CHAPTER 1

GOVERNANCE – process whereby elements CORPORATE GOVERNACE- system of rules

in society wield power authority influence and practices and process by which business
corporation are directed and controlled;
TRUE- “it compromises all the process of balancing the interest of a company
Governing”
Corporate Governance Stricture- distribution
Governance can be used in the ff. of rights and responsibilities among different
a. National Governance participants
b. Local Governance Purpose of Corporate Governance- is to
c. Corporate Governance facilitate effective entrepreneurial and prudent
d. International Governance management long term success of the
8 basic characteristics of Good Governance company

1. PARTICIPATION- by both men and 4 Objective of Corporate Governance

women ; key cornerstone of good 1. Fair and Equitable Treatment of
governance Shareholders- all deserve equitable
2. Rule of Law- fair and legal framework safeguard by a good governance
requires full protection of human rights structure in any organization
3. Transparency- information is freely 2. Self- Assessment – assess their
available and directly accessible behavior and actions
4. Responsiveness- institutions and 3. Increase Shareholders Wealth- seen
process try to serve the needs within to have higher valuation attached to
reasonable timeframe their share by businessman
5. Consensus Oriented- required 4. Transparency and Full Disclosure-
meditation of the different interest in higher degree of transparency
society
6. Equity and Inclusiveness- ensures 3 Effective Corporate Governance
that all its members feels that have a
stake; have opportunities to improve or 1. Transparency and Full Disclosure
maintain their well being 2. Accountability
7. Effectiveness and Efficiency- produce 3. Corporate Control
result that meets the needs of society; it CHAPTER 2
covers the sustainable use of natural
resources and protection of environment FALSE/No- “Small Business Enterprise do
8. Accountability- key requirement of not need Good Governance”
good governance; whom varies
 Good governance is important not only
depending in whether decision or action
the large listed public companies but to
taken are internal or external
small medium business
FALSE-“Transparency and Accountability are  They apply it because of 2 reason
synonymous” o To maximize the income on
limited resources
TRUE- “Responsiveness usually results to
effectiveness and efficiency”
 o To steer the company to become
more efficient and effective
Specific Activity of BOD
FALSE/No- “Does Good Governance Require
a. Overall Operation
Absolute Rules that must be adopted by all
b. Performance
organization?”
c. Compliance and Legal Conformance
 Good governance is based on principal
Broad Role of Non- Executive or
underpinned by consensus
Independent Director- the same of the broad
Essence of Any System of Corporate role of the BOD
Governance- is to follow the board and
Broad Role of Management- operation and
management freedom to steer their
accountability; manage the organization
organization forward and to exercise that
effectively; provide accurate and timely reports
freedom.
Broad Role Audit Committees of the BOD-
Board of Director Derive its Authority- from
provide internal and external audit function and
shareholders who elect the member during
the process of preparing the annual financial
annual meeting
statements
Board of Director Accountable – to all
Broad Role of Regulators- BOA set
stakeholder of the company; shareholders,
accounting and auditing standards while SEC
regulators, external auditors, creditors, and
ensure the accuracy timeliness and fairness of
society in general
public reporting of financial information
The Shareholders want Accountability on:
Broad Role of External Auditors- perform
a. Financial Performance audits of company financial statement to
b. Financial Transparency ensure that the statement are free of material
c. Stewardship misstatement
d. Quality of Internal Control
Broad Role of Internal Auditors- perform of
e. Proper composition of the Board and the
the compliance of the company policies and
Nature of the Activities
laws
Management Responsibility in Financial
Reporting
PUBLIC CORPORATION
1. Choose Accounting Principles
2. Implement System of Internal Control Board of Director
3. Ensure the FS contains accurate and Delegate
complete disclosure Executive
Management
SHAREHOLDERS/
Broad Role of Shareholders- elect the BOD OWNER
Operational
approves major initiatives from the board
Management
Responsibilities
Broad Role of Board of Director- serves as
Internal Auditors
the major representation of the shareholders;
manage account character and proper
accountability
 Stakeholders Why is there a need for a corporation to
maintain a comprehensive and cost-
Shareholders/
efficient communication channels to
Owners
shareholders and other?
External Auditors
 This is for disseminating relevant
Regulators information to its intended users. And
channels is crucial for informed decision
Society and Others
making by investors stakeholders and
other internal user

What is the objective of the company in

having a, strong and effective internal
control system?

 To ensure the integrity, transparency

CHAPTER 3 and proper governance in the conduct of
its affair, taking into account its size risk
SECURITIES AND EXCHANGE
profile and complexity of operation
COMMISSION- approved the Code of
Corporate Governance for publicly listed What is the purpose of having an
companies during November 10, 2016 independent internal audit function in
publicly listed corporation?
SEC MC No. 19, Series of 2016- it has the
goal to help the company develop and sustain  Its provides an independent and
an ethical corporate culture and keep abreast objective assurance and consulting
with recent developments in corporate services designed to add value and
governance improve the company operation
 It is use to monitor and guide the
Silent Provision- is to establish a code of
implementation of company policies.
business conduct and submit a new manual on
Corporate Governance that would “provide Give at least four responsibilities of Chief
standards for professional and ethical behavior Auditor Executive
as well as articulate acceptable and
unacceptable conduct and practices”  Provides an independent risk based
assurance service to the Board
Selecting the External audit firm- audit  Perform regular and special audits as
committee activities and responsibilities contained in the annual audit plan
 Performs compliance audit and advisory
READ MORE ABOUT CHAPTER 3 O
services related to the governance and
control
 Monitors and evaluates governance
process
Activities of Risk Management Department Characteristics and Values Associated with
Ethical Behavior
 Defining risk management strategy
 Identifying and analyzing key risk a. Integrity- be principled, honorable,
exposure relating to economic upright, courageous and act on
environmental social and governance conviction; do not be twofaced or
(EESG) unscrupuluos
 Evaluating and categorizing each b. Honesty- be truthful, sincere, forthright,
identified risk straightforward, frank; do not cheat
 Establishing a risk register with clearly steal, lie
defined prioritized and residual risk c. Trustworthiness and Promise
 Developing a risk mitigation plan Keeping- be worthy of trust keep
 Communicating and Reporting promises , full commitments; do not
significant risk exposures interpret agreements in unreasonably
 Monitoring and evaluating the technical or legalistic manner
effectiveness of the organization risk d. Loyalty(fidelity) and Confidentiality-
management processes be faithful and loyal to family, friends,
employers, client and country; do not
To what may shareholders rights relate? use or disclose information learned in
 Pre-emptive Rights confidence
 Dividend Policies e. Fairness and openness- be fair and
 Right to propose the holding of meeting open minded, be willing to admit error ;
 Right to nominate candidates to the do not overreach or take advantage of
BOD others mistake
 Nomination Process f. Caring for Others- be caring, kind and
 Voting procedures that would govern the compassionate; share , be giving
annual and special shareholders g. Respect for Other- demonstrate for
meeting human dignity, privacy and the right to
self-determination
How may participation of employee in h. Responsible Citizenship- obey just
corporate governance be encouraged? law
i. Pursuit of Excellence- meeting your
 By making the result of the votes taken
personal and professional
during the most recent annual or special
responsibilities
shareholders meeting publicly available
j. Accountability- be accountable, accept
the next meeting
responsibility for decision for the
CHAPTER 5 foreseeable consequences

ETHICS- as a set of moral principles or values “Ethical behavior is necessary because for
that governs the action, and decision of an a society to function in an orderly manner”
individual or group while personal ethics- vary
from individual to individual at any point in time
Why do people act unethically?

 The person ethical standards are

different from those of society as a
whole
 The person chooses to act selfishly

Personal Ethics

 Basic justice, fairness

 Respect for the right of others
 Concern for the right of others
 Concern for the wellbeing on welfare of
others
 Benevolence, trustworthiness honesty
 Compliance with the law

Professional Ethics

 Integrity, impartiality, objectivity

 Professional competence
 Confidentiality
 Professional behavior
 Avoidance of potential or apparent
conflict of interest

Business ethics

 Fair competition
 Global as well as domestic justice
 Social responsibility
 Concern for environment