GBRIC

• Governance


  The process of decision-making and the process by which decisions are implemented (or not implemented) through the exercise of power or authority by leaders of the country and / or organizations
• Characteristics of good governance

  • Participation
  • Rule of law
  • Transparency
  • Responsiveness
  • Consensus oriented
  • Equity and inclusiveness
  • Effectiveness & efficiency
  • Accountability
• Corporate governance


  A system of rules, practices and processes by which business corporations are directed and controlled
• Basic principles of effective corporate governance

  • Transparency and full disclosure
  • Accountability
  • Corporate control
• There is no simple universal formula for good governance
• Governance starts with the shareholders/owners delegating responsibilities through an elected board of directors to management and, in turn, to operating units with oversight and assistance from internal auditors
• The board of directors and its audit committee oversee management and, in that role, are expected to protect the shareholders' rights
• Management can influence who sits on the board and the audit committee as well as other governance controls that might be put into place
• Companies have responsibilities to other stakeholders, not just shareholders
• Stakeholders can be anyone who is influenced, whether directly or indirectly, by the actions of a company
• Management and the board have responsibilities to act within the laws of society and to meet various requirements of creditors, employees and the stakeholders
• Regulators are a response to society's wishes that organizations, in their pursuit of returns for their owners, act responsively and operate in compliance with relevant laws
• What owners want accountability on

  • Financial performance
  • Financial transparency - financial statements that are clear with full disclosure and that reflect the underlying economics of the company
  • Stewardship, including how well the company protects and manages the resources entrusted to it
  • Quality of internal control
  • Composition of the board of directors and the nature of its activities, including information on how well management incentive systems are aligned with the shareholders' best interests
• Management has always had the primary responsibility for the accuracy and completeness of an organization's financial statements
• From a financial reporting perspective, it is management's responsibility to choose which accounting principles best portray the economic substance of company transactions, implement a system of internal control that assures completeness and accuracy in financial reporting, and ensure that the financial statements contain accurate and complete disclosure
• Related parties involved in corporate governance

  • Shareholders
  • Board of directors
  • Non-executive or independent directors
  • Management
  • Audit committees of the board of directors
  • Regulators
  • External auditors
• Shareholders


  • Provide effective oversight through election of board members, approval of major initiatives
• Specific activities of the board of directors

  • Establishing the organization's vision, mission values and ethical standards
  • Delegating an appropriate level of authority to management
  • Demonstrating leadership
  • Assuming responsibility for the business relationship with CEO including his or her appointment, succession, performance remuneration and dismissal
  • Overseeing aspects of the employment of the management team
  • Recommending auditors and new directors to shareholders
  • Ensuring effective communication with shareholders other stakeholders
  • Crisis management
  • Appointment of the CFO and corporate secretary
  • Ensuring the organization's long-term viability and enhancing the financial position
  • Formulating and overseeing implementation of corporate strategy
  • Approving the plan, budget and corporate policies
  • Agreeing key performance indicators (KPIS)
  • Monitoring / assessing assessment, performance of the organization, the board itself, management and major projects
  • Overseeing the risk management framework and monitoring business risks
  • Monitoring developments in the industry and the operating environment
  • Oversight of the and organization, including its control and accountability systems
  • Approving and monitoring the progress of major capital expenditure, capital management and acquisitions and divestitures
  • Understanding and protecting the organization's financial position
  • Requiring and monitoring legal and regulatory compliance including compliance with accounting standards, unfair trading legislations, occupational health and safety and environmental standards
  • Approving annual financial reports, annual reports and other public documents / sensitive reports
  • Ensuring an effective system of internal controls exists and is operating as expected
• Specific activities of non-executive or independent directors

  • To understand the organization, its business, its operating environment and its financial position
  • To apply expertise and skills in the organization's best interests
  • To assist management to keep performance objectives at the top of its agenda
  • To understand that his/her role is not to act as auditor, nor to act as a manager
  • To respect the collective, cabinet nature of the board's decisions
  • To prepare for and attend board meetings
  • To seek information on a timely basis
  • To ensure that he/she is in a position to contribute to the discussion when a matter comes before the board, or alert the chairman in advance to the need for further information
  • To ask appropriate questions relative to operations
• Specific activities of management


  • Recommend the strategic direction and translate the strategic plan into the operations of the business
  • Manage the company's human, physical and financial resources to achieve the organization's objectives - run the business
  • Assume day to day responsibility for the organization's conformance with relevant laws and regulations and its compliance framework
  • Develop, implement and manage the organization's risk management and internal control frameworks
  • Develop, implement and update policies and procedures
  • Be alert to relevant trends in the industry and the organization's operating environment
  • Provide information to the board
  • Act as conduit between the board and the organization
  • Developing financial and other reports that meet public, stakeholder and regulatory requirements
• Specific activities of the audit committee of the board of directors

  • Selecting the external audit firm
  • Approving any non-audit work performed by the audit firm
  • Selecting and / or approving the appointment of the Chief Audit Executive (Internal Auditor)
  • Reviewing and approving the scope and budget of the internal audit function
  • Discussing audit findings with internal auditor and external auditor and advising the board (and management) on specific actions that should be taken
• Specific activities of the Board of Accountancy

  • Conducting CPA Licensure Board Examinations
  • Approving accounting principles
  • Approving auditing standards
  • Interpreting previously issued standards implementing quality control processes to ensure audit quality
  • Educating members on audit and accounting requirements
• Specific activities of the Securities and Exchange Commission

  • Reviewing filings with the SEC
  • Interacting with the Financial Reporting Standards Council in setting accounting standards
  • Specifying independence standards required of auditors that report on public financial statements
  • Identify corporate frauds, investigate causes, and suggest remedial actions
• Specific activities of external auditors

  • Audit of public company financial statements
  • Audits of nonpublic company financial statements
  • Other assurance and advisory services
• Control processes to ensure audit quality
• Educating members on audit and accounting requirements
• Securities and Exchange Commission (SEC)

  • Ensure the accuracy, timeliness and fairness of public reporting of financial and other information for public companies
• SEC activities


  1. Reviewing filings with the SEC

  2. Interacting with the Financial Reporting Standards Council in setting accounting standards

  3. Specifying independence standards required of auditors that report on public financial statements

  4. Identify corporate frauds, investigate causes, and suggest remedial actions
• External Auditors


  • Perform audits of company financial statements to ensure that the statements are free of material misstatements including misstatements that may be due to fraud
• External Auditor activities


  1. Audit of public company financial statements

  2. Audits of nonpublic company financial statements

  3. Other services such as tax or consulting
• Internal Auditors


  • Perform audits of companies for compliance with company policies and laws, audits to evaluate the efficiency of operations, and periodic evaluation and tests of controls
• Internal Auditor activities


  1. Reporting results and analyses to management (including operational management) and audit committees

  2. Evaluating internal controls
• The SEC Code of Corporate Governance for Publicly-Listed Companies (CG Code for PLCs) was released on November 22, 2016 during the 3rd Annual SEC-PSE Corporate Governance Forum
• The CG Code for PLCs is the first of a series of CG Codes for different types of Philippine corporations under SEC supervision
• The CG Code for PLCs is intended to raise the corporate governance standards of Philippine corporations to a level at par with its regional and global counterparts
• The latest G20/OECD Principles of Corporate Governance and the ASEAN Corporate Governance Scorecard were used as key reference materials in the drafting of the CG Code for PLCs
• "Comply or explain" approach

  Voluntary compliance with mandatory disclosure
• The CG Code for PLCs does not prescribe a "one size fits all" framework, and the Principle of Proportionality will be considered in the application of its provisions
• Principles


  High-level statements of corporate governance good practices, and are applicable to all companies
• Recommendations


  Objective criteria that are intended to identify the specific features of corporate governance good practice that are recommended for companies operating according to the Code