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Reported by: Alvin B. Cabrera

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1 Reported by: Alvin B. Cabrera
Code of Corporate Governance Securities and Exchange Commission Insurance Commission Reported by: Alvin B. Cabrera

Defined by SEC code as a system “whereby shareholders, creditors and other stakeholders of a corporation ensure that the management enhances the value of the corporation as it competes in an increasingly global market” sec. 1 (B) – SEC Code of Corporate Governance

3 SEC Code of Corporate Governance
SEC Memorandum Circular no. 6 series of 2009, revising the previously issued code of corporate governance issued in 2002. Objective: In accordance with state policy to actively promote governance reforms aimed to raise investor confidence, develop capital market and help achieve high sustained growth for corporate sector and the economy. (Code of Corporate governance 2002) Scope: The revised code of corporate governance (2009) shall apply to registered corporations and to branches or subsidiaries of foreign corporations operating in the Philippines that: Sell equity and/or debt securities to the public that are required to be registered with the commission. Have assets in excess of fifty million pesos and at least two hundred stockholders who own at least one hundred shares each of equity securities. Whose equity securities are listed on an exchange Are grantees of secondary licenses from the commission.

4 Insurance Commission Circular no. 31-2005
CORPORATE GOVERNANCE PRINCIPLES AND LEADING PRACTICES Insurance Commission Circular no Objective: To enhance the corporate accountability of insurers and intermediaries, promote the interests of their stakeholders specifically those of the policyholders, claimants and creditors. Key features: Role of the board, the chairman and the non-executive directors Procedures for the appointment of directors Formal evaluation of the performance of the board and individual directors.

5 Board of Directors The governing body elected by the stockholders that exercises the corporate powers of a corporation, conducts all its Business and controls its properties SEC Definition Refers to the collegial body that exercises the corporate powers of all corporations formed under the Corporation code. It conducts all business and controls or holds all properties of such corporations. IC definition

6 IC laid down Principles
Board of Directors General Responsibility Board’s responsibility to foster the long-term success of the corporation, and to sustain its competitiveness and profitability in a manner consistent with its corporate objectives and the best interest of its stockholders. SEC laid down Gen. resp. Principles: Every Company should be headed by an effective Board to lead and control the company to ensure its success. Provide entrepreneurial leadership of the company within a framework of prudent and effective controls which enable risks to be assessed and managed Set the companies’ strategic aims Ensure that the necessary financial and human resources are in place for the company to meet its objectives and review management performance Set the companies values and standards Ensure that its obligations to shareholders and others are understood and met. IC laid down Principles

7 Insurance Code posted additional qualification for a Board of Director
Board of Directors Insurance Code posted additional qualification for a Board of Director Directors sitting on the board in any insurance entity shall be possessed of the necessary skills, competence and experience, in terms of management capabilities preferably in the field of insurance or insurance related disciplines. (IC Circular Letter letter E (A) (1) Qualification of Directors)

8 Public Accountability (Insurance Code)
CORPORATE GOVERNANCE PRINCIPLES AND LEADING PRACTICES Public Accountability (Insurance Code) As custodian of public funds, insurance corporations and insurance intermediaries shall ensure that their dealings with the public are always conducted in a fair, hones and equitable manner. (sec. V – Insurance Code) The diligence required of insurance companies, intermediaries and their directors and officers is not merely due diligence of a good father of a family, but one of a much higher order, perhaps even equivalent to the highest diligence required in banking industry. code of corporate governance (2009)– Villanueva

9 Non-executive directors (led by independent directors)
Board of Directors Essential Standards Meeting Regularly Discharge of duties efficiently Non-executive directors (led by independent directors) Meet annually without the chairman’s presence to appraise the chairman’s performance and on other such occasions deemed appropriate Statement of how the Board operates, types of decisions to be followed and those that are delegated to management Identification of chairman, vice chairman, independent director and the chairmen and members of the nomination, audit and remuneration committees. Number of meetings and its attendance Annual Report All concerns of the directors about running the company shall be recorded in the minutes of the Board

10 Constitution of an effective Board
Composition At least 5 but not more than 15 members elected by shareholders 2 independent directors in the Board SEC CODE: at least 2 or 20% of the member of the Board, whichever is lesser Balance of executives and non executives No individual or small group of individuals can dominate the Board’s decision making. Must be separate in principle to ensure balance of power, accountability and independent decision making Chairman shall be non-executive director  Check and balance Chairman and CEO SEC CODE: If the position of Chair and CEO are unified, the proper checks and balances should be laid down  independent views.

11 Appointment to the Board – Insurance Code of Corporate Governance
Essential Standards There shall be a formal, rigorous and transparent procedures for the selection and appointments to the Board. Appointments to the Board shall be made on merit and against subjective criteria Careful deliberation and consideration shall be done to ensure appointees have enough time for the job. Plans shall be in place for orderly succession to the Board and that of the senior management level in order to maintain a balance of appropriate skills and experiences within the company. Committees Nomination Committee Audit Committee Remuneration Committee

12 Formation of Committees in the SEC Code
Article 3 (K) (i) has provided that the Board should constitute an Audit Committee which shall consist of at least three (3) directors who shall preferably have accounting and finance backgrounds. Article 3 (K) (ii) provided that the board “may” also organize the following committees 1. Nomination Committee 2. Compensation or Remuneration Committee

13 Nomination Committee Composition Role: Audit Committee Composition
At least 3 members of the BOD, one of whom must be independent Shall review and evaluate the qualifications of all persons nominated to the Board as well as those nominated to other positions requiring appointment by the BOD. It should prepare a descriptions of the roles and capabilities of a particular appointment. Role: Audit Committee Composition Shall be comprised of independent board members, preferably with accounting and finance experiences Provides oversight of the institutions internal and external auditors. It shall monitor and evaluate the adequacy and effectiveness of the internal control system of the company. Role:

14 Remuneration Committee
Composition At least 3 members, one of whom is an independent director It shall judge or make plans where to position the company relative to other companies. But such comparisons shall be used with caution in view of the risk of an upward ratchet of the level of remuneration with no corresponding improvement in performance. It shall delegate responsibilities for setting up remunerations for all executive directors and chairman, including pension rights or any compensation payments. Role:

15 SEC Code IC Code SEC vs IC Duties and Functions
General Responsibility: - Responsibility to foster long-term success of the corporation and to sustain its competitiveness and profitability in a manner consistent with its corporate objectives and best interest of stockholders. Implement a process for the selection of directors who can add value and contribute independent judgment and policies. Appoint competent, professional, honest and highly motivated management officers. Essential Standards: Board must meet regularly to discharge its duties efficiently, and all concerns of Directors shall be recorded in the minutes of the Board. Responsibilities of Board Essential Standards Adopt the company’s strategic plan. Oversee conduct of company’s business to ensure business properly managed, and dealings with policy-holders, claimants and creditors are fair and equitable

16 SEC Code IC Code Adopt an effective succession planning program for management. Provide sound strategic policies and guidelines to the corporation on major capital expenditures Establish programs that can sustain its long-term viability and strength. Periodically evaluate and monitor the implementation of such policies and strategies, including the business plans, operating budgets and Management’s overall performance. Identify principal business risks and ensure implementation of appropriate risk management system. Approve corporate policies and core areas of operations of under-writing, investments, reinsurance and claims management. Plan succession, appointing, training, fixing the compensation of replacing senior management. Develop and implement an investor relations program

17 SEC Code IC Code Ensure the corporation’s faithful compliance with all applicable laws regulations and best business practices Establish and maintain an investor relations program that will keep stockholders informed of important developments in the corporation. Identify the sectors in the community in which the corporation operates or are directly affected by its operations, and formulate a clear policy and accurate, timely and effective communication with them. Review adequacy and integrity of internal control systems and management information systems, including systems of compliance with the laws, rules, regulations, directives and guidelines. Select/appoint officers who are qualified to administer insurance affairs soundly and effectively, and establish adequate selection process for all personnel. Apply fit and proper standards on personnel.

18 SEC Code IC Code Adopt a system of check and balance within the Board. A regular review of the effectiveness of such system should be conducted to ensure the integrity of the decision making and reporting processes at all times. Identify key risk areas and performance indicators and monitor these factors with due diligence to enable the corporation to anticipate and prepare for possible threats to its operational and financial viability. Establish compensation package for all personnel consistent with interest of all stakeholders. Review/approve material transaction not in the ordinary course of business. Establish system of check and balance for the board. Have appropriate reporting system so Board can monitor, assess and control management’s performance.

19 SEC Code IC Code Formulate and implement policies and procedures that would ensure the integrity and transparency of related party transactions between and among the corporation and stakeholders. Constitute an Audit Committee and such other committees it deems necessary to assist the Board in the performance of its duties and responsibilities. Establish and maintain an alternative dispute resolution system in the corporation that can amicably settle conflicts or differences between the corporation and its stockholders, and the corporation and third parties, including regulatory authorities Present to Board members and shareholders balance and understandable assessment of company’s performance and financial condition. Appoint Compliance Officer to be responsible for coordinating, monitoring and facilitating compliance with laws, rules and regulations. Entitled to Corporate Secretary who shall ensure: all appointments are proper, all necessary information obtained from directors, both for the company’s own record and in meeting statutory and agency obligations.

20 SEC Code IC Code Meet at such times or frequencies as may be needed. The minutes of such meetings should be duly recorded. Independent views during Board meetings should be encouraged and given due consideration. Keep the activities and decision of the Board within its authority under the articles of incorporation and by-laws, and in accordance with existing laws, rules and regulations. Appoint a Compliance officer who shall have the rank of at least Vice President. In the absence of such appointment, the corporate secretary, preferably a lawyer, shall act as compliance officer.

21 Duties and Responsibilities of Individual Directors
SEC Code IC Code Conduct fair business transactions with the corporation and ensure that his personal interest does not conflict with the interest of the corporation. Devote the time and attention necessary to properly and effectively perform his duties and responsibilities. Act judiciously Exercise Independent Judgment Have a working knowledge of the statutory and regulatory requirements that affect the corporation, including its articles of incorporation and by-laws, the rules and regulations of the Conduct fair business transaction with the company to ensure that personal interest does not bias board decisions. Act honestly, in good faith, and with loyalty to the best interest of the company, stockholders and other stakeholders such as policy-holders, investors, borrowers, other clients and general public. Devote time and attention necessary to properly discharge their duties and responsibilities, familiarize himself w/ the company’s business, must be constantly aware of the company’s condition and be knowledgeable to contribute meaningfully to Board’s work.

22 Duties and Responsibilities of Individual Directors
SEC Code IC Code To act judiciously – Before deciding on any matter brought before the Board of Directors, he should thoroughly evaluate the issues, ask questions and seek clarifications. Exercise independent judgment: He should view each problem/situation objectively. Have a working knowledge of the statutory and regulatory requirements affecting the corporation, including contents of its articles of incorporation and by-laws, SEC requirements and of other regulatory angencies. Act judiciously: Before deciding on any matter brought before the Board, he should thoroughly evaluate the issues, ask questions and seek clarification. Exercise independent judgment: He shall view each problem/situation objectively. He shall have working knowledge of the statutory and regulatory requirements of the company, including contents of articles of incorporation and by-laws, IC requirements and of other government agencies.

23 Duties and Responsibilities of Individual Directors
SEC Code IC Code Commission and, where applicable, the requirements of relevant regulatory agencies. Observe Confidentiality. Observe confidentiality of non-public information acquired by reason of his position, and not disclose said information to any other person without board authority. Every director shall make decisions objectively in the company’s interests. Non-executive director shall: * Scrutinize performance of Management in meeting agreed goals and objectives; monitor performance report. * Constructively challenge and help develop strategic proposals for the company.

24 Accountability and Audit
The Board is primarily accountable to the stockholders. It should provide them with a balanced, position and prospects on quarterly basis, including interim and other reports that could adversely affect its business, as well as reports to regulators that are required by law. Preparation of Financial Statements Effective system of internal control

25 Insurance Commission Circular no. 21-2009
Corporate Governance Scorecard Insurance Commission Circular no The scorecard requires full disclosure of company practices on corporate governance in accordance with the Principles and Leading Practices on Good Corporate Governance. OBJECTIVE: The scorecard has been developed to further measure levels of compliance with corporate governance rules and regulations. Developed by the IC and during the Annual working session of the Institute of Corporate Directors (ICD) (a non-government organization that has been in the forefront of promoting corporate governance reforms in the Philippines)

26 Corporate Governance Scorecard
Employs the “person-on-the-street” test serving as a reasonable approximation of the quality and quantity of public disclosure. It takes the side of an ordinary investor with no special access to any privileged information. The easier for the ordinary investor to get information, the higher is the score. Issues Weights I. Rights of Shareholders 15% II. Equitable Treatment of Shareholders III. Role of Stakeholders 10% IV. Disclosure and Transparency 30% V. Board Responsibilities Total 100%

27 Manulife Financial Corporation
Business Profile Manulife Financial Corporation (MFC) provides financial protection and wealth management products and services to both individual and group customers in the United States, Canada, and Asia. These products and services include individual life insurance, group life and health insurance, long-term care insurance, pension products, annuities and mutual funds.

28 Audit and Risk Management Committee (ARMC)
Risk Governance The Board of Directors oversees the implementation by management of appropriate systems to identify and manage principal risks of the company’s business and periodically reviews and approves our enterprise risk policy, risk taking philosophy and overall risk appetite. Audit and Risk Management Committee (ARMC) Assisted the Board in its oversight with respect to the effectiveness of Manulife’s risk management and compliance practices Strategy: Our corporate governance practices, corporate values, and integrated, enterprise-wide approach to management risk set the foundation for mitigating risks. We strengthen this base by establishing appropriate internal controls and systems and by seeking to retain trained and competent people throughout the organization.

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