

Question 28

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

Answer 28

Executive director

Question 29

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

Answer 29

Non-executive director

Question 30

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 30

Conglomerate

Question 31

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.

Answer 31

Internal control

Question 32

Process, effected by an entity’s Board of Directors, management and other 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 32

Enterprise Risk Management

Question 33

It 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 or that exerts direct or indirect control over the company; the company’s directors; officers; shareholders and related interests (DOSRI), and their close family members, as well as corresponding persons in affiliated companies.

Answer 33

Related Party

Question 34

This shall also include such other person or juridical entity whose interest may pose a potential conflict with the interest of the company.

Answer 34

Related Party

Question 35

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

Answer 35

Related Party Transactions

Question 36

It should be interpreted broadly to include not only transactions that are entered into with related parties, but also outstanding transactions that are entered into with an unrelated party that subsequently becomes a related party.

Answer 36

Related Party Transactions

Question 37

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 37

Stakeholders

Question 38

This includes, among others, customers, creditors, employees, suppliers, investors, as well as the government and community in which it operates.

Answer 38

Stakeholders