The Board of Directors and Management, i.e. officers and staff of F ilsyn Corporation (the “company”) hereby commit themselves to the principles and best practices contained in this Manual, and acknowledge that the same may guide the attainment of our corporate goals.
This Manual will institutionalize the principles of good corporate governance in the entire organization.
The Board of Directors and Management, employees and shareholders, believe that corporate governance is a necessary component of what constitutes sound strategic business management and will therefore undertake every effort necessary to create awareness within the Organization as soon as possible.
Principle 1: The company will be headed by a competent, working board to foster the long term success of the corporation, and to sustain its competitiveness and profitability in a manner consistent with its corporate objectives and the long- term best interests of its shareholders and other stakeholders.
Principle 2: The fiduciary roles, responsibilities and accountabilities of the Board as provided under the law, the company's articles and by-laws, and other legal pronouncements and guidelines will be clearly made known to all directors as well as to stockholders and other stakeholders.
Principle 3: Board committees will be set up to the extent possible to support the effective performance of the Board's functions, particularly with respect to audit, risk management, related party transactions, and other key corporate governance concerns, such as nomination and remuneration. The composition, functions and responsibilities of all committees established will be contained in a publicly available Committee Charter.
Principle 4: To show full commitment to the company, the directors will devote the time and attention necessary to properly and effectively perform their duties and responsibilities, including sufficient time to be familiar with the corporation's business.
Principle 5: The Board will endeavor to exercise objective and independent judgment on all corporate affairs.
Principle 6: The best measure of the Board's effectiveness is through an assessment process. The Board will regularly carry out evaluations to appraise its performance as a body, and assess whether it possesses the right mix of backgrounds and competencies.
Principle 7: Members of the Board are duty-bound to apply high ethical standards, taking into account the interests of all stakeholders.
Principle 8: The company will establish corporate disclosure policies and procedures that are practical and in accordance with best practices and regulatory expectations.
Principle 9: The Company will establish standards for the appropriate selection of an external auditor, and exercise effective oversight of the same to strengthen the external auditor's independence and enhance audit quality.
Principle 10: The company will ensure that material and reportable non-financial and sustainability issues are disclosed.
Principle 11: The company will maintain a comprehensive and cost-efficient communication channel for disseminating relevant information. This channel is crucial for informed decision making by investors, stakeholders and other interested users.
Principle 12: To ensure the integrity, transparency and proper governance in the conduct of its affairs, the company will have a strong and effective internal control system and enterprise risk management framework.
Principle 13: The company will treat all shareholders fairly and equitably, and also recognize, protect and facilitate the exercise of their rights.
Principle 14: The rights of stakeholders established by law, by contractual relations and through voluntary commitments will be respected. Where stakeholders' rights and/or interests are at stake, stakeholders will have the opportunity to obtain prompt effective redress for the violation of their rights.
Principle 15: A mechanism for employee participation will be developed to create a symbiotic environment, realize the company's goals and participate in its corporate governance processes.
Principle 16: The company will be socially responsible in all its dealings with the communities where it operates. It will ensure that its interactions serve its environment and stakeholders in a positive and progressive manner that is fully supportive of its comprehensive and balanced development.
Corporate Governance - the system of stewardship and control to guide organizations in fulfilling their long-term economic, moral, legal and social obligations towards their stakeholders.
Corporate governance is a system of direction, feedback and control using regulations, performance standards and ethical guidelines to hold the Board and senior management accountable for ensuring ethical behavior - reconciling long- term customer satisfaction with shareholder value - to the benefit of all stakeholders and society.
Its purpose is to maximize the organization's long-term success, creating sustainable value for its shareholders, stakeholders and the nation.
Board of Directors - the governing body elected by the stockholders that exercises the corporate powers of a corporation, conducts all its business and controls its properties.
Management - a group of executives given the authority by the Board of Directors to implement the policies it has laid down in the conduct of the business of the corporation.
Independent director - a person who is independent of management and the controlling shareholder, and is free from any business or other relationship which could, or could reasonably be perceived to, materially interfere with his exercise of independent judgment in carrying out his responsibilities as a director.
Executive director - a director who has executive responsibility of day-to-day operations of a part or the whole of the organization.
Non-executive director - a director who has no executive responsibility and does not perform any work related to the operations of the corporation.
Congiomerate - a group of corporations that has diversified business activities in varied industries, whereby the operations of such businesses are controlied and managed by a parent corporate entity.
Internal control - a process designed and effected by the board of directors, senior management, and all levels of personnel to provide reasonable assurance on the achievement of objectives through efficient and effective operations; reliable, complete and timely financial and management information; and compliance with applicable laws, regulations, and the organization's policies and procedures.
Enterprise Risk Management - a process, effected by an entity’s Board of Directors, management and other personnel, applied in strategy setting and across the enterprise that is designed to identify potential events that may affect the entity, manage risks to be within its risk appetite, and provide reasonable assurance regarding the achievement of entity objectives.
Related Party - shall cover the company's subsidiaries, as well as affiliates and any party (including their subsidiaries, affiliates and special purpose entities), that the company exerts direct or indirect control over or that exerts direct or indirect control over the company; the company’s directors; officers; shareholders and related interests (DOSRI), and their close family members, as well as corresponding persons in affiliated companies. This shall also include such other person or juridical entity whose interest may pose a potential conflict with the interest of the company.
Related Party Transactions - a transfer of resources, services or obligations between a reporting entity and a related party, regardless of whether a price is charged. It will be interpreted broadly to include not only transactions that are entered into with related parties, but also outstanding transactions that are entered into with an unrelated party that subsequently becomes a related party.
Stakeholders - any individual, organization or society at large who can either affect and/or be affected by the company's strategies, policies, business decisions and operations, in general. This includes, among others, customers, creditors, employees, suppliers, investors, as well as the government and community in which it operates.
1. ESTABLISHING A COMPETENT BOARD
Principle 1
The company will be headed by a competent, working board to foster the long-term success of the corporation, and to sustain its competitiveness and profitability in a manner consistent with its corporate objectives and the long-term best interests of its shareholders and other stakeholders.
The Board will be composed of directors with a collective working knowledge, experience or expertise that is relevant to the company's industry/sector. The Board will always ensure that it has an appropriate mix of competence and expertise and that its members remain qualified for their positions individually and collectively, to enable it to fulfill its roles and responsibilities and respond to the needs of the organization based on the evolving business environment and strategic direction.
The Board will be composed of a majority of non-executive directors who possess the necessary qualifications to effectively participate and help secure objective, independent judgment on corporate affairs and to substantiate proper checks and balances.
The Company will provide a policy on the training of directors, including an orientation program for first-time directors and relevant annual continuing training for all directors.
The Board will have a policy on board diversity.
The Board will ensure that it is assisted in its duties by a Corporate Secretary, who will be a separate individual from the Compliance Officer. The Corporate Secretary will not be a member of the Board of Directors and will annually attend a training on corporate governance.
The Corporate Secretary is primarily responsible to the corporation and its shareholders, and not to the Chairman or President of the Company and has, among others, the following duties and responsibilities:
a. Assists the Board and the board committees in the conduct of their meetings, including preparing an annual schedule of Board and committee meetings and the annual board calendar, and assisting the chairs of the Board and its committees to set agendas for those meetings;
b. Safe keeps and preserves the integrity of the minutes of the meetings of the Board and its committees, as well as other official records of the corporation;
c. Keeps abreast on relevant laws, regulations, all governance issuances, relevant industry developments and operations of the corporation, and advises the Board and the Chairman on all relevant issues as they arise;
d. Works fairly and objectively with the Board, Management and stockholders and contributes to the flow of information between the Board and management, the Board and its committees, and the Board and its stakeholders, including shareholders;
e. Advises on the establishment of board committees and their terms of reference;
f. Informs members of the Board, in accordance with the by-laws, of the agenda of their meetings at least five working days in advance, and ensures that the members have before them accurate information that will enable them io arrive at intelligent decisions on matters that require their approval;
g. Attends all Board meetings, except when justifiable causes, such as illness, death in the immediate family and serious accidents, prevent him/her from doing so;
h. Performs required administrative functions;
i. Oversees the drafting of the by-laws and ensures that they conform with regulatory requirements; and
j. Performs such other duties and responsibilities as may be provided by the SEC.
The Board will ensure that it is assisted in its duties by a Compliance Officer, who will have a rank of Senior Vice President or an equivalent position with adequate stature and authority in the corporation. The Compliance Officer will not be a member of the Board of Directors and will annually attend the training on corporate governance.
The Compliance Officer is a member of the company's management team in charge of the compliance function. Similar to the Corporate Secretary, he/she is primarily liable to the corporation and its shareholders, and not to the Chairman or President of the company. He/she has, among others, the following duties and responsibilities:
a. Ensures proper onboarding of new directors (i.e., orientation on the company's business, charter, articles of incorporation and by-laws, among others);
b. Monitors, reviews, evaluates and ensures the compliance by the corporation, its officers and directors with the relevant laws, this Code, rules and regulations and all governance issuances of regulatory agencies;
c. Reports the matter to the Board if violations are found and recommends the imposition of appropriate disciplinary action;
d. Ensures the integrity and accuracy of all documentary submissions to regulators;
e. Appears before the SEC when summoned in relation to compliance with this Code;
f. Collaborates with other departments to properly address compliance issues, which may be subject to investigation;
g. Identifies possible areas of compliance issues and works towards the resolution of the same;
h. Ensures the attendance of board members and key officers to relevant trainings; and
i. Performs such other duties and responsibilities as may be provided by the SEC.
2. ESTABLISHING CLEAR ROLES AND RESPONSIBILITIES OF THE BOARD
Principle 2
The fiduciary roles, responsibilities and accountabilities of the Board as provided under the law, the company’s articles and by-laws, and other legal pronouncements and guidelines wil! be clearly made known to all directors as well as to shareholders and other stakeholders.
The Board members will act on a fully informed basis, in good faith, with due diligence and care, and in the best interest of the company and all shareholders.
The Board will oversee the development of and approve the company's business objectives and strategy, and monitor their implementation, in order to sustain the company's long-term viability and strength.
The Board will be headed by a competent and qualified Chairperson.
The roles and responsibilities of the Chairman include, among others, the following:
a. Makes certain that the meeting agenda focuses on strategic matters, including the overall risk appetite of the corporation, considering the developments in the business and regulatory environments, key governance concerns, and contentious issues that will significantly affect operations;
b. Guarantees that the Board receives accurate, timely, relevant, insightful, concise, and clear information to enable it to make sound decisions;
c. Facilitates discussions on key issues by fostering an environment conducive for constructive debate and leveraging on the skills and expertise of individual directors;
d. Ensures that the Board sufficiently challenges and inquires on reports submitted and representations made by Management;
e, Assures the availability of proper orientation for first-time directors and continuing training opportunities for all directors; and
f. Makes sure that performance of the Board is evaluated at least once a year and discussed/followed up on.
The Board will be responsible for ensuring and adopting an effective succession planning program for directors, key officers and management to ensure growth and a continued increase in the shareholders' value. This will include adopting a policy on the retirement age for directors and key officers as part of management succession and to promote dynamism in the corporation.
The Board will align the remuneration of key officers and board members with the long-term interests of the company. In doing so, it will formulate and adopt a policy specifying the relationship between remuneration and performance. Further, no director will participate in discussions or deliberations involving his own remuneration.
The Board will have a formal and transparent board nomination and election policy that will include how it accepts nominations from minority shareholders and reviews nominated candidates. The policy will also include an assessment of the effectiveness of the Board's processes and procedures in the nomination, election, or replacement of a director. In addition, its process of identifying the quality of directors will be aligned with the strategic direction of the company.
The following may be considered as grounds for the permanent disqualification of a director:
a. Any person convicted by final judgment or order by a competent judicial or administrative body of any crime that: (a) involves the purchase or sale of securities, as defined in the Securities Regulation Code; (b) arises out of the person's conduct as an underwriter, broker, dealer, investment adviser, principal, distributor, mutual fund dealer, futures commission merchant, commodity trading advisor, or floor broker; or (c) arises out of his fiduciary relationship with a bank, quasi-bank, trust company, investment house or as an affiliated person of any of them;
b. Any person who, by reason of misconduct, after hearing, is permanently enjoined by a final judgment or order of the SEC, Bangko Sentral ng Pilipinas (BSP) or any court or administrative body of competent jurisdiction from: (a) acting as underwriter, broker, dealer, investment adviser, principal distributor, mutual fund dealer, futures commission merchant, commodity trading advisor, or floor broker; (b) acting as director or officer of a bank, quasi-bank, trust company, investment house, or investment company; (c) engaging in or continuing any conduct or practice in any of the capacities mentioned in sub- paragraphs (a) and (b) above, or willfully violating the laws that govern securities and
banking activities.
The disqualification will also apply if (a) such person is the subject of an order of the SEC, BSP or any court or administrative body denying, revoking or suspending any registration, license or permit issued to him under the Corporation Code, Securities Regulation Code or any other law administered by the SEC or BSP, or under any rule or
regulation issued by the Commission or BSP; (b) such person has otherwise been restrained to engage in any activity involving securities and banking; or (c) such person is the subject of an effective order of a self-regulatory organization suspending or expelling him from membership, participation or association with a member or participant of the organization;
c. Any person convicted by final judgment or order by a court, or competent administrative body of an offense involving moral turpitude, fraud, embezzlement, theft, estafa, counterfeiting, misappropriation, forgery, bribery, false affirmation, perjury or other fraudulent acts;
d. Any person who has been adjudged by final judgment or order of the SEC, BSP, court, or competent administrative body to have willfully violated, or willfully aided, abetted, counseled, induced or procured the violation of any provision of the Corporation Code, Securities Regulation Code or any other law, rule, regulation or order administered by the SEC or BSP;
e. Any person judicially declared as insolvent;
f. Any person found guilty by final judgment or order of a foreign court or equivalent financial regulatory authority of acts, violations or misconduct similar to any of the acts, violations or misconduct enumerated previously;
g. Conviction by final judgment of an offense punishable by imprisonment for more than six years, or a violation of the Corporation Code committed within five years prior to the date of his election or appointment; and
h. Other grounds as the SEC may provide.
In addition, the following may be grounds for temporary disqualification of a director:
a. Absence in more than fifty percent (50%) of all regular and special meetings of the Board during his incumbency, or any 12-month period during the said incumbency, unless the absence is due to illness, death in the immediate family or serious accident. The disqualification will apply for purposes of the succeeding election;
b. Dismissal or termination for cause as director of any publicly-listed company, public company, registered issuer of securities and holder of a secondary license from the Commission. The disqualification will be in effect until he has cleared himself from any involvement in the cause that gave rise to his dismissal or termination;
c. If the beneficial equity ownership of an independent director in the corporation or its subsidiaries and affiliates exceeds two percent (2%) of its subscribed capital stock. The disqualification from being elected as an independent director is lifted if the limit is later complied with; and
d. If any of the judgments or orders cited in the grounds for permanent disqualification has not yet become final.
The Board will have the overall responsibility in ensuring that there is a group-wide policy and system governing related party transactions (RPTs) and other unusual or infrequently occurring transactions, particularly those which pass certain thresholds of materiality. The policy will include the appropriate review and approval of material or significant RPTs, which guarantee fairness and transparency of the transactions. The policy will encompass all entities within the group, taking into account their size, structure, risk profile and complexity of operations.
The Board will be primarily responsible for approving the selection and assessing the performance of the Management led by the Chief Executive Officer (CEO), and control functions led by their respective heads (Chief Risk Officer, Chief Compliance Officer, and Chief Audit Executive).
The Board will establish an effective performance management framework that will ensure that the Management, including the Chief Executive Officer, and personnel's performance is at par with the standards set by the Board and Senior Management.
The Board will oversee that an appropriate internal control system is in place, including setting up a mechanism for monitoring and managing potential conflicts of interest of Management, board members, and shareholders. The Board will also approve the Internal Audit Charter.
The Board will oversee that a sound enterprise risk management (ERM) framework is in place to effectively identify, monitor, assess and manage key business risks. The risk management framework will guide the Board in identifying units/business lines and enterprise-level risk exposures, as well as the effectiveness of risk management strategies.
The Board will have a Board Charter that formalizes and clearly states its roles, responsibilities and accountabilities in carrying out its fiduciary duties. The Board Charter will serve as a guide to the directors in the performance of their functions and will be publicly available and posted on the company's website.
3. ESTABLISHING BOARD COMMITTEES
Principle 3
Board committees will be set up to the extent possible to support the effective performance of the Board's functions, particularly with respect to audit, risk management, related party transactions, and other key corporate governance concerns, such as nomination and remuneration. The composition, functions and responsibilities of all committees established will be contained in a publicly available Committee Charter.
The Board will establish board committees that focus on specific board functions to aid in the optimal performance of its roles and responsibilities.
The Board will establish an Audit Committee to enhance its oversight capability over the company's financial reporting, internal control system, internal and external audit processes, and compliance with applicable laws and regulations. The committee will be composed of at least three appropriately qualified non-executive directors, the majority of whom, including the Chairman, will be independent. All of the members of the committee must have relevant background, knowledge, skills, and/or experience in the areas of accounting, auditing and finance. The Chairman of the Audit Committee will not be the chairman of the Board or of any other committees.
The Audit Committee has the following duties and responsibilities, among others:
a. Recommends the approval of the Internal Audit Charter ([A Charter), which formally defines the role of Internal Audit and the audit plan as well as oversees the implementation of the IA Charter;
b. Through the Internal Audit (IA) Department, monitors and evaluates the adequacy and effectiveness. of the.corporation's internal control system, integrity of financial reporting, and security of physical and information assets. Well-designed internal control procedures and processes that will provide a system of checks and balances will be in place in order to (a) safeguard the company's resources and ensure their effective utilization, (b) prevent occurrence of fraud and other irregularities, (c) protect the accuracy and reliability of the company’s financial data, and (d) ensure compliance with applicable laws and regulations;
C. Oversees the Internal Audit Department, and recommends the appointment and/or grounds for approval of an internal audit head or Chief Audit Executive (CAE). The Audit Committee will also approve the terms and conditions for outsourcing internal audit services;
d. Establishes and identifies the reporting line of the Internal Auditor to enable him to properly fulfill his duties and responsibilities. For this purpose, he will directly report to the Audit Committee;
e. Reviews and monitors Management's responsiveness to the Internal Auditor's findings and recommendations;
f. Prior to the commencement of the audit, discusses with the External Auditor the nature, scope and expenses of the audit, and ensures the proper coordination if more than one audit firm is involved in the activity to secure proper coverage and minimize duplication of efforts;
g. Evaluates and determines the non-audit work, if any, of the External Auditor, and periodically reviews the non-audit fees paid to the External Auditor in relation to the total fees paid to him and to the corporation's overall consultancy expenses. The committee will disallow any non-audit work that will conflict with his duties as an External Auditor or may pose a threat to his independence. The non-audit work, if allowed, will be disclosed in the corporation's Annual Report and Annual Corporate Governance Report;
h. Reviews and approves the Interim and Annual Financial Statements before their submission to the Board, with particular focus on the following matters:
Any change(s) in accounting policies and practices
Areas where a significant amount of judgment has been exercised
Significant adjustments resulting from the audit
Going concer assumptions
Compliance with accounting standards
Compliance with tax, legal and regulatory requirements
i. Reviews the disposition of the recommendations in the External Auditor's management letter;
j. Performs oversight functions over the corporation's Internal and External Auditors. It ensures the independence of internal and External Auditors, and that both auditors are given unrestricted access to all records, properties and personnel to enable them to perform their respective audit functions;
k. Coordinates, monitors and facilitates compliance with laws, rules and regulations;
I. Recommends to the Board the appointment, reappointment, removal and fees of the External Auditor, duly accredited by the Commission, who undertakes an independent audit of the corporation, and provides an objective assurance on the manner by which the financial statements will be prepared and presented to the stockholders.
The Audit Committee meets with the Board at least every quarter without the presence of the CEO or other management team members, and periodically meets with the head of the internal audit.
The Board will establish a Corporate Governance Committee that will be tasked to assist the Board in the performance of its corporate governance responsibilities, including the functions that were formerly assigned to a Nomination and Remuneration Committee. It will be composed of at least three members, all of whom will be independent directors, including the Chairman.
The Corporate Governance Committee (CG Committee) is tasked with ensuring compliance with and proper observance of corporate governance principles and practices. It has the following duties and functions, among others:
a. Oversees the implementation of the corporate governance framework and periodically reviews the said framework io ensure that it remains appropriate in light of material changes to the corporation's size, complexity and business strategy, as well as its business and regulatory environments;
b. Oversees the periodic perforniance evaluation of the Board and its committees as well as executive management, and conducts an annual self-evaluation of its performance;
c. Ensures that the results of the Board evaluation are shared, discussed, and that concrete action plans are developed and implemented to address the identified areas for improvement;
d. Recommends continuing ecucation/training programs for directors, assignment of tasks/projects to board committees, succession plan for the board members and senior officers, and remuneration packages for corporate and individual performance;
e. Adopts corporate governance policies and ensures that these are reviewed and updated regularly, and consistently implemented in form and substance; and
f. Proposes and plans relevant trainings for the members of the Board.
A Nomination Committee, which may be composed of at least three (3) members and one of whom will be an independent director, will determine the nomination and election process for the company’s directors and has the special duty of defining the genera! profile of board members that the company may need and ensuring appropriate knowledge, competencies and expertise that complement the existing skills of the Board.
A Compensation or Remuneration Committee, which may be composed of at least three (3) members and one of whom will be an independent director, will establish a formal and transparent procedure to develop a policy for determining the remuneration of directors and officers that 1s consistent with the corporation’s culture and strategy as well as the business environment in which it operates.
Subject to a corporation's size, risk profile and complexity of operations, the Board will establish a separate Board Risk Oversight Committee (BROC) that will be responsible for the oversight of a company's Enterprise Risk Management system to ensure its functionality and effectiveness. The BROC will be composed of at least three members, the majority of whom will be independent directors, including the Chairman. The Chairman will not be the Chairman of the Board or of any other committee. At least one member of the committee must have relevant thorough knowledge and experience on risk and risk management.
The Board Risk Oversight Committee (BROC) has the following duties and responsibilities, among others:
a. Develops a formal enterprise risk management plan which contains the following elements: (a2) common language or register of risks, (b) well-defined risk management goals, objectives and oversight, (c) uniform processes of assessing risks and developing Strategies to manage prioritized risks, (d) designing and implementing risk management strategies, and (e) continuing assessments to improve risk strategies, processes and measures;
b. Oversees the implementation of the enterprise risk management plan through a Management Risk Oversight Commiitee. The BROC conducts regular discussions on the company's prioritized and residual risk exposures based on regular risk management teports and assesses how the concerned units or offices are addressing and managing these risks;
C. Evaluates the risk management plan to ensure its continued relevance, comprehensiveness and effectiveness. The BROC revisits defined risk management strategies, looks for emerging or changing maierial exposures, and stays abreast of significant developments that seriously impact the likelihood of harm or loss;
d. Advises the Board on its risk appetite levels and risk tolerance limits;
e. Reviews at least annually the company's risk appetite levels and risk tolerance limits based on changes and developments in the business, the regulatory framework, the external economic and business environment, and when major events occur that are considered to have major impacts on the company;
f. Assesses the probability of each identified risk becoming a reality and estimates its possible significant financial impact and likelihood of occurrence. Priority areas of concern are those risks that are the most likely to occur and to impact the performance and stability of the corporation and its stakeholders;
g. Provides oversight over Management's activities in managing credit, market, liquidity, operational, legal and other risk exposures of the corporation. This function includes regularly receiving information on risk exposures and risk management activities from Management; and
h. Reports to the Board on a regular basis, or as deemed necessary, the company’s material risk exposures, the actions taken to reduce the risks, and recommends further action or plans, as necessary.
Subject to a corporation's size, risk profile and complexity of operations, the Board will establish a Related Party Transaction (RPT) Committee, which will be tasked with reviewing all material related party transactions of the company and will be composed of at least three non-executive directors, two of whom will be independent, including the Chairman.
The following are the functions of the RPT Committee, among others:
a. Evaluates on an ongoing basis existing relations between and among businesses and counterparties to ensure tha: all related parties are continuously identified, RPTs are monitored, and subsequent changes in relationships with counterparties (from non-related to related and vice versa) are captured. Related parties, RPTs and changes in relationships will be reflected in the relevant reports to the Board and regulators/supervisors;
b. Evaluates all material RPTs to ensure that these are not undertaken on more favorable economic terms (e.g., price, commissions, interest rates, fees, tenor, collateral requirement) to such related parties than similar transactions with non- related parties under similar circumstances and that no corporate or business resources of the company are misappropriated or misapplied, and to determine any potential reputational risk issues that may arise as a result of or in connection with the transactions. In evaluating RPTs, the Committee takes into account, among others, the following:
1. The related party's relationship to the company and interest in the transaction;
2. The materiai facts of the proposed RPT, including the proposed aggregate value of such transaction;
3. The benefits to the corporation of the proposed RPT;
4. The availability of other sources of comparable products or services; and
5. An assessment of whether the proposed RPT is on terms and conditions that are comparable to the terms generally available to an unrelated party under similar circumstances. The company will have an effective price discovery system in place and exercise due diligence in determining a fair price for RPTs;
c. Ensures that appropriate disclosure is made, and/or information is provided to regulating and supervising authorities relating to the company's RPT exposures, and policies on conflicts of interest or potential conflicts of interest. The disclosure will include information on the approach to managing material conflicts of interest that are inconsistent with such policies, and conflicts that could arise as a result of the company's affiliation or transactions with other related parties;
d. Reports to the Board of Directors on a regular basis, the status and aggregate exposures to each related party, as well as the total amount of exposures to all related parties;
€. Ensures that transactions with related parties, including write off of exposures are subject to a periodic independent review or audit process; and
f. Oversees the implementation of the system for identifying, monitoring, measuring, controlling, and reporting RPTs, including a periodic review of RPT policies and procedures.
All established committees will be required to have Committee Charters stating in plain terms their respective purposes, memberships, structures, operations, reporting processes, resources and other relevant information. The Charters will provide the standards for evaluating the performance of the Committees. It wili also be fully disclosed on the company's website.
4. FOSTERING COMMITMENT
Principle 4
To show full commitment to the company, the directors will devote the time and attention necessary to properly and effectively perform their duties and responsibilities, including sufficient time to be familiar with the corporation's business.
The directors will attend and actively participate in all meetings of the Board, Committees, and Shareholders in person or through tele-videoconferencing conducted in accordance with the rules and regulations of the Commission, except when justifiable causes, such as, illness, death in the immediate family and serious accidents, prevent them from doing so. In Board and Committee meetings, the director will review meeting materials and if called for, ask the necessary questions or seek clarifications and explanations.
The absence of a director in more than fifty percent (50%) of all regular and special meetings of the Board during his/her incumbency is a ground for disqualification in the succeeding election, unless the absence is due to illness, death in the immediate family, serious accident or other unforeseen or fortuitous events.
The non-executive directors of the Board will concurrently serve as directors to a maximum of five publicly listed companies to ensure that they have sufficient time to fully prepare for meetings, challenge Management's proposals/views, and oversee the iong-term strategy of the company.
A director will notify the Board where he/she is an incumbent director before accepting a directorship in another company.
5. REINFORCING BOARD INDEPENDENCE
Principle 5
The board will endeavor to exercise an objective and independent judgment on all Corporate affairs.
The Board will have at least three independent directors, or such number as to constitute at least one-third of the members of the Board, whichever is higher.
The Board will ensure that its independent directors possess the necessary qualifications and none of the disqualifications for an independent director to hold the position.
An Independent Director refers to a person who, ideally:
a. Is not, or has not been a senior officer or employee of the covered company unless there has been a change in the controlling ownership of the company;
b. Is not, and has not been in the three years immediately preceding the election, a director of the covered company; a director, officer, employee of the covered company’s subsidiaries, associates, affiliates or related companies; or a director, officer, employee of the covered company's substantial shareholders and its related companies;
c. Has not been appointed in the covered company, its subsidiaries, associates, affiliates or related companies as Chairman "Emeritus," "Ex-Officio" Directors/Officers or Members of any Advisory Board, or otherwise appointed in a capacity to assist the Board in the performance of its duties and responsibilities within three years immediately preceding his election;
d. Is not an owner of more than two percent (2%) of the outstanding shares of the covered company, its subsidiaries, associates, affiliates or related companies;
e. Is not a relative of a director, officer, or substantial shareholder of the covered company ot any of its related companies or of any of its substantial shareholders. For this purpose, relatives include spouse, parent, child, brother, sister and the spouse of such child, brother or sister;
f. is not acting as a nominee or representative of any director of the covered company or any of its related companies;
g. {s not a securities broker-dealer of listed companies and registered issuers of securities, "Securities broker-dealer" refers to any person holding any office of trust and responsibility in a broker-dealer firm, which includes, among others, a director, officer, principal stockholder, nominee of the firm to the Exchange, an associated person or salesman, and an authorized clerk of the broker or dealer;
h. ls not retained, either in his personal capacity or through a firm, as a professional adviser, auditor, consultant, agent or counsel of the covered company, any of its related companies or substantial shareholder, or is otherwise independent of Management and free from any business or other relationship within the three years immediately preceding the date of his election;
i. Does not engage or has not engaged, whether by himself or with other persons or through a firm of which he is a partner, director or substantial shareholder, in any transaction with the covered company or any of its related companies or substantial shareholders, other than such transactions that are conducted at arm's length and could not materially interfere with or influence the exercise of his independent judgment;
j. Is not affiliated with any non-profit organization that receives significant funding from the covered company or any of its related companies or substantial shareholders; and
k. Is not employed as an executive officer of another company where any of the covered company’s executives serve as directors.
Related companies, as used in this section, refer to (a) the covered entity's holding/parent company; (b) its subsidiaries; and (c) subsidiaries of its holding/parent company.
The Board's independent directors will serve for a maximum cumulative term of nine years. After which, the independent director will be perpetually barred from re- election as such in the same company, but may continue to qualify for nomination and election as a non-independent director. In the instance that a company wants to retain an independent director who has served for nine years, the Board will provide meritorious justification/s and seek shareholders' approval during the annual shareholders' meeting.
The positions of Chairman of the Board and Chief Executive Officer will, as much as practicable, be held by separate individuals and each will have clearly defined responsibilities to foster an appropriate balance of power, increased accountability and better capacity for independent decision making by the Board. A clear delineation of functions will be made between the Chairman of the Board and the Chief Executive Officer upon their election. If the positions of the
Chairman of the Board and the Chief Executive Officer are held by one person, the proper checks and balances will be laid down to ensure that the Board gets the benefit of independent views and prospectives.
The Chief Executive Officer (CEO) has the following roles and responsibilities, among others:
a. Determines the corporation's strategic direction and formulates and implements its strategic plan on the direction of the business;
b. Communicates and implements the corporation's vision, mission, values and overall strategy and promotes any organization or stakeholder change in relation to the same:
c. Oversees the operations of the corporation and manages human and financial resources in accordance with the strategic plan;
d. Has a good working knowledge of the corporation's industry and market and keeps up-to- date with its core business purpose;
e. Directs, evaluates and guides the work of the key officers of the corporation;
f. Manages the corporation's resources prudently and ensures a proper balance of the same;
g. Provides the Board with timely information and interfaces between the Board and the employees;
h. Builds the corporate culture and motivates the employees of the corporation; and
i. Serves as the link between internal operations and external stakeholders.
The Board will designate a lead director among the independent directors if the Chairman of the Board is not independent, including if the positions of the Chairman of the Board and Chief Executive Officer are held by one person.
The functions of the lead director include, among others, the following:
a. Serves as an intermediary between the Chairman and the other directors when necessary;
b. Convenes and chairs meetings of the non-executive directors; and
c. Contributes to the performance evaluation of the Chairman, as required.
A director with a material interest in any transaction affecting the corporation will abstain from taking part in the deliberations for the same.
The non-executive directors (NEDs) will have separate periodic meetings with the external auditor and heads of the internal audit, compliance and risk functions, without any executive directors present to ensure that proper checks and balances are in place within the corporation. The meetings will be chaired by the lead independent director.
6. ASSESSING BOARD PERFORMANCE
Principle 6
The best measure of the Board's effectiveness is through an assessment process. The Board will regularly carry out evaluations to appraise its performance as a body, and assess whether it possesses the right mix of backgrounds and competencies.
The Board will conduct an annual self-assessment of its performance, including the performance of the Chairman, individual members and committees. Every three years, the assessment will be supported by an external facilitator.
The Board will have in place a system that provides, at the minimum, criteria and process to determine the performance of the Board, the individual directors, committees and such system will allow for a feedback mechanism from the shareholders.
7. STRENGTHENING BOARD ETHICS
Principle 7
Members of the Board are duty-bound to apply high ethical standards, taking into account the interests of all stakeholders.
The Board will adopt a Code of Business Conduct and Ethics, which would provide standards for professional and ethical behavior, as well as articulate acceptable and unacceptable conduct and practices in internal and external dealings. The Code will be properly disseminated to the Board, senior management and employees. It will also be disclosed and made available to the public through the company website.
The Board will ensure the proper and efficient implementation and monitoring of compliance with the Code of Business Conduct and Ethics and internal policies.
DISCLOSURE AND TRANSPARENCY
8. ENHANCING COMPANY DISCLOSURE POLICIES AND PROCEDURES
Principle 8
The company will establish corporate disclosure policies and procedures that are practical and in accordance with best practices and regulatory expectations.
The Board will establish corporate disclosure policies and procedures to ensure a comprehensive, accurate, reliable and timely report to shareholders and other stakeholders that gives a fair and complete picture of a company's financial condition, results and business operations.
The company will have a policy requiring all directors and officers to disclose/report to the company any dealings in the company's shares within three business days.
The Board will fully disclose all relevant and material information on individual board members and key executives to evaluate their experience and qualifications, and assess any potential conflicts of interest that might affect their judgment.
The company will provide a clear disclosure of its policies and procedure for setting Board and executive remuneration, as well as the level and mix of the same in the Annual Corporate Governance Report. Also, the company will disclose the remuneration on an individual basis, including termination and retirement provisions.
The company will disclose its policies governing Related Party Transactions (RPTs) and other unusual or infrequently occurring transactions. The material or significant RPTs reviewed and approved during the year will be disclosed in its Annual Corporate Governance Report
The company will make a full, fair, accurate and timely disclosure to the public of every material fact or event that occurs, particularly on the acquisition or disposal of significant assets, which could adversely affect the viability or the interest of its shareholders and other stakeholders. Moreover, the Board of the offeree company will appoint an independent party to evaluate the fairness of the transaction price on the acquisition or disposal of assets.
The company's corporate governance policies, programs and procedures in the Manual on the Corporate Governance. will be submitted to the regulators and posted on the company's website.
9. STRENGTHENING THE EXTERNAL AUDITOR'S INDEPENDENCE AND IMPROVING AUDIT QUALITY
Principle 9
The company will establish standards for the appropriate selection of an external auditor, and exercise effective oversight of the same to strengthen the external auditor's independence and enhance audit quality.
The Audit Committee will have a robust process for approving and recommending the appointment, reappointment, removal, and fees of the external auditor. The appointment, reappointment, removal, and fees of the external auditor will be recommended by the Audit Committee, approved by the Board and ratified by the shareholders. For removal of the external auditor, the reasons for removal or change will be disclosed to the regulators and the public through the company website and required disclosures.
The Audit Committee Charter will include the Audit Committee's responsibility on assessing the integrity and independence of external auditors and exercising effective oversight to review and monitor the external auditor's independence and objectivity and the effectiveness of the audit process, taking into consideration relevant Philippine professional and regulatory. requirements. The Charter will also contain the Audit Committee's responsibility on reviewing and monitoring the external auditor's suitability and effectiveness on an annual basis.
The company will disclose the nature of non-audit services performed by its external auditor in the Annual Report to deal with the pctential conflict of interest. The Audit Committee will be alert for any potential conflict of interest situations, given the guidelines or policies on non-audit services, which could be viewed as impairing the external auditor’s objectivity.
10. INCREASING FOCUS ON NON-FINANCIAL AND SUSTAINABILITY REPORTING
Principle 10
The company will ensure that the material and reportable non-financial and sustainability issues are disclosed.
The Board will have a clear and focused policy on the disclosure of non-financial information, with emphasis on the management of economic, environmental, social and governance (EESG) issues of its business, which underpin sustainability. The company will adopt a globally recognized standard/framework in reporting sustainability and non-financial issues.
11. PROMOTING A COMPREHENSIVE AND COST-EFFICIENT ACCESS TO RELEVANT INFORMATION
Principle 11
The company will maintain a comprehensive and cost-efficient communication channel for disseminating relevant information. This channel is crucial for informed decision-making by investors, stakeholders and other interested users.
The company will include media and analysts’ briefings as channels of communication to ensure the timely and accurate dissemination of public, material and relevant information to its shareholders and other investors.
INTERNAL CONTROL SYSTEM AND RISK MANAGEMENT FRAMEWORK
12. STRENGTHENING THE INTERNAL CONTROL SYSTEM AND ENTERPRISE RISK MANAGEMENT FRAMEWORK
Principle 12
To ensure the integrity, transparency and proper governance in the conduct of its affairs, the company will have a strong and effective internal control system and enterprise risk management framework.
The Company will have an adequate and effective internal control system and an enterprise risk management framework in the conduct of its business, taking into account its size, risk profile and complexity of operations.
The Company will have in place an independent internal audit function that provides an independent and objective assurance, and consulting services designed to add value and improve the company's operations.
The following are the functions of the internal audit, among others:
a. Provides an independent risk-based assurance service to the Board, Audit Committee and Management, focusing on reviewing the effectiveness of the governance and control processes in (1) promoting the right values and ethics, (2) ensuring effective performance management and accounting in the organization, (3) communicating risk and control information, and (4) coordinating the activities and information among the Board, external and internal auditors, and Management;
b. Performs regular and special audit as contained in the annual audit plan and/or based on the company's risk assessment;
c. Performs consulting and advisory services related to governance and control as appropriate for the organization;
d. Performs compliance audit of relevant laws, rules and regulations, contractual obligations and other commitments, which could have a significant impact on the organization;
e. Reviews, audits and assesses the efficiency and effectiveness of the internal control system of all areas of the company;
f. Evaluates operations or programs to ascertain whether results are consistent with established objectives and goals, and whether the operations or programs are being carried out as planned;
g. Evaluates specific operations at the request of the Board or Management, as appropriate; and
h. Monitors and evaluates governance processes.
A company's internal audit activity may be a fully resourced activity housed within the organization or may be outsourced to qualified independent third party service providers.
Subject to a company's size, risk profile and complexity of operations, it will have a qualified Chief Audit Executive (CAE) appointed by the Board. The CAE will oversee and be responsible for the internal audit activity of the organization, including that portion that is outsourced to a third party service provider. In case of a fully outsourced internal audit activity, a qualified independent executive or senior management personnel will be assigned the responsibility for managing the fully outsourced internal audit activity.
The following are the responsibilities of the CAE, among others:
a. Periodically reviews the internal audit charter and presents it to senior management and the Board Audit Committee for approval;
b. Establishes a risk-based internal audit plan, including policies and procedures, to determine the priorities of the internal audit activity, consistent with the organization's goals;
c. Communicates the internal audit activity's plans, resource requirements and impact of resource limitations, as well as significant interim changes, to senior management and the Audit Committee for review and approval;
d. Spearheads the performance of the internal audit activity to ensure it adds value to the organization;
e. Reports periodically to the Audit Committee on the internal audit activity's performance relative to its plan; and
f. Presents findings and recommendations to the Audit Committee and gives advice to senior management and the Board on how to improve internal processes.
Subject to its size, risk profile and complexity of operations, the company will have a separate risk management function to identify, assess and monitor key risk exposures.
The risk management function involves the following activities, among others:
a. Defining a nsk management strategy;
b. Identifying and analyzing key risks exposure relating to economic, environmental, social and governance (EESG) factors and the achievement of the organization's strategic objectives;
c. Evaluating and categorizing each identified risk using the company's predefined risk categories and parameters;
d. Establishing a risk register with clearly defined, prioritized and residual risks;
e. Developing a risk mitigation plan for the most important risks to the company, as defined by the risk management strategy;
f. Communicating and reporting significant risk exposures including business risks (i.e., strategic, compliance, operational, financial and reputational risks), control issues and risk mitigation plan to the Board Risk Oversight Committee; and
g. Monitoring and evaluating the effectiveness of the organization's risk management processes.