GGSR CHAPT 4

• Corporation


  An entity created by law, company law dictates how it is created or incorporated
• Law


  A mechanism that protects people's fundamental rights, establishes order, resolves disputes, and sets standards
• Business law (commercial law)

  A body of law that deals with corporate contracts, manufacture or sale of goods and services, employment, labor relations, and many others
• Knowledge of the law is essential in running organizations that are socially responsible and governed well
• Regulation


  A legal system that controls and regulates the business activities of a certain country
• Corporations


  Legal entities that have similar rights accorded to that of a person, they are allowed to perform functions that humans make
• Corporate governance


  Deals with external regulations (legal) and internal control of the corporation through legal means by its board of directors
• CSR (Corporate Social Responsibility)


  An internal commitment of a company to behave ethically and satisfy the needs of its various stakeholders, a voluntary initiative in the West for which no legislation has been made into law
• Economics


  Describes how societies produce and consume goods and services
• Milton Friedman


  A foremost economist of the 20th century who suggested that more money infused in an economic system lessens the degree of government involvement, and was a staunch advocate of free markets because he believes that free markets raise the standard of living and not from central planning by the government
• Free market


  A basic form of capitalism (monetary goods and services owned by private individuals and companies) that restricts government intervention in the economy, where transactions are constrained by regulation that seeks to protect the players in the markets and the general public
• Regulation is needed to produce revenues for the government to support economic programs and policies, as part of what businesses pay (i.e. taxes, licenses, and permits) goes to the government agencies that perform oversight functions
• The Revised G20/OECD principles (2015)

  Principle 1: The corporation should have a corporate governance framework that promotes transparent and fair markets that abide by the rule of law.

  Principle 2: The rights and equitable treatment of shareholders and key ownership functions. The corporate governance framework should be able to protect and facilitate the exercise of shareholder rights. It should also ensure the equitable treatment of shareholders, including minority and foreign shareholders.

  Principle 3: Institutional investors, stock markets, and other intermediaries, The corporate governance framework should provide sound incentives throughout the investment chain and allow stock markets and other intermediaries to engage and contribute to good corporate governance.

  Principle 4: The role of stockholders in corporate governance. The corporate governance framework should recognize the rights of all stakeholders and promote active cooperation between corporations and stakeholders in sustaining financially sound companies.

  Principle 5: Disclosure and transparency. The framework should ensure timely and accurate disclosure is made available to investors and the public. This includes the financial situation, performance, ownership, and governance of the corporation.

  Principle 6: Responsibilities of the board. The corporate governance framework should ensure the company's proper strategic guidance, effective monitoring of management by the board of directors, and the board's accountability to the company and shareholders.
• Philippine Corporation Code


  Approved in 1980, prescribes the rules and regulations in the establishment and operation of corporations in the Philippines, including the incorporation of private corporations, regulation of the board of directors, and the powers and capacity of corporations, by-laws, and board meetings. It was revised in 2019 to improve the ease of doing business in the country and align with international business community standards.
• The notable changes in the revised Philippine Corporation Code include: 1) Removal of the minimum number of incorporators, 2) Required minimum P1,000,000.00 capital stock on stock corporations, 3) Removal of the 50 year corporate term (now exists indefinitely), 4) Creation of one person corporation (OPC), 5) Use of internet to attend a meeting and filing of reports, and 6) Power of the Securities and Exchange Commission (SEC) to remove disqualified directors or trustees.
• Political issues and corporate governance


  Good governance is not simply limited to addressing business disruptions and creating a competitive advantage through strategy, but also includes addressing issues like climate change, healthcare, income taxes, bribery in government, etc. that concern stakeholders. Changes in government policy and regulations can affect the operational viability or even the survival of a corporation, so the board should be aware of the uncertain and volatile environment and be prepared to manage the changes to mitigate risks.
• The global pandemic that reached its peak in the first quarter of 2020 shows how a healthcare issue as a political issue affects a company, as Covid-19 had put a great strain on business and financial systems worldwide. Another example is the TRAIN law (Tax Reform for Acceleration and Inclusion) legislated and passed in 2017, which had several implications for various industries and companies had to adjust to the changes.
• Environmental issues like global warming caused by pollution and greenhouse gas emissions have gained immense public support in recent years, and the pressure from the public and advocacy groups all over the world on a more sustainable way of conducting business had created an impact on how large companies manage their resources.
• Solace Hotel


  A 3 star hotel in Makati City, owned and operated by AMsamm Property and Development Inc. The CEO, Ms Mylene Co, has been in the garment/retail/trading sector for over thirty years and established the hotel four years ago. She felt the need to review and improve the board structure.
• Solace Hotel currently has the following in place: 1) Board of Directors, 2) Certification of incorporation and other documentary requirements, 3) Code of conduct, 4) Company by-laws, 5) SEC filings, and 6) Audited financial statements. However, the hotel currently has no corporate governance guidance in place.
• Solace Hotel's board currently has 5 executive directors, four of which are family members and one executive manager. The CEO's desire to include an outside independent director is under study by the board.