Raising the bar of Corporate Governance

In the present corporate world, sound corporate governance plays a major role in any successful business. Implementation of an effective code of corporate governance maximizes the company’s resources and enterprise value with respect to its shareholders. It also promotes transparency and fairness in dealing with all stakeholders.

The Securities and Exchange Commission (SEC) approved the Code of Corporate Governance for Publicly Listed Companies (CG Code for PLCs). Pursuant to SEC Memorandum Circular 19, the Code took effect on January 1. All publicly listed companies are required to submit a new manual on corporate governance to the SEC on or before May 31.

The Code is intended to raise the corporate governance standards of Philippine corporations to a level at par with its regional and global counterparts.

As defined in the Code, Corporate Governance is the system of stewardship and control to guide organizations in fulfilling their long- term economic, moral, legal, and social obligations towards their stakeholders. It is a system of direction, feedback and control using regulations, performance standards and ethical guidelines to hold the Board and senior management accountable for ensuring ethical behavior — reconciling long-term customer satisfaction with shareholder value — to the benefit of all stakeholders and society. Its purpose is to maximize the organization’s longterm success, creating sustainable value for its shareholders, stakeholders and the nation.

The new corporate governance code provides a framework for whistleblowing, allowing employees to express concerns about unethical practices.

‘COMPLY OR EXPLAIN’ APPROACH

The Code adopts the “comply or explain” approach which combines voluntary compliance with mandatory disclosure. Companies are encouraged to comply with the Code, but if they chose not to, they must identify any areas of noncompliance in their annual corporate governance reports and explain the reasons for noncompliance.