k.

    Compensation or salary of board members – The directors as a general rule are not entitled to compensation
except reasonable per diems.

[As mentioned, a director cannot participate in determining his own compensation

because there is conflict of interest in such situation. If compensation is to be
determined for all members of the board, the board may set up a special committee
on compensation and its recommendations shall be subject to stockholders’
approval (Herbosa and Recalde, ibid., p. 144). Any such compensation without
proper authorization in the bylaws or by the vote of the stockholders may be
recovered in a stockholders’ suit. The stockholders cannot ratify a board action
fixing their salaries. Such action, being contrary to law, cannot be ratified. The
stockholders themselves, by the requisite vote, must fix the compensation (De
Leon, The Corporation Code, pp. 286 and 288)]

i. Required vote for granting compensation to board of directors

1.     At least majority vote of the outstanding capital stock excluding the directors
[under Section 29 of the Revised Corporation Code whish
expressly states that “directors or trustees shall not participate in
the determination of their own per diems and compensation.”]
ii. Maximum limit for salary of board of directors
1.     10% of net income before tax of the immediately preceding year
  iii. Reasonable per diems of board of directors
1.     At least majority vote of the board of directors
l. Creation of Executive Committee
  i. Requirement for creation of executive committee
1.     It must be created only by virtue of provision in the by-laws.
ii. Membership of executive committee
1.     It must consist of at least three members of the board of directors.
                                   iii. Powers that cannot be delegated by board of directors to executive committee
(FAAD)
1.     Filling up of vacancy in the board
2.     Adoption or amendment of by-laws
3.     Approval of corporate acts requiring approval or ratification by stockholders
4.     Distribution or declaration of any time of dividends 
m. Acts of management or administration
     i. Quorum for validity of meeting
1.     At least majority of the directors as stated in the Articles of Incorporation
                                      ii. Required vote for approval of act of management or administration
1.     At least majority of the directors who attended the meeting with quorum.
                                     iii. Business judgment rule or Doctrine of Management Prerogative means that the
decision of the board of directors on matters of management cannot be changed by the court unless such
management decision is ultra vires or destructive of the interest of minority stockholders.
k.

Directors of corporations, in general, shall not receive any compensation as such

directors, except for reasonable per diems, in the absence of any provision in the
bylaws fixing their compensation. They may receive compensation, other than
reasonable per diems, only upon the vote of the stockholders representing at least a
majority vote of the outstanding capital stock (Section 29, Revised Corporation
Code).

In no case shall the total yearly compensation of the directors exceed ten percent
(10%) of the net income before income tax of the corporation during the preceding
year. Moreover, directors are not allowed to participate in the determination of their
own per diems or compensation (ibid.).

The rationale for the above rule is explained as follows: “Appointment to the board
is a consequence of corporate ownership. An owner or member is ordinarily
expected to assume the post of director or trustee, and manage the corporation for
his ultimate benefit. Thus, the law does not generally authorize the payment of
compensation to a shareholder or member as director or trustee” (Herbosa and
Recalde, The Revised Corporation Code, p. 143). Directors render services
gratuitously and the return upon their shares adequately furnishes the motives for
services without compensation (SEC Opinion dated Sept. 8, 1975).

ADVERTISEMENT

As mentioned, a director cannot participate in determining his own compensation

because there is conflict of interest in such situation. If compensation is to be
determined for all members of the board, the board may set up a special committee
on compensation and its recommendations shall be subject to stockholders’
approval (Herbosa and Recalde, ibid., p. 144). Any such compensation without
proper authorization in the bylaws or by the vote of the stockholders may be
recovered in a stockholders’ suit. The stockholders cannot ratify a board action
fixing their salaries. Such action, being contrary to law, cannot be ratified. The
stockholders themselves, by the requisite vote, must fix the compensation (De
Leon, The Corporation Code, pp. 286 and 288).

On the grant of per diems, there are two standards for their approval: First, the per
diems should be reasonable and, second, the directors cannot participate in the
determination thereof. What is a “reasonable” per diem depends on the
circumstances. A reasonable per diem is not subject to tax as there is no income on
the part of the director, since its amount is only enough to cover his costs. On the
other hand, an excessive per diem amounts to compensation and becomes
generally subject to tax (Herbosa and Recalde, supra, p. 144). Under the old
Corporation Code, there was no mention as to whether the board of directors can
approve the grant of per diems and, thus there was the conclusion then that the
board has such authority to fix per diems for themselves. This issue has now been
clarified under Section 29 of the Revised Corporation Code whish expressly states
that “directors or trustees shall not participate in the determination of their own per
diems and compensation.”

Directors may also receive compensation in addition to reasonable per diems, when
they render services to the corporation in a capacity other than as directors. As the
Supreme Court held, the proscription against granting compensation to directors is
not a sweeping rule as the phraseology of the law allows the same when they
render services to the corporation in a capacity other than as directors (Western
Institute of Technology vs. Salas, 278 SCRA 216).

[Sec. 30. Compensation of directors. - In the absence of any provision in the

by-laws fixing their compensation, the directors shall not receive any compensation,
as such directors, except for reasonable pre diems: Provided, however, That any
such compensation other than per diems may be granted to directors by the vote of
the stockholders representing at least a majority of the outstanding capital stock at
a regular or special stockholders' meeting. In no case shall the total yearly
compensation of directors, as such directors, exceed ten (10%) percent of the net
income before income tax of the corporation during the preceding year.]

l.

Structure and Composition – The Board of Directors shall create and appoint an Executive committee
composed of the Chairman of the Board, the President and Chief Executive Officer and three (3) other
members of the Board of Directors. The Chairman of the Risk Oversight Committee may be required by
the Chairman of the Board to regularly attend the meetings of the Executive Committee. The Chairman
of the Board, or in case of his/her absence, the President and Chief Executive Officer, shall preside over
all meetings of the Executive Committee.

[ The by-laws of a corporation may create an executive committee,

composed of not less than three members of the board, to be appointed by
the board. Said committee may act, by majority vote of all its members, on
such specific matters within the competence of the board, as may be
delegated to it in the by-laws or on a majority vote of the board, except with
respect to: (1) approval of any action for which shareholders' approval is
also required; (2) the filing of vacancies in the board; (3) the amendment or
repeal of by-laws or the adoption of new by-laws; (4) the amendment or
repeal of any resolution of the board which by its express terms is not so
amendable or repealable; and (5) a distribution of cash dividends to the
shareholders.]

m.

[ Immediately after their election, the directors of a corporation must

formally organize by the election of a president, who shall be a director, a
treasurer who may or may not be a director, a secretary who shall be a
resident and citizen of the Philippines, and such other officers as may be
provided for in the by-laws. Any two (2) or more positions may be held
concurrently by the same person, except that no one shall act as president
and secretary or as president and treasurer at the same time.
The directors or trustees and officers to be elected shall perform the duties
enjoined on them by law and the by-laws of the corporation. Unless the
articles of incorporation or the by-laws provide for a greater majority, a
majority of the number of directors or trustees as fixed in the articles of
incorporation shall constitute a quorum for the transaction of corporate
business, and every decision of at least a majority of the directors or
trustees present at a meeting at which there is a quorum shall be valid as a
corporate act, except for the election of officers which shall require the vote
of a majority of all the members of the board.
Directors or trustees cannot attend or vote by proxy at board meetings.]

[Business judgment rule or Doctrine of Management Prerogative

Under the doctrine of management prerogative, every employer has the inherent
right to regulate, according to his own discretion and judgment, all aspects of
employment, including hiring, work assignments, working methods, the time, place
and manner of work, work supervision, transfer of employees, lay-off of workers,
and discipline, dismissal, and recall of employees 

the manner in which management conducts its own affairs to achieve its purpose is
within the management’s discretion

The policies, rules, and regulations on work-related activities of the employees

must always be fair and reasonable, and the corresponding penalties in enforcing
discipline in the workplace must be commensurate to the offense involved and to
the degree of the infraction]