Principles, Recommendations, and Explanations Flashcards
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 1
The Board should be composed of directors with a collective working knowledge, experience or expertise that is relevant to the company’s industry/sector. The Board should always ensure that it has an appropriate mix of competence and expertise and that its members remain qualified for their positions individually and collectively, to
enable it to fulfill its roles and responsibilities and respond to the needs of the organization based on the evolving business environment and strategic direction.
Recommendation 1.1
Competence can be determined from the collective _____, ______, ______ of each director that is relevant to the industry/sector that the company is in.
knowledge, experience and expertise
T or F. A Board with the necessary knowledge, experience and expertise can properly perform its task of overseeing management and governance of the corporation, formulating the corporation’s vision, mission, strategic objectives, policies and procedures that would
guide its activities, effectively monitoring management’s performance and supervising
the proper implementation of the same.
T
The Board sets ______ for its members to facilitate the selection of ___________ for board
seats, and to serve as a benchmark for the evaluation of its performance.
qualification
standards, potential nominees
The Board should be composed of a majority of non-executive directors who possess the
necessary qualifications to effectively participate and help secure objective, independent
judgment on corporate affairs and to substantiate proper checks and balances.
Recommendation 1.2
The right combination of non-executive directors (NEDs) includes _______ and ________.
independent
directors (IDs) and executive directors (EDs)
T or F. The director can dominate the small group of
directors in the decision-making process.
F, No director or small group of
directors can dominate the decision-making process.
A board composed of a
_________ assures protection of the company’s interest over the interest of the individual shareholders.
majority of NEDs
Who determines the qualifications of the NEDs that enable them to effectively participate in the deliberations of the Board and carry out their roles and responsibilities?
The company
The Company should provide in its Board Charter and Manual on Corporate Governance a policy on the training of directors, including an orientation program for first-time directors and relevant annual continuing training for all directors.
Recommendation 1.3
T or F. The orientation program for first-time directors and relevant annual continuing training
for certain directors aim to promote effective board performance and continuing qualification of the directors in carrying-out their duties and responsibilities.
F, all directors
orientation program for first-time directors
at least 8 hours
annual continuing training
at least 4 hours
Only the first-time directors are required to be properly oriented upon joining the board.
F, all directors should be properly oriented upon joining the board. T
The orientation program covers ___________________ and an introduction to the ___________, ____________________, and _________________.
SEC-mandated topics on
corporate governance, company’s business, Articles of
Incorporation, Code of Conduct
It should be able to meet the specific needs of the company and the individual directors and aid any new director in effectively performing his or her functions.
Orientation Program
It makes certain that the
directors are continuously informed of the developments in the business and regulatory environments, including emerging risks relevant to the company
Annual continuing program
It involves courses on
corporate governance matters relevant to the company, including audit, internal controls, risk management, sustainability and strategy.
Annual continuing program
The annual continuing program involves courses on
corporate governance matters relevant to the company, including _________, ___________, ____________, ____________ and _____________.
audit, internal
controls, risk management, sustainability, strategy
T or F. It is not encouraged that companies assess their own training and development needs in determining the coverage of their
continuing training program.
F, it is encouraged
The Board should have a policy on board diversity
Recommendation 1.4
Having a board diversity policy is a move to avoid _____ and ensure that optimal decision-making is achieved.
groupthink
It is a phenomenon that majority wins
groupthink
T or F. A board diversity policy is not limited to gender diversity.
T
A board diversity policy also includes ___, ______, ________, ________, ________, and ________.
age, ethnicity, culture, skills, competence and knowledge
A good example of a gender diversity policy
increase the number of female directors, including female independent directors
The Board should ensure that it is assisted in its duties by a Corporate Secretary, who should be a separate individual from the Compliance Officer. The Corporate Secretary should not be a member of the Board of Directors and should annually attend a training
on corporate governance.
Recommendation 1.5
Requisites of a corporate secretary
- separate individual from the Compliance Officer
- should not be a member of the Board of Directors
- should annually attend a training
on corporate governance.
T or F. The Corporate Secretary is primarily responsible to the Chairman or President, and not to the corporation and its
shareholders of the Company
F, responsible to the corporation and its shareholders, not to the Chairman of President
Assists the Board and the board committees in the conduct of their meetings, including preparing an annual schedule of Board and committee meetings and the
annual board calendar, and assisting the chairs of the Board and its committees to set agendas for those meetings
Corporate Secretary
Safe keeps and preserves the integrity of the minutes of the meetings of the Board and its committees, as well as other official records of the corporation
Corporate Secretary
Keeps abreast on relevant laws, regulations, all governance issuances, relevant industry developments and operations of the corporation, and advises the Board and the Chairman on all relevant issues as they arise
Corporate Secretary
Works fairly and objectively with the Board, Management and stockholders and contributes to the flow of information between the Board and management, the
Board and its committees, and the Board and its stakeholders, including shareholders
Corporate Secretary
Advises on the establishment of board committees and their terms of reference
Corporate Secretary
Informs members of the Board, in accordance with the by-laws, of the agenda of their meetings at least five working days in advance, and ensures that the members
have before them accurate information that will enable them to arrive at intelligent decisions on matters that require their approval
Corporate Secretary
Attends all Board meetings, except when justifiable causes, such as illness, death in the immediate family and serious accidents, prevent him/her from doing so
Corporate Secretary
Performs required administrative functions
Corporate Secretary
Oversees the drafting of the by-laws and ensures that they conform with regulatory requirements
Corporate Secretary
Performs such other duties and responsibilities as may be provided by the SEC
Corporate Secretary
The Board should ensure that it is assisted in its duties by a Compliance Officer, who should have a rank of Senior Vice President or an equivalent position with adequate stature and authority in the corporation. The Compliance Officer should not be a
member of the Board of Directors and should annually attend a training on corporate governance.
Recommendation 1.6
Requisites of a compliance officer
- should have a rank of Senior Vice President or an equivalent position
- should not be a member of the Board of Directors
- should annually attend a training on corporate governance
The ______________ is a member of the company’s management team in charge of the compliance function.
Compliance Officer
T or F. The compliance officer is primarily liable to the corporation and its shareholders, and not to the Chairman or President of the company.
T
Ensures proper onboarding of new directors (i.e., orientation on the company’s business, charter, articles of incorporation and by-laws, among others)
Compliance Officer
Monitors, reviews, evaluates and ensures the compliance by the corporation, its officers and directors with the relevant laws, this Code, rules and regulations and all
governance issuances of regulatory agencies
Compliance Officer
Reports the matter to the Board if violations are found and recommends the imposition of appropriate disciplinary action
Compliance Officer
Ensures the integrity and accuracy of all documentary submissions to regulators
Compliance Officer
Appears before the SEC when summoned in relation to compliance with this Code
Compliance Officer
Collaborates with other departments to properly address compliance issues, which
may be subject to investigation
Compliance Officer
Identifies possible areas of compliance issues and works towards the resolution of
the same
Compliance Officer
Ensures the attendance of board members and key officers to relevant trainings
Compliance Officer
Performs such other duties and responsibilities as may be provided by the SEC
Compliance Officer
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 shareholders and other stakeholders.
Principle 2
The Board members should act on a fully informed basis, in good faith, with due diligence and care, and in the best interest of the company and all shareholders.
Recommendation 2.1
The two key elements of the fiduciary duty of board members
duty of care and duty of loyalty
It requires board members to act on a fully informed basis, in good faith, with due diligence and care.
Duty of care
It requires the board members to act in the interest of the company and all its shareholders, and not those of the controlling company of the group or any other
stakeholder.
Duty of loyalty
The Board should oversee the development of and approve the company’s business objectives and strategy, and monitor their implementation, in order to sustain the company’s long-term viability and strength.
Recommendation 2.2
This creates optimal value to the corporation.
Sound strategic policies and objectives
The Board should be headed by a competent and qualified Chairperson.
Recommendation 2.3
Makes certain that the meeting agenda focuses on strategic matters, including the overall risk appetite of the corporation, considering the developments in the business and regulatory environments, key governance concerns, and contentious
issues that will significantly affect operations
Chairman
Guarantees that the Board receives accurate, timely, relevant, insightful, concise, and clear information to enable it to make sound decisions
Chairman
Facilitates discussions on key issues by fostering an environment conducive for constructive debate and leveraging on the skills and expertise of individual directors
Chairman
Ensures that the Board sufficiently challenges and inquires on reports submitted and representations made by Management
Chairman
Assures the availability of proper orientation for first-time directors and continuing training opportunities for all directors
Chairman
Makes sure that performance of the Board is evaluated at least once a year and discussed/followed up on
Chairman
The Board should be responsible for ensuring and adopting an effective succession planning program for directors, key officers and management to ensure growth and a continued increase in the shareholders’ value. This should include adopting a policy on
the retirement age for directors and key officers as part of management succession and to promote dynamism in the corporation.
Recommendation 2.4
The _______________ and __________ is the goal of succession planning
transfer of company leadership to highly competent and qualified individuals
It is responsible in implementing a process to appoint competent, professional, honest and highly motivated management officers who can add value to the company
Board
This should include adopting a policy on the retirement age for directors and key officers as part of management succession and
to promote dynamism in the corporation.
Succession planning program
The Board should align the remuneration of key officers and board members with the
long-term interests of the company. In doing so, it should formulate and adopt a policy specifying the relationship between remuneration and performance. Further, no
director should participate in discussions or deliberations involving his own remuneration.
Recommendation 2.5
Key considerations in determining proper compensation:
(1) the level of remuneration is commensurate to the responsibilities of the role;
(2) no director should participate in deciding on his remuneration; and (3) remuneration pay-out schedules should be sensitive to risk outcomes over a multi-year horizon
their remuneration is determined independent of any business line being overseen
employees in control functions (risk compliance and internal audit)
performance measures are based principally on the achievement of their objectives so as not to compromise their independence
employees in control functions (risk compliance and internal audit)
The Board should have and disclose in its Manual on Corporate Governance a formal and transparent board nomination and election policy that should include how it accepts nominations from minority shareholders and reviews nominated candidates. The policy
should also include an assessment of the effectiveness of the Board’s processes and procedures in the nomination, election, or replacement of a director. In addition, its process of identifying the quality of directors should be aligned with the strategic
direction of the company
Recommendation 2.6
It is the ________’s responsibility to develop a policy on board nomination, which is
contained in the company’s Manual on Corporate Governance
Board
T or F. The policy should
encourage shareholders’ participation by including procedures on how the Board
accepts nominations from majority shareholders
F, minority
The policy should also promote
___________ of the Board’s nomination and election process.
transparency
The nomination and election process also includes the review and evaluation of the qualifications of all persons nominated to the Board, including whether candidates:
(1) possess the knowledge, skills, experience, and particularly in the case of non-executive
directors, independence of mind given their responsibilities to the Board and in light of
the entity’s business and risk profile;
(2) have a record of integrity and good repute;
(3) have sufficient time to carry out their responsibilities; and
(4) have the ability to promote a smooth interaction between board members.
Permanent or Temporary? Any person convicted by final judgment or order by a competent judicial or administrative body of any crime that: (a) involves the purchase or sale of securities, as defined in the Securities Regulation Code; (b) arises out of the person’s conduct as an underwriter, broker, dealer, investment adviser, principal, distributor, mutual fund dealer, futures commission merchant, commodity trading advisor, or floor
broker; or (c) arises out of his fiduciary relationship with a bank, quasi-bank, trust company, investment house or as an affiliated person of any of them
Permanent disqualification
Permanent or Temporary? Any person who, by reason of misconduct, after hearing, is permanently enjoined by a
final judgment or order of the SEC, Bangko Sentral ng Pilipinas (BSP) or any court or administrative body of competent jurisdiction from: (a) acting as underwriter, broker, dealer, investment adviser, principal distributor, mutual fund dealer, futures commission merchant, commodity trading advisor, or floor broker; (b) acting as director or officer of a bank, quasi-bank, trust company, investment house, or investment company; (c) engaging in or continuing any conduct or practice in any of the capacities mentioned in sub-paragraphs (a) and (b) above, or willfully violating the laws that govern securities and banking activities.
Permanent disqualification
Permanent or Temporary? Any person convicted by final judgment or order by a court, or competent administrative body of an offense involving moral turpitude, fraud, embezzlement,
theft, estafa, counterfeiting, misappropriation, forgery, bribery, false affirmation, perjury or other fraudulent acts
Permanent disqualification
Permanent or Temporary? Any person who has been adjudged by final judgment or order of the SEC, BSP, court, or competent administrative body to have willfully violated, or willfully aided, abetted, counseled, induced or procured the violation of any provision of the Corporation Code, Securities Regulation Code or any other law, rule, regulation or order administered by the SEC or BSP
Permanent disqualification
Permanent or Temporary? Any person judicially declared as insolvent
Permanent disqualification
Permanent or Temporary? Any person found guilty by final judgment or order of a foreign court or equivalent financial regulatory authority of acts, violations or misconduct similar to any of the acts, violations or misconduct enumerated previously
Permanent disqualification
Permanent or Temporary? Conviction by final judgment of an offense punishable by imprisonment for more than six years, or a violation of the Corporation Code committed within five years prior to the date of his election or appointment
Permanent disqualification
Permanent or Temporary? Other grounds as the SEC may provide
Permanent disqualification
Permanent or temporary? Absence in more than fifty percent (50%) of all regular and special meetings of the Board during his incumbency, or any 12-month period during the said incumbency, unless the absence is due to illness, death in the immediate family or serious accident. The disqualification should apply for purposes of the succeeding election
Temporary disqualification
Permanent or temporary? Dismissal or termination for cause as director of any publicly-listed company, public company, registered issuer of securities and holder of a secondary license from the Commission. The disqualification should be in effect until he has cleared himself from
any involvement in the cause that gave rise to his dismissal or termination
Temporary disqualification
Permanent or temporary? If the beneficial equity ownership of an independent director in the corporation or its subsidiaries and affiliates exceeds two percent (2%) of its subscribed capital stock.
The disqualification from being elected as an independent director is lifted if the limit is later complied with
Temporary disqualification
Permanent or temporary? If any of the judgments or orders cited in the grounds for permanent disqualification has not yet become final.
Temporary disqualification
The Board should have the overall responsibility in ensuring that there is a group-wide policy and system governing related party transactions (RPTs) and other unusual or infrequently occurring transactions, particularly those which pass certain thresholds of
materiality. The policy should include the appropriate review and approval of material or significant RPTs, which guarantee fairness and transparency of the transactions. The policy should encompass all entities within the group, taking into account their size, structure, risk profile and complexity of operations.
Recommendation 2.7
Ensuring the integrity of related party transactions is an important fiduciary duty of the _________
director
It is the __________’s role to initiate policies and measures geared towards prevention of abuse and promotion of transparency, and in compliance with applicable
laws and regulations to protect the interest of all shareholders.
Board
One such measure is the
________________ by shareholders of material or significant RPTs approved by the
Board, in accordance with existing laws
required ratification
Content of the RPT Policy:
- Definition of related parties;
- Coverage of RPT policy;
- Guidelines in ensuring arm’s-length terms;
- Identification and prevention or management of potential or actual
conflicts of interest which arise; - Adoption of materiality thresholds;
- Internal limits for individual and aggregate exposures;
- Whistle-blowing mechanisms, and
- Restitution of losses and other remedies for abusive RPTs.
T of F. The company is given the discretion to set their materiality threshold at a level where omission or misstatement of the transaction could pose a significant risk to
the company and influence its economic decision.
T
T or F. The SEC may direct a company to reduce its materiality threshold or amend excluded transactions if the SEC deems that
the threshold or exclusion is inappropriate considering the company’s size, risk profile,
and risk management systems.
T
T or F. In cases where the shareholders’ approval is required, it is good practice for interested shareholders to abstain and let the
disinterested parties or majority of the minority shareholders decide
T
The Board should be primarily responsible for approving the selection and assessing the
performance of the Management led by the Chief Executive Officer (CEO), and control functions led by their respective heads (Chief Risk Officer, Chief Compliance Officer, and Chief Audit Executive).
Recommendation 2.8
Who is the head of the management?
CEO
Who is the head of the Board?
Chairperson
It is the responsibility of the _________ to appoint a competent management team at all
times, monitor and assess the performance of the management team based on established performance standards that are consistent with the company’s strategic objectives, and conduct a regular review of the company’s policies with the management
team.
Board
The Board should establish an effective performance management framework that will ensure that the Management, including the Chief Executive Officer, and personnel’s
performance is at par with the standards set by the Board and Senior Management.
Recommendation 2.9
The Board should oversee that an appropriate internal control system is in place, including setting up a mechanism for monitoring and managing potential conflicts of
interest of Management, board members, and shareholders. The Board should also approve the Internal Audit Charter.
Recommendation 2.10
The Board should oversee that a sound enterprise risk management (ERM) framework is in place to effectively identify, monitor, assess and manage key business risks. The
risk management framework should guide the Board in identifying units/business lines
and enterprise-level risk exposures, as well as the effectiveness of risk management strategies.
Recommendation 2.11
The ____________ is responsible for defining the company’s level of risk tolerance and providing
oversight over its risk management policies and procedures.
Board
The Board should have a Board Charter that formalizes and clearly states its roles, responsibilities and accountabilities in carrying out its fiduciary duties. The Board Charter should serve as a guide to the directors in the performance of their functions and should be publicly available and posted on the company’s website.
Recommendation 2.12
It guides the directors on how to discharge their functions. I
Board Charter
It provides the standards for evaluating the performance of the Board.
Board Charter
It contains the roles and responsibilities of the Chairman
Board Charter
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
Principle 3
The Board should establish board committees that focus on specific board functions to aid in the optimal performance of its roles and responsibilities.
Recommendation 3.1
The four Board committees:
- Audit Committee
- Corporate Governance Committee
- Board Risk Oversight Committee 4. Related Party Transaction Committee
T or F. The type of board committees to be established by a company would depend on its size, risk profile and complexity of operations.
T
The Board should establish an Audit Committee to enhance its oversight capability over the company’s financial reporting, internal control system, internal and external audit processes, and compliance with applicable laws and regulations. The committee should be composed of at least three appropriately qualified non-executive directors, the majority of whom, including the Chairman, should be independent. All of the members of the committee must have relevant background, knowledge, skills, and/or experience in the areas of accounting, auditing and finance. The Chairman of the Audit Committee should not be the chairman of the Board or of any other committees.
Recommendation 3.2
The audit committee should be composed of:
at least three appropriately qualified non-executive directors, majority of whom, including the Chairman, should be independent
This committee is responsible for overseeing the senior management in establishing and maintaining an adequate, effective and efficient internal control framework. It ensures that systems and processes are designed to provide assurance in areas including reporting, monitoring compliance with laws, regulations and internal
policies, efficiency and effectiveness of operations, and safeguarding of assets.
Audit Committee
Through the Internal Audit (IA) Department, monitors and evaluates the adequacy and effectiveness of the corporation’s internal control system, integrity of financial reporting, and security of physical and information assets. Well-designed internal control procedures and processes that will provide a system of checks and balances should be in place in order to (a) safeguard the company’s resources and ensure
their effective utilization, (b) prevent occurrence of fraud and other irregularities, (c) protect the accuracy and reliability of the company’s financial data, and (d)
ensure compliance with applicable laws and regulations
Audit Committee
Oversees the Internal Audit Department, and recommends the appointment and/or grounds for approval of an internal audit head or Chief Audit Executive (CAE). The
Audit Committee should also approve the terms and conditions for outsourcing internal audit services
Audit Committee
Establishes and identifies the reporting line of the Internal Auditor to enable him to properly fulfill his duties and responsibilities. For this purpose, he should directly
report to the Audit Committee
Audit Committee
Reviews and monitors Management’s responsiveness to the Internal Auditor’s findings and recommendations
Audit Committee
Prior to the commencement of the audit, discusses with the External Auditor the nature, scope and expenses of the audit, and ensures the proper coordination if more than one audit firm is involved in the activity to secure proper coverage and minimize duplication of efforts
Audit Committee
Evaluates and determines the non-audit work, if any, of the External Auditor, and periodically reviews the non-audit fees paid to the External Auditor in relation to the
total fees paid to him and to the corporation’s overall consultancy expenses. The committee should disallow any non-audit work that will conflict with his duties as an External Auditor or may pose a threat to his independence3. The non-audit work, if allowed, should be disclosed in the corporation’s Annual Report and Annual Corporate Governance Report
Audit Committee
Reviews and approves the Interim and Annual Financial Statements before their submission to the Board, with particular focus on the following matters:
* Any change/s in accounting policies and practices
* Areas where a significant amount of judgment has been exercised
* Significant adjustments resulting from the audit
* Going concern assumptions
* Compliance with accounting standards
* Compliance with tax, legal and regulatory requirements
Audit Committee
Reviews the disposition of the recommendations in the External Auditor’s management letter
Audit Committee
Performs oversight functions over the corporation’s Internal and External Auditors. It ensures the independence of Internal and External Auditors, and that both
auditors are given unrestricted access to all records, properties and personnel to enable them to perform their respective audit functions
Audit Committee
Audit Committee
Coordinates, monitors and facilitates compliance with laws, rules and regulations
Audit Committee
Recommends to the Board the appointment, reappointment, removal and fees of the External Auditor, duly accredited by the Commission, who undertakes an independent audit of the corporation, and provides an objective assurance on the manner by which the financial statements should be prepared and presented to the stockholders
Audit Committee
In case the company does not have a Board Risk Oversight Committee and/or Related Party Transactions Committee, performs the functions of said committees as provided under Recommendations 3.4 and 3.5.
Audit Committee
The Audit Committee meets with the Board at least every _______ without the presence of the CEO or other management team members, and periodically meets with the head of the internal audit.
quarter
The Board should establish a Corporate Governance Committee that should be tasked to assist the Board in the performance of its corporate governance responsibilities, including the functions that were formerly assigned to a Nomination and Remuneration Committee. It should be composed of at least three members, all of whom should be independent directors, including the Chairman.
Recommendation 3.3
This committee is tasked with ensuring compliance with and proper observance of corporate governance principles and
practices.
Corporate Governance Committee (CG Committee)
Oversees the implementation of the corporate governance framework and
periodically reviews the said framework to ensure that it remains appropriate in
light of material changes to the corporation’s size, complexity and business strategy,
as well as its business and regulatory environments
Corporate Governance Committee (CG Committee)
Oversees the periodic performance evaluation of the Board and its committees as well as executive management, and conducts an annual self-evaluation of its performance
Corporate Governance Committee (CG Committee)
Ensures that the results of the Board evaluation are shared, discussed, and that concrete action plans are developed and implemented to address the identified areas for improvement
Corporate Governance Committee (CG Committee)
Recommends continuing education/training programs for directors, assignment of
tasks/projects to board committees, succession plan for the board members and senior officers, and remuneration packages for corporate and individual
performance
Corporate Governance Committee (CG Committee)
Adopts corporate governance policies and ensures that these are reviewed and updated regularly, and consistently implemented in form and substance
Corporate Governance Committee (CG Committee)
Proposes and plans relevant trainings for the members of the Board
Corporate Governance Committee (CG Committee)
Determines the nomination and election process for the company’s directors and has the special duty of defining the general profile of board members that the company may need and ensuring appropriate knowledge, competencies and expertise that complement the existing skills of the Board
Corporate Governance Committee (CG Committee)
Establishes a formal and transparent procedure to develop a policy for determining the remuneration of directors and officers that is consistent with the corporation’s culture and strategy as well as the business environment in which it operates.
Corporate Governance Committee (CG Committee)
T or F. The establishment of a Corporate Governance Committee does not preclude companies
from establishing separate Remuneration or Nomination Committees, if they deem
necessary.
T
Subject to a corporation’s size, risk profile and complexity of operations, the Board should establish a separate Board Risk Oversight Committee (BROC) that should be responsible for the oversight of a company’s Enterprise Risk Management system to ensure its functionality and effectiveness. The BROC should be composed of at least three members, the majority of whom should be independent directors, including the Chairman. The Chairman should not be the Chairman of the Board or of any other committee. At least one member of the committee must have relevant thorough knowledge and experience on risk and risk management.
Recommendation 3.4
BROC should be composed of:
- at least
three members, the majority of whom should be independent directors, including the
Chairman - The Chairman should not be the Chairman of the Board or of any other committee.
- At least one member of the committee must have relevant thorough knowledge and experience on risk and risk management.
This committee is generally for
conglomerates and companies with a high risk profile.
Board Risk Oversight Committee
It is integral to an effective corporate governance process
and the achievement of a company’s value creation objectives.
Enterprise risk management
Its responsibility to assist the Board in ensuring that there is an effective and integrated risk management process in place
BROC
Develops a formal enterprise risk management plan which contains the following elements: (a) common language or register of risks, (b) well-defined risk management goals, objectives and oversight, (c) uniform processes of assessing
risks and developing strategies to manage prioritized risks, (d) designing and implementing risk management strategies, and (e) continuing assessments to improve risk strategies, processes and measures
Board Risk Oversight Committee
Oversees the implementation of the enterprise risk management plan through a Management Risk Oversight Committee. The BROC conducts regular discussions on
the company’s prioritized and residual risk exposures based on regular risk management reports and assesses how the concerned units or offices are addressing
and managing these risks
Board Risk Oversight Committee
Evaluates the risk management plan to ensure its continued relevance, comprehensiveness and effectiveness. The BROC revisits defined risk management
strategies, looks for emerging or changing material exposures, and stays abreast of significant developments that seriously impact the likelihood of harm or loss
Board Risk Oversight Committee
Advises the Board on its risk appetite levels and risk tolerance limits
Board Risk Oversight Committee
Reviews at least annually the company’s risk appetite levels and risk tolerance limits based on changes and developments in the business, the regulatory framework, the external economic and business environment, and when major events occur that are
considered to have major impacts on the company
Board Risk Oversight Committee
Assesses the probability of each identified risk becoming a reality and estimates its possible significant financial impact and likelihood of occurrence. Priority areas of concern are those risks that are the most likely to occur and to impact the performance and stability of the corporation and its stakeholders
Board Risk Oversight Committee
Provides oversight over Management’s activities in managing credit, market,
liquidity, operational, legal and other risk exposures of the corporation. This function includes regularly receiving information on risk exposures and risk management activities from Management
Board Risk Oversight Committee
Reports to the Board on a regular basis, or as deemed necessary, the company’s material risk exposures, the actions taken to reduce the risks, and recommends further action or plans, as necessary
Board Risk Oversight Committee
Subject to a corporation’s size, risk profile and complexity of operations, the Board should establish a Related Party Transaction (RPT) Committee, which should be tasked with reviewing all material related party transactions of the company and should be
composed of at least three non-executive directors, two of whom should be independent, including the Chairman.
Recommendation 3.5
Related Party Transaction (RPT) Committee should be composed of:
at least three non-executive directors, two of whom should be
independent, including the Chairman
Evaluates on an ongoing basis existing relations between and among businesses and counterparties to ensure that all related parties are continuously identified, RPTs are monitored, and subsequent changes in relationships with counterparties (from non-related to related and vice versa) are captured. Related parties, RPTs and changes in relationships should be reflected in the relevant reports to the Board and regulators/supervisors
RPT Committee
Evaluates all material RPTs to ensure that these are not undertaken on more favorable economic terms (e.g., price, commissions, interest rates, fees, tenor, collateral requirement) to such related parties than similar transactions with nonrelated parties under similar circumstances and that no corporate or business
resources of the company are misappropriated or misapplied, and to determine any potential reputational risk issues that may arise as a result of or in connection with the transactions
RPT Committee
Ensures that appropriate disclosure is made, and/or information is provided to regulating and supervising authorities relating to the company’s RPT exposures, and
policies on conflicts of interest or potential conflicts of interest. The disclosure should include information on the approach to managing material conflicts of
interest that are inconsistent with such policies, and conflicts that could arise as a result of the company’s affiliation or transactions with other related parties
RPT Committee
Reports to the Board of Directors on a regular basis, the status and aggregate exposures to each related party, as well as the total amount of exposures to all related parties
RPT Committee
Ensures that transactions with related parties, including write-off of exposures are subject to a periodic independent review or audit process
RPT Committee
Oversees the implementation of the system for identifying, monitoring, measuring, controlling, and reporting RPTs, including a periodic review of RPT policies and procedures
RPT Committee
All established committees should be required to have Committee Charters stating in plain terms their respective purposes, memberships, structures, operations, reporting processes, resources and other relevant information. The Charters should provide the standards for evaluating the performance of the Committees. It should also be fully
disclosed on the company’s website.
Recommendation 3.6
It clearly defines the roles and accountabilities of each committee
to avoid any overlapping functions, which aims at having a more effective board for the
company.
Committee Charter
This can also be used as basis for the assessment of committee performance.
Committee Charter
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 4
The directors should attend and actively participate in all meetings of the Board, Committees, and Shareholders in person or through tele-/videoconferencing conducted
in accordance with the rules and regulations of the Commission, except when justifiable causes, such as, illness, death in the immediate family and serious accidents, prevent them from doing so. In Board and Committee meetings, the director should review meeting materials and if called for, ask the necessary questions or seek clarifications and
explanations.
Recommendation 4.1
T or F. The absence of a director in more than fifty percent (50%) of all regular and special meetings of the Board during his/her incumbency is a ground for disqualification in the
succeeding election, unless the absence is due to illness, death in the immediate family, serious accident or other unforeseen or fortuitous events.
T
The non-executive directors of the Board should concurrently serve as directors to a maximum of five publicly listed companies to ensure that they have sufficient time to
fully prepare for meetings, challenge Management’s proposals/views, and oversee the long-term strategy of the company.
Recommendation 4.2
Being a director necessitates a _____________ to the corporation
commitment
T or F. There is no need to
set a limit on board directorships.
F, there is a need
A director should notify the Board where he/she is an incumbent director before accepting a directorship in another company.
Recommendation 4.3
T or F. It is not important that a director notifies his/her incumbent Board before accepting a directorship in another company
F, it is important
The board should endeavor to exercise an objective and independent judgment on all
corporate affairs.
Principle 5
The Board should have at least three independent directors, or such number as to constitute at least one-third of the members of the Board, whichever is higher.
Recommendation 5.1
The presence of _______________ in the Board is to ensure the exercise of independent judgment on corporate affairs and proper oversight of managerial performance, including prevention of conflict of interests and balancing of competing demands of the corporation.
independent directors
The ideal number ranges from ____________ to a substantial majority
one-third
The Board should ensure that its independent directors possess the necessary qualifications and none of the disqualifications for an independent director to hold the
position.
Recommendation 5.2
It is worthy to note that _________ and _________ should go hand-in-hand.
independence and competence
Is not, or has not been a senior officer or employee of the covered company unless there has been a change in the controlling ownership of the company
Independent Director
Is not, and has not been in the three years immediately preceding the election, a director of the covered company; a director, officer, employee of the covered
company’s subsidiaries, associates, affiliates or related companies; or a director, officer, employee of the covered company’s substantial shareholders and its related
companies
Independent Director
Has not been appointed in the covered company, its subsidiaries, associates, affiliates or related companies as Chairman “Emeritus,” “Ex-Officio” Directors/Officers or Members of any Advisory Board, or otherwise appointed in a capacity to assist the Board in the performance of its duties and responsibilities within three years immediately preceding his election
Independent Director
Is not an owner of more than two percent (2%) of the outstanding shares of the covered company, its subsidiaries, associates, affiliates or related companies
Independent Director
Is not a relative of a director, officer, or substantial shareholder of the covered company or any of its related companies or of any of its substantial shareholders.
For this purpose, relatives include spouse, parent, child, brother, sister and the spouse of such child, brother or sister
Independent Director
Is not acting as a nominee or representative of any director of the covered company or any of its related companies
Independent Director
Is not a securities broker-dealer of listed companies and registered issuers of securities. “Securities broker-dealer” refers to any person holding any office of trust
and responsibility in a broker-dealer firm, which includes, among others, a director, officer, principal stockholder, nominee of the firm to the Exchange, an associated
person or salesman, and an authorized clerk of the broker or dealer
Independent Director
Is not retained, either in his personal capacity or through a firm, as a professional adviser, auditor, consultant, agent or counsel of the covered company, any of its
related companies or substantial shareholder, or is otherwise independent of Management and free from any business or other relationship within the three years
immediately preceding the date of his election
Independent Director
Does not engage or has not engaged, whether by himself or with other persons or through a firm of which he is a partner, director or substantial shareholder, in any transaction with the covered company or any of its related companies or substantial
shareholders, other than such transactions that are conducted at arm’s length and could not materially interfere with or influence the exercise of his independent judgment
Independent Director
Is not affiliated with any non-profit organization that receives significant funding from the covered company or any of its related companies or substantial shareholders
Independent Director
Is not employed as an executive officer of another company where any of the covered company’s executives serve as directors
Independent Director
Related companies, as used in this section, refer to:
(a) the covered entity’s
holding/parent company;
(b) its subsidiaries; and
(c) subsidiaries of its holding/parent
company
The Board’s independent directors should serve for a maximum cumulative term of nine
years. After which, the independent director should be perpetually barred from reelection as such in the same company, but may continue to qualify for nomination and election as a non-independent director. In the instance that a company wants to retain
an independent director who has served for nine years, the Board should provide meritorious justification/s and seek shareholders’ approval during the annual shareholders’ meeting.
Recommendation 5.3
maximum cumulative term for the Board’s independent directors
9 years
T or F. The independent director should be perpetually barred from reelection as such in the same company, but may continue to qualify for nomination and election as a non-independent director.
T
T or F. In the instance that a company wants to retain
an independent director who has served for nine years, the Board should not provide meritorious justification/s and seek shareholders’ approval during the annual shareholders’ meeting.
F, should provide
T or F. Service in a board for a long duration may impair a director’s ability to act independently and objectively.
T
T or F. Independent directors (IDs) who have served for nine
years may continue as a non-executive director of the company
F, may continue as non-independent
T or F.Tthe shareholders may not
choose to re-elect an independent director who has served for nine years.
F, may choose
The positions of Chairman of the Board and Chief Executive Officer should be held by separate individuals and each should have clearly defined responsibilities.
Recommendation 5.4
T or F. The positions of Chairman of the Board and Chief Executive Officer should be held by
the same individuals
F, separate
The division of responsibilities and
accountabilities between the Chairman and CEO is clearly defined and delineated and
disclosed in the ______________
Board Charter
One-tier
Mr. A is the CEO and chairman
Two-tier
Mr. A is the CEO and Mr. B is the chairman
Determines the corporation’s strategic direction and formulates and implements its
strategic plan on the direction of the business
CEO
Communicates and implements the corporation’s vision, mission, values and overall strategy and promotes any organization or stakeholder change in relation to the
same
CEO
Oversees the operations of the corporation and manages human and financial resources in accordance with the strategic plan
CEO
Has a good working knowledge of the corporation’s industry and market and keeps up-to-date with its core business purpose
CEO
Directs, evaluates and guides the work of the key officers of the corporation
CEO
Manages the corporation’s resources prudently and ensures a proper balance of the
same
CEO
Provides the Board with timely information and interfaces between the Board and the employees
CEO
Builds the corporate culture and motivates the employees of the corporation
CEO
Serves as the link between internal operations and external stakeholders
CEO
The Board should designate a lead director among the independent directors if the Chairman of the Board is not independent, including if the positions of the Chairman of
the Board and Chief Executive Officer are held by one person.
Recommendation 5.5
T or F. In cases where the Chairman is not independent and where the roles of Chair and CEO are combined, putting in place proper mechanisms ensures independent views and perspectives. A suggested mechanism is the appointment of a strong
“lead director” among the independent directors.
T
Serves as an intermediary between the Chairman and the other directors when necessary
Lead director
Convenes and chairs meetings of the non-executive directors
Lead director
Contributes to the performance evaluation of the Chairman, as required
Lead director
A director with a material interest in any transaction affecting the corporation should abstain from taking part in the deliberations for the same.
Recommendation 5.6
T or F. The abstention of a director from participating in a meeting when related party transactions, self-dealings or any transactions or matters on which he/she has a
material interest are taken up ensures that he has no influence over the outcome of the deliberations.
T
The non-executive directors (NEDs) should have separate periodic meetings with the external auditor and heads of the internal audit, compliance and risk functions, without any executive directors present to ensure that proper checks and balances are in place
within the corporation. The meetings should be chaired by the lead independent director.
Recommendation 5.7
___________ are expected to scrutinize Management’s performance, particularly in meeting the companies’ goals and objectives.
NEDs
It is their role to satisfy themselves on the integrity of the corporation’s internal control and effectiveness of the risk management systems
NEDs
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 6
The Board should conduct an annual self-assessment of its performance, including the
performance of the Chairman, individual members and committees. Every three years,
the assessment should be supported by an external facilitator.
Recommendation 6.1
____________ helps the directors to thoroughly review their performance and understand their roles and responsibilities.
Board assessment
It provides a means to assess a director’s attendance at board
and committee meetings, participation in boardroom discussions and manner of voting
on material issues
Board assessment
The ______________ can be any independent third party such as, but not limited to, a consulting firm, academic institution or professional organization.
External facilitator
The Board should have in place a system that provides, at the minimum, criteria and process to determine the performance of the Board, the individual directors, committees and such system should allow for a feedback mechanism from the shareholders.
Recommendation 6.2
T or F. Companies are given the discretion to determine the assessment criteria and process, which should be based on the mandates, functions, roles and responsibilities provided in the Board and Committee Charters.
T
This committee oversees the evaluation process
Corporate Governance Committee
Members of the Board are duty-bound to apply high ethical standards, taking into
account the interests of all stakeholders
Principle 7
The Board should adopt a _______________________________, which would provide standards for professional and ethical behavior, as well as articulate acceptable and
unacceptable conduct and practices in internal and external dealings.
Code of Business Conduct and Ethics
The Board should ensure the proper and efficient implementation and monitoring of
compliance with the Code of Business Conduct and Ethics and internal policies.
Recommendation 7.2
The company should establish corporate disclosure policies and procedures that are practical and in accordance with best practices and regulatory expectations.
Principle 8
The Board should establish corporate disclosure policies and procedures to ensure a comprehensive, accurate, reliable and timely report to shareholders and other stakeholders that gives a fair and complete picture of a company’s financial condition,
results and business operations
Recommendation 8.1
Setting up clear policies and procedures on corporate disclosure that comply with the disclosure requirement as provided in __________________________, __________________________, and other regulations such as those required by the ____________________, is essential for comprehensive and timely reporting.
Rule 68 of the Securities Regulation Code (SRC), Philippine Stock Exchange Listing and Disclosure Rules, Bangko Sentral ng Pilipinas
The Company should have a policy requiring all directors and officers to disclose/report to the company any dealings in the company’s shares within three business days.
Recommendation 8.2
T or F. Directors often have access to material inside information on the company
T
What is rule 18?
reports to be filed by 5% of beneficial owner
What is rule 23?
Reports to be Filed by Directors, Officers and Principal
The Board should fully disclose all relevant and material information on individual board members and key executives to evaluate their experience and qualifications, and
assess any potential conflicts of interest that might affect their judgment.
Recommendation 8.3
A disclosure on the board members and key executives’ information is prescribed under _____________________________
Rule 12 Annex C of the SRC
The company should provide a clear disclosure of its policies and procedures for setting Board and executive remuneration, as well as the level and mix of the same in the Annual Corporate Governance Report. Also, companies should disclose the remuneration on an individual basis, including termination and retirement provisions.
Recommendation 8.4
Disclosure of ______________ enables investors to understand the link between the remuneration paid to directors and key management personnel and
the company’s performance.
remuneration policies and procedure
The Revised Code of Corporate Governance requires only a disclosure of all fixed and
variable compensation that may be paid, directly or indirectly, to its directors and top four management officers during the _______________________.
preceding fiscal year
T or F. Disclosure on board and executive remuneration is not on an individual basis (including termination and retirement provisions) is increasingly regarded as good practice and is now mandated in many countries.
F, is on individual basis
The company should disclose its policies governing Related Party Transactions (RPTs) and other unusual or infrequently occurring transactions in their Manual on Corporate Governance. The material or significant RPTs reviewed and approved during the year should be disclosed in its Annual Corporate Governance Report.
Recommendation 8.5
The company should make a full, fair, accurate and timely disclosure to the public of every material fact or event that occurs, particularly on the acquisition or disposal of
significant assets, which could adversely affect the viability or the interest of its shareholders and other stakeholders. Moreover, the Board of the offeree company
should appoint an independent party to evaluate the fairness of the transaction price on the acquisition or disposal of assets.
Recommendation 8.6
The company’s corporate governance policies, programs and procedures should be contained in its Manual on Corporate Governance, which should be submitted to the regulators and posted on the company’s website.
Recommendation 8.7
It is one of the core principles of corporate governance.
Transparency
To ensure the better protection of shareholders’ and other stakeholders’ rights, ________________ of the company’s corporate governance policies, programs and procedures is imperative
full disclosure
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 9
The Audit Committee should have a robust process for approving and recommending the appointment, reappointment, removal, and fees of the external auditor. The
appointment, reappointment, removal, and fees of the external auditor should be recommended by the Audit Committee, approved by the Board and ratified by the
shareholders. For removal of the external auditor, the reasons for removal or change should be disclosed to the regulators and the public through the company website and required disclosures.
Recommendation 9.1
The __________, ____________, _____________, and ________ of the external auditor should be
recommended by the _____________, approved by the ________ and ratified by the
__________________.
appointment, reappointment, removal, and fees
Audit Committee
Board
shareholders
T or F. For removal of the external auditor, the reasons for removal or change should be not be disclosed to the regulators and the public through the company website and
required disclosures.
F, should be disclosed
T or F. Shareholders’ ratification clarifies or emphasizes that the external auditor is accountable to the management whom he may interact with in the conduct of his audit, rather than to the shareholders or to the company as a whole .
F, accountable to the shareholders or to the company as a whole, rather than to the management whom he may interact with in the conduct of his audit.
It should include the Audit Committee’s responsibility on
assessing the integrity and independence of external auditors and exercising effective
oversight to review and monitor the external auditor’s independence and objectivity and the effectiveness of the audit process, taking into consideration relevant Philippine professional and regulatory requirements.
Audit Committee Charter
The Audit Committee Charter should include the Audit Committee’s responsibility on
assessing the integrity and independence of external auditors and exercising effective oversight to review and monitor the external auditor’s independence and objectivity and the effectiveness of the audit process, taking into consideration relevant Philippine professional and regulatory requirements. The Charter should also contain the Audit Committee’s responsibility on reviewing and monitoring the external auditor’s
suitability and effectiveness on an annual basis.
Recommendation 9.2
It includes a disclosure of its responsibility on assessing the
integrity and independence of the external auditor.
Audit Committee Charter
It establishes detailed guidelines,
policies and procedures that are contained in a separate memorandum or document.
Audit Committee Charter
T or F. The company should not disclose the nature of non-audit services performed by its external
auditor in the Annual Report to deal with the potential conflict of interest.
F, should disclose
This committee should be alert for any potential conflict of interest situations, given the guidelines or policies on non-audit services, which could be viewed as impairing the external auditor’s objectivity
Audit Committee
The company should disclose the nature of non-audit services performed by its external
auditor in the Annual Report to deal with the potential conflict of interest. The Audit Committee should be alert for any potential conflict of interest situations, given the guidelines or policies on non-audit services, which could be viewed as impairing the
external auditor’s objectivity.
Recommendation 9.3
It oversees the overall relationship
with the external auditor.
Audit Committee
It evaluates and determines the nature of non-audit services, if
any, of the external auditor.
Audit Committee
T or F. Allowing the same auditor to perform non-audit services for the company may create a potential conflict of interest
T
T or F. In order to mitigate the risk of possible conflict between the auditor and the company, the Audit Committee puts in place robust policies and procedures designed to promote auditor dependence in the long run
F, auditor independence
T or F. The Audit Committee is guided by internationally and nationally recognized best practices and regulatory requirements or
issuances.
F, guided by nationally and internationally recognized
The company should ensure that the material and reportable non-financial and sustainability issues are disclosed.
Principle 10
The Board should have a clear and focused policy on the disclosure of non-financial information, with emphasis on the management of economic, environmental, social and governance (EESG) issues of its business, which underpin sustainability. Companies
should adopt a globally recognized standard/framework in reporting sustainability and non-financial issues.
Recommendation 10.1
EESG
economic, environmental, social and governance
T or F. One way to respond to sustainability challenges is disclosure to all
shareholders and other stakeholders of the company’s strategic (long-term goals) only, as well as the impact of a wide range of sustainability issues.
F, strategic and operational
Disclosures can be made using standards/frameworks, such as the ____________ by the _______________________, the __________________ by the
_______________________ and/or the ________________________________.
G4 Framework, Global Reporting Initiative (GRI)
Integrated Reporting Framework, International Integrated Reporting Council (IIRC)
Sustainability Accounting
Standards Board (SASB)’s Conceptual Framework
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.
Principle 11
The company should include media and analysts’ briefings as channels of communication to ensure the timely and accurate dissemination of public, material and
relevant information to its shareholders and other investors.
Recommendation 11.1
T or F. The manner of disseminating relevant information to its intended users is as important as the content of the information itself.
T
These can provide timely and up-to-date information relevant to investors’ decision-making, as
well as to other interested stakeholders.
communication channels
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.
Principle 12
The Company should have an adequate and effective internal control system and an
enterprise risk management framework in the conduct of its business, taking into account its size, risk profile and complexity of operations.
Recommendation 12.1
These help sustain safe and sound operations as well as implement management policies to attain corporate goals.
internal control system and enterprise risk management
framework
It embodies management oversight and control culture; risk recognition and assessment; control activities; information and communication; monitoring activities and correcting deficiencies
effective internal control system
It typically includes such activities as the identification, sourcing, measurement, evaluation, mitigation and monitoring of risk.
effective enterprise risk management framework
The Company should have in place an independent internal audit function that provides an independent and objective assurance, and consulting services designed to add value and improve the company’s operations.
Recommendation 12.2
T or F. A separate internal audit function is essential to monitor and guide the implementation
of company policies.
T
Provides an independent risk-based assurance service to the Board, Audit Committee and Management, focusing on reviewing the effectiveness of the governance and control processes in (1) promoting the right values and ethics, (2) ensuring effective performance management and accounting in the organization, (3) communicating risk and control information, and (4) coordinating the activities and information among the Board, external and
internal auditors, and Management
independent internal audit function
Performs regular and special audit as contained in the annual audit plan and/or based on the company’s risk assessment
independent internal audit function
Performs consulting and advisory services related to governance and control as appropriate for the organization
independent internal audit function
Performs compliance audit of relevant laws, rules and regulations, contractual obligations and other commitments, which could have a significant impact on the organization
independent internal audit function
Reviews, audits and assesses the efficiency and effectiveness of the internal control system of all areas of the company
independent internal audit function
Evaluates operations or programs to ascertain whether results are consistent with established objectives and goals, and whether the operations or programs
are being carried out as planned
independent internal audit function
Evaluates specific operations at the request of the Board or Management, as
appropriate
independent internal audit function
Monitors and evaluates governance processes
independent internal audit function
T or F. A company’s internal audit activity is a fully resourced activity housed only within the
organization and cannot be outsourced to qualified independent third party service
providers.
F, housed within the organization or may be outsourced to a qualified independent third party service provider
Subject to a company’s size, risk profile and complexity of operations, it should have a
qualified Chief Audit Executive (CAE) appointed by the Board. The CAE shall oversee and be responsible for the internal audit activity of the organization, including that portion
that is outsourced to a third party service provider. In case of a fully outsourced internal audit activity, a qualified independent executive or senior management personnel
should be assigned the responsibility for managing the fully outsourced internal audit
activity.
Recommendation 12.3
The Chief Audit Executive (CAE) is appointed by the _____
board
It shall oversee and
be responsible for the internal audit activity of the organization, including that portion that is outsourced to a third party service provider.
Chief Audit Executive (CAE)
In case of a fully outsourced internal audit activity, a qualified ___________________ or ________________________
should be assigned the responsibility for managing the fully outsourced internal audit
activity.
independent executive or senior management personnel
The CAE, in order to achieve the necessary independence to fulfill his/her responsibilities, directly reports functionally to the ___________________ and administratively to the _______
Audit Committee
CEO
Periodically reviews the internal audit charter and presents it to senior management and the Board Audit Committee for approval
Chief Audit Executive (CAE)
Establishes a risk-based internal audit plan, including policies and procedures, to determine the priorities of the internal audit activity, consistent with the
organization’s goals
Chief Audit Executive (CAE)
Communicates the internal audit activity’s plans, resource requirements and impact of resource limitations, as well as significant interim changes, to senior management and the Audit Committee for review and approval
Chief Audit Executive (CAE)
Spearheads the performance of the internal audit activity to ensure it adds value to the organization
Chief Audit Executive (CAE)
Reports periodically to the Audit Committee on the internal audit activity’s performance relative to its plan
Chief Audit Executive (CAE)
Presents findings and recommendations to the Audit Committee and gives advice to senior management and the Board on how to improve internal processes
Chief Audit Executive (CAE)
Subject to its size, risk profile and complexity of operations, the company should have a separate risk management function to identify, assess and monitor key risk exposures.
Recommendation 12.4
Defining a risk management strategy
risk management function
Identifying and analyzing key risks exposure relating to economic,
environmental, social and governance (EESG) factors and the achievement of the organization’s strategic objectives
risk management function
Evaluating and categorizing each identified risk using the company’s predefined risk categories and parameters
risk management function
Establishing a risk register with clearly defined, prioritized and residual risks
risk management function
Developing a risk mitigation plan for the most important risks to the company, as defined by the risk management strategy
risk management function
Communicating and reporting significant risk exposures including business risks (i.e., strategic, compliance, operational, financial and reputational risks), control
issues and risk mitigation plan to the Board Risk Oversight Committee;
risk management function
Monitoring and evaluating the effectiveness of the organization’s risk management processes
risk management function
In managing the company’s Risk Management System, the company should have a Chief Risk Officer (CRO), who is the ultimate champion of Enterprise Risk Management (ERM) and has adequate authority, stature, resources and support to fulfill his/her responsibilities, subject to a company’s size, risk profile and complexity of operations.
Recommendation 12.5
Supervises the entire ERM process and spearheads the development,
implementation, maintenance and continuous improvement of ERM processes and documentation
Chief Risk Officer (CRO)
Communicates the top risks and the status of implementation of risk
management strategies and action plans to the Board Risk Oversight Committee
Chief Risk Officer (CRO)
Collaborates with the CEO in updating and making recommendations to the
Board Risk Oversight Committee
Chief Risk Officer (CRO)
Suggests ERM policies and related guidance, as may be needed
Chief Risk Officer (CRO)
Provides insights on the following:
- Risk management processes are performing as intended;
- Risk measures reported are continuously reviewed by risk owners for
effectiveness; and
- Established risk policies and procedures are being complied with
Chief Risk Officer (CRO)
T or F. There should be clear communication between the Board Risk Oversight Committee and
the CRO
T
The company should treat all shareholders fairly and equitably, and also recognize, protect and facilitate the exercise of their rights.
Principle 13
The Board should ensure that basic shareholder rights are disclosed in the Manual on Corporate Governance and on the company’s website.
Recommendation 13.1
It is the responsibility of the _______ to adopt a policy informing the shareholders of all
their rights.
Board
_____________ are encouraged to exercise their rights by providing clear-cut processes and procedures for them to follow.
Shareholders
Shareholders’ rights:
- Pre-emptive rights;
- Dividend policies;
-Right to propose the holding of meetings and to include agenda items
ahead of the scheduled Annual and Special Shareholders’ Meeting; - Right to nominate candidates to the Board of Directors;
- Nomination process; and
- Voting procedures that would govern the Annual and Special
Shareholders’ Meeting.
The right to propose the holding of meetings and items for inclusion in the agenda is given to all shareholders, including _______ and _________ shareholders
minority
foreign
T or F. Companies may require that the proposal be made by
shareholders holding a specified percentage of shares or voting rights
T
T or F. The degree of ownership concentration is considered in determining the threshold to ensure that minority shareholders are not effectively prevented from exercising this right
T
T or F. Only certain shareholders are given the opportunity to nominate candidates to the
Board of Directors in accordance with the existing laws.
F, all shareholders must be given
The procedures of the
nomination process are expected to be discussed clearly by the ___________
board
The related shareholders’ rights and relevant company policies should be contained in
the ________________________________
Manual on Corporate Governance
The Board should encourage active shareholder participation by sending the Notice of Annual and Special Shareholders’ Meeting with sufficient and relevant information at least 28 days before the meeting
Recommendation 13.2
It is good practice to have the
Notice sent to all shareholders at least ____________ and posted on the
company website.
28 days before the meeting
Required information in the Notice include:
date, location, meeting
agenda and its rationale and explanation, and details of issues to be deliberated on and
approved or ratified at the meeting
The Board should encourage active shareholder participation by making the result of the votes taken during the most recent Annual or Special Shareholders’ Meeting publicly available the next working day. In addition, the Minutes of the Annual and Special Shareholders’ Meeting should be available on the company website within five business days from the end of the meeting
Recommendation 13.3
The Minutes of the Annual and Special Shareholders’ Meeting should be available on the company website within __________________ from the end of the meeting
five business days
Voting results include a breakdown of the ______ and ______ votes on the matters raised during the Annual or Special Stockholders’ Meeting.
approving and dissenting
The Minutes of Meeting include :
(1) A description of the voting
and the vote tabulation procedures used;
(2) the opportunity given to shareholders to
ask questions, as well as a record of the questions and the answers received;
(3) the
matters discussed and the resolutions reached;
(4) a record of the voting results for each
agenda item;
(5) a list of the directors, officers and shareholders who attended the
meeting; and
(6) dissenting opinion on any agenda item that is considered significant in
the discussion process.
The Board should make available, at the option of a shareholder, an alternative dispute mechanism to resolve intra-corporate disputes in an amicable and effective manner.
This should be included in the company’s Manual on Corporate Governance
Recommendation 13.4
The RA for alternative dispute
mechanism
RA 9285
T or F. It is important for the shareholders to be well-informed of the company’s processes and
procedures when seeking to redress the violation of their rights.
T
This is to solve internally before going outside.
Alternative Dispute Resolution (ADR) procedures
The Board should establish an Investor Relations Office (IRO) to ensure constant engagement with its shareholders. The IRO should be present at every shareholders’
meeting
Recommendation 13.5
This serves as a bridge between the company and the shareholders
Investor Relations Office (IRO)
This ensures that all information
regarding the activities of the company are properly and timely communicated to shareholders.
Investor Relations Program
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.
Principe 14
The Board should identify the company’s various stakeholders and promote cooperation
between them and the company in creating wealth, growth and sustainability
Recommendation 14.1
T or F. Due consideration is given to those who have an interest in
the company and are directly affected by its operations.
T
The Board should establish clear policies and programs to provide a mechanism on the fair treatment and protection of stakeholders
Recommendation 14.2
The Board should adopt a transparent framework and process that allow stakeholders
to communicate with the company and to obtain redress for the violation of their rights.
Recommendation 14.3
Stakeholder engagement touchpoints in the
company, such as the _________________, ______________________,
__________________, and ____________________.
Investor Relations Office
Office of the Corporate Secretary
Customer Relations Office
Corporate Communications Group
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
Principle 15
The Board should establish policies, programs and procedures that encourage employees to actively participate in the realization of the company’s goals and in its
governance.
Recommendation 15.1
The establishment of policies and programs covering, among others, the following:
(1) health, safety and welfare;
(2) training and development; and (3) reward/compensation
for employees
It is further fostered when the
company recognizes the firm-specific skills of its employees and their potential contribution in corporate governance.
Active participation
The Board should set the tone and make a stand against corrupt practices by adopting an anti-corruption policy and program in its Code of Conduct. Further, the Board should disseminate the policy and program to employees across the organization through trainings to embed them in the company’s culture.
Recommendation 15.2
This encourages employees to report corrupt practices and outlines procedures on how to combat, resist and stop these corrupt practices.
anti-corruption policy and program
These are more effective when the Board sets the tone and leads the
company in their execution.
anti-corruption programs
The Board should establish a suitable framework for whistleblowing that allows employees to freely communicate their concerns about illegal or unethical practices, without fear of retaliation and to have direct access to an independent member of the
Board or a unit created to handle whistleblowing concerns. The Board should be conscientious in establishing the framework, as well as in supervising and ensuring its
enforcement.
Recommendation 15.3
This sets up the procedures and safe-harbors for complaints of employees, either personally or through their representative bodies, concerning illegal and unethical behavior
whistleblowing framework
The inclusion of safeguards to secure the confidentiality of the informer and to ensure protection from retaliation
whistleblowing framework
Part of the framework is granting individuals or representative bodies confidential direct access to either an _______________ or a unit designed to deal with whistleblowing concerns.
independent director
T or F. Companies may opt to establish an ombudsman to deal with complaints and/or established confidential phone and e-mail
facilities to receive allegations.
T
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 development
Principle 16
The company should recognize and place an importance on the interdependence between business and society, and promote a mutually beneficial relationship that
allows the company to grow its business, while contributing to the advancement of the society where it operates.
Recommendation 16.1
It means that the company not only complies with existing regulations, but also voluntarily employs value
chain processes that takes into consideration economic, environmental, social and
governance issues and concerns
Sustainable development
