My name is Julianne Eusebio and for the last topic of Module 2.

1 I will discuss
about Governance and Agency.

So to start, The majority of owners of a corporation are normally distinct from its
managers. Ang mga manager ang kadalasan na gumagawa ng desisyon or nag
ttake ng action para sa firm or sa business. So kapag ang manager nag fail na
gawin yung trabaho nila on behalf of the shareholder or yung owners, mag ffail
rin sila na maachieve yung goal nila na mamaximize yung wealth ng mga
shareholders So to ensure that managers will act consistent with the interest of
the shareholders, businesses establish what they call corporate governance
 (READ)

So when we say corporate governance it is a structure that is intended to benefit

all corporate stakeholders by ensuring na yung firm o isang business ay
pinapatakbo ng maayos in an ethical manner and sumusunod sa laws and
regulation ng isang bansa

So sa firm meron dalawang factors that can influence the corporate governance
so meron tayong internal and external. Internal factors yun yung mga
shareholders, board of directors, and officers. On the other hand meron ding
external factors which are the clients, creditors, suppliers, competitors, and
government regulations.
Under Governance and Agency we are going to talk about 3 sub-topics which are
the Individual versus Institutional Investors, Government Regulation, and the
Agency Issue.

Para mas maintindihan natin ang role ng isang shareholder sa pag shape sa
corporate governance ng isang company, it is better that we distinguish the
difference between Individual investors and Institutional Investors.

(READ INDIVIDUAL INVESTORS)

Generally speaking sa sobrang onti ng shares ng isang individual investor hindi

niya na mmeet yung means or quota para makapag influence sa corporate
governance ng isang business. Pero, To influence the firm, individual investors
often find it necessary to act as a group by voting collectively on corporate
matters such as mag bobotohan para sa board of directors etc. On the other
hand,

(READ INSTITUTIONAL INVESTORS)

Institutional investors are investment professionals that are paid to manage and
hold large quantities of securities or money on behalf of individuals, businesses,
and the government. Usually Institutional investors yung nag momonitor and nag
influence sa corporate governance ng isang firm or business. Sila yung madalas
nang ppressure or nag aabot ng concern sa board of directors with regards sa
management or sa kung pano sila nagpapatakbo sa management. Institutional
Investors also have the right to liquidate their holdings if sobrang pasaway yung
company na hindi sila nakikinig ganon.

So yun yung difference nila pero dahil individual and institutional investors share
the same goal, even though wala masyadong power ang individual investor sa
corporate governance ng isang company, they still benefit from the activism that
institutional investors do

During the past decade, corporate governance has received increased attention
due to several high-profile corporate scandals involving abuse of corporate power
and, in some cases, alleged criminal activity by corporate officers. Ever since na
implement ang corporate governance andaming issues, scandals, and cases
regarding sa (1) false disclosures sa financial statements tapos may mga
undisclosed conflicts of interest between corporations and sa analysts, auditors,
and attorneys and between corporate directors, officers, and shareholders. Pero
nung 2002 may inimplement na law yun yong

The Sarbanes-Oxley Act of 2002

So ano ba una yung Sarbanes-Oxley Act of 2002 or SOX. SOX Act of 2002 is an act
that aims to eliminate corporate disclosure and conflict of interest problems. This
act contains provisions about corporate financial disclosures and the relationships
among corporations, analysts, auditors, attorneys, directors, officers, and
shareholders. Ever since 2002, SOX accomplished the following

(READ)

So next is the Agency issue. We all know that the duty of a manager is to
maximize the wealth of the owners. Shareholders give managers decision-making
authority over the firm; thus, ang mga managers ay tinitingnan rin as agents ng
shareholders ng isang firm

(READ PRINCIPAL AGENT RELATIONSHIP)

In general, ang nag bibind dito sa principal–agent relationship ay dapat may terms
and agreements na contract. This principal-agent relationship works well kapag
 ang agent ay gumagawa ng desisyon based on the principal’s interest pero hindi
siya nag wowork kapag nag coconflict or different yung ideas or interests nila.
Ngayon kapag di na sila nag kakasundo eto yung tinatawag na

(READ AGENCY PROBLEMS)

Agency problems eto na yung mga problem ana nag ooccur kapag yung agent mas
nag fofocus siya sa personals goals niya, for example yung personal wealth niya,
job security, lifestyle etc. na nakakaaffect rin sa performance niya sa workplace or
sa decisions na need niya gawin. RATHER than the goals of the shareholder which
is always about maximizing the shareholder’s wealth. Etong agency problems na
ito will result in agency costs.

(READ AGENCY COSTS)

For example, nagkakaroon ng agency costs kapag si agent or manager hindi

nakapag invest on time because of his/her personal interest or opinion. Or kapag
si Manager naman kailangan pang bantayan ni shareholder para kumilos, dun
nagkakaroon ng agency cost where in dahil sa problem na yon nababawasan ang
wealth ni shareholder
 So lastly, In addition to the roles played by corporate boards, institutional
investors, and government regulations, kailangan nila na mag focus on making
sure na ma strengthen yung corporate governance by also considering kung ano
ba yung goals and interest ng managers when it comes to their personal wealth,
job security, and lifestyle. So yun ay yung etong nakikita niyo sa screen.

(READ)

In addition rin, pinaka effective pa rin na pang laban sa agency problems yung
performance based compensation packages na sa performance nila nakabased
yung rewards and additional benefits para may niloolook forward rin yung mga
managers to do their best and make a wise decision for the company.