PARTIES IN CORPORATE

GOVERNANCE

Notre Dame of Dadiangas University

Business College – Accountancy Program

Module Prepared by: Prof. Jon Leo J. Licayan, CPA

Internal Parties External Parties
Board of Directors Shareholders

Corporate Secretary External Auditors

Regulators
Management
Government
Employees Stock Exchanges
Unions Potential Investors

STAKEHOLDERS’ INTERESTS

CORPORATION
Internal Parties
Board of Directors
• Composed of Executive and/ or Non-Executive Directors of a
Corporation.
• Responsible in overall Corporate Governance, hence it is their
responsibility to develop corporate policies and strategic directions.
• Plays the role in ensuring that the company is achieving its corporate
objectives.
Corporate Secretary
• Responsible in proving relevant, reliable and timely information to all
directors, which is crucial when making corporate decisions.
• Acts as advisor of the Board, hence expertise on the applicable
regulations and corporate governance is a must.
• Acts as liaison between the Board of Directors and Management
Internal Parties
Management (Sub-Board Management)
• Composed of Operational Managers of a Company that are not members of
the Board.
• Responsible in implementing the Corporate Policies and Strategies set by
the Board;
• Develops tactics and procedures to ensure smooth flow of day-to-day
operation of the company.
Employees
• Performs the tactical plans and procedures of the Management.
• Responsible in complying with the corporate governance systems in place,
and report back to the management if ever the system or some of its parts
are not working well.
Unions (Employees/ Trade Unions)
• Responsible in protecting the interests of the employees.
External Parties
Shareholders
• As principal owners of the company, it is the responsibility of the
Board and Management to protect their rights and interests.
• Collectively, they have the power to alter, disregard or rectify the
decisions or policies made by the board.
External Auditors
• Engaged in corporate governance system to ensure that the
company present reliable and accurate information, especially those
pertaining to finances.
• Helps in promoting good corporate governance not only through the
opinions that they issue but also through the recommendations they
provide in order to strengthen internal controls.
External Parties
Regulators
• Ensure that the company is operating in accordance with applicable
laws, rules and regulations.
• The Securities and Exchange Commission (SEC), in the
Philippines, supervises the corporate sector through the Policies
they issue and recommendations they make on issues concerning
the securities market as well as advise Congress and other
government agencies on all aspects of the securities market.
• The Cooperative Development Authority (CDA), in the
Philippines, is the agency tasked to promote the viability and growth
of cooperatives as instruments of equity, social justice and economic
development in the country.
External Parties
Government
• The Congress, as a legislature, has the power to create laws
that will push corporate boards to take more responsibility of
the actions that they are doing.
• They have the ability to expand or limit the powers vested upon
regulatory agencies to make sure that they are doing their
tasks effectively as regulators of corporate entities.
• Local Government Units pursuant to the delegated power
given to them has the power to tax and regulate some of the
activities of corporate entities primarily to promote the general
welfare of their constituents.
External Parties
Stock Exchanges
• Generally, stock exchanges are organized to allow companies
to raise capital from a large pool of investors and to provide
a market for investors to later sell their shares in those
companies.
• As these companies are privately owned, they have to strictly
abide and has to require publicly listed companies to abide by
government regulations to protect their reputation as a stock
exchange firms.
External Parties
Potential Investors
• Could be small individual investors or institutional investors.
• Institutional investors are organizations with large pool of funds
coming from several individual investors specifically intent
ended to be invested either in securities, bonds, real properties
and other investment assets.
• Under extreme circumstances, institutional shareholder has the
power to intervene more actively in another company by using
its voting power to unseat the board.