Good Governance Reviewer PDF

GOOD GOVERNANCE REVIEWER Professional Corporation - Typically, only licensed professionals can own shares or be shareholders CORPORATION - A legal entity that is separate and distinct f...

GOOD GOVERNANCE REVIEWER Professional Corporation - Typically, only licensed professionals can own shares or be shareholders CORPORATION - A legal entity that is separate and distinct from its owners. - It is created by individuals, stockholders, or shareholders with the Corporate Social Responsibility (CSR) - refers to a company’s commitment to operating in an ethical and purpose of operating for profit. socially responsible manner to satisfy their various stakeholders’ - They are allowed to enter into contracts, sue and be sued, own needs. assets, remit federal and state taxes, and borrow money from financial institutions. Ethics - Refers to a set of moral principles or values that guide behavior and decision making SHAREHOLDERS 4 DIMENSIONS OF CORPORATE SOCIAL RESPONSIBILITY - The owner of corporation also known as stockholders. Economic - This is the foundational responsibility of a business to - They have the right to vote. be profitable. Legal - Businesses are expected to comply with laws and INVESTORS regulations set by governments and regulatory bodies. - Provide the capital necessary for growth and expansion. Ethical - Ethical responsibility goes beyond legal requirements and - It is possible to invest without buying shares. focuses on doing what is morally right. Philanthropical - This involves voluntary activities that go MANAGEMENT beyond the company’s economic, legal, and ethical obligations. It - The Chief Executive Officer (CEO) run the day-to-day operations. encompasses charitable contributions, community involvement, and support for social causes. - Identifies corporate risk. BOARD OF DIRECTOR DRIVERS AND BARRIERS OF CORPORATE SOCIAL RESPONSIBILITY - Overseen the strategies and performance of the management. DRIVERS – Regulations, Market behavior, Social activism, SHAREHOLDERS Culture Strategy - They are the one who approve mergers and acquisitions. BARRIERS- Limited financial resources, Profit maximization, Availability of human resources SECURITY AND EXCHANGE COMMISSION (SEC) - It is the national government regulatory agency charged with DRIVERS OF CORPORATE SOCIAL RESPONSIBILITY supervision over the corporate sector, the capital market Regulations - Governments and regulatory bodies often establish participants, and the securities and investment instruments market, laws and standards that compel companies to adopt socially responsible practices. and the protection of the investing public. Market Behavior - Increasingly, consumers are looking for brands that align with their values, including ethical practices and sustainability. 5 TYPES OF CORPORATIONS Social Activism - Social movements and advocacy groups can exert pressure on companies to address issues like environmental Stock Corporation - Often referred to as a corporation or a joint- sustainability, human rights, and fair labor practices. stock company. Culture - A company’s internal culture and values can drive its CSR initiatives. Organizations with a strong commitment to ethics and Non-stock Corporation - Usually formed for non-profit purposes, community may naturally incorporate CSR into their business such as charitable, educational, religious, or cultural activities. practices. Strategy - CSR can be part of a company's long-term strategic One Person Corporation - Also known as a Single-Member vision, aligning with goals related to sustainability, reputation, and Corporation or Sole-Shareholder Corporation. risk management. Foreign Corporation - They are subject to the laws and tax regulations of the jurisdictions where they operate. DRIVERS OF CORPORATE SOCIAL RESPONSIBILITY Sustainability: Good governance practices often include long-term planning and sustainability considerations. Limited Financial Resources - CSR initiatives often require financial investment, whether for environmental sustainability Ethical Conduct: Governance frameworks promote ethical programs, community engagement, or ethical supply chain behavior and decision making within the organization. practices. Profit Maximization - The primary goal of many businesses is to maximize profits. CSR activities, which may involve higher costs or Strategy – defined as a plan of action taken to achieve objectives. lower short-term returns, can sometimes conflict with this profit- driven focus. Formulation – planning Availability of Human Resources - Effective CSR implementation Evaluation – controlling often requires specialized knowledge and skills, such as expertise in sustainability, social impact assessment, or ethical governance. Implementation – organizing Establish Goals – This is initially performed by creating and/or clarifying your business vision/mission and identifying goals IMPORTANCE OF GOOD GOVERNANCE AND SOCIAL objectives. RESPONSIBILITY. Scan Environment – Perform a thorough analysis and assessment SOCIAL RESPONSIBILITY of the internal and external environment of the company. Ethical Behavior: Social responsibility ensures that organizations External – looks at the opportunity and threats operate in an ethical manner, taking into account the impact of their actions on society, the environment, and various stakeholders. Internal – Looks at the strengths and weaknesses Reputation and Trust: Companies that actively engage in socially Stakeholders – are individuals or groups of people who can be responsible practices often enjoy enhanced reputation and trust affected by activities engaged in corporations in achieving their among customers, employees, investors, and the community. goals. Key stakeholders are shareholders (Investors, owners, partners, or anyone who has financial stake in the company), Risk Management: By addressing social and environmental issues Customers, employees, suppliers, and society ( government, civil proactively, organizations can mitigate risks related to regulatory society, institutions) compliance, environmental damage, and social backlash. Stakeholder Theory – A conceptual framework of business ethics Attraction and Retention of Talent: Employees are increasingly and organizational management which addresses moral and ethical seeking to work for companies that align with their values and values in the management of a business or other organization. demonstrate a commitment to social and environmental issues. Strategic CSR – it starts within the organization when it embeds Market Differentiation: Socially responsible practices can and aligns its CSR initiatives as part of the company’s overall differentiate a company from its competitors, providing a strategy. competitive advantage in markets where consumers and investors are prioritizing ethical considerations. Alignment of CSR with business strategy – Leadership, Employee engagement, collaboration, Communication, Value Creation. Community Impact: Engaging in social responsibility initiatives helps improve the well being of communities and contributes to Corporate Governance – refers to the system by which companies solving societal challenges, creating a positive impact on the local are directed and controlled. and global scale. Key players in corporate governance – board of directors, management/manager, officers, shareholders, customers, stakeholders, suppliers GOOD GOVERNANCE Other forms of organization – Partnership, Corporation, Sole Transparency and Accountability: Good governance involves Proprietorship, cooperative, limited liability company. transparent processes and accountability mechanisms, ensuring that an organization’s activities are conducted openly and that decision- makers are held accountable for their actions. This fosters trust and integrity. Theoretical Perspective Effective Decision-Making: Strong governance structures, such as Stakeholder Theory – the most influential corporate governance well-functioning board of directors, help ensure that decisions are model made based on sound judgement and strategic considerations, rather than personal interest or biases. Agency Theory – provide the owner and agent relationship Compliance and Risk Management: Good governance ensures Resource Dependency Theory – Availability of resources that the organization adheres to laws, regulations, and internal improves organizational performance policies. This minimizes the risk of legal issues, financial mismanagement, and operational failures. Stewardship Theory – focus on stewards or company owner Stakeholder Confidence: Investors, customers, and other Transaction Cost Theory – supposes that companies try to stakeholders are more likely to have confidence in an organization minimize the costs of exchanging resources with the environment. that demonstrates good governance. Political Theory – philosophical study of government , addressing 11232, otherwise known as the “Revised Corporation Code of The questions about the nature. Philippines” or “RCC” – with the aim of improving the ease of doing business in the country. APPROACHES TO CORPORATE GOVERNANCE Transparency – the quality of being easily seen through, refers to being open and honest Accountability – Legal contractual and social obligations to both shareholders and non-shareholders must be upheld. Establish Board Composition – a new focus on board diversity and independence. Risks Management – The board and management must determine risks of all kinds and how best to control them. FUNCTIONS OF THE BOARD Accountability – An acceptance of responsibility for honest and ethical conduct towards others. Monitoring and Supervising – Another function of the board is to oversee the performance of its management. Policy Making – ensures the company rules and supervise management activities Strategy Formulation – this will steer the company to achieve its mission and vision Membership of the Board – A corporation is composed of one director (for OPCs) up to maximum of 15 directors owning at least one share of stock. Independent, Non- Executive, Executive director. Towards effective Working Board – Board leadership and composition, operational and deliberative processes, board culture and dynamics and performance evaluation and improvement. Family Governance – wealth management, next-generation involvement and business succession. Ethical Stewardship – the honoring of duties owned to employees, stakeholders, and society in the pursuit of long term wealth creation. LEGAL, REGULATORY, AND POLITICAL ISSUES Regulation – A legal system that controls and regulates the activities in the business of a certain community, country or the universe at large. THE PHILIPPINE CORPORATION CODE – Corporate governance in the Philippines is principle-based - One of the main purposes of the code is to align Philippine governance codes with that of the international business community standards (such as the OECD and ASEAN Corporate governance inititatives) - the first of the series of Codes that is intended to cover all types of corporations in the Philippines under supervision of the Securities and Exchange Commission (SEC)