Group 4 AC1204 MW 12:00-1:30 GR234MC 01/31/2020

Avergonzado, Natasha Jewel Malubay, Joelle

Barba, Mica April Ng, Romulo Ericson II
Friolo, Lucille Ann Orillaneda, Alexa Rae

Instructions: Define and expound the following components of corporate governance,

specifically under board’s role in corporate governance.

I. BOARD’S ROLE IN CORPORATE GOVERNANCE

The Board of Directors’ role is to manage the company’s business. It delegates to the
CEO—the Chief Executive Officer, and through the CEO then to other senior management, the
responsibility for managing the business. The Board oversees the management and governance
of the company and to monitor senior management’s performance (Ingersoll Rand, 2018). The
Board of Directors’ key purpose is to ensure the company’s prosperity by collectively directing
the company’s affairs, whilst meeting the appropriate interests of its shareholders and
stakeholders (Jan & Sangmi, 2016). For better governance, the Board functions as follows (Jan
& Sangmi, 2016):
a) The Board should meet regularly, retain full and effective control over the company and
monitor the executive management. The Board members should attend and actively
participate in the meetings. During the meetings, they should steer the discussions
properly and should set priorities and ensure these are acted upon.
b) Directors should exhibit total commitment to the company, and should be conscious of
protecting the interest of all stakeholders.
c) The Board of Directors should be alert to any deteriorating situations in functional areas
of the company (finance, the stock market, sales, personnel, and the like). They also have
a great responsibility in the matter of employment and dismissal of the CEO.
d) An efficient board should be able to anticipate business events that would spell success or
lead to disaster; they should be alert to such situations and be ready with a strategy to
meet them.
e) The Directors must act in good faith, to always have the best interest of the company, and
that the Directors must always favor the company’s interests over their own. There must
be integrity of the company by way of the financial statements, compliance with laws and
ethics, and integrity of relationships with customers, suppliers, and stakeholders.
f) The Board of Directors should provide counsel and oversight on the selection, evaluation,
development, and compensation of senior management.
g) The Directors must monitor corporate performance against strategic business plans,
oversee operating results on a regular basis to evaluate whether the business is being
properly managed.

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  Board’s Composition, Qualifications, and Selection

The Board of Directors is comprised by a specific number of individuals, at least five (5)
but not more than fifteen (15), elected by stockholders who hold these individuals into account as
suitable to function efficiently and methodologically. The companies covered by the Revised
Code of Corporate Governance must have at least two independent directors or independent
directors that constitute twenty percent (20%) of the board. The Board of Directors may also be a
combination of executive and non-executive directors ensuring that no director can dominate the
decision-making process. The Corporate Governance and Nominating Committee reviews the
composition of the full Board to identify the qualifications and areas of expertise needed to
further enhance the composition of the board (Ingersoll Rand, 2018). The shareholders will
always have the ultimate control as to the composition of the board of directors, who can appoint
and to dismiss a director, usually by a majority vote, provided that a special procedure—which is
complex and involves legal advice—is followed. The shareholders can also fix the minimum and
maximum number of directors (Richard Winfield, 2019).

The Chair and Chief Executive Officer should be separate to foster an appropriate
balance of power, increased accountability, and better capacity for independent decision-making
by the Board. The qualifications for membership in the Board are provided for in the Corporation
Code, Securities Regulation Code, and other relevant laws. The Board may provide for
additional qualifications, the following (SEC Memorandum Circular No.6, 2009):
a) College education or equivalent academic degree;
b) Practical understanding of the business of the corporation;
c) Membership in good standing in relevant industry, business, or professional
organizations; and
d) Previous business experience

The Board of Directors will also take into account all factors they deem appropriate,
including, among other things: breadth of experience, understanding of business and financial
issues, ability to exercise sound judgment, diversity, leadership, and achievements, and
experience in matters affecting business and industry. Each candidate should have the highest
character and integrity. The Shareholders may recommend candidates for Board membership,
and are evaluated in the same manner as director candidates (Ingersoll Rand, 2018).

 Leadership Structure of the Board

According to Silver, Chen, & Kagan (2018), a large number of companies have
implemented a two-tier corporate hierarchy—or a chain of command, to organize the company
and have the management run the company in a coordinated and standardized way. The first tier
is where the Board of Directors is in. The second tier is the upper management—individuals who
are hired by the board of directors. The Chairman is technically the leader of the corporation,
also known as the Board Chairman, and is responsible for running the board smoothly and

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effectively. The Chairman ensures that there is strong communication among the Board and the
management team, and maintaining corporate integrity.

In the first tier, the Board of Directors is made up of two types of representatives: inside
directors and outside directors. The inside directors are chosen from within the company, they
may be the CEO, CFO, and other members who work for the company daily. The outside
directors are chosen externally and are considered to be independent from the company. Their
role is to monitor the management team, and as the acting advocates for the stockholders; their
essence is to make sure that the shareholder’s interests are well served.

 Outside Advisors and Advisory Directors

The Outside Advisors give the Board of Directors non-binding strategic advice to manage
the corporation. It is informal and gives flexibility in structure and management compared to the
Board of Directors because they have knowledge from others. Though the Outside Advisors have
no authority to vote on corporate matters and bear no legal fiduciary responsibilities. The
Outside Advisors and Advisory Directors offer assistance to the company with various subjects
including marketing, managing human resources, and even influencing the direction of
regulators (Stautberg, 2014).

The Outside Advisors and Advisory Directors are composed of experts who have
experience in different fields involving the business; they offer innovative advice and dynamic
perspectives that would benefit greatly to the overall strategy of the company. For the reason that
they are experts who have no great influence in the company—as compared to the Board of
Directors—they provide unbiased information and advice that is unbiased (Bottomley, Bingham,
Thorning-Lund, & Slattery, 2014).

Though the Outside Advisors and Advisory Directors have distance control allowing
them to have unbiased opinions, offer formal advice, and have a higher efficiency due to their
expertise, they have less compensation and have fiduciary duty issues or liability issues. Though
the compensation may vary depending on the organization or company, the Outside Advisors
still earn less than the Board of Directors (Taylor, Marino, Rasor-Greenhalgh, & Hudak, 2010).

 Board and Board Committee Meeting Minutes

The Board committees hold meetings regularly so the members of a board of directors
can make decisions regarding the direction of the organization. They have meeting agendas,
which are fundamental to the success of a board meeting, and set the tone, pace, and content of a
board meeting (Governance Professionals of Canada, 2016). Independent directors should
always attend Board meetings, unless otherwise provided by laws (SEC Memorandum Circular
No.6, 2009).

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 In Board Committee meetings, a director or secretary at the request of a director may call
for a director’s meeting. Each director must be given reasonable notice of the meeting, its date,
time, and place (Richard Winfield, 2019). During the meeting, important records must be taken
to serve as the official and legal record of the meeting; this is called the meeting minutes. These
records should be kept clear, accurate, and be a complete report of all the business that has
transacted, and should be worded in a matter that is simple and unambiguous (Carter, 2011).

The legal importance of the meeting minutes is necessary to make certain that every
organization has a policy of recording minutes in such a way that ensures the minutes accurately
reflect the wishes and actions of the board of directors, and should be clear and concise, and
accurately conveys the meaning of the action taken.

 Access to Senior Management and Staff

The senior management, generally, is the team of individuals at the highest level of
management of an organization, involved with the day-to-day tasks of managing the company.
They are delegated with executive powers with and by the authority of the board of directors,
sometimes the shareholders (Menz, 2012). The senior management ensures that the organization
is effective and successful. They implement appropriate strategy that the organization can adapt
to and ensure that their strategies are correctly applied, and effectively manage the demands of
the stakeholders (Simsek, Veiga, Lubatkin, & Dino, 2005).

The Board members have complete and direct access to the company’s senior
management, as they encourage management’s attendance at Board and Committee meetings
that (a) management can provide additional insight into the items being discussed because of
personal involvement in these areas, and (b) managers with future leadership potential are given
exposure to the Board. The scheduled Board meetings allow the interaction between directors
and senior managers; the directors are often invited to contact senior managers directly with
questions and suggestions (Colgate-Palmolive Company, 2019).

 Director Orientation and Training

Director Orientation and Training refers to the procedure that would help new directors to
have a grasp on contributing fully, as early in their time of service as possible, to the duties of the
Board (MacDonald, 2016). Corresponding to the director’s orientation and training, he or she
should:
a) Figure out the nature of their part in the Board, obligations, and their engagement in
monitoring tasks around the Board and committee.
b) Familiarize the prevailing corporate objectives, goals, opportunities, and barriers facing
the management.
c) Develop practical comprehension of the business of the corporation, which includes their
past business experience.

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 d) Learn how Board meetings run and manage the discussions among Board members to
make decisions of the management.
e) Perceive how Board functions are similar and dissimilar to the other boards they have
handled with.

 Board Compensation

Board Compensation is referring to how the Board is compensated. Generally, the Board
directors consider a lot of things when identifying the compensation paid for them. Obviously,
wealthier corporations pay high salaries to attract the best possible candidates to the Board.
These candidates are those persons that will help them to increase their profitability while
monitoring risks.

In order to decide the amount of salary to be paid for the Board and other benefits, board
directors must consider the size and net worth of the company. They also take into account
whether the company is public or private, the complexity of its infrastructure, how active the
board directors are in all of the meetings, their roles, and the weight of responsibility board
directors have when assigning compensation.

 Board Tenure

Board Tenure refers to the average length of time, representing the number of years; the
firm’s directors have served on the board. Board tenure reflects the likelihood that board
members’ control over the monitoring of executives will increase as the average tenure period
increases. On the face of it, this does seem like a good starting point but one must remember that
board members will naturally develop strong relationships over time, and that they are likely to
fall imperceptibly into “groupthink”. Without knowing it, even the most dedicated director is
likely to become less liable to ask awkward or challenging questions.

In such an environment, reappointing non-executive directors every three years can

become automatic. It is hard to undertake a thorough and objective assessment of the value a
particular director has added and is likely to add. Directors with longer tenure would logically
accumulate more firm-specific knowledge while sitting on the board (Johnson et al., 2013).
According to Forbes and Milliken (1999) firm-specific knowledge is a form of tacit knowledge
about the firm which allows board members to deal effectively with strategic issues and
improving the Board’s ability to provide resources to the company.

 Board’s Responsibilities

The Board’s main responsibility is to oversee the management and governance of the
corporation. They should set corporate objectives that are measurable, have a set time frame that
is to be realized, and set the policies for the accomplishment of its corporate objectives. In setting

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policies, it shall provide an independent check on the management (Baren, 2009). Usual
corporate objectives include revenue growth rates, market share, and minimum acceptable
financial return.

Consequently, they have a responsibility to nurture the long-term success, to strengthen

their competitiveness, and to maximize profitability, in such a way that they should be consistent
with its corporate objectives and the best interests of its stockholders (DePamsphilis, 2010). So,
they should oversee the corporate performance and evaluate the results then compare it to their
strategic plans and other long- range goals.

Also, they have a responsibility to define the corporation’s vision, mission, strategic
objectives, policies, and procedures that shall guide its operational activities, by the means of
effectively overseeing the Management’s administration.

 Individual Responsibilities of Directors

A director should act in the best interest of the corporation in a manner characterized by
transparency, accountability and fairness. He should also exert effort in directing the corporation
with the exercise of leadership, prudence, and integrity towards a sustained progress. Listed
below are the individual responsibilities of directors:
1. Conduct fair business transactions with the corporation, and ensure that his personal
interest does not conflict with the interests of the corporation.
The basic principle to be observed is that a director should not abuse his rank to gain
some benefit or advantage for himself and/or his related interests. If there is an
occurrence of conflict of interest, may it be actual or potential, on the part of a director,
he should wholly and instantly disclose it and should not participate in the decision-
making process.
2. Devote the time and attention necessary to properly and effectively perform his duties
and responsibilities.
A director should spare enough time to familiarize himself with the corporation’s
business. He or she should always raise awareness of and knowledgeable with the flow of
the corporation and its operation to essentially take part of the Board’s task.
3. Act judiciously. Before deciding on any matter brought before the Board, a director
should carefully evaluate the issues and, if necessary, make inquiries and request
clarification.
4. Exercise independent judgment. Since a corporation conforms to transparency, the
director should also make objective judgment given the circumstances.
5. Have a working knowledge of the statutory and regulatory requirements that affect the
corporation, including its articles of incorporation and by-laws, the rules and regulations
of the Commission and, where applicable, the requirements of relevant regulatory
agencies.

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 6. Observe confidentiality. A director should keep confidentiality and security to all non-
public information he may acquire. He should not reveal that information to unauthorized
persons, like his or her children, without the authority of the Board.

II. KEY UNDERPINNING CONCEPTS OF CORPORATE GOVERNANCE

 Fairness

This refers to equal treatment like for example; the board of directors should treat all
stakeholders fairly and equitably, including employees, communities and public officials. The
fairer the entity appears to stakeholders, the more likely it is that it can survive the pressure of
interested parties. The Company undertakes to protect shareholders' rights and ensure equal
treatment of shareholders. The Board of Directors shall give all shareholders the opportunity to
obtain effective redress for violations of their rights.

 Openness/transparency

The directors should disclose material information in a timely and accurate manner. The
Company shall provide timely, accurate disclosure of information about all material facts
relating to its activities, including its financial situation, social and environmental indicators,
performance, ownership structure and governance of the Company, as well as free access to such
information for all stakeholders.

 Innovation

This refers to the development of a new organizational strategy that will somehow
change a company’s business practices, as well as the way its workplace is organized and its
relationship with external stakeholders. The role of the board is to facilitate innovation by
creating and supporting a corporate environment that fosters innovation, ensuring that the board
is comprised of directors who can knowledgeably advise and question the company about the
impact and risks of innovative strategies, and by developing a boardroom culture consistent with
a tone of innovation.

 Skepticism

This refers to an attitude that includes a questioning mind, being alert to conditions which
may indicate possible misstatement due to error or fraud, and a critical assessment of audit
evidence. The term skepticism is often associated with doubt, but it actually describes a search
for the truth. The directors do need to apply skepticism to all aspects of corporate life, not just to
financial statements.

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  Independence

Each director should be independent and there should be no conflict of interest. For
example, it would not be good for a director to get involved in the sale of an asset to another
company, if he or she was a director of that other company too. Hence, the decisions made and
internal processes established should be objective and not allow for undue influences or overt
personnel motivation to prevail. That is, the company should be run for the benefit of all
stakeholders.

 Probity/honesty

This is fundamental to corporate governance systems involving integrity, honor, virtue

and fair dealing. It is not simply telling the truth but also not being guilty of issuing misleading
statements or presenting information in confusing or distorted way. The directors must protect
the shareholders interests in the organization, and should give confidence to the shareholders that
their interests are being protected.

 Responsibility

The board of directors should ensure the organization complies with the relevant laws
where it operates. They are given the authority to act on behalf of the company. They should
therefore accept full responsibility for the powers that it is given and the authority that it
exercises. They are also responsible for overseeing the management of the business affairs of the
company, appointing the chief executive and monitoring the performance of the company. In
doing so, it is required to act in the best interests of the company. The Company recognizes the
rights of all interested parties permitted by applicable law, and seeks to cooperate with such
persons or companies for their own development and financial stability.

 Accountability

Those who control the business (i.e. directors) should be accountable to those who own
the business (i.e. shareholders). The Code provides for accountability of the Company's Board of
Directors to all shareholders in accordance with applicable law and provides guidance to the
Board of Directors in making decisions and monitoring the activities of the executive bodies.
 Reputation

This is the overall estimation in which an organization is held by its internal and external
stakeholders based on its past actions and probability of its future behavior. It is a protective
measure, not only for the organization’s benefit but also for shareholder value. A business can
achieve its objectives more easily if it has a good reputation among its stakeholders, especially
key stakeholders such as its largest customers, opinion leaders in the business community,
suppliers and current and potential employees. The board of directors has the obligation to

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preserve the reputation of a corporation. A new consulting firm report suggests that the board
should be similarly focused on preserving its own reputation.

 Judgment

This means taking decisions to enhance the organization’s performance. It is when people
in a company or organization are responsible for deciding when or how to perform certain tasks
or aspects of the work, based on their knowledge and ability to judge, the responsibility for the
decision is said to be at their discretion. It helps to guard a corporation's board of directors from
frivolous legal allegations about the way it conducts business. The board of directors is the most
significant decision-making body because they are collectively responsible for the success of the
company and as wells as for organizing the administration of the company and the appropriate
organization of its operations.

 Integrity

This refers to consistency between what a director says, writes and does. It means
authenticity, candor, reliability, confidentiality, solidarity, and a willingness to accept personal
accountability and be bound by board decisions and a director’s own role within them. Moral and
ethical issues should be considered when making decisions relevant to the organization. Integrity
in the boardroom is based on factors such as organizational values, the need to uphold the
board’s fiduciary responsibilities and a willingness to be accountable. The board’s role in
maintaining integrity includes working with the CEO to establish the right tone at the top,
understanding compliance requirements and establishing expectations for senior management,
which then cascade to the entire organization. In addition, the board should help to build trust
and long-term relationships with shareholders, customers, regulators and employees.

III. BOARD’S RESPONSIBILITIES

 Provide Oversight
The first responsibility of the board that is – to provide oversight, refers to management
of an operation or process to ensure that it is being carried out properly, efficiently, legally, and
correctly. It is a responsibility in the sense that the board management is delegated with authority
and control to supervise those in the lower-level and middle-level management. This
responsibility, for instance, includes asking for timely departmental reports as well as
supervising and monitoring closely to verify the validity of such reports sent. By doing so, the
board would be able to look at the actual condition or status of the company at the big picture
towards the attainment of the corporation’s goals and objectives.

Oversight of governance by the board also includes continuous review of the internal
structure of the company to ensure that there are clear lines of accountability for management
throughout the organisation.

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  Establish an Appropriate Corporate Culture
Another responsibility the board has is to establish an appropriate corporate culture. This
corporate culture refers to the shared values, attitudes, standards, practices, and beliefs that
characterize members of an organization and define its nature. It is an implicit manifestation of
beliefs and behaviors that determine how a company's employees and management interact and
handle outside business ventures. Needless to say, it is an essential component of any business's
ultimate success or failure. That is why the board members must establish an appropriate
corporate culture that would reflect the vision, goals, strategies, structure, and every other aspect
of operations of the organization.

 Comply With Fiduciary Duties and the Law

Another responsibility the board is to comply with fiduciary duties and the law. This
fiduciary duty refers to the highest standard of care in which they must act with utmost
responsibility. The board is essentially entrusted with their knowledge and expertise of the
corporation’s assets in acting on its behalf and best interest at all times. Moreover, they are
required to perform their duties following the key elements of duty of care, loyalty and
obedience – that is, acting on a fully informed basis, in good faith, with due diligence and care
all the while remaining subservient to the law.
a) With regard to the duty of care, the board must perform their responsibilities in a manner
that is in line with the care, diligence, and skill of an ordinarily prudent person who
would find themselves in a similar situation in a corresponding position.
b) The duty of loyalty mandates board members and officers to behave in a manner that is in
good faith and believed to put the interests of the institution before any personal interests
or those of another person or organization. The fiduciary cannot act out of avarice or
expedience either.
c) Obedience is the duty board members have to ensure the company is operating in a
manner that furthers its stated purpose and is always operating in compliance with all
statutes and regulations.

 Select, Retain, and Oversee Management

Part of the many responsibilities placed in the hands of the board is to select, retain, and
oversee the corporate strategy, management and operations of the company. This includes
appointing, compensating, monitoring and, when necessary, replacing key executives and
overseeing succession planning.

It is up to the board members and officers to ensure and to manage that the company is
staffed with well-suited employees that are in line with the overall direction and strategy of the
business organization. It is a crucial responsibility for the board to do so as it makes the
organization as firm and grounded as its overarching goals and objectives.

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  Oversee Compensation and Benefits Arrangements
The board is also responsible to oversee compensation and benefits arrangements of its
employees, executives, and themselves. Aside from carefully selecting the best-suited people for
management and monitoring the overall status of the organization, the board has to make sure
that the aforementioned positions are well-remunerated as it is one of the key to long-term
company performance. Regardless, the board must also make sure that they are justly benefited
and compensated so as to safeguard the interest of the organization and its shareholders. This
means that they must assess the costs and benefits of remuneration plans, the contribution of
incentive schemes such as stock option schemes, and the total value of compensation
arrangements following this responsibility.

 Maintain Appropriate Affiliate and Holding Company Relationships

This responsibility refers to maintaining effective partnerships and communication with

the community, the organization’s members and its stakeholders. In business, it is important to
keep a strong and positive relationship with stockholders. Being transparent of the performance
of the business to stockholders fosters a positive relationship.

Exercising accountability to shareholders and relevant stakeholders is one of the

responsibilities of the board. Taking into account their interest and monitoring information by
gathering and evaluating appropriate information is effective in relationship building in as much
as having constant communication, thereby promoting goodwill and support.

An affiliate is when one company is considered a minority shareholder of another, in

which less than 50% is owned by the parent company as compared to a subsidiary company that
owns more than 50% of all shares. Companies may be affiliated with one another to get into a
new market, to maintain separate brand identities, to raise capital without affecting the parent or
other companies, and to save on taxes. Whereas, a holding company is a company which does
not produce goods or services but only having the purpose of owning shares of other companies.

For instance, in the case of holding companies and affiliated banks, the corporate
governance principles, corporate values, and strategic objectives of the affiliated bank should
coincide with the holding company. If faced with conflicts of interest or competing on priorities,
the bank’s board should ensure the interests of the bank are not subordinate to the interests of the
parent holding company in decisions that may adversely affect the bank’s risk profile, financial
condition, safety and soundness, and compliance with laws and regulations.

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  Establish and Maintain an Appropriate Board Structure

At the core of corporate governance, the Board of Directors is responsible for helping a
corporation to set goals, to support executive duties, and to ensure the company possesses well-
managed resources at its disposal. They are composed of individual men and women who are
elected by the company’s shareholders for multiple-year terms. In essence, the Board of
Directors tries to ascertain that shareholders' interests are satisfied. The Board of Directors
should be a representation of both management and shareholder interests, including both internal
and external members. To render effective, the board must take steps, both in their structures and
in their nominating procedures to ensure that insiders and executive owners are unable to
exercise undue control over the board’s activities and decisions (CFA Institute).

Board members can be divided into three categories: 1) Chairman- responsible for
running the board smoothly and effectively, 2) Inside Directors- responsible for approving high-
level budgets prepared by upper management, implementing and monitoring business strategy,
and approving core corporate initiatives and projects, 3) Outside Directors- provide unbiased and
impartial perspectives on issues brought to the board. Board members are fiduciaries who steer
the organization towards a sustainable future by adopting sound, ethical, and legal governance
and financial management policies.

Moreover, the management team of the board structure is directly responsible for the
company's day-to-day operations and profitability which comprises: 1) Chief Executive Officer-
responsible for the corporation's entire operations and reports directly to the Chairman and the
Board of Directors, 2)Chief Operations Officer- looks after issues related to the corporation's
operations, marketing, sales, production, and personnel, 3)Chief Financial Officer- responsible
for analyzing and reviewing financial data, reporting financial performance, preparing budgets,
and monitoring expenditures and costs. A management team is a group of individuals that
operate at the higher levels of an organization and have day-to-day responsibility for managing
other individuals and maintaining responsibility for key business functions.

Zahra and Pearce (1989) recognized other dimensions of board structure, such as the
different types of board committees, membership, and the flow of information and patterns of
committee membership. Board committees are an important component of the corporate and risk
governance structure for they aid the board to undertake oversight duties and responsibilities. To
enable better and more focused attention on the affairs of the Corporation, the board delegates
certain matters to the committees of the board set-up to have a greater in-depth analysis.
Moreover, committees review items in great detail before it is placed before the board for its
consideration. Hence, directors should be assigned to committees that align with their skills and
experience. As such, the board should find the right balance between maintaining institutional
knowledge and gaining new perspectives.

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 The following are some of the important committees of the Board:
a) Audit Committee- in charge of overseeing financial reporting and disclosure
b) Shareholders Grievance Committee- assists the Board in controlling the shareholders'
grievances against the Company and redresses the complaints of the shareholders
c) Remuneration Committee- ensure thorough and independent preparation of matters
relating to compensation to the executive personnel
d) Risk Committee- responsibility for the risk management policies of the Corporation's
global operations and oversight of the operation of the Corporation's global risk
management framework.
e) Nomination Committee- responsible in identifying potential candidates to meet desired
profiles and propose them to shareholders
f) Corporate Governance Committee- responsible in determining the membership of your
board and measure the quality of performance of the board as a whole and of your
individual board members
g) Corporate Compliance Committee- improve reporting and analysis of compliance
information; and risk assessments, monitoring and overall compliance trends within
companies
h) Ethics Committee- set and oversee the rules for a company's conduct

To satisfy the board structure for the positions held, the board should strive for diversity
of backgrounds, expertise, and perspectives, including an increased investor focus. With these
attributes, it would enrich the probability that the board will act independently on management
and ensure that the board can understand complex financial activities and transactions.

In monitoring managerial performance, the board must be able to exercise objective

judgment to prevent conflicts of interest and balance competing for corporation demands. This
would mean independence to management with relevant implications for the composition and
structure of the board. Hence, this sense of independence requires members of the board to be
likewise independent so that they may significantly contribute to the decision making of the
board. Thus, upholding an objective view of the performance evaluation of the Board and
management is necessary.

 Perform Board Self-Assessments

The Board may create an internal self-rating system that can measure the performance of
the Board and Management. The creation and implementation of such a self-rating system,
including its salient features, may be disclosed in the corporation’s annual report. The objective
of Board self-assessment is to ensure that the duties and responsibilities are followed by the
board and that certain processes are in place, signifying that there are due diligence and oversight
in the organization. Moreover, this assessment can address certain internal issues such as conflict
of interests.

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Board self-assessments taken annually are essential given that it would provide the board an
overlook of their performance and certain areas that needs further improvement. Hence, it
indicates that if the board fails to assess, they could not perform at their optimum capability,
which results in faltering investors and the whole community.

With all the essential requirements of being a board director, they should be evaluated
based on how well they can communicate effectively with other board directors, how diligent
and prepared they come in board meetings, and how well they comprehend the distinct roles
played by the management and the rest of the Board Directors. One way of detecting whether the
assessment left a huge impact or not is to see if the Board Directors continue to ask themselves
how they could improve and what more do they need to do. Monitoring of governance by the
board includes continuous assessment of the company's internal structure to ensure that there are
clear lines of accountability for management throughout the organization.

 Oversee Financial Performance and Risk-Reporting

Risk Reporting is communicating the facts and data through reports and statements to the
person for whom the data is collected and compiled. On the other hand, financial oversight
ensures the board's use of financial controls to protect the community's assets. The Board is
responsible for overseeing both financial performance and risk reporting.

The oversight of a company's risk management is essential for the board since it is
generally related to corporate strategy. It includes oversight of responsibilities for managing risks
and the company's acceptance of the degree of risk, incorporating how they can manage it in
pursuit of its goals. Risk oversight is a primary board responsibility in the evolving business and
risk landscape, hence it is what directors need to develop and continuously improve practices to
establish a well-defined and effective oversight function. It is the duty of the board (senior
management) to ensure that there is an effective means of risk oversight taking place. Taking
into account the integrity of the systems (i.e. monitoring & reporting) to enforce accountability.
Normally, this includes the establishment of an internal audit system directly reporting to the
Board.

In the financial aspect, the Board of Directors already has principles on how to prepare
consolidated financial statements, as well as the preparing process and controlling operations, job
descriptions and responsibilities for consolidated financial statements are specified. Boards
ensure the use of financial controls and those funds should be prudently invested, considering
cash management, banking, and contracting parameters and establish policies related to budgets.

Rendering this effective, the internal control system requires adequate and reliable
information to allow management to achieve their goals and functionality of controls. Any
findings and recommendations made by auditors are to be reported both to the Board of
Directors and to the Internal Audit Committee. Transparency is the essence of corporate

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governance. Hence, the more transparent the corporation is the less mismanagement and
misappropriation of assets. Thus, it is essential that important information should be
appropriately disclosed, such as earnings results, acquisition or disposition of assets, off-balance
sheet transactions, related party transactions, and direct and indirect remuneration of members of
the Board and Management. All such information should be disclosed through the appropriate
exchange mechanisms and submissions to the Commission. The Board and management should
be certain that the information is sufficient to keep relevant parties informed of the financial
condition and performance. Their goal is to protect the community's assets. Thus, oversight of
the quality area often involves utilization and risk management in addition to continuous quality
improvement.

 Support Efforts to Serve Community Credit Needs

Community Reinvestment Act (CRA) is a law intended to encourage depository

institutions to help meet the credit needs of the communities in which they operate, including
low- and moderate-income (LMI) neighborhoods, consistent with safe and sound banking
operations. It requires that federal bank regulatory agencies must evaluate periodically the
depository institution's record in helping meet the credit needs of the community.

A unique responsibility of not-for-profit institutions is giving aid and attention to

community relationships. With direct communication, the Board must call unto the sensitive
needs (unmet or underserved) and common expectations of the citizens, bringing this into light
the quality of life in the community and how will they address those needs. Failure to do so
would give the idea that there is uncertainty and inequality, hence hindering the opportunity of
expansion.

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