SEC MC 19 2016 Flashcards
The fiduciary roles, responsibilities and accountabilities of the Board as provided under the law, the company’s articles and by-laws, and other legal pronouncements and guidelines should be clearly made known to all directors as well as to stockholders and other stakeholders.
Principle 2
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
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
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 Board should endeavor to exercise objective and independent judgment on all corporate affairs.
Principle 5
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
Members of the Board are duty-bound to apply high ethical standards, taking into account the interests of all stakeholders.
Principle 7
The company should establish corporate disclosure policies and procedures that are practical and in accordance with best practices and regulatory expectations.
Principle 8
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 company should ensure that material and reportable non-financial and sustainability issues are disclosed.
Principle 10
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
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 treat all shareholders fairly and equitably, and also
recognize, protect and facilitate the exercise of their rights.
Principle 13
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.
Principle 14
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 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 governing body elected by the stockholders that exercises the corporate powers of a corporation, conducts all its business and controls its properties.
Board of Directors
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.
Management
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.
Independent Director
a director who has executive responsibility of day-to-day operations of a part or the whole of the organization.
Executive Director
a director who has no executive responsibility and does not perform any work related to the operations of the corporation.
Non Executive Director
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.
Conglomerate
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.
Internal Control
a 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.
Enterprise Risk Management
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.
Related Party
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.
Related Party
a transfer of resources, services or obligations between a reporting entity and a related party, regardless of whether a price is charged.
Related Party Transactions
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.
Related Party Transactions
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.
Stakeholders
This includes, among others, customers, creditors, employees, suppliers, investors, as well as the government and community in which it operates.
Stakeholders
The Board should be composed of directors with a collective working knowledge, experience or expertise that is relevant to the company’s industry/sector.
Recommendation 1.1
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
T/F
A board of directors can effectively oversee management without relevant industry knowledge.
False
T/F
The collective expertise of a board is not necessary for formulating a corporation’s strategic objectives.
False
T/F
Qualification standards for board members are set to assist in both selection and performance evaluation.
True
A competent board is responsible only for monitoring financial performance, not for overseeing management practices.
False
A competent board is responsible only for monitoring financial performance, not for overseeing management practices.
False
T/F
Effective governance includes formulating policies and procedures to guide corporate activities.
True
T/F
The vision and mission of a corporation are solely the responsibility of the CEO, not the board.
False
T/F
Board members do not need to have any previous experience in the industry relevant to the company.
False
T/F
Monitoring management’s performance is a key function of the board of directors.
True
T/F
A diverse board can enhance the collective knowledge and experience available to the company.
True
T/F
Setting qualification standards for board members is an optional step in the governance process.
False
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 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
T/F
A board with a majority of non-executive directors (NEDs) can help prevent decision-making domination by a small group of directors.
True
T/F
Independent directors (IDs) are not considered part of the non-executive directors.
False
T/F
The qualifications of NEDs are determined solely by individual shareholders.
False
Having a majority of NEDs protects the interests of the company over those of individual shareholders.
True
T/F
Executive directors (EDs) are the same as non-executive directors (NEDs).
False
T/F
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/F
The orientation program for first-time directors should last at least six hours.
False
T/F
All directors are required to undergo annual continuing training.
True
T/F
The orientation program includes topics mandated by the SEC.
True
T/F
The orientation program is optional for new directors.
False
T/F
Annual continuing training should last a minimum of four hours.
True
T/F
The orientation program covers the company’s Articles of Incorporation.
True
T/F
The orientation program covers the company’s Articles of Incorporation.
True
T/F
Continuing training should only focus on corporate governance matters.
False
T/F
The training programs should be tailored to meet the company’s and directors’ specific needs.
True
T/F
Directors are not required to be informed about emerging risks during their training.
False
T/F
Effective board performance is the ultimate goal of these training programs.
True
The Board should have a policy on board diversity.
Recommendation 1.4
T/F
A board diversity policy aims to promote groupthink.
False
T/F
Board diversity includes factors such as age, ethnicity, and culture.
True
T/F
Gender diversity is the only focus of a board diversity policy.
False
T/F
Increasing the number of female directors is an example of a gender diversity policy.
True
T/F
A board diversity policy can enhance optimal decision-making.
True
T/F
Diversity in skills and competence is not considered in a board diversity policy.
False
T/F
Female independent directors are a specific target in gender diversity initiatives.
True
T/F
Female independent directors are a specific target in gender diversity initiatives.
True
T/F
A board diversity policy is irrelevant to decision-making processes.
False
T/F
The concept of diversity includes knowledge among board members.
True
T/F
All boards are required to have a diversity policy.
False
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
T/F
The Corporate Secretary is primarily responsible to the Chairman of the Company.
False
T/F
One of the duties of the Corporate Secretary is to assist in conducting Board meetings.
True
T/F
The Corporate Secretary is responsible for preserving the integrity of the minutes of Board meetings.
True
T/F
The Corporate Secretary must keep up with relevant laws and regulations.
True
T/F
It is the Corporate Secretary’s role to advise on the establishment of board committees.
True
T/F
It is the Corporate Secretary’s role to advise on the establishment of board committees.
True
T/F
The Corporate Secretary is required to attend all Board meetings unless justifiable causes prevent them.
True
T/F
Performing administrative functions is not part of the Corporate Secretary’s responsibilities.
False
T/F
The Corporate Secretary drafts the by-laws and ensures they meet regulatory requirements.
True
T/F
The Corporate Secretary reports only to the Board Chair.
False
T/F
Advising the Board on governance issues is one of the Corporate Secretary’s duties.
True
T/F
The Corporate Secretary contributes to the flow of information between the Board and stakeholders.
True
T/F
The Corporate Secretary is responsible for creating the annual board calendar.
True
T/F
The Corporate Secretary is allowed to delegate their responsibilities to other staff members.
False
T/F
The Corporate Secretary performs additional duties as specified by the SEC.
True
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.
Recommendation 1.6
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
T/F
The Compliance Officer is primarily liable to the Chairman of the company.
False
T/F
One of the Compliance Officer’s duties is to ensure proper onboarding of new directors.
True
T/F
The Compliance Officer monitors compliance with relevant laws and regulations.
True
T/F
The Compliance Officer does not need to report violations to the Board.
False
T/F
Ensuring the integrity of documentary submissions to regulators is part of the Compliance Officer’s role.
True
T/F
The Compliance Officer is required to appear before the SEC if summoned.
True
