Corporate Governance Paradigm under the Corporation Code of the Philippines

The Corporation Code contains its own set of “corporate governance (CG) principles,” which can be summarized into the following general statements:

a. The size and composition of the Board of Directors can only be based on provisions contained in the Articles of Incorporation or the By-Laws.

b. Other than in those cases specifically provided by law, any qualification or disqualification pertaining to the members of the Board of Direc

tors shall be valid only when expressly provided in the articles or by-laws.

c. Boards of Directors

have no power by mere exercise of their Business Judgment, to provide for their own qualifications and disqualifications.

d. Outside of specific statutory empowerment, the power to elect, compensate, discipline, and remove any member of the Board of Directors is vested with the stockholders.

Section 14(6) of the Corpora- chance of electing their nominees into the Board. It embodies the “CG principle” that the Board of Directors of every stock corporation, although it speaks and decides through the vote of the majority of its members, should have varied representation that allows the airing of the concerns and interests of the minority stockholders. The mandatory cumulative voting system in the election of the members of the Boards of Directors of companies under the Corporation Code therefore adheres to the current CG principle of capital stock. In essence, outside of statutory provisions on the matter, the composition of the Board of Directors and the qualifications and disqualifications of its members are

governed by existing provisions in the articles of incorporation and by-laws, and cannot be changed simply by a formal resolution of the Board of Di

rectors in the exercise of their