GBERMIC Chapter 1-5

Chapter 1 Characteristics of Good Governance (8) Equity and Inclusiveness

-It is a characteristic of good governance
Governance Participation that ensures that all its members feel that
- refers to a process whereby elements in - It is a characteristic of good governance they have a stake in it and do not feel
society wield power, authority and influence whereby men and women are key excluded from the mainstream of society.
and enact policies and decisions concerning cornerstones of good governance. - This requires all groups, but particularly the
public life and social upliftment. - It could be either direct or through most vulnerable, to have opportunities to
- It means the process of decision making legitimate institutions or representatives. improve or maintain their well-being.
and the process by which decisions are - It needs to be informed and organized.
implemented through the exercise of power Consensus Oriented (have 1 goal)
or authority by leaders of the country and or Accountability - It is a characteristic of good governance
organizations. - It is a characteristic of good governance that requires meditation of the different
that interests in society to reach a broad
Governance comprises all the process of is the key requirement of it. consensus on what is in the best interest of
governing (6) - It cannot be enforced without transparency the whole community and how this can be
and the rule of law. achieved.
- Undertaken by the government of a country - It requires a broad and long-term
- By a market or by a network Effectiveness and Efficiency perspective on what is needed for sustainable
- Over a social system and whether through - It is a characteristic of good governance human development and how to achieve the
the laws that processes and institutions produce goals of such development.
- Norms results that meet the needs of society while - This can only result from an understanding
- Power of language making the best use of resources at their of the historical, cultural and social contexts
disposal. of a given society or community.
Governance can be used in several - This concept context of good governance
contexts (4) also covers the sustainable use of natural Responsiveness
- Corporate governance resources and the protection of the - It is a characteristic of good governance
- International governance environment. that institutions and processes try to serve the
- National governance needs of all stakeholders within a reasonable
- Local governance timeframe.
 GBERMIC Chapter 1-5
Transparency suppliers, financiers, government and the 2) Self-Assessment
- It is a characteristic of good governance community. - Corporate governance enables firms to
that means: decisions taken and their - It is a topic that has received growing assess their behavior and actions before they
enforcement are done in a manner that attention in the public in recent years as are scrutinized by regulatory agencies.
follows rules and regulations. policy makers and others become more
- It means that information is freely available aware of the contribution good governance 3) Increase Shareholders' Wealth
and directly accessible to those who will be makes to financial market stability and - Protect the long-term interests of the
affected by such decisions and their growth. shareholders.
enforcement. - It is all about controlling one’s business
- It means that enough information is and so is relevant, and indeed vital, for all 4) Transparency and Full Disclosure
provided and that it is provided in easily and governments and the community. - Ensuring a higher degree of transparency in
understandable forms and media. - Its purpose is to facilitate effective, an organization by encouraging full
entrepreneurial and prudent management that disclosure of transactions in the company
Rule of Law can deliver long term success of the accounts.
- ) It is a characteristic of good governance company.
that requires fair legal frameworks that are - Its fundamental aim is to enhance Basic Principles of effective corporate
enforced impartially. shareholders value and protect the interests governance. (3)
- It also requires full protection of human of other stakeholders by improving corporate Transparency and Full Disclosure
rights, particularly those minors. performance and accountability. - Is the board telling us what is going on?
- requires an independent judiciary and an - Does the board meet the information needs
impartial and incorruptible force. (Basic) Objectives of Corporate of investment communities?
Governance - Does it safeguard integrity in financial
Corporate Governance 1) Fair and Equitable Treatment of reporting?
- Is defined as the system of rules, practices Shareholders - Does it make timely and balanced
and processes by which business - A corporate governance structure ensures disclosure?
corporations are directed and controlled. equitable and fair treatment of all - Can an outsider meaningfully analyze the
- It involves balancing the interests of a shareholders of the company. organization’s actions and performance?
company’s many stakeholders, such as
shareholders, management, customers,
 GBERMIC Chapter 1-5
Accountability Chapter 2
- Is the board taking responsibility? BOD (board of directors) and Audit
- Does the board clarify its role and that of Good Corporate Governance committee
management? - based on the principles underpinned by - Oversee the management and are expected
- Does it promote objective, ethical and consensus and continually developing notion to protect the shareholder’s rights.
responsible decision making? of good practice.
- Does it lay solid foundations for Management
management oversight? True or False - It is part of the governance framework.
- Does the composition mix of board There are no absolute rules which must be - It can influence who sits on the board and
membership ensure an appropriate range adopted by all organizations. the audit committee as well as other
and mix of expertise, diversity, knowledge T or F governance controls that might be put in
and added value? Answer: True place.
- Is the organization's senior official There is a simple universal formula for good
committed to widely accepted standards of governance. The shareholders/owners delegates
correct and proper behavior? T or F responsibilities to:
Answer: False - (There is no simple - Board of Directors
Corporate Control formula for good governance) - Executive Management
- Is the board doing the right thing? The essence of any system of good corporate - Operational Management
- Has the board built long-term sustainable governance is to allow the board and - Internal Auditors
growth in shareholders’ value for the management the freedom to drive their
corporation? organization forward and to exercise that Board of Directors, Executive Management,
- Does it create an environment to take risks? freedom within a framework of effective Operational Management, and Internal
- Does it encourage enhanced performance? accountability. Auditors are accountable to:
- Does it recognize and manage risk? T or F - Shareholders/owners
- Does it remunerate fairly and responsibly? Answer: True - External Auditors
- Does it recognize the legitimate interests of - Regulators
stakeholders? Shareholders/owners - Society and Others
- Are conflicts of interest avoided such that - it is where governance starts delegating
the organization’s best interests prevail at all responsibilities.
times?
 GBERMIC Chapter 1-5
Regulators Owners
Accountabilities do not extend only to the - Are a response to society’s wishes to - They want disclosures from management
shareholders. ensure that organizations, in their pursuit of that are accurate and objectively verifiable.
T or F returns for their owners, act responsibly and
Answer: True operate in compliance with relevant laws. Multiple Choice
From a financial reporting perspective, it is
Stakeholders Shareholders/owners the management’s responsibility to except:
- Companies also have responsibilities to - They delegate responsibilities to various a. Choose which accounting principles best
other stakeholders parties within the corporation, they also portray the economic substance of company
- They can be anyone who is influenced, require accountability as to how well transactions
whether directly or indirectly, by the resources that have been entrusted to b. Implement a system of internal control
actions of a company. management and the board have been used. that assures completeness and accuracy in
financial reporting
Management and the board The owners want accountability on such c. Ensure that the financial statements
- They have responsibilities to act within the things: contain accurate and complete disclosure
laws of society and to meet various - Financial Performance or Financial d. Include information on how well
requirements of creditors, employees, and Transparency management incentive systems are
stakeholders. - Stewardship aligned with the shareholder’s best
- Quality of Internal Control interest.
Board group of stakeholders has an interest - Composition of the BOD and the nature
in quality of corporate governance. of its activities Shareholders
- Provide effective oversight through the
Employees and creditors have a vested Financial Transparency election of board members,approval of
interest in the organization and how it is - Financial statements that are clear with full major initiatives such as buying or selling
governed. disclosure and that reflect the underlying stock, and annual reports on management
economics of the company. compensation from the board.

Stewardship
- Includes how well the company protects
and manages the resources entrusted to it.
 GBERMIC Chapter 1-5
Board of directors Securities and Exchange Commission Code of Corporate Governance for
- The major representative of stockholders - Ensure the accuracy and fairness of public publicly listed companies.
to ensure that the organization is run reporting of financial and other information - Its goal is to help companies develop and
according to the organization’s charter and for public companies sustain an ethical corporate culture and
that there is proper accountability. keep abreast with recent developments in
External Auditors corporate governance.
Non-Executive or Independent Directors - Performs audit of company financial
- The same as the broad role of the entire statements to ensure that the statements are Board of Directors
BOD free of material misstatements including - They are required to implement the code
misstatements that may be due to fraud. and make sure that management and
Management employees comply with the internal policies
- Operations and accountability. Internal Auditors set.
- Manage the organization effectively; - Perform audits of companies for
provide accurate and timely reports to compliance with company policies and laws, Implementation and Monitoring
shareholders and other stakeholders. audits to evaluate the efficiency of Compliance
operations, and periodic evaluation and - The real challenge in many companies that
Audit Committee of the BOD tests of controls. have already developed their Code of
- Provide oversight of the internal and Business
external audit function and the process of Chapter 3
preparing the annual financial statements as THE BOARD’S GOVERNANCE
well as public reports on internal control. On November 10, 2016 the Securities and RESPONSIBILITIES
Exchange Commission approved the Code
Board of Accountancy of Corporate Governance for publicly listed Principles 1: The company should be
- Set accounting standards dictating companies. headed by a competent, working board to
underlying financial reporting and auditing foster the long-term success of the
concepts; set the expectations of audit corporation, and to sustain its
quality and accounting quality. competitiveness and profitability in a
manner consistent with its corporate
objectives and the long-term best interests
of its shareholders.
 GBERMIC Chapter 1-5
Principle 6: The best measure of the
Principle 2: The fiduciary roles, Board’s effectiveness is through an Principle 11: The company should
responsibilities and accountabilities of the assessment process. The Board should maintain a comprehensive and cost-
Board as provided under the law, the regularly carry out evaluations to appraise efficient communication channel for
company’s articles and by-laws, and other its performance as a body, and assess disseminating relevant information. This
legal pronouncements and guidelines whether it possesses the right mix of channel is crucial for informed decision-
should be clearly made known to all backgrounds and competencies. making by investors, stakeholders and other
directors as well as to stockholders and interested users.
other stakeholders. Principle 7: Members of the Board are
duty-bound to apply high ethical standards, INTERNAL CONTROL SYSTEM AND
Principle 3: Board committees should be taking into account the interests of all RISK MANAGEMENT FRAMEWORK
set up to the extent possible to support the stakeholders. Principle 12: To ensure the integrity,
effective performance of the Board’s transparency and proper governance in the
functions, particularly with respect to audit, DISCLOSURE AND TRANSPARENCY conduct of its affairs, the company should
risk management, related part transactions, Principle 8: The company should establish have a strong and effective internal control
and other key corporate governance corporate disclosure policies and system and enterprise risk management
concerns, such as nomination and procedures that are practical and in framework.
remuneration. accordance with best practices and
regulatory expectations. CULTIVATING A SYNERGY
Principle 4: To show full commitment to RELATIONSHIP WITH
the company, the directors should devote Principle 9: The company should establish SHAREHOLDERS
the time and attention necessary to properly standards for the appropriate selection of an Principle 13: The company should treat all
and effectively perform their duties and external auditor, and exercise effective shareholders fairly and equitably, and also
responsibilities, including sufficient time to oversight of the same to strengthen the recognize, protect and facilitate the exercise
be familiar with the corporation’s business. external auditor’s independence and of their rights.
enhance audit quality.
Principle 5: The Board should endeavor to DUTIES TO STAKEHOLDERS
exercise objective and independent Principle 10: The company should ensure Principle 14: The rights of stakeholders
judgment on all corporate affairs. that material and reportable non-financial established by law, by contractual relations
and sustainability issues are disclosed. and through voluntary commitments must
 GBERMIC Chapter 1-5
be respected. Where stakeholders’ rights powers of corporation conducts all its Conglomerate
and/or interests are at stake, stakeholders business and controls its properties. - a group of corporations that has diversified
should have the opportunity to obtain business activities in varied industries,
prompt effective redress for the violation of Management whereby the operations of such businesses
their rights. - a group of executives given the authority are controlled and managed by a parent
by the Board of Directors to implement the corporate entity.
Principle 15: A mechanism for employee policies it has laid down in the conduct of
participation should be developed to create business of the corporation. Internal Control
a symbiotic environment, realize the - a process designed and effected by the
company’s goals and participate in its Independent director board of directors, senior management, and
corporate governance processes. - a person who is independent of all levels of personnel to provide reasonable
management and the controlling assurance on the achievement of objectives
Principle 16: The company should be shareholder, and is free from any business through efficient and effective operations;
socially responsible in all its dealings with or other relationship which could, or could reliable, complete and timely financial and
the communities where it operates. It reasonably be perceived to, materially management information; and compliance
should ensure that its interactions serve its interfere with his exercise of independent with applicable laws, regulations, and the
environment and stakeholders in a positive judgment in carrying out his responsibilities organization’s policies and procedures.
and progressive manner that is fully as a director.
supportive of its comprehensive and Enterprise Risk Management
balances development. Executive director - a process, effected by an entity’s Board of
- a director who has executive responsibility Directors, management and other personnel,
Corporate Governance of day-to-day operations of a part or the applied in strategy setting and across the
- the system of stewardship and control to whole of the organization. enterprise that is designed to identify
guide organizations in fulfilling their long- potential events that may affect the entity,
term economic, moral, legal and social Non-executive director manage risks to be within its risk appetite,
obligations towards their stakeholders. - a person who has no executive and provide reasonable assurance regarding
responsibility and does not perform any the achievement of entity objectives.
Board of Directors work related to the operations of the
- the governing body elected by the corporation.
stockholders that exercises the corporate
 GBERMIC Chapter 1-5
Related Party objectives and the long-term best interests Governance a policy on the training of
- shall cover the company’s subsidiaries, as of its shareholders and other stakeholders. directors, including an orientation program
well as affiliates and any party, that the for first-time directors and relevant annual
company exerts direct or indirect control Recommendation 1.1 continuing training for all directors.
over or that exerts direct or indirect control The Board should be composed of directors
over the company. with a collective working knowledge, Recommendation 1.4
experience or expertise that is relevant to The Board should have a policy on board
Related Party Transactions the company’s industry/sector. The Board diversity.
- a transfer of resources, services or should always ensure that it has an
obligations between a reporting entity and a appropriate mix of competitive and Recommendation 1.5
related party, regardless of whether a price expertise and that its members remain The Board should ensure that it is assisted in
is charged. qualified for their positions individually and its duties by a Corporate Secretary, who
collectively, to enable it to fulfill its roles should be a separate individual from the
Stakeholders and responsibilities and respond to the Compliance Officer. The Corporate
- any individual, organization or society at needs of the organization based on the Secretary should not be a member of the
large who can either affect and/or be evolving business environment and Board of Directors and should annually
affected by the company’s strategies, strategic direction. attend a training on corporate governance.
policies, business decisions and operations,
in general. Recommendation 1.2 Recommendation 1.6
The Board should be composed of a majority The Board should ensure that it is assisted in
The Board’s Governance Responsibilities of non-executive directors who possess the its duties by a Compliance Officer, who
necessary qualifications to effectively should have a rank of Senior Vice-President
I. Establishing A Competent Board participate and help secure objective, or an equivalent position with adequate
Principle 1 independent judgment on corporate affairs stature and authority in the corporation. The
The company should be headed by and to substantiate proper checks and Compliance Officer should not be a
competent, working board to foster the balances. member of the Board of Directors and
long-term success of the corporation, and to should annually attend a training on
sustain its competitiveness and profitability Recommendation 1.3 corporate governance.
in a manner consistent with its corporate The Company should provide in its Board
Charter and Manual on Corporate
 GBERMIC Chapter 1-5
II. Establishing Clear Roles And Recommendation 2.4
Responsibilities of The Board The Board should be responsible for Recommendation 2.7
Principle 2 ensuring and adopting an effective The Board should have the overall
The fiduciary roles, responsibilities and succession planning program for directors, responsibility in ensuring that there is a
accountabilities of the Board as provided key officers, and management to ensure group-wide policy and system governing
under the law, the company’s articles and growth and a continued increase in the related party transactions (RPTs) and other
by-laws and other legal pronouncements shareholders’ value. unusual or infrequently occurring
and guidelines should be clearly made transactions, particularly those which pass
known to all directors as well as to Recommendation 2.5 certain thresholds of materiality.
shareholders and other stakeholders. The Board should align the remuneration of
key officers and board members with the Recommendation 2.8
Recommendation 2.1 long-term interests of the company. In The Board should be primarily responsible
The Board members should act on a fully doing so, it should formulate and adopt a for approving the selection and assessing
informed basis, in good faith, with due policy specifying the relationship between the performance of the Management led by
diligence and care, and in the best interest remuneration and performance. Further, no the Chief Executive Officer (CEO), and
of the company and all shareholders. director should participate in discussions or control functions led by their respective
deliberations involving his own heads.
Recommendation 2.2 remuneration.
The Board should oversee the development Recommendation 2.9
of and approve the company’s business Recommendation 2.6 The Board should establish an effective
objectives and strategy, and monitor their The Board should have and disclose in its performance management framework that
implementation, in order to sustain the Manual on Corporate Governance a formal will ensure that the Management, including
company’s long-term viability and strength. and transparent board nomination and the CEO and personnel’s performance is at
election policy that should include how it par with the standards set by the Board and
Recommendation 2.3 accepts nominations from minority Senior Management.
The Board should be headed by a competent shareholders and reviews nominated
and qualified Chairperson. candidates. Recommendation 2.10
The Board should oversee that an
appropriate internal control system is in
place, including setting up a mechanism for
 GBERMIC Chapter 1-5
monitoring and managing potential III. Establishing Board Committees responsibilities, including the functions that
conflicts of interest of Management, board Principle 3 were formerly assigned to a Nomination
members, and shareholders. The Board Board committees should be set up to the and Remuneration Committee.
should also approve the Internal Audit extent possible to support the effective
Charter. performance of the Board’s functions, Recommendation 3.4
particularly with respect to audit, risk Subject to a corporation’s size, risk profile
Recommendation 2.11 management, related party transactions and and complexity of operations, the Board
The Board should oversee that a sound other key corporate governance concerns, should establish a separate Board Risk
enterprise risk management (ERM) such as nomination and remuneration. Oversight Committee (BROC) that should
framework is in place to effectively identify, be responsible for the oversight of a
monitor, assess and manage key business Recommendation 3.1 company’s Enterprise Risk Management
risks. The risk management framework The Board should establish board system to ensure its functionality and
should guide the Board in identifying committees that focus on specific board effectiveness.
units/business lines and enterprise-level risk functions to aid in the optimal performance
exposures, as well as the effectiveness of of its roles and responsibilities. Recommendation 3.5
risk management strategies. Subject to a corporation’s size, risk profile
Recommendation 3.2 and complexity of operations, the Board
Recommendation 2.12 The Board should establish an Audit should establish a Related Party
The Board should have a Board Charter that Committee to enhance its oversight Transaction (RPT) Committee, which
formalizes and clearly states its roles, capability over the country’s financial should be tasked with reviewing all
responsibilities and accountabilities in reporting, internal control system, internal material related party transactions of the
carrying out its fiduciary duties. The Board and external audit processes, and company and should be composed of at
Charter should serve as a guide to the compliance with applicable laws and least three non-executive directors, two of
directors in the performance of their regulations. whom should be independent, including the
functions and should be publicly available Chairman.
and posted on the company’s website. Recommendation 3.3
The Board should establish a Corporate Recommendaiton 3.6
Governance Committee that should be All established committees should be
tasked to assist the Board in the required to have Committee Charters
performance of its corporate governance stating in plain terms their respective
 GBERMIC Chapter 1-5
purposes, memberships, structures, Management’s proposals/views, and Recommendation 5.3
operations, reporting processes, resources oversee the long-term strategy of the The Board’s independent directors should
and other relevant information. company. serve for a maximum cumulative term of
nine years. After which, the independent
IV. Fostering Commitment Recommendation 4.3 director should be perpetually barred from
Principle 4 A director should notify the Board where re-election as such in the same company,
To show full commitment to the company, he/she is an incumbent director before but may continue to qualify for nomination
the directors should devote the time and accepting a directorship in another and election as a non-independent director.
attention necessary to properly and company.
effectively perform their duties and Recommendation 5.4
responsibilities, including sufficient time to V.Reinforcing Board Independence The positions of the Chairman of the Board
be familiar with the corporation’s business. Principle 5 and Chief Executive Officer should be held
The board should endeavor to exercise an by separate individuals and each should
Recommendation 4.1 objective and independent judgment on all have clearly defined responsibilities.
The directors should attend and actively corporate affairs.
participate in all meetings of the Board, Recommendation 5.5
Committees, and Shareholders in person or Recommendation 5.1 The Board should designate a lead director
through the tele-/videoconferencing, The Board should have at least three among the independent directors if the
conducted in accordance with the rules and independent directors, or such number as to Chairman of the Board is not independent,
regulations of the Commission, except constitute at least one-third of the members including if the positions of the Chairman
when justifiable causes, such as illness, of the Board, whichever is higher. of the Board and Chief Executive Officer
death in the immediate family and serious are held by one person.
accidents, prevent them from doing so. Recommendation 5.2
The Board should ensure that its independent Recommendation 5.6
Recommendation 4.2 directors possess the necessary A director with a material interest in any
The non-executive directors of the Board qualifications and none of the transaction affecting the corporation should
should concurrently serve as directors to a disqualifications for an independent abstain from taking part in the deliberation
maximum of five publicly listed companies director to hold the position. for the same.
to ensure that they have sufficient time to
fully prepare for meetings, challenge
 GBERMIC Chapter 1-5
Recommendation 5.7 Recommendation 6.2 VIII. Disclosure And Transparency
The non-executive directors (NEDs) should The Board should have in place a system that Principle 8
have separate periodic meetings with the provides, at the minimum, criteria and The company should establish corporate
external auditor and heads of the internal process to determine the performance of the disclosure policies and procedures that are
audit, compliance and risk functions, Board, the individual directors, committees practical and in accordance with best
without any executive directors present to and such system should allow for a practices and regulatory expectations.
ensure that proper checks and balances are feedback mechanism from the shareholders.
in place within the corporation. The Recommendation 8.1
meetings should be chaired by the lead VII. Strengthening Board Ethics The Board should establish corporate
independent director. Principle 7 disclosure policies and procedures to ensure
Members of the Board are duty-bound to a comprehensive, accurate, reliable and
VI. Assessing Board Performance apply high ethical standards, taking into timely report to shareholders and other
Principle 6 account the interests of all stakeholders. stakeholders that gives a fair and complete
The best measure of the Board’s picture of a company’s financial condition,
effectiveness is through an assessment Recommendation 7.1 results and business operations.
process, The Board should regularly carry The Board should adopt a Code of Business
out evaluations to appraise its performance Conduct and Ethics, which would provide Recommendation 8.2
as a body, and assess whether it possesses standards for professional and ethical The Company should have a policy requiring
the right mix of backgrounds and behavior, as well as articulate acceptable all directors and officers to disclose/report
competencies. and unacceptable conduct and practices in to the company any dealings in the
internal and external dealings. company’s shares within three business
Recommendation 6.1 days.
The Board should conduct an annual self- Recommendation 7.2
assessment of its performance including the The Board should ensure the proper and Recommendation 8.3
performance of the Chairman, individual efficient implementation and monitoring of The Board should fully disclose all relevant
members and committees. Every three compliance with the Code of Business and material information on individual
years, the assessment should be supported Conduct and Ethics and internal policies. board members and key executives to
by an external facilitator. evaluate their experience and qualifications,
and assess any potential conflicts of interest
that might affect their judgment.
 GBERMIC Chapter 1-5
Recommendation 8.4 auditor in the Annual Report to deal with
The company should provide a clear IX. Strengthening The External Auditor’s the potential conflict of interest.
disclosure of its policies and procedure for Independence and Improving Audit
setting Board and executive remuneration, Quality Chapter 4
as well as the level and mix of the same in Principle 9
the Annual Corporate Governance Report. The company should establish standards for X. Increasing Focus On Non-Financial
the appropriate selection of an external and Sustainability Reporting
Recommendation 8.5 auditor, and exercise effective oversight of Principle 10
The company should disclose its policies the same to strengthen the external The company should ensure that the material
governing Related Party Transactions auditor’s independence and enhance audit and reportable non-financial and
(RPTs) and other unusual or infrequently quality. sustainability issues are disclosed.
occurring transactions in their Manual on
Corporate Governance. Recommendation 9.1 Recommendation 10.1
The Audit Committee should have a robust The Board should have a clear and focused
Recommendation 8.6 process for approving and recommending policy on the disclosure of non-financial
The company should make a full, fair, the appointment, reappointment, removal, information, with emphasis on the
accurate and timely disclosure to the public and fees of the external auditor should be management of economic, environmental,
of every material fact or event that occurs, recommended by the Audit Committee, social and governance (EESG) issues of its
particularly on the acquisition or disposal of approved by the Board and ratified by the business, which underpin sustainability.
significant assets, which could adversely shareholders.
affect the viability or the interest of its XI. Promoting a Comprehensive and
shareholders and other stakeholders. Recommendation 9.2 Cost-Effective Access yo Relevant
The Audit Committee Charter includes a Information
Recommendation 8.7 disclosure of its responsibility on assessing Principle 11
The company’s corporate governance the integrity and independence of the The company should maintain a
policies, programs and procedures should external auditor. comprehensive and cost-efficient
be contained in its Manual on Corporate communication channel for disseminating
Governance, which should be submitted to Recommendation 9.3 relevant information. This channel is
the regulators and posted on the company’s The company should disclose the nature of crucial for informed decision-making by
website. non-audit services performed by its external
 GBERMIC Chapter 1-5
investors, stakeholders and other interested account its size, risk profile and complexity authority, stature, resources and support to
users. of operations. fulfill his/her responsibilities, subject to a
company’s size, risk profile and complexity
Recommendation 11.1 Recommendation 12.2 of operations.
The company should include media and The Company should have in place an
analysts’ briefings as channels of independent internal audit function that CULTIVATING A SYNERGIC
communication to ensure the timely and provides an independent and objective RELATIONSHIP WITH
accurate dissemination of public, material assurance, and consulting services designed SHAREHOLDERS
and relevant information to its shareholders to add value and improve the company’s
and other investors. operations. XIII. Promoting Shareholder Rights
Principle 13
INTERNAL CONTROL SYSTEM AND Recommendation 12.3 The company should treat all shareholders
RISK MANAGEMENT FRAMEWORK Subject to a company’s size, risk profile and fairly and equitably, and also recognize,
complexity of operations, it should have a protect and facilitate the exercise of their
XII. Strengthening The Internal Control qualified Chief Audit Executive (CAE) rights.
System and Enterprise Risk appointed by the Board.
Management Framework Recommendation 13.1
Principle 12 Recommendation 12.4 The Board should ensure that basic
To ensure integrity, transparency and proper Subject to its size, risk profile and shareholder rights are disclosed in the
governance in the conduct of its affairs, the complexity of operations, the company Manual on Corporate Governance and on
company should have a strong and effective should have a separate risk management the company’s website.
internal control systems and enterprise risk function to identify, assess and monitor key
management framework. risk exposures. Recommendation 13.2
The Board should encourage active
Recommendation 12.1 Recommendation 12.5 shareholder participation by sending the
The Company should have an adequate and In managing the company’s Risk Notice of Annual and Special Shareholders’
effective internal control system and an Management System, the company should Meeting with sufficient and relevant
enterprise risk management framework in have a Chief Risk Officer (CRO), who is information at least 28 days before the
the conduct of its business, taking into the ultimate champion of Enterprise Risk meeting.
Management (ERM) and has adequate
 GBERMIC Chapter 1-5
Recommendation 13.3 DUTIES TO STAKEHOLDERS XV. Encouraging Employee’S
The Board should encourage active Participation
shareholder participation by making the XIV. Respecting Rights of Stakeholders Principle 15
result of the votes taken during the most And Effective Redress for Violation of A mechanism for employee participation
recent Annual or Special Shareholders’ Stakeholder’s Rights should be developed to create a symbiotic
Meeting publicly available the next Principle 14 environment, realize the company’s goals
working day. The rights of stakeholders established by law, and participate in its corporate governance
by contractual relations and through processes.
Recommendation 13.4 voluntary commitments must be respected.
The Board should make available, at the Recommendation 15.1
option of a shareholder, an alternative Recommendation 14.1 The Board should establish policies,
dispute mechanism to resolve intra- The Board should identify the company’s programs and procedures that encourage
corporate disputes in an amicable and various stakeholders and promote employees to actively participate in the
effective manner. cooperation between them and the company realization of the company’s goals and in its
in creating wealth, growth and governance.
Recommendation 13.5 sustainability.
The Board should establish an Investor Recommendation 15.2
Relations Officer (IRO) to ensure constant Recommendation 14.2 The Board should set the tone and make a
engagement with its shareholders. The IRO The Board should establish clear policies and stand against corrupt practices by adopting
should be present at every shareholders’ programs to provide a mechanism on the an anti-corruption policy and program in its
meeting. fair treatment and protection of Code of Conduct.
stakeholders.
Recommendation 15.3
Recommendation 14.3 The Board should establish a suitable
The Board should adopt a transparent framework for whistle-blowing that allows
framework and process that allow employees to freely communicate their
stakeholders to communicate with the concerns about illegal or unethical practices,
company and to obtain redress for the without fear of retaliation and to have direct
violation of their rights. access to an independent member of the
 GBERMIC Chapter 1-5
Board or a unit created to handle whistle- Chapter 5 create excuses and justification for breaking
blowing concerns. Ethics commitments.
- is a set of moral principles or values that
XVI. Encouraging Sustainability and govern the actions and decisions of an 4. Loyalty (Fidelity) and Confidentiality
Social Responsibility individual or group. - be faithful and loyal to family, friends,
Principle 16 employers, client and country
The company should be socially responsible Characteristics and Values Associated - do not use or disclose information learned
in all its dealings with the communities with Ethical Behavior (10) in confidence
where it operates. - in professional context, safeguard the
Recommendation 16.1 1. Integrity influences and conflicts of interest.
The company should recognize and place an - Be principles, honorable, upright,
importance on the interdependence between courageous and act on convictions 5. Fairness and Openness
business and society, and promote a - do not be two-faced or unscrupulous, or - Be fair and open-minded, be willing to
mutually beneficial relationship that allows adopt an end-justifies-the means philosophy admit error and, where appropriate, change
the company to grow its business while that ignores principle. positions and beliefs, demonstrate a
contributing to the advancement of the commitment to justice, the equal treatment of
society where it operates. 2. Honesty individuals, and tolerance for acceptance of
- Be truthful, sincere, forthright, diversity
straightforward, frank, candid - do not overreach or take advantage of
- do not cheat, steal, lie, deceive or act another’s mistakes or diversities.
deviously.
6. Caring for Others
3. Trustworthiness And Promise Keeping - Be caring, kind and compassionate; share,
- Be worthy of trust, keep promises, full by giving, be of service to others; help those
commitments, abide by the spirit as well as in need to avoid harming others.
the letter of an agreement
- do not interpret agreements in an 7. Respect for Others
unreasonably technical or legalistic manner - Demonstrate respect for human dignity,
in order to rationalize noncompliance or privacy, and the right to self-determination
of all people; be courteous, prompt and
 GBERMIC Chapter 1-5
decent; provide others with the information - do not “win at any cost”. excellence) but are important for an orderly
they need to make informed decisions about society.
their own lives; 10. Accountability 4.Business decisions influence employees,
- do not patronize, embarrass, or demean. - Be accountable, accept responsibility for customers, suppliers and competitors, while
decisions, for foreseeable consequences of company operations affect communities,
8. Responsible Citizenship actions and in actions, and for setting an governments and the environment.
- Obey just laws; if all law unjust, openly example of others.
protest it; - to safeguard and advance integrity and Why Do People Act Unethically?
- exercise all democratic rights and reputation of their families, companies,
privileged responsibly by participation professions and the government itself. 1.The person’s ethical standards are different
(voting and expressing informed views), - an ethically sensitive individual avoids from those of society as a whole, or
social consciousness, and public service even the appearance of impropriety, and 2.The person chooses to act selfishly
- when in a position of leadership or takes whatever actions are necessary to
authority, openly respect and honor correct or prevent inappropriate conduct of CATEGORIES OF ETHICAL
democratic processes of decision making, others. PRINCIPLES
avoid unnecessary secrecy or concealment of
information, and assure that others have all Why is Ethical Behavior Necessary? Principles of Personal Ethics include
information they need to make intelligent  Basic justice, fairness
choices and exercise their rights. 1.For a society to function in an orderly  Respect for the right of others
manner.  Concern for the right of others
9. Pursuit Excellence 2.The need for ethics in society is  Concern for the well-being on welfare
- Pursue excellence in all matters; in meeting sufficiently important that many commonly of others
your personal and professional held ethical values are incorporated into laws  Benevolence, trustworthiness, honesty
responsibilities, be diligent, reliable, 3.A considerable portion of ethical values of  Compliance with the law
industrious and committed a society cannot be incorporated into laws
- perform all task to the best of your ability, because of the judgmental nature of certain Professional Ethics include among others
develop and maintain a high degree of values (cheating, stealing, deceiving, lying)  Integrity, impartiality, objectivity
competence, be well informed and well and those that deal with many aspects of  Professional competence
prepared principles (integrity, loyalty, pursuit of  Confidentiality
- do not be content with mediocrity  Professional behavior
 GBERMIC Chapter 1-5
 Avoidance of potential or apparent General Principle of Professional Conduct
conflict of interest Professional are required not only to have an
ethical commitment, a personal resolve to act
Business Ethics include among others ethically, but also have both ethical
 Fair competition awareness and ethical competency.
 Global as well as domestic justice
 Social responsibility Ethical awareness
 Concern for environment - refers to the ability to discern between right
and wrong, while ethical competency
The Need For Professional Ethics pertains to the ability to engage in sound
moral reasoning and consider carefully of
All recognized professions have several alternative actions.
common characteristics. Specific Principle of Professional Conduct
Most important characteristics: 1.Service to Others
1.a responsibility to serve the public 2.Integrity and Objectivity
2.a complex body of knowledge 3.Professional Competence
3.standard of admission to the profession 4.Solidarity and Teamwork
4.a need for public confidence 5.Social and Civic Responsibility
6.Global Competitiveness
CODE OF GOVERNANCE FOR THE 7.Equality of All Professions
PROFESSION IN THE PHILIPPINES
(E.O. No. 220, June 23, 2003)

This Code is adopted by the PRC and the

42 Professional Regulatory Boards to cover
an environment of good governance in which
all Filipino professionals shall perform their
tasks.