PRINCIPLE 2

ESTABLISHING CLEAR ROLES AND

RESPONSIBILITIES OF THE BOARD

ARQUION | BARON | JUNIO

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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.
Corporate Governance | Principle 2
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OVERVIEW
Recommendation 2.1 Recommendation 2.5 Recommendation 2.9

Recommendation 2.2 Recommendation 2.6 Recommendation 2.10

Recommendation 2.3 Recommendation 2.7 Recommendation 2.11

Recommendation 2.4 Recommendation 2.8 Recommendation 2.12

Corporate Governance | Principle 2

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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.
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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.
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Recommendation 2.3

The Board should be headed by a

competent and qualified
Chairperson.
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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. This should include adopting a
policy on the retirement age for directors and key
officers as part of management succession andto
promote dynamism in the corporation.
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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.
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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. The policy should also include an assessment of
the effectiveness of the Board’s processes and procedures in
the nomination, election, or replacement of a director. In
addition, its process of identifying the quality of directors
should be aligned with the strategic direction of the company.
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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. The policy should include the appropriate review
and approval of material or significant RPTs, which guarantee
fairness and transparency of the transactions. The policy should
encompass all entities within the group, taking into account
their size, structure, risk profile and complexity of operations.
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SUGGESTIONS FOR THE CONTENT OF THE RPT POLICY:

Definition of related parties; Adoption of materiality

Coverage of RPT policy; thresholds;
Guidelines in ensuring arm’s- Internal limits for individual
length terms; and aggregate exposures;
Identification and prevention Whistle-blowing mechanisms,
or management of potential or and
actual conflicts of interest Restitution of losses and other
which arise; remedies for abusive RPTs
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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 (Chief Risk Officer, Chief
Compliance Officer, and Chief Audit Executive).
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RECOMMENDATION 2.9
The Board should establish an effective performance
management framework that will ensure that the
Management, including the Chief Executive Officer,
and personnel’s performance is at par with the
standards set by the Board and Senior Management.

Corporate Governance | Principle 2

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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.
Corporate Governance | Principle 2
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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.
Corporate Governance | Principle 2
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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.

Corporate Governance | Principle 2

 Corporate Governance | Principle 2

THANK YOU
ARQUION | BARON | JUNIO