GROUP 3 February 5, 2024

Fostering Commitment,
Reinforcing Board
Independence, Assessing
Board Performance, &
Strengthening Board
Ethics
GROUP 3 February 5, 2024

1 Principle 6 Recommendation 4.3

2 7
Scope:
Recommendation 4.1 Explanation

Fostering 3 Explanation 8 Summary

Commitment 4 Recommendation 4.2

5 Explanation
GROUP 3 Februrary 5, 2024

Principle 4:

FOSTERING COMMITMENT

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 tele-/video conferencing 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. In Board and
Committee meetings, the director should review meeting
materials and if called for, ask the necessary questions or seek
clarifications and explanations.
GROUP 3 February 5, 2024

The absence of a director in more

Explanation than fifty percent (50%) of all regular
and special meetings of the Board
A director's commitment to the during his/her incumbency is a ground
company is evident in the amount of for disqualification in the succeeding
time he dedicates to performing his election, unless the absence is due to
duties and responsibilities, which includes illness, death in the immediate family,
his presence in all meetings of the serious accident or other unforeseen or
Board, Committees and Shareholders. In fortuitous events.
this way, the director is able to effectively
perform his/her duty to the company and
its shareholders.
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, challenge
Management's proposals/views, and oversee the long-
term strategy of the company.
GROUP 3 February 5, 2024

Explanation Since sitting on the board of too many

companies may interfere with the
Being a director necessitates a
optimal performance of board
commitment to the corporation. Hence,
members, in that they may not be able
there is a need to set a limit on board
to contribute enough time to keep
directorships.
abreast of the corporation's operations
and to attend and actively participate
This ensures that the members of the
during meetings, a maximum board
board are able to effectively commit
seat limit of five directorships is
themselves to perform their roles and
recommended.
responsibilities, regularly update their
knowledge and enhance their skills.
Recommendation 4.3

A director should notify the Board where he/she

is an incumbent director before accepting a
directorship in another company.
GROUP 3 February 5, 2024

Explanation This is for the company to be

The Board expects commitment able to assess if his/her present
from a director to devote sufficient responsibilities and commitment
time and attention to his/her duties to the company will be affected
and responsibilities. Hence, it is and if the director can still
important that a director notifies adequately provide what is
his/her incumbent Board before expected of him/her.
accepting a directorship in
another company.
 SUMMARY

Principle 4: FOSTERING COMMITMENT

RECOMMENDATIONS:
4.1 - attend & actively participate in meetings exc. justifiable
causes
4.2 - a maximum board seat limit of five directorships
4.3 - notify the Board where he/she is an incumbent director
before accepting a directorship in another company.
GROUP 3 February 5, 2024

Independent Director
1 Principle 6 refers to…

Scope: 2 Recommendation 5.1 7 Recommendation 5.3

Reinforcing
3 Explanation 8 Explanation
Board
Independece 4 Recommendation 5.2 9 Recommendation 5.4

5 Explanation 10 Explanation
GROUP 3 February 5, 2024

CEO: Roles
11 and Responsibilities
16 Recommendation 5.7

Scope: 12 Recommendation 5.5 17 Explanation

Reinforcing
13 Explanation 18 Summary
Board
Independece 14 Recommendation 5.6

15 Explanation
GROUP 3 Februrary 5, 2024

Principle 5: Reinforcing Board

Independence

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.
GROUP 3 February 5, 2024

Explanation There is increasing global recognition that

more independent directors in the Board
lead to more objective decision-making,
particularly in conflict of interest situations.
In addition, experts have recognized that
The presence of independent directors in there are varying opinions on the optimal
the Board is to ensure the exercise of number of independent directors in the
independent judgment on corporate affairs board. However, the ideal number ranges
and proper oversight of managerial from one-third to a substantial majority.
performance, including prevention of
conflict of interests and balancing of
competing demands of the corporation.
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.
GROUP 3 February 5, 2024

Explanation
It is therefore important that the non-
executive directors, including independent
directors, possess the qualifications and
Independent directors need to possess a stature that would enable them to
good general understanding of the effectively and objectively participate in
industry they are in. Further, it is worthy to the deliberations of the Board.
note that independence and competence
should go hand-in-hand.
An Independent Director refers to a person
who, ideally:

a. Is not, or has not been a senior officer or employee of the covered company unless
there has been a change in the controlling ownership of the company;

b. Is not, and has not been in the three years immediately preceding the election, a
director of the covered company; a director, officer, employee of the covered company's
subsidiaries, associates, affiliates or related companies; or a director, officer, employee of
the covered company's substantial shareholders and its related companies;

c. Has not been appointed in the covered company, its subsidiaries, associates, affiliates or
related companies as Chairman "Emeritus," "Ex-Officio" Directors/Officers or Members of
any Advisory Board, or otherwise appointed in a capacity to assist the Board in the
performance of its duties and responsibilities within three years immediately preceding
his election;
An Independent Director refers to a person
who, ideally:

d. Is not an owner of more than two percent (2%) of the outstanding shares of the
covered company, its subsidiaries, associates, affiliates or related companies;

e. Is not a relative of a director, officer, or substantial shareholder of the covered company

or any of its related companies or of any of its substantial shareholders. For this purpose,
relatives include spouse, parent, child, brother, sister and the spouse of such child, brother
or sister;

f. Is not acting as a nominee or representative of any director of the covered company or

any of its related companies;
An Independent Director refers to a person
who, ideally:

g. Is not a securities broker-dealer of listed companies and registered issuers of

securities. "Securities broker-dealer" refers to any person holding any office of trust and
responsibility in a broker-dealer firm, which includes, among others, a director, officer,
principal stockholder, nominee of the firm to the Exchange, an associated person or
salesman, and an authorized clerk of the broker or dealer;

h. Is not retained, either in his personal capacity or through a firm, as a professional

adviser, auditor, consultant, agent or counsel of the covered company, any of its related
companies or substantial shareholder, or is otherwise independent of Management and
free from any business or other relationship within the three years immediately preceding
the date of his election;
An Independent Director refers to a person
who, ideally:

i. Does not engage or has not engaged, whether by himself or with other persons or
through a firm of which he is a partner, director or substantial shareholder, in any
transaction with the covered company or any of its related companies or substantial
shareholders, other than such transactions that are conducted at arm's length and could
not materially interfere with or influence the exercise of his independent judgment;

j. Is not affiliated with any non-profit organization that receives significant funding from
the covered company or any of its related companies or substantial shareholders; and

k. Is not employed as an executive officer of another company where any of the covered
company’s executives serve as directors.
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. In the instance that a
company wants to retain an independent director who has served
for nine years, the Board should provide meritorious justification/s
and seek shareholders’ approval during the annual shareholders’
meeting.
GROUP 3 February 5, 2024

Reckoning of the cumulative nine-year

Explanation term is from 2012, in connection with

SEC Memorandum Circular No. 9, Series of
2011.
Any term beyond nine years for an ID is
subjected to particularly rigorous review,
Service in a board for a long duration may taking into account the need for
impair a director’s ability to act progressive change in the Board to ensure
independently and objectively. Hence, an appropriate balance of skills and
the tenure of an independent director is experience. However, the shareholders
set to a cumulative term of nine years. may, in exceptional cases, choose to re-
Independent directors (IDs) who have elect an independent director who has
served for nine years may continue as a served for nine years. In such instances,
non-independent director of the company. the Board must provide a meritorious
justification for the re-election.
Recommendation 5.4

The positions of Chairman of the Board and Chief Executive

Officer should be held by separate individuals and each should have
clearly defined responsibilities.
GROUP 3 February 5, 2024

Explanation
This type of organizational structure
facilitates effective decision making and
good governance. In addition, the division
To avoid conflict or a split board and to of responsibilities and accountabilities
foster an appropriate balance of power, between the Chairman and CEO is clearly
increased accountability and better defined and delineated and disclosed in the
capacity for independent decision-making, Board Charter.
it is recommended that the positions of
Chairman and Chief Executive Officer
(CEO) be held by different individuals.
The CEO has the following roles and
responsibilities, among others:

a. Determines the corporation’s strategic direction and formulates and implements its
strategic plan on the direction of the business;

b. Communicates and implements the corporation’s vision, mission, values and overall
strategy and promotes any organization or stakeholder change in relation to the same;

c. Oversees the operations of the corporation and manages human and financial
resources in accordance with the strategic plan;

d. Has a good working knowledge of the corporation’s industry and market and keeps up-
to-date with its core business purpose;

e. Directs, evaluates and guides the work of the key officers of the corporation;
The CEO has the following roles and
responsibilities, among others:

f. Manages the corporation’s resources prudently and ensures a proper balance of the
same;

g. Provides the Board with timely information and interfaces between the Board and the
employees;

h. Builds the corporate culture and motivates the employees of the corporation; and

i. Serves as the link between internal operations and external stakeholders.

The roles and responsibilities of the Chairman are provided under Recommendation 2.3.
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.
GROUP 3 February 5, 2024

This lead director has sufficient authority

Explanation to lead the Board in cases where

management has clear conflicts of interest.

The functions of the lead director include,

In cases where the Chairman is not among others, the following:
independent and where the roles of Chair
and CEO are combined, putting in place a. Serves as an intermediary between the
proper mechanisms ensures independent Chairman and the other directors when
views and perspectives. More importantly, necessary;
it avoids the abuse of power and authority, b. Convenes and chairs meetings of the
and potential conflict of interest. A non-executive directors; and
suggested mechanism is the appointment c. Contributes to the performance
of a strong “lead director” among the evaluation of the Chairman, as required.
independent directors.
Recommendation 5.6

A director with a material interest in any transaction affecting the

corporation should abstain from taking part in the deliberations for
the same.
GROUP 3 February 5, 2024

Explanation
The fundamental principle to be observed
is that a director does not use his position
The abstention of a director from to profit or gain some benefit or advantage
participating in a meeting when related for his himself and/or his/her related
party transactions, self-dealings or any interests.
transactions or matters on which he/she
has a material interest are taken up
ensures that he has no influence over the
outcome of the deliberations.
Recommendation 5.7

The non-executive directors (NEDs) should have separate periodic

meetings with the external auditor and heads of the internal audit,
compliance 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.
GROUP 3 February 5, 2024

Explanation
This role can be better performed by the
NEDs if they are provided access to the
external auditor and heads of the internal
NEDs are expected to scrutinize audit, compliance and risk functions, as
Management’s performance, particularly in well as to other key officers of the
meeting the companies’ goals and company without any executive directors
objectives. Further, it is their role to satisfy present. The lead independent director
themselves on the integrity of the should lead and preside over the meeting.
corporation’s internal control and
effectiveness of the risk management
systems.
 SUMMARY
5.1 Independent Directors must constitute at
least three members of the board or one-third,
whichever is higher

5.2 Qualifications of an Independent Director

must be met

5.3 Independent Director’s maximum tenure of

service is 9 years

5.4 CEO and Chairman positions must be held by

two different persons
 SUMMARY
5.5: Appoint a Lead Independent Director in case
the Chairman is not independent

5.6 A director who has a material interest in

transactions affecting the corporation shall
abstain in meetings where the same is discussed.

5.7 Lead Independent Director to lead Non-

Executive Directors’ periodical meetings with
external audit, internal audit heads, and control
and risk functions.
GROUP 3 February 5, 2024

1 Principle 4 Recommendation 6.2

Scope: 2 Recommendation 6.1 5 Explanation

Assessing
Board 3 Explanation

Performance
GROUP 3 Februrary 5, 2024

Principle

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.
GROUP 3 February 5, 2024

Explanation In addition, it provides a means to assess a

director’s attendance at board and
committee meetings, participation in
Board assessment helps the directors to boardroom discussions and manner of
thoroughly review their performance and voting on material issues. The use of an
understand their roles and responsibilities. external facilitator in the assessment
The periodic review and assessment of the process increases the objectivity of the
Board’s performance as a body, the board same. The external facilitator can be any
committees, the individual directors, and
independent third party such as, but not
the Chairman show how the
limited to, a consulting firm, academic
aforementioned should perform their
institution or professional organization.
responsibilities effectively.
Recommendation 6.2

The Board should have in place a system that provides, at the

minimum, criteria and process to determine the performance of the
Board, the individual directors, committees and such system should
allow for a feedback mechanism from the shareholders.
GROUP 3 February 5, 2024

Explanation Companies are given the discretion to

determine the assessment criteria and
process, which should be based on the
mandates, functions, roles and
Disclosure of the criteria, process and responsibilities provided in the Board and
collective results of the assessment Committee Charters. In establishing the
ensures transparency and allows
criteria, attention is given to the values,
shareholders and stakeholders to
principles and skills required for the
determine if the directors are performing
company. The Corporate Governance
their responsibilities to the company.
Committee oversees the evaluation
process.
 SUMMARY

6.1 Self Assessment including evaluation of

Chairman, individuals, and committee to ensure
that responsibilities are complied with, Every 3
years, self-assessment must be supported by an
external facilitator

6.2 Create a system with criteria to assess the

performance of the Board, individual directors,
and committees. Feedback mechanisms from
shareholders must be allowed.
GROUP 3 February 5, 2024

1 Principle 4 Recommendation 7.2

Scope: 2 Recommendation 7.1 5 Explanation

Strengthening
Board Ethics 3 Explanation
GROUP 3 Februrary 5, 2024

Principle
Your facilitators

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. The Code should be
properly disseminated to the Board, senior management and
employees. It should also be disclosed and made available to the
public through the company website.
GROUP 3 February 5, 2024

Explanation The main responsibility to create and

design a Code of Conduct suitable to the
needs of the company and the culture by
which it operates lies with the Board. To
A Code of Business Conduct and ensure proper compliance with the Code,
Ethics formalizing ethical values is appropriate orientation and training of the
an important tool to instill an ethical Board, senior management and employees
corporate culture that pervades on the same are necessary.
throughout the company.
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.
GROUP 3 February 5, 2024

This includes efficient communication

Explanation channels, which aid and encourage employees,

customers, suppliers and creditors to raise
concerns on potential unethical/unlawful
behavior without fear of retribution. A
The Board has the primary duty to company’s ethics policy can be made effective
make sure that the internal controls and inculcated in the company culture through
are in place to ensure the company’s a communication and awareness campaign,
compliance with the Code of
Business Conduct and Ethics and its continuous training to reinforce the code,
internal policies and procedures. strict monitoring and implementation and
Hence, it needs to ensure the setting in place proper avenues where issues
implementation of said internal may be raised and addressed without fear of
controls to support, promote and
guarantee compliance. retribution.
 SUMMARY

7.1 Adopt the Code of Business Conduct and

Ethics for professional and ethical behavior and
to determine acceptable and unacceptable
conduct.

7.2 Strictly monitor and implement this Code to

inculcate ethical culture within the corporation

Idowu Koyenikan
GROUP 3 February 5, 2024

That's a Thank you for

participating.

wrap!