Case Analysis:

On February 27, 2015, Nick Reyes tenure as president of Phil Way of Philippines (PWP) came to
an abrupt halt. In response to the growing dissension at local Phil Way chapters across the country,
coupled with donor and media calls for his withdrawal, Nick Reyes resigned from his position as head of
the largest charity organization in the Philippines. “I do this because media attention is over-shadowing
the importance of the work of the Phil Way,” wrote Nick Reyes in a letter to Lee Dylan, chairperson of
PWP Board of Governors executive committee”.
The “media attention” to which Nick Reyes referred consisted of allegation of misuse of funding
and excessive compensation. In addition to 2 million annual package and 10 million retirement package,
Nick allegedly enjoyed a “first class” travel budget and annually spent about 400,000 for Cebu Pacific
Airlines, Concorde flights and nearly 10 million for limousine services’.
Many people balked at these numbers and questioned how an executive of a non-profit
organization could possibly rationalize such “outrageous” expenses and compensation. “Were hearing
from people that they’re very concerned that any money they’re giving to charity is being wasted”.
Noted Joe Sy Chan, president of the Phil Way “National Capital Area Manila”. “We’re really concerned
that we might suffer from the adverse publicity”.
Although preliminary investigation during December 2009 did not find any wrongdoing by Nick
Reyes, he nevertheless submitted his resignation. He left in an attempt to minimize negative fallout on
the organization. “It hurts me to see and hear unfair criticism of a system that has done so much for this
country,” Nick Reyes explained. “I’ve never been through something like this in my life.” Many people,
such as Charles Cojuangco, who donated 20 million to the Phil Way in 2009 believed that Nick had to
leave to prevent negative repercussions for the PWP organization and its affiliates. “It’s definitely the
right thing to do given the circumstances, pressure and questions that Phil Way has to deal with,”
agreed Kenneth Leyson, president of National Charities Information. “People will remember these
charges for several years down the road”. PWP definitely felt the blow of the Nick Reyes scandal. “This
kind of stuff leaves you grief stricken,” remarked Leyson. “It doesn’t just affect the Phil Way of
Philippines, it affects local Phil Ways, it could affect local senior-citizen and day-care centers. It affects
every single one of us who involved in the charitable filed in the country. We are all diminished, and the
public trust has been diminished. During 2010 contributions to Phil Way chapters dropped for the first
time since 1950’s. It was estimated that the Phil Way network as a whole raised 660 million pesos less
in pledges in 2010 that it did in 2009 – a 2.5% decline. “The scandal has tarred and feathered the Phil
Way’s motherhood and apple-pie image”, said Robert Go, executive director of the National Committee
for Responsive Philanthropy”. For the first time PWP was under scrutiny.
Recovering from the scandal presented an imposing challenge for the company, but one that
the organization faced head-on. In response to public concern, PWP conducted an investigation and
published a report that detailed numerous financial abuses by its management during the prior five
years. In addition, the PWP board suspended Nick Reyes 10 million retirement packages. Nick appeared
on ABS-CBN “nightline” and attempted to speak up in his own behalf. During his tenure he increased
PWP fundraising to 20 billion and established a powerful marketing alliance with the National Basketball
Association (NBA through which the PWP received millions of pesos worth of free advertising. But, in
the end, even Nick realized he had made at least one mistake. “I did not pay enough attention to detail
or to the way some of my actions…. And my personal style could have been perceived by certain
people”, Nick conceded.
Since the Nick Reyes experienced, many changes have taken at PWP. Managers are now held
responsible for their budgets and are monitored monthly by senior vice-presidents. Coach travel is
mandated for all business trips (including the president’s), and a daily meal allowance has been set.
Perhaps most important, individual can now pledge directly to the charity of their choice through the
PWP. “It’s going to be a rough couple of years,” stated PWP President Elaine L. Cho, shortly after taking
control of the organization. “The old way of doing things has got to change-the old-boy network and the
whole culture.”
What happened at PWP reflects a concern that has affected corporate Philippines as a whole,
not just non-profit organization. The PWP experience serves as a lesson for all companies as the 2010’s
bear witness to a general public outcry against lavish executive compensation packages. While many
people argue that executives must receive compensation commensurate with the responsibilities they
carry, others contend that discretion must still be used. As Nick Reyes learned, perceptions are
extremely important.

Requirement:

1. The New CEO approach you as a consultant to create a new accounting system of the
company to prevent such issue in the future and to recover the company’s image.

2. Identify the risks involve associated in the new accounting system you created, and make a
strategy how to mitigate risk, or avoid risk.