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53 views22 pagesIntroduction To Corporate Governance
The document discusses the history and evolution of corporate governance regulations in the Philippines from 2001 onwards, with the Bangko Sentral ng Pilipinas first issuing guidelines for banks and financial institutions in 2001. It then outlines how the Securities and Exchange Commission and Insurance Commission introduced their own corporate governance codes in subsequent years. It provides an overview of the key principles of corporate governance, including accountability, transparency and promoting shareholder value. Finally, it discusses the relationship between a company's board of directors and management, including their respective roles and the potential for conflicts between them.
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0% found this document useful (0 votes)
53 views22 pagesIntroduction To Corporate Governance
The document discusses the history and evolution of corporate governance regulations in the Philippines from 2001 onwards, with the Bangko Sentral ng Pilipinas first issuing guidelines for banks and financial institutions in 2001. It then outlines how the Securities and Exchange Commission and Insurance Commission introduced their own corporate governance codes in subsequent years. It provides an overview of the key principles of corporate governance, including accountability, transparency and promoting shareholder value. Finally, it discusses the relationship between a company's board of directors and management, including their respective roles and the potential for conflicts between them.
Uploaded by
Makai CunananCopyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Corporate Governance
OVERVIEW
The future of Corporate Governance
May 2001
Bangko Sentral ng Pilipinas (BSP) issued
Circular 283 mandating the adoption of
good corporate governance practices by
members of the boards of directors of
banks and non bank financial institution
under its jurisdiction.
The future of Corporate Governance
1980
April 2002
Securities and Exchange Commission (SEC)
came out with its Code of Corporate
Governance
- registered and listed corporations ( local
and foreign corporation)
The future of Corporate Governance
July 2002
Insurance Commission (IC) promulgated
the Code of Corporate Governance for all
life and non life Insurance companies and
Intermediaries.
The future of Corporate Governance
June 2004
Energy Regulatory Commission (ERC)
launched its program to promote good
corporate governance in distribution
utilities
2009 – SEC revised Corporate Governance
2019 – SEC revised Corporate Governance
2018 - ASEAN Corporate Governance
The future of Corporate Governance
Soon it will mandated
to small and medium sized enterprises
(SMEs)
- family corporations
Advantages to Institutionalized CG
1.Best global practices dictate it
2. Necessary in a globalized and
competitive economy
3. Contributes to the enhancement of
shareholder value
4. Contributes to the nation’s economic
competitiveness
Corporate Governance
Is the set of processes, customs,
policies, laws and institutions affecting
the way a corporation is directed,
administered or controlled.
- It includes the relationships among the
many stakeholders involved and the goals
for which the corporation is governed.
Corporate Governance
Ensure the accountability of certain individuals in
an organization.
A system whereby shareholders, creditors and
other stakeholders of a corporation are assured
that management enhances the value of the
corporation as it completes in an increasingly
global market place. - SEC
Corporate Governance
Relationship of a company to its
shareholders, or more broadly as its
relationship to society – Financial Times
Promoting corporate fairness,
transparency and accountability. – J.
Wolfenshon-president of World Bank
Corporate Governance
Professor Kenneth Scott of Stanford Law School
Force that bears on the decision-making of the
firm
Encompass not only the control risk of
stockholders but also the contractual covenant
insolvency powers of debt holders, the
commitments entered into by employees,
customers and suppliers, the regulations issued
by government agencies and the statues enacted
by parliamentary bodies.
Corporate Governance
- Organization for Economic Cooperation and
Development (OECD)
- As the system by which business corporations are
directed and controlled.
- specifies the distribution of rights and responsibilities
among different participants in the corporation.
- spells out the rules and procedures for making
decision on corporate affairs
- provides structure through which the company set its
objectives, and the means to attain objectives and
monitor performance.
The relationship between Board of
Directors and Management
A board of directors (BOD)
is an elected group of individuals that
represent shareholders.
is a governing body that typically meets at
regular intervals to set policies for corporate
management and oversight.
makes decisions as a fiduciary on
behalf of shareholders.
A fiduciary
is a person or organization that acts on behalf
of another person or persons, putting their
clients' interest ahead of their own, with a duty
to preserve good faith and trust. Being a
fiduciary thus requires being bound both legally
and ethically to act in the other's best interests.
Corporate management
isthe group of senior executives and
managers who are responsible for
leading, directing and administrating an
organization.
works as a team to lead and
direct the company’s work toward
the executive-level goals.
The relationship of Board of Directors
and Management
The board oversees the decisions taken
by the management
ratifies them along with acting as the
final arbiters of the strategic direction
and focus that the company is heading
into
- is responsible for the actions of the
management
themanagement needs to take the
board into confidence about its
decisions.
neither the management nor the board
can exist without each other and hence
both need each other to attain the
common goal of the organization.
Relationship conflict
happens because the board has a
top view of the organization and
the management has a deeper
insight.
Principal-agent problem
Shareholders invest their savings or
capital in a company.
The company then deploys the capital to
fund its operations.
This allows the corporation and its
shareholders’ investments to grow.
Principal-agent problem
is a conflict in priorities between a person or group
and the representative authorized to act on their
behalf. An agent may act in a way that is contrary to
the best interests of the principal.
Agent - is a person who has been legally
empowered to act on behalf of another
person or an entity.
Principal - individual party or parties, the
owner of a private company
Agency cost
the principal cannot constantly monitor the
agent’s actions.
The risk that the agent will shirk a
responsibility, make a poor decision, or
otherwise act in a way that is contrary to
the principal’s best interest
Additional agency costs can be incurred
while dealing with problems that arise
from an agent's actions.