A push for good corporate governance

Corporate governance, as defined by the Revised Code of Corporate Governance, is a framework of rules, systems, and processes in the corporation that governs the performance by the board of directors and management of their respective duties and responsibilities to the stockholder. The Code embodies the very essence of corporate governance which is transparency. Corporations are mandated to disclose all material information which could adversely affect its viability and the interest of its stakeholders. These disclosure and transparency requirements are intended to prevent the management and the dominant stockholders from mismanaging and misappropriating the assets of the corporation.

With the advent of the ASEAN economic integration in 2015, the ASEAN Capital Markets Forum initiated the ASEAN Corporate Governance Scorecard (ACGS) which is intended to raise the overall corporate governance standards of ASEAN publicly-listed companies, increase their visibility to investors, and promote the ASEAN as an investment class.  The Philippines, through the Securities and Exchange Commission (SEC) issued a series of circulars in order to improve the corporate governance in the country and to be able to cope up with the ASEAN economic integration. To further the government’s push for stronger and more robust corporate governance, the SEC issued memorandum circular (MC) 3, Series of 2015 on Jan. 14, 2015 in connection with MC 5, Series of 2013.The circular, which addressed to all newly listed companies in the Philippines, requires newly listed companies to file their Annual Corporate Governance Report (ACGR) on May 30 following the one (1) year anniversary of their listing in the Philippine Stock Exchange. For companies listed from May 31 to Dec. 31, their ACGR will be submitted on May 30, two (2) years after their listing. The above-mentioned period is also the deadline for the posting of the ACGR in the company’s website.

The circular likewise provides an illustration to determine the schedule for filing the ACGR and posting the same in its website, such that if the company is listed on Jan. 15, 2014 the first filing and posting in the website of its AGCR will be on May 30, 2015. On the other hand, if the company is listed on Nov. 15, 2015, it needs to submit its ACGR and post the same in the website on May 30, 2016.

As regards subsequent filing of the ACGR for the second to fourth year, the company is required to report the changes and updates in its ACGR in accordance with SEC MC Nos. 1 and 12, Series of 2014. For the fifth year, the company is required to submit a fully accomplished ACGR and likewise post the same in its website five (5) years after its first filing.

One may recall that pursuant to its regulatory and supervisory powers over corporations, the SEC issued MC 5, Series of 2013 on March 20, 2013. The said circular requires all listed companies to submit an (ACGR) subject to the guidelines stated therein. A penalty of PhP 20,000.00 shall be imposed for the late filing of the report. The continuous failure to comply with this requirement shall subject the company to a monthly penalty of P2,000.00 until the report is filed. 

On Oct. 2, 2013, the SEC through MC 18 further required the publicly listed corporations to post their ACGR in their respective websites as a separate entry from the company’s Annual Report. This requirement is in line with the peer review process that is being undertaken by Corporate Governance (CG) experts within the ASEAN region. This circular is intended to provide the CG experts with sufficient information for the conduct of the said review.   

According to the ASEAN Corporate Government Scorecard Country Reports and Score Card for 2013 – 2014, a joint initiative of the ASEAN Capital Markets Forum and the Asian Development Bank, the Philippine publicly listed corporations have scored better in the category of disclosure and transparency for the year 2013-2014. The report says that the ACGR required by the SEC helped in making the necessary corporate information available to the public. The ACGR requirement likewise increased the number of publicly listed corporations which disclosed the details of their corporate governance. 

In a PSE – SEC Corporate Governance Forum conducted last Oct. 21, 2015, the Chairman of the Institute of Corporate Directors (ICD), reported about the standing of the Philippines in the ASEAN Corporate Governance Scorecard.  According to the report, the Philippines came very late in the field of corporate governance. Thus, the SEC has taken the initiative by requiring the submission and filing of ACGRs, the posting of said ACGRs in their company websites, and requiring the directors of each publicly listed corporations to attend the Annual Corporate Governance orientation seminars. ICD helps Philippine publicly listed companies to abide by the SEC requirements on corporate governance. The report says that the Philippines’ goal for 2015 is to have at least 20 publicly listed companies in the Top 50 ASEAN Scorecard and at least 30 competitive publicly listed corporations. For the Philippines to be an island of good corporate governance by 2015, compliance is not enough and there is a need for high-level performance.

With the approaching economic integration, the challenge remains for the Philippines to step up its game to promote proper corporate governance. While it is not certainly not a new concept, the stronger emphasis by government regulators on governance heralds a new era in the life of many emerging economies like our own. But with sound corporate governance rules and regulations coupled with its proper implementation and compliance of publicly listed corporations, there is no way but up for the Philippines.

Ma. Louise C. Aviso is a Supervisor from the Tax Group of R.G. Manabat & Co. (RGM&Co.), the Philippine member firm of KPMG International.

This article is for general information purposes only and should not be considered as professional advice to a specific issue or entity.

The views and opinions expressed herein are those of the author and do not necessarily represent the views and opinions of KPMG International or RGM&Co. For comments or inquiries, please email [email protected] or [email protected].

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