Corporate

Governance
 CORPORATE GOVERNANCE

Is a system by which organizations are directed and controlled.

-Cadbury Report

Is a set of relationships between a company’s directors, its shareholders, and other

stakeholders. It provides the structure through which the objectives of the company are set,
and the means of achieving those objectives and monitoring performance are determined.
-OECD

Good corporate governance helps to build an environment of trust, transparency and

accountability necessary for fostering long-term investment, financial stability and business
integrity, thereby supporting stronger growth and more inclusive societies.
-OECD
 CORPORATE GOVERNANCE

The system of stewardship and control to guide organizations in fulfilling their long-term
economic, moral, legal and social obligations towards their stakeholders.
-Philippine SEC

Corporate governance is a system of direction, feedback and control using regulations,

performance standards and ethical guidelines to hold the Board and senior management
accountable for ensuring ethical behavior – reconciling long- term customer satisfaction with
shareholder value – to the benefit of all stakeholders and society.
-Philippine SEC
Why the buzz on
CG? 4
 OWNER MANAGER

OWNERSHIP CONTROL

OWNERSHIP CONTROL The separation of ownership and control creates

problems for good corporate governance, because
the directors of a company might be able to run the 5
STAKEHOLDERS company in a way that is not in the best interests of
the shareholders, but the shareholder might not be
able to prevent the directors from doing this,
BOARD OF because the directors have most of the powers to
DIRECTORS control what the company does.

MANAGEMENT
Management Governance
Concerned with running the day to day Concerned with leading the company,
business operations of a company. and monitoring and controlling the
decisions of management to ensure
that the business meets its objectives.

Concerned with making business Concerned with monitoring and

decisions. controlling decisions, as well as
providing leadership and direction.
7
● Using the USJR structure, identify who you think are members of
management and of governance.
 Board 9

Structures
 Multi Tier Unitary

Supervisory Board Board of Directors

Management Board
EDs NEDs
10

What do you think are the advantages and disadvantages of each of the
two board structures?
 What are the
approaches to
corporate governance? 11
 Rules Based Principles Based

Legal requirement Comply or explain basis

Rare Usual
12
Principles of Corporate
Governance
(Philippine SEC) 13
Board’s Governance Responsibilities 01 - 07
Disclosure and Transparency 08 - 11
Internal Control and Risk
Management Framework
12 14

Cultivating a Synergic Relationship

with Shareholders 13

Duties to Stakeholders 14 - 16
Board’s Governance Responsibilities

1. Establishing a Competent Board

2. Establishing Clear Roles and Responsibilities of The Board
3. Establishing Board Committees
4. Fostering Commitment
5. Reinforcing Board Independence
6. Assessing Board Performance
7. Strengthening Board Ethics
Disclosure and Transparency

8. Enhancing Company Disclosure Policies and Procedures

9. Strengthening The External Auditor’s Independence and Improving Audit Quality
10. Increasing Focus on Non-financial and Sustainability Reporting
11. Promoting a Comprehensive and Cost-efficient Access to Relevant Information
Internal Control and Risk
Management Framework

12. Strengthening the Internal Control System and Enterprise Risk Management
Framework
Cultivating a Synergic Relationship
with Shareholders

13. Promoting Shareholder Rights

Duties to Stakeholders

14. Respecting Rights of Stakeholders and Effective Redress for Violation of Stakeholder’s
Rights
15. Encouraging Employees’ Participation
16. Encouraging Sustainability and Social Responsibility
It has been said that governance is
more of a concern for publicly
listed corporations, rather than 20
small family owned ones. Why do
you think this is the case?
 Models of
Corporate 21

Governance
 Japanese
Model

22

https://ceopedia.org/index.php/File:Japanese_model_of_corporate_governance.png
 German Model

23

https://ceopedia.org/index.php/File:German_model_of_corporate_governance.png
US Anglo
Saxon Model

24
● In a publicly listed entity where there are many different shareholders,
the presence of a knowledge gap exists between the owners and
management. How do you understand “knowledge gap” in this
context?

● What do you think can be done to address this knowledge gap?

Agency theory
in corporate
governance
 STAKEHOLDERS

Rules, laws, regulations, controls, reporting

Alignment of interests*
CONFLICT OF 28
KNOWLEDGE GAP
INTEREST
BOARD OF Non Executive Directors
DIRECTORS

External Audit

MANAGEMENT
Agency costs

29
Best practices 30
 Separation of Board
Board composition
powers subcommittees

NEDs should comprise

Committees set up by the
greater than 50% of the
board, and consisting of
Board.
selected directors, which
are given responsibility
Focus of the Board:
for monitoring a particular
1. Strategy 31
aspect of the company’s
2. Scrutiny Chairman of the Board
affairs but for which the
3. Risk should not be the same
board has reserved the
4. People person as the Chief
power of decision-making
Executive Officer.
Governance Roles:
1. Strategy formulation
2. Policy making Audit Committee
3. Supervising Nomination Committee
executive activities Remuneration Committee
4. Accountability Risk Committee
 Credits
This is where you give credit to the ones who are part of this
project. 32
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Thank you 33