Corporate Governance PDF

Governance – the combination of processes - Responsible to direct and/or oversee the and structures implemented by the board to organization’s activities and hold senior inform, direct, manage, and monitor the management accountable activities of the organization towar...

Governance – the combination of processes - Responsible to direct and/or oversee the and structures implemented by the board to organization’s activities and hold senior inform, direct, manage, and monitor the management accountable activities of the organization toward the - Typically includes members who are not part achievement of its objectives. (ISPPIA) of management Corporate Governance – involves a set of The Role of BODs relationships among a company’s 1. To act on a fully informed basis, in good management, its board, its shareholders, and faith, with due diligence and care, and in the other stakeholders. It also provides the best interest of the company and all structure through which the objectives of the shareholders. company are set, and a means of attaining 2. To oversee the development of and approve those objectives and monitoring performance the company’s business objectives and are determined. (OECD) strategy and monitor their implementation, in order to Corporate Governance in PH Setting sustain the company’s long term viability and a. Regulated by SEC thru the Corporate strength. Governance Code for PLCs 3. To ensure and adopt an effective succession b. SEC Form I-ACGR (Integrated Annual planning program for directors, key officers, Corporate Governance Report) submitted and to SEC; follows “Comply or Explain” approach management 4. To align the remuneration of key officers and “Comply or Explain” Approach directors with the long-term interests of the a. This approach combines voluntary organization. compliance with mandatory disclosure. 5. To develop a policy on board nomination and b. Covered companies are not required to election. comply with all the recommendations of the 6. To ensure proper implementation of the applicable corporate governance codes policy and system governing related party transactions and other unusual or infrequently “Principle of Proportionality” occurring transactions a. In applying this principle, boards or companies are allowed flexibility in establishing 7. Responsible for approving the selection and their CG policies. assessing the performance of Management b. The policies should take into consideration and control functions. the size and risk profile of the listed company, 8. To establish an effective performance among others, and ensure proportionality. management framework. 9. To oversee that an appropriate internal Chief Audit Executive (CAE) control system is in place. The CAE describes the role of a person in a 10. To oversee that a sound enterprise risk senior position responsible for effectively management (ERM) framework is in place. managing the internal audit activity in accordance with the internal audit charter & the Code of Professional Ethics for IA mandatory elements of the International - States the principles and expectations Professional Practices Framework (IPPF). governing behaviour of individuals and organizations in the conduct of internal Chief Audit Executive (CAE) auditing. To ensure effective organizational - Describes the minimum requirements for independence, the CAE functionally reports to conduct, and behavioural expectations rather the board. than specific activities. Generally, the CAE also has an administrative, or “dotted,” reporting line to a - Purpose: To promote an ethical culture in the member of senior profession of internal auditing. management. - A code of Ethics is necessary and appropriate for the profession of internal auditing, founded The Role of BODs as it is on the trust placed in its objective BOD assurance about governance, risk - The highest level governing body management and control. The Code of Ethics include two essential time, talents, and the entity’s resources in the components: best interest of absentee owners. 1. Principles that are relevant to the profession and practice of internal auditing; and Principles 2. Rules of Conduct that describe behavior 1. Fairness norms expected of internal auditors. 2. Responsibility 3. Accountability Principles 4. Transparency 1. Integrity 4 Core Principles of Corporate Governance The integrity of internal auditors establishes - These core principles serve as guidance for trust and thus provides the basis for reliance corporations in the formulation of its policies on their judgment. and reforms relating to increased investor 2. Objectivity confidence, development of capital market and Internal auditors exhibit the highest level of sustainable growth. professional objectivity in gathering, evaluating, and Board Charter communicating information about the activity or - A document which clearly defines the power, process being examined. Internal auditors authority, roles, and accountabilities of the make a directors in carrying out their fiduciary duties. balanced assessment of all the relevant - It serves as guide to directors in performing circumstances and are not unduly influenced their functions and should be publicly available by their own interests or by others in forming and posted on the company’s website judgments. 3. Confidentiality Principal-Agent Relationship Internal auditors respect the value and - The BODs shall exercise the corporate ownership of information they receive and do powers, conduct all business, and control all not disclose information without appropriate properties of the corporation. As such, a authority unless there is a legal or professional director of a corporation holds a position of obligation to do so. trust and owes loyalty to the corporation. 4. Competency - This fiduciary duty of a director to the Internal auditors apply the knowledge, skills, corporation creates a principal-agent and experience needed in the performance of relationship between them. internal audit services. Trust Fund Doctrine A Model of Business - This provides for the rule that the property of - Business organizations exist to create value a for their stockholders. corporation is considered as a fund held in - To form business enterprise, entrepreneurs trust decide on the appropriate organizational for the creditors.. form (e.g. corporation or partnership) and hire managers to manage the resources that have Types of Board Committees been made available to the enterprise thru 1. Audit Committee investment or lending. 2. Nomination Committee 3. Compensation Committee - Due to the way resources are invested and 4. Corporate Governance Committee managed in the modern business world, a 5. Board Risk Oversight Committee system of corporate governance is necessary, 6. Related Party Transactions Committee through which managers are overseen & supervised. Fostering Board Commitment - Simply defined, corporate governance 1. Directors should devote the time and consists of all people, processes, and activities attention necessary to properly and effectively in place to help ensure proper stewardship perform their duties and responsibilities, over an entity’s assets. including sufficient time to be familiar with the corporation’s business. - Good corporate governance ensures that 2. Directors should attend and actively those managing an entity properly utilize their participate in all board meetings, Committee meetings and shareholders’ meeting, except Consider whether your actions in response for justifiable causes to the situation and the advice obtained are sufficiently well documented, either by way of Reinforcing Board Independence minutes or your own records. The Board should endeavor to exercise an objective and independent judgment on all Ethical Threats to Independence corporate affairs. 1. Familiarity 2. Intimidation Assessing Board Performance 3. Self-interest The Corporation Code requires that at each 4. Self-review regular meeting of shareholders or members, 5. Advocacy the board of directors or trustees shall present to shareholders or members the appraisal and performance reports for the board and the criteria and procedure for assessment. It also requires every corporation vested with public interest, domestic or foreign, doing business in the Philippine to submit to SEC a director or trustee appraisal or performance report and the criteria used to asses each director or trustee. Strengthening Board Ethics Directors are duty-bound to apply high ethical standards, taking into account the interests of all stakeholders. Thus, it is imperative that the board adopts a Code of Business Conduct and Ethics, which would provide standards for professional and ethical behavior for the board, as well as articulate acceptable and unacceptable conduct and practices in internal and external dealings. Ethics Intelligence Internal Auditors are challenged to recognize and evaluate ethical and unethical situations often encountered in practice and it is important to be alert to situations that may threaten these fundamental principles. Ethics Intelligence is the ability to discern when there a re ethical implications in an issue and being able to respond appropriately from an ethical perspective Internal Auditors are challenged to recognize and evaluate ethical and unethical situations often encountered in practice and it is important to be alert to situations that may threaten these fundamental principles. Ethics Intelligence is the ability to discern when there a re ethical implications in an issue and being able to respond appropriately from an ethical perspective What to do when facing ethical dilemma? Seek advice from your superior, professional body or obtain independent legal advice.