But just 5 percent of firms undergo a corporate governance health check
Twenty years after the onset of the Asian financial crisis, corporate governance in the Philippines has improved, but there is still much work to do, with just 5 percent of public companies choosing to undergo a corporate governance health check.
In the Philippines, where more than 85 percent of businesses are family-owned and controlled, corporate governance standards are measured by the country’s Institute of Corporate Directors (ICD), a non-stock, not-for-profit organization set up in 1999 and whose aim is to raise the level of corporate governance policy and practice in the Philippines to world-class standards.
As well as advocating and monitoring corporate governance standards, the ICD runs a series of seminars and training development programs for directors that teach the principles and benefits of corporate governance at levels ranging from basic to advanced. The ICD also holds in-depth discussions on relevant laws and regulatory frameworks.
One of its key tools is the corporate governance health check, set up in 2013 to help companies assess their state of governance according to the internationally recommended practices of the ASEAN Corporate Governance Scorecard, which was launched in 2011 to encourage publicly listed companies to go beyond national legislative requirements.
On average, however, just 5 percent of publicly listed companies in the Philippines request a corporate governance health check, according to Roberto Bascon, director for corporate governance analytics at the ICD. He says stakeholder relations is the most important ESG issue faced by companies in the Philippines.
‘Our assessment shows that Philippine companies need to improve on how [they communicate] with other stakeholders, including [establishing] a program to ensure the company’s value chain is environmentally friendly or consistent with promoting sustainable development,’ he notes.
In the four years since the governance health check was set up, Bascon says Philippine public companies have made improvements in their relations with shareholders in four main ways:
• The notice of annual stockholders meeting (ASM) agenda now includes a rationale and explanation of items that require shareholder approval
• An increasing number of companies now allow shareholders to nominate candidates to the board
• Following the requirement by the Philippine Securities and Exchange Commission for all public companies to submit an annual corporate governance report, the quality of disclosure on related-party transactions has improved
• The minutes of ASMs are now released in a timely manner, within five days of the meeting, and the results of ASMs are made public by the next working day.
The ICD has also noted progress in whistleblowing practices and in professional development.
‘Increasingly, companies adopt a whistleblowing policy, disclosing [their] procedures and ensuring that reporting employees are protected from retaliation, [and] boards of directors undergo a continuing professional development program regularly,’ says Bascon.