SEC CODE OF CORPORATE GOVERNANCE FOR PUBLICLY-LISTED COMPANIES

On November 10, 2016, the Securities and Exchange Commission approved the Code
of Corporate Governance for publicly-listed companies. Its goal is to help companies
develop and sustain an ethical corporate culture and keep abreast with recent
developments in corporate governance.

One of its salient provisions is for publicly-listed companies to establish a code of

business conduct and submit a new manual on Corporate Governance that would
“provide standards for professional and ethical behavior as well as articulate acceptable
and unacceptable conduct & practices”. The Board of Directors is required to implement
the code and make sure that management and employees comply with the internal
policies set.

THE BOARD’S GOVERNANCE RESPONSIBILITIES

Principles 1: The company should be headed by a competent, working board to foster
the long-term success of the corporation, and to sustain its competitiveness and
profitability in a manner consistent with its corporate objectives and the long-term best
interests of its shareholders.

Principle 2: The fiduciary roles, responsibilities and accountabilities of the Board as

provided under the law, the company’s articles and by-laws, and other legal
pronouncements and guidelines should be clearly made known to all directors as well as
to stockholders and other stakeholders.

Principle 3: Board committees should be set up to the extent possible to support the
effective performance of the Board’s functions, particularly with respect to audit, risk
management, related part transactions, and other key corporate governance concerns,
such as nomination and remuneration.

Principle 4: To show full commitment to the company, the directors should devote the
time and attention necessary to properly and effectively perform their duties and
responsibilities, including sufficient time to be familiar with the corporation’s business.

Principle 5: The Board should endeavor to exercise objective and independent judgment
on all corporate affairs.

Principle 6: The best measure of the Board’s effectiveness is through an assessment

process. The Board should regularly carry out evaluations to appraise its performance
as a body, and assess whether it possesses the right mix of backgrounds and
competencies.

Principle 7: Members of the Board are duty-bound to apply high ethical standards, taking
into account the interests of all stakeholders.

DISCLOSURE AND TRANSPARENCY

Principle 8: The company should establish corporate disclosure policies and procedures
that are practical and in accordance with best practices and regulatory expectations.
Principle 9: The company should establish standards for the appropriate selection of an
external auditor, and exercise effective oversight of the same to strengthen the external
auditor’s independence and enhance audit quality.

Principle 10: The company should ensure that material and reportable non-financial and
sustainability issues are disclosed.

Principle 11: The company should maintain a comprehensive and cost-efficient

communication channel for disseminating relevant information. This channel is crucial for
informed decision-making by investors, stakeholders and other interested users.

INTERNAL CONTROL SYSTEM AND RISK MANAGEMENT FRAMEWORK

Principle 12: To ensure the integrity, transparency and proper governance in the conduct
of its affairs, the company should have a strong and effective internal control system and
enterprise risk management framework.

CULTIVATING A SYNERGY RELATIONSHIP WITH SHAREHOLDERS

Principle 13: The company should treat all shareholders fairly and equitably, and also
recognize, protect and facilitate the exercise of their rights.

DUTIES TO STAKEHOLDERS
Principle 14: The rights of stakeholders established by law, by contractual relations and
through voluntary commitments must be respected. Where stakeholders’ rights and/or
interests are at stake, stakeholders should have the opportunity to obtain prompt
effective redress for the violation of their rights.

Principle 15: A mechanism for employee participation should be developed to create a

symbiotic environment, realize the company’s goals and participate in its corporate
governance processes.

Principle 16: The company should be socially responsible in all its dealings with the
communities where it operates. It should ensure that its interactions serve its
environment and stakeholders in a positive and progressive manner that is fully
supportive of its comprehensive and balances development.

DEFINITION OF TERMS:
Corporate Governance – the system of stewardship and control to guide organizations
in fulfilling their long-term economic, moral, legal and social obligations towards their
stakeholders.

Board of Directors – the governing body elected by the stockholders that exercises the
corporate powers of corporation conducts all its business and controls its properties.

Management – a group of executives given the authority by the Board of Directors to

implement the policies it has laid down in the conduct of business of the corporation.

Independent director – a person who is independent of management and the

controlling shareholder, and is free from any business or other relationship which could,
or could reasonably be perceived to, materially interfere with his exercise of independent
judgment in carrying out his responsibilities as a director.
Executive director – a director who has executive responsibility of day-to-day
operations of a part or the whole of the organization.

Non-executive director – a person who has no executive responsibility and does not
perform any work related to the operations of the corporation.

Conglomerate – a group of corporations that has diversified business activities in varied

industries, whereby the operations of such businesses are controlled and managed by a
parent corporate entity.

Internal Control – a process designed and effected by the board of directors, senior
management, and all levels of personnel to provide reasonable assurance on the
achievement of objectives through efficient and effective operations; reliable, complete
and timely financial and management information; and compliance with applicable laws,
regulations, and the organization’s policies and procedures.

Enterprise Risk Management – a process, effected by an entity’s Board of Directors,

management and other personnel, applied in strategy setting and across the enterprise
that is designed to identify potential events that may affect the entity, manage risks to be
within its risk appetite, and provide reasonable assurance regarding the achievement of
entity objectives.

Related Party – shall cover the company’s subsidiaries, as well as affiliates and any
party, that the company exerts direct or indirect control over or that exerts direct or
indirect control over the company.

Related Party Transactions – a transfer of resources, services or obligations between

a reporting entity and a related party, regardless of whether a price is charged.

Stakeholders – any individual, organization or society at large who can either affect
and/or be affected by the company’s strategies, policies, business decisions and
operations, in general.

THE BOARD’S GOVERNANCE RESPONSIBILITIES

I. ESTABLISHING A COMPETENT BOARD
Principle 1
The company should be headed by competent, working board to foster the long-
term success of the corporation, and to sustain its competitiveness and
profitability in a manner consistent with its corporate objectives and the long-term
best interests of its shareholders and other stakeholders.

Recommendation 1.1
The Board should be composed of directors with a collective working knowledge,
experience or expertise that is relevant to the company’s industry/sector. The
Board should always ensure that it has an appropriate mix of competitive and
expertise and that its members remain qualified for their positions individually
and collectively, to enable it to fulfill its roles and responsibilities and respond to
the needs of the organization based on the evolving business environment and
strategic direction.

Recommendation 1.2
 The Board should be composed of a majority of non-executive directors who
possess the necessary qualifications to effectively participate and help secure
objective, independent judgment on corporate affairs and to substantiate proper
checks and balances.

Recommendation 1.3
The Company should provide in its Board Charter and Manual on Corporate
Governance a policy on the training of directors, including an orientation program
for first-time directors and relevant annual continuing training for all directors.

Recommendation 1.4
The Board should have a policy on board diversity.

Recommendation 1.5
The Board should ensure that it is assisted in its duties by a Corporate Secretary,
who should be a separate individual from the Compliance Officer. The Corporate
Secretary should not be a member of the Board of Directors and should annually
attend a training on corporate governance.

Recommendation 1.6
The Board should ensure that it is assisted in its duties by a Compliance Officer,
who should have a rank of Senior Vice-President or an equivalent position with
adequate stature and authority in the corporation. The Compliance Officer should
not be a member of the Board of Directors and should annually attend a training
on corporate governance.

II. ESTABLISHING CLEAR ROLES AND RESPONSIBILITIES OF THE BOARD

Principle 2
The fiduciary roles, responsibilities and accountabilities of the Board as provided
under the law, the company’s articles and by-laws and other legal
pronouncements and guidelines should be clearly made known to all directors as
well as to shareholders and other stakeholders.

Recommendation 2.1
The Board members should act on a fully informed basis, in good faith, with due
diligence and care, and in the best interest of the company and all shareholders.

Recommendation 2.2
The Board should oversee the development of and approve the company’s
business objectives and strategy, and monitor their implementation, in order to
sustain the company’s long-term viability and strength.

Recommendation 2.3
The Board should be headed by a competent and qualified Chairperson.

Recommendation 2.4
The Board should be responsible for ensuring and adopting an effective
succession planning program for directors, key officers, and management to
ensure growth and a continued increase in the shareholders’ value.

Recommendation 2.5
The Board should align the remuneration of key officers and board members with
the long-term interests of the company. In doing so, it should formulate and adopt
a policy specifying the relationship between remuneration and performance.
Further, no director should participate in discussions or deliberations involving his
own remuneration.

Recommendation 2.6
The Board should have and disclose in its Manual on Corporate Governance a
formal and transparent board nomination and election policy that should include
how it accepts nominations from minority shareholders and reviews nominated
candidates.

Recommendation 2.7
The Board should have the overall responsibility in ensuring that there is a group-
wide policy and system governing related party transactions (RPTs) and other
unusual or infrequently occurring transactions, particularly those which pass
certain thresholds of materiality.

Recommendation 2.8
The Board should be primarily responsible for approving the selection and
assessing the performance of the Management led by the Chief Executive Officer
(CEO), and control functions led by their respective heads.

Recommendation 2.9
The Board should establish an effective performance management framework
that will ensure that the Management, including the CEO and personnel’s
performance is at par with the standards set by the Board and Senior
Management.

Recommendation 2.10
The Board should oversee that an appropriate internal control system is in place,
including setting up a mechanism for monitoring and managing potential conflicts
of interest of Management, board members, and shareholders. The Board should
also approve the Internal Audit Charter.

Recommendation 2.11
The Board should oversee that a sound enterprise risk management (ERM)
framework is in place to effectively identify, monitor, assess and manage key
business risks. The risk management framework should guide the Board in
identifying units/business lines and enterprise-level risk exposures, as well as the
effectiveness of risk management strategies.

Recommendation 2.12
The Board should have a Board Charter that formalizes and clearly states its
roles, responsibilities and accountabilities in carrying out its fiduciary duties. The
 Board Charter should serve as a guide to the directors in the performance of their
functions and should be publicly available and posted on the company’s website.

III. ESTABLISHING BOARD COMMITTEES

Principle 3
Board committees should be set up to the extent possible to support the effective
performance of the Board’s functions, particularly with respect to audit, risk
management, related party transactions and other key corporate governance
concerns, such as nomination and remuneration.

Recommendation 3.1
The Board should establish board committees that focus on specific board
functions to aid in the optimal performance of its roles and responsibilties.

Recommendation 3.2
The Board should establish an Audit Committee to enhance its oversight
capability over the country’s financial reporting, internal control system, internal
and external audit processes, and compliance with applicable laws and
regulations.

Recommendation 3.3
The Board should establish a Corporate Governance Committee that should be
tasked to assist the Board in the performance of its corporate governance
responsibilities, including the functions that were formerly assigned to a
Nomination and Remuneration Committee.

Recommendation 3.4
Subject to a corporation’s size, risk profile and complexity of operations, the
Board shoul establish a separate Board Risk Oversight Committee (BROC) that
should be responsible for the oversight of a company’s Enterprise Risk
Management system to ensure its functionality and effectiveness.

Recommendation 3.5
Subject to a corporation’s size, risk profile and complexity of operations, the
Board should establish a Related Party Transaction (RPT) Committee, which
should be tasked with reviewing all material related party transactions of the
company and should be composed of at least three non-executive directors, two
of whom should be independent, including the Chairman.

Recommendaiton 3.6
All established committees should be required to have Committee Charters
stating in plain terms their respective purposes, memberships, structures,
operations, reporting processes, resources and other relevant information.

IV. FOSTERING COMMITMENT

Principle 4
To show full commitment to the company, the directors should devote the time
and attention necessary to properly and effectively perform their duties and
responsibilities, including sufficient time to be familiar with the corporation’s
business.
 Recommendation 4.1
The directors should attend and actively participate in all meetings of the Board,
Committees, and Shareholders in person or through the tele/videoconferencing,
conducted in accordance with the rules and regulations of the Commission,
except when justifiable causes, such as illness, death in the immediate family
and serious accidents, prevent them from doing so.

Recommendation 4.2
The non-executive directors of the Board should concurrently serve as directors
to a maximum of five publicly listed companies to ensure that they have sufficient
time to fully prepare for meetings, challeng Management’s proposals/views, and
oversee the long-term strategy of the company.

Recommendation 4.3
A director should notify the Board where he/she is an incumbent director before
accepting a directorship in another company.

V. REINFORCING BOARD INDEPENDENCE

Principle 5
The board should endeavor to exercise an objective and independent judgment
on all corporate affairs.

Recommendation 5.1
The Board should have at least three independent directors, or such number as
to constitute at least one-third of the members of the Board, whichever is higher.

Recommendation 5.2
The Board should ensure that its independent directors possess the necessary
qualifications and none of the disqualifications for an independent director to hold
the position.

Recommendation 5.3
The Board’s independent directors should serve for a maximum cumulative term
of nine years. After which, the independent director should be perpetually barred
from re-election as such in the same company, but may continue to qualify for
nomination and election as a non-independent director.

Recommendation 5.4
The positions of the Chairman of the Board and Chief Executive Officer should
be held by separate individuals and each should have clearly defined
responsibilities.

Recommendation 5.5
The Board should designate a lead director among the independent directors if
the Chairman of the Board is not independent, including if the positions of the
Chairman of the Board and Chief Executive Officer are held by one person.
 Recommendation 5.6
A director with a material interest in any transaction affecting the corporation
should abstain from taking part in the deliberation for the same.

Recommendation 5.7
The non-executive directors (NEDs) should have separate periodic meetings with
the external auditor and heads of the internal audit, compliancde and risk
functions, without any executive directors present to ensure that proper checks
and balances are in place within the corporation. The meetings should be chaired
by the lead independent director.

VI. ASSESSING BOARD PERFORMANCE

Principle 6
The best measure of the Board’s effectiveness is through an assessment
process, The Board should regularly carry out evaluations to appraise its
performance as a body, and assess whether it possesses the right mix of
backgrounds and competencies.

Recommendation 6.1
The Board should conduct an annual self-assessment of its performance
including the performance of the Chairman, individual members and committees.
Every three years, the assessment should be supported by an external facilitator.

Recommendation 6.2
The Board should have in place a system that provides, at the minimum, criteria
and process to determine the performancde of the Board, the individual directors,
committees and such system should allow for a feedback mechanism from the
shareholders.

VII. STRENGTHENING BOARD ETHICS

Principle 7
Members of the Board are duty-bound to apply high ethical standards, taking into
account the interests of all stakeholders.

Recommendation 7.1
The Board should adopt a Code of Business Conduct and Ethics, which would
provide standards for professional and ethical behavior, as well as articulate
acceptable and unacceptable conduct and practices in internal and external
dealings.

Recommendation 7.2
The Board should ensure the proper and efficient implementation and monitoring
of compliance with the Code of Business Conduct and Ethics and internal
policies.

VIII. DISCLOSURE AND TRANSPARENCY

Principle 8
The company should establish corporate disclosure policies and procedures that
are practical and in accordance with best practices and regulatory expectations.
 Recommendation 8.1
The Board should establish corporate disclosure policies and procedures to
ensure a comprehensive, accurate, reliable and timely report to shareholders and
other stakeholders that gives a fair and complete picture of a company’s financial
condition, results and business operations.

Recommendation 8.2
The Company should have a policy requiring all directors and officers to
disclose/report to the company any dealings in the company’s shares within three
business days.

Recommendation 8.3
The Board should fully disclose all relevant and material information on individual
board members and key executives to evaluate their experience and
qualifications, and assess any potential conflicts of interest that might affect their
judgment.

Recommendation 8.4
The company should provide a clear disclosure of its policies and procedure for
setting Board and executive remuneration, as well as the level and mix of the
same in the Annual Corporate Governance Report.

Recommendation 8.5
The company should disclose its policies govering Related Party Transactions
(RPTs) and other unusual or infrequently occuring transactions in their Manual
on Corporate Governance.

Recommendation 8.6
The company should make a full, fair, accurate and timely disclosure to the
public of every material fact or event that occurs, particularly on the acquisition or
disposal of significant assets, which could adversely affect the viability or the
interest of its shareholders and other stakeholders.

Recommendation 8.7
The company’s corporate governance policies, programs and procedures should
be contained in its Manual on Corporate Governance, which should be submitted
to the regulators and posted on the company’s website.

IX. STRENGTHENING THE EXTERNAL AUDITOR’S INDEPENDENCE AND

IMPROVING AUDIT QUALITY
Principle 9
The company should establish standards for the appropriate selection of an
external auditor, and exercise effective oversight of the same to strengthen the
external auditor’s independence and enhance audit quality.

Recommendation 9.1
The Audit Committee should have a robust process for approving and
recommending the appointment, reappointment, removal, and fees of the
external auditor should be recommended by the Audit Committee, approved by
the Board and ratified by the shareholders.
Recommendation 9.2
The Audit Committee Charter includes a disclosure of its responsibility on
assessing the intergrity and independence of the external auditor.

Recommendation 9.3
The company should disclose the nature of non-audit services performed by its
external auditor in the Annual Report to deal with the potential conflict of interest.