Governance, Business Ethics, Risk Management & Internal Control 202

INTRODUCTION TO CORPORATE GOVERNANCE

Generally, governance refers to a process whereby elements in society wield power,
authority and influence and enact policies and decisions concerning public life and
social upliftment.
GOVERNANCE
the process of decision-making and the process by which decisions are implemented
(or not implemented) through the exercise of power or authority by leaders of the
country and / or organizations.
CHARACTERISTICS OF GOOD GOVERNANCE
1. PARTICIPATION
Freedom of association and expression on one hand and an organized civil society on
the other hand.
2. RULE OF LAW
Full protection of human rights
3. TRANSPARENCY
Information is freely available and directly accessible to those who will be affected
by such decisions and their enforcement.
4. RESPONSIVENESS
Good governance requires that institutions and processes try to serve the needs of all
stakeholders within a reasonable timeframe.
5. CONSENSUS ORIENTED
Understanding of the historical, cultural and social contexts of a given society or
community.
6. EQUITY AND INCLUSIVENESS
This requires all groups, but particularly the most vulnerable, to have opportunities
to improve or their well-being. maintain
7. EFFECTIVENESS & EFFICIENCY
Meet the needs of society; sustainable use of natural resources and the protection of
the environment.
 8. ACCOUNTABILITY
An organization or an institution is accountable to those who will be affected by its
decisions or actions. Accountability cannot be enforced without transparency and the
rule of law.
CORPORATE GOVERNANCE: AN OVERVIEW
system of rules, practices and processes by which business corporations are directed
and controlled.
It basically involves balancing the interests of a company's many stakeholders, such
as shareholders, management, customers, suppliers, financiers, government and the
community.
PURPOSE OF CORPORATE GOVERNANCE
• to facilitate effective, entrepreneurial and prudent management that can
deliver long-term success of the company.
• to enhance shareholders' value and protect the interests of other stakeholders
by improving corporate performance and accountability
OBJECTIVES OF CORPORATE GOVERNANCE
• FAIR AND EQUITABLE TREATMENT OF SHAREHOLDERS
• SELF-ASSESSMENT
• INCREASE SHAREHOLDERS’ WEALTH
• TRANSPARENCY AND FULL DISCLOSURE
BASIC PRINCIPLES OF EFFECTIVE CORPORATE GOVERNANCE
1. Transparency and Full Disclosure
Is the board telling us what is going on?
2. Accountability
Is the board taking responsibility?
3. Corporate Control
Is the board doing the right thing?
Chapter 2: RELATIONSHIP BETWEEN SHAREHOLDERS/OWNERS &
OTHER STAKEHOLDERS
INTRODUCTION
• Many of the characteristics of good governance described in Chapter 1
relevant to both SME's and large listed public companies.
• It is important to recognize that good corporate governance is based on
principles underpinned by consensus and continually developing notions of
good practice.
• There are no absolute rules which must be adopted by all organizations.
• "There is no simple universal formula for good governance"
• When corporate governance is discussed, it is often spoken of in terms of a
company's corporate governance framework.
• The key elements within an effective governance framework, and the issues
relating to each element and are relevant to organizations large and small, in
both the private and the public sectors.
• Many of the matters listed may not be directly relevant in all situations and
some may not, in particular circumstances, be within the board's control, but
it provides a useful context in which any organization can consider its
governance needs so that they might be most appropriately addressed.
SHAREHOLDERS & STAKEHOLDERS
• Governance starts with the shareholders/owners delegating responsibilities
through an elected board of directors to management and, in turn, to
operating units with oversight and assistance from internal auditors.
• The board of directors and its audit committee oversee management and, in
that role, are expected to protect the shareholders' rights.
• However, it is important to recognize that management is part of the
governance framework; management can influence who sits on the board and
the audit committee as well as other governance controls that might be put
into place.
• In return for the responsibilities (and power) given to management and the
board, governance demands accountability back through the system to the
shareholders.
• However, the accountabilities do not extend only to the shareholders.
Companies also have responsibilities to other stakeholders.
• Stakeholders can be anyone who is influenced, whether directly or indirectly,
by the actions of a company.
• Management and the board have responsibilities to act within the laws of
society and to meet various requirements of creditors, employees and the
stakeholders.
• A broad group of stakeholders has an interest in the governance because it
has a relationship to economic performance and the quality of financial
reporting.
• For example, it is likely that many employees have significant funds invested
in pension plans. Those pension plans are designed to protect the financial
interests of those employees in their retirement.
• Regulators are a response to society's wishes organizations, in their pursuit of
returns for their owners, act responsively and operate in compliance with
relevant laws.
• Owners want accountability on such things as:
• Financial performance
• Financial transparency financial statements that are clear with full
disclosure and that reflect the underlying economics of the company.
• Stewardship, including how well the company protects and manages
the resources entrusted to it.
• Quality of internal control
• Composition of the board of directors and the nature of its
activities, including information on how well management incentive
systems are aligned with the shareholders' best interests.
 • The owners want disclosures from management that are accurate and
objectively verifiable. Management has always had the primary responsibility
for the accuracy and completeness of an organization's financial statements.
From a financial reporting perspective, it is management's responsibility to:
o Choose which accounting principles best portray the economic
substance of company transactions.
o Implement a system of internal control that assures completeness and
accuracy in financial reporting.
o Ensure that the financial statements contain accurate and complete
disclosure.

RELATED PARTIES INVOLVED IN CORPORATE GOVERNANCE

RELATED PARTIES IN CG
Governance and financial reporting reliability are receiving considerable attention
from a number of parties including regulators, standard setting bodies, the
accounting profession, lawmakers and financial statement users.

OVERVIEW OF RESPONSIBILITIES
1. SHAREHOLDERS
Broad Role:
• Provide effective oversight through election of board members, approval
of major initiatives.
• such as buying or selling stock, annual reports on management
compensation, from the board.

2. BOARD OF DIRECTORS
Broad Role:
• The major representative of stockholders to ensure that the organization is
run according to the organization's charter and that there is proper
accountability.
Specific activities include among others:
1. Overall Operations
a) Establishing the organization's vision, mission values and ethical
standards.
b) Delegating an appropriate level of authority to management.
c) Demonstrating leadership.
d) Assuming responsibility for the business relationship with CEO
including his or her appointment, succession, performance
remuneration and dismissal.
e) Overseeing aspects of the employment of the management team.
f) Recommending auditors and new directors to shareholders.
g) Ensuring effective communication with shareholders other
stakeholders.
h) Crisis management.
i) Appointment of the CFO and corporate secretary.

2. Performance
a) Ensuring the organization's long-term viability and enhancing the
financial position. Formulating and overseeing implementation of
corporate strategy.
b) Approving the plan, budget and corporate policies.
c) Agreeing key performance indicators (KPIS).
d) Monitoring / assessing assessment, performance of the organization,
the board itself, management and major projects.
e) Overseeing the risk management framework and monitoring business
risks.
f) Monitoring developments in the industry and the operating
environment.
g) Oversight of the and organization, including its control and
accountability systems.
h) Approving and monitoring the progress of major capital expenditure,
capital management and acquisitions and divestitures.
 3. Compliance / Legal Conformance
a) Understanding and protecting the organization's financial position.
b) Requiring and monitoring legal and regulatory compliance including
compliance with accounting standards, unfair trading legislations,
occupational health and safety and environmental standards.
c) Approving annual financial reports, annual reports and other public
documents / sensitive reports.
d) Ensuring an effective system of internal controls exists and is
operating as expected.

3. NON-EXECUTIVE OR INDEPENDENT DIRECTORS

Broad Role:
• The same as the broad role of the entire board of directors
Specific activities include among others.
a) To understand the organization, its business, its operating environment
and its financial position.
b) To apply expertise and skills in the organization's best interests.
c) To assist management to keep performance objectives at the top of its
agenda,
d) To understand that his/her role is not to act as auditor, nor to act as a
manager.
e) To respect the collective, cabinet nature of the board's decisions.
f) To prepare for and attend board meetings.
g) To seek information on a timely basis.
h) To ensure that he/she is in a position to contribute to the discussion when
a matter comes before the board, or alert the chairman in advance to the
need for further information.
i) To ask appropriate questions relative to operations,

4. MANAGEMENT
Broad Role:
• Operations and accountability.
• Manage the organization effectively and provide accurate and timely
reports to shareholders and other stakeholders
Specific activities include among others.
 a) Recommend the strategic direction and translate the strategic plan into the
operations of the business.
b) Manage the company's human, physical and financial resources to
achieve the organization's objectives - run the business.
c) Assume day to day responsibility for the organization's conformance with
relevant laws and regulations and its compliance framework.
d) Develop, implement and manage the organization's risk management and
internal control frameworks.
e) Develop, implement and update policies and procedures.
f) Be alert to relevant trends in the industry and the organization's operating
environment.
g) Provide information to the board.
h) Act as conduit between the board and the organization.
i) Developing financial and other reports that meet public, stakeholder and
regulatory requirements.

5. AUDIT COMMITTEES OF THE BOARD OF DIRECTORS

Broad Role:
• Provide oversight of the internal and external audit function and the
process of preparing the annual financial statements as well as public
reports on internal control.
Specific activities include among others.
a) Selecting the external audit firm.
b) Approving any non-audit work performed by the audit firm.
c) Selecting and / or approving the appointment of the Chief Audit
Executive (Internal Auditor).
d) Reviewing and approving the scope and budget of the internal audit
function.
e) Discussing audit findings with internal auditor and external auditor and
advising the board (and management) on specific actions that should be
taken.
 6. REGULATORS
A. BOARD OF ACCOUNTANCY
Broad Role:
• Set accounting and auditing standards dictating underlying financial
reporting and auditing concepts, set the expectations of audit quality
and accounting quality.

Specific activities include among others.

a) Conducting CPA Licensure Board Examinations.
b) Approving accounting principles.
c) Approving auditing standards.
d) Interpreting previously issued standards implementing quality control
processes to ensure audit quality.
e) Educating members on audit and accounting requirements.

B. SECURITIES AND EXCHANGE COMMISSION

Broad Role:
• Ensure the accuracy, timeliness and fairness of public reporting of
financial and other information for public companies.
Specific activities include among others.
a) Reviewing filings with the SEC.
b) Interacting with the Financial Reporting Standards Council in setting
accounting standards.
c) Specifying independence standards required of auditors that report on
public financial statements.
d) Identify corporate frauds, investigate causes, and suggest remedial actions

7. EXTERNAL AUDITORS
Broad Role:
• Perform audits of company financial statements to ensure that the
statements are free of material misstatements including misstatements
that may be due to fraud.
Specific activities include among others.
a) Audit of public company financial statements.
b) Audits of nonpublic company financial statements.
c) Other services such as tax or consulting

8. INTERNAL AUDITORS
Broad Role:
• Perform audits of companies for compliance with company policies and
laws, audits to evaluate the efficiency of operations, and periodic
evaluation and tests of controls.
Specific activities include among others.
a) Reporting results and analyses to management (including operational
management) and audit committees.
b) Evaluating internal controls.
CHAPTER 3 AND 4: SEC CODE OF CORPORATE GOVERNANCE FOR
PUBLICLY-LISTED COMPANIES
CG CODE for PLCs
• Released last November 22, 2016 during the 3rd Annual SEC-PSE Corporate
Governance Forum
• The first of a series of CG Codes for different types of Philippine
corporations under SEC supervision.
• It is intended to raise the corporate governance standards of Philippine
corporations to a level at par with its regional and global counterparts.
• The latest G20/OECD Principles of Corporate Governance and the ASEAN
Corporate Governance Scorecard were used as key reference materials in the
drafting of this Code.
• A new feature of this Code is the adoption of the “comply or explain”
approach. This approach combines voluntary compliance with mandatory
disclosure.
• The Code does not in any way prescribe a “one size fits all” framework. The
Principle of Proportionality will be considered in the application of its
provisions.

INTRODUCTION
The Code is arranged as follows: Principle, Recommendations and Explanations.
• Principles - can be considered to be high-level statements of corporate
governance good practices, and are applicable to all companies.
• Recommendations - objective criteria that are intended to identify the
specific features of corporate governance good practice that are
recommended for companies operating according to the Code. Alternatives to
a Recommendation may be justified in particular circumstances if good
governance can be achieved by other means.
• Explanations - strive to provide companies with additional information on the
recommended best practice.

PRINCIPLE OF PROPORTIONALITY
It is where SEC addresses specific segments of the corporate sector, which may
be differentiated on the basis of company type, size, access to public funds and
risk profile, among others. Smaller companies may decide that the costs of some of
the provisions outweigh the benefits or are less relevant in their case.
This code is designed to allow companies some flexibility in establishing their
own corporate governance practices.

“COMPLY OR EXPLAIN” APPROACH (voluntary compliance with mandatory

disclosure)
Under “comply and explain” approach, compliance with the Code is not
mandatory. But it is mandatory to submit to SEC the company’s annual corporate
governance reports and disclose any deviations from the Recommendations of
the SEC. Such reports shall be available to the public, including the company’s
shareholders and other stakeholders.
When a recommendation is not complied with, the company must disclose and
describe this non-compliance, and explain how the overall principle is being
achieved. The alternative should be consistent with the overall principle.
There are sixteen (16) principles that are distributed among five (5) main sections,
namely:
• Board’s Governance Responsibilities (Principles 1 – 7)
• Disclosure and Transparency (Principles 8 – 11)
• Internal Control and Risk Management Framework (Principle 12)
• Cultivating a Synergic Relationship with Shareholders (Principle 13)
• Duties of Stakeholders (Principles 14 -16)
The purpose of CG Code for PLCs is to help companies develop and sustain an
ethical corporate culture and keep abreast with recent developments in corporate
governance.
In general, the New CG Code aims to –
• Increase the responsibilities of the board;
• Ensure the competence and commitment of the directors;
• Strengthen the protection of shareholders and other stakeholders; and
• Promote full disclosure and transparency in both financial and non-financial
reporting
DEFINITION OF TERMS
CORPORATE GOVERNANCE
- the system of stewardship and control to guide organizations in fulfilling their
long-term economic, moral, legal and social obligations towards their
stakeholders.
- Corporate governance is a system of direction, feedback and control using
regulations, performance standards and ethical guidelines to hold the Board
and senior management accountable for ensuring ethical behavior –
reconciling long- term customer satisfaction with shareholder value – to the
benefit of all stakeholders and society.
- Its purpose is to maximize the organization’s long-term success, creating
sustainable value for its shareholders, stakeholders and the nation.
Board of Directors
- the governing body elected by the stockholders that exercises the corporate
powers of a corporation, conducts all its business and controls its properties.
Management
- 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.
Independent director
- 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
Executive director
- a director who has executive responsibility of day-to-day operations of a part
or the whole of the organization.
Non-executive director
- a director who has no executive responsibility and does not perform any work
related to the operations of the corporation.
Conglomerate
- 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.
Internal control
- 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.
Enterprise Risk Management
- 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.
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. This shall also include such
other person or juridical entity whose interest may pose a potential conflict
with the interest of the company.
Related Party Transactions
- a transfer of resources, services or obligations between a reporting entity and
a related party, regardless of whether a price is charged. 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.
Stakeholders
- 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. This includes, among others, customers, creditors,
employees, suppliers, investors, as well as the government and community in
which it operates.
THE BOARD’S GOVERNANCE RESPONSIBILITIES
1. ESTABLISHING A COMPETENT BOARD
Principle
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.
Recommendation
• Be composed of directors with a collective working knowledge
experience or expertise that is relevant to the company’s industry/sector
• Be headed by a competent and qualified Chairperson
• Provide a policy on the training of directors
• Have a policy on Board Diversity
• Be assisted by a Corporate Secretary and Compliance Officer
TRAINING OF DIRECTORS
Roles and Duties of Corporate Secretary and Compliance Officer
2. ESTABLISHING CLEAR ROLES AND RESPONSIBILITIES OF THE
BOARD
Principle
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.

Recommendation
It leads in establishing the tone and practices of good corporate governance at the
top by exercising the following responsibilities:
• Fiduciary Duty
• Strategic Direction and corporate performance
• Succession Planning
• Remuneration and Other Incentives of Directors and Senior Management
• Selection, Nomination and Election of Board Members
• Related Party Transactions
• Selection and assessing the performance of the Management
• Effective performance management framework
• Internal Control
• Enterprise Risk Management
• Board Charter

3. ESTABLISHING BOARD COMMITTEES

Principle
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.
Recommendation
The board may establish the following committees:
• Audit Committee
• Corporate Governance Committee
• Board Risk Oversight Committee
• Related Party Transactions Committee
The Board may establish such other committees as may be deemed necessary for the
efficient and effective performance of its functions.
Audit Committee
• 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.
• The Chairman of the Audit Committee should not be the chairman of the
Board or of any other committees.
• All of the members of the committee shall preferably be with accounting,
auditing or related financial management expertise or background,
knowledge, skills and experience proportion with the size, complexity of
operations and risk profile of the company.

Corporate Governance Committee

• The Board should establish an 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.
• The committee should be composed of at least three members, all of whom
should be independent directors, including the Chairman.
• Ensures the compliance with and proper observance of corporate governance
principles and practices.
Board Risk Oversight Committee
• 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 committee should be composed of at least three members, the majority of
whom should be independent directors, including the Chairman. At least one
member of the committee must have relevant thorough knowledge and
experience on risk and risk management.
• BROC has the responsibility to assist the Board in ensuring that there is and
effective and integrated risk management process in place.

Related Party Transaction 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.
• The committee should be composed of at least three non-executive directors,
two of whom should be independent, including the Chairman.

4. FOSTERING COMMITMENT
Principle
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.
Recommendation
• Directors are required to attend meetings, except when justifiable causes,
such as, illness, death in the immediate family and serious accidents,
prevent them from doing so.
• And should notify the Board where he/she is an incumbent director
before accepting a directorship in another company.
 5. REINFORCING BOARD INDEPENDENCE
Principle
The board should endeavor to exercise an objective and independent
judgment on all corporate affairs.

Executive Non-executive Independent

Executive director Non-executive director is An independent
is a director who a director has no director is a person
has executive executive responsibility who, apart from
responsibility of and does not perform any shareholdings and
day-to-day work-related operations fees received from
operations of a of the corporations. the corporation, is
part or whole of They shall constitute at independent of
the organization. least the majority of the management and
Board to promote the free from any
independent oversight business or other
of the management by relationship.
the BOD.

Independence of the board:

• Proper mixed of executive and non-executive directors.
• The separation of the position of chairperson and the chief executive officers.
• The proper disclosure of adverse interests of directors affecting the
corporation.
• The board of the following corporation vested with public interest shall have
independent director constituting at least 20% of such board
▪ Corporations covered by Section 17.2 of RA 8799.
▪ Banks and quasi-banks, NSSLAs, pawnshops, corporations engaged
in money service business, preneed, trust and insurance companies
and other financial intermediaries.
▪ Other corporations engaged in business vested with public interest.
• The Board of publicly listed companies should have at least 3 independent
directors, or such numbers as to constitute at least 1/3 of the members of the
board, whichever is higher.
• The Board of public companies should have at least2 independent directors,
or such numbers as to constitute at least 1/3 of the members of the board,
whichever is higher.
Qualification of Independent Director
(SEC Memorandum Circular No. 16 Series of 2002)
• He shall have at least 1 share of stock of the corporation
• He shall be at least a college graduate, or he shall have been engaged or
exposed to the business of the corporation for at least 5 yrs.
• He shall possess integrity/probity; and
• He shall be assiduous
Disqualification of independent Director
The board may also provide disqualifications of independent director. For example,
if during his tenure:
• He becomes an officer or employees of the corporation or becomes any of the
persons enumerated in the definition who is not an independent director
• His beneficial ownership exceeds the maximum percentage
e.g. 2% set by the company
• He fails to meet the attendance requirement
• Other disqualifications which the company may deem proper
Term of an Independent director
• The Board’s independent directors should serve for a maximum cumulative
term of 9 years.
• After which, the independent director should be perpetually barred from re-
election 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 9 yrs., the Board should provide meritorious justification/s and
seek shareholder’s approval during the annual shareholders’ meeting;
CEO roles and responsibilities:
• Determines the corporation’s strategic direction and formulates and
implements its strategic plan on the direction of the business;
• Directs, evaluates and guides the work of the key officers of the corporation;
• Has a good working knowledge of the corporation’s industry and market and
keeps up-to-date with its core business purpose.
• Provides the Board with timely information and interfaces between the Board
and the employees.
Lead Director
• Serves as an intermediary between the Chairman and the other directors when
necessary
• Convenes and chairs meetings of the non-executive directors
• Contributes to the performance evaluation of the chairman, as required.
A director with a material interest in any transaction affecting the corporation should
abstain from taking part in the deliberation for the same.
6. ASSESSING BOARD PERFORMANCE
Principle
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.
• 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.
• 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 shareholders.

7. STRENGTHENING BOARD ETHICS

Principle
Members of the Board are duty-bound to apply high ethical standards, taking
into account the interests of all stakeholders.
• The Board should adopt a Code of Business Conduct and ethics, which
would provide standards for professional and ethical behavior, as well as
articulate acceptable and unacceptable conduct and practices in internal
and external dealings.
• The Board should ensure the proper and efficient implementation and
monitoring of compliance with the Code of Business Conduct
DISCLOSURE AND TRANSPARENCY
8. ENHANCING COMPANY DISCLOSURE POLICIES AND
PROCEDURES
Principle
The company should establish corporate disclosure policies and procedures
that are practical and in accordance with best practices and regulatory
expectations.
• 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.
• 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.
• 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.
• The company should provide a clear disclosure of its policies and procedure
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.
• 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.
• 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.
• 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.
 9. STRENGTHENING THE EXTERNAL AUDITOR’S INDEPENDENCE
AND IMPROVING AUDIT QUALITY
Principle
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.
10. INCREASING FOCUS ON NON-FINANCIAL AND SUSTAINABILITY
REPORTING
Principle
The company should ensure that the material and reportable non-financial
and sustainability issues are disclosed.
11. PROMOTING A COMPREHENSIVE AND COST- EFFICIENT ACCESS
TO RELEVANT INFORMATION
Principle
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.
INTERNAL CONTROL SYSTEM AND RISK MANAGEMENT
FRAMEWORK
12. STRENGTHENING THE INTERNAL CONTROL SYSTEM AND
ENTERPRISE RISK MANAGEMENT FRAMEWORK
Principle
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.
CULTIVATING A SYNERGIC RELATIONSHIP WITH SHAREHOLDERS
13. CULTIVATING A SYNERGIC RELATIONSHIP WITH SHAREHOLDERS
Principle
The company should treat all shareholders fairly and equitably, and also
recognize, protect and facilitate the exercise of their rights.
DUTIES TO STAKEHOLDERS
14. DUTIES TO STAKEHOLDERS
Principle
The rights of stakeholders established by law, by contractual relations and
through voluntary commitments must be respected. Where stakeholders’ right and/or
interest are at stake, stakeholders should have the opportunity to obtain prompt
effective redress for the violations of their rights.
15. DUTIES TO STAKEHOLDERS
Principle
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.
16. DUTIES TO STAKEHOLDERS
Principle
The company should be socially responsible in all its dealings with the
communities where it operates. It should ensure that its interactions serve its
commitment and stakeholders in a positive and progressive manner that is fully
supportive of its comprehensive and balanced development.