Class Report on Corporate Governance in the Philippines

Topic 5: Comparative Analysis of Corporate Governance Practices: Philippines vs. ASEAN Countries

Corporate Governance in the Philippines: A Simplified Overview

Introduction:
Today, I will be discussing corporate governance in the Philippines. Corporate governance refers to
the system of rules, practices, and processes by which a company is directed and controlled. It
ensures that companies operate in a transparent, accountable, and responsible manner. In the
Philippines, corporate governance focuses on monitoring bank lending, financial reporting, and
ensuring fairness for investors in public equity markets [[1]]
(https://www.dlsu.edu.ph/wp-content/uploads/2019/12/CorporateGovernancePhilippineStyle_WH
OCONTROLSTHEBALL_.pdf).

1. Monitoring Bank Lending:

In the Philippines, corporate governance plays a crucial role in monitoring bank lending practices.
This is important to ensure that banks provide loans responsibly and avoid excessive risk-taking. By
implementing effective corporate governance practices, banks are encouraged to assess the
creditworthiness of borrowers, maintain appropriate risk management systems, and adhere to
regulatory guidelines. This helps to safeguard the stability of the banking sector and protect the
interests of depositors [[1]]
(https://www.dlsu.edu.ph/wp-content/uploads/2019/12/CorporateGovernancePhilippineStyle_WH
OCONTROLSTHEBALL_.pdf).

2. Financial Reporting:
Corporate governance also emphasizes the importance of accurate and transparent financial
reporting. Companies in the Philippines are required to prepare and disclose financial statements
that provide a true and fair view of their financial position and performance. This ensures that
investors, creditors, and other stakeholders have access to reliable information for making informed
decisions. By adhering to strong corporate governance practices, companies can enhance their
credibility and attract investment [[1]]
(https://www.dlsu.edu.ph/wp-content/uploads/2019/12/CorporateGovernancePhilippineStyle_WH
OCONTROLSTHEBALL_.pdf).

3. Fairness for Investors in Public Equity Markets:

Another key aspect of corporate governance in the Philippines is ensuring fairness for investors
trading in public equity markets. This involves promoting transparency, integrity, and equal
treatment of shareholders. The Securities and Exchange Commission (SEC) in the Philippines
enforces regulations to protect investors’ rights and prevent fraudulent activities. By upholding
strong corporate governance principles, companies can build trust with investors and foster a
conducive environment for capital market growth [[1]]
(https://www.dlsu.edu.ph/wp-content/uploads/2019/12/CorporateGovernancePhilippineStyle_WH
OCONTROLSTHEBALL_.pdf).

Comparative Analysis of Corporate Governance Practices: Philippines vs. ASEAN Countries:

The Philippines has made significant progress in enhancing its corporate governance practices, but it
is also important to compare it with other countries in the ASEAN region. Through comparative
analysis, we can identify areas for improvement and learn from best practices. This analysis can
include factors such as board composition, disclosure requirements, shareholder rights, and
enforcement mechanisms. By benchmarking against other countries, the Philippines can continue to
strengthen its corporate governance framework [[1]]
(https://www.dlsu.edu.ph/wp-content/uploads/2019/12/CorporateGovernancePhilippineStyle_WH
OCONTROLSTHEBALL_.pdf).

In the Philippines, there are guidelines called the Philippine Stock Exchange (PSE) Corporate
Governance Code that listed companies must follow. This code provides rules and recommendations
on how companies should be run. For example, it covers things like the composition of the board of
directors, their roles and responsibilities, and how much information should be shared with
shareholders.

Now, let’s compare the Philippines with other ASEAN countries. Singapore, for instance, is known for
its strong corporate governance practices. They have a good legal framework, strict enforcement,
and a culture that values transparency and accountability. This has helped companies in Singapore
gain trust and confidence from investors.

Other countries like Malaysia and Thailand have also made progress in improving their corporate
governance practices. They have implemented rules and regulations to make sure companies are
well-managed and accountable to their shareholders.

However, there are still challenges in the Philippines and other ASEAN countries. Some of these
challenges include ensuring that boards of directors are independent and effective, dealing with
transactions involving related parties, protecting the rights of shareholders, and making financial
reporting more transparent.

To tackle these challenges, it is important for ASEAN countries to collaborate and learn from each
other. By sharing knowledge and best practices, they can work towards improving corporate
governance practices across the region. Initiatives like the ASEAN Corporate Governance Scorecard
have been established to benchmark and enhance corporate governance practices in ASEAN
countries.

Topic 6: The Evolution of Corporate Governance Regulations in the Philippines

Now, let’s turn our attention to the evolution of corporate governance regulations in the Philippines.
Over the years, the country has made significant changes to its rules and regulations to ensure
transparency, accountability, and investor protection. Let’s explore this journey!

In 2000, the Philippines introduced the Securities Regulation Code (SRC). This code aimed to
strengthen corporate governance practices by requiring companies to have independent directors
and audit committees. It also emphasized the importance of sharing important information with
shareholders. Additionally, the Securities and Exchange Commission (SEC) was established as the
primary regulatory authority for corporations.

In 2002, the SEC issued the Code of Corporate Governance. This code provided guidelines for listed
companies to enhance transparency, protect shareholder rights, and improve the effectiveness of
their boards of directors. The code was revised in 2016 to align with international best practices and
adapt to changing needs.

To further promote good corporate governance, the Philippines adopted the ASEAN Corporate
Governance Scorecard in 2012. This scorecard assesses corporate governance practices of listed
companies using a set of indicators. It helps identify areas for improvement and encourages
companies to enhance their governance practices.

In 2009, the Philippine Stock Exchange (PSE) introduced its own corporate governance code, which is
mandatory for listed companies. This code outlines principles and best practices that companies
must follow regarding board composition, directors’ responsibilities, and disclosure requirements.

The SEC has also issued additional guidelines and circulars to address emerging issues such as
related-party transactions, cybersecurity, and sustainability reporting. These guidelines provide
companies with specific instructions on how to handle these matters and ensure good governance
practices.

All these changes in the regulations demonstrate the Philippines’ commitment to improving
corporate governance practices and aligning with global standards. The aim is to enhance
transparency, accountability, and investor confidence in the country’s business environment.

In conclusion, the comparative analysis of corporate governance practices and the evolution of
corporate governance regulations in the Philippines provide valuable insights into the strengths,
weaknesses, and progress of the country’s governance framework. By learning from other ASEAN
countries and continuously refining regulations, the Philippines aims to create a business
environment that fosters trust, transparency, and sustainable growth.

The Evolution of Corporate Governance Regulations in the Philippines:

Corporate governance regulations in the Philippines have evolved over time to address emerging
challenges and align with international standards. The Securities Regulation Code (SRC) and the Code
of Corporate Governance (CCG) are two key regulatory frameworks that guide corporate governance
practices in the country. These regulations have been revised and updated to enhance transparency,
accountability, and investor protection. The continuous evolution of corporate governance
regulations reflects the commitment of the Philippines to foster a business environment that
promotes good governance [[1]]
(https://www.dlsu.edu.ph/wp-content/uploads/2019/12/CorporateGovernancePhilippineStyle_WH
OCONTROLSTHEBALL_.pdf).

Learn more:

1. [Corporate Governance, Philippine Style: | DLSU]

(https://www.dlsu.edu.ph/wp-content/uploads/2019/12/CorporateGovernancePhilippineSt
yle_WHOCONTROLSTHEBALL_.pdf)