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Insurance Code of

Governance

CORPORATE GOVERNANCE PRINCIPLES AND LEADING


PRACTICES
Public Accountability (Insurance Code)
As custodian of public funds, insurance corporations and
insurance intermediaries shall ensure that their dealings
with the public are always conducted in a fair, hones and
equitable manner.
IC code delineated the role of the Chairman and the Chief
Executive Officer.
The diligence required of insurance companies,
intermediaries and their directors and officers is not
merely due diligence of a good father of a family, but one
of a much higher order, perhaps even equivalent to the
highest diligence required in banking industry.

CORPORATE GOVERNANCE PRINCIPLES AND LEADING


PRACTICES
Insurance Commission Circular no. 31-2005
Objective: To enhance the corporate accountability of
insurers and intermediaries, promote the interests of their
stakeholders specifically those of the policyholders,
claimants and creditors.
Key features:
Role of the board, the chairman and the non-executive
directors
Procedures for the appointment of directors
Formal evaluation of the performance of the board and
individual directors.

Board of Directors
Refers to the collegial body that exercises the corporate powers of all
corporations formed under the Corporation code. It conducts all business
and controls or holds all properties of such corporations.
Directors sitting on the Board in any insurance entity shall be possessed of
the necessary skills, competence and experience, in terms of management
capabilities preferably in the field of insurance or insurance-related
disciplines.
Principles:
Every Company should be headed by an effective Board to lead and
control the company to ensure its success.
Provide entrepreneurial leadership of the company within a
framework of prudent and effective controls which enable risks to be
assessed and managed
Set the companies strategic aims
Ensure that the necessary financial and human resources are in
place for the company to meet its objectives and review management
performance
Set the companies values and standards
Ensure that its obligations to shareholders and others are
understood and met.

Board of Directors
Essential Standards

Meeting Regularly
Non-executive
directors (led by
independent
directors)
Annual Report

-Discharge of duties
efficiently

-Meet annually without the


chairmans presence to appraise the
chairmans performance and on
other such occasions deemed
appropriate
Statement of how the Board
operates, types of decisions to be
followed and those that are
delegated to management
Identification of chairman, vice
chairman, independent director and
the chairmen and members of the
nomination, audit and remuneration
committees.
Number of meetings and its
attendance

All concerns of the directors about running the company shall be


recorded in the minutes of the Board

Constitution of an effective Board

Composition

At least 5 but not more than 15


members elected by shareholders
2 independent directors in the
Board
SEC CODE: at least 2 or 20% of
the member of the Board,
whichever is lesser

Balance of executives
and non executives

Chairman and CEO

No individual or small group of


individuals can dominate the Boards
decision making.

Must be separate in principle to


ensure balance of power,
accountability and independent
decision making
Chairman shall be non-executive
the
Check
and balance
SECdirector
CODE: If
position
of Chair and
CEO are unified, the proper checks and
balances should be laid down
independent views.

Appointment to the Board

Essential Standards
1. There shall be a formal, rigorous and transparent procedures for the
selection and appointments to the Board.
2. Appointments to the Board shall be made on merit and against
subjective criteria
3. Careful deliberation and consideration shall be done to ensure
appointees have enough time for the job.
4. Plans shall be in place for orderly succession to the Board and that
of the senior management level in order to maintain a balance of
appropriate skills and experiences within the company.

Committees

Nomination Committee
Audit Committee
Remuneration
Committee

Nomination Committee
Composition

Role:

At least 3 members of the BOD, one of


whom must be independent
Shall review and evaluate the
qualifications of all persons nominated to
the Board as well as those nominated to
other positions requiring appointment by
the BOD. It should prepare a descriptions
of the roles and capabilities of a
particular appointment.

Audit Committee
Composition

Role:

Shall be comprised of independent board


members, preferably with accounting
and finance experiences
Provides oversight of the institutions
internal and external auditors.
It shall monitor and evaluate the
adequacy and effectiveness of the
internal control system of the company.

Remuneration Committee
Composition

Role:

At least 3 members, one of whom is an


independent director
It shall judge or make plans where to
position the company relative to other
companies. But such comparisons shall
be used with caution in view of the risk
of an upward ratchet of the level of
remuneration with no corresponding
improvement in performance.
It shall delegate responsibilities for
setting up remunerations for all
executive directors and chairman,
including pension rights or any
compensation payments.

SEC vs IC

SEC Code

IC Code

Duties and Functions

Essential Standards:

Ensure:
Standard of best practice for
the company and its
stakeholders
Conduct itself with utmost
honesty and integrity

1.

1.

Install a system of selection to


ensure a mix of competent
directors, each of whom can
add value and contribute
independent judgment to the
formulation of sound
corporate strategies and
policies.

Board must meet regularly to


discharge its duties efficiently,
and all concerns of Directors
shall be recorded in the
minutes of the Board.
Responsibilities of Board
Essential Standards
1.
Adopt the companys strategic
plan.
2.

Oversee conduct of companys


business to ensure business
properly managed, and
dealings with policy-holders,
claimants and creditors are
fair and equitable

SEC Code
2.

3.

Select and appoint the CEO


and other senior officers who
must have the motivation,
integrity, competence and
professionalism at a very high
level.

IC Code
3.

Identify principal business


risks and ensure
implementation of appropriate
risk management system.

4.

Approve corporate policies


and core areas of operations
of under-writing, investments,
reinsurance and claims
management.

Adopt a professional
development program for
employees and officers and
succession planning for senior
management.
5.

6.

Plan succession, appointing,


training, fixing the
compensation of replacing
senior management.
Develop and implement an
investor relations program

SEC Code

IC Code

4.

Determining corporations
purpose and value, set
strategies and general
policies to ensure that it
survives and thrives despite
financial crisis and its assets
and reputation adequately
protected.

5.

Provide sound written policies 8.


and strategic guidelines that
will help decide on major
capital expenditures.

6.

Determine important policies


that bear on the character of
the corporation its long-term
viability and strength

7.

9.

Review adequacy and


integrity of internal control
systems and management
information systems,
including systems of
compliance with the laws,
rules, regulations, directives
and guidelines.
Select/appoint officers who
are qualified to administer
insurance affairs soundly and
effectively, and establish
adequate selection process
for all personnel.
Apply fit and proper
standards on personnel.

SEC Code
7.

8.

9.

IC Code

Periodically evaluate and


10.
monitor implementation of
such strategies, business
plans and operating budgets
as well as managements
over-all performance to ensure 11.
optimum results.
Ensure that company complies
with laws, regulations and
12.
codes of best business
practice.
Identify the companys major
and other stakeholders
formulate a clear policy of
communication, render
accounting on serving their
legitimate interests.

13.

Establish compensation
package for all personnel
consistent with interest of all
stakeholders.
Review/approve material
transaction not in the ordinary
course of business.
Establish system of check and
balance for the board.
Have appropriate reporting
system so Board can monitor,
assess and control
managements performance.

SEC Code
10.

Provide an investor relations


program that reaches to
shareholders.

11.

Adopt system of internal


checks and balances, which
may be applied in the first
instance to the Board and a
regular review of such system,
must be made.

12.

IC Code
14.

Present to Board members and


shareholders balance and
understandable assessment of
companys performance and
financial condition.

15.

Appoint Compliance Officer to


be responsible for
coordinating, monitoring and
facilitating compliance with
laws, rules and regulations.

Endeavor to provide
appropriate technology and
16.
systems rating to account for
available resources to ensure a
position of a strong and
meaningful competitor.

Entitled to Corporate Secretary


who shall ensure: all
appointments are proper, all
necessary information
obtained from directors, both
for the companys own record
and in meeting statutory and
agency obligations.

SEC Code
13.

Identify risk areas and key


performance indicators and
monitor the factors with due
diligence.

14.

Constitute an Audit and


Compliance Committee

15.

Properly discharge Board


functions by meeting
regularly, giving due
consideration to independent
views, and all meeting should
properly be minuted.

16.

Keep Board authority within


the defined powers of the
corporation, as prescribed in
its articles and by law, and in
existing laws, rules and
regulations.

IC Code

Duties and Responsibilities of Individual Directors


SEC Code

IC Code

1.

Conduct fair business


1.
transactions with corporation
and ensure that personal interest
does not bias board decisions.

Conduct fair business transaction


with the company to ensure that
personal interest does not bias
board decisions.

2.

Devote time and attention


necessary to properly discharge
his duties and responsibilities,
familiarize himself with the
institutions business, must be
constantly aware of its condition
and be knowledgeable to
contribute meaningfully to
Boards work.

2.

Act honestly, in good faith, and


with loyalty to the best interest
of the company, stockholders
and other stakeholders such as
policy-holders, investors,
borrowers, other clients and
general public.

3.

Devote time and attention


necessary to properly discharge
their duties and responsibilities,
familiarize himself w/ the
companys business, must be
constantly aware of the
companys condition and be

Duties and Responsibilities of Individual Directors


SEC Code
3.

4.

5.

To act judiciously Before


deciding on any matter brought
before the Board of Directors, he
should thoroughly evaluate the
issues, ask questions and seek
clarifications.

IC Code
4.

Act judiciously: Before deciding


on any matter brought before the
Board, he should thoroughly
evaluate the issues, ask
questions and seek clarification.

5.

Exercise independent judgment:


He shall view each
problem/situation objectively.

6.

He shall have working knowledge


of the statutory and regulatory
requirements of the company,
including contents of articles of
incorporation and by-laws, IC
requirements and of other
government agencies.

Exercise independent judgment:


He should view each
problem/situation objectively.
Have a working knowledge of the
statutory and regulatory
requirements affecting the
corporation, including contents
of its articles of incorporation
and by-laws, SEC requirements
and of other regulatory
angencies.

Duties and Responsibilities of Individual Directors


SEC Code

IC Code
7.

Observe confidentiality of nonpublic information acquired by


reason of his position, and not
disclose said information to any
other person without board
authority.

8.

Every director shall make


decisions objectively in the
companys interests. Nonexecutive director shall:
* Scrutinize performance of
Management in meeting agreed
goals and objectives; monitor
performance report.
* Constructively challenge and help
develop strategic proposals for
the company.

Accountability and Audit


The Board is primarily accountable to the stockholders. It
should provide them with a balanced, position and
prospects on quarterly basis, including interim and other
reports that could adversely affect its business, as well as
reports to regulators that are required by law.

Preparation of Financial Statements


Effective system of internal control

Corporate Governance Scorecard

Insurance Commission Circular no. 21-2009


The scorecard requires full disclosure of company
practices on corporate governance in accordance with the
Principles and Leading Practices on Good Corporate
Governance.
OBJECTIVE: The scorecard has been developed to further
measure levels of compliance with corporate governance
rules and regulations.
Developed by the IC and during the Annual working
session of the Institute of Corporate Directors (ICD)
(a non-government organization that has been in the
forefront of promoting corporate governance reforms in
the Philippines)

Corporate Governance Scorecard


Employs the person-on-the-street test serving as a
reasonable approximation of the quality and quantity of
public disclosure.
It takes the side of an ordinary investor with no special
access to any privileged information. The easier for the
ordinary investor to get information, the higher is the
score.
Issues

Weights

I. Rights of Shareholders

15%

II. Equitable Treatment of


Shareholders

15%

III. Role of Stakeholders

10%

IV. Disclosure and


Transparency

30%

V. Board Responsibilities

30%

Total

100%

Manulife Financial Corporation


Business Profile

Manulife Financial Corporation (MFC) provides financial protection


and wealth management products and services to both individual
and group customers in the United States, Canada, and Asia.
These products and services include individual life insurance,
group life and health insurance, long-term care insurance, pension
products, annuities and mutual funds.

Risk Governance
The Board of Directors oversees the implementation by management of
appropriate systems to identify and manage principal risks of the companys
business and periodically reviews and approves our enterprise risk policy, risk
taking philosophy and overall risk appetite.

Audit and Risk


Management
Committee (ARMC)

Assisted the Board in its oversight with


respect to the effectiveness of Manulifes
risk management and compliance
practices

Strategy:
Our corporate governance practices, corporate values, and integrated, enterprisewide approach to management risk set the foundation for mitigating risks. We
strengthen this base by establishing appropriate internal controls and systems and
by seeking to retain trained and competent people throughout the organization.