OI{rrr o{ Il. l.}r5iir :r 0t ,rr! i,lIrIr||rr.r!.GOVERNANCE COMMISSIONt()R GOVI R\r1r N r Ln\ \ r t) (,( Cl)\ I tn JLtfn { r) i,()[\ (rr"\ReD a79. l/Enr 84 Md&it t Ccedln, rbr.. Pt*rE r00a

GCG MemoaarouM C|RCULAR No. 2012-07

Cooe or GoRpoRlre GoveRNntce FoR GOCCS

WHEREAS, pursuant to the State declared policy of treating Government-Owned or -Controlled Corporations (cOCCs) as significant tools for economicdevelopment, and the statutorily-mandated obligation of the State to ensure thatthe governance of GOCCs is carried out in a transparent, responsible andaccountable manner and with the utmost degree of professionalism andeffectiveness, under governing boards which are competent to carry out theirfunctions, fully accountable to the Stale as its fiduciaries and always acting forthe best interests of the State, the Governance Commission for GOCCS(GCG), in the exercise of its mandate under Section 5(c) of Republic Act No.10149, approved the CoDE oF CoRpoRATE covERr{ANcE FoR GOCCs (,,CoDE") atits En Banc meeting held on 26 April 2012lot fotmal submission to the Presidentof the Philippines for His Excellency's approval of what would constilule as anorganic document for the GOCC Sector,

WHEREAS, Hrs ExcELLENCY, PREstoENTapproved the Code for formal promulgation on

BENTGNo S. AaurNo lll, formally

NOW, THEREFORE, the Commission hereby formalty promutgates andimplements the Code as follows:

t.

DEFtNtIoNS oF TERMS

SEcrot{ l. Definition of Tetms. - For purposes of this Code, the followingterms shall have the following meanings:

'Acf" refers to Republic Act No. 10149, and ofiicially named the "GOCCGovemance Act of 2011."

PNOYo08188

"Altiliate" rcle.s to a corporation fifty percent (50%) or less of theoutstanding capital stock of which is owned or controlled, directly orindirectly, by the GOCc.'

"Appointive Directors" refer to: ('l ) in the case of Chartered GOCCS, allmembers of its Board of Directors/Trustees who are not ex officlo membersthereof; (2) in the case of Nonchartered GOCCS, members of its Board ofDirectors/Trustees whom the State nominates, or is entitled to nominate, tothe extent of its percentage shareholdings in such GOCC; and (3) in thecase of Subsidiaries and Affiliates, members of its Board ofDirectorslTrustees whom the GOCC nominates, or is entitled to nominate,to the extent of its percentage shareholdings in such Subsidiary or Affiliate.'?

"Atlicles of lncorporatlon" refers to primary franchise of a NoncharteredGOCC that, once approved and registered with the Securities andExchange Commission (SEC) by the issuance of the certificate ofincorporataon under its official seal, commences the existence of the GOCCas a separate juridical person with a right of succession and the powers,attributes and properties expressly authorized by law or incident to itsexistence.3

"Board Officers" refer to Officers whose primary task is to serve theBoard or to pursue the immediate functions of the Board, such as theChairman, Vice-Chairman and the Corporate Secretary.

"Board of Directorslfruslees" or "Board' or "Governing Board' ("Board')refers to the collegial body that exercises the corporate powers, conductsall business and controls or holds all properties, of a GOCC, whether it beformally referred to as the "Board of Directors" or "Board of Trustees" orsome other term in its Charter, Articles of lncorporation or By-laws

"ByJaws" refers to the basic instrument adopted by a NoncharteredGOCC and duly registered with the Securities and Exchange Commission(SEC) for its internal government, and to regulate the conduct and prescribethe rights and duties of its stockholders or members towards the GOCC andamong themselves in reference to the management of its affairs.o

"Chaie| .efe.S to the formal act of Congress creating a CharteredGOCC and defining its franchise.

"Chaier Statemenf' refers to a statement of the GOCC'S vision,mission and core values.5

"Chief Executive Officel' ('CEO')refers to the highest ranking corporateexecutive who heads Management, who could be named as the Presidentor the General N.4anager, Chairman or the Administrator of a GOCC.6

€r,ii. or rlr ,(,!.d !, & Drrd@@r

lillll llllillt tilflil lililir il fl

Code of Cotporcle Governance fot the GOCC SeclotPage 2 of 3'1

lsec 3(a), R.A. No. 10149.

:Sec 3(b). R A. No 10149. .-ri,rAdoDled lrom Secs.2 and 19, Corporation Code olthe Philippines. t \'Gokongwei. Jr. v. Securities and E)rchange Commission, 89 SC RA 336 { 1979 l- ' / ):Sec 3{3). R.A. No. 10149. \ l'Sec 3(g). R.A. No. 10149

\l

PNOY008189

"Confidential lnformation" refers to all non-public information entrustedto or obtained by a member of the Board or Officer by reason of his/herposition as such with the GOCC. lt includes, but is not limited to, non-publicinformation that might be of use to competilors or harmful to the GOCC orits customers/stakeholders if disclosed, such as: (1) non-public informationabout the GOCC's financial condition, prospects or plans, its marketing andsales programs and research and development information, as well asinformation relating to mergers, acquisitions, divestitures, stock splits andsimilar transactions; (2) non-public information concerning possibletransactions or ventures with other companies, or information aboutsuppliers, joint venture partners, or any information that the GOCC is underobligation to keep confidential; and (3) non-public information about internaldiscussions, deliberations and decisions, between and among Directorsand Officers.

"Chatlered GOCC" refers to a GOCC, including a GFl, created andvested with functions by a special law.'

"Directof' rcfe's to any member of the Governing Board of a GOCC,whether it be formally referred to as the "Board of Directors" or "Board ofTrustees" or some other term in it Charter, Articles of lncorporation or By-Laws.

"Ex Officio Board Membef' (Ex Officio Director\ rcfe.S to any individualwho sits or acts as a member of the Board of Directors/Trustees by virtue ofone's title to another office, and without further warrant or appointment.B

"Executive Officel' ("Oftice/') refers to the CEO or whoever is thehighest ranking officer in the GOCC, and such other corporate offlcer of theGOCC as expressly provided for in its Charter (for a Chartered GOCC) orBylaws (for a Nonchartered GOCC), such as the Vice-President, ChiefFinancial Officer, Chief lnvestment Officer, and General Manager.e Asdistinguished from Board Officers, Executive Officers primarily form part ofthe Management of the GOCC.

"Extraordinary Diligence" refers to the measure of care and diligencethat must be exercised by Directors and Officers in discharging theirfunctions, in conducting the business and dealing with the properties andmonies of GOCCS, which is deemed met when Directors and Officers actusing the utmost diligence of a very cautious person taking into seriousconsideration all the prevailing circumstances and Material Facts, giving

due regard to the legitimate interests of all affected Stakeholders.'0

"Fit and Proper Ru/e" refers to a set of standards for determiningwhether a member of the Board of Directorsffrustees or the CEO isqualified to hold a position in a GOCC which shall include, but not be limited

to, standards on integrity, experience, education, training and competence'

lsec. 3{0, R.A. No. r0r49osec 3(i), R.A No. 10149sAdopred from Sec 2(q). R.A No. 10149. Se€ Guroa v

Plantalion co. v. Acosta,510 SCRA 249 (2006).roDeived from Sections 19 and 2'l ofR.A. No. 10149.

Lezama. 103 Phil. 553 (1958), Pamplora

Code of Corporata Governance for the GOCC Sector':IPage 3 of 31

PNOY008190

as such standards are set forth under GCG Memorandum Circular No.2012-05."

"Government Agency' .elets to any of the various units of theGovernment of the Republic of the Philippines, including a department,bureau, office, instrumentaiity or GOCC, or a local government or a distinctunit therein.''?

"Government Financial lnstitution" ("GFrl refers to any financialinstitution or corporation in which the government directly or indirectly ownsmajority of the capital stock and which are either: (1) registered with ordirectly supervised by lhe Bangko Sental ng Pllrpinas ("BSP"); or (2)collecting or transacting funds or contributions from the public and placesthem in financial instruments or assets, such as deposits, loans, bonds andequity, including but not limited to, the Government Service lnsuranceSystem and the Social Security System.'3

"Government lnstrumentalities with Corporate Powers"l"GICP')I" Government Corporate Entitl' (GCE,) refer to an instrumentalityor agency of the government, which is neither a corporation nor an agencyintegrated within the departmental framework, but vested by law withspecial functions or jurisdictions, endowed with some if not all corporatepowers, administering special funds, and enjoying operational autonomy,usually through a Charter.'a

"Government-Owned or -Controlled Corporation" ("GOCC") refers toany agency organized as a stock or non-stock corporation, vested withfunctions relating to public needs, whether governmental or proprietary in

nature and owned by the Government of the Republic of the Philippines,directly or through its instrumentalities, either wholly or, where applicable,as in the case of stock corporalions, to the extent of at least a majority of itsoutstanding capital stock. The term includes Governmenl lnstrumentalitieswith Corporate Powers ('G/CP'), Government Corporate Entities ("GCE)and Government Financial lnstitutions ("GFI'). The term also includes aSubsidiary of a GOCC.'5

"Management' refers to the body given the authority to implement thepolicies determined by the Board in directing the course and businessactivities of the GOCC.'6

"Materiat lnformation" ("Matenal Facf') refers to information which a

reasonable investor, stakeholder or Supervising Agency would considerimportant in determing whether: (1) to buy, sell, hold or otheMise transactwith the securities issued by a GOCC; or (2) to the exercise with reasonableprudence voting rights related to securities held with such GOCC, or

rrS6c. 3(i), R.A. No- 1014s.

'?S6c 3(L), R.A. No. 10149.BSec. 3(m), R A. No. 10149'{Sec 3(n). R.A. No. 101a9.''S6c qo), R.A. No. 10149.'GAdopled from Art. 1(d). SEC Revised cod€ ol CoDorale Govemance (SEC Memorandum Circular No.

Code of Corpoate Govornance for lhe GOCC SeclorPage 4 of 316&. !rur. !,!.,n!lUr Bi{sler

ilil ilil1ilil lllllllllIll

06, s. 2009)

PNOY008191

relating to corporate acts, contracts and transactions which would adverselyaffect the operalions of the GOCC.'-

"Nonchadered GOCC' refers to a GOCC organized and operatingunder Batas Pambansa Bilang 68, or "The Corporation Code of lhePhilippines".'3

"Non-Stock GOCC" refers to a Chartered or Nonchartered GOCC whichhas no equity represented by shares of stock.

"Officers" refer to both Board Officers and Executive Officers."

"Per Diems" refer to the compensation granted to members ofGoverning Boards of a GOCC for actual attendance in meetings.'zo

"Pertormance Evaluation System" ("PES") refers to the process ofappraising the accomplishments of GOCCS in a given fiscal year based onset performance criteria, targets and weights.'?l

"Perlormance Scorecard' refers to a governance and management toolforming parl of the performance evaluation system which consists of a setof measures, targets and initiatives that facilitate the achievement ofbreakthrough results and performance through the effective and efficientmonitoring and coordination of the strategic objectives of the GOCC."

"Public Officials" ot "Public Officers" .efet to elective and appointiveofficials and employees, whether permanent or temporary, whether in thecareer or non-career service, whelher or not they receiye compensation,regardless of amount," who are in the National Government, and all otherinstrumentalities, agencies or branches of the Republic of the Philippines,including government-owned-or-controlled corporations, and theirsubsidiaries.'?a

" Stakeholdef' refers to any individual or entity for whose benefit theGOCC has been constituted, or whose life, occupation, business or well-being is directly affected, whether favorably or adversely, by the regulartransactions, operations, or pursuit of the business or social enterprise forwhich the GOCC has been mnstituted. and which would include astockholder, member, or other investor in the GOCC, management,employees, supply creditors, or the community in which the GOCCoperates.

"Stock GOCC'refers to eilher a Chartered or Nonchartered GOCC in

which its equity or capital is represented by shares of stock.

rTAdopied from SRC Rut€ 3,losec. 3ro). R.A. No. 10149rqsec.3(q), R.a No 10149

losec. 3(s), R.A No.6713.:-Sec. 3(r), R.A. No. 10149zzsec.3{u), R.A No. 10149.

'?rsec. 3{b), R.A. No.6713.2'Sec. e(a), n.a.lo. tOtlg.

lmplementing Rules and Regulations to lh€ Sscurities Regulation Code.

Code of Corporale Gavernance for the GOCC Secloro ^e5of3l

(F6r. crrlr. fi.rrid orur. Ebr*Dmr

lt lt r l lll lrlllll lll,ll lilrt I ilPNOY008192

"Strategy Map" refers to an integrated set of strategic choices orobjectives drawn by the governing body, the successful execution of whichresults in the achievement of the GOCC's vision in relation to its mission orpurpose for having been created.?5

"Subsidiaty' refers to a corporation where at least a majority of theoutstanding capital stock is owned or controlled, directly or indirectly,through one or more intermediaries, by the GOCC.'?6

"Superuising Agency' refers to a Government Agency to which a GOCCis attached to for purposes of policy and program coordination and forgeneral supervision."

SEc. 2. Singu/ar Term lnclude the Plural. - Unless otherwise indicated inthis Code, any reference to a singular, shall apply as well to the plural, and vlceversa.

SEc. 3. Coverage. - This Code shall be observed by all GOCCS,GICPs/GCEs and GFls, including their Subsidiaries, covered by the Act.

.

RoLE oF GOCCs rN NATloNAL DEvELopMENT

SEc. 4. GOCCS as the Srate's Economic Tools for Developmert. - TheState recognizes the potential of GOCCS as significant tools to pursue economicdevelopment, and as a means to promote groMh by ensuring that theiroperations are consistent with national development policies and programs.'u

Under the Act, the State, acting through the GCG, is mandated to ensurethat the:

(a) Operations of GOCCs are rationalized and properly monitored in

order that government assets and resources are used efficientlyand government exposure to all forms of liabilities and subsidies iswarranted and incurred through prudent means;x

(b) Governance of GOCCs is carried out in a transparent, responsibleand accountable manner and with utmost degree ofprofessionalism and effectiveness;s and

(c) Governing Boards are competent to carry out their functions, fullyaccountable to the State as its fiduciary, and always acting in thebest interest of the State.3'

'?5sec. qy). R.a. No. 10149.

ssec.3(z), R.A. No. 10149.

292, 25 July 1987)

'?sAdootod from Sec. 2, R.A. No. 10149.}Sec.2(b), R.A. No. 10149rsec. zici, n.l.llo. rorls.

Cde of Cr}rporate Governance fot the GOCC Sactor

Od{. !r d! ]Do$.d .l & Db'rE Wt

il il Iillu lil ullilililllilllll llllPNOYo08193

Page 6 of 31

.

GovERNTNG BoARD

SEc. 5. Board Diectly Vested with Corporate Powers. - Having beenvested directly by law with the legal capacity and authority to exercise allcorporate powers, conduct all the business, and to hold all the properties of theGOCC," the Governing Board is primarily responsible for the governance of theGOCC. Consequently, it is the Board and not Management, that is primarilyaccountable to the State for the operations and performance of the GOCC.

SEc. 6. Eoard Duty to Properly Select and Provide lndependent Check onManagement. - Concomitant with the power to elect the CEO from among theirranks and to appoint other Officers of the GOCC, it is the duty of everyGoverning Board to ensure that they elect and/or employ only Officers who are fitand proper to hold such offices with due regard to their qualifications,competence, experience and integrity.33 The Board is therefore obliged to providean independent check on Management.I

sEc. 7. Mandate and Responsibility for the Gocc's Peiormance. -Although the day-to-day management of the affairs of the GOCC may be withManagement, the Board is, however, responsible for providing policy directions,monitoring and overseeing Management actions,35 as articulated in its Charter orArticles of lncorporation, and other relevant legislation, rules and regulations.These mandated functions and responsibilities include the following:

(a) Provide the corporate leadership of the GOCC subject to the rule oflaw, and the objectives set by the National Government throughthe Supervising Agencies and the GCG;

(b) Establish the GOCC'S vision and mission, strategic objectives,policies and proc€dures, as well as defining the GOCC'S valuesand standards through:

. Charter Statements:

. Strategy Maps; and

. Other control mechanism mandated by best businesspractices;

(c) Determine impo(ant policies that bear on the character of theGOCC to foster its long-term success, ensure its long{erm viabilityand strength, and secure its sustained competitiYeness;

llsec 2{e), R.A. No. 1o1as."Adopling Sec. 23, Coeoration Code.

"Sec. 19(e), R.A. No. 10149.vAdooted from Sec. lll2Xa), SEC Codo of Corporal€ Govemance, Memolandum Circular No. 2' s. 2002.r5Adooted ftom Soc. l(2Xa). SEC Cod€ of CoDorate Govemanc€, Memorandum Circular No- 2, s. 2002'

Code of Corpoate Govornance tot lho GOCC SectorPage 7 of 31e!u.ort.I .!ni or rt Ib{eptr'

il il illt lillil il ll lll ll llPNOY00!194

(d) Determine the organizational struciure of the GOCC, defining theduties and responsibilities of its Officers and employees andadopting a compensation and benefit scheme that is consistentwith the GOCC Compensation and Position Classiflcation System(CPCS) developed by GCG and formally approved by thePresident of the Philippines;

(e) Ensure that personnel selection and promotion shall be on the basisof merit and fitness and that all personnel action shall be in pursuitof the applicable laws, rules and regulations;

(f) Provide sound written policies and strategic guidelines on theGOCC'S operating budget and major capital expenditures, andprepare the annual and supplemental budgets of the GOCC;

(g) Comply with all reportorial requirements, as required in the Charteror Articles of lncorporation and By-laws, as well as applicable laws,rules and regulations;

(h) Formally adopt and conduct annually the mandated PerformanceEvaluation System (PES) and the Performance Scorecard andtimely and accurate report the results to the GCG; and

(i) Ensure the fair and equitable treatment of all Stakeholders andenhancing the GOCC's relations with its Stakeholders.

SEc. 8. Speclfc Functions of the Board. - ln addition to those specified in

its Charter or Articles of lncorporation and/or By-laws, the Board shall performthe following functions:

(a) Meet regularly, ideally at least once every month, to propedydischarge its responsibilities, with independent views expressedduring such meetings being given due consideration, and that allsuch meetings shall be properly documented or minuted;

(b) Determine the GOCC'S purpose and value, as well as adoptstrategies and policies, including risk management policies andprograms, in order to ensure that the GOCC survives and thrivesdespite financial crises and that its assets and reputation areadequately protected;

(c) Monitor and evaluate on a regular basis the implementation ofcorporate strategies and policies, business plans and operatingbudgets, as well as Management's over-all performance to ensureoptimum results;

(d) Adopt a competitive selection and promotion process, aprofessional development program, as well as a succession plan'

to ensure that the Officers oI the GOCC have the necessarymotivation, integrity, competence and professionalism;

Code of Corporate Govemance for the GOCC SectorPage 8 of 316tu, !r lhr ar!,r!!u !r lbr fb Eew,

ffiililrflrlllllllil lilllil lllil]l ll1

PNOY008195

(e) Monitor and manage potential conflicts of interest of Directors,Management, and shareholders, including misuse of corporateassets and abuse in related party transactions:

(0 lmplement a system of internal checks and balances, which may beapplied in the first instance to the Board; and ensure that suchsystems are reviewed and updated on a regular basis;

(g) Ensure the integrity of the GOCC's accounting and financialreporting systems, including independent audit, and thatappropriate systems of control are in place, in particular, systemsfor risk management, financial and operational control, andcompliance with the law and relevant standards;

(h) ldentify and monitor, and provide appropriate technology andsystems for the identification and monitoring of key risks andperformance areas;

(i) Adopt, implement and oversee the process of disclosure andcommunications;

Constitute an Audit Committee and such other specializedcommittees as may be necessary, or required by applicableregulations, to assist the Board in discharging its functions: and

Conduct and maintain the affairs of the GOCC within the scope ofits authority, as prescribed in its Charter or Articles oflncorporation, By-laws, and applicable laws, rules and regulation.

SEc.9. Compos,lion of the Governing Board - For Chartered GOCCs, thecomposition of their Boards shall be as provided for in their Charter. ForNonchartered GOCCS, the composition of their Boards shall be as provided for intheir Articles of lncorporation and/or By-laws.$

SEc. 10, Ex Officio Alternates. - Ex Officio Oirectors may designate theirrespective alternates, who ideally should be the officials next-in-rank to them,and whose acts shall be considered the acts of their principals.3T

SEc. 11. Multiple Eoard Sears. - The capacity of Appointive Directors toserve with diligence shall not be compromised. As such, no Appointive Directorin a GOCC, Subsidiary or Affiliate may hold more than two (2) other Eoard seatsin other GOCCS, Subsidiaries and/or Affiliates.

SEc.12. Appointment of Appointive Directors. -12.1. All Appointive Directors in GOCCS and their Subsidiaries shall be

appointed by the President of the Philippines from a shortlist

Prepared bY the GCG.*

(i)

(k)

ssec. 13. R.A. No. 10149.

"Sec. 14. R.A. No. 10149.$Sec. tS. n-1. Ho. tOtlg.

Code of Corpoale Govenance lor lhe GOCC SeclorPage I of 31

@tu. orrn. ! l}rdor rr lhlormtilillilrilil|ilil til ll llffl ll

PNOY008196

12.2. fhe selection and nomination, and shortlisting of prospectiveAppointive Directors shall be pursued in accordance with the rulesand criteria formulated by the GCG, which shall include the followingstatutorily-mandated conditions, thus:

(a) The GCG shall cause the creation of the Search Committeeto pursue the process of selection, nomination andshortlisting of prospective appointees;3'g

(b)All nominees included in the list submitted by the GCG to thePresident shall meet the Fit and Proper Rule, and suchother qualilications which the GCG may determinetaking into consideration the unique requirements of eachGOCC:ao

(c) The GCG shall ensure that the shortlist shall exceed by atleast fifty percent (50%) of the number of Directors to beappointed;'1 and

(d) ln the event that the President does not see fit to appoint anyof the nominees included in the shortlist, the President shallask the GCG to submit additional nominees.{'?

'12.3. Afriliates, not being within the deinition of "GOCC", continue to begoverned by their Articles of lncorporation and By-laws, and thenomination of Appointive Directors to their Boards shall remain withinthe business judgment prerogative of the Governing Boards of theHolding GOCCS in accordance with the guidelines set by the GCG.

ln the preparation for the annual stockholders' meetings of theAffiliates at which the members of their Board are nominated andelected, the Governing Boards of the Holding GOCCS shall, throughformal board resolulions, nominate candidates for the AppointiveDirectors for each Affiliate whom the Holding GOCC is entitled tonominate to the extent of its percentage shareholdings in suchAffiliates.

SEc. 13. Fit and Proper. - All members of the Board, the CEO and otherOfficers of the GOCCs including Appointive Directors in Subsidiaries andAffiliates shall be qualified by the Fit and Proper Rule adopted by the GCG inconsultation and coordination with the relevant government agencies to whichthe GOCC is attached, and approved by the President,a3 and shall include by

reference the qualifications expressly provided for in the Charters or ByJaws ofthe GOCCS.

To maintain the quality of management of the GOCCS, the GCG, incoordination with the Supervising Agencies shall, subject to the approval of thePresident, prescribe, pass upon and review the qualilications and

.4..t,Fd-Ii+ 1,..,.. ,/\,r.

Code of Corporale Governance fot lhe GOCC SeclorPage 10 of 3'1

3ss6c. 15, R.A. No. 10149-

'3sec.'to, R.n. lto. totlg.

@tur !fih !ur!d !r'n. rt ee@t

lllt[illtrlt il flilltilI ililPNOY008197

disqualifications of individuals appointed as Directors, CEO and other ExecutiveOfficers and shall disqualify those found unfit.'4

ln determining whether an individual is fit and proper to hold the position ofan Appointive Director, CEO or Officer of the GOCC, due regard shall be given toone's integrity, experience, education, training and competence.a5

SEc.14. Term of Office of Appointive Diectors. - Pursuant to Section 17of the Act, any provision in the Charters, Articles of lncorporation and/or By-lawsof each GOCC to the contrary notwithstanding, the term of office of eachAppointive Director shall be for one (1) year, unless sooner removed for cause:Providod, however, That each Appointive Director shall continue to hold ofriceuntil the successor is appointed and qualified.a6

14.1 . By virtue of the provisions of Section 17 of the Act providing that "Anyprovision of law to the contrary notwithstanding, all incumbent CEOSand appointive members of the Board of GOCCS shall, uponapproval of this Act, have a term of office until June 30, 20'11, unlesssooner replaced by the Presadent,"aT and notwithstanding anyprovision in the Charter, Articles of lncorporation and/or By-laws tothe contrary, the one (1) year Term of Office of all AppointiveDirectors in all GOCCs covered by the Act shall begin on 01 July ofthe year of appointment and ending on 30 June of the following year.

14.2. An Appointive Director may be nominated by the GCG for re-appointment by the President only if one obtains a performancescore of above average or its equivalent or higher in the immediatelypreceding year of tenure as Appointive Director based on theperformance criteria for Appointive Directors adopted for thecocc.'3

14.3. Appointment to any vacancy shall only be for the unexpired term ofthe predecessor. The appointment of a Director to fill such vacancyshall be in accordance wiih the manner provided for regularnomination, shortlisting and appointment of Appointive Directors. oe

SEc.15. Board Officers. - The Board Officers of a GOCC are the Chairmanof the Board (who is the highest ranking of the Board Officers), the Vice-

Chairman, the Corporate Secretary, and the Compliance Offlcer, who must all be

Filipino citizens. Nonchartered GOCCS are hereby mandated to amend theirrespective By-laws to provide for the creation and appointment of such Board

offices.

15.'l. Chaiman of lhe Board. - ldeally, the roles of the Chairman and the

CEO should be with different individuals in order to ensure an

appropriate balance of power, increased accountability, greater

6Sec. tZ, nl lto. tOl+g."Ses lasl paragraph of Sec. 17, R.A No. 10149

Code ot Corryale Govarnance lor lhe GOCC Secto/-Page '11 ot 31

ltil llllPNOY008198

capacity of the Board for independent decision-making, and optimumcapacity to exercise supervisory function over Management.

Where both positions of the Chairman and the CEO are unified in thesame individual, checks and balances should be clearly provided bythe Governing Board to help ensure that independent, outside views,perspectives, and judgments are given proper hearing in the Board.

The Chairman shall, when present, preside at all meetings of theBoard. The Chairman's responsibilities may include:

(a) Calling meetings to enable the Board to perform its dutiesand responsibilities;

(b) Approving meeting agenda in consultation with the CEO andthe Corporate Secretary;

(c) Exercising control over quality, quantity and timeliness of theflow of information between Management and the Board;and

(d) Assisting in ensuring compliance with the GOCC's guidelineson corporale governance.

The r€sponsibilities set out above, may pertain only to the Chairman'srole in respect to the Board proceedings, and shall not be taken as acomprehensive list of all the duties and responsibilities of a Chairman.

For legal purposes, the Chairman of the Governing Board shall beconsidered as the'Head of Agency" ofthe GOCC.

15.2. Vice-Chairman. - ln the absence of the Chairman of the Board, theVice-Chairman shall preside at the meetings of the Board.

'15.3. Corporate Secretary. - The Corporate Secretary need not be amember of the Governing Board. ldeally, the Corporate Secretarymust possess organizational and interpersonal skills, and the legalskills of a Chief Legal Officer. The Corporate Secrelary shall havethe following functions:

Serve as an adviser to the Board Members on theirresponsibilities and obligations;

Keep the minutes of meetings of the shareholders, the Board,the Executive Committee, and all other committees in a book orbooks kept for that purpose, and furnish copies thereof to theChairman, the CEO and other members of the Board asappropriate;

(c) Keep in safe custody the seal of the GOCC and affix it to anyinstrument requiring the same;

(d) For stock GOCCS, have charge of the stock certificate book andsuch other books and papers as the Board may direct;

(e) Attend to the giving and serving of notices of Board andshareholder meetings, if applicable;

(a)

(b)

-MHeE, crqr B ud ottu lf.lmlrlI ll Iilit]II til ilt ltitil I il

Cde of Cotporate Governance fot the GOCC SoclorPage 12 of 31

PNOYo08199

(f) Be fully informed and be part of the scheduling process of otheractivities of the Eoard;

(g) Receive inslructions from the Chairman on the preparation of anannual schedule, the calling of Board meetings, the preparationof regular agenda for meetings, and notifying the Board of suchagenda at every meeting;

(h) Oversee the adequate flow of information to the Board prior tomeetings; and

(i) Ensure fulfillment of disclosure requirements to regulatory bodies.

The Corporate Secretary shall have such other responsibilities as theBoard may impose upon him. The Board shall have separate andindependent access to the Corporate Secretary.

15.4. Compliance Officer. - fhe Board shall appoint a Compliance Officerwho shall report directly to the Chairman. ln the absence of such officeor appointment, the Corporate Secretary, who is preferably a lawyer,shall act as Compliance Officer.s The Compliance Officer shallperform the following duties:5'

(a) Monitor compliance by the GOCC of the requirements underthe Act, this Code, the rules and regulations of theappropriate Government Agencies and, if any violations arefound, report the matter to the Board and remmmend theimposition of appropriate disciplinary action on theresponsible parties and the adoption of measures to preventa repetition of the violation;

(b) Appear before the GCG when summoned in relation tocompliance with this Code or other compliance issuesi and

(c) lssue a certification every 30 May of the year on the extent ofthe GOCC'S compliance with the government corporalestandards governing GOCCs for the period beginning 01

July of the immedialely preceding calendar year and, if thereare any deviations, explain the reason for such deviation.

The appointment of a Compliance Officer shall not relieve theGoverning Board of its primary responsibility vis-e-vis the State, actingthrough the GCG, to ensure that the GOCC has complied with all itsreportorial, monitoring and compliance obligations.

'Adopted from Art. 3(FX2)(m), SEC Revisod Code of Corporate Govemance (SEC MemorandumCircular No. 6, s. 2009).

5iAdopted from Art.3(M). SEC Revised code of Corporale Govemance (SEC ir€morandum Circular No.6, s.2009).

Cde of Corporate Govemanci fot the GOCC SoctotPage 13 oI 31

lt I lilil rilPNOYo08200

SEc,16. Board Commiffees. - The creation of Board Committees and othersuch oversight bodies enables the members of the Governing Board to efficientlymanage their time and ensure the proper understanding and resolution of allissues affecting the GOCC and the proper handling of all other concerns, andallows the Board to effectively utiiize the expertise of its Directors.

16.1. The Governing Boards of GOCCS shall therefore constitute the propercommittees to assist them in performing their duties andresponsibilities,5' providing each of the committees with written termsof reference defining the duties, authorities and the composition ofthe committees constituted. The committees shall report to the entireBoard as a collegial body and the minutes of their meetings shall becirculated to all members of the Board.53 The existence of thecommittees shall not excuse the Board of Directors/Trustees of itscollective responsibility for all matters that are within the primaryresponsibility and accountability of the Board.5n

16.2. As a minimum, the Board shall be supported by the followingspecialized committees:

16.2.'1. Executive Commiftee. - Depending on the size of theGoverning Board, it may constitute an ExecutiveCommittee composed of not less than three (3) membersof the Board, with the Chairman of the Board being theCommittee Chairman.

The Executive Commiftee, in accordance with the authoritygranted by the Board, or during the absence of the Board,shall act by a vote of at least two-thirds (2/3) of itsmembers on such specific matters within the competenceof the Board as may from time to time be delegated to theExecutive Committee in accordance with the GOCC'SCharter or By-Laws, except with respect to:$

(a) Approval of any action for which shareholders' approvalis also required;

(b) Filling of vacancies on the Board or in the ExecutiveCommittee;

(c) Amendment or repeal of By-Laws or the adoption of newBy-Laws;

(d) Amendment or repeal of any resolution of the Boardwhich by its express terms cannot be amended orsubject to repeal;

(e) Distribution of cash dividends; and

t'See OECO Guidelines - Annotalions lo "The Responsibilities of lhe Eoards of State-OwnedEnlerprises,'p 52

51S;e OECD Guidelin€s - Annotations lo 'The Responsibalities of lhe Boards ol State-Owned "".;+lt,-'s66 oECD Guidelin€s - AnnotatEns lo "lhe ResponsrDrl[es ot lhe BoaIds or stale_uwneo .2--\..Enterprises," p.52. ./' \"See Sec. 35. Corporctlon Code of ihe Phrhpprn€s ; l

cc s"coi J€ tu, or r,!. 3(.r!d or r,\. lhiEfu,fl ll l lil l t []ilil ililtlt tililt il

Page 14 of 31

PNOY008201

(f) Exercise of powers delegated by the Board exclusivelyto other committees.

16.2.2. Audit Comm,tfee. - The Audit Committee shall consist of atleast three (3) Directors, whose Chairman should haveaudit, accounting or finance background. The Committeeshall be responsible for the following:$

(a) Overseeing, monitoring and evaluating the adequacyand effectiveness of the GOCC'S internal controlsystem, engage and provide oversight of the GOCC'Sinternal and external auditors. and coordinate with theCommission on Audit (COA);

(b) Reviewing and approving audit scope and frequency,the annual internal audit plan, quarterly, semi-annualand annual financial statements before submission tothe Board, focusing on changes in accounting policiesand practices, major judgmental areas, significantadjustments resulting from the audit, going concernassumptions, compliance with accounting standards,and compliance with tax, legal, regulatory and COArequirements;

(c) Receiving and reviewing reports of internal and externalauditors and regulatory agencies, and ensuring thatManagement is taking appropriate corrective actions, in

a timely manner in addressing control and compliancefunctions with regulatory agencies;

(d) Ensuring that internal auditors have free and full accessto all the GOCC'S records, properties and personnelrelevant to and required by its function and that theinternal audit activity shall be free from interference indetermining its scope, performing its work andcommunicating its results; and

(e) Developing a transparent financial management systemthat will ensure the integrity of internal control activitiesthroughout the GOCC through a procedures andpolicies handbook that will be used by the entireorganization.

'16.2.3. Governance Commitlee. - The Governance Committeeshall assist the Board of Directors in fulfilling its corporategovernance responsibilities. The Committee shall becomposed of at least three (3) members of Board, andchaired by the Chairman of the Board. The Committee shallbe responsible for the following:

$Adopled from Sec. 9(a), SEC Memorandum Cncular No. 2, s. 2002.

Code of Cotpotate Governance lor lhe GOCC SectotPage 15 of 31

flil ilIt lililllil il tlit ilPNOY008202

(a) Overseeing the periodic psrformance evaluation of theBoard and its committees and Management; and alsoconducting an annual self-evaluation of theirperformance;

(b) Deciding whether or not a Director is able to and hasbeen adequately carrying out his/her duties as directorbearing in mind the director's contribution andperformance (e.9., competence, candor, attendance,preparedness and participation). lnternal guidelinesshall be adopted that address the competing timecommitments that are faced when directors serve onmultiple boards;

(c) Recommending to the Board regarding the continuingeducation of Directors, assignment to BoardCommittees, succession plan for the ExecutiveOfficers, and their remuneration commensurate withcorporate and individual performance; and

(d) Recommending the manner by which the Board'sperformance may be evaluated and proposing anobjective performance criteria to be approved by theBoard. Such performance indicators shall address howthe Board will enhance long-term shareholder value.

'16.2.4. Nomination and Remunerations Commrtfee." - TheNomination and Remunerations Committee shall consistof at least three (3) members of the Board. TheCommittee shall be responsible for the following:

(a) lnstalling and maintaining a process to ensure thatOfficers to be nominated or appointed shall have thequalifications and none of the disqualificationsmandated under the law, rules and regulations;

(b) Reviewing and evaluating the qualifications of allpersons nominated to positions in the GOCC whichrequire appointment by the Boardi

(c) Recommending to the GCG nominees for the shortlist inline with the GOCC's and its subsidiaries' Boardcomposition and succession plan; and

(d) Oeveloping recommendationsthe CPCS and ensuring thatconsistent with the GOCC'Senvironment, as well as theregulations.

5?Adopted from Sec- 9(8Xb), SEC Memorandum Circular No. 2, s. 2002.

to the GCG for updatinqthe same continues to beculture, strategy, controlperlinent laws, rules and

Cde ol Cqporcte Govornance for the GOCC Sector

6tur or'r.l@rdr ontu )!t@m,ill tillillfll l|lililil tilr]lt I tilt I

PNOYo08203

Page 16 of 31

16.2.5. Risk Management Commiftee. - The Risk ManagementCommittee shall consist of at least three (3) members, withat least one member having a background in finance andinvestments. The Risk Management Committee shall beresponsible for the following:

(a) Performing oversight risk management functionsspecifically in the areas of managing credit, market,liquidity, operational, legal, reputational and other risksof the GOCC, and crisis management, which shallinclude receiving from Senior Management periodicinformation on risk exposures and risk managementactivities:

(b) Developing the Risk Management Policy of the GOCC,ensuring compliance with the same and ensure that therisk management process and compliance areembedded throughout the operations of the GOCC,especially at the Board and Management level: and

(c) Providing quarterly reporting and updating the Board onkey risk management issues as well as ad hocreporting and evaluation on investment proposals;

16.3. Combining the Mandatory Committees. - Nothing herean shallpreclude the Governing Board from formally combining the functionsof the committees into such combinations that will best seNe theinterest of the GOCC.

16.4. Other Commiltees Requned by Law, Rules and Regulations. - lnaddition to the committees required in this Code, each GOCC, whenso covered, shall also establish the committees required under thecorresponding and applicable rules and regulations issued by theBangko Sentral ng Pilipinas (BSP), the lnsurance Commission (lC),the Securities and Exchange Commission (SEC) and the PhilippineStock Exchange (PSE), and other Supervising Agencies.

SEc. 17. Annual Performance Evaluation of the Board. - A systematicevaluation process of the Board shall be developed as a necessary tool inenhancing its professionalism and as a useful incentive for Board Members todevote sufficient time and effort to their duties. The evaluation should also beinstrumental in developing effective and appropriate induction and trainingprograms for new and existing members of the Board.

Bffii6!tr !r$. !rd$d r*, .hrfr i.liililr]ilil iil [ illl]lt[ iliil fl

PNOYo08204

Page 17 of 31

tv.

MANAGEMENT

SEc. 18. Ro/e of Management. - The Management of every GOCC standsas the center of decision-making for the day-to-day affairs of the GOCC. ltdetermines the GOCC'S activities by putting the targets set by the Board inconcrete terms and by implementing basic strategies for achieving those targets.

Management is responsible to the Board for implementing the infrastructurefor the GOCC's success through the following mechanisms in its organization asset by the Board: organizational structures that work effectively and efficiently inattaining the goals of the GOCC; useful planning, control, and risk managementsystems that assess risks on an integrated cross-functional approachiinformation systems that are defined and aligned with an information technologystrategy and the business goals of the GOCC; and a plan of succession lhatformalizes the process of identifying, training and selection of successors in keypositions in the GOCC.

SEc. 19. Maragement Primarily Accountable to the Board. - Managementis primarily accountable to the Board for the operations of the GOCC. As part ofits accountability, Management shall provide all members of the Board with abalanced and understandable account of the GOCC's performance, posation andprospects on a monthly basis. This responsibility shall extend to interim andother price sensitive public reports and reports to regulators.

sEc.20. Chief Executive Officer (CEO). - The CEO or the highest-rankingExecutive Officer provided for in the Charter or By-laws, shall be elecled annuallyby the members of the Board from among its ranks.$ The CEO shall be subjectto the disciplinary powers of the Board and may be removed by the Board forcause.u'oln addition to the duties imposed on him by the Board, the CEO shall:

(a) Exercise general supervision and authority over the regular courseof business, affairs, and property of the GOCC, and over itsemployees and officers;

(b) See to it that all orders and resolutions of the Board are carried intoeffecti

(c) Submit to the Board as soon as possible after the close of eachfiscal year, and to the shareholders at the annual meeting, ifapplicable, a complete repori of the operations of the GOCC for thepreceding year, and the state of ats affairs;

(d) Report to the Board from time to time all matters which the interestof the GOCC may require to be brought to its notice; and

(e) Perform such other duties and responsibilities as the Board mayimpose upon him.

*S6c. 18, R-A. No. 10149.

Code ol CorpoQte Governanco fot lhe GOCC SectorPage 18 of 31etu.!rAi p,!dorltfr'rryrn.

Iilil ilil lt ilil|lilIlllt ilPNOY008205

SEc.21. Other Executive Officers. - Subject to the provisions of its Charteror By-Laws, the Executive Officers shall be appointed by the Board.

21.1. Corporate Treasurer. - The Treasurer shall have charge of the funds,securities, receipts and disbursements of the GOCC. Unlessotherwise provided in the Charter or the By-laws, the Treasurer shallalso have the following functions:

(a) Oeposit or cause to be deposited all monies and other valuableeffects in the name and to the credit of the GOCC in compliancewith applicable laws, rules and regulations:

(b) Regularly and at least quartedy render to the CEO or to the Boardan account of the fund condition of funds of the GOCC and all ofhis transactions as such;

(c) Ensure fund availability on a timely basis and at the mosteconomical means;

(d) Optimize yields in temporary excess funds, but at the same timeensure the implementation of appropriate risk managementmeasures over its resourcesi

(e) Provide relevant and timely financial market information;

(f) Perform such other responsibilities as the Board may impose.

21.2 chief Finance Officer (CFO). - fhe CFO, who may also be theTreasurer, shall be responsible for the following:

(a) Providing management with accurate, relevant, and timelyoperating and financial reports and analysis necessary forflnancial planning and strategy formulation, and monitoring actualimplementation of budgets, plans and programs towards theachievement of corporate goalsi

(b) t\4aintaining the integrity of accounting records as the basis of thefinancial statements and reports provided to [,lanagement fordecision making and to government regulatory bodies in

compliance with statutory requirements;

(c) Promoting investor and public confidence in the GOCC byaddressing the various information requirements of the investingpublic and ensuring that all other legal reportorial obligations tothe concerned agencies are complied with;

(d) Strengthening internal controls by monitoring compliance withpolicies and recommending to Management appropriate actionsand changes in systems and procedures in the exigencies of theservice; and

(e) Performing such other responsibilities as the Board may impose.

SEc.22. Power of the Governing Board to Discipline/Remove Oflicers. -Subject to existing civil service laws, rules and regulations, and in ensuring

6er. !l {,.3(.!d ort. P!drr@,

tiltililililtil]ilil tilll I I fl]il u

Code of Corpohle Govenance for the GOCC SectotPage 19 of 31

PNOY008206

compliance with the requirements of due process, the Board shall have theauthority to discipline, or remove from office, the CEO, or any other Oflicer, upona majority vote of the members of the Board who actually took part in theinvestigation and deliberation.60

V,

DUrES AND OBLTGATToNS oF DtREcroRS AND OFFTcERS

SEc.23. Fiduciaries of the State. - Directors and Officers are fiduciaries ofthe State in that: (a) they have the legal obligation and duty to always act in thebest interest of the GOCC, with utmost good faith in all dealings with theproperties, interests and monies of the GOCC;6' and (b) they are constituted astrustees in relation to the properties, interests and monies of the GOCC.6'

SEc.24. Directors and Officers as Public Officials. - Directors and Officersare also Public Officials as defined by, and are therefore mvered by theprovisions of the "Code of Conduct and Ethical Standards for Public Officials andEmployees,"63 with its declared policies: (a) to promote a high standard of ethicsin public service; and (b) Public Offcials and employees shall at all times beaccountable to the people and shall discharge their duties with utmostresponsibility, integrity, competence, and loyalty, act with patriotism and justice,lead modest lives, and uphoid public interest over personal interest.6o

SEc.25. Respect for and Obedience to the Conslitution and the Law. - AsPublic Officials, a Director or Officer shall respect and obey the Constitution, andshall comply, and cause the GOCC to faithfully and timely comply, with all legalprovisions, rules and regulations, and corporate governance standards,applicable to them and to the GOCC in which they serve, and to act within thebounds of their Charter, Articles of lncorporation and ByJaws.

SEc-26. Duty of Diligence. - The fiduciary duty of diligence of Directors andOfficers to always act in the best interest of the GOCC, with utmost good faith inall its dealings with the property and monies of the GOCC, includes the obligationto:

(a) Exercise extraordinary diligence, skill and utmost good faith in theconduct of the business and in dealing with the properties of theGOCC, using the utmost diligence of a very cautious person withdue regard to all the circumstances;65

(b) Apply sound business principles to ensure the flnancial soundnessof the cOCC;"s and

esec.22. R.A. No. 10149.5 Opening paragraph of Sec. 19, R.A. No. 10t49."'Sec.20. R.A. No. 10149.6rReD. Act No.6713.es* z nl H. ezrt:lsec. lg(b)combined wtlh Sec.2l. R.A. No. 10149.*Sec l9(d), R.A. No. 10149.

Code of Cotporale Governance for the GOCC SectotPage 20 of 31€tu. o(dr.}n.r!i! o(dri ifiiE r.,

il [ ilil |]ililt flil]|il [ il [PNOYOOE20T

(c) Elect and/or employ only Officers who are fit and proper to holdsuch office with due regard to the qualifications, competence,experience and integrity.""'

Every Director or Olficer, by the act of accepting such position in theGOCC, afflrms and agrees: (1) to have a working knowledge of the statutory andregulatory requirements affecting the GOCC he is to serve, including thecontents of its Charter, or A(icles of lncorporation and By-laws, the requirementsof the GCG, and where applicable, the requirements of other SupervisingAgencies; and (2) to always keep himself informed of industry developments andbusiness trends in order to safeguard the GOCC'S interests and preserve itscompetitiveness.

SEc. 27. Duty of Loyalty. - The fiduciary duty of loyalty of Directors andOfficers to always acl in the best interest of the GOCC, with utmost good faith inall its dealings with the property and monies of the GOCC, includes the obligationto:

(a) Act with utmost and undivided loyalty to the GOCC;ft

(b) Avoid conflicts of interest and declare any interest they may havein any particular matter before the Board:6'oand

(c) Avoid (1) taking for themselves opportunities related to theGOCC's business; (2) using the GOCC's property, information orposition for personal gain; or (3) competing with the Gocc'sbusiness opportunities.

27 .1. Avoid Conflict of lnterest. - Directors and Officers shall at all timesavoid any actual or potential conflict of interest with the GOCC. Eachshall also avoid any conduct, or situation, which could reasonably beconstrued as creating an appearance of a conflict of interest.

Any question about a Director's or Officer's actual or potential conflictof interest with the GOCC shall be brought promptly to the attention ofthe Chairman of the Board, who will review the question anddetermine an appropriate course of action.

27.2. Trustee Relation to GOCC Properties, lnterests and Monies. - Exceptfor the psr dlern received for actual attendance in board meetingsand the reimbursemenl for actual and reasonable expenses andincentives as authorized by the GCG, any and all realized andunrealized profits and/or benefits including, but not limited to, theshare in the profits, incentives of Directors or Officers in excess ofthat authorized by the GCG, stock options, dividends and othersimilar offers or grants from corporations where the GOCC is astockholder or investor, and any benefit from the performance ofDirectors or Officers acting tor and in behalf of the GOCC in dealingwith its properties, investments in other corporations, management of

67S€c 19{6), R.a. No. lol49.ss€c. ,qa), R.a. No. lOl49.u'S6c. 19(c). R.A. No. 10t49.

eer.!rur }r.trD. .,(rr.l'lE!wr

1ilil ilillt[]iltl[IlllIll

Code of Corporcte Governance for lhe GOCC Seclot

PNOYo08208

Page 21 of 31

Subsidiaries and other interest, are to be held in trust by suchDirector or Ofllcer for the exclusive benefit of the GOCCre p rese nted .

/o

27.3. Taking of Corporate Opporlunities. - Where a Director or an Offlcer,by reason of his being a member of the Board or an Officer of aGOCC, acquires or receives for himself/herself a benefit or profit ofwhatever kind or nature, including but not limited to, the acquisitionof shares in corporations where such GOCC has an interest, the usethe properties of the GOCC for his/her own benefit, the receipt ofcommission(s) on contract(s) with the GOCC or its assets, or thetaking advantage of corporate opportunities of the GOCC, all suchprofits or benefits shall be subject to restitution pursuant to Section24 of the Act, without prejudice to any administrative, civil or criminalaction against members of the such Director or Officer. The remedyof restitution shall apply notwithstanding the fact that such Director orOfficer risked his/her own funds in the venture."

27.4. Restitution. - Pursuant to Section 24 of the Act, upon thedetermination and report of the Commission on Audit (COA)pursuant to a Notice of Disallowance which has become final andexecutory, that properties or monies belonging to the GOCC are inthe possession of a Director or Officer of a GOCC without authority,or that profits are earned by the Director or Officer in violation ofhis/her fiduciary duty, or the aggregate per diems, allowances andincentives received in a particular year are in excess of the limitsprovided under the Act, the Director or Officer receiving suchproperties or monies shall immediately return the same to theGOCC.

Failure by a Director or Officer to make the restitution within thirty(30) days after a written demand has been served shall, after trialand final .iudgment, subject such Director or Officer to thepunishment of imprisonment for one ('l ) year and a fine equivalent totwice the amount to be restituted and, in the discretion of the court ofcompetent jurisdiction, disqualification to hold public office.7'?

SEc.28. L,,;ryrlts to Compensation, Per Diems, Allowances and lncentives. -Pursuant to Section 23 of the Act:

(a) The Charters or By-laws of the GOCCS to the contrarynotwithstanding, the compensation, per diems, allowances andincentives of the Appointive Directors shall be determined by theGCG, using as a reference, among others, Executive Order No.24, dated February 10, 2011;

(b) Directors shall not be entitled to retirement benefits acting as suchdirectorsi and

*MH€eJr.rur. !id!. or rll| tDh'r@mr

tiltiliilililtilrlil il]ltiI fiiiI il

7osec. 20 of R.A. No. 10149.7lLast paraqraph oISec 19, R.A. No. 10149

"Art 24. R.A. No. 10149

\

./Li-

Code ol Corporcte Governance for lhe GOCC Sectoro^^^ 22 ol 31

PNOY008209

(c) With respect to GOCCs organized solely for the promotion of socialwelfare and lhe common good, without regard to prorit, the totalyeatly per dlems and incentives in the aggregate which theDirectors may receive shall be determined by the President uponthe recommendation of the GCG based on the achievement bysuch GOCC of its performance target(s).

SEc.29. No Gift Policy. - A Director or Officer shall not solicit, nor accept,directly or indirectly, any gift, gratuity, favor, entertainment, loan or anything ofmonetary value ("Gift") from any person where such Gift:

(a) Would be illegal or in violation of law;

(b) ls part of an attempt or agreement to do anything in return;

(c) Has a value beyond what is normal and customary in the Goccsbusiness;

(d) ls being made to influence the member of Board's, or Officels,actions as such; or

(e) Could create the appearance of a conflict of interest.

Every Governing Board shall formally adopt a "No Glfr Porcy''within theGOCC and ensure its full advertisement to the community and its strictimplementation by particular set of rules.

SEc.30. Duty of Confidentiality. - Pursuant to their duties of diligence andloyalty, a member of the Board or an Offlcer shall not use or divulge confidentialor classified information officially made known to them by reason of their officeand not made available to the public, either: (1) to further their private interests,or give undue advantage to anyone; or (2) which may preiudice the publicinterest.

vt.

OBLTGATToNs oF THE GOCC To DtREcroRS aND OFFICERS

SEc. 31. Providing for Staff Support to Directors. - Each GOCC shallprovide the members oI its Governing Board with reasonable support staff andoffice facilities to allow them to properly discharge their duties andresponsibilities.

SEc.32. Obtaining of Directors and Officers Liability lnsurance (DOLI). -Having imposed the highest level of responsibility and accountability on themembers of the Board and Officers, 1.e., that of extraordinary diligence, it isequitable that when the GOCC itself and/or the members of the Board andManagement are sued before tribunals on matters that are within the officialfunctions and capacity and on matters where business judgment has beenexercised in good faith, that there be proper recovery of the costs of litigation andthe judgment liability imposed. lt is prudent measure therefore for every GOCC to

€tur o:tu lirrod orri. !iieru,,rilfl ilillt illllllllIllll

Codo ol Corporate Governanca lot the GOCC SectorPage 23 of 31

:. ;/- '

PNOY008210

oblain "Directors and Officers Liability lnsurance" (DOLI) coverage for itself andthe members of the Governing Board and Officers against contingent claims andliabilities that may arise from, as well as the expenses that may be incurred inprosecuting, the actions that may be filed against the GOCC arising from theactions of the Governing Board and/or Management that may cause loss ordamage to third parties.

Nothing in this section shall be construed as to authorize thereimbursement or the incurring of costs, such as the payment of premiums onDOLI coverage, by the GOCC on the litigation expenses incurred and thejudgment liability decreed against a Director or Officer for breach of any of hisfiduciary duties or for fraud committed in the performance of his or her duties tothe GOCC and/or its stakeholders.

v[.CSR AND RELATIoNS wlTH STAKEHoLDERS

SEc. 33. Duty to Be Responsive to Stakeholders. - Every Director andOfficer accepts the position fully aware that he assumes certain responsibilitiesnot only to the GOCC and its stockholders, but also with different constituenciesor Stakeholders, who have the right to expect that the GOCC is being run in aprudent manner and with due regard to the interests of all Stakeholders."Consequently, members of the Board and Officers shall deal fairly with theGOCC's employees, customers, suppliers and other Stakeholders. No memberof the Board or Officer may take unfair advantage ol the GOCC'S employees,customers, suppliers and other Stakeholders through manipulation, concealment,abuse of confidential or privileged information, misrepresentation of materialfacts, or any other unfair-dealing practice.

SEc. 34. CSR Pflncrples. - As an integral part of the National Government,GOCCs are inherently mandated to be socially responsible, to act and operateas good corporate citizens. The Governing Board shall recognize and perform

the obligations the GOCC has towards the National Government, its majoritystockholder, as well as the minority stockholders when existing, together with theemployees, suppliers, customers and other Stakeholders, and the communitiesin which it operates.

The Directors, Officers and all its employees are required to abide byethical policies as mandated by the GCG. The protection of the reputation andgoodwill of every GOCC is of fundamental importance, and Directors, Offlcersand employees should be aware of the disciplinary implications of breaches ofpolicy.

7\aren ftom Sec. ll(2xa), SEC Cod€ of CoeDrais Govemance, SEC M€moranduo Circular No. 2, s.2002

Cod6 ot Corpoate Governance fot lhe GOCC SaclotPage 24 of 31

il ilriililPNOYo08211

Every member of the GOCC is encouraged to promptly report anypotentially illegal, improper and/or unethical mnduct that they become aware ofat their workplace or in connection with their work. Every GOCC should have anenvironment that enables its people to raise genuine and legitimate concernsinternally. However, in the event that the people of the GOCC, and/or thestockholders believe their reporting to management may result in harassment, orundue distress, they may contact the GCG support to report such matters. TheGCG provides for an opportunity for concems to be investigated and ensuresappropriate action is taken to resolve the matter effectively.

SEc. 35. Formal Recognition of the Stakeholders. - Every GOCC Boardshall, as an integral part of its Charter Statement and embodied in its Manual ofCorporate Governance, identify and formally recognize the GOCC'S major andother Stakeholders, identify the nature of their interests, provide a hierarchysystem of their conflicting interest in the GOCC, and providing a clear policy oncommunicating or relating with Stakeholders accurately, effectively andsufficiently, together with a system of properly rendering an accounting on howthe GOCC has served their legitimate interests."

SEc. 36. Employees. - Every employee in a GOCC is encouraged to -(a) Remember that the biggest stakeholder is the Government;

(b) Share the vision ofthe GOCC;

(c) Be accountable to the public;

(d) Listen and learn from his/her co-employees;

(e) Think and act as a team;

(f) Focus on the customers and strive for customer satisfaction:

(g) Respect others;

(h) Communicate with stockholders and customers;

(i) Deliver results and celebrate success; and

(.j) Protect the reputation of the GOCC.

There should be employee development discussions and structured trainingprograms for continuing personal and professional development for employees.

SEc. 37. Cuslomers. - lntegrity and honesly in dealings with customers isnecessary for a successful and sustained business relationship. Every GOCCshould operate a highly effective and efficient organization, focused on meetingcustomer objectives with the aim of providing services which give fair value andconsistent quality, reliability and safety in return for the price paid for the same.GOCCs should operate policies of continuous improvement, of both processesand the skills of the staff, to take best advantage of advances in all aspect ofsociety in order to ensure that it continues to add value to its customers'businesses.

?taken from S€c. ll(2xbxi), SEC Cod6 of Corporate Govemance, SEC Memorandum Circutar No. 2, s2002.

Gtur!r ,r !or!d rl.ir !rd@w,

ilil ilflllil ililril lllllCode of Cotpotale Governance fot the GOCC Sector

Page 25 of 31

PNOY008212

GOCCs should have clear and strong lines of communication which allowthem to respond quickly and efficiently to customer and markel requirements, aswell as the public needs, and for the customers to receive consistent service inorder to successfully and consistently deliver what the GOCC is mandated to do.

SEc.38. Suppfiers. - As with other relationships with the Stakeholders,GOCCS should aim to develop relationships and improve networking withbusiness partners and suppliers based on mutual trust. GOCCS should aim tooffer, through partnership with its suppliers, the best combination of state-of-the-art technology and world class service, strong customer relations and deepindustry knowledge and experience, together with the capacity to implement anddeliver value-added solutions on time and within budget.

SEc. 39. Heath and safety. - Every GOCC should aim to ensure a safeand healthy working environment for all its employees, outside contractors andvisitors. The GOCC should comply with all relevant local legislation orregulations, and best practice guidelines recommended by national health andsafety authorities. The staff should be informed regarding the policies andpractices of the GOCC in order to maintain a healthy, safe and enjoyableenvironment.

SEc.40. Environmert. - GOCCS should consider that there are inevitableenvironmental impacts associated with daily operations. lt shall be the goal oIevery GOCC to minimize harmful etfects and consider the development andimplementation of environmental standards to achieve this to be of greatimportance. As such, GOCCS should strongly encourage 3 R's: "Reduce", "Re-

use" , and " Racycle" .

ln the course of the operations of the GOCC, it should identify opportunitiesto reduce consumption of energy, water and other natural resources. GOCCSshould also strive to re-use and recycle where possible and dispose of non-recyclable items responsibly, thereby minimizing our impact on the environment.ln doing so, by adopting simple, environmentaily friendly initiatives, the GOCCshall raise awareness among the members of the communities it affects.

v .

DrscLosuRE AND TRANSpARENcy REeUtREMENTS

SEc. 41. Transparency as the Essence of Corporate Governance. - fheessence of corporate governance is transparency; the more transparent lheinternal workings of the GOCC are, the more difficult it will be for the Boardand/or Management to mismanage the GOCC or to misappropriate its assets.'5 ltis therefore imperative that GOCCS disclose all material information to theNational Government and the public, its ultimate stakeholder, in a timely andaccurate manner at alltimes.

T5Adopted ftom An. 8, Revised Code of CoDoral6 Govemance, SEC Memorandum Circutar No. 6, s.2009.

Cde of Corporate Governance for tho GOCC SoctorPage 26 of 31

PNOYo08213

SEc.42. GOCC Manual of Corporate Governance. - Every GOCC, actingthrough its Governing Board, shall promulgate and adopt its corporategovernance rules and principles in accordance with this Code,?6 and which in

addition shall contain the following items:

(a) Detailed responsibilities of members of the Board, which shall beavailable to all Stakeholders and to the public;"

(b) Formal Charter of expectations that each Oirector shall sign and becommitted to;'3

(c) List of Disclosures to be made by Directors;7'g

(d) Statement by the Directors confirming the truth and fairness of theGOCC's financial statementse similar to a Statement ofManagement Responsibility; and

(e) List of Fines and other consequences when Directors violate, oromit to carry out their duties, under applicable law.6'

The Manual shall be submitted to the GCG, which shall evaluate the sameand their compliance with this Code taking into account the classification andindustry of the GOCC. The Manual shall be available for inspection by any of theidentirled Stakeholders of the GOCC at reasonable hours on business days.

SEc.43. Mandatory Website. - ln accordance with Section 25 of the Act, allGOCCS shall maintain a website and post therein for unrestricted public access:

43.1. On lnstitutional Mafters:

(a) For Chartered GOCCS, the latest version of its Charter;

(b) For Nonchartered GOCCS, latest General lnformation Sheet(GlS) and brief company background including date ofincorporation, history, functions and mandate;

List of Subsidiaries and Affiliates; and

Government Corporate lnformation Sheet (GCIS) asmandated by the GCG in its Memorandum Circular No.2012-01.

43.2. On the Board and Officers:

(a) Complete listing of the Directors and Officers with aftachedresume, and their membership in Board Committees;

(b) Complete compensation package of all the board membersand officers, including travel, representation, transportationand any other form of expenses or allowances; 3'z

(c)

(d)

@o, orLrj.Irdd orr!.Ii pDmr

il['tiltfl,il t]tilil Iil[

T6Coaorate Govemance Principles for Businsss Enl€rprises,corporate oov/comoralg oov orincioles.odf., last accessed 2 MarchCorporale Govemance Princjples for Eusness Enterpnses.'

'ADB Comorate Govemanc€ PrinciDles lor Bu$n€ss Enrerpns€s.

'"ld.

!'Sec. zs1e1, n.l. Ho. rol+s.

www.6db.om/documenls/brochureY2012. hereinafrer referred lo as 'ADB

Code ol Corporate Govenance tor lha GOCC Sectorpage 27 of 31

PNOY008214

lnformation on Board Committees and their activities;33 and

Attendance record of Directors in Board and Commifteemeetings.

Financial and Operational Mafters.

Their latest annual Audited Financial and Performance Reportwithin thiriy (30) days from receipt of such Report;u

Audited Financial Statements in the immediate past three (3)years;s5

(c) Quarterly, and Annual Reports and Trial Balance;36

(d) Current Corporate Operating Budget (COB);3?

(e) Local and foreign borrowings;33

(f) Government subsidies and net lending;3s

(g) All borrowings guaranteed by the Government;$

(h) Any material risk factors and measures taken to manage suchrisks:'g1 and

(k) Performance Evaluation System (PES).

43.4. On Governance Mafters.

(a) Charter StatemenUMission-Vision Statements;

(b) Performance Scorecards and Strategy Map;"

(c) Organizational Chart;

(d) Manual of Corporate Governance;

(e) CSR Statement; and

(f) Balance Scorecard.

43.5. Such other information or report that the GCG may require.s3

SEc.44. GOCCS Must Be Active Paiicipants in the lntegrated CorporateRepoding System. - ln the pursuit of national development and providing betterservice to the public, and to ensure each GOCC's faithful performance of theirmandate using the standards of good governance, transparency, accountabilityand responsibility, the National Government, through the GCG, shall develop anlntegrated Corporate Reporting System (ICRS) to provide an extensive database

(c)

(d)

43.3. On

(a)

(b)

&S6c. 25{a), R.A. No. 10r49.

"Sec 25{b). R a. No lol4g.ss6c. 25{c), R.A. No. 10t49.37s€c 25id). RA No t0149.ss6c. 25{0. R.A. No 10149.

"S€c.25(h). R.A. No. 10149.*S6c.25{i), R.a. No. 10149.

:^Adopled from the OECD Gudolines - -Transparoncy and Disclosure.' V-E{ 3). p. 16."Sec.25(g), R.A. No. 10149."Ssc.25(i). R.A. No. 10149.

Cde ot Corporate Governanca fot the GOCC Sectot

@ tu' ol rlr. ;drini o I 4r

[ il ilil lflil[ ilt liltPNOYo08215

Page 28 of 31

and comprehensive information on GOCCS, pursuant to the followingparameters:

44.1. The ICRS shall provide a platform for the electronic submission byGOCCS of various reportorial requiremenls such as financialstatements, list of directors and officers, compensation, operatingbudgets and performance commitments;

44.2. Reports provided under the Disclosure and TransparencyRequirements in the Ownership and Operations Manual for GOCCSand the government corporate standards governing GOCCS shallalso be incorporated into the System;

44.3. The ICRS shall also be linked initially to National GovernmentAgencies with GOCC dealings, such as with the Commission onAudit (COA), Department of Finance (DOF), the Deparlment ofBudget and Management (DBM), and eventually to the PublicFinancial Management System and the Government lntegratedFinancial Management lnformation System (GlFMlS);'g4 and

44.4. Every GOCC, acting through its Board and [,1anagement, shall ensurethat it becomes an active and responsible member and contributor tothe tcRS.

SEc.45. Mandatory Reporls. - The Board shall regulady submit, as may berequired by the GCG and other Government Agencies, the following:

(a) Performance Scorecards;

(b) lmplementation of the audit recommendations of COA; and

(c) Compliance with commitments on servicing loans to, andborowings guaranteed by, the National Government.

SEc.46. Other Repotlorial Requiremenls. - All GOCCs shall also submit tothe GCG periodically in electronic form to the GCG the following:

(a) Common Form financial statements based on annual auditedfinancial statements within thirty (30) days from receipt of therepo(i

(b) Dividend computations and payments in accordance withRepublic Act No. 7656, also known as "The Dividends Law;"

(c) Cash and investment balances;

(d) For GFls, actual and projected Statement of Cash SurpluVDeficit;

(e) Capital expenditure program;

(f) Statement of Financial Operations;

eNEDA Philippine oevelopmenr Plan 2011-2016, s0 (2011).

Code of Corporalo Governance for lhe GOCC SectorPage 29 of 31eorr or'h r{r!d or'!. fb,r@@

flililililililtilililrilPNOY008215

(g) Acquisition or disposition of assets;

(h) Off Balance Sheet transactions; and

(i) Reports for the annual corporate budget call such as but notlimited to the following:

(1) Physical and Financial Performance reports (the immediatelypreceding three (3) years); and

(2) Sources and Uses of Funds (the immediately preceding three(3) years) and the proposal for the coming year.

SEc. 47. The format and schedule of submission for the various reportsshall be provided by the GCG in consultation with the Department of Finance(OOF), Department of Budget and Management (DBM), Commission on Audit(COA) and other Government Agencies as may be proper.

tx.

HtcHEST STANDARDS PRtNctPLE'gs

. Public service being a public trust, nothing in this Code shall beSEc.construed

48.1.

48AS:

48.2.

48.3.

Corporate Government Standardsr Relieving or excusing GOCCS,their Oirectors and Officers, from complying with more rigorousstandards of corporate governance as those required by regulatoryagencies having jurisdiction over their business enterprises or theindustry in which they operate, such as the Philippine StockExchange (PSE) or the Securities and Exchange Commission (SEC)for GOCCS that are listed companies or public companies asprovided for in the Securities Regulation Code, the Bangko Sentralng Pilipinas (BSP) for GOCCs that are banking institutions, and thelnsurance Commission (lC) for GOCCS which are insurancecompanies or insurance intermediaries.$

Reponorial Requirements: A waiver of the separate reportorialrequirements mandated by the regulatory agencies that havejurisdiction over the GOCC and its business operations.

Administrative and Criminal Liabilities; A waiver of the administrativeor criminal liabilities imposed by existing laws, rules and regulations,such as the Anti-Graft and Corrupt Practices Act,'g7 and the Code ofConduct and Ethical Standards for Public Officials and Employeesfor Government Officials,$ for offenses or breach of ethical standardscommitted by Directors, Officers and employees of GOCCs.

lladopred rrom Sec. s(c). R.A. No. 1014e.$Sec. 5(c), R.A. No. 10149.

"Reo Acl No. 30 19.e8Rep. Acl No. 6713.

Cod6 of Coryorate Governance fot the GOCC SeclorPage 30 of 3'1

flril iltitr l lt,fl ililtPNOY008217

x.

MtscELLANEous PRovtstoNS

Sec.49. Amendmenrs. - This Code may be amended by the GcG throughthe issuance of a memorandum circular duly published in the GCG's website andcopy formally submitted to the UP Law Center.

SEc.50. Effectivity. - This Code shall be effective fifteen ('15) days after it ispublished in the GCG'S website and from the date formal copy is received by theUP Law Center.

ADOPTED this day of November, 2012.

ISIMASecretary, Department of Finance

(DOF)

006271

@t---*2FLORENCIO B. ABAD

Secretary, Department of Budget andManagement (DBM)

CE

RAINIER B. BUTALIDCommissioner

DISAPPROVED:

U,L"PRESIDENT NO S. AQUTNO t

---oOo-

Codo of Cotpotate Govemanco lot lho GOCC SoclotPage 31 of 31

Chairman

GE

NOV 2 2012

PNOY0082r8