2009 cg scorecard for plcs

8/12/2019 2009 CG Scorecard for PLCs

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A PROJECT OF THE

School of Law

IN COLLABORATION WITH

The 2009 Corporate Governance Scorecard forPublicly Listed companies


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2009 C ORPORATE G OVERNANCE S CORECARD FOR P UBLICLY -LISTED C OMPANIES

Back round

The Institute of Corporate Directors (ICD) has been in the forefront of promoting corporate governance reforms in the country. Through the Institutes ofDirectors in East Asia Network (IDEA.Net) which ICD took the !ea" in setting up it a!so works with simi!ar!y#oriente" institutes in eight other East Asianeconomies.

ICD###a!ong with its peer institutes in IDEA.Net###has been active!y !ooking for ways an" means to go beyon" "irector training a!rea"y re$uire" in virtua!!ya!! economies where an IDEA.Net institute is active!y working. %eyon" comp!iance with the "irector training re$uirement ICD has been pushing for performancei.e. improve" actua! practices in !ine with g!oba! corporate governance princip!es.

Among the initiatives it has taken towar"s higher stan"ar"s of performance the corporate governance scorecar" (C'c) has been un"ertaken by ICD in thehi!ippines. It has fo!!owe" the IDEA.Net temp!ate for C'c which was initiate" in Thai!an" an" which has since been a"opte" in China ong *ong an"In"onesia.

The Philippine CG Scorecard for Publicly!Listed Companies

The C'c initiative is envisione" as a too! that pub!ic corporations can use to fin" out where they are in their corporate governance practices re!ative to thepractices of others in their own economies in the region as we!! as to g!oba!!y#regar"e" +goo" practices,. aving such information they cou!" "raw up a rea!isticroa" map towar"s gra"ua!!y improving their corporate governance practices at the pace an" in the manner they free!y "etermine for themse!ves.

The C'c as in"icate" in the !ast four years shows that the over#a!! score for the hi!ippines has gra"ua!!y improve". -any of the corporations###particu!ar!y those that have actua!!y !ooke" c!ose!y at their in"ivi"ua! C& scores an" presumab!y have acte" on them###have shown noticeab!e improvements in theirscores.

2


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The 2009 Philippine CG Scorecard for Publicly!Listed Companies

Thus far the regiona! framework initiate" an" fo!!owe" by Thai!an" has inf!uence" the approach that the hi!ippines an" other participating economies havebeen taking. That approach takes off from the ECD princip!es which have been g!oba!!y a"opte". It uses the +person#on#the street, test/ it re!ies on pub!ic"isc!osure. In other wor"s the score a corporation gets in the C'c is "etermine" by how much the corporation "isc!oses to the genera! pub!ic through theregu!ators an" more specifica!!y through the e0change as we!! as through its corporate website an" corporate reports. The more c!aims it makes that it has a!rea"ya"opte" a +best practice, consistent with the ECD g!oba! princip!es the higher its score. 1or as !ong as an or"inary person on the street with access to genera!!yavai!ab!e information can get a specific information on a C& practice then a positive score is notche" up.

The approach traces its va!i"ity to the C& mantra of +"isc!osure "isc!osure an" "isc!osure,. The temp!ate for "isc!osure is provi"e" an" the ECDprincip!es forge that temp!ate. -oreover the approach takes the si"e of an or"inary investor with no specia! access to any privi!ege" information/ base" on theinformation that such an or"inary investor wou!" have access to what 2u"gment can be ma"e of the corporate governance practices of a pub!ic!y#!iste" corporation3The easier for the or"inary investor to get information the higher is the score. This is "one for many items unti! an over#a!! C'core can be given to a corporation.The weights per category are as fo!!ows/

I. 4ights of 'hareho!"ers 567

II. E$uitab!e Treatment of 'hareho!"ers 567III. 4o!e of 'takeho!"ers 867I9. Disc!osure : Transparency 5;79. %oar" 4esponsibi!ities 5;7

Self!"ssessment and #alidation

The


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A team of specia!!y traine" eva!uators from the Ateneo


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The Ateneo


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*$s the policy on the directors+ remuneration

disclosed to the shareholders?

olicy and criteria for directorremuneration should be presented to

shareholders.-#emuneration is defined as the totalemoluments other than per diems.

" 0 0inutes, "genda,$nformation %tatement, "nnual

#eport or %E orm 1(2",ompany !ebsite

&o 3es 1.''()

45ow is the directors+ remuneration

disclosed to the shareholders?

Directors+ compensation should bedetermined according to the company+s

stated criteria and policy, with approval by

the shareholders.

" 0 0inutes, "genda,$nformation %tatement, "nnual

#eport

Director+sremuneration

available only as

total / summation

Details of

remuneration policyavailable

1.''()

6 Does the company allow shareholders toelect board members individually?

%hareholders should have an opportunityto consider and elect each board member

individually.

" 0 0inutes, $nformation%tatement, "nnual #eport,

ompany 7y2laws&o 3es 1.''()

Ri &ts Disc(ose$

8 9uality of &otice to call %hareholders+0eeting in the past year. &otice should include: $nformation source: $nformation %tatement; by2laws.

8.1 &omination of directors providing theirnames and bachere should be a summary and/or asimple presentation of the company+s

financial, operational and legal highlights.>his is to allow the ordinary shareholder

or sta


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'9uality of 0inutes of %hareholders+ 0eeting

>he 0inutes should include:

' .1 oting method and vote counting systemoting method and vote counting systemshould be declared before the meeting

begins.

" 0 0inutes, %E orm 1(2 ,&otice to call %hareholders+

0eeting, ompany 7y2@aws,$nformation %tatement

&ot included $ncluded =.61()

'.* $ssues and 0otions >he minutes should indicate the issuesand motions raised during the meeting. 0inutes of %hareholders+ 0eeting &ot included $ncluded =.61()

'.4 "greements arrived at during the meeting; >he minutes should indicate theagreements arrived at during the meeting 0inutes of %hareholders+ 0eeting &ot included $ncluded =.61()

'.6 orporate acts which were approved ordisapproved by the stoche minutes should indicate orporateacts which were approved or disapproved

by the stocwo; attended both

of the last two " 0s 1.''()

C Did the EB/0anaging Director attend atleast one of the last two " 0s?

%hareholders should have an opportunityto address the EB and 0D.

" 0 0inutes, #eports to%E/%E /7% , ertification of

"ttendance

ero; did not attendeither of the two

" 0s

Bne; attended one " 0

>wo; attended bothof the last two

" 0s1.''()

$s a name list of board members attendingthe " 0 available?

&ame list of board and committeemembers in attendance should be

recorded in the minutes.

" 0 0inutes, #eports to%E/7% &o 3es 1.''()

1=Do " 0 minutes record that there was anopportunity allowing shareholders to aswo; attended bothof the last two

" 0s=.88')

T#.eover Ru(es

1* Does the company have anti2ta


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1*.1 Do 7oard members collectively own morethan *8) of outstanding shares? $nformation %tatement, ompany!ebsite, %E orms 1(2", 1C2",

*42", *4273es &o =.C44)

1*.*

!hat is the proportion of outstanding sharesthat are considered Ffree floatF?

>he bigger the float, the better.

"nnual #eport, $nformation%tatement, company website,

9uarterly Disclosures to%E/7% -re: computation

= 2 *=) *= 2 4=) over 4=) =.C44)

P#rt II' EQ/ITABLE TREAT-ENT OF SHAREHOLDERS )*+0otin Ri &ts !or Sre&o($ers

14 or the same class of shares, does theprinciple of one share one vote apply?

"nnual #eport, $nformation%tatement, "rticles of

$ncorporation&o 3es

1.''()

16Does the company have any mechanism

that allows minority shareholders toinfluence board composition?

>he company should describe theprocess in its annual report. %ome

examples are 1 cumulative voting, and *explicitly allowing minority shareholders toinfluence the nomination of independent

directors.

"nnual #eport, " 0 &otice to%hareholders, ompany

overnance uidelines and/or "rticles of $ncorporation,

$nformation %tatement

&o

5as mechanism toallow minorityshareholder toinfluence board

composition

1.''()

Sre&o($ers Con!(ict

185as there been any case of insider trading

involving company directors andmanagement in the past two years?

Directors and management should act inthe best interest of shareholders and thus

should not be involved in any case ofinsider trading.

"nnual #eport, $nformation%tatement, %E and/or %E

records3es &o 1.''()

1'

5as the company established a system toprevent the use of material inside

information and inform all employees,management, and board members of this

system?

>he company should establish a policyregarding the use of material inside

information and ma


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1CDoes the company have a policy that

requires management to disclose related2party transaction?

"pplicable when the company is involvedin related2party transactions that require

shareholders+ approval.

"nnual #eport, 0anual,ode of Ethics, ompany

!ebsite, $nformation %tatement &o 3es 1.''()

1 "re the nature and extent of transactions

with affiliated and related partiescommunicated to shareholders annually?

>here might be cases where companymay be involved in related party

transactions, but it should adequatelyarticulate the rationale for such

transactions.

"nnual #eport, inancial%tatement, Details of related2party transactions, "rticles of

$ncorporation, $nformation%tatement

&o 3es 1.''()

*=

$s the company a part of an economic groupwhere the parent / controlling shareholder

also controls his is to provide sufficient information forshareholders, in order to facilitate the useof proxy voting. irms earning top marhere is no requirement according to

orporation ode but existence ma


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A,- Proce$ures

*6

5ow many days in advance does thecompany send out notice of general

shareholder meetings? orporate @aw: * wee


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*C Does the company provide a continuingtraining program for its employees?

>he company has specific policies andprograms on training and development

consistent with its obligations to itsemployees. or holding companies, this

should apply to the companies they hold.

"nnual #eport, 0anual,ode of Ethics &o coverage

Bnly superficialcoverage

3es, comprehensivecoverage =. = )

* Does the company explicitly mention itsobligations to customers?>he company+s obligations to customers-providing useful products that are valuedby customers, etc. should be mentionedin the company+s public communications.

"nnual #eport, 0anual,ode of Ethics, %ustainableDevelopment #eport -or any

other report on %#

&o coverage Bnly superficialcoverage3es, comprehensive

coverage =. = )

4= Does the company explicitly mention the roleof suppliers/business partners?

>he role of suppliers -providing rawmaterials; honor of business agreements;

timely payment; cooperative effortsshould be mentioned in the company+s

public communications.

"nnual #eport, 0anual,ode of Ethics, %ustainable

Development #eport -or anyother report on %#

&o coverage Bnly superficialcoverage3es, comprehensive

coverage =. = )

41 Does the company explicitly mention itsobligations to shareholders?

>he company+s obligations toshareholders -creation and growth in

value; stability and long2termcompetitiveness should be outlined in the

company+s public communications.

"nnual #eport, 0anual,ode of Ethics, $nformation

%tatement&o coverage Bnly superficialcoverage


4* Does the company explicitly mention itsobligations to creditors?

>he company+s obligations to creditorsincluding honoring debt agreement-s and

timely payment of debt obligations.

"nnual #eport, 0anual,ode of Ethics, $nformation

%tatement&o coverage Bnly superficialcoverage


44Does the company explicitly mention

environmental issues in its publiccommunication?

ompanies earning the top scorethoroughly describe their environmentalactivities and the standard to which they

measure their performance -such asinternational standards li


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46

Does the company explicitly mention itsbroader obligations to society and / or the

community?

ommunity activities, awareness, andinvolvement should be in addition to other

stahere should be adequate public info onthe companyIs ownership structure.>he following items evaluate specific

items surrounding ownership:

4'.1 7 rea


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4C "ssess the quality of the "nnual #eport, inparticular, the following:>he reports on each topic should be clear,

comprehensive, and informative.

4C.1 inancial performance

"nnual #eport -including theannual report prepared for themedia/ general dissemination

&ot available Bnly superficial#eports are clear,

comprehensive, andinformative.

=.*6=)

4C.* 7usiness operations, competitive position,and other non2financial matters "nnual #eport -including theannual report prepared for themedia/ general dissemination

&ot available Bnly superficial

#eports are clear K

comprehensive andinclude mention ofmar


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4$s there any statements requesting directorsto report their transactions of the company

shares?

>his is to monitor and ensure a properrelationship between directors and the

company.

ull 7usiness $nterest Disclosure%tatement, %E orms 1C"/

1C"%. %E orm *4"/7 &o 3es 1. *4)

Au$it Process

6=Does the company have an internal audit

operation established as a separate unit inthe company?

7est practice requires internal auditoperation to be established as a separate

unit in the company 0anual, "nnual #eport &o 3es 1. *4)

61 Does the internal auditor report to the board

audit committee? "udit ommittee harter &o 3es 1. *4)

6*Does the internal audit function provide anindependent evaluation of the internalcontrol processes of the company?

$ndependent evaluation of the internalcontrol processes of the company shouldbe included in the functions of the "udit

ommittee

"nnual report, 0anual, odeof Ethics, company website,

7oard ommittee harters -onlyif publicly available

&o 3es 1. *4)

64 Does the company perform an annual auditusing %E accredited external auditors?>he external auditors should be

accredited by %E .

hec< publicly available info onaudit contract, audit committee

process, and audit reports,$nformation %tatement, "nnual

#eport

&o 3es 1. *4)

66 $s the financial report disclosed in a timelymanner during the past year?

ommon practice: 1=8 days after end offiscal year, and 68 days after end of

quarter

"nnual #eport, %E and/or %Erecords, "udited inancial

%tatements. 9uarterly #eports,$nformation %tatement, %E

orm 1(

Disclosed 1=8 daysafter end of fiscalyear, and 68 days

after end of quarter

Disclosed earlierthan common

practice.1. *4)

68 "re there any accounting qualifications inthe audited financial statements apart from

the 9ualification on Nncertainty of %ituation?

9ualifications will be determined based onmaterial disagreements in accounting

between auditor and management

"uditor #eport -financialstatements section , $nformation

%tatement3es

%ome reservationsdrawing attention to

certain items&o 1. *4)

6'

Does the company website disclose up2to2date information on:

6'.1 7usiness operation !ebsite must contain up2to2datecorporate information for each of these

items. e.g., financial statements andannual reports must be the most recentones. #ecord the date the website was

examined: JJJJJJJJJJ/JJJJJJJJJ/JJJJJJJJJ or

write the date on the front of thisquestionnaire. rint out the evidence with

website dates.

ompany !ebsite &o 3es =.*6=)6'.* inancial statements ompany !ebsite &o 3es =.*6=)6'.4 ress release ompany !ebsite &o 3es =.*6=)6'.6 %hareholding structure ompany !ebsite &o 3es =.*6=)6'.8 BrganiGation structure ompany !ebsite &o 3es =.*6=)

6'.'orporate group structure - N6Afor a

company that does not belong to corporategrouping

ompany !ebsite &o 3es =.*6=)

6'.( Downloadable annual report ompany !ebsite &o 3es =.*6=)

+&


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6 '.C &otice to cal l shareho lders+ meet ing ompany !ebsite &o 3es =.*6=)

6(

Does the company provide contact detailsfor a specific $nvestor #elations person or

unit that is easily accessible to outsideinvestors?

7est ractice recommends that the boardshould consider establishing an $#

function to communicate withshareholders / potential investors.

0anual, "nnual #eport,ompany !ebsite &ot available

$# person/unitdesignated but not

considered a distinctK official $# unit

$# person specifiedwith contact

information madehe company should establish effectivechannels to communicate with

shareholders / investors to ensure that

material information is disclosed tointerested parties equally.

6C.1 "nnual reportompany !ebsite, "nnual

#eport, Disclosures to%E/%E /7%

&o 3es =.6C1)

6C.* ompany website 0ust contain relevant K up2to2datecorporate information

ompany !ebsite, "nnual#eport, Disclosures to

%E/%E /7%&o 3es =.6C1)

6C.4 "nalyst briefing-s ompany !ebsite, "nnual

#eport, Disclosures to%E/%E /7%

&o 3es =.6C1)

6C.6 ress conference-s / press briefing-s ublic information disseminated about thecompany+s financial performanceompany !ebsite, "nnual#eport, %E orm 1(2 &o 3es =.6C1)

P#rt 0' BOARD RESPONSIBILIT4 )5+-onitorin #n$ Contro(

6

Does the company have its own writtenorporate overnance 0anual that clearly

describes its value system and boardresponsibilities?

>he corporate governance rules shouldreflect a value2oriented management ofthe company which tahecorporate governance rules should alsoreflect the vision and responsibilities of

the board. >his question is evaluated withtwo criteria: firstly, board responsibilities

are clearly stated and secondly, thecorporate governance policy is clearly

disclosed, meaning the policy is written bythe firm itself, distributed to employees, or

approved by the board.

0anual, ompany !ebsite, "nnual #eport, olicy

&o company2specific written rules

mentioned.

#ules exist, but notformally approved

by the board

#ules approved bythe board and fully

disclosed1.41')

+'


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8=Does the 7oard of Directors provide code ofethics or statement of business conduct for

all directors and employees?

>he company should set up a policy onthe business code of ethics and

encourage the directors, management,and employees to adhere to.

"nnual #eport, 0anual,ode of Ethics, ompany

!ebsite&o 3es 3es and effecti velycommunicated 1.41')

81 Does the company have corporatevision/mission/values? "nnual #eport, ompany

!ebsite &o 3es 1.41')

8*

Does the %E have any evidence of non2compliance of the company with %E rules

and regulations in the last year?

Examples of non2compliance may includedelay in publishing financial reports,

retroactive approval by shareholders, non2compliance with rules regarding related2

party transactions, directors owningshares without reporting.

%E records. &ote if recordsshow whether the firm had anyFsuspendedF trading.

>wo cases or more Bne case &one 1.41')

84 "ssess the quality of the "udit ommittee#eport in the "nnual #eport:

" full and complete audit committee reportwill contain information described in the

six topics listed in 86.1 to 86.'.

84.1 "ttendance "udit ommittee #eport &o 3es =.*'4)84.* $nternal control "udit ommittee #eport &o 3es =.*'4)84.4 roposed auditors "udit ommittee #eport &o 3es =.*'4)84.6 inancial report review "udit ommittee #eport &o 3es =.*'4)84.8 @egal compliance "udit ommittee #eport &o 3es =.*'4)

86 5ave board members participated in the

training on orporate overnance.

or an effective system, directors areencouraged to participate in director

training to fully understand their dutiesand responsibilities.

Directors+ profile section in "nnual #eport, $nformation

%tatement@ess than *8) 7etween *8)2(8) 0ore than (8) 1.41')

88 5ave senior management executivesattended training on orporate overnance?

$t is best that senior executives alsoundergo training on corporate governanceas they too, play a very important role in

implementing in the company.

Disclosures to %E and/or %E, "nnual #eport, $nformation

%tatement@ess than *8) 7etween *8)2(8) 0ore than (8) 1.41')

8' !hat is the attendance performance of theboard members during the past 1* months?7oard members have a responsibility to

attend board meetings.

"nnual #eport, %E orm 1(2",$nformation %tatement,ertificate of "ttendance

M(=) "verageattendance (= 2 C=)

LC=) "verageattendance 1.41')

8( Does the company provide a rishe board has the duty to ensure thateffective ris< management system-s are

in place.

"nnual #eport, olicy,ompany !ebsite, "udited

inancial %tatement, 0anual&o 3es 1.41')

8CDoes the company clearly distinguish theroles and responsibilities of the board and

management?

>here should be a clear separation ofroles, duties, and responsibilities between

the board and management.

"nnual #eport, olicy,ompany !ebsite, 0anual ,7y2laws &o

3es -5ave Bot&7oard and 0 >

roles Kresponsibilities

1.41')

+


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8 Does the board conduct an annual self2assessment?>he board should set up formal criteria to

assess its performance. "nnual #eport, olicy,

ompany !ebsite, 0anual

No -Br Aust have adescription of the

7oard+s dutieswritten without

evidence of actualactivity

4es -0ust haveevidence showing

actualimplementation

1.41')

'=Does the company conduct an annual

performance assessment of theEB/ resident?

$t is a duty of the board to assess theperformance of the EB/0D/ resident. "nnual #eport, olicy,ompany !ebsite

No -Br Aust have adescription of the

7oard+s dutieswritten withoutevidence of actual

activity

4es -0ust have

evidence showingactualimplementation

1.41')

'1 5ow many board meetings are held peryear? lease provide the number 7y2laws, "nnual #eport orm

1(

'1.1 Does the firm report board meetingattendance of individual directors?

$f the firm provides a listing in the annualreport of each board member and his or

her board meeting attendance record, thecompany receives a OgoodI. ompanies

that provide a list of board meetingattendance but no individual brea


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'4.1.* rofile / 9ualifications

"nnual #eport, 0anual, olicy, ompany !ebsite, 7oard

ommittee harters -only ifpublicly available , $nformation

%tatement, %E orm 1(2

&o 3es =.=C )

'4.1.4 $ndependence




&o 3es =.=C )

'4.1.6 $s the hairman of the ommittee anindependent director?

7est ractice recommends that thehairman of the ommittee should be an

independent director.

7oard ommittee harters -onlyif publicly available , "nnual

#eport, %E orm 1(2 ,$nformation %tatement,

0anual

&o 3es =.=C )

'4.1.8 erformance / 0eeting "ttendance



%tatement, ertification oforporate %ecretary

&o 3es =.=C )

'4.*Compensation / Remuneration .

- ompensation/ #emuneration ommittee$f yes, are the following items disclosed?

7est ractice recommends establishing acompensation / remuneration committee

to ensure that compensation isdetermined according to company criteria

and policy.

'4.*.1 harter/#ole and #esponsibilities



%tatement

&o 3es =.16')

'4.*.* $s the ommittee composed of a maAority ofindependent directors?

7est ractice recommends that a maAorityof the committee members should be

independent directors.




&o 3es =.16')

'4.*.4 erformance / 0eeting "ttendance "nnual #eport, olicy,

ompany !ebsite, %E orm1(2", ertification of "ttendance

&o 3es =.16')

'4.4 Nomination Committee . $f yes, are thefollowing items disclosed?

or transparency and equitable treatmentof shareholders, there should be a

nomination committee.

+*


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'4.4.1 harter/#ole and #esponsibilities




&o 3es =.16')

'4.4.* $s the ommittee composed of a maAority ofindependent directors?

7est ractice recommends that a maAorityof the committee members should be

independent directors.

"nnual #eport, 0anual, olicy, %E orm 1(2 ,

$nformation %tatement, ompany!ebsite

&o 3es =.16')

'4.4.4 erformance / 0eeting "ttendance "nnual #eport, olicy,

ompany !ebsite, %E orm1(2", ertificate of "ttendance

&o 3es =.16')

Bo#r$ Co"position

'65ow many board members are independent

directors?

>he more non2executive directors on theboard, the higher the level of board

independence in decision2mahe 7oard should clearly define themeaning of +independence+.

"nnual #eport, 0anual, olicy, $nformation %tatement,

ompany !ebsite

rovide it accordingto the %E definition

rovide its owndefinition that is

more stringent than%E definition

1.41')

'' Does the board conduct assessment of whatshe 7oard should conduct assessment ofwhat she 7oard of Directors should have aseparate report that essentially outlinesthe activities of the board which includeapproval of financial statements of the

previous year. >hese items may beincluded in the hairman+s report if there

is no separate board report.

hairman+s report, "uditommittee report, other public

documents&o 3es 1.41')

2,

2009 cg scorecard for plcs

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