Finding True North Corporate Governance Philippines

PwC GGAPP Philippines
Corporate Governance Survey
Finding the true north

Advancing corporate
governance in the Philippines
www.pwc.com/ph
Foreword
Message from
the SEC Chairperson
My warmest congratulations to In addition, the SEC believes that the

the Good Governance Advocates results of this Survey would be most
and Practitioners of the Philippines beneficial in the implementation
(GGAPP) on the success of its 2016 of the 2016 Code of Corporate
Code of Corporate Governance Governance for PLCs. The new
Survey. The GGAPP has been a Code aims to make Philippine
consistent partner of the Securities corporate governance standards at
and Exchange Commission (SEC) par with regional and international
in its advocacy to promote good standards and this Survey would
corporate governance for Philippine be a useful tool for providing both
corporations. As actual practitioners the SEC and PLCs the necessary
of good corporate governance from information on the focus areas to
various publicly listed companies be addressed in the advancement of
(PLCs), GGAPP has consistently corporate governance for Philippine
provided the SEC invaluable insights corporations.
Atty. Teresita J. Herbosa
Chairperson, Securities & Exchange on the application of best corporate
Commissions (SEC) governance and ethical practices. The promotion of good corporate
Moreover, GGAPP has contributed governance is an uphill battle.
greatly to both the SEC Philippine However, with partners such as
Corporate Governance Blueprint GGAPP assisting SEC in instilling
and the 2016 Code of Corporate the proper corporate governance
Governance for PLCs. foundation in PLCs, it is certain that
the time will come when corporate
This recent initiative of conducting governance will be second nature to
the 2016 Code of Corporate companies and due recognition will
Governance Survey in partnership be given to the benefits of compliance
with Isla Lipana & Co./PwC with good practices.
Philippines highlights GGAPP’s
desire to continuously contribute Congratulations once again to GGAPP
to the development of appropriate and looking forward to a continuing
and progressive rules, standards and partnership in the promotion of good
practices on good governance. It is a corporate governance!
testament to the group’s increasing
role in the improvement of the
Philippine corporate governance
ecosystem.
ii Finding the true north: Advancing corporate governance in the Philippines

Message from
the PSE President
Congratulations to the Good companies that practice it are highly

Governance Advocates and transparent about their business
Practitioners of the Philippines thereby making the business easy
(“GGAPP”) and Isla Lipana & Co. to assess and evaluate. This in turn
/ PwC Philippines (“PwC”) for enables the company to win the
their successful conduct of the PH trust of its stakeholders including
Governance Survey in the fourth investors, making it easy for such
quarter of 2016. The Philippine Stock company to raise funds from the
Exchange (“PSE”) fully supported this capital market. Companies practicing
undertaking not only by promoting corporate governance usually
and encouraging its roster of publicly outperform those that don’t.
al listed companies to participate but
t fin Like most of the companies who
n ot ye by participating in the survey as a
o
Phot listed company and meticulously participated in said survey, PSE is
answering the survey questions. happy that the results are finally out.
PSE believed this survey was very The results will provide Philippine
Ramon S. Monzon
President and Chief Executive important to form a well-founded companies with a clearer path on
Officer, Philippine Stock Exchange basis for assessing the present state their journey to faithful compliance
(PSE)
of corporate governance among with the new Governance Code.
Philippine companies and their
Mabuhay GGAPP and PwC!
readiness to comply with the new
Corporate Governance Code for
Listed Companies, which took effect
last January 2017.
Corporate governance is something

PSE strongly subscribes to and it
actively supports several initiatives
to improve the corporate governance
of publicly listed companies.
Some companies equate corporate
governance with increased costs
and additional burden to their
management not realizing that
practicing it yields the opposite
results. Because corporate
governance is based on the principle
of transparency and disclosure,
PwC GGAPP Corporate Governance Survey 2016 iii

Foreword
Message from
the ICD CEO
On behalf of the Board of Trustees More importantly, these documents

and Fellows of the Institute of can also yield valuable lessons,
Corporate Directors (ICD), I wish to which are used to form the basis of
congratulate the Good Governance policies and programs that will guide
Advocates and Practitioners of the regulators, companues, investors
Philippines (GGAPP) and Isla Lipana and other members of the corporate
& Co./PwC Philippines (PwC) on the governance ecosystem in working
publication of their 2016 Corporate together to realize their common
Governance survey. objective of making the Philippines
one of the leading practitioners of
Surveys such as this one provide corporate governance in the ASEAN
important benchmarks and region.
perspectives which, when added
to other references which ICD has Mabuhay ang GGAPP at ang PwC!
developed and worked on such as
Ricardo Nicanor N. Jacinto the ASEAN Corporate Governance
Chief Executive Officer,
Institute of Corporate Directors (ICD) Scorecard, provide a clearer picture
on the state of corporate governance
in the country.
iv Finding the true north: Advancing corporate governance in the Philippines

Message from
the GGAPP Chairman
It is indeed a proud moment for both Finally, as Chairman of GGAPP, I

GGAPP and PwC to finally launch this would like to thank our Knowledge
Survey Report. Partner, PwC, for this initiative. None
of this would have been possible
This report was conceived as a way without the dedication and passion
for individual companies to assess of their personnel. I would also
where they may find themselves in like to thank Chairperson Teresita
terms of compliance with the new J. Herbosa of the SEC, and former
Code of Corporate Governance for President of the PSE, Mr. Hans Sicat
Publicly Listed Companies. for their support and assistance.
It is our hope that through this report, We hope GGAPP and PwC’s modest
companies will be able to steadily and effort at developing substantive
progressively adopt more and more knowledge and information on
of these best practices on Corporate corporate governance in the
Atty. Vincent Edward Festin Governance in order to attain their Philippines will inspire others to
Chairman, Good Governance objectives and also to positively
Advocates & Practitioners of the contribute to enriching this body of
Philippines (GGAPP)
respond to the needs of their various knowledge further.
stakeholders.
Thank you very much.
It is also our hope to conduct this
survey annually in order to monitor
adoption and progress. We trust
that companies will find value in the
survey and the insights generated
therefrom and that more and more
companies will respond to this survey.
PwC GGAPP Corporate Governance Survey 2016 v

Foreword
Message from
the GGAPP President
Last year, we in GGAPP had the Fortunately, we found a wonderful

privilege of working together and like-minded partner in Isla
with regulators headed by SEC Lipana & Co./PwC.
Chairperson Teresita J. Herbosa
and other organizations that The resulting survey provided us
share our advocacy to improve the a tool to be able to benchmark
corporate governance framework with our peers and extract a more
of the Philippine capital market and realistic view of the readiness of the
hammer out a new Code of Corporate participant companies to adopt the
Governance for publicly listed new Code.
companies (‘PLCs”).
We are learning that although
This Code recommends much has been achieved since 2002
internationally recognized best when the first Philippine Corporate
practices that will hopefully heighten Governance Code was promulgated,
Atty. Jocelyn C. Villar-Altamira the accountability of boards, enhance there are still gaps that need to be
President, Good Governance addressed.
Advocates & Practitioners of the the competence of directors and
Philippines (GGAPP) ensure the protection of stockholders
This survey is just the first step that
and other stakeholders.
hopefully will enable all of us to
However, as practitioners in the make better informed decisions and
field of governance in our respective take innovative measures to ensure
companies and organizations, we continued adherence by all to the
realize how difficult it is to comply corporate governance principles of
with some of the recommendations of fairness, accountability, integrity and
the Code. transparency.
PLCs, depending on various factors

such as shareholder structure
and industry, are in different
stages of development as far as
their governance frameworks are
concerned.
vi Finding the true north: Advancing corporate governance in the Philippines

Message from
the PwC Philippines Chairman
Balancing short-term with long-term PwC is honored to embark with

goals, creating sustainable value for GGAPP on this first-ever journey to
stakeholders, achieving growth but capture on paper the actual practices
helping inclusive growth. These are and intention of public companies
the issues organizations commonly on corporate governance. These
address, but moreso for those whose speak volumes about the leadership
businesses are grounded on principles in the organizatiom and impact on
of good corporate governance. the confidence of their investors and
stakeholders.
It is encouraging that the number
of private companies embracing the It is our wish that this first Corporate
concept of good governance and Governance Survey serves as a
transparency is improving, as we have platform for greater awareness and
observed. dialogue to continuously nurture a
culture of integrity and values. Such
For public companies, it is even a culture creates enduring wins, not
Atty. Alexander B. Cabrera reassuring that the readiness
Chairman and Senior Partner, only for the company, but for the
Isla Lipana & Co./PwC Philippines to comply, and for some, actual country.
compliance with governance
principles, are already at a
respectable level.
PwC GGAPP Corporate Governance Survey 2016 vii

Contents
Then and now:

Corporate Governance The 2016 Corporate
in the Philippines Governance Survey
1 8
Where we are:
Survey results The Board’s governance
and analysis responsibilities Disclosure and transparency
12 14 27
The role and next steps

for corporate governance
Next steps and conclusion key players Conclusion
40 42 44
viii Finding the true north: Advancing corporate governance in the Philippines
Cultivating a synergic
Internal control and risk relationship with
management framework shareholders Duties to stakeholders
31 33 36
Acknowledgments
46
PwC GGAPP Corporate Governance Survey 2016 ix

Then and now:
Corporate governance
in the Philippines
Knowing about the beginnings of corporate

governance (CG) in the Philippines is both a
stepping-back and stepping-up exercise.
We step back to learn the groundwork, and we

step up to reach a vantage point where we can
see and understand the rationale for current
corporate governance practices and initiatives.
It is easy to remember an event or an

experience if details are weaved in to form a
story.
In an interview with Dr. Jesus P. Estanislao, the

founder of the Institute of Corporate Directors,
we learned the story of the early years of
corporate governance in the Philippines.
As you read our conversation with Dr.

Estanislao, you will realize that he is more than
an eyewitness. He is a protagonist in the CG
story.
x Finding the true north: Advancing corporate governance in the Philippines

PwC GGAPP Corporate Governance Survey 2016 1
Then and now:
Corporate
governance
in the Philippines
Stepping back
Beginnings of Philippine Corporate Governance
PwC: When did you first think of me all the materials he brought.
starting the conversation on CG or I read them and I became even
pursuing the CG advocacy? more convinced that this was
an undertaking I could commit
Dr. Jesus P. Estanislao (JPE): During myself to.
the East Asian financial crisis in the I noticed that a
late 1990s, I had a front-seat view of b. Bangko Sentral ng Pilipinas (BSP) big part of the
the rescue packages being prepared Governor Rafael Buenaventura reform program
and put together for Thailand, and his Deputy at that time,
Indonesia and South Korea. I was now Governor Amando “Say”
associated with the
then in Japan as Dean of the ADB Tetangco Jr. I briefed them on rescue packages was
(Asian Development Bank) Institute. what I wanted to do, and asked if corporate governance.
they might consider pushing CG
I noticed that a big part of the reform As I looked closer,
reform in the PH banking system.
program associated with the rescue They were fully supportive, I found that this
packages was corporate governance. indeed enthusiastic. particular reform
As I looked closer, I found that
this particular reform made sense, c. A small group of professionals, made sense, including
including for the Philippines, since with whom I would meet for the Philippines,
we had the same bad CG practices each week for other matters. since we had the same
as Indonesia and Thailand. So after I suggested to them that they
I came home, and I was looking for become a test group or a focus
bad CG practices
something really constructive to do, group to go over materials on CG as Indonesia and
I decided to go for CG reform in the that I had adapted from the CG Thailand.
Philippines. materials from Harvard. They
were eager participants in that Dr. Jesus P. Estanislao
Following that basic decision, I experimental group. Founder and
looked around for initial possible Chairman Emeritus,
allies. I found four: d. I contacted my friends over at the Institute of Corporate Directors
World Bank, and they were only
a. Jesus “Gigi” Zulueta Jr., who had pleased to invite me to a special
just returned from a short course training program they were
at the Harvard Business School going to test-run for a few select
on corporate governance. He lent individuals. I signed up.
2 Finding the true north: Advancing corporate governance in the Philippines

The story gives these lessons on how to strengthen the CG advocacy:
1. Identify key individuals who will lead.
2. Solicit support from local regulatory agencies.
3. Widen the network of individuals and institutions to support the advocacy.
4. Reach out to international groups.
5. Commit to continuous learning.
These themes will be discussed in the different sections of the report.
PwC: How did you start the CG I tapped into my network in the c. The Australian Aid Agency
advocacy? business community to help me. (AUSAID) provided support,
Along with Rex Drilon, Alicia “Baby” mainly in arranging and
JPE: Armed with that knowledge Vergel de Dios, Gigi Zulueta and that facilitating a connection with the
of CG and with willing individuals, initial band that offered themselves as Australian Institute of Directors
including the BSP, that would help a test group for adapting CG materials (AIOD). ICD sent its initial batch
me adapt global CG principles and into the Philippines, I was able to of potential trainers to Sydney
suggested best practices to Philippine initiate ICD. But ICD needed technical for a week’s intensive program on
conditions, I decided to set up the and financial help. The much-needed CG at the Australian IOD.
Institute of Corporate Directors (ICD) help initially came from outside:
as a vehicle for pursuing CG reform in We sent two batches, and there
the Philippines. a. The World Bank (WB) group were a few occasional CG experts
soon connected me with that would come from Australia to
While ICD was going to get involved the International Corporate conduct a few training programs in
in training, it was clear from the Governance Network, where I Manila. ICD made sure that its CG
start that the bigger challenge was met the “who´s who” of global principles and suggested practices
to undertake an initiative that would CG advocates, e.g. Ira Millstein, have global provenance, and much of
address a bigger challenge: how to Lord Cardbury, etc. The World what ICD has been trying to do has
introduce a corporate governance Bank through the WB Institute been simply to adapt those to local
reform process in the Philippines. also provided ICD with a grant conditions.
to get started and pursue its CG
An advocacy is much bigger and more advocacy for a few years.
demanding than being simply a CG
b. The BSP came through and in
training provider. I then organized
effect required all directors of
towards the end of 1999 an initial
commercial banks at that time
conference to introduce CG to a
to undergo a special CG training.
mixed group, which nonetheless was
ICD was chosen as the service
made up mainly of business sector
provider by all commercial
representatives. I had about 120
banks.
persons attend that initial conference
in the University of Asia & the Pacific
(UA&P). From there, ICD just got
going.

Then and now:
Corporate
governance
in the Philippines
Stepping up
Code of Corporate Governance 2002 and 2009
Having learned about the early PwC: Why was there a need to revise Examples of this coordination and
years of CG, we move ahead to the 2002 CG Code and come up with collaboration work where ICD was a
reach the vantage point as we the CG Code of 2009 and a circular key player are the following:
speak with Rex C. Drilon, Vice in 2014 to revise the definition of
Corporate Governance and finally, a. Crafting of the SEC Corporate
Chairman of ICD. Governance Blueprint 2020
the 2016 CG Code?
Rex C. Drilon (RCD): The b. The third revision of the

He shared with us the key CG SEC (Securities and Exchange Corporate Governance Code of
initiatives in the recent years Commission), with some prodding 2016
leading to the 2016 SEC Code of from ICD and advocacy groups
c. The appointment of ICD by SEC
Corporate Governance. such as SharePHIL (Shareholders’
as the Domestic Rating Board
Association of the Philippines)
(DRB) of the ASEAN Corporate
and GGAPP, restored the role of
Governance Scorecard (ACGS)
stakeholders in corporations, which
was removed in the 2009 version of d. The conduct of ICD’s own
the CG Code. Philippine Corporate Governance
Scorecard Awards co-sponsored
The 2016 CG Code embodies all the
with SEC and PSE up to 2012
needed provisions that are required to
(thereafter, ICD decided to
make corporate governance principles
drop this program and opted
and practices in the Philippines
to join the ASEAN Corporate
aligned with the ASEAN Corporate
Governance Scorecard (ACGS)
Governance initiatives and many of
Program of the ASEAN Capital
the global best practices as suggested
Market Forum, or ACMF)
by OECD and G20 countries.
e. The issuance of PSE’s 10
PwC: What were SEC’s and
Guidelines for Well-Governed
PSE’s roles, and in general, the
PLCs using the network of ICD
government’s?
among the other institutes of
RCD: ICD and its founder, Dr. corporate directors in Asia and
Estanislao, closely coordinated the in consultation with global
activities of ICD with the regulators experts in corporate governance.
– SEC, PSE, BSP, the Insurance The key PSE officer who crafted
Commission (IC) and, in the last the Guidelines was former ICD
five years, with the Governance President Jonathan Juan “JJ”
Commission for GOCCs (GCG). Moreno. This has become the

basis for the PSE’s annual Bell PwC: What are the three most
Awards. significant provisions or topics of
the CG Code of 2016?
f. The establishment of the Good
Governance Advocates and RCD: The key elements of the new CG
Professionals of the Philippines Code for Publicly Listed Companies
(GGAPP) and the Shareholders’ (PLC) are as follows:
Association of the Philippines a. The principle of “Comply or Jesus P. Estanislao
(SharePHIL). Founder & Chairman
Explain”. Emeritus, Institute of
Corporate Directors
g. The aborted project with the b. There are 16 Principles in
PSE to establish the Maharlika the new Code and a total 67
Board in the stock market Recommendations under
to be composed of listed the 16 Principles. A PLC can
companies committed to much opt to comply with all 67
higher standards of corporate recommendations or may
governance. seek exemption from some
of the recommendations,
PwC: What are the trigger factors provided the PLC explains why
for the 2015 Corporate Governance Rex C. Drilon
it will not comply with said Vice Chairman,
Blueprint and 2016 CG Code? recommendations, hence the Institute of Corporate
Directors
“Comply or Explain” provision.
RCD: The changing times and the
need for the country to align its c. The 16 Principles follow the
governance principles and practices updated principles of corporate
to the best practices in the world governance as recently revised by
were the primary motivation of the Organization for Economic
SEC and the regulated companies Cooperation and Development
and the governance advocates like (OECD).
ICD, GGAPP and SharePHIL to work
together to craft the CG Blueprint for It is apparent that there are now more
the future (2020) and update the CG participants in the CG conversation
Code. compared to the time it started about
20 years ago.
Keep the conversation going.
Be part of the CG story.

Then and Now:
Corporate
Governance
in the Philippines
Timeline of corporate governance

in the Philippines
2002
CG Code
Late
1990s
East Asian Institute of

Financial Crisis Corporate
“I noticed that a big part of Directors
the reform program “…an initiative that would
associated with the rescue address a bigger challenge:
packages (for Thailand, how to introduce a corporate
Indonesia, and South Korea) governance reform process in
was corporate governance.” the Philippines.”
- Dr. Jesus P. Estanislao - Dr. Jesus P. Estanislao

2000s
2009 CG Code
The CG advocacy requires a mix of :
1. Leaders
What lies ahead
It is apparent that there are
2. Regulators’ support
now more participants in the
3. CG advocates
CG conversation compared to
4. International community
the time it started about
5. Commitment to learning 20 years ago.
2014 Circular
2016 CG Code
2016 and The journey to align with the
beyond ASEAN Corporate
Governance initiatives and
many of the global best
practices as suggested by
OECD and G20 countries

The 2016
Corporate Governance Survey
Survey objectives and design

This survey on the new Code Survey participants were • The Board’s Governance
of Corporate Governance for asked to answer 125 Responsibilities (seven
Publicly Listed Companies questions categorized into five Principles, 70 questions)
(CG Code) aims to provide sections, with each section
companies and readers insights corresponding to the key • Disclosure and
on the following: themes of the new CG Code. Transparency (four
Principles, 20 questions)
• The current state of By far a longer and more
corporate governance tedious set of questions • Internal Control System
practices and compliance in compared to the normal and Risk Management
the Philippines survey, the number of Framework (one Principle,
questions is a modest attempt five questions)
• Whether Philippine publicly to encompass the entirety
listed companies are ready of the new CG Code: five
• Cultivating a Synergic
to comply with the new CG themes, 16 Principles, and Relationship with
Code 67 Recommendations with
Shareholders (one
corresponding Explanations.
Principle, 15 questions)
• Changes that companies
need to institute in order Distribution of questions across
• Duties to Stakeholders
to comply with the new CG the five key themes are as
(three Principles,
Code. follows:
15 questions)

The 2016
Corporate
Governance Survey
51 respondents
The survey was designed and The respondent profile, in terms of

Market capitalization (in PHP)
delivered via an online platform, the organizational designation/role
allowing respondents to answer by 1
4
of the officer specifically answering
accessing the online survey form. the survey, showed that 27 out of
6
Link to the survey was published the 51 responses were submitted
via the PSE website, and individual by Compliance Officers. Other
28
emails sent to target respondents. 8 roles represented were Corporate
With the questions requiring various 4
Governance Officers and Corporate
types of responses and considerable Secretaries. With the significant
amount of corporate information, the amount of corporate information
minimum time needed to complete Not less than 20 million to 100 million More than 100 million to 500 million across the various areas of
the survey was around 60 minutes. More than 500 million to 1 billion
More than 5 billion to 10 billion
More than 1 billion to 5 billion
More than 10 billion
governance and management, these
Ideally, respondents should have a three corporate officers typically have
full view of corporate governance for Out of over 200 companies access to the information by virtue of
the company he/she represents. invited to participate, their designation/role.
51 responded.
Publicly listed companies (as
indicated in the SEC website) were
invited to participate in the survey,
with requests communicated through Industry breakdown Respondent’s profile
company contact information and
disclosures available for general
use. Challenges were encountered
Financial 17 # Answer % Count
with the various listed companies’
information disclosure, but despite Industrial 10 1 Compliance 53% 27
this, the survey garnered 51 Property 8 officer
respondents representing over 20% Services 8 2 Corporate 14% 7
of the listed companies as of the third governance
Mining and oil 3
quarter of 2016. officer
Holding firms 3 3 Corporate 12% 6
In terms of market capitalization,
ETF 1 secretary
more than 50% of the respondents
represented institutions with SME 1 4 Investor relations 12% 6
capitalization of more than PHP10bn officer
For the industry profile, the financial
(biggest individual corporations 5 General manager 4% 2
services sector registered the largest
and conglomerates). This category 6 Others 6% 3
participation registering 33% of the
represents 42% of the 234 registered
total respondents. The Industrial and Total 100% 51
companies. Out of the total 98
Services sectors, which comprise the
companies in this category, 29%
largest population in terms of number
responded to the survey.
of listed corporations, accounted for
20% and 16% respectively.

Description of five corporate governance themes
The new CG Code adopted themes • Internal control system and

that reflect the key dimensions of risk management framework:
corporate governance: highlights the importance of
strong and adequate mechanisms
• The Board’s governance to identify, assess, mitigate and
responsibilities: pertains to the monitor key risks, as well as the
essential expectations from the enabling management officers
Board of Directors in the context and functions.
of organization, leadership,
competence, composition, • Cultivating a synergic
responsibilities, company relationship with shareholders:
and management oversight, specifies the key practices to
performance, independence and promote and protect shareholder
ethics. rights, including mechanism to
resolve infringement on such
• Disclosure and transparency: rights.
elaborates the principles
that promote sufficient • Duties to stakeholders:
communication of, and access to defines the scope and
relevant and significant corporate company responsibilities to its
information for stakeholders, stakeholders, and the promotion
related party transactions, of stakeholder engagement,
corporate governance sustainability and social
mechanism, non-financial responsibility.
and sustainability reporting.
This also covers external audit
expectations on independence
and quality.

Where we are:
Survey results
and analysis

Where we are:
Survey results and
analysis
The Board’s governance responsibilities
Establishing a competent
Board Established selection and review criteria
Board composition and qualifications
help ensure that directors are qualified to
perform their roles
The Board, the primary driver
of corporate governance, should
exhibit the necessary competence
collectively and individually. It should Most respondents The qualification criteria for directors, including
establish a sound director selection agree that the minimum the grounds for their disqualification, are
and review criteria that directors qualifications for reviewed:
have the necessary expertise and directorship include:
experience required to be stewards
of the organization. Almost all
Review frequency:
respondents have indicated “Business Directorship criteria
expertise and experience” and
Business expertise
“Educational attainment” as key and experience
minimum requirements for a director, None of the above 3
98%
corresponding to the technical
capabilities and academic credentials
At least once every
aligned to the organization’s strategy 2-3 years 2
and operations. Furthermore, with Educational
the evolving needs of organizations to attainment
benefit from industry knowledge and 96% At least once every
12 months 33
professional network opportunities,
“Membership in external
organizations” is also high on the list Membership
At least once every
2
of director qualifications. 6 months
in external
78% organizations
On an ad hoc basis
11
Our leaders, fully engaged and vigilant, set the tone of governance and ensure that the
mechanism for disclosure, protection of the rights of shareholders, the equitable treatment
of shareholders, and the accountability of the Board of Directors and management are in
place, while maintaining a collaborative and productive work environment that drives high
performance and quality orientation, consistent with our commitment to deliver strong
customer and shareholder value.
Ricardo R. Chua
President and Chief Executive Officer, China Banking Corporation

Organizations not only evaluate the the lower half of the selection criteria Director sourcing
qualifications of directors during the are the personal attributes such as
selection and appointment process, cultural fit, age, gender and ethnicity. Organizations are becoming
but also on a continuing basis. Almost cognizant of alternative means
69% carry out reviews of director The responses can be viewed using to source director candidates, to
qualifications, including grounds for two perspectives: Organizations enhance transparency in the director
disqualification, at least once every look at director qualifications sourcing and nomination process.
12 months. While the majority of the that have more direct relevance While nomination from shareholders
respondents adhere to this practice, to the company’s industry/sector and the organization’s professional
such practice needs to be more formal and operations, with less bias network remain the primary methods
and frequent for the remaining 31%. against personal attributes such (including fellow board member
as ethnicity, age and gender. recommendations), 47% of the
Director selection criteria are However, this can also mean that respondents are using professional
a combination of technical and while organizations have adopted search firms and external sources,
personal attributes, but the policies to enhance board diversity with 43% assessing the adoption of
traditional attributes remain the top (67% of the respondents, while the these methods.
considerations: integrity, education, rest are considering to adopt one),
prior business experience and organizations may not necessarily
technical skills. Consistent with the translate these into director selection
requirements of the new CG Code, the criteria that will consciously seek for
majority of the respondents strongly candidates with diverse cultural fit,
agree that integrity is the paramount ethnicity, age or gender.
qualification sought for directors.
Following integrity, the next set of top
considerations revolves around the
technical attributes of the director. At
The selection of directors continues to be anchored on

traditional criteria—integrity, education, and experience
Considerations in selecting directors
Weighted
Average
Integrity 11 8 41 4.73 (1)
Knowledge/education 2 12 37 4.61 (2)
Prior business experience 11 13 36 4.59 (2)
Technical skills 12 20 28 4.45 (4)

Membership in industry, business, or professional
organizations 1 2 9 24 15 3.98 (5)
Cultural fit 3 9 16 14 9 3.33 (6)
Age 5 19 16 5 6 2.80 (7)
Gender 6 16 17 8 4 2.76 (7)
Ethnicity 8 16 17 6 4 2.65 (9)
Strongly Disagree Disagree Neither Agree Agree Strongly Agree

nor Disagree

Where we are:
Survey results and
analysis
Board diversity The majority of the Boards are

comprised of non-executive directors,
The common manifestation of Board which typically range from as low as
diversity efforts is through gender 4 to as high as 14. Almost 50% of the
diversity: increasing the number of I don’t believe in just respondents have five to eight non-
female board directors. As for the executive directors. Executive director
current female representation in the bringing in women memberships range from one to three
Board, 55% reported to have at least in the Board for the for most companies.
one female non-executive director, sake of their being
with five being the highest. From the To promote effective board
executive directors, only 35% have at women. They must be performance and continuing
least one female executive director, honest, very ethical, qualification of directors and key
with three being the highest. able to speak up and officers (such as the Compliance
Officer and Corporate Secretary),
do what’s right for the training policies are adopted.
organization. Given Suggested duration should be at least
the opportunity, eight hours for first-time directors’
orientation program, and four hours
women perform
for director annual continuing
very well. Also, they training program. No specific
control the purse of duration was recommended for
55% 35% the family. So, it’s Compliance Officers and Corporate
Secretaries but they should undergo
good also to have the relevant training on corporate
No. of respondents No. of respondents women point-of-view governance annually. Respondents
with at least one with at least one in corporations. primarily indicate that directors strive
female non-executive female executive to achieve the minimum of four hours
director director
Corazon de la Paz-Bernardo annually. These training programs
Independent Director cover a wide range of topics, but
typically concentrate on board
responsibilities, risk management and
internal controls.

Most directors and corporate officers undergo continuous
training and meet the prescribed requirements of the Code
Training on the following areas is constantly being

Training hours of directors, compliance provided:
officer, and corporate secretary
Director Officer
36 rank rank
Board responsibilities 1 1
29 Risk management 1 2
Internal controls 3 6
Related party transactions 4 6
Protection of minority 5 3
shareholders
Illegal activities of 5 3
corporations/directors/officers
12 13
Sustainability 7 9
5 Financial reporting and audit 7 8
3 4 Confidentiality 7 9
Insider trading 10 3
0-4 hours 5-8 hours 9-16 hours 17 to 24 More than Strategy 11 11
hours 24 hours
Short swing transactions 12 12
Directors Compliance Officer and

Corporate Secretary
The new CG Code recommends that the Corporate The Ethics & Compliance and
Secretary and Compliance Officer are two separate Corporate Governance Officers act as
individuals and are not members of the Board. However,
78% of the respondents confirm that these roles are held advisors. These are the people who do
separately. While both roles are primarily responsible to the detailed work that is then sent and
the corporation and its shareholders, 16% are considering brought to company leadership so that
separating the roles: the Corporate Secretary is expected
to primarily support the Board in the discharge of its they can make sound decisions and
duties, while the Compliance Officer is in charge of very informed decision.
the compliance function as part of management. 92%
indicate that they are not members of the Board, while the Atty. Vincent Edward Festin
Chairman, GGAPP
remainder consider non-Board members for these roles.

Where we are:
Survey results and
analysis
Clear roles and At least 45 (88%) of Boards In at least 88% of the respondents,
responsibilities of the periodically monitor and evaluate: the Board exercised oversight on key
personnel decisions involving:
Board • Implementation of policies and
strategies • Oversight of CEO and
Board involvement in governance and management team performance
• Management performance
management oversight
• Quality of governance • Defining CEO duties and
responsibilities
• Key developments in the business
and regulatory environment • Evaluating senior management
Directors continue to While 41 (80%) of Boards scrutinize
appointments
• Selecting and appointing
have an active role in most types of related party qualified CEO and management
transactions, only 37 (73%) of officers
ensuring long-term Boards scrutinize transactions with
companies that they share a director, Boards have been working to ensure
viability; however, i.e. interlocking directors. the establishment of an internal
more needs to be At least 37 respondents (73%) agree
control system, with at least 76% (39)
performing the following:
done. that a director’s renumeration should
primarily be anchored on: • Overseeing and assessing the
performance of the Chief Audit
• Associated responsibilities Executive, Chief Risk Officer and
• The achievement of financial Chief Compliance Officer
performance targets • Monitoring the implementation
• Completion of non-financial and conducting periodic reviews
performance objectives of the governance framework
• Reviewing the company’s human
However, only 21 respondents
resource policies
(41%) consider the following as
a key determinant of a director’s • Resolving situations that involve
renumeration: conflicts of interests
• Display of appropriate risk-taking • Ensuring an appropriate
behavior compensation program for
employees
• Prevention of conflicts of interest
• Maintaining a sound
management succession plan

Succession plan Strategy and risk management are
interlinked, and should be taken
In coming up with succession plans together. Being able to oversee
for management and key officers, strategy requires the appropriate
the Board takes into account the foresight and management of
following priority areas: We recognize that the
attendant risks. Taking into account
• Identification and appointment
business of banking the representation of financial
of key officers necessarily entails services (where those supervised by
risk, and that proper the Bangko Sentral ng Pilipinas are
• Assessment of current leadership
required to have an ERM framework),
competencies risk mitigation, not it appears that even non-financial
• Skills and talent enhancement of outright risk avoidance, services have recognized the
people in the organization is the key to long-term importance. This translates to an
ERM framework and even a specific
Crafting of a policy for key officers’ success. Our corporate
Board Risk Oversight Committee.
retirement age is considered by only governance structure
55% of the respondents and is the Board charter
keeps pace with the
last priority among the recommended
areas. changing risks that the 65% of the respondents indicate
bank faces and will be that their respective Board
Enterprise risk management Charters include the Board’s roles,
facing in the coming
responsibilities, accountabilities
Enterprise risk management’s years with a dynamic and the corresponding standards for
(ERM) prominence as part of the
risk management evaluating the Board’s performance.
Board agenda has been increasing This also applies to the specific roles
through the years, brought about program that calls
and responsibilities of the Board
by the evolving business, regulatory for the continuing Chairman. On the other hand,
and external landscape, as well reassessment of risks the Board Charters may not be
as the need to properly anticipate appropriately disclosed to the public
and respond to business risks. With and controls and the
as only 59% published their Board
this, 78% of the respondents have timely reporting of these Charters on the company website.
adopted and implemented an ERM risks to the Board of While this may reflect an area for
framework anchored on business
strategy and risk tolerance, and
directors. improvement, the remaining 41% are
considering adoption.
the Board evaluates the continuing
Mr. Ricardo R. Chua
relevance and sufficiency of the ERM President and Chief Executive
framework at least on an annual Officer, China Banking
basis. Corporation

Where we are:
Survey results and
analysis
Establishing Board
committees Board committees play a more active
Committee charters
role in enhancing the effectiveness of
corporate strategy and operations
Organizations are increasingly
organizing Board committees to focus
on key aspects of governance and
boost overall Board effectiveness, Adoption rate of Board Committees
with appropriate emphasis on audit,
risk management and related party
transactions. At least 71% of the
respondents indicate that these Board
100% 98% 76% 61%
committees have their respective
charters to outline their mandate,
Nomination and Audit committee Risk oversight Corporate
composition and responsibilities, as remuneration committee governance
well as the standards for evaluating committee committee
the committee’s performance. Such
charters are also published on the
company websites. The remaining
respondents are keen to adopt
39% 37% 16% 18%
the same approach to drive clear
understanding and expectations from Related party Executive Information Finance
these committees. transaction committee technology committee
committee steering
Aside from the Board committees committee
recommended by the new CG Code,
organizations have instituted other
committees to focus on specific
areas of corporate governance and
management oversight. Usually, the
Executive Committee is delegated
the responsibility of reviewing and
approving management decisions
or transactions on behalf of the I make sure that I know what’s going on with internal
Board (subject to specified limits and audit side and also the activities of the external auditors
parameters). The typical IT Steering to ensure that there will be no surprises as to where
Committee oversees the development,
implementation and monitoring of
the organization is going. And usually, my role has to
the IT strategy and plans, especially do with making sure that the risks are minimized or
significant IT investments. Financing, addressed as best as we can in the organization.
capital and investment decisions
are the normal items tackled in the Corazon de la Paz-Bernardo
Finance Committee. Independent Director

Audit Committee independence, allowing a more for Nomination and Remuneration/
objective assessment of management Compensation. Others choose to
98% (50) of the respondents performance and business operations, have a single Corporate Governance
confirmed the existence of their while keeping the flow of information Committee that would perform
dedicated Audit Committees, with between the Board and Internal Audit both nomination and remuneration
almost all headed by an independent more open. functions in addition to addressing
director as Audit Committee corporate governance matters.
Chairman distinct from the Chairman Board Risk Oversight Committee Director membership ranges from
of the Board. However, only 60% (30) the minimum of three members to
disclosed that their Audit Committee Among the respondents, 76% (39)
at most seven. Only 34% (11) of
Chairman is not a chairman of other have their respective Board Risk
those with Corporate Governance
board committees, while the rest Oversight Committees, with almost
Committees have met the required
have concurrent chairmanships all having a Chairman separate from
number of independent directors
and represent an area for further the Chairman of the Board. However,
(three members), but all committees
consideration. This may be due to similar to the Audit Committee
are chaired by independent directors.
the limited number of independent Chairman, the majority of the
directors that have the necessary Board Risk Oversight Committee 39% (20) of the companies have
qualifications for committee Chairpersons hold concurrent not set up a separate Corporate
chairmanships. chairmanships. Only 82% are Governance Committee.
compliant with the recommendation
There are also issues with regard to of having an independent director as Related Party Transactions
membership in Audit Committees. Chairman. Committee membership Committee
32% (16) of Audit Committees fall ranges from the minimum of
short of the recommended minimum three directors to at most seven. Consistent with the respondents
of three qualified non-executive Independent directors comprise the profile concentrated on financial
directors, with even three indicating majority for 66% of the respondents, services and large corporates/
they have no non-executive director with one company having no conglomerates, 39% have identified
in the Audit Committee. 18% (9) independent director at all. and responded to the need to set
of the Audit Committees did not up a Related Party Transactions
have independent directors, with Almost all BROCs have at least one Committee. All committees have
the majority having only one. These member who has proficiency in the at least two independent directors,
statistics affect the independence of risk management discipline. and have an independent director as
the Audit Committee, and should be Chairman.
Corporate Governance Commitee
reassessed to ensure effectiveness
of the committee in discharging its The manner in which Corporate
duties. On a different note, Audit Governance Committee functions are
Committee did not include the CEO exercised differs from one company
for 86% (43) of the respondents, to another. Some have established a
while the rest are considering the separate committee to focus on the
non-inclusion of the CEO in the observance and compliance with
membership. 72% (36) of Audit corporate governance principles,
Committees meet with the Head while retaining separate committees
of Internal Audit at least quarterly.
These reinforce the committee’s

Where we are:
Survey results and
analysis
Fostering commitment
Concurrent directorships continue to be
To perform their duties and
responsibilities consistent with the one of the areas for debate at corporate
company’s business and stakeholder Boards
expectations, directors are required
to devote the necessary time and
attention to the organization
they serve. This requirement is No. of concurrent directorships allowed
confirmed by all respondents,
expecting directors to attend and
actively participate in meetings, with
exceptions in justifiable cases.
6 or more
In the same thread, 47% expect 8%
directors to notify the Board in the
event they will pursue a directorship
in another company, and 47%
are considering setting the same
Not
allowed The majority of
requirement in their respective
47% 4 to 5 companies (53%)
companies.
35% allow directors to hold
The majority of companies (53%) concurrent directorships
allow non-executive directors to at multiple companies.
hold concurrent directorships at
multiple companies, while the rest
have enforced restrictions to allow 1 to 3
directors sufficient time and focus 10%
on the organization they oversee.
Four companies should consider their
stand on allowing more concurrent
directorships than recommended by
the new CG Code, although this may
be related to related companies or
those belonging to conglomerates
who share non-executive directors.
At ICD we always say, “Independence depends on your willingness to speak out and say a
point of view, which you believe honestly, contradicts everybody else in the room”. It could
be a winning formula, it could be an ethical position, but the point is, are you willing to
speak out? And that’s very difficult. You have the responsibility for the other investor in the
room, the minority, especially. The contrary point of view is helpful, not because you want
to do it for its own sake, but it’s always because people get better decisions, quality decisions
from different perspectives. If you can add that perspective, that different perspective, the
independent one, you’re adding a lot of value into the company that you serve.
Ricardo Nicanor N. Jacinto
CEO, Institute of Corporate Directors

Reinforcing Board independence
Since the 2002 Code, there continues to
The new CG Code recommends
various means to strengthen be regulatory emphasis on ensuring the
the Board’s objectivity and independence of Boards
independence, with sufficient
emphasis on the appointment of
qualified independent directors.
The foremost recommendation At least 42 respondents (82%) affirmed that independent directors are
covers the appointment of at least evaluated on the following:
three independent directors, or such • Is independent from the management committee of the Board or the
number comprising at least one-third related parties of the company
of the Board membership, whichever
• Holds no more than 2% of the outstanding shares of the company and its
is higher. Unfortunately, 41% do not
related parties
meet the three-member requirement
and this can dampen the objectivity • Is not related within the fourth degree of consanguinity to a director,
of the Board. This places more officer, or substantial shareholder of the company and its related parties
pressure on the current independent • Is not acting as a nominee or representative of any director of the company
directors to influence overall Board and its related companies
objectivity, and puts pressure on
• Was not retained as a professional adviser, consultant, agent, or counsel of
the non-independent directors to
the company, its related companies, or substantial shareholder
exercise their impartiality, especially
on overseeing corporate matters and • Has previous business or relationship with the company within three years
management performance. prior to his/her election
• Has not engaged in any transaction with the company, its related
In 2013, the US Council of
companies, or substantial shareholders that were not conducted at arm’s
Institutional Investors introduced a
length and could materially impact his/her independence
revised policy statement on board
tenure, where it noted that directors
with extended tenures should no One interesting area is the appointment of a lead director among the
longer be considered independent.1 independent directors, if the Chairman of the Board is not independent,
including if the CEO and Chairman of the Board roles are held by one person.
While 69% (35) of the respondents have confirmed that these two roles are
held by separate individuals, only 16% (8) have indicated that they have a
lead director. 51% (26) are considering the adoption of this recommendation,
43 respondents allow potentially seeing the advantage of having a lead independent director
independent directors to regardless of the independence of the Chairman. However, 33% (17) have
hold a cumulative tenure of no plans for adoption. This may mean several things, among others: (1) the
83%
seven or more years. appointed Chairman of the Board is already independent; (2) the current
composition of the Board collectively provides proper mechanisms for
resolution of conflicts of interest; or (3) the organization has yet to perceive
the need to have one.
35 respondents affirmed
that the role of the CEO and The above observation has some parallelism with the US context. Some
the Board Chairman are companies under investor pressure evaluate the leadership structure and split
69%
held by separate persons. the Chair and CEO roles. Boards with a combined Chair/CEO role have an
independent lead or presiding director. 2
1 PwC Director-Shareholder Insights: Board composition

– Key trends and developments, May 2016
2 PwC Director-Shareholder Insights: A look at board
composition – How does your industry stack up?

Where we are:
Survey results and
analysis
Assessing Board performance

Board performance is primarily
The conduct of Board performance evaluated through the conduct of
evaluation presents a significant periodic self-assessments
opportunity. While annual self-
assessments are the norm for 63% of
the companies, the remaining 37% do
not utilize the insights and areas for 63% of the respondents conduct annual self-assessment in their
improvement that a self-assessment companies at least once a year.
can bring. It remains to be seen how
the Board and organization assess its
performance sans self-assessment. Self-assessment has 12
Likewise, third-party evaluations are yet to be conducted
not fully adopted to provide a more
independent and objective review of On an ad hoc basis
Board performance. 6
A thorough and robust Board

assessment process highlights the At least once every
2 years 1
performance of the Board collectively
and individually. It should guide
the organization in evaluating At least once a year
the continued relevance of Board 30
composition, director competency,
and qualifications. Subsequently,
At least once every
the Board should take action on the 2
6 months
results of these assessments.
75% of the respondents have yet to conduct a third party

evaluation of the Board’s performance
A third-party
evaluation has yet to 38
be conducted
On an ad hoc basis 5
At least once every

1
3 years
At least once every 1

2 years
At least once a year 6

Various communication channels are used by the Board in
disclosing information on Board performance
None of the above 16
Others 3
Company website 24
Investor relations office 10
Annual shareholders’ meetings 16
Formal communications/ reports 23
*Others consist of: (1) internal records and (2) matters taken up in the Board meeting for notation and
confirmation

Where we are:
Survey results and
analysis
Strengthening Board ethics

Boards have a critical role in developing
It is important that any Board
directive, or policy, is communicated or nurturing an ethical culture
to the target audience, to articulate
the “tone at the top” and to promote
adoption and implementation. With
this, the Board has adopted various
means to advocate and instill one Main methods used to instill
significant component of corporate corporate ethics in company values
culture: ethics.
Avenues to disclose the Board’s Code

of Business Conduct and Ethics
88%
Communication
and Awareness
Company
Company website
website 43 Campaign
Formal Formal
communications/
communications/ 20
reports reports
Annualshareholders’
shareholders’
72% 71%
Annual 13 Ongoing Supporting
meetings
meetings Monitoring and Context and
Accountability Methods Culture
Investor relations offce
Investor office 11
69%
Training and
The majority of respondents (84%) Reinforcement
disclose their Code of Business of the Code
Conduct and Ethics.
If you’re able to convince the owners of companies to believe in good

corporate governance and to respect shareholders’ rights, it will be much
easier to build a culture of good corporate governance in those companies.
If you approach CG from bottom to top, it will be a challenge because those
people below will still have to convince the true decision makers on the value
of good corporate governance. You may cry to high heavens but if the owners
do not believe in it, it will be difficult to develop a culture of corporate
governance in our country.
Atty. Francisco Ed. Lim
President, Shareholders Association of the Philippines (SharePHIL)

Disclosure and transparency
Enhancing company
disclosure policies and Most companies have established
procedures policies and procedures on the
Across all recommendations disclosure of financial information
considered, respondents affirmed
the adoption of company disclosure
policies and procedures covering The majority of companies (at least
financial reporting, significant
transactions, and ownership 71%) have already established formal
information. One minor area for
improvement though is the disclosure policies to guide the disclosure of financial
on third party evaluation of
transaction prices, where 86% have information and other significant corporate
implemented the practice while the
rest are considering adoption.
matters to the following parties:
Government Shareholders Employees Self-regulatory

regulators organizations
Suppliers Creditors Customers Communities
We promptly disclose major and market-sensitive information like dividend declarations,

joint ventures and acquisitions, sale and disposition of significant assets, as well as
financial and non-financial information that may affect the investment decision of the
investing public, in the form of press releases in newspapers and reports in our internal
publications.
Ricardo R. Chua
President and Chief Executive Officer, China Banking Corporation

Where we are:
Survey results and
analysis
Disclosures on Board remuneration

remain to be limited
At least 32 respondents (63%) have

disclosed information pertaining to their
Board members and key executives.
Types of information disclosed, out of At least 25 respondents

51 respondents: (49% of total) disclose
• Membership in other Boards (50) the following information
about remuneration:
• Their qualifications (50)
• Remuneration policy
• Other executive positions (49) (41)
• Shares they own in the company • Level and mix of
(49) remuneration (26)
• Training/seminars attended (47) • Link between
• Whether or not they are performance and
considered an independent remuneration (25)
director (46)
• Claims filed against them (32)
Not more than 18
respondents (35% of total)
also include:
• Procedures for settling
remuneration (18)
• Retirement provisions
(16)
• Remuneration on an
individual basis (14)
• Termination provisions
(14)

Increasing focus on
non-financial and GRI G4 standards continue to be a
sustainability reporting leading choice of Boards for reporting on
corporate sustainability
15 respondents (29% of the total) have adopted G4 Framework by

the Global Reporting Initiative (GRI) to report on sustainability and non-
financial issues.
Six respondents (12% of the total) have adopted Conceptual Framework
Corporate governance of the Sustainability Accounting Standards Board (SASB).
is all about making Five respondents (10% of the total) have instead adopted the Integrated
sure that you get the Reporting Framework by the International Integrated Reporting Council
(IIRC).
best people possible to
nurture a business, to However, 28 respondents (54% of the total) have yet to adopt
nurture a company and any framework for reporting on sustainability and non-financial
issues.
make it sustainable. And
when I say sustainable, In developing and publishing sustainability reports, respondents strongly
agree on the inclusion of governance, ethics and integrity, materiality policies
I’m talking about the and stakeholder engagement. Topics such as sustainability strategy and human
literal definition which rights gathered the least concurrence from the respondents.
is the capacity to endure In the US, many have started to report Environmental, social and governance
over the long term. (ESG) factors in response to increased expectations for more transparency.
However, there is misalignment in the framework adopted and preferred by
Ricardo Nicanor N. Jacinto companies and investors. 80% of corporates use GRI, while 43% of investors
CEO, Institute of Corporate
Directors
prefer SASB, only 21% prefer GRI.3 This should be an area to consider for
Philippine companies assessing which framework to use, as the use of various
frameworks makes the comparison between companies more difficult.
3 PwC’s ESG Pulse 2016

29
Where we are:
Survey results and
analysis
Disclosures on sustainability reports In managing the appointment,

reapptointment and removal of
Sustainability strategy Organizational profile external auditors, Audit Committees
have established processes which
include:
3.84 4.16 • Recommendation by the Audit
1 5 1 5
Committee
Materiality policies Stakeholder engagement
• Approval by the Board of
Directors
• Ratification by the shareholders
4.06 4.12
1 5 1 5 • Disclosure to regulators
Governance Ethics and integrity
• Disclosure to the public via the
company’s website
All the foregoing processes apply to

4.27 4.2
1 5 1 5 external audit appointment for all
Economic impact Environment companies, 82% for reappointment
and 80% for removal.
Promoting a
4.06 4.08
1 5 1 5 comprehensive and
Labor practices Human rights cost-efficient access to
relevant information
Organizations have increasingly used
3.96 3.63 their corporate websites as a publicly
1 5 1 5
accessible source of information,
Society Product responsibility
with 98% of the respondents
indicating they do so, while the rest
have plans to adopt such mode of
3.9 4.02
communication. Likewise, the Annual
1 5 1 5 Corporate Governance Report posted
on the corporate website remains
Strengthening the external Audit Committee the results of the for most respondents to be the
auditor’s independence audit. Likewise, external auditors are comprehensive source of corporate
reviewed regularly for their suitability
and improving audit and independence (92%, 47) and are
governance information.
quality imposed safeguards by organizations
to prevent conflicts of interest due to
A promising area based on responses
the provision of non-audit services.
is the Audit Committee’s oversight on
Relevant to this, the majority of
the performance and independence
the respondents did not engage
of external auditors. All respondents
the external auditors for non-audit
confirmed the Audit Committee’s
services for the last three years, while
active oversight on financial reporting
25% have received three or more
audits, where typically the external
non-audit services.
auditors present and discuss to the

Internal control and risk management framework
Strengthening the
internal control system Internal audit plays a critical role in
and enterprise risk strengthening controls and mitigating
management framework risks to the company
The internal audit function has been And in terms of periodic reporting of the Chief Audit Executive, 75% report
a staple component of overseeing the to the Audit Committee at least on a quarterly basis (the default reporting
design and continued operation of line of the Chief Audit Executive). This becomes an area for improvement
key organizational and operational for the remaining 25%, especially the three responding that this does not
controls. As such, all respondents apply. Constant communication between the Chief Audit Executive and
have the internal audit function Audit Committee (and the Board) allows a more timely escalation and
implemented in various forms: reporting of issues noted, business areas that need more oversight and
focus, risks that have higher likelihood of occurring, and emerging risks
that need attention and treatment.
Internal audit structure used
Outsourced
5
Co-sourced
RC02 - RC02 How does the Chief Audit Executive report to the following?
1
# Question Not Once a Once Once Once a Total

applicable month every every year
quarter six
months
1 Audit 6% 3 27% 14 47% 24 14% 7 6% 3 51
Committee
2 Board of 35% 18 18% 9 35% 18 2% 1 10% 5 51
In-house
Directors
45 3 Chief 18% 9 41% 21 35% 18 2% 1 4% 2 51
Executive
Officer

Where we are:
Survey results and
analysis
78% of the respondents indicated

that they have implemented Different avenues are used to disclose
risk management systems for
capturing the company’s risk
information on material risk exposures
exposure, while the remainder
are considering implementing one
for their organizations. Taking
into account the representation of Companies use at least one of the following
financial services companies who avenues to disclose material risk exposures to
are required by their regulatory external parties
agency to implement enterprise
risk management and supporting
infrastructure, it appears that A formal report, as part of a mandatory requirement
companies are realizing the by regulators
importance of identifying, assessing 75%
and mitigating risk exposures which

can adversely impact strategic and
operational objectives. Although
looking at it from a different A formal report, as part of the disclosure requirements
perspective, organizations seem of an Exchange
71%
to have encountered difficulties in
addressing this requirement despite
it being part of the old CG Code, with
almost a quarter of respondents still
yet to implement one. The company’s website as one of its voluntaty
65% initiatives
While a significant fraction of
companies have risk management
systems in place, the main challenge
relevant to this covers the robustness
of such systems, and the quality
and degree of implementation There were 2 companies, however, that did not use any
that influences the Board’s and of the above avenues to disclose material risk exposures.
management’s ability to manage
known and emerging risks.

Cultivating a synergic relationship
with shareholders
Promoting shareholder
rights Boards regularly assess if policies and
Treating shareholders fairly and
procedures allow the proper exercise of
equitably, as well as providing the shareholder rights
conducive environment to protect and
allow exercise of shareholder rights, At a minimum, 37 respondents (or
can only be realized if the appropriate 73% of total) confirmed that the
policies and platforms are in place. exercise of shareholders’ rights is
being ensured by their Board through
73%
At a minimum, companies are organized and effective application of
encouraged to ensure proper established policies and procedures.
articulation and dissemination of
the basic shareholder rights, and
empower shareholders to exercise the
same through established processes. 50 out of 51 respondents (98%) have policies and procedures
The scope of shareholder rights that allow shareholders to effectively exercise their right to vote...
covers these elements, among others:
But only 37 respondents (73%) have policies and procedures that
• Pre-emptive rights
allow shareholders to exercise the right to file derivative suits.
• Right to vote
• Right to inspect or examine
corporate records
• Right to receive dividends
• Right to the issuance of
certificate of stocks One of the interesting things that we are told by foreign
• Right to transfer or dispose investors is that they like buying into certain companies
shares as investors because of the strong guidance and vision
• Appraisal rights of the founding family members who probably are
• Right to file derivative suits somewhere still in the hierarchy of management and not
• Right to participate in the just owners of the company.
distribution of assets upon
dissolution of the company Hans B. Sicat
Former President & CEO, PSE
Various mechanisms are put in place
to allow shareholders to exercise the opportunity for direct shareholder respondents allow shareholders to
their rights and actively participate in involvement. Respondents from suggest agenda items, while the
the corporate governance processes. 98% (50) of the companies confirm remaining respondents intend to
However, the Annual Stockholders’ that their respective Boards ensure adopt such mechanism.
Meeting (ASM) proved to be the communication of sufficient
most prevalent and established information to shareholders for
mechanism, providing decision-making. 76% (39) of the

Where we are:
Survey results and
analysis
Poll voting (28) and showing of

Shareholders are notified of annual hands (14) are other popular voting
alternatives.
shareholders’ meetings through
different communication channels ASM minutes are aligned to
regulatory reporting requirements
Most respondents agreed that ASM
Notice is disseminated through...
minutes include these information:
01 02 03 04 • Voting and tabulation of

procedures used (88%)
Formal Newspapers of
Company Disclosures to • Opportunities given to
communications general
website an Exchange
to stakeholders circulation shareholders for asking questions
(92%)
• Matters discussed and
resolutions reached (96%)
• Record of voting results for each
agenda item (90%)
• List of persons in attendance
(69%)
• Dissenting opinions considered
(76%)
Posting of ASM minutes
...with a usual notification period of:

11
• 1-2 months (65%)
17
• Less than 28 days (29%)
Shareholder voting needs to evolve with the changing times, such as

9
through the use of technology. According to the 51 respondents, the most
popular form of voting is proxy voting (44) and the least popular form is
the electronic or remote voting (7).
15
1 working day 2 to 3 working days

5 working days More than a week

The top three challenges that we face in the Investor Relations Office on a daily basis
are: first, communicating financial results, whether it be good or bad; second, telling a
good story that is, making our story known and ensuring that it is accurate; and, third,
balancing the interests of both the shareholders and management.
The frequently asked questions from investors, shareholders, fund-managers, brokers are:
our growth story and dividends. I guess those are the top two things that they commonly
ask us.
Kristina Garcia
Director for Investor Relations, Century Properties Group, Inc.
Minority participation in director debate, and directors are also open to

selection process discussing the company’s use of cash Numerous
When it comes to director
with investors.5
developments have
nomination, election and removal,
84% (43) of the respondents
As for related party transactions, helped promote
respondents in varying degrees
have policies and procedures have indicated that related party shareholder
enabling minority shareholders to transactions undergo the following
communicate their inputs on director processes (notwithstanding the
engagement, such
nomination, while 94% (48) disclose minimal prevalence of a separate as IROs
the experience and background Related Party Transaction
of candidates for directorship. Committee):
45
This reflects the growing need for of the respondents
• Disclosures of conflicts of interest
addressing the rights of minority engage their
by directors and key executives
shareholders, and how companies shareholders through
(96%)
have responded to date. As with any
right, companies need to ensure that • Approval by the Board of 51 the Investor Relations
Office which:
the exercise of these rights is within Directors as deemed necessary
appropriate bounds. To implement (88%) • receives feedback, complaints,
this, companies can consider adopting and queries from shareholders
• Proper monitoring by the
proxy access rules. management team on a day-to- • is responsible for managing the
day basis (71%) company’s investor relations
Proxy access rules allow shareholders program
that meet certain ownership criteria • Ratification by majority vote
to submit a limited number of director of shareholders for material or • has a dedicated email address
candidates for inclusion on the significant RPTs (65%) and telephone number.
company’s annual proxy.4
Shareholder disclosures 44 includes the

appointment of an
investor relations
In terms of disclosure of company
equity and holdings, 98% (50)
51 officer
regularly share with shareholders
the capital and control structure, Respondent companies have instituted the following mechanisms to assist
and 90% (46) disclose all company shareholders who seek to address the violation of their right(s):
holdings in other listed companies,
including the respective objective Dedicated investor relations
Email addressf or complaints (46)
and rationale. The remainder of personnel (41)
the respondents are considering
adoption of these mechanisms. It is
worth noting that company’s capital Complaints hotline (27) ADR/ Arbitration procedure (14)
allocation plan is the center of long-
term versus short-term investment
Escalation policy (2)
4 PwC Director-Shareholder Insights: Board composition

– Key trends and developments, May 2016
5 PwC’s 2016 Annual Corporate Directors Survey
Where we are:
Survey results and
analysis
Duties to stakeholders
Respecting the rights of

stakeholders and effective There is higher emphasis on the
redress for violation of consideration of stakeholders in
stakeholders’ rights operational decision-making
Companies do not operate in
isolation: for them to realize
their short and long-term goals
and objectives, they have to work
together with their stakeholders.
Such stakeholders either affect or
are affected by how the companies
operate and make decisions. And
in this context of interdependence,
companies have to also support
the rights and interests of their
stakeholders—driven by legislation,
contractual arrangements and It is clear that
voluntary commitments of the stakeholders are
companies themselves. relevant to operational
decision-making.
78%
When it comes to ensuring focus
on how a company serves its
customers and conducts its business,
92% (47) of the respondents
have corresponding policies and and environment) in selecting rest consider establishing one
procedures in place. While the suppliers and contractors. This in the future. Likewise, the
structure, scope and composition of may indicate that aside from majority of the corresponding
these policies and procedures may the capability of the suppliers/ insolvency procedures define
vary, these typically revolve around contractors to deliver the specific mechanisms for disclosing
customer interaction and touchpoints resource or service acquired, financial difficulties for mutual
(from business development up companies look beyond the development of solutions
to post-transaction support) and tangibles and consider how between the company and
supporting operational processes. suppliers/contractors consider creditors.
their respective stakeholders as
As to dealing with suppliers and well. Only 78% (40) of respondents
contractors, almost all respondents confirm having appropriate
say they deal with them in a In the case of protecting the procedures to address
professional and objective manner. rights of creditors, established community issues in the
92% (47) of the companies consider solvency framework for creditor localities where they operate.
both economic and non-economic protection exists for 76% (39) The rest are considering
factors (such as society, human rights of the respondents, while the establishing such procedures.

Encouraging employees’ Stakeholders need to be made more
participation
aware of their role in furthering
Among all stakeholders, employees
have the most direct impact on
corporate governance
(and get the most impact from)
the company they work with. If
employees do not carry out their Communications with Employees, in
roles and responsibilities well, the stakeholders are primarily particular, have been
company ceases to generate the
value it intends to deliver. Likewise, conducted via: encouraged to actively
they are the key pieces that bring participate in corporate
corporate governance and strategy to
work on a day-to-day basis.
01 02 03 04 governance through:
Training and
Recognizing the need to foster development
employees’ active participation in

corporate governance, Boards have
adopted various mechanisms in their
respective organizations. Web-based media
channels (100%)
The top choices include:
Formal reports (88%)
• Training and development Increasing Policies
programs (94%) representation
Email and/or hotline (75%)
• Health, safety and welfare policy
(90%) Stakeholders’ relations office (53%)
• Reward/compensation policy
(86%)
While being the most direct

way to engage employees in
corporate governance is employee
representation in the Board Employee engagement is not only
(excluding executive directors), concentrated on programs addressing
only 14% confirm implementing this employee welfare and development,
process. but also on those emphasizing
employee duty in cultivating a culture
Work councils appear to gain traction of honesty, transparency and fair
in promoting employee participation. dealing. Two mechanisms to address
Other methods include employee these intentions are anti-corruption
stock option or purchase plans, programs and whistleblowing
long-term incentive plans and service programs.
excellence awards.

Where we are:
Survey results and
analysis
Anti-corruption policies and Employee whistleblowing

programs have to evolve in frameworks should
light of increasing regulatory encourage employees to
scrutiny report matters as needed
Respondents’ employee whistleblowing
Only 33 respondents (65%
frameworks cover:
of the total) report that their
company’s Anti-Corruption
policy and program include Confidentiality safeguards 45
provisions that:
Anti-retaliatory safeguards 37
• encourage employees to report

corrupt practices Dedicated email facility 36
• assist individuals in identifying

corrupt practices Confidential hotline 33
• endeavor to mitigate corrupt

practices Direct access to independent director 31
• outline procedures on how to

combat, resist and stop these Establishment of an ombudsman 16
corrupt practices
• formalize the role of the Board in
setting the tone and leading the
execution of the policy.
Anti-corruption training programs are

conducted:
Annually (14) Monthly (2)
On an ad hoc basis (32) Semi-annually (3)

Encouraging sustainability With the increasing opportunities for
and social responsibility stakeholders to exert their influence
and impact on companies, Boards and
More companies are acknowledging management should provide more
Talagang nabago ang the value of sustainability and social focus on environmental, social and
lugar namin nung responsibility in fulfilling their duties governance (ESG) factors. More and
dumating ang Manila to the broad stakeholder base, as the more, stakeholders are considering
responses reflect various stages of ESG factors when they evaluate a
Water at yung programa adopting recommended practices: company’s strategy, risk profile, and
nilang Tubig para sa • 84% (43) confirmed that its plan to create long-term value.6
Barangay. Nag-unite the company value chain
Not only do stakeholders in general
ang mga tao dahil sa process considers economic,
appreciate ESG as key factors;
environmental, social, and
pangangailangan ng governance issues and concerns,
investors, specifically, increasingly
tubig. Yung dating while 78% (40) put high
recognize that ESG factors can be
material to the investment process
kanya-kanya, walang importance on complying with
and returns.
pakialaman sa isa’t isa, environmental regulations.
nabago at nagkaroon ng • 67% (34) indicate the existence They see how ESG factors
of a company shared value contribute to value creation and risk
unity ang mga tao. framework that highlights the management, and that the influence
responsibility of the company to of ESG factors on securing deals and
Ms. Cora Fajilagot
President of Kaybagsik contribute solutions to address impact on valuation is growing.7
Neighborhood Association, global challenges.
Brgy. San Luis, Antipolo, Rizal
Beneficiary of Tubig para sa
• All other respondents consider
Barangay (Water for the Poor) adoption of these recommended
Project of Manila Water practices.
6 PwC’s ESG Pulse 2016
7 PwC and Principles for Responsible Investment: The

Integration of Environmental, Social and Governance
Issues in Mergers and Acquisitions Transactions,
December 2012

Next steps and conclusion

Next steps and
conclusion
The role and next steps for

corporate governance key players
Regulators information, the SEC can gauge areas compliance and identify priority areas
with the highest rates of adoption for improvement.
With its strong thrust to institute including the methods by which
strong corporate governance in the companies illustrate their compliance Since the release of the new CG
Philippines that is aligned to regional with the recommendations. Likewise, Code in November 2016, companies
and global standards, the SEC a more thorough analysis can be done have been taking stock and working
developed the “Philippine Corporate to assess adoption based on company towards either complying with
Governance Blueprint 2015: Building type, size, industry, among others. the recommendations or assessing
a Stronger Corporate Governance alternatives to be put forward. As
Framework.” With the “Comply or Explain” shown in the readiness questions
operative principle in the new CG across the 16 principles, almost
As a result of this blueprint borne out Code, the SEC can also identify areas all have registered more than 50%
of tedious work and expertise of SEC where companies are not inclined to adoption, with a significant part of
and various stakeholders, the revised adopt the specific recommendations. the rest considering adoption at least
CG Code was created. The CG Code is within a year.
just one of the strategic priorities for As companies are required to explain,
implementation up to 2020, with the SEC can obtain information on the Companies who are already adhering
others complementing and building reasons for not complying, and to the ASEAN Corporate Governance
on the CG Code to provide the develop assessments on the suitability Scorecard (ACGS) may have an
breadth and depth of coverage for the and acceptability of explanations. advantage, as the ACGS is one of the
corporate governance elements. The same approach can also be key reference materials used for the
applied when companies put forward new CG Code. While this can apply to
Guided by the blueprint, SEC, in alternatives adopted to address the larger corporates who have relatively
collaboration with other regulators Principles and Recommendations. more developed CG practices, the
for certain sectors, continues to mid- and smaller-tier companies
champion good corporate governance As more concrete data are generated may encounter more challenges in
while providing mechanisms to during the first year of the new CG adopting the new recommendations.
increase multiple stakeholder Code implementation, insights can They need to judiciously translate
involvement. They need to be derived and used by the SEC to the principle of proportionality to
judiciously translate the principle enhance, tailor or introduce new their respective organizations, and
and put forward clear descriptions action plans to the 2015 CG blueprint. put forward clear descriptions and
and explanations in their Annual Likewise, the SEC should continue explanations in their Manual on
Corporate Governance Reports. leveraging feedback from companies Corporate Governance.
and advocacy groups to develop
2017 will see the submission of a comprehensive view of the CG Notwithstanding the above
the new Manual on Corporate landscape and developments. circumstances, companies should
Governance that incorporates the continue advocating the CG Code
elements of the new CG Code. This, Private sector – beyond paper compliance and
together with the preliminary insights Listed companies adopting tangible outputs. To a
provided by this survey, will provide certain extent, leading companies can
the SEC the first concrete view of During the first year of the new lend technical expertise, experience
the level of compliance by publicly CG Code implementation, listed and lessons learned to those with less
listed companies. It will also define companies have the opportunity to developed CG practices.
the baseline for the company’s efforts objectively evaluate their level of
for initial adoption. Armed with this

Companies should also use to their Advocacy groups
advantage the institution of CG
practices by communicating such to Regulators and companies alike
the broader set of stakeholders. This require a steady support system to
will not only solicit more involvement propagate CG practices and allow PSE serves as a bit of a
and participation, this bodes well for a more collaborative approach carrot and stick. Things
the corporate reputation, too. to building on the strengths and
contributions of each other. This is like the Bell Awards
Private sector – where advocacy groups can lend their serve as a good way to
Non-listed companies expertise, experience and passion for benchmark individual
CG.
Although the new CG Code primarily
companies so that they
applies to publicly-listed companies, Advocacy groups should continue know where they are
companies not covered by this to partner with the SEC and other relative to others in
regime should consider assessing oversight and regulatory bodies
to propagate CG appreciation corporate governance. The
the applicability of the principles
and recommendations, including and value. Likewise, they can be market in itself is also a
other CG-related issuances by SEC effective conduits of feedback and good “stick” as companies
and relevant regulators. While non- information between SEC and
organizations. Composed of company are increasingly required
mandatory, these companies are
playing in the same field as PLCs, thus representatives and CG practitioners to be more transparent by
exposing them to similar expectations alike, these groups can influence investors.
of their own stakeholders. member companies to adhere to CG
best practices as a way to “walk the Hans B. Sicat
With the new CG Code aligned to talk” and strengthen CG culture. Former President & CEO, PSE
regional and global best practices, it
provides a ready benchmark for own They can also provide inputs on
CG efforts, and adopt a more strategic the actual implementation of CG
mindset (rather than compliance) for recommendations to SEC. Lastly, they
its own long-term value creation and can provide a platform for sharing CG
sustainability. practices among members and other
organizations.

Next steps and
conclusion
Conclusion
Current state of corporate Across five key themes, respondents • Cultivating a synergic
governance have shown different degrees of relationship with shareholders:
implementation and openness to With recommendations similar
The results appear to paint a adopt: to the provisions of the 2009
promising picture of the companies’ • The Board’s governance CG Code, most respondents
readiness to adopt the new CG code. responsibilities: Adoption is a have indicated that they value
In the readiness questions covering work in progress for this most strong collaboration with
selected recommendations of the comprehensive theme. Almost shareholders and protection their
16 principles, almost all areas have all however, have confirmed the rights, especially the minority
registered more than 50% adoption existence of a dedicated Audit shareholders.
with a significant number of the Committee. As of now, there is a • Duties to stakeholders:
remainder considering adoption of very low readiness to allow third- Principles under this theme
the recommendations at least within party experts to assess Board’s are relatively new, yet an
the year. However: performance. overwhelming majority ensure
• Majority of the respondents • Disclosure and transparency: that duties to stakeholders are
were from companies with Over 90% of the respondents met, with existing mechanisms
large capitalization (more than have existing practices in correspondent to the
PHP10bn), indicating that disclosing financial information recommendations.
the results represent more the and external audit. However,
current state of CG for larger It is interesting to consider though the
adoption is a challenge for perspective of various international
corporates. Typically, these majority of the respondents
companies have more developed institutions insofar as Philippine CG
on disclosures regarding non- practices are concerned:
CG practices and may participate financial and sustainability
in the ACGS. However, this does issues. • World Economic Forum
not intend to conclude the direct Competitiveness Report (2010-
correlation of capitalization and • Internal control system and 2016):
quality of CG practices. risk management framework:
Most of the respondents -- The Philippines is ranked in
• Regulated industries such as indicate the implementation the middle tier (66th) out
financial services represent of internal control systems and of 138 countries in terms of
one third of the respondents. internal audit. Enterprise risk “Corporate Governance” in
These institutions are required management implementation is 2016, improving from 90th
to comply with relatively more a work in progress, having been in 2010, but declined starting
stringent CG requirements as significantly expanded from the 2014.
imposed by their regulators. previous CG Code. -- The lowest attribute was
for “Strength of Investors’
Protection” but fared better
for “Strength of Auditing
and Reporting Standards”
(related to “Disclosure and
Transparency”) and “Efficacy
of Corporate Boards” (related
to “Board Governance”).

Let’s all get together so that we can have a
stronger voice, not just with the regulators but
with our bosses and with our stakeholders and
this is a step moving to right direction.
Atty. Jocelyn Villar-Altamira
President, GGAPP
• CLSA-ACGA (Asian Corporate • While the elements of “Comply respondent turnout and the resulting
Governance Association) CG or Explain” and “Principle of data pool.
Watch 2016: Proportionality” allow companies
some degree of flexibility, This survey aims to push forward
-- The Philippines ranked more conversations and the
10th out of the 11 markets considering the companies’ type,
size and complexity (among momentum on CG by providing a
assessed in the survey, starting platform. GGAPP and PwC
ranking lower than ASEAN others), it should drive more
insightful assessments and advocate the following:
peers Singapore, Thailand
and Malaysia, but higher decisions towards embedding CG • More thorough and targeted
than Indonesia. in the organization. studies on the various
• All CG stakeholders should dimensions of the new CG code
-- The Philippines’ “score fell and Philippine CG in general.
because of slow progress work towards the general
on reform and general CG acceptance and embodiment • Targeted surveys that can cover
standards are well below of CG, advocate a consistent key stakeholders and officers for
those other markets. ” yet tailored application of the CG, such as corporate directors,
recommendations, and espouse compliance officers and C-suite
-- The Philippines scored the importance and value of CG. executives.
the highest for “IGAAP”
(International Generally • The results of the survey should • Subsequent studies that should
Accepted Accounting help increase the maturity focus on:
Principles), but needs of CG practices, contribute
-- The “why” and “how” for
improvement on “Corporate inclusive development in the CG
specific areas of interest
Governance Rules/Practices”, environment, and drive better
perception from stakeholders and -- The detail, quality
Corporate Governance
international institutions. and rationale for the
Culture and Enforcement.
adoption/non-adoption of
In summary: Areas for further recommendations
• While the various CG players consideration -- Alternatives put forward by
have put forward meaningful companies and “explanation”
The survey intended to cover as for non-adoption of the
efforts to establish and promote many aspects of the principles and
CG practices, so much more need recommendations.
recommendations of the new CG
to be done. Code. However, with the extent of
• More effort is needed not only items covered by the new CG code
for the adoption of baseline vis-à-vis survey administration
recommendations by a few, but considerations, the questions
also the broader acceptance covered the “what” of selected
and adoption across various recommendations. The length of
categories of listed companies. survey, time required to complete, the
amount of information required and
the appropriate officer(s) to respond
were key parameters that drove the

Acknowledgments
Ricardo R. Chua Corazon de la Paz- Cora Fajilagot

President and Bernardo President, Kaybagsik
Chief Executive Officer, Independent Director Neighborhood Association,
China Banking Corporation Manila Water Company
Project Beneficiary
Atty. Vincent Edward Kristina Garcia Ricardo Nicanor N. Jacinto

Festin Director for Investor Relations, Chief Executive Officer,
Chairman, Good Governance Century Properties Group, Inc. Institute of Corporate Directors
Advocates & Practitioners of (ICD)
the Philippines (GGAPP)
Atty. Francisco Ed. Lim Hans B. Sicat Atty. Jocelyn C.

President, Shareholders Former President & CEO, Villar-Altamira
Association of the Philippines Philippine Stock Exchange President, Good Governance
(SharePHIL) (PSE) Advocates & Practitioners of
the Philippines (GGAPP)

Advisory group Rocky Saldajeno Judelyn Liaban
Markets Senior Manager Mark John Pentecostes
Alexander Cabrera Isla Lipana & Co./PwC Philippines Aria Traveros
Chairman and Senior Partner, Business Services Philippines
Isla Lipana & Co./PwC Philippines Design and layout Associates,
PwC Philippines
Benjamin Azada Dennis Bautista
Managing Principal, Markets Senior Manager John Ryan V. Lara
PricewaterhouseCoopers Consulting Isla Lipana & Co./PwC Philippines Melissa D. Monares
Services Philippines Co. Ltd. Isagani S. Mondala
Christian Gonzales
Business Services Philippines
Rex Drilon Markets Senior Associate
Interns,
Vice Chairman, Isla Lipana & Co./PwC Philippines
PwC Philippines
Institute of Corporate Directors
Marc Thaddeus Bodo
Estrella Bibat
Sundara Raj Markets Associate
Executive Assistant,
Chief Executive Officer, Isla Lipana & Co./PwC Philippines
Isla Lipana & Co./PwC Philippines
PwC South East Asian Consulting
Project management
Diana Jaime
Joazral Azam Yusof Administrative Assistant,
Executive Director - Grace Aries
Ethics and Independence Director, Isla Lipana & Co./PwC Philippines
Risk and Governance,
PwC Consulting Services (M) Sdn Isla Lipana & Co./PwC Philippines
Interview contacts
Bhd
Allan Cao
Maryanne Parel-Corpuz
Vincent Edward Festin Assurance and Markets Director, Isla
Executive Assistant to the President,
Chairman, GGAPP Lipana & Co./PwC Philippines
Philippine Stock Exchange
Professor,
Project support
Ateneo de Manila Nancy Gallego
Graduate School of Business Rafael Francisco Suarez Executive Secretary,
Maria Regina Ciel Quiambao ACCRA Law
Jocelyn Villar-Altamira
Deals and Corporate Finance
President, GGAPP Ma. Chimene Alvarez
Associates,
Assistant Vice President & Head of Compliance Officer,
Corporate Governance and China Banking Corporation
Compliance Office, Jackson Dulnuan
Manila Electric Company Alexander Escucha
Ianna Pinote Reyes
Senior Vice President for Investor
Assurance Associates,
Charles Gamo and Corporate Relations Group,
Member, GGAPP China Banking Corporation
Director, Origination & Client Jay Armand Ogayon
Coverage, Mary Ann Ducanes
Seodel Hearty T. Pilapil
China Bank Capital Corporation Marketing Communications
Department Head,
Assistant Manager,
Research, data analysis and writing China Banking Corporation
PwC Philippines
Alvin Dave Pusing Thom Ryan Ortega
Philip P. Lanuzo
Senior Manager, Corporate Compliance Manager,
PricewaterhouseCoopers Consulting Manila Electric Company
Senior Associate,
Services Philippines Co. Ltd.
PwC Philippines Luis Juan Oreta
Rochelle Dichaves Josephine Pagdanganan
Tatiana Marie Arcenas Victoria Santos
Associate,
Carl Angelo Cabusas Prevelyn Gazmen
PricewaterhouseCoopers Consulting
Camille Caringal Gina Agapito
Services Philippines Co. Ltd.
Lea Blosom Castillo Romy Gonzales
Editors Ma. Leanel Cordero Bernie Balingit
Lie Catherine Galam Manila Water Company Team
Tina Arceo-Dumlao Macris Jeresano
Business Features Editor, Jemuel Jed Jorge
Philippine Daily Inquirer
www.pwc.com/ph
Contact information
For further information on the survey content, please contact:
Alexander Cabrera
Chairman and Senior Partner,
+63 (2) 845 2728
alex.cabrera@ph.pwc.com
Good Governance Advocates & Practitioners of the Philippines (GGAPP)

The Good Governance Advocates and Practitioners of the Philippines is an association of good governance advocates and
practitioners from various publicly-listed companies, the public sector and other organizations who have come together to
promote and assist in the development of good governance in the country.

Isla Lipana & Co. is PwC in the Philippines.
We have provided professional services in the Philippines for 95 years. We stick to the highest quality standards in delivering
audit and assurance, tax and advisory services within and outside the country.
At PwC, our purpose is to build trust in society and solve important problems. We’re a network of firms in 157 countries with more than 223,000
people who are committed to delivering quality in assurance, advisory and tax services. Find out more and tell us what matters to you by
visiting us at www.pwc.com.　
This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should
not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express
or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, Isla
Lipana & Co., its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of
you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.
The analysis described herein and was based only on the information made available and project activities completed as of
18 May 2017. Accordingly, changes in circumstances after this date could affect the findings outlined in this Report.
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PwC GGAPP Philippines

Corporate Governance Survey

Finding the true north

My warmest congratulations to In addition, the SEC believes that the

ii Finding the true north: Advancing corporate governance in the Philippines

Congratulations to the Good companies that practice it are highly

Corporate governance is something

PwC GGAPP Corporate Governance Survey 2016 iii

On behalf of the Board of Trustees More importantly, these documents

iv Finding the true north: Advancing corporate governance in the Philippines

It is indeed a proud moment for both Finally, as Chairman of GGAPP, I

PwC GGAPP Corporate Governance Survey 2016 v

Last year, we in GGAPP had the Fortunately, we found a wonderful

PLCs, depending on various factors

vi Finding the true north: Advancing corporate governance in the Philippines

Balancing short-term with long-term PwC is honored to embark with

PwC GGAPP Corporate Governance Survey 2016 vii

Then and now:

The role and next steps

PwC GGAPP Corporate Governance Survey 2016 ix

Knowing about the beginnings of corporate

We step back to learn the groundwork, and we

It is easy to remember an event or an

In an interview with Dr. Jesus P. Estanislao, the

As you read our conversation with Dr.

x Finding the true north: Advancing corporate governance in the Philippines

2 Finding the true north: Advancing corporate governance in the Philippines

2. Solicit support from local regulatory agencies.

3. Widen the network of individuals and institutions to support the advocacy.

4. Reach out to international groups.

5. Commit to continuous learning.

These themes will be discussed in the different sections of the report.

PwC GGAPP Corporate Governance Survey 2016 3

Rex C. Drilon (RCD): The b. The third revision of the

4 Finding the true north: Advancing corporate governance in the Philippines

Keep the conversation going.

Be part of the CG story.

PwC GGAPP Corporate Governance Survey 2016 5

Timeline of corporate governance

East Asian Institute of

6 Finding the true north: Advancing corporate governance in the Philippines

PwC GGAPP Corporate Governance Survey 2016 7

Survey objectives and design

8 Finding the true north: Advancing corporate governance in the Philippines

The survey was designed and The respondent profile, in terms of

10 Finding the true north: Advancing corporate governance in the Philippines

The new CG Code adopted themes • Internal control system and

PwC GGAPP Corporate Governance Survey 2016 11

12 Finding the true north: Advancing corporate governance in the Philippines

The Board’s governance responsibilities

14 Finding the true north: Advancing corporate governance in the Philippines

The selection of directors continues to be anchored on

Considerations in selecting directors

Integrity 11 8 41 4.73 (1)

Knowledge/education 2 12 37 4.61 (2)

Prior business experience 11 13 36 4.59 (2)

Technical skills 12 20 28 4.45 (4)

Cultural fit 3 9 16 14 9 3.33 (6)

Age 5 19 16 5 6 2.80 (7)

Gender 6 16 17 8 4 2.76 (7)

Ethnicity 8 16 17 6 4 2.65 (9)

Strongly Disagree Disagree Neither Agree Agree Strongly Agree

PwC GGAPP Corporate Governance Survey 2016 15

Board diversity The majority of the Boards are