Corporate Governance in the Philippines

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Questions and Answers

What is the primary responsibility of the Audit Committee?

To establish policies on executive remuneration

To review the qualifications of all Board nominees

To oversee internal controls and the Board's oversight responsibility (correct)

To perform the annual financial audit of the corporation

Which committee is responsible for evaluating the qualifications of individuals nominated to the Board?

Audit Committee

Executive Committee

Compensation Committee

Nomination Committee (correct)

What is one of the key responsibilities of the Board of Directors?

To determine the daily operations of the corporation

To oversee the marketing strategies of the corporation

To evaluate product lines for profitability

To protect the resources entrusted by shareholders (correct)

What task does the Compensation or Remuneration Committee perform?

Develop a policy on executive remuneration Signup and view all the answers

Who is responsible for electing the members of the Board of Directors?

The shareholders Signup and view all the answers

What are the three distinct dimensions of the legal environment?

Domestic laws of home country, domestic laws of foreign markets, and international law Signup and view all the answers

Which market is NOT considered a central institution of corporate governance?

The financial derivatives market Signup and view all the answers

How does the political environment influence organizations?

It affects the policies and benefits organizations can derive. Signup and view all the answers

What is a characteristic of firms that rely heavily on technology?

They are more technologically sensitive. Signup and view all the answers

Which aspect of the external environment can create significant threats to organizations?

Political conditions Signup and view all the answers

What is the primary responsibility of the audit committee?

To ensure accurate financial reporting Signup and view all the answers

How does a company's ownership structure affect the board of directors?

It influences the efficiency of governance Signup and view all the answers

Which of the following is a typical responsibility of a CEO?

Manage the company’s public relations Signup and view all the answers

What role does the CEO play in managing financial risk?

Recommends budgets for approval Signup and view all the answers

What is a key function of a Chief Financial Officer (CFO)?

Implementing internal controls Signup and view all the answers

How does the CEO act as a liaison for the board?

By providing information and advice to board members Signup and view all the answers

What area should the CFO focus on for effective management?

Financial risk management Signup and view all the answers

What is expected of the CEO regarding the company's programs, products, and services?

To administer design and quality control Signup and view all the answers

What is one of the primary responsibilities of a CFO regarding financing sources?

To maintain relationships with banks and financial institutions Signup and view all the answers

What role does a CFO play in managing risk within a company?

They provide insights into potential risks based on company operations Signup and view all the answers

Which of the following is NOT a right of shareholders?

To impose personal management choices Signup and view all the answers

What is a key role of a CFO in major strategic issues?

To participate in decisions that affect the company's long-term future Signup and view all the answers

How can shareholders change the board of directors?

By voting to remove or refuse to re-elect them Signup and view all the answers

What is an important aspect of what CFOs must avoid while providing information to shareholders?

Diminishing the company's competitive position in the market Signup and view all the answers

What function does the CFO serve in relation to other parties within an organization?

They act as a bridge between various parties in the organization Signup and view all the answers

What distinguishes independent auditors in the context of corporate governance?

They provide objective evaluations of the company's financial status Signup and view all the answers

Study Notes

Corporate Governance in the Philippines

The Audit Committee ensures a sound internal control system and board oversight.
The Nomination Committee reviews and evaluates board member qualifications.
The Compensation Committee establishes a transparent procedure for executive compensation.

Internal Foundation of Corporate Governance

Board of Directors:
- Oversee the corporation's activities, management, and operations.
- Their authority and responsibilities are defined by shareholders and by-laws.
- Primary responsibility is protecting shareholder resources and ensuring a return on investment.
- Comprised of individual directors elected by shareholders.
- Includes audit and compensation committees.
Audit Committee:
- Ensures financial statements and reports are accurate and comply with financial reporting standards.
Ownership Structure:
- Significantly impacts the board's effectiveness in governance.
Chief Executive Officer (CEO):
- Responsible for implementing the board's strategies and procedures.
- Acts as a bridge between the board and staff.
- Oversees program, product, and service delivery while maintaining quality.
- Manages financial risks, budgets, and organizational resources.
- Responsible for human capital management, following legal standards.
- Builds a positive image of the company to stakeholders.
Chief Financial Officer (CFO):
- Implements internal financial controls.
- Analyzes capital investment requirements and secures financing.
- Develops relationships with financial institutions.
- Advises management.
- Participates in strategic decision-making.
- Manages company risk.
- Serves as a central point of connection within the organization.
- Maintains objectivity and financial transparency.
Shareholders:
- Have the right to receive dividends and a share of company proceeds upon liquidation.
- Must balance their information rights with the company's competitive needs.
- Must ensure their influence does not hinder company operations.
- Can remove or refuse to re-elect directors if dissatisfied with their performance.

External Environment of Corporate Governance

Auditors:
- Independent external institutions that ensure efficient company operations.
- Verify the accuracy of public records, adherence to reporting standards, and timely tax payments.
Legal Environment:
- Composed of domestic laws of the home country, foreign markets, and international law.
Markets:
- Crucial for corporate governance.
- Include product, capital, and managerial labor markets.
Other External Factors:
- Political Environment:
  - Influences company policies and benefits.
  - Shapes internal and external organizational dynamics through human resource selection.
- Technological Environment:
  - Impacts businesses relying heavily on technology.
- Social Environment:
  - The ecosystem within which organizations operate.

Corporate Protection within Legal Boundaries

Anti-Takeover Defenses:
- Used to prevent hostile takeovers.
- Can involve various tactics and strategies.
- Subject to legal regulations and review.

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Description

This quiz explores the essential components of corporate governance in the Philippines, including the roles of the Audit, Nomination, and Compensation Committees. It covers the responsibilities of the Board of Directors and the impact of ownership structure on governance effectiveness. Test your understanding of these critical concepts!