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Corporate
Governance
 organization created by a group of shareholders who have
ownership of the corporation.
it deals with the processes and systems by which an
organization or society operates.
Corporate
Governance
refers to the system by which corporations are directed and
controlled
Specifies the distribution of rights and responsibilities
among different participants in the corporation and specifies
the rules and procedures for making decisions in corporate
affairs.
Corporate Governance
Evolution of Corporate Governance: Wave
of High Profile Scandals, Fraud, Crisis
1990s - CEO dismissals in the US (IBM, Kodak, etc.); Financial
collapse of UK corporates (Polly Peck, Bank of Credit and
Commerce Int’l, Maxwell Group,etc.)
1997 - Asian Financial Crisis
2000 - Massive bankruptcies and criminal malfeasance
(Enron, Worldcom, AIG, AOL, Arthur Andersen, etc.)
2008 - US Sub-prime Crisis goes global
2011 - Greece crises and impacts Eurozone
2012 - JP Morgan’s “sloppy” deals, Barclays’ Libor-rigging scandal
Reactions/Interventions to address crisis
1992 - The Cadbury Report issued. Defined Boards’ responsibilities
and accounting systems.
2000 - OECD’s principles of corporate governance issued
2002 - Sarbanes and Oxley passed into law in the US
2008 - Bailouts of “too big to fail” corporate by governments
• e.g. Troubled Asset Relief Program in the US
2009 - Dodd-Frank Wall Street Reform and Consumer Protection
Act
• Current - tighter monetary and financial policies, risk management
Corporate Governance in the Philippines
2001 - World Bank & IMF Report: Corporate Governance
Assessment of the Philippines based on OECD Principles
• High concentration of wealth by limited number of families
• Weak enforcement of corporate law and capital market
regulations
• Weak corporate boards
• Need to professionalize accounting and auditing sectors
• Poor disclosures of financial and non-financial information
• Unprotected rights of minority shareholders
SEC, PSE and BSP Response
• SEC issued Corporate Governance Code in 2002, amended in
2009
• Required training and defined disqualifications of Directors
• Required accreditation of external auditors, term of managing
partner limited
• Required setting up of various Board Committees
• Imposed minimum of 2 independent directors in Boards
• Required Audit Committees to Self-Assess Performance
Corporate Governance Parties
Shareholders
Those that
own the
company
Directors
Guardians of
the companies
assets for the
shareholders
Manager
Who use the
companies
assets
Accountability
ANSWERABLE for the actions/decisions
Fairness
Stakeholders Stakeholders
•EQUAL-HANDED
•BALANCED
•NO BIAS
Ensuring the protection of shareholders’ rights and the
enforceability of contracts with service/resource providers
Transparency
Open & clear DISCLOSURE
Not CONCEALING info
•Requiring timely disclosure of adequate information concerning
corporate financial performance
Independence
Independent
Free from conflict of
interest
Vested Interest
Influences
Connection/Relationship
Decisions/actions
• Better access to external finance
• Lower costs of capital – interest rates on loans
• Improved company performance – sustainability
• Reduced risk of corporate crisis and scandals
Why do we need Corporate
Governance?
CODE OF CORPORATE GOVERNANCE
• Composition of the Board
– composed of at least 5 but not more than15 members
elected by shareholders.
– Public companies shall have at least 2 independent
directors
Board Governance
• The Chairman and the Chief Executive Officer
– Ensure an appropriate balance of power, increased
accountability and greater capacity of the Board for
independent decision-making.
 Provide vision and mission
 Schedule meeting
 Assist in ensuring compliance with company’s
guidelines on corporate governance
• Directors
– Should act in the best interest of the corporation in a manner
characterized by transparency, accountability and fairness
 Install process of selection to ensure a mix of competent
directors, each of whom can add value and contribute
independent judgment to the formulation of sound corporate
strategies and policies.
Determines corporation’s purpose and value as well as
strategies and general policies
• Audit Committee
– Composed of at least 3 members, with accounting &
finance background.
 manage credit, market, liquidity, operational, legal and
other risk of the corporation.
 review quarterly, half year & annual financial
statements
Board Committee
• Nomination Committee
– May be composed of at least 3 members
 review and evaluate the qualifications of all persons
nominated to the Board.
• Compensation or Remuneration Committee
– May be composed of at least 3 members
Develop policy on remuneration and ensure that
compensation is consistent with corporations culture and
strategy,.
• Corporate Secretary
1. Voting Right
2. Pre-emptive right
3. Power of inspection
4. Right to information
5. Right to dividends
6. Appraisal rights
Stockholders Right and Protection
of Interests
THANK YOU!

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Corporate governance

  • 2.  organization created by a group of shareholders who have ownership of the corporation. it deals with the processes and systems by which an organization or society operates. Corporate Governance
  • 3. refers to the system by which corporations are directed and controlled Specifies the distribution of rights and responsibilities among different participants in the corporation and specifies the rules and procedures for making decisions in corporate affairs. Corporate Governance
  • 4. Evolution of Corporate Governance: Wave of High Profile Scandals, Fraud, Crisis 1990s - CEO dismissals in the US (IBM, Kodak, etc.); Financial collapse of UK corporates (Polly Peck, Bank of Credit and Commerce Int’l, Maxwell Group,etc.) 1997 - Asian Financial Crisis 2000 - Massive bankruptcies and criminal malfeasance (Enron, Worldcom, AIG, AOL, Arthur Andersen, etc.) 2008 - US Sub-prime Crisis goes global 2011 - Greece crises and impacts Eurozone 2012 - JP Morgan’s “sloppy” deals, Barclays’ Libor-rigging scandal
  • 5. Reactions/Interventions to address crisis 1992 - The Cadbury Report issued. Defined Boards’ responsibilities and accounting systems. 2000 - OECD’s principles of corporate governance issued 2002 - Sarbanes and Oxley passed into law in the US 2008 - Bailouts of “too big to fail” corporate by governments • e.g. Troubled Asset Relief Program in the US 2009 - Dodd-Frank Wall Street Reform and Consumer Protection Act • Current - tighter monetary and financial policies, risk management
  • 6. Corporate Governance in the Philippines 2001 - World Bank & IMF Report: Corporate Governance Assessment of the Philippines based on OECD Principles • High concentration of wealth by limited number of families • Weak enforcement of corporate law and capital market regulations • Weak corporate boards • Need to professionalize accounting and auditing sectors • Poor disclosures of financial and non-financial information • Unprotected rights of minority shareholders
  • 7. SEC, PSE and BSP Response • SEC issued Corporate Governance Code in 2002, amended in 2009 • Required training and defined disqualifications of Directors • Required accreditation of external auditors, term of managing partner limited • Required setting up of various Board Committees • Imposed minimum of 2 independent directors in Boards • Required Audit Committees to Self-Assess Performance
  • 8. Corporate Governance Parties Shareholders Those that own the company Directors Guardians of the companies assets for the shareholders Manager Who use the companies assets
  • 9.
  • 11. Fairness Stakeholders Stakeholders •EQUAL-HANDED •BALANCED •NO BIAS Ensuring the protection of shareholders’ rights and the enforceability of contracts with service/resource providers
  • 12. Transparency Open & clear DISCLOSURE Not CONCEALING info •Requiring timely disclosure of adequate information concerning corporate financial performance
  • 13. Independence Independent Free from conflict of interest Vested Interest Influences Connection/Relationship Decisions/actions
  • 14. • Better access to external finance • Lower costs of capital – interest rates on loans • Improved company performance – sustainability • Reduced risk of corporate crisis and scandals Why do we need Corporate Governance?
  • 15. CODE OF CORPORATE GOVERNANCE
  • 16. • Composition of the Board – composed of at least 5 but not more than15 members elected by shareholders. – Public companies shall have at least 2 independent directors Board Governance
  • 17. • The Chairman and the Chief Executive Officer – Ensure an appropriate balance of power, increased accountability and greater capacity of the Board for independent decision-making.  Provide vision and mission  Schedule meeting  Assist in ensuring compliance with company’s guidelines on corporate governance
  • 18. • Directors – Should act in the best interest of the corporation in a manner characterized by transparency, accountability and fairness  Install process of selection to ensure a mix of competent directors, each of whom can add value and contribute independent judgment to the formulation of sound corporate strategies and policies. Determines corporation’s purpose and value as well as strategies and general policies
  • 19. • Audit Committee – Composed of at least 3 members, with accounting & finance background.  manage credit, market, liquidity, operational, legal and other risk of the corporation.  review quarterly, half year & annual financial statements Board Committee
  • 20. • Nomination Committee – May be composed of at least 3 members  review and evaluate the qualifications of all persons nominated to the Board. • Compensation or Remuneration Committee – May be composed of at least 3 members Develop policy on remuneration and ensure that compensation is consistent with corporations culture and strategy,. • Corporate Secretary
  • 21. 1. Voting Right 2. Pre-emptive right 3. Power of inspection 4. Right to information 5. Right to dividends 6. Appraisal rights Stockholders Right and Protection of Interests