CABILAN, RIC JOHN N.

Philippine Corporate Governance: Concerns and Impacts

Corporate governance is the system of rules, practices and processes by which

business corporations are directed and controlled. Good corporate governance has
been the bedrock of the current trends of the corporations. It is a system comprises of
internal and external rules that as much as possible must be attained by every
business. Hence, it is the framework that every corporation should ought to comply. The
reason for this particular circumstance is that it would not just solely benefit the
corporation because it would also uphold the business position in the community in
terms of its roles played as a catalyst for environmental and social upliftment. This
subject matter points to various areas such as the Market CG’s scores, measuring of
governance, corporate social responsibility (CSR), and corporate standards. The
corporate governance has been cultivating over the decades but its full implementation
seemed to be far from the best practice, meaning, even up to this day, corporate
governance as a framework is yet to be fully executed. Perhaps, there are stagnation
elsewhere that probably halted its mobility. This synthesis attempts to investigate and
unravel the significance and impacts of good corporate governance. And, the reason
why underperformed countries especially Philippines have been stagnated to its
mobility.

In the international context, corporate governance has been the common drive of
every country in Asia. According to Allen et. al. (2010) Asia Special Report, Market
scores have changed and some of the Asian countries are high performing and
improved on top such as Thailand, Japan, Indonesia, China and Malaysia while
Singapore and Hong Kong regained their spot. And, some others were tagged as worst
performer such as India, Korea and Philippines which had a disappointing survey
results specially in most CG categories. These findings were found to be pleasing to
high-performing countries but a challenge to the others. These somehow lead us to the
question of what executions had done by those countries on the spot list? On the other
hand, what are the causes of the stagnation or lack of execution which had brought
those underperformed countries on the least spot? Hong Kong and Singapore were
prosperously regained their spot and based on the CG report these countries had
CABILAN, RIC JOHN N.

outstandingly re-claimed different market category scores such CG rules and practices,
enforcement, political and regulatory, IGAAP, and CG Culture (Allen et. al., 2010). As
these indications are tested to different countries in Asia, there were clear evidences
that Philippines and other Asian countries floundered in those categories. Philippines
was evidently underperformance due to its consistent decline to different CG categories
(Allen et. al., 2010). Corporate governance truly plays central role. According to the
reported case, the biggest corporate scandal in Asia brought by lacking of CG
enforcement was found in Satyam which they falsified figures to make it appear as if the
corporation was accomplishing its goals. The shortage was first easily filled by the
controlling shareholder inserting his own money around balance sheet dates. This
instance was analogous to Enron and Worldcom corporate scandal (Allen et.al., 2010).
These have been the great challenge to all governments and regulators to persuade
their private sectors to pursue governance improvements willingly and in their own self-
interest. It is necessary to bridge the gap between the political and regulatory
environment and the CG culture. Markets that perform well in this area are more likely
to maintain regulatory reforms more effectively and efficiently, as well as develop
meaningful corporate governance structures (Allen et. al., 2010).

Elsewhere, Corporate Social Responsibility (CSR) is defined as social and

Environmental actions that goes beyond a company's legal obligations. Although it was
often considered that CSR was somehow unrelated to the company's immediate profit-
making activities, this requirement is becoming increasingly difficult to uphold in light of
the growing business rationale for CSR (Chambers et.al, 2003). According to (Powell
et.al., 2010), the number of CSR reports published in 2009 increased from 2005 which
indicated that Asia from 12% of global CSR Report had increased to 21% (Chambers
et.al, 2010). In most cases Asian countries are thriving to uphold Corporate Social
Responsibility (CSR) even though in Asia, the entirety remains basically voluntary. CSR
structures of issues that companies face are the workplace, marketplace, environment,
and community. In the Philippines, today, as markets become more unstable or volatile,
firms are duty-bound to make a property business model and implement environmental
and social initiatives that may profit future generations additionally as create long-run
worth for stakeholders (Villacorte and Antipala, 2021). According to the recent
CABILAN, RIC JOHN N.

government mandate, the Securities and Exchange Commission (SEC) has published
its 2019 Circular Memorandum (MC) Series 4, entitled Sustainability Reporting
Guidelines for Listed Companies, which outlines the sustainability of the reporting
process in the Philippines form part of the annual report every year.

On the special report of (Allen et.al., 2010), different countries in Asia had been
tagged as steadily improving while others are in the market downgrade level. Looking
up into the CG scores, it indicates that some of the countries are high-performing in
specific magnitudes but low-performing in the other. In case of the Philippines, who had
been marked as worst performer (fallen back), it was saddening fact that the scores for
most categories are in a down-ward hill rate. The scores for most categories such as
CG rules and practices, enforcement, political and regulatory environment, and CG
culture slipped while accounting and auditing (IGAAP) are in steady state (Leahy et.al.,
2010).

To sum it all up, good corporate governance drives every corporation and
ultimately resulted to a meaningful performance of a country in a global perspective.
And, this has to be taken full consideration by worst-performing countries like the
Philippines. The goal of corporate governance is to help create the trust, transparency
and accountability needed to foster long-term investment, financial stability and
corporate integrity, thereby supporting stronger growth and a more inclusive society.
These were the outstanding venture to all governments and regulators to influence their
non-public sectors to pursue governance upgrades willingly and of their very own self-
interest. It is vital to bridge the space among the political and regulatory surroundings
and the CG culture because corporations that carry out properly on this location are
much more likely to hold regulatory reforms correctly and efficiently and eventually,
contribute to the macro part of the country to international outlook.

References:

Allen, J. (2010). Asia Special Report. Market CG Scores- Sinners Repent, pp. 5-24

Powell, S. (2010). Asia Special Report. Social Responsibility on the rise, pp. 25-31

Leahy, C. et.al. (2010). Asia Special Report. Market Profiles, pp.53-111

CABILAN, RIC JOHN N.

Villacorte, B., Antipala, Y.A. (2021). Sustainability reporting in the Philippines: Year One
review