Introduction to Good Governance

Question 1

When did the Securities and Exchange Commission (SEC) approve and release SEC Memorandum Circular No. 19?

Answer 1

November 22, 2016

Question 1

It is a system of direction, feedback, and control using regulations, performance standards, and ethical guidelines, to hold the company’s Board and senior management accountable for ensuring ethical behavior to the benefit of all stakeholders and society.

Answer 1

Corporate Governance

Question 2

What is the SEC Memorandum Circular No. 19?

Answer 2

The Code of Corporate Governance for Publicly Listed Companies (CG Code for PLCs)

Question 3

Why is there SEC Memorandum Circular No. 19?

Answer 3

To raise the corporate governance standards of Philippine corporations to a level at par with its regional and global counterparts.

Question 4

What approach does the Code adopt?

Answer 4

“Comply and Explain” approach

Question 5

This combines voluntary compliance with mandatory disclosure, and it means that companies do not have to comply with the Code.

Answer 5

“Comply and Explain” approach

Question 6

What must companies state in their annual corporate governance reports?

Answer 6

1. Whether they comply with the Code provisions
2. Identify any areas of non-compliance
3. Explain the reasons for non-compliance.

Question 7

What are the parts of the Code?

Answer 7

1. Principles
2. Recommendations
3. Explanations

Question 8

The part where there are high-level statements of corporate governance good practices that apply 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

It supplements the recommendations, which aim to provide companies with information about best practices in corporate governance.

Answer 10

Explanations

Question 11

Similarities of Bad Government and Bad Governance

Answer 11

Disregard for the concern of the many in the decisions
Shortsightedness
Whimsical and expedient decision-making
Corruption

Question 12

Criteria for Good Governance (ARATER)

Answer 12

• Accountability;
• Responsiveness;
• A long-term view of the public interest;
• Transparency and predictability;
• Ethics in decision-making and implementation; and
• Rule-bound decision-making and action

Question 13

Eight (8) Characteristics of Good Governance

Answer 13

Accountability
Rule of law
Transparency
Consensus oriented
Responsiveness
Equity and inclusiveness
Participation
Effectiveness and efficiency

Question 14

A characteristic where all men and women should have a voice in decision-making, either directly or through a legitimate intermediate organization that represents their interests.

Answer 14

Participation

Question 15

Good governance requires fair legal frameworks that are imposed impartially.

Answer 15

Rule of law

Question 16

It means that decisions are taken, and their enforcement are done in a manner that follows the rules and regulations.

Answer 16

Transparency

Question 17

It requires that the organization and processes try to serve all stakeholders within a reasonable timeframe.

Answer 17

Responsiveness

Question 18

It means organizations mediate differing interests to reach a broad consensus on what is in the best interests of the group and, where possible, on policies and procedures.

Answer 18

Consensus Oriented

Question 19

The organization must ensure that all its members feel they have a stake in it and do not feel excluded.

Answer 19

Equity and inclusiveness

Question 20

It means that processes and organizations must produce results that meet needs while making the best use of resources.

Answer 20

Effectiveness and efficiency

Question 21

Decision-makers must be accountable to the public, as well as to organizational stakeholders.

Answer 21

Accountability

Question 22

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

Answer 22

Board of Directors

Question 23

Why must companies establish a competent working board?

Answer 23

To foster the long-term success of the corporation and 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 24

What does the Code suggest to the company’s BOD to be competent?

Answer 24

• To have directors with a collective knowledge relevant to the company’s industry/sector;
• To have a majority of non-executive directors (NEDs);
• To create policy training of directors;
• To have a policy on board diversity; and
• To be assisted by the corporate secretary and compliance officer

Question 25

He assumes certain responsibilities to different constituencies or stakeholders, who have the right to expect that the organization is being run prudently and soundly.

Answer 25

Director

Question 26

What is the team that manages the day-to-day affairs of the organization?

Answer 26

The Management Team

Question 27

Who is responsible for monitoring and overseeing management action?

Answer 27

the Board of Directors

Question 28

It refers to a director who is at the same time appointed to head a department/unit within the corporate organization.

Answer 28

Executive director

Question 29

It refers to a Board member with non-executive functions.

Answer 29

Non-executive director