By JAMES A. LOYOLA
The Securities and Exchange Commission (SEC) is promoting good corporate governance in the country with its issuance of the Code of Corporate Governance for Public Companies and Registered Issuers.
The Code applies to public companies, or those with assets of at least ₱50 million and having 200 or more shareholders holding at least 100 shares each of equity securities.
It also covers companies that issue proprietary and/or non-proprietary shares/certificates; equity securities offered to the public but are not listed in an Exchange; or debt securities offered to the public and required to be registered with the SEC, whether or not listed in an Exchange.
Companies do not have to comply with the Code, but they must state in their Annual Corporate Governance Reports whether they comply with the Code’s provisions, identify any areas of non-compliance, and explain the reasons for non-compliance.
“The Code of Corporate Governance aims to steer public companies and registered issuers in the Philippines toward higher standards of corporate governance,” SEC Chairperson Emilio B. Aquino said.
He added that, “Compliance with the higher standards of corporate governance should translate to better value propositions for shareholders and customers, minimized risks, growth and sustainability.”
The Code promotes 16 principles across different corporate governance subjects, namely: Board’s governance responsibilities, disclosure and transparency, internal control and risk management frameworks, cultivating a synergic relationship with shareholders/members, and duties to stakeholders.
Among others, the Code recommends that the covered companies’ board of directors should have a policy on diversity to avoid groupthink and ensure that optimal decision-making is achieved.
To reinforce its independence, the board should also be composed of a majority of non-executive directors and have at least two independent directors, or such number as to constitute at least one-third of the members of the board, whichever is higher.
The Code further encourages the establishment of board committees such as the audit committee, corporate governance committee and board risk oversight committee to support the effective performance of the board’s functions.