code of corpote governance

8/10/2019 Code of Corpote Governance

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CODE OF CORPORATE GOVERNANCE

In accordance with the States policy to actively promote corporate governance reforms aimed toraise investor confidence, develop capital market and help achieve high sustained growth for thecorporate sector and the economy, the Commission, in its Resolution No.1!, Series of "##"

dated $pril #% "##", approved the promulgation and implementation of this Code, which shall &eapplica&le to corporations whose securities are registered or listed, corporations which aregrantees of permits'licenses and secondary franchise from the Commission and pu&liccompanies. (his Code also applies to &ranches or su&sidiaries of foreign corporations operatingin the )hilippines whose securities are registered or listed

I. Definitions

A. Board of Directors* refers to the collegial &ody that e+ercises the corporate powers of allcorporations formed under the Corporation Code. It conducts all &usiness and controls orholds all property of such corporations.

B. Corporate Governance* refers to a system where&y shareholders, creditors and otherstakeholders of a corporation ensure that management enhances the value of thecorporation as it competes in an increasingly glo&al marketplace.

C. Independent Director* refers to a person other than an officer or employee of thecorporation, its parent or su&sidiaries, or any other individualhaving any relationship withthe corporation, which would interfere with the e+ercise of independent udgment incarrying out the responsi&ilities of a director. (his means that apart from the directorsfees and shareholdings, he should &e independent of management and free from any&usiness or other relationship which could materially interfere with the e+ercise of hisindependent udgment.

D. Public Company* refers to any corporation with a class of e-uity securities listed in an

+change or with assets in e+cess of /ifty Million)esos 0)!#,###,###.## and havingtwo hundred 0"## or more stockholders each holding at least one hundred 01## sharesof a class of its securities.

E. Management * refers to the &ody given the authority to implement the policiesdetermined &y the 2oard in directing the course'&usiness activity'ies of the corporation.

. E!ecutive Director* refers to a director who is at the same time appointed to head adepartment'unit within the corporate organi3ation.

G. "on#e!ecutive director* refers to a 2oard mem&er with non4e+ecutive functions.

$. "on#audit %ork* refers to other services offered &y the e+ternal auditor to a corporation

that are not directly related and relevant to its statutory audit function. +amples includeaccounting, payroll, &ookkeeping, reconciliation, computer proect management, dataprocessing or information technology outsourcing services, internal auditing, and servicesthat may compromise the independence and o&ectivity of the e+ternal audit.

I. Internal control * refers to the process effected &y a companys 2oard of 5irectors,management and other personnel, designed to provide reasona&le assurance regardingthe achievement of o&ectives in the effectiveness and efficiency of operations, the


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relia&ility of financial reporting, and compliance with applica&le laws, regulations, andinternal policies.

&. Internal control environment* refers to the framework under which internal controls aredeveloped, implemented, alone or in concert with other policies or procedures, tomanage and control a particular risk or &usiness activity, or com&ination of risks or

&usiness activities, to which the company is e+posed.

'. Internal auditing* refers to an independent, o&ective assurance and consulting activitydesigned to add value and improve an organi3ations operations. It helps an organi3ationaccomplish its o&ectives &y &ringing a systematic, disciplined approach to evaluate andimprove the effectiveness of risk management, control, and governance processes.

(. Internal audit department* refers to a department, division, team of consultants, or otherpractitioner0s that provide independent, o&ective assurance and consulting servicesdesigned to add value and improve an organi3ations operations.

M. C)ief Audit E!ecutive* refers to the top position within the organi3ation responsi&le forinternal audit activities. In a traditional internal audit activity, this would &e the internal

audit director. In the case where internal audit activities are o&tained from outside serviceproviders, the chief audit e+ecutive is the person responsi&le for overseeing the servicecontract and the overall -uality assurance of these activities, and follow4up ofengagement results. (he term also includes such titles as general auditor, chief internalauditor, and inspector general.

". Independence * refers to that environment which allows the person to carry out his'herwork freely and o&ectively.

*. *b+ectivity * refers to un&iased mental attitude that re-uires the person to carry outhis'her work in such a manner that he'she has an honest &elief in his'her work productand that no significant -uality compromises are made. 6&ectivity re-uires the personnot to su&ordinate his'her udgment to that of others.

P. ,tandards for t)e Professional Practice of Internal Auditing -,PPIA* refers to the criteria&y which the operations of an internal auditing department are evaluated and measured.(hey are intended to represent the practice of internal auditing as it should &e, provide aframework for performing and promoting a &road range of value4added internal auditactivities and foster improved organi3ational processes and operations.

CODE OF CORPORATE GOVERNANCE

II. The Board Governance

(he 2oard of 5irectors 02oard is primarily responsi&le for the governance of the corporation.It needs to &e structured so that it provides an independent check on management. $s such, it isvitally important that a num&er of &oard mem&ers &e independent from management.


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1. Composition of the 2oard

(he 2oard shall &e composed of at least five 0! &ut not more than fifteen 01!mem&ers elected &y shareholders. )u&lic companies shall have at least two 0"independent directors or such independent directors shall constitute at least twentypercent 0"#7 of the mem&ers of such 2oard, whichever is the lesser. $ll other

companies are encouraged to have independent directors as well.

(he 2oard may include a &alance of e+ecutive and non4e+ecutive directors 0includingindependent non4e+ecutives, having a clear division of responsi&ilities such that noindividual or small group of individuals can dominate the 2oards decision making.

(he non4e+ecutive directors should &e of sufficient -ualifications, stature and num&erto carry significant weight in the 2oards decisions. Non4e+ecutive directors considered&y the 2oard to &e independent shall &e identified in the annual report.

". 8ultiple 2oard Seats

(he 2oard may consider guidelines on the num&er of directorships for its mem&ers.

(he optimum num&er is related to the capacity of a director to perform his dutiesdiligently in general. (he Chief +ecutive 6fficer and other e+ecutive directors maysu&mit themselves to a low indicative limit on mem&ership in other corporate 2oards.(he same low limit may apply to independent, non4e+ecutive directors who serve as full4time e+ecutives in other corporations. In any case, the capacity of directors to serve withdiligence shall not &e compromised.

. (he Chairman and the Chief +ecutive 6fficer

(he roles of the Chairman and the Chief +ecutive 6fficer 09C6: may &e separateto ensure an appropriate &alance of power, increased accounta&ility and greater capacityof the 2oard for independent decision4making. (he company shall disclose therelationship &etween the Chairman and the C6 upon their election.

;here &oth positions of the Chairman and C6 are unified, there is clearly oneleader to provide a single vision and mission. In this instance, checks and &alancesshould &e clearly provided to help ensure that independent, outside views, perspectives,and udgments are given proper hearing in the 2oard.

(he Chairmans responsi&ilities may includeualifications of 5irectors

very director shall own at least one 01 share of the capital stock of the corporationof which he is a director, which share shall stand in his name in the &ooks of the

corporation.

(he 2oard may provide for additional -ualifications of a director such as, &ut notlimited to, the following

code of corpote governance

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